David Randolph Smith

Arbitration Agreement in NHC Nursing Home Contract
Held Unenforceable

Raiteri ex rel Cox v. NHC Healthcare/Knoxville, Inc.,2003 WL 23094413, (Tenn. Ct. App. December 30, 2003) the Court of Appeals held in a wrongful death nursing home negligence case that the trial court erred in granting a motion to compel mediation and arbitration pursuant to the dispute resolution procedures contained in the defendant’s nursing home admission agreement.The agreement was signed by the patient's husband, although the wife had not been adudicated incompetent. The agreement waived a jury trial and provided for arbitration. The court discussed both Buraczynski v. Eyring, 919 S.W.2d 314, 318 (Tenn. 1996) (which upheld an arbitration agreement) and Howell v. NHC Healthcare-Fort Sanders, Inc., 109 S.W.3d 731, 733 (Tenn. Ct. App. 2003) (that refused enforcement of arbitration), noting that Howell refused to order mediation or arbitration based upon a determination that the NHC admission agreement was unenforceable because (1) the patient’s husband could not read and (2) the admissions coordinator failed to explain that by signing the agreement he was waiving his wife’s right to a jury trial. Id. at 735.The Eastern Section Court appeals affirmed the trial court in Howell because the nursing home “ha[d] not demonstrated that the parties bargained over the arbitration terms, or that it [sic] was within the reasonable expectations of an ordinary person.” The Court further explained the Howell holding: "We held in Howell that the party seeking to enforce an alternative dispute resolution agreement must show that the parties “‘actually’ bargained over the arbitration provision or that it was a reasonable term considering the circumstances.” Id. at 734 (quoting Brown v. Karemor Int’l, Inc., C/A No. 01A01-9807-CH-00368, 1999 WL 221799, at *3 (Tenn. Ct. App. M.S., filed April 19, 1999). The Court in Raiteri, however, struck down the NHC agreement not simply because the husband (rather than wife signed) but because the agreement was a contract of adhesion.

  • "We find persuasive the plaintiff’s arguments that Mr. Cox did not have the express or apparent authority to sign the admission agreement for his wife and that the alternative dispute resolution provisions are otherwise unenforceable. We will address the latter of these two arguments first. We hold that the admission agreement in the instant case is a contract of adhesion because the admissions coordinator offered it to Mr. Cox on a take-it-or-leave-it basis, i.e., Mr. Cox had to sign the agreement as written or his wife would not be admitted. See Eyring, 919 S.W. 2d at 320. Mr. Cox, as the weaker party, was not afforded an opportunity to bargain over the terms of the agreement. He certainly had no opportunity to bargain over the mediation and arbitration provisions. He was handed a form contract, under, what was for him, very trying circumstances, i.e., his need to quickly find accommodations for his ailing wife. It is clear he had two options: sign the form contract as presented to him by the defendant, thereby clearing the way for his wife’s admission to the defendant’s facility or refuse to sign the contract and thereafter try to make arrangements for his wife’s shelter and related accommodations. This is a classic case of a contract of adhesion. Following the teachings of Eyring and Howell, we hold that the mediation and arbitration provisions are unenforceable. In so holding, we rely upon the following facts: unlike Eyring, the dispute resolution procedures in this case are a part of an eleven page contract dealing with many issues, including financial arrangements and consent to care, rather than being set forth in a separate stand-alone document; the dispute resolution procedures do not contain any type of “short explanation” encouraging patients to ask questions; essential terms in the mediation and arbitration provisions are “buried” and not clearly “laid out”; there are no provisions addressing how mediation and arbitration work; most significantly, the provision waiving a patient’s right to a jury trial isburied – and in no way highlighted – in the provisions; the dispute resolution procedures seem for choosing the arbitrator; and, unlike the arbitrationprocedures before us, including the provision waiving type, and color as the rest of the agreement."
  • "In summary, we hold that Mr. Cox did not have the actual or apparent authority to bind Mrs. Cox to the alternative dispute resolution provisions in the admission agreement. Furthermore, these provisions, especially the waiver of the right to a jury trial, are outside the reasonable expectations of a reasonable consumer, and, hence, unenforceable. Following Eyring and Howell, we hold that the trial court erred when it decreed that the mediation and arbitration terms were enforceable. Therefore, we conclude that the judgment below must be reversed. In view of our holding, we do not find it necessary to reach the plaintiff’s argument based upon her interpretation of 42 U.S.C. § 1396r(c)(5)(A)(iii) and 42 C.F.R. §§ 483.12(d)(3).