Arbitration Challenges for Long-Term Care Providers

As of August 2020, just 8% of confirmed novel coronavirus infections in the United States had been detected in adult long-term care facilities – but these facilities accounted for 41% of deaths from COVID-19. A cascade of government and media reports describes the toll the virus continues to take in these facilities. Facility operators anticipate a wave of litigation alleging negligence as their lobbyists push for protective legislation.

Well before the virus struck, efforts to channel claims into arbitration had become a principal long-term care sector tool to control risks associated with traditional litigation, not least the "runaway jury." The Federal Arbitration Act embodies a strong national policy preference for arbitration, one courts routinely enforce when presented with agreements providing for its use.

Several recent court decisions illustrate the challenges long-term care operators face when attempting to translate this preference into practice. This article reviews what went wrong for the defendants in these cases, and it closes with a checklist to ensure that the process of "onboarding" long-term care residents produces an arbitration provision courts should enforce.

In two decisions issued in as many weeks, the North Carolina Court of Appeals refused to enforce written arbitration provisions, leaving wrongful death claims against elder care facilities for trial courts – that is to say juries – to resolve. Both decisions stress that the FAA-based preference for arbitration does not come into play until an analysis under state law discloses an enforceable agreement to arbitrate. Put simply: no agreement, no arbitration.

In both North Carolina cases, the facility's challenge reflected Contracts 101: it could not prove its resident had agreed to arbitrate. In Gay v. Saber Healthcare, the facility had the resident's daughter review and sign, apparently on an iPad, documents in "footnote-sized font." Examining the range of onboarding documents, the Court detected an ambiguity in references both to arbitration and to the "express … preserv[ation of] any and all rights to a bench trial." 

To resolve the ambiguity, the Court relied on evidence that the onboarding process presented the daughter with only the signature page of a three-page arbitration agreement. The Court concluded it would be "unreasonable" to prefer arbitration terms the facility could not prove the daughter had even seen prior to admission, given the implication elsewhere that disputes would be for "trial."

The stumbling block in Register v. Wrightsville Health was even more basic: the facility could not prove that anyone had signed its arbitration agreement for the resident. The facility produced "an electronic record" purporting to show the resident's daughter's signature, but could not refute the daughter's affidavit denying the signature was hers.

The last decision reviewed here was issued on Aug. 12, 2020, in another wrongful death case, this one before a federal trial court in Tennessee. In Brown v. Quince Nursing and Rehab. Center, LLC, the court refused to order arbitration under a contract signed by the deceased resident's mother, purportedly acting as her child's surrogate. Tennessee law permits health care decision-making by surrogate when a physician determines the patient lacks capacity. The court concluded that the facility failed to provide "clear, cogent and convincing proof" that a physician had determined the son lacked capacity, and specifically rejected the mother's signature itself as sufficient evidence in that regard.

These decisions arise against a background of prior decisions from numerous federal and state courts that – reserving opinion on judges' subjective views – refuse to compel arbitration based upon a range of deficiencies at the onboarding stage. The following checklist captures key learning from Gay, Register and Brown as well as other decisions torpedoing efforts to compel arbitration:

1. Independently confirm signature. The gold standard here would be notarized signatures on key onboarding documents. If that is not feasible, have a reliable staff member: (a) document that she confirmed the identity of the signatory; and (b) enumerate the documents she witnessed that person sign.
2. Confirm the authority of the signatory to act for the resident. Somewhat curiously, both Gay and Register gave little attention to the authority of the respective daughters to act for their mothers. Gay does not discuss authority. Register refers to a health care power of attorney, implying without explanation that it authorized the daughter to commit her mother to the facility's terms. Brown, by contrast, centers on the facility's failure to prove a parent's authority to act as a surrogate. Like the concept that a contract depends on mutual assent, this point implicates a basic legal principle: one party must have authority to bind another to a contract. No state automatically confers authority on an adult child to act for a parent, or vice versa, and the burden will be on the facility to establish the authority of a child-signatory.
3. Make the arbitration language conspicuous. Gay is no outlier in refusing arbitration partly on evidence the signatory never saw arbitration terms. Make the arbitration requirement conspicuous through headings and type that stand out from the body of the document. This will help defeat arguments that the requirement was buried or obscure within the onboarding documents. Consider adding explanatory language to cut through any legalese ("Accepting this agreement means you give up your right to a trial in court or before a jury").
4. Have the signatory acknowledge review and acceptance of the arbitration provision in particular. Gay implies that if the signature page had some clear reference to arbitration – something like "I acknowledge by my signature that this contract is subject to arbitration and that I have fully reviewed its arbitration provision" – the argument about whether the signatory had in fact received the full provision might have left the court unmoved.

For assistance understanding any of the legal developments highlighted in this update, please contact a member of our Health Care Practice Group.