The Long-Term Care Arbitration Act: S. 512 in the 111th Congress: Bringing Sandbox Lessons to Mainstream

March 9, 2009

Reintroduced by Senators Martinez, Kohl, Durbin and Feingold, the Fairness in Nursing Home Arbitration Act (the “Act”) is back on the Senate floor, almost. The Act applies to long-term care, not just nursing homes. Tabled in the 110th Congress, the Act was again referred for consideration to the Senate Judiciary Committee, Chaired by Senator Patrick Leahy. Following the Act through this committee will be difficult, because information on committee proceedings is notoriously opaque. Reports are vague and records are often indecipherable. The best that the long-term care industry can do at this point in the process is to contact Senators serving on the Committee to voice any concerns with the Act before Committee proceedings are finalized. As it is currently stated, however, the Act is not the end of the world for binding arbitration in the long-term care industry.

Purporting to “protect dispute resolution options for residents of nursing homes,” the Act appears to invalidate most existing arbitration clauses in residence and care agreements throughout the country. In relatively straight-forward language, the relevant part of the Act provides as follows:

‘(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.’.

Use of the term “long-term care facility” in the Act appears to incorporate virtually the entire senior care industry, including nursing homes, assisted living facilities, and continuing care retirement communities. The term “long-term care facility” is defined by the Act to be:

‘(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;

The Act purports to be a response to many complaints by residents, ombudsmen, and various other watchdog groups of facilities overreaching in what is typically a one-sided, vulnerable negotiation. The “wrong” being addressed is that long-term care facilities abuse their negotiation position during the admission process to “sneak” one-sided arbitration clauses into residence and care agreements. Residents, it is perceived, unwittingly sign away their “constitutional right” to have their dispute heard by an impartial judge or jury. If unchecked by the Act, proponents argue, the long-term care industry will be successful in immunizing itself from “events of abuse and neglect.” In typical legislative fashion; however, the Act provides a broad-brush “solution” that may adversely affect legitimate, arms-length alternative dispute resolution clauses. In short, the bad apple is being allowed to spoil legitimate, common sense principles of dispute resolution.

On its current face, however, the proposed Act does not appear to be the end of enforceable alternative dispute resolution. While it seems to take away all pre-dispute arbitration agreements, this draft of the Act also appears to give back those pre-dispute agreements which are otherwise allowed by federal law. In paragraph (d) the Act appears to incorporate the provisions of the Federal Arbitration Act (the “FAA”). Enacted in 1925, the specific language of the FAA has been all but whittled into obscurity by courts around the country, leaving the FAA to stand, in its simplest form, for fairness. If you boil away all of the case law interpreting the FAA, it comes down to fairness and equality. Upheld arbitration agreements are equal in scope (i.e., both sides are bound by the clause and both sides have equal access to the forum). Successful alternative dispute forums are mutually negotiated; adhesion clauses are generally stricken. In the end of the analysis, whether the proposed Act applies to the arbitration clause in your contract will turn on the issue of fairness. So, what have we learned since 1925? Once again, nothing other than what you learned in the sandbox as a child. Fair is fair, and fair will likely be upheld. Unfair is unfair, and unfair will likely get a bucket of sand dumped on your head.