"The average nursing home claim amount in the United States shrank from $261,000 in 1998 to an estimated $116,000 in 2008, during a period when tort reform and arbitration increased, according to a 2009 Aon Corp study for the American Health Care Association, which represents 11,000 senior living and rehabilitation centers.

Part of the decline is attributed to the arbitration agreements.

'Settlements are less costly,' with arbitration, said Chris Coleianne, an actuary with Aon.

A 2009 Aon analysis of data from 2004 to 2008, based on responses from 11 providers, representing about 5 percent of nursing home beds in the country, found:

** The average payment in arbitrated cases was $91,000, compared to $138,000 in nonarbitrated cases, about 35 percent less.

** The nursing homes' legal costs were about $33,000, compared to $56,000 in nonarbitrated cases, about 41 percent less."

Typically, when a resident is admitted to a nursing home in New Mexico, she or a family member will be given between 40-80 pages of paperwork to review and sign. This paperwork includes such diverse things as consents for treatment; do not resuscitate orders; Medicare or Medicaid payment authorization forms; decisions about whether the facility or the family will do the resident's laundry; authorizations to release medical records, if necessary; decisions about whether or not the resident may be photographed; information about the facility's HIPAA policy; and what the actual contract between the nursing home and the resident entails: payment for meals, housing, and medical care, and the terms on which that contract may be terminated.

More commonly now, stuck in amongst these volumes of documents, are arbitration "agreements," where the resident or her family member "agrees" to binding arbitration to resolve any disputes of negligent care, including wrongful death or other personal injury suits.

It is very important to pay attention to the particular circumstances and particular language of the arbitration clause that is at issue in your case, because the defenses vary greatly. For example, sometimes the "arbitration agreements" are just single-paragraph clauses in the admission contract; other times, they are stand-alone, multi-page documents. Some are mandatory: required to be signed for the resident to be admitted to the nursing home. Others are "optional," with an opt-out provision or a statement that they can be rescinded within a period of time-for example, 30 days.

Sometimes the resident or family member signs the arbitration agreement while she is still hospitalized, before she has even been transported to the nursing home (At one local chain, it was the practice that a nurse liaison would go to the hospital and get the resident to sign three documents before she could be admitted: the consent for treatment, the Medicaid/Medicare Reimbursement form, and the arbitration agreement).

If the paperwork has not been completed before the resident is admitted, it may be signed at the same time the resident is admitted. Sometimes, however, it will not be signed until a few days later. Some admissions coordinators sit with the resident or family member while she is reviewing the paperwork, either reading it word-for-word or offering descriptions of each document. Others are performing other duties at the same time, coming in and out of the room. Others still just point to the specific places where the resident or her family member must sign. It is vitally important to know what circumstances your resident or her family members were in when they were presented with the arbitration clause.

Sometimes the admissions coordinator has a basic understanding of what arbitration is, and has had training on how to discuss arbitration agreements with family members or residents. Other times, the admissions coordinator-and often his or her supervisor-has no idea about the differences between arbitration and mediation, or the differences between arbitration and trial by jury. These are important things for you to know.

Rivera and Adkins highlight how vital a well-developed record is. Do everything you can to preserve your right to take discovery on these issues, and have an evidentiary hearing, if needed. In Rivera, Plaintiff's counsel requested the opportunity to conduct discovery and to have an evidentiary hearing, but the trial court denied that request. Unfortunately, that left him with virtually no record on procedural unconscionability, and the Court of Appeals used that as a basis to deny that argument. In contrast, in Adkins, the court allowed an evidentiary hearing on the issue of procedural unconscionability; when confronted with such an overwhelming record, the Court of Appeals affirmed the trial court's ruling.

There are eight defenses to arbitration clauses that are currently pending on appeal in the New Mexico Court of Appeals:

1  Lack of authority of the person signing the arbitration agreement

If the resident did not sign the arbitration agreement, who did? Does this person have a power of attorney or other designation of authority? What kind of POA is it? Is it only for healthcare decisions? Does it specifically grant the authority to litigate or make decisions regarding the resolution of disputes?

In Corum v Roswell Senior Living, Ct App No 28,314,[1] the resident's husband, who was not her power of attorney, signed the arbitration clause. The district court ruled that this was not a "health-care decision" as contemplated by the New Mexico Uniform Health-Care Decisions Act. In Barron v Evangelical Lutheran Good Samaritan Society, Ct App No 29, 707,[2] the resident said that her granddaughter could sign her admission "papers," but there was no evidence that the resident ever had any idea that an arbitration clause was contained in the papers. The district court ruled that the granddaughter's authority to admit her grandmother to the nursing home did not extend to signing an optional arbitration clause. The Court of Appeals proposed summary reversal, on the basis that authority to sign the "admission papers" necessarily extended to the authority to sign an optional arbitration clause. This case is now on the general calendar.

2   Procedural unconscionability

This defense is most often available when the resident herself signed the arbitration agreement, but the fact that someone else may have signed it does not necessarily mean that you cannot raise this defense. Often in these cases, there will be issues regarding the person's health, mental status, level of education, medications, etc. (See Adkins)-Neither Cordova and Fiser actually addressed procedural unconscionability, but both helped establish a continuum of unconscionability. In Coca v Vida Encantada, Ct App No 29,824[3], there was a nine-hour evidentiary hearing, including expert witness testimony, on an arbitration clause signed by a resident who was experiencing a significant cognitive decline, and was admitted to the nursing home directly from the hospital. The district court determined that the circumstances surrounding the signing of the contract were procedurally unconscionable. In Strausberg v Laurel Healthcare Providers, Ct App No 29,238,[4] the district court determined that an arbitration clause signed by a woman who had a master's degree and worked for the Air Force, while hospitalized on pain medications, was not procedurally unconscionable.

3  Substantive unconscionability

Cordova broadened the definition and explicitly overturned the language from Guthmann characterizing an unconscionable contract as one 'such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other'".  Cordova, 2009-NMSC-021, ¶ 31 Rivera, of course, attempts to narrow it.

In nursing home arbitration clauses, it is fairly common to see language about the resident having to litigate disputes related to care, but the facility retains the right to sue over collections. We have argued that this is substantively unconscionable under Cordova. This issue is on appeal in two cases, both of which have the same language: Strausberg (decided pre-Cordova), and Chavez v Laurel, Ct App No ____(decided post-Cordova)

Another aspect of unconscionability relates to the terms of the procedure required for arbitration: how much does it cost? What limitations, if any, are there on the discovery? Limitations on the right to appeal? Are there limitations on the award? Many nursing home arbitration clauses specify the AHLA, which can cost approximately $40,000 for just a one-week arbitration hearing-to get the privilege of a defense attorney hearing your case and deciding what, if anything, you should be compensated. This issue is on appeal in Zuckerman v Valle Norte, Ct App No _____,[5] where the district court determined that the AHLA procedures and costs rendered the arbitration clause substantively unconscionable.

4   Consideration

The CMS and NM DOH have said that a nursing home may not discharge a resident for not signing an arbitration agreement. This raises two questions: (1) what is the consideration for the agreement to arbitrate? and (2) does the nursing home have a duty to tell this to the resident's family? Often, the family believes that signing it is required, whether or not the facility would actually go through with discharging their family member if it is not signed. This is an issue raised and briefly addressed in Corum, but not used as a basis for the district court's ruling.

5   Wrongful death beneficiaries bound?

We have also argued that the wrongful death beneficiaries cannot be bound to the contract signed before the person died, because the wrongful death beneficiaries could not be in existence or cognizable while the person was still alive. In Lawrence v Beverly Manor, 273 SW2d 525 (Miss 2009),the Missouri Supreme Court determined that a nursing home admission arbitration clause could not be enforced against the nursing home resident's wrongful death beneficiaries, holding that "the decedent's daughter was an agent for the purpose of securing residential treatment for the decedent during her lifetime, and nothing in the arbitration agreement can be construed to extend to new and independent causes of action[T]herefore[,]...Ms. Lawrence could not bind or limit any person who had a right of action arising by reason of her death at some point in the future." Lawrence, 273 SW3d at 526-27, internal quotation marks and punctuation omitted; emphasis added.  

New Mexico courts have consistently held that our Wrongful Death Act's purpose is to "compensate the statutory beneficiaries and to deter negligent conduct." Romero v Byers, 117 NM 422, 427, 872 P2d 840, 845 (1994). The Act "provides a cause of action for the benefit of the statutory beneficiaries to sue a tortfeasor for the damages ..." Id. at428, 846 (emphasis added and internal citations omitted).

This is an issue raised and briefly addressed in Corum, but it did not form the basis for the district court's ruling.

6   Capacity

This defense must be used carefully, because it is a higher burden of proof than the other defenses, and Defendants will always use it to attempt to make it easier to uphold the arbitration clause. Its factual basis is often intertwined with the issues of procedural unconscionability. In Coca, the court found that Plaintiff had established, by clear and convincing evidence, that the nursing home resident was suffering from a long-standing cognitive deficit, and the Defendants failed to show that she was experiencing a period of lucidity when she signed the arbitration clause.

7  Unavailability of arbitral forum

Often, the arbitration clause will name a particular arbitral forum-the NAF, the AAA, the AHLA. Recently, many of these organizations have said that they will not arbitrate these kinds of disputes. In July, 2009, the NAF was shut down by the Minnesota AG and no longer arbitrates consumer disputes. The AAA has also said it will not arbitrate them under its Consumer Arbitration rules. The AHLA will only arbitrate personal injury disputes if there is a post-dispute agreement to arbitrate, or if a judge orders them to do so.

We argue that this means that the choice of arbitrator was integral to the agreement, and the court cannot reform the parties' agreement. This issue is being briefed in Barron, but arose after the district court issued its ruling It was also raised in the petition for rehearing in Rivera, which the Court of Appeals denied.

8  Waiver

If a party does not invoke an arbitration clause until litigation is fully underway, it can be deemed to have waived any right to compel arbitration. In Zuckerman v Valle Norte, Ct App No _____, the district court determined that the Defendants had waived their right to compel arbitration when they waited until 5 months after the suit was filed, participated in the Rule 16 scheduling conference, and discovery was well under way.

Other issues

Defendants often attempt to argue that certain defenses must be heard by the arbitrator, and not the court. A recent memorandum opinion from the Court of Appeals, referencing an earlier case, Murken v Deutsche Morgan Grenfell, 2006-NMCA-080, reaffirms that in most cases, this is not correct. In Tafoya, the district court granted the Defendants' motion to compel arbitration, and included the following statement:

"The arbitrator will decide whether or not the agreement to arbitrate is enforceable."

The Court of Appeals proposed Summary Reversal. In its Memorandum Opinion, the Court reiterated that "New Mexico law dictates that the court, not the arbitrator, shall determine whether an arbitration clause is valid."

______________________________________________________________________________________________________

[1]  This case is on the general calendar It has been fully briefed and is awaiting a ruling