PROTECTING THOSE WHO CANNOT PROTECT THEMSELVES: THE EFFICACY OF PRE-DISPUTE ARBITRATION AGREEMENTS IN NURSING HOMES.

• Author: Burgess, Rhys E.

Introduction I. History of the Law A. Arbitration Law in the United States 1. Development of the FAA and its Current Interpretation 2. Congressional Reform Efforts B. Arbitration in Nursing Home Admission Contracts II. A Flawed Model: The Issues of Arbitration Clauses for Nursing Homes A. Legal Rights of the Injured 1. Pre-Dispute Clauses Signed by Third Party 2. Pre-Dispute Clauses Tend to be Unconscionable B. Public Policy Concerns 1. Purported Societal Benefits of Arbitration 2. Potential Societal Costs of Arbitration III. Forging a Path Forward: Proposed Solutions A. Amending the FAA 1. Excluding Pre-Dispute Arbitration Clauses 2. Creating a Standard of Review B. Improving Arbitration in Nursing Homes C. Judicial Review of Arbitration Decisions D. Mediation as an Alternative to Arbitration IV. Working with the Status Quo: Current Options for Residents A. Refuse to Sign Pre-Dispute Arbitration Clauses B. File Suit in Court Conclusion INTRODUCTION

At some point, many Americans confront issues that arise when loved ones lose the ability to care for themselves and require professional assistance. A common solution is to admit those people into a nursing home or assisted living facility. (2) However, the person signing the admission contract may not fully understand what they are agreeing to or the consequences of doing so. Commonly found in such contracts is a pre-dispute arbitration clause, which is a binding contractual provision, whereby the parties to the contract waive their right to pursue future legal claims against one another in a traditional court proceeding. (3) Instead, claims must be resolved in a private arbitration proceeding without the option of a jury. (4)

This was the case when Paul Ormond, friend and legal guardian of John Mitchell, admitted John into a Massachusetts nursing home. (5) John was sixty-nine years old and in poor health after suffering a stroke. (6) During the admission process, Paul was given dozens of pages of paperwork and merely signed wherever the admissions director instructed. (7) Unbeknownst to him, one of those pages contained a pre-dispute arbitration clause that required John and his family to submit any future claims against the facility to arbitration. (8) A few weeks after John was admitted to the nursing home, staff members dropped John while using a lift device. (9) The staff chose not to send him to the hospital because his vital signs were stable. (10) Several days after the incident, John died as a result of brain bleeding. (11)

After John's sons hired an attorney, Paul discovered he had signed a pre-dispute arbitration clause. (12) Paul explained, "I thought it was deceptive, and I was pretty angry that I'd been tricked into signing something that I didn't know what it was [.]" (13) In court, John's family challenged the validity of the arbitration clause; the judge found the clause invalid due to the large amount of information not adequately explained. (14) Therefore, John's family was able to pursue their claim in court. (15) While John's family obtained a favorable result, another person in similar circumstances before a different court could be forced to arbitrate their claim.

Today, many Americans unknowingly forgo their right to traditional judicial resolution of claims through pre-dispute arbitration clauses that frequent employment and consumer contracts. (16) Arbitration is a type of alternative dispute resolution ("ADR") whereby both parties agree to have their dispute resolved in a private proceeding presided over by one or a panel of three arbitrators. (17) The arbitrator(s) will render a decision that is generally binding and final. (18) In arbitration, the parties retain the right to be represented by counsel. (19) Arbitration is private rather than public, and parties often have discovery rights that are more curtailed than those in traditional court proceedings. (20) Further, the arbitrator controls the admission of evidence with broad authority, since he is not bound by the traditional rules of evidence used in courts. (21) The right to appeal the arbitrator's decision is extremely limited, and the standard of review is so high that decisions are rarely overturned, "[regardless of] whether or not they are fair or true to the law." (22)

Generally, the arbitrator is not required to justify his decision with conclusions of fact or law, or by stating his reasoning. (23) Consequently, the losing party cannot examine the arbitrator's decision to explore whether it was based on an erroneous understanding of the facts, law, or due to flawed reasoning. This stands in contrast to litigation, where a record of the proceedings is kept for such purpose. (24) The United States Supreme Court highlighted these differences between arbitration and traditional litigation, explaining "the factfinding process in arbitration usually is not equivalent to judicial factfinding." (25) Given the differences between arbitration and traditional litigation, pre-dispute clauses may represent "a potential dark side to [alternative dispute resolution]." (26)

The validity of pre-dispute arbitration clauses in regard to nursing home admission contracts has become a contentious area of law. (27) The impetus for this contention is that it is standard practice for nursing homes to include pre-dispute arbitration clauses in admission forms. (28) Arbitration of nursing home claims tends to differ from other consumer claims, and thus deserves different treatment. Unfortunately, claims against nursing homes are likely to involve abuse or negligence by the facility's staff that results in injury or death to a resident. (29) Residents should not be forced to resolve such serious claims without judge and jury unless they fully understood its implications when they signed the clause.

Part I of this Comment explores the history of arbitration law, both in the United States and specifically within the context of nursing homes. Part II identifies and explains controversial issues regarding pre-dispute arbitration clauses in nursing homes, focusing on residents' legal rights and public policy matters. Part III proposes alternative resolutions for these issues. Finally, Part IV explores how soon-to-be residents can protect their rights under the law as it currently stands.

1. HISTORY OF THE LAW

   1. Arbitration Law in the United States

      1. Development of the FAA and its Current Interpretation

         Modern-day arbitration has been shaped by its development in the federal legislature and its interpretation by the United States Supreme Court. Arbitration in the United States dates back to the 1800s; in those days arbitration clauses could be voided so long as the arbitrator had not rendered a decision. (30) However, that changed with the Federal Arbitration Act ("FAA") enactment in 1925. (31) One of the primary motivations for enacting a federal arbitration scheme was to alleviate overcrowding in courts. (32) The FAA mandates that arbitration clauses are presumptively valid, irrevocable, and enforceable. (33) The FAA and subsequently-enacted state laws laid the foundation for modern arbitration law by establishing that arbitration clauses are generally enforceable. (34) Due to the Supreme Court's broad interpretation of the FAA, arbitration clauses are currently enforced in a wide variety of contexts--possibly even beyond the FAA's originally-intended scope of applicability. (35)

         The congressional hearings preceding the FAA's enactment demonstrate the FAA was intended to apply to contracts involving two merchants agreeing to arbitrate future disputes. It is less clear whether legislators intended it to apply solely to contracts between businesspeople, or also to those between a business and a consumer. (36) In a 1923 Senate subcommittee hearing regarding the pending FAA, a supporter from the American Bar Association testified that the FAA's primary purpose was to provide two merchants the means to agree to arbitrate their dispute. (37) In the same hearing, another proponent recalled a successful arbitration proceeding in which he had been involved between a steamship company and a shipping firm, specifically noting that arbitration can help merchants reduce costs. (38) The FAA founders primarily focused on contracts between businesspeople. Therefore, many advocates believe the FAA's application should align with its legislative intent and apply only to such contracts.

         The Supreme Court has not shared the sentiment that Congress did not intend for the FAA to apply to consumer contracts. One of the most notable Supreme Court decisions involving arbitration agreements' applicability to consumers is AT&T Mobility v. Concepcion, where the Supreme Court held arbitration clauses in consumer contracts to be enforceable. (39) The Court relied on two principles regarding the FAA: that the FAA reflects a policy favoring arbitration, and that arbitration is a contractual matter. (40) The Court rebutted the dissent's argument that Congress' intent was for the FAA to apply only to contracts between businesspeople, noting that there is no such limitation in the text of the FAA. (41) Proponents argue the FAA is applicable to contracts between consumers and businesses in different states because the FAA affects interstate commerce. It is also argued that by the time the FAA was enacted, consumers engaged in interstate commerce in the form of mail-order companies, and thus the FAA founders had already contemplated its application to consumers. (42) Furthermore, one of the FAA's proponents noted that arbitration was available to "anyone having a commercial transaction." (43)

         Even accepting arguendo that the FAA applies to consumer contracts, whether it was intended to extend to contracts of adhesion (i.e. "take it or leave it" contracts) remains a separate issue. Prior to the FAA's enactment, Senator Walsh, who was one of three senators who presided over a hearing regarding a pending arbitration bill...