Nursing Homes: The Battle Against Arbitration Continues

By: Donna Russo, Esq.
Some nursing agreements contain a provision requiring any disputes, including litigation for nursing home neglect and abuse, to resolved by arbitration rather than the right to a jury trial.  Arbitration is very restrictive, limits discovery and the dispute is decided by an arbitrator whose decision is binding.  Arbitration is favored by defense attorneys.
Plaintiffs’ attorneys do not want to be bound by an arbitration procedure and want full discovery and trial including the right to appeal.   Many times, the family of potential nursing home residents are presented with papers to sign on admission.  Due to the stress of the situation of placing a loved one in a nursing home along with pressure from the nursing home facility, the potential resident or his/her family members sign forms without reviewing them.  These forms can contain an arbitration provision.  The paperwork should be reviewed and the arbitration provision should be stricken.
Three recent decisions address these arbitration provisions.  In Hall v. Healthsouth Rehabilitation Hospital of Vineland et. als. Appellate Division (unpublished), July 16, 2013, A-2453-12T4, the Court was presented with an agreement containing an arbitration provision which was signed by the resident’s son.    Specifically, the husband of the resident signed his name on the line labeled as “Signature of Resident’s Legal Representative in his/ her Individual capacity[.]”   However, the husband did not sign his name on the line entitled “Signature of Resident’s Legal Representative in his/her Representative capacity.”  It is undisputed that the husband did not have a power of attorney from his wife nor had she been declared incompetent, and the husband had not been appointed as her guardian.  After being served with a complaint, the nursing home filed a motion to dismiss in lieu of an answer contending that the matter must be resolved by arbitration.  The husband contended that he lacked express or implied authority to bind his wife to the agreement.  The trial court denied the nursing home’s motion to dismiss and the Appellate Division affirmed.  The Appellate Division, citing the recent Supreme Court opinion in Oxford Health Plans LLC v. Sutter, ___ U.S. ___ (2013) [which held that certain gateway matters are presumptively for the courts to decide], ruled that the fact-dependent issues of whether the husband had authority to sign is to be decided by the trial court.  If the trial court decides that the husband lacked authority, the case will be civilly litigated and if not, the case will proceed with arbitration.
On August 14, 2013, the New Jersey Supreme Court issued its opinion in Cole v. Jersey City Medical Center,        N.J.        (2013), 2013 N.J. Lexis 830.  In this case, the parties proceeded civilly for twenty one months and conducted discovery and motion practice.  The Court addressed the issue of waiver of the arbitration requirement.  The Court acknowledged that arbitration is a favored means of dispute resolution and that an arbitration agreement is a contract subject to the legal rules governing the construction of contracts.   The Court held that waiver of a  contractual provision is never presumed but that parties may waive their right to arbitrate in certain circumstances which must be proven by clear and convincing evidence.  Waiver is the voluntary and intentional relinquishment of a known right.  The Court ruled that “The party must ‘have full knowledge of [its] legal rights and intend to surrender those rights” but that a party need not expressly state its intent to waive a right but a waiver can occur implicitly if “the circumstances clearly show that the party knew of the right and then abandoned it, either by design or indifference.” citing Knorr v. Smeal, 178 N.J. 169, 177 (2003).
The Cole Court held that a fact sensitive analysis must be undertaken by the court.”  The Court found:
In deciding whether a party to an arbitration agreement waived its right to arbitrate, we concentrate on the party’s litigation conduct to determine if it is consistent with its reserved right to arbitrate the dispute.  Among other factors, courts should evaluate: (1) the delay in making the arbitration request; (2) the filing of any motions, particularly dispositive motions, and their outcomes; (3) whether the delay in seeking arbitration was part of the party’s litigation strategy; (4) the extent of discovery conducted; (5) whether the party raised the arbitration issue in its pleadings, particularly as an affirmative defense, or provided notification of its intent to seek arbitration; (6) the proximity of the date on which the party sought arbitration to the trial date; and (7) the resulting prejudice suffered by the other party, if any.  No one factor is dispositive.  A court will consider an agreement to arbitrate waived, however, if arbitration is simply asserted in the answer and no other measure is taken to preserve the affirmative defense.
The Cole Court, applying these factors, concluded that the defendant engaged in litigation conduct that was inconsistent with its right to arbitrate.  Even if there is another party to the litigation who is not a  signatory, the party seeking arbitration cannot wait and must preserve the defense in its answer, move to compel arbitration in a timely manner, move to stay the judicial proceeding, or notify the other party to the arbitration agreement that its litigation conduct should not be considered a waiver of its right to arbitrate.
On August 29, 2013, the Appellate Division rendered its opinion (unpublished)  in Levonas v. Regency Heritage Nursing and Rehabilitation Center,et.als, A-4995-11T4.  The Appellate Division was presented with facts similar to Cole.  There was a thirty month delay in the nursing home seeking arbitration; the nursing home actively participated in the litigation.  The Appellate Division ruled that the defendant engaged in litigation conduct that was inconsistent with the right to arbitrate and the defendant waived its right to arbitrate.  The Court further held that “the court, not an arbitrator, has jurisdiction to address the threshold or ‘gateway’ question of agency.”