Three patients—Van Buren Adams, Olive Clark and Joe Paul Wellner—died while residents of Kentucky nursing homes or rehabilitation centers. Before they were admitted to a facility, each patient designated a family member as his or her attorney-in-fact, authorizing them to make decisions on their behalf. At the time of their admissions, each attorney-in-fact signed a document agreeing to resolve any disputes in private arbitration rather than in court. But after the patients' deaths, each attorney-in-fact sued the facilities for negligence, statutory violations and wrongful death. Each facility argued that the documents required the case to be resolved through arbitration.
Pre-dispute arbitration clauses are a popular tool for companies desiring to limit their liability in court. Under the Federal Arbitration Act (FAA) these clauses are "valid, irrevocable, and enforceable." The U.S. Supreme Court has repeatedly articulated a strong federal policy favoring arbitration of disputes, stating that the FAA pre-empts state laws that attempt to ban arbitration of certain claims and routinely uphold pre-dispute arbitration agreements (for example, see AT&T Mobility v. Concepcionopens in new window, 2011). The court reinforced this policy in Marmet Health Center, Inc. v. Brownopens in new window (2012), holding that the FAA prohibits a categorical ban on arbitration clauses in nursing home admission agreements.
Despite these rulings, the Kentucky trial courts denied the nursing homes' motions to dismiss the lawsuits and compel arbitration; the facilities appealed. The Kentucky Supreme Court held that they would not infer delegation of power to an attorney-in-fact to waive the right to trial "without a clear and convincing manifestation of the principal's intention to do so." The court found that none of the power-of-attorney documents involved in these cases demonstrated clear intent to allow the attorney-in-fact to agree to pre-dispute arbitration and concluded that the arbitration agreements were not validly formed (Extendicare Homes, Inc. v. Whismanopens in new window, 2015). The facilities appealed to the Supreme Court, which agreed to hear the case (Kindred Nursing Centers Limited Partnership v. Clarkopens in new window, 2016).
In a parallel development, a Center for Medicare and Medicaid Services (CMS) rule banning the use of compulsory pre-dispute arbitration agreements in nursing home contracts was to go into effect in November, but a federal judge granted a preliminary injunction to delay the rule while challenges to its validity are resolved (American Health Care Association v. Burwell, 2016).
The pending case and CMS rule raise the issue of consumer contracts that require arbitration and consumers' ability to understand and meaningfully consent to waiving their right to raise claims in court. Consumer arbitration mandates also raise questions about how these issues affect the people admitted to nursing homes and other long-term care facilities—people who may be sick, disabled or dependent, and making decisions under significant stress. Other concerns raised by the CMS rule include unequal bargaining power, the potential for coercion, the possibility of inadequate explanation of the nature and consequences of the agreement, and the inherent conflict of interest in the facility providing such explanations. Given the 1.4 million residents of nursing homes in the United States (National Center for Health Statistics, 2014), dispute resolution processes and procedures for ensuring the appropriate waiver of rights in this context have the potential for widespread impact. Research by psychologists comparing litigation and arbitration and the contractual decision-making and expectations of those admitted to long-term care will increase understanding of these decisions.
"Judicial Notebook" is a project of APA Div. 9 (Society for the Psychological Study of Social Issues).
