The Demise of Arbitration Agreements in Long-Term Care Contracts

By Bailey, Laura K. | Missouri Law Review, Winter 2010 | Go to article overview

The Demise of Arbitration Agreements in Long-Term Care Contracts


Bailey, Laura K., Missouri Law Review


I. INTRODUCTION

In the past few decades, the use of pre-dispute binding arbitration provisions in a wide array of consumer contracts has increased exponentially. (1) one of the industries that has seen a particularly significant increase in the use of arbitration agreements is the nursing home industry. In fact, individuals entering nursing homes and the families of those individuals will more likely than not come across these clauses when signing contracts of admission with long-term care providers. (2) While the use of arbitration agreements has traditionally been supported by the united States congress, most state legislatures, and the judiciary, the use of these provisions in the context of nursing home contracts has been the subject of great debate over the past ten years.

The prospect of arbitration is very appealing to those in the nursing home business. Through the eyes of the industry, arbitration is a logical and cost-effective means of resolving future claims between nursing homes and individuals residing in the facilities. (3) By including these clauses in their contracts, nursing home administrators claim that they are avoiding exorbitant damage awards by juries. (4) The facilities are also discouraging future claimants from filing suit against them. (5) However, mandatory pre-dispute arbitration clauses may not be so helpful to nursing home residents. More and more frequently, people seeking the assistance and shelter of a long-term care facility are forgoing their rights to have future disputes against care providers heard by a judge or jury, simply because they have no choice. Nursing home admission contracts are offered on a "take-it-or-leave-it" basis, and incoming residents either sign the agreements or are not admitted to the nursing home. (6) This proves to be particularly troubling when one considers the vulnerable condition most people are in when entering nursing homes and signing the agreements.

The decision to enter a long-term care facility is not an easy one for potential residents, nor is it an easy decision for their families. In signing a long-term care admission contract containing a compulsory arbitration provision, people are often unknowingly relinquishing their rights to hold that facility accountable in the unfortunate circumstance that the nursing home fails to provide adequate care for the patient. (7)

This Article argues that pre-dispute compulsory arbitration provisions in nursing home contracts should not be enforced and encourages the elimination of such clauses in long-term care contracts. (8) This Article will lay out the historical background and development of arbitration and then will address the use of arbitration clauses in nursing home admission contracts. Finally, this Article will explore recent developments of arbitration law in long-term care contracts, both federally and in the state of Missouri, with particular attention given to the Supreme Court of Missouri's decision in Lawrence v. Beverly Manor. (9)

II. LEGAL BACKGROUND

A. Historical Background of Arbitration & the Federal Arbitration Act of 1925

Historically, the judiciary was very critical of arbitration agreements. (10) The courts' disfavor of such agreements emanated from English common law and was reflective of the English courts' disapproval of pre-dispute binding arbitration. (11) However, arbitration provisions became increasingly popular in the beginning of the twentieth century, (12) and the United States Congress put an end to the early condemnation of these agreements by adopting the Federal Arbitration Act of 1925 (FAA). (13)

The FAA expressly confirms the binding nature of arbitration agreements (14) and conveys Congress's support of using alternative means of dispute resolution. (15) The pertinent section, 9 U.S.C. [section] 2, provides,

   A written provision in any maritime transaction or a contract
   evidencing a transaction involving commerce to settle by
   arbitration a controversy thereafter arising out of such contract
   or transaction, or the refusal to perform the whole or any part
   thereof, or an agreement in writing to submit to arbitration an
   existing controversy arising out of such a contract, transaction,
   or refusal, shall be valid, irrevocable, and enforceable, save upon
   such grounds as exist at law or in equity for the revocation of any
   contract. … 

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