Are Arbitration Agreements In Nursing Home Admission Contracts Enforceable?

Recent Case from the Court of Appeals

By Felicia C. Curran

Copyrighted by and Reprinted By Permission of Continuing Education of the Bar*

Introduction

Nursing homes are increasingly using arbitration agreements signed at the time of an elderly resident's admission to try to keep elder abuse cases out of court. Plaintiff's attorneys are increasingly taking their chances that the arbitration agreements their clients signed will not be enforceable, and filing suit in court. The result is a plethora of rulings by the Courts of Appeal on when and whether arbitration agreements in nursing home contracts are enforceable. One recurring issue is who, if anyone, has authority to make a binding arbitration agreement on the elderly resident's behalf.

Hogan v. Country Villa Health Services et al. (2007) 148 Cal.App.4th 259

One would not think that a power of attorney to make health care decisions would include the authority to make binding arbitration agreements with a nursing home, because the decision to arbitrate a claim is not a health care decision, but that's the holding in the recent case, Hogan v. Country Villa Health Services et al. (2007) 148 Cal.App.4th 259. In Hogan, a daughter holding a power of attorney for health care decisions under Probate Code Section 470, signed agreements to binding arbitration on behalf of her mother at the time of admission to a skilled nursing facility. The court reasoned that because the decision on whether to admit an ailing parent to a particular nursing home is a health care decision, and statutes regulating contracts of admission to long term care facilities provide for arbitration agreements as long as certain conditions are met, that the agreement to arbitrate is part of the health care decision making process of choosing a particular nursing home. Id. at 267-268. Hogan applied in the skilled nursing facility context the reasoning that had been used in Garrison v. Superior Court of Los Angeles (2005) 132 Cal.App.4th 253, in the context of an arbitration agreement with a residential care facility for the elderly (Health & Safety Code Sections 87100 et seq).

Hogan's reasoning is flawed, in my opinion, because the legislature has banned arbitration provisions from admission contracts to SNFs, and SNFs cannot condition admission on the resident's agreement to arbitrate. See Title 22 California Code of Regulations Section 1599.81 subd. (a) -(b)). Thus the agreement to arbitrate with a SNF is precluded by statute from being part of the resident's admission to the facility, so it cannot be part of that decision making process, regardless of whether the SNF presents the arbitration agreement at the time of admission. Until another appellate court takes up this issue, however, nursing homes and care homes will be able to rely on the signatures of persons holding a health care power of attorney, as long as the agreement is made as part of the admissions process to the facility. If the arbitration agreement is executed after the resident's admission, it will be harder for defendants to bring it within the reasoning of Hogan and Garrison, because it is much further removed from the health care decision making process.

Flores v. Evergreen at San Diego, LLC (2007) 148 Cal.App.4th 581

In Flores v. Evergreen at San Diego, LLC (2007) 148 Cal.App.4th 581, defendants sought to compel arbitration of elder abuse claims brought by Mrs. Flores, whose husband signed an agreement for binding arbitration at the time she was admitted to the nursing home. Mr. Flores did not have power of attorney for his wife, but acquired it months after he signed on her behalf. Defendants argued that simply by virtue of being the spouse, that the husband was his wife's "agent" with authority to bind his wife to arbitration. The court rejected that argument. The closest case was Pagarigan v. Libby Care Center (2002) 99 Cal.App.4th 298, in which daughters without a power of attorney signed an arbitration agreement on their mother's behalf at the time of admission. The Pagarigan court had rejected the nursing home's argument that the daughter had authority to bind her mother to arbitration simply by being next of kin.

In Flores the defendant tried to capitalize on the differences in the spousal and next of kin relationships, but the court was persuaded. [An agency cannot be established from the marital relationship alone. Id. at 589. The court distinguished and rejected what it characterized as broad dicta stating that spouses can bind each other to arbitration agreements. Ibid.

Defendants also argued that next of kin impliedly have authority to sign arbitration agreements because the legislature has authorized them to make admission decisions on behalf of mentally incompetent family members, even in the absence of a power of attorney. The court, in rejecting that argument, drew a distinction between the "admission decisions and medical decisions" that the legislature had authorized next of kin to make and the "decision whether to agree to an arbitration provision in a nursing home contract" which it held is "not a necessary decision that must be made to preserve a person's well-being. Id. at 594. In other words, the fact that a nursing home puts an arbitration agreement in an admission document does not make arbitration a health-related issue. The court's analysis will be useful to any lawyer mounting a challenge to Hogan and Garrison.

Fitzhugh v. Granada Healthcare & Rehab. Center, LLC (2007) 150 Cal.App.4th 469

Another recurring issue is what sort of claims are subject to binding arbitration. Fitzhugh v. Granada Healthcare & Rehab. Center, LLC (2007) 150 Cal.App.4th 469, is by far the most significant ruling relating to arbitration in nursing home agreements, and opens the door to the argument that elder abuse claims against skilled nursing facilities are not subject to binding arbitration as long as they are plead with a cause of action for violation of the Patient's Bill of Rights (22 CCR § 72527).

A family brought a lawsuit on behalf of Ruth Fitzhugh, a deceased resident of a nursing home. The complaint included causes of action under Health & Safety Code Section 1430(b) for violation of the Patient's Bill of Rights ( 22 CCR § 72527), for elder abuse under the Elder Abuse and Dependent Adult Civil Protection Act (Wel & I C §§ 15600-15660)(EDACPA), and wrongful death on behalf of the heirs.

The husband had signed an arbitration agreement on his wife's behalf, as her "legal representative." Defendant moved to compel the EDACPA and wrongful death cause of actions, conceding that the Section 1430 (b) cause of action was not subject to arbitration based on the express statutory provision making any agreement to arbitrate a violation of the Patient's Bill of Rights void. Health & Safety Code §1430(b).

The issue of the spouse's authority to sign for the resident was not raised. The lower court held that even assuming that the EDACPA cause of action were subject to arbitration, the heirs' wrongful death cause of action was not, because none of the heirs had agreed to arbitrate their claims as individuals. The court then exercised its discretion under Civ. Proc. §1281.2 subd. c to deny defendants' petition to compel arbitration of the EDACPA claim because of the possibility of conflicting rulings on common issues of law or fact if the EDACPA claim and the wrongful death and Section 1430(b) claim were to proceed in different forums.

The appellate court affirmed. The court held, "If plaintiffs' claims proceed in different forums, there is a potential for inconsistent rulings on a common fact, such as whether any violations of the Patients' Bill of Rights caused the decedent's injuries or her death." Id. at 475-476.

The damages available on the Patient's Bill of Rights claim are a maximum $500 per violation, giving plaintiffs' lawyers little incentive to bring such claims. Lawyers commonly sue for elder abuse under the EDACPA, which provides enhanced remedies, punitive damages and attorney fees. (Welf & I C §15657 subd. (a) - (b)). Now that the Patient's Bill of Rights claim has been shown to provide a key argument for keeping elder abuse claims in court, you can expect to see Section 1430(b) claims plead in conjunction with EDACPA claims.

Conclusion

Elderly persons' admissions to nursing homes are often crisis-driven, and the admissions process is not the place or the time to make a decision to forego the right to sue the nursing home in court. These recent appellate decisions have given lawyers representing elders and their families reason to hope that in many cases they will see their day in court, regardless of what they or their families signed during the admissions process.

*Reproduction of this article is prohibited without the permission of Felicia Curran or Continuing Education of the Bar