New York Estate Planning & Elder Law Blog
GOLDEN LIVING CENTER SEEKING TO FORCE ARBITRATION
On December 18, 2015, national long term care facility operator, Golden Living Centers filed a writ of certiorari with the United States Supreme Court to review a decision of the Pennsylvania Supreme Court issued on October 27, 2015. The Pennsylvania Supreme Court determined that the arbitration agreement was void due to reliance on the National Arbitration Forum as the exclusive arbitrator.
The National Arbitration Forum, based in Minneapolis, Minnesota, no longer accepts consumer cases pursuant a consent decree with Minnesota Attorney General, Lori Swanson. According to Plaintiff’s counsel (the prevailing party), the Pennsylvania Supreme Court also noted a distorted “lopsided balance of power” between the “far less sophisticated non-drafting party” and the national corporation. As such, the Pennsylvania Supreme Court implicitly framed the matter as a consumer contract, which creates further complications for the Defendant corporation. Consumer contracts are governed by a whole different set of rules and regulations, such as Regulation Z which grants consumers a three day right of rescission on all consumer contracts. Regulation Z controls in timeshare purchases and home refinance loans, so the idea that it would control in nursing home contracts is not a far stretch of existing law.
LIFE OF THE CASE
It is interesting to note that throughout the litigation, essentially from day one, Golden Living Centers lost and continued to lose and in fact never won any material or significant point or fact during the course of the litigation. To school the reader in some basic civil procedure, all cases are opened by “pleadings” which generally includes a complaint, an answer, a counterclaim, an answer to the counterclaim and depending on the jurisdiction an impleader, which is when a third party is brought in as a party. Pennsylvania has a unique twist on this general scheme in that it allows for what are called “preliminary objections” that, if granted, essentially throw out a party’s’ pleadings. In the case at hand, Golden Living Center filed a Preliminary Objection claiming that the complaint should be dismissed as the arbitration provision controls.
The trial Court denied the same, they then filed an interlocutory appeal (an appeal before all other issues are ripe or final) and lost at the intermediate appellate Court and at finally at the state Supreme Court. Given that a small percentage of petitioners (in 2013 only 3.77% of non indigent cases) who seek full review by the United States Supreme Court actually have their case heard it seems as if Golden Living Centers will have to litigate their case in an actual trial court, before a jury rather than via arbitration. To make matters worse for Golden Living Centers, the Supreme Court passed on a similar case in 2009 from Illinois that held to the contrary to their argument for full review, namely that the Federal Arbitration Act supersedes state law on arbitration agreements. The Supreme Court did so a second time on a similar ruling from the Oklahoma Supreme Court in just June, 2015.
WHAT WILL HAPPEN TO ARBITRATION IN LONG TERM CARE CONTRACTS ON A LONG TERM BASIS?
Some commentators noted that since National Arbitration Forum stopped taking cases in 2009, most of the contracts out there that have language requiring use of their service have been amended. It is unclear if the larger framework of the case as a consumer contract will be recognized and handled as such. All of this is conjecture and the law and the practice of the law sometimes moves at a glacial pace, so none of this is likely to happen soon.
It is important to note that there is a growing movement of states Attorneys General that are seeking to ban arbitration terms from nursing home contracts. The Center for Medicare & Medicaid Services recently closed a public comment period for rules and regulations that may touch and concern arbitration agreements in the context of nursing homes. The New York Times published a series of articles starting on October 31, 2015 critical of such arbitration clauses. Given that there are many forces closing in on the industry usage of arbitration clauses, all at once, there is no way to know whether or not these provisions will survive long term.
Given the powerful statement by the Pennsylvania Supreme Court in regards to the disproportionate balance of power between the contracting parties, the only way for the average consumer to equalize the playing field is for an experienced elder law attorney to review the contract and advise on all pertinent issues.