The Fight Against Mandatory Pre-Dispute Civil Arbitration Goes On

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An unprecedented legislative fight against mandatory, pre-dispute arbitration clauses has taken a new turn as the Senate Judiciary Committee approved bill S2838, the Fairness in Nursing Home Arbitration Act. Earlier in July, the House Judiciary Committee approved HR6126, a bill with the same title.

These initiatives follow in the footsteps of the far reaching bill called “Fairness in Arbitration Act”, which would just about ban any form of civil arbitration. To be clear, arbitration itself would not be banned; pre-dispute mandatory arbitration agreements would.

These bills prohibiting mandatory arbitration are short, to the point, merciless. To begin with, the bill would affect public, not-for-profit, and proprietary nursing facilities. Any form of pre-dispute arbitration agreement would “not be valid or specifically enforceable”. If the bill passes, recent federal case law would not apply as the bill impedes arbitrators from determining whether a valid agreement to arbitrate exists. Furthermore, parties may challenge the clause, or the entire contract containing it in a court of law, or both, because the goal is to end mandatory arbitration.

These legislative initiatives make one point abundantly clear: no more mandatory arbitration.

To amend chapter 1 of title 9 of United States Code with respect to arbitration. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Fairness in Nursing Home Arbitration Act'.

SEC. 2. DEFINITIONS.

 

Section 1 of title 9, United States Code, is amended—

(1) by striking the section heading and inserting the following: Sec. 1. Definitions';

(2) by inserting before the first beginning quotation mark, the following: (a) As used in this chapter, the term (1)';

(3) by striking `Maritime' and inserting `maritime';

(4) by striking `jurisdiction;' and inserting `jurisdiction; (2)'; and

(5) by striking the period and inserting the following: `; (3) `long-term care facility' means—

(A) any skilled nursing facility, as defined in 1819(a) of the Social Security Act;

(B) any nursing facility as defined in 1919(a) of the Social Security Act; or

(C) a public facility, proprietary facility, or facility of a private nonprofit corporation that—

(i) makes available to adult residents supportive services to assist the residents in carrying out activities such as bathing, dressing, eating, getting in and out of bed or chairs, walking, going outdoors, using the toilet, obtaining or taking medication, and which may make available to residents home health care services, such as nursing and therapy; and

(ii) provides a dwelling place for residents in order to deliver such supportive services referred to in clause (i), each of which may contain a full kitchen and bathroom, and which includes common rooms and other facilities appropriate for the provision of supportive services to the residents of the facility; and

(4) `pre-dispute arbitration agreement' means any agreement to arbitrate disputes that had not yet arisen at the time of the making of the agreement.

(b) The definition of `long-term care facility' in subsection (a)(3) shall not apply to any facility or portion of facility that—

(1) does not provide the services described in subsection (a)(3)(C)(i); or

(2) has as its primary purpose, to educate or to treat substance abuse problems.'

SEC. 3. VALIDITY AND ENFORCEMENT.

Section 2 of title 9, United States Code, is amended—

(1) by striking the section heading and inserting the following:

Sec. 2. Validity and enforceability';

(2) by striking `A written' and inserting `(a) A Written';

(3) by striking `, save' and all that follows through `contract', and inserting `to the same extent as contracts generally, except as otherwise provided in this title'; and (4) by adding at the end the following:

(b) A pre-dispute arbitration agreement between a long-term care facility and a resident of a long-term care facility (or anyone acting on behalf of such a resident, including a person with financial responsibility for that resident) shall not be valid or specifically enforceable.

(c) This section shall apply to any pre-dispute arbitration agreement between a long-term care facility and a resident (or anyone acting on behalf of such a resident), and shall apply to a pre-dispute arbitration agreement entered into either at any time during the admission process or at any time thereafter.

(d) A determination as to whether this chapter applies to an arbitration agreement described in subsection (b) shall be determined by Federal law. Except as otherwise provided in this chapter, the validity or enforceability of such an agreement to arbitrate shall be determined by the court, rather than the arbitrator, irrespective of whether the party resisting the arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.'.

SEC. 4. EFFECTIVE DATE.

This Act, and the amendments made by this Act, shall take effect on the date of the enactment of this Act and shall apply with respect to any dispute or claim that arises on or after such date.

To begin with, the larger “Fairness in Arbitration Act” seems to be on hold. It appears that proponents of banning mandatory pre-dispute clauses across the civil law board feel that the war should be fought fighting smaller battles; probably not a bad domino-style strategy. Whether this approach produces the desired domino effect remains to be seen.

Why these bills? Senator Herb Kolh (D-Wis), sponsor of the bill, explains it: "Our goal is to protect, residents and families from being forced to make a critical decision about their legal rights during the stressful and emotional process of admission into a nursing facility, at which time families are focused solely on finding their loved one the best possible care and not on the legal technicalities of arbitration".

“To protect” is our bold type. Protect from what?: abuse, plain and simple. Many in the US feel that civil arbitration schemes are one-sided, that “consumer contracts carry within them the seed of abuse” (Appeals 9th Circuit). There is complex federal case law establishing doctrine regarding substantive/procedural abuse in consumer contracts, doctrine designed to become rules of thumb, a never ending fight for equity between unequal parties. Are they so unequal?

Nursing homes fear runaway legal costs, skyrocketing insurance premiums, punitive damages, class actions, as do most businesses providing services to consumers in the US. Do away with it all through arbitration. In their zeal to protect themselves, nursing homes –and businesses in general providing services to consumers—fall for arbitration schemes that “deny citizens their constitutional right to their day in court, before a jury of their peers”, or so proponents of these bills argue.

What about consumer greed? Forbidden in most of Europe, contingency fees are a well-established reality in the US. It is also true that many citizens in this country –the better part of them—would not be able to press legitimate rights otherwise, the cost of civil litigation being so staggering. By no means are we suggesting that Trial Lawyers are at fault, nor consumers, nor businesses, but jury awards are oftentimes shocking, disproportionate, scary. Between the three they have, however, managed to tie a Gordian knot much too tight to undo barehanded.

The fact remains that these bills do not tackle underlying issues, nor resolve them at all. These bills intend to turn the table around 180 degrees and feel more like “my turn”. The playing field is not leveled by these bills. Businesses simply are made to play uphill facing west in an afternoon match. No sunglasses either. However, to play in this strange new field, consumers will have to pay Hamptons-size country club fees.

Lastly, what are insurance companies saying? Probably “ooops”, and that means “ouch” for consumers and business alike.