Many nursing home contracts, which a new resident is required to sign, contain a binding arbitration clause.
An arbitration agreement is a contract stating that, if a dispute arises, the parties will not file a lawsuit in a traditional court of law. Instead, with an arbitration agreement, the parties will submit their dispute to an arbitrator, which is a neutral third-party whose decision will bind the parties.
Arbitration provisions in any consumer setting rarely if ever favor the consumer. They are always to the advantage of the company. After all, why else would companies, particularly nursing homes, fight so hard to enforce them?
In short, they are always one-sided. It is just a matter of when they go too far (which is quite far in light of recent United States Supreme Court case-law) that they are considered “unfairly” or “unreasonably” one-sided. Fortunately, in New Mexico, the Courts still look after consumers and will draw the line to protect them.
The New Mexico Court of Appeals once again reviewed the propriety of mandatory arbitration agreements for nursing home residents in Ruppelt v. Laurel Healthcare. In this case, the plaintiff‘s father was a resident in a nursing home when he died. The plaintiff alleged that the nursing home‘s negligence led to her father‘s death. When the plaintiff filed the nursing home negligence lawsuit, the nursing home sought to have the case dismissed relying on the arbitration provision in the admission contract.
If a binding arbitration agreement is enforceable, then a lawsuit is precluded. However, if the terms of a contract are unconscionable, the court may strike the unconscionable terms and refuse to enforce them. New Mexico Courts have in the past been quite hard on binding arbitration provisions in nursing home contracts placing the burden on the nursing home to prove the fairness of the provisions in Strausberg v. Laurel Healthcare Providers. The United States Supreme Court on the other hand completely cut the legs from this protection in Marmet Health Care Center v. Brown.
However, in the Ruppelt case, the New Mexico Court of Appeals has again put the burden on nursing homes. Specifically, in New Mexico, a contract clause may be deemed unconscionable if one party is forced to submit its claims to arbitration but allows the other party the option of filing a lawsuit in a traditional court of law.
In the Ruppelt case, the arbitration agreement was completely one-sided (as arbitration agreements almost always are). Under the agreement, disputes pertaining to collections and patient discharge could be brought via lawsuit in a traditional court of law while patient claims were forced to arbitration.
While either party could technically bring a lawsuit for collections or patient discharge disputes, it is very unlikely for a patient to bring such a lawsuit. On the other hand, collections issues and patient discharge disputes are among the most common types of lawsuits brought by nursing homes. In essence, the arbitration agreement forces a patient to bring his or her most likely dispute for negligent care in arbitration while allowing the nursing home to bring its most likely disputes in a court of law. For this, the court found that the provision was “unfairly one-sided.”
By limiting the patient‘s access to the courts, while allowing free access for itself, the nursing home created an unconscionable arbitration agreement. When a contract clause is found to be unconscionable, the court then has the option to either simply void that term and enforce the remaining parts of the contract, or voiding the full agreement.
In this case, the clause allowing collections and patient discharge disputes to be brought in court was central to the arbitration agreement. Simply voiding all offending clauses might affect the central provisions of the agreement between the parties. Therefore, the entire arbitration agreement was invalidated by the Court.