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  • Writer's pictureW. Cory Reiss

Nursing home case may defuse some contract landmines.

Updated: Feb 19, 2021

You’ve just brought your elderly mother to an assisted living facility to check her in, and emotions are running high.

You sit at a table with a couple of administrators who ask you to sign some papers — or more commonly, a line on an iPad screen.

Then months later, your mother falls multiple times or suffers horrible bedsores and infection, and she dies as a result. Even if the facility was egregiously at fault, whether your family can sue already may have been decided in the facility’s favor because one of the papers, or screens, you signed was an arbitration agreement.

But the North Carolina Court of Appeals just fired a shot across the bow of arbitration advocates.

Arbitration agreements require parties to avoid court and take their dispute before a private panel or single arbitrator for a binding determination, including about damages. By signing one, you waive your right to a trial. Our Courts have enforced them with near religious fervor under the Federal Arbitration Act and a premise that alternatives to litigation are cheaper and make good public policy.

Less discussed is that arbitration clauses provide corporations a quiet way to dispose of controversy and avoid big jury verdicts in favor of consumers. And they mitigate that risk by tying consumers' hands before anything goes wrong.

Members of the North Carolina Court of Appeals, however, may have blown a hole in the conventional wisdom that if a contract contains arbitration language, the fix is in.

In that April 21 decision, Gay vs. Saber Healthcare Group, LLC, the daughter of a woman being admitted to an assisted living facility was shown the signature pages of two agreements on an iPad and asked to sign them for her mother. She did so. One was an arbitration agreement that stated at the top of each page “NOT A REQUIREMENT FOR ADMISSION – READ CAREFULLY.”

When her mother died, allegedly due to negligent care, the executor of the estate sued. The facility asked the Trial Court to stay the lawsuit and compel binding arbitration under the agreement. The judge, however, determined that based on an affidavit by the admitting daughter, the facility never showed her the pages of the agreement stating that she was waiving her right to legal remedies in court and agreeing to arbitrate, and therefore the parties didn’t mutually agree to arbitration as required for such contracts to be enforceable. The judge also decided that the arbitration agreement was inconsistent with language in the separate admission contract that waived the parties’ right to a jury trial but pointedly reserved their right to a bench trial before a judge. He reasoned the arbitration agreement was fatally ambiguous when paired with a contract allowing for bench trials, and therefore was not enforceable.

Two members of the three-judge panel agreed that the facility’s failure to show the daughter, or discuss, critical language in the arbitration agreement’s previous pages was fatal to its enforcement and that the language in the two agreements could not be reconciled. For both reasons, the Court of Appeals affirmed the judge’s refusal to order arbitration.

The third judge, Judge John Tyson, issued a lengthy dissent extolling the virtues of precedent that essentially says if you sign a contract, you’re charged with knowledge of all its provisions. It is truly established law that you don’t get out of a contract by claiming you didn’t read it. Additionally, Judge Tyson argued, the language reserving a bench trial in the admission agreement and the language in the arbitration agreement barring all litigation options could be reconciled because the arbitration agreement was not mandatory; therefore, if the patient didn’t sign the arbitration agreement, the parties could seek a bench trial under the admission agreement.

Judge Tyson issued a sweeping indictment of the decision: “The majority’s opinion ignores fundamental principles and interpretation of contract law, disregards our nation’s and our state’s public policies in favor of arbitration, and misapplies the de novo standard of review to affirm the trial court’s order.” The dissent provides a right of automatic appeal to the Supreme Court.

One might argue that the effect of this case is limited to the factual scenario that raised the question: showing a patient’s legal representative only the signature page of a contract, and on an electronic device no less. But those of us who cheer erosion of pro-corporate waivers tucked into contracts designed to waive consumers’ rights without them realizing it should see new room to maneuver if the Supreme Court upholds this decision.

Now, every fact about how the agreement was presented and discussed with the consumer, if at all, and in particular disclosure of an arbitration agreement contained within it, could be crucial in determining whether litigation rights were truly waived.

Regardless of the outcome, always beware of lurking arbitration clauses when signing any contract, but particularly admission documents to assisted living and skilled nursing facilities. They exist to tie your hands in advance.


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