For nursing homes, it may seem prudent and efficient to have residents and/or their family sign arbitration agreements to help avoid costly lawsuits later. However, as seen in a recent Berks County case, arbitration agreements should be approached with extreme caution.
Judge Jeffrey Sprecher of Berks County Court of Common Pleas overruled preliminary objections seeking to have the court enforce a nursing home arbitration agreement. In Hendricks v. Manor Care, PICS #14-1611, the administrator of the estate of Esther Hendricks filed suit against Manor Care for negligence resulting from injuries the decedent, Esther Hendricks, suffered. Shortly after Ms. Henricks became a resident at Manor Care, her daughter, who was not power of attorney, was asked to sign a number of documents, including an arbitration agreement. The court focused in on three clauses outlined in the arbitration agreement:
- First, Manor Care sought to require any and all claims against it be handled through arbitration.¹
- Manor Care sought to enforce a confidentiality agreement that would apply not only to the arbitration proceedings, but to any discovery produced by Manor Care.
- In the event that the arbitration clause was unenforceable, Manor Care sought to require its residents waive any right to a jury trial.
Judge Sprecher found each of the above terms to be unconscionable, misleading and overreaching. The court noted that this agreement was not negotiated at arm’s length, but rather was presented to Ms. Henricks’ daughter without an opportunity to comment, review or modify the terms. They questioned whether the daughter had actual authority to sign the agreement. The arbitration agreement was also entered into during an emotionally volatile time, when Ms. Hendricks was just being placed at the facility. There was little evidence that either Ms. Hendricks or her daughter understood the agreement or the rights they were waiving before signing the various documents. Judge Sprecher also found the arbitration clause to be misleading because Manor Care suggested that arbitration is quicker resolution and less costly. Costs associated with arbitration can be as high as costs associated with trial. The court also took issue with the confidentiality clause because it sought to “bury all proof of bad things that may be alleged to occur in the nursing home.” Finally, the court found the no jury trial clause to be unenforceable because it requires residents of Manor Care to give up a fundamental constitutional right “without a full explanation of what there are forsaking.” In short, the court found these provisions to be an improper effort on Manor Care’s part to take advantage of its disparity and bargaining position.
This case is currently on appeal before the Superior Court. On June 24, 2015, oral argument was held before Judge Elliott, Judge Stabile, and Judge Musmanno. The Superior Court focused on the question of whether the daughter had authority to sign the arbitration agreement. To determine whether the daughter had authority to sign the arbitration agreement, the court engaged in an analysis of agency that may be created by 1) express authority, 2) implied authority, 3) apparent authority, or 4) authority by estoppel. ManorCare failed to present any evidence that Ms. Hendricks represented that her daughter could sign an arbitration agreement on her behalf under any of the aforementioned forms of agency. Having found that Ms. Hendricks’ daughter did not have authority to sign an arbitration agreement on behalf of her mother, the Superior Court affirmed Judge Sprecher’s order overruling ManorCare’s preliminary objections to compel arbitration.
Consult experienced healthcare counsel to ensure your arbitration agreements and process of presenting them complies with current Pennsylvania case law. The Attorneys at Fitzpatrick Lentz & Bubba have extensive experience advising nursing homes and other healthcare providers on a wide range of healthcare law matters, including arbitration agreements and compliance.
¹It should be noted that Manor Care sought to require the arbitration be handled by National Arbitration Forum despite the fact that this organization no longer hears arbitrations of this nature.