Binding Arbitration and Admissions Agreements
We frequently review long term care facility agreements for our clients. We want to be sure they understand what is contained in these agreements which can be 30 pages or more with multiple attachments and exhibits. It is a legally binding contract that contains rights and responsibilities for each party but the language can sometimes be a bit confusing.
A decision handed down last week by a New Jersey Appellate Division court is an interesting case focused on the admission agreement and more specifically the circumstances of it’s signing by the resident, the resident’s daughter and the assisted living facility. The issues were raised after the resident filed a lawsuit in state court alleging negligent care by the facility caused him certain personal injuries. The facility in turn said that there was an enforceable arbitration agreement contained as part of the admissions agreement which was signed by the resident and his daughter preventing the lawsuit. Instead this agreement directed that all claims of negligence be submitted to binding arbitration.
Binding arbitration means that the matter is not handled through the states court legal system. There is no judge. Instead, an arbitrator is chosen or provided, sometimes from an arbitration association which is in the business of providing arbitration services to parties who need a means to resolve their disputes. The advantage to this process is that it takes less time and money to resolve disagreements, however, the process also tends to be less formal with relaxed rules of evidence. Additionally, there is no entitlement that the dispute be decided by a judge who has legal training or “a jury of peers”, which is a bedrock of our legal system.
Arbitration agreements have been a subject of legal scrutiny for many years. The New Jersey Legislature enacted a statute which provides that a clause or provision in an admissions agreement that waives or limits the right to sue for negligence or malpractice shall be void and unenforceable. There is also a federal law known as the Federal Arbitration Act (FAA), which states a preference that disputes be resolved through arbitration rather than in the courts. The FAA, however, doesn’t apply to all situations, but when it does it preempts – or overrides – any state law to the contrary.
The FAA applies only to written agreements that require arbitration of disputes that arise out of transactions that involve interstate commerce. The term commerce is defined broadly to include transactions that can be considered to flow between states. The FAA was meant primarily to encourage disputes in the “business world” to be settled thru arbitration.
It would seem that a dispute between a facility and a resident here in New Jersey would not fall within the FAA and then the NJ law prohibiting mandatory arbitration clauses would apply but that’s not what the court decided. They recognized this possibility but didn’t end it there. More interestingly, they focused on the circumstances of the signing of the admissions paperwork and what the resident and his daughter did or did not agree to.
What happened in that case – or what the parties allege happened since they are not in agreement on all the facts – is not uncommon. Often placement needs to happen quickly and decisions are made before all the appropriate paperwork has been signed by all the parties.
The court’s analysis I think can be instructive for residents and facilities alike. I’ll get into more detail next week.