In many cases the decision to enter a nursing home is made under extremely difficult conditions. When signing admission contracts patients and their families are often in a state of extreme vulnerability, where their decision-making ability is not optimal. In these high-stress situations, patients often do not consider the consequences of the terms to which they are agreeing.
In many cases, nursing home admission documents contain mandatory arbitration clauses. At a time when all that matters is obtaining the required care, patients don‘t realize that they are giving up their right to file a personal injury lawsuit against the nursing home if that nursing home commits negligence or abuse.
The New Mexico Court of Appeals recently issued a ruling recognizing the unequal bargaining power of patients seeking admission to a nursing home. In Strausberg v. Laurel Healthcare Providers, the Court of Appeals held that nursing homes that sought to enforce arbitration agreements had the burden of proving that the arbitration agreement is not unconscionable.
The underlying suit in Strausberg alleged negligence on the part of a nursing home for care the Plaintiff received after back surgery. While under the nursing home‘s care, the Plaintiff claims that she developed ulcers and an infection that could have been prevented had she been given the proper care. The district court, however, dismissed Plaintiff‘s complaint and granted the nursing home‘s motion to compel arbitration because the Plaintiff had signed an arbitration agreement as a condition to being admitted into the nursing home for rehabilitative care.
The New Mexico Court of Appeals reversed the decision to dismiss the case and compel arbitration, finding that the district court made an error in placing the burden of proving that the arbitration agreement was unenforceable on the Plaintiff. The Court stated that the burden was on the nursing home to show that the arbitration clause was not unconscionable.
The Court began by stating that even though arbitration agreements are recognized under federal and New Mexico law, an arbitration agreement may be unenforceable if it is substantively or procedurally unconscionable. An agreement is substantively unconscionable when its terms unreasonably benefit one of the parties over the other(s). An agreement where there is extremely unequal bargaining power between the parties and one party has no real choice is procedurally unconscionable.
In most commercial transaction cases the party challenging the validity of an arbitration agreement must prove that the agreement is unconscionable. However, the Court in Strausberg indicated that in a case involving nursing homes seeking to enforce arbitration agreements that are a condition for admission, the nursing home, and not the patient, must prove that the agreement is enforceable.
The Court differentiated the case before it from regular commercial transactions because the people seeking care in a nursing home are in a state of critical necessity and are vulnerable to being taken advantage of. For this reason, a person may sign an arbitration agreement when trying to gain admission into a nursing home that they would never have signed had they not been in a high-stress situation.
Even though this recent decision may seem like good news to patients and their families, it is important to take notice that most nursing home arbitration agreements in New Mexico are found to be enforceable. Keeping this in mind, when faced with the need to seek admission to a nursing home, patients and family members are strongly urged not sign arbitration agreements.