Nursing Home Arbitration Clauses Aren’t Fair, but Federal Court Decisions Make Them Hard to Avoid

A recent report by Oklahoma Watch sounded the alarm that mandatory arbitration clauses are increasingly being required for admission into Oklahoma nursing homes.

Oklahoma Watch is a non-profit investigative journalism agency. Its piece, “Price of Admission to Nursing Homes: No Lawsuits,” was carried by NewsOK, The Tulsa World and several other outlets. The piece had all of its sympathies in the right place. However, the article and the state officials it quoted are overlooking the bigger issue.

The article reported that Oklahoma nursing homes are including arbitration clauses in admission contracts now more than ever, despite state law that forbids such requirements.

The article did not present statistics about the percentage of Oklahoma nursing facilities that require arbitration clauses or how the percentage compares with earlier years. It does quote a DHS official who said that a “substantial portion” of our state’s 300+ nursing homes include such clauses in their admission contracts.

Many news reports and legal papers from across the country echo the observation that nursing home arbitration clauses have become common and are increasing. The Oklahoma Watch article is certainly right that requiring a nursing home resident to sign away one’s legal rights is a violation of the Oklahoma Nursing Home Care Act, which says (63 O.S. 1-1939, OSCN 2015):

“A. The owner and licensee are liable to a resident for any intentional or negligent act or omission of their agents or employees which injures the resident. …

“B. A resident may maintain an action under the Nursing Home Care Act for any other type of relief, including injunctive and declaratory relief, permitted by law.

“… D. Any waiver by a resident or the legal representative of the resident of the right to commence an action under this section, whether oral or in writing, shall be null and void, and without legal force or effect.

“E. Any party to an action brought under this section shall be entitled to a trial by jury and any waiver of the right to a trial by a jury, whether oral or in writing, prior to the commencement of an action, shall be null and void, and without legal force or effect.”

As I said, the article is correct, but nobody’s disputing that mandatory arbitration clauses are invalid under Oklahoma law. It is not as if Oklahoma’s nursing homes are simply ignoring the law and hoping that nobody will notice.

The real question, which has been addressed in several important court decisions in recent years, is whether federal law allowing arbitration clauses trumps state laws that invalidate them. Courts in several states have ruled that the Federal Arbitration Act takes precedence over state nursing home laws, because the homes receive Medicare and Medicaid funding and are therefore participating in interstate commerce. A 2012 U.S. Supreme Court ruling seems to support those decisions.

Several Relevant Court Decisions

We Oklahomans are sometimes proud of bucking national trends. The Oklahoma Supreme Court made us proud in 2006, when it ruled in Bruner v. Timberlane Manor Ltd. Partnership that the Federal Arbitration Act does not negate our state’s Nursing Home Care Act provision against mandatory arbitration clauses.

However, that was almost 10 years ago, and other decisions since then have cast various shades of gray on the question. For example:

  • In the Northern District of Oklahoma, Rainbow Health Care Center v. Crutcher (2008) specifically took issue with the Bruner decision.
  • In New Jersey, in Estate of Ruszala ex rel. Mizerak v. Brookdale Living Communities (2010), Oklahoma’s Bruner case is referenced.
  • The landmark decision to date is the U.S. Supreme Court decision in Marmet Health Care Center v. Brown (2012). The Marmet decision favored the nursing home industry’s application of the FAA to protect their arbitration clauses.

The industry was emboldened by the Marmet decision, which is why arbitration clauses have been on the rise here in Oklahoma and across the country since then. However, it remains an open question exactly how courts will apply Marmet to Oklahoma nursing home arbitration clauses. New York attorney Keith Kaplan, in a paper evaluating Marmet’s impact, concluded:

“Although Marmet removes blanket state statutory and public policy prohibitions against the arbitration of bodily injury and wrongful death claims against nursing homes, New York courts will nevertheless have to decide whether enforceable agreements to arbitrate were effectuated under the specific facts before them, in conformity with principles of contract and agency law. This will likely result in differing results, with the courts directing the parties to arbitration in some instances, while invalidating the contractual arbitration provisions in others.”

Are State Officials Keeping Up?

I don’t expect the Oklahoma Watch reporter to be knowledgeable on state and federal case law affecting nursing homes, but I am disappointed that some of our state officials seem to be behind the curve on where this issue stands.

Carter’s article quotes more than one state official who complain that nursing homes are ignoring state law. As I have explained, the issue is more complicated than that. One of those state officials apparently gave the reporter copies of letters sent out in 2002 and 2006 by the state Health Department and state Health Care Authority, warning nursing homes to stop requiring arbitration clauses because of the state law. Those letters were written long before the cases referenced above, including the 2012 Supreme Court decision.

Arbitration Should Not be Mandatory

Make no mistake: Mandatory arbitration clauses are a device the nursing home industry uses to avoid jury trials and high dollar awards. It should be illegal to deny nursing home residents their legal rights and the opportunity to tell their story to a jury of their fellow citizens. Arbitration panels are well known for favoring industry over individual plaintiffs, for often issuing no awards and for issuing smaller awards than those rendered by juries.

We fully support the goal of preserving nursing home residents’ right to trial by jury. However, we won’t accomplish that goal by reciting state law while ignoring the several court decisions that have shaken the authority of that law.

Other creative solutions to this problem are possible and should be sought by our state lawmakers, consumer advocacy groups, public-spirited investigative reporters — and attorneys who represent nursing home residents.

A solution needs to be found, or the residents of our nursing homes, which will eventually include many people reading this blog post, will continue to see the erosion of their legal rights.