Binding Arbitration: How the Trump Administration’s New Laws Affect Your Loved Ones

By November 15, 2018 Blog
Binding Arbitration: How the Trump Administration’s New Laws Affect Your Loved Ones

The concern over last year’s new rule regarding binding arbitration is still very much a topic of discussion; particularly for those with loved ones in long-term care facilities. TIME magazine tells the story of an 87-year-old woman with dementia who was sexually abused during her stay at a nursing home near Birmingham, Alabama. After a criminal investigation failed to produce enough evidence to identify a suspect in the alleged attack, the woman’s family tried to file a civil suit against the nursing home, alleging everything from negligence to outrageous conduct. They felt there was plenty of evidence to back up those charges. But none of it would see the light of day in a courtroom.

When the woman first came to the nursing home, she signed the facility’s standard admissions contract. Buried in pages of terms and conditions was what is known as a pre-dispute binding arbitration agreement. By signing it, the woman gave up her Seventh Amendment right to trial by jury and any right to bring a civil suit against the facility for any reason and at any time in the future.

According to the article, roughly half the 2.5 million Americans in nursing homes are likely bound by arbitration agreements in their admissions contracts.

What Is the Trump Administration’s Position on Binding Arbitration Agreements in Nursing Homes?

Frequently, prospective nursing home residents are handed a stack of papers to sign before they are admitted. Among these papers is usually a binding arbitration agreement that states they will go to arbitration instead of suing if something goes wrong.

Here is a timeline of recent updates to the federal policy on binding arbitrations:

  • In November 2016, the Obama administration issued a regulation prohibiting nursing facilities from forcing residents to sign pre-dispute binding arbitration agreements.
  • The nursing home industry challenged the rule in federal court and delayed enforcement until July 2017.
  • In June 2017, the Trump administration announced they would be “indefinitely” postponing the rule enactment schedule for the following month, and had negotiated an alternate rule.
  • As of January 2018, class action waivers are banned and arbitration agreements are allowed in any long-term care facility that accepts Medicaid or Medicare, as long as the contract clauses are written in “plain language.”    

What Is Arbitration?

Arbitration was designed as a streamlined, cost-effective method of resolving legal disputes as opposed to filing a lawsuit and going to court. Arbitrations begin with a notice of intent, followed by a response, the selection of arbitrators, and then the hearing itself. Similar to courtroom proceedings, evidence will be presented, arguments made, and witnesses called; though, there are limitations that expedite the dealings. For instance, depending on the arbitration and the organization overseeing it, there may be less motion practice and less discovery before the arbitration hearing. Additionally, the ultimate decision of the arbitrator may not be susceptible to challenge by appealing to a higher court or tribunal.  

Unlike court cases, arbitration is typically not a matter of public record. This can be a favorable difference if you are a plaintiff who wishes to remain anonymous. Rather than having your case heard by a judge or jury in open court, arbitration hearings occur before a private arbitrator who abides by a different set of rules than civil courts. One of those rules being the selection of the arbitrator.

For example, in a case that goes to court, neither party generally has any input with regard to who the judge will be. However, with an arbitration, the parties often have some input into who will end up being their arbitrator. Both parties may be allowed to select from a pool of arbitrators or eliminate choices from provided options. Arbitrators can also be required to be experts in the field or industry involved in a dispute, whereas a judge may or may not have such expertise

The Pros and Cons of Arbitration in Cases of Sexual Abuse

A number of state attorney generals, state senators, and groups (like the AARP and the American Association for Justice) who oppose nursing home arbitration clauses worry that the new rule will lead to less transparency and accountability. They argue that nursing home residents will have to pay their lawyer’s (and a share of the arbitrator’s) fees out-of-pocket. Studies show that awards to Plaintiffs can be up to 35 percent lower in arbitration. Plaintiffs may also have to travel further to attend arbitration proceedings and will likely have a harder time appealing unfavorable results.

While arbitration can be an uphill battle, there are also a few benefits of going into arbitration:

  • Simpler procedures
  • Faster processing time
  • Protection of your identity
  • Lower total case costs (generally speaking)

Working with an attorney who has substantial experience representing clients in arbitration is key. Arbitration is not a bar to recovery. In fact, arbitration shouldn’t hinder an experienced attorney’s ability to negotiate the reimbursement of lawyer and arbitration fees as part of the Plaintiff’s final award.

Are Arbitration Agreements Enforceable in California?

Hiring a knowledgeable attorney will help you determine whether an arbitration agreement you’ve signed is enforceable. Article VI of the Constitution, also known as “The Supremacy Clause,” states that, in a dispute, federal law takes precedence over state law. Based on this statement, a signed nursing home agreement could potentially favor the nursing home facility.

However, the State of California has a longstanding history of ruling favorably in challenges to the Federal Arbitration Act. Under California law, nursing home contracts must be procedurally and substantively “conscionable”—supported by consideration and absent of fraud.

Procedural factors pertain to the circumstances during which the contract was signed. For instance, a contract could be deemed “procedurally unconscionable” if your loved one signed the contract while on mind-altering medications. The courts look unfavorably on stronger parties taking advantage of weaker parties in the drafting of terms. “Take it or leave it” contracts that do not allow signees to opt out later are also unfavorably by the courts in many cases.

Substantive factors focus on the terms of the agreement and whether they are so one-sided that they shake the conscience. One example would be a contract that limits damage recovery, requires arbitration hearings prohibitively far from the resident’s home, or mandates that one side pay upfront for all costs related to arbitration.

In the August 2000 case Armendariz vs. Foundation Health Psychcare Services Inc., the California Supreme Court ruled that arbitration agreements must: 1) require neutral arbitrators; 2) allow for more than minimal discovery; 3) result in a written decision by the arbitrator; 4) allow for all types of relief available in court; and 5) not require parties to pay unreasonable costs.   

How to Avoid Nursing Home Clauses That Trample Your Rights

If you’re in the early stages of finding a nursing home for your loved one that will allow the pursuance of all legal remedies if necessary, you can:

  • Hire an attorney to review the paperwork before you sign.
  • Cross out and withhold surrogate authority.
  • Consider different facilities that are privately funded or offer non-binding agreements.

If you have signed a nursing home arbitration agreement within the past 30 days, you may also send a rescission letter via certified mail. If it has been more than 30 days, you will need to prove that the contract in some way violates California’s Health and Safety Code Section 1599.81(a).

Binding Arbitration Agreements Are Not Dead-Ends

The civil attorneys at Lewis & Llewellyn have ample experience in identifying legal solutions for individuals who have signed pre-dispute binding arbitration agreements during the nursing home admissions process. Our firm is equipped to help you fight, even if your case involves a previously signed agreement. There is always hope for justice to prevail when you work with an experienced legal team.

Lewis & Llewellyn has assisted plaintiffs in both public and private disputes. Nursing homes may try to shield themselves from liability by seeking refuge behind binding arbitration agreements, but our multi-million-dollar track record is a testament to our commitment to achieving justice for our clients. If your loved one has experienced abuse while in the care of a nursing home, contact us or call +1 (415) 800-0590 for a free, no-cost evaluation of your case.

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