PA. Justices Void Nursing Home Arbitration Agreement

The Pennsylvania Supreme Court, in a recent case, found a way to get around some forced arbitration clauses. Forced arbitration clauses can be found within any contract - from cell phones to credit card contracts, to nursing home admission forms. These clauses take away a consumer's right to hold a company accountable in court if they break the law or cheat them.

On October 27, the Court held that neither a severability clause nor the Federal Arbitration Act were enough to save an agreement that said arbitration should be conducted "exclusively" in accordance with the NAF code. Since 2009, NAF has no longer handled arbitration disputes following a decree it entered into with the Minnesota Attorney General's Office. Because of this, the Court held that the agreement was unenforceable.

The Legal Intelligencer in an article on November 3rd, described the impact that this ruling will have.

"The ruling will invalidate any old arbitration agreements that include a clause specifically designating the NAF as sole arbitrator, according to attorneys familiar with nursing home arbitration litigation. But nursing home companies have since adapted to the Minnesota consent decree and largely stopped identifying sole arbitrators or administrators in their form contracts, attorneys said, so the impact of the court's narrow ruling on the NAF clause will be contained to a relatively small subset of agreements still utilizing a similar clause."

"The ruling's larger impact, though, will be felt in the treatment of form contracts under the principles of Pennsylvania contract law, said Stephen Trzcinski of Wilkes & McHugh, who represented Evonne Wert." Ms. Wert's brought a wrongful death suit against the nursing home where her mother, Anna Kepner, was residing. The suit alleged abuse and neglect by the nursing home.

Marty Kardon of Kanter, Bernstein & Kardon, who chairs the national nursing home litigation group of the American Association for Justice, stated in the article that the ruling "makes you think not only are they looking at this strictly as a plain old contract ... they're looking behind that and seeing the people that are involved in this and who has the disparity of bargaining power," he said.

Justice Stevens wrote in his opinion "[p]remising the integrality of a contractual term on the subjective understanding of a far less sophisticated nondrafting party is ill-advised public policy that would further distort an already lopsided balance of power."

While this case represents a win for some cases in Pennsylvania, the battle against forced arbitration is far from over. The hope is that this is one of many steps towards a growing momentum against forced arbitration. 


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