Judge Finds Nursing Home Arbitration Agreement Unconscionable

On October 3, 2014, Judge Jeffrey K. Sprecher of the Berks County Court of Common Pleas found that an arbitration agreement ManorCare nursing home made a resident’s family sign was unconscionable because it was a one sided “adhesion contract” and violated public policy. See Hendricks v. Manor Care, Civil Action No. 13-2028 (2014) Order dated August 25, 2014.

The case arose from an incident that occurred on January 5, 2013. ManorCare nursing home resident, Ms. Brown, was found lying in bed with blood on her hands and pillowcase. A nurse’s aide reported that another nurse’s aide had hit her on the arm and thrown a can of shaving cream at her face, hitting her above the eye.

As a result of this incident, Plaintiff’s estate filed a lawsuit against ManorCare nursing home and its owners in Berks County Court of Common Pleas. The Complaint contained counts for negligence, negligence per se, battery, negligent hiring and negligent retention.

The nursing home defendants filed preliminary objections to the Complaint seeking, among other things, to dismiss the lawsuit and enforce a binding arbitration agreement signed by Ms. Brown’s daughter.

Facts of record showed that Ms. Brown had independently checked herself into the facility and signed some, but not all, necessary paperwork. Ms. Brown’s daughter signed the remaining paperwork, including the arbitration agreement the next day. Ms. Brown’s daughter did not have power of attorney. Further, Ms. Brown did not direct her daughter to sign on her behalf.

Judge Sprecher found that Ms. Brown’s daughter did not have authority to sign the agreement since she was never granted a power of attorney or given signing authority by anyone, including Ms. Brown.

Court Findings Void the ‘Unconscionable’ Contract

The Court further found the agreement to be unconscionable and therefore avoidable because it was an “adhesion contract.” An adhesion contract is a standard form contract prepared by one party, to be signed by the party in a weaker position, usually a consumer, who has little choice about the terms.

Judge Sprecher was critical of numerous provisions of the arbitration agreement produced by Manor Care. He denounced “misleading” provisions which portrayed arbitration as beneficial to anyone entering into the agreement.   Judge Sprecher found other provisions confusing, unduly favorable to the nursing home defendants and in violation of public policy.  In particular, Judge Sprecher rejected sections of the agreement that:

  • required claims to be filed with NAF – which no longer hears such cases;
  • portrayed the arbitration agreement as beneficial to anyone entering into the agreement;
  • were comprised of very long, confusing sentences;
  • barred future claims if not presented at the arbitration hearing;
  • misled the consumer on “benefits of arbitration” such as being fast and cheap
  • bound anyone remotely related to the parties to the contract forever;
  • provided for attorney’s fees against anyone who unsuccessfully challenged the enforcement of the agreement;
  • required confidentiality to protect the home from bad publicity;
  • required residents to give up fundamental federal and state constitutional rights to a trial by jury which is guaranteed by both the Seventh Amendment of the United States and The Pennsylvania Constitution without a full explanation of what they were forsaking.

Judge Sprecher also found the arbitration agreement to be procedurally unconscionable due to the disparity of the bargaining positions. The agreement was signed in an emotionally trying time where the daughter was not “entering into any agreement” but simply signing as a formality.

Conclusions Made by the Court

The Court concluded that “Arbitration may be fine for monetary issues in business transactions, but injuries caused intentionally or negligently in tort should not be the subject of routine arbitration unless both parties fully completed negotiated and agreed to the final terms. Unlike contracts where the issues are relatively clear and a breach can be easily identified, negligence issues are not so obvious.”

However, the Court clarified that it did not invalidate all nursing home agreements, just this particular agreement between these parties because it breached basic contract principals and due process.

Judge Sprecher’s ruling in Hendricks v. Manor Care is a significant step in the right direction for Pennsylvania nursing home consumers and residents. The case should be used as a valuable tool in the practitioner’s toolkit to fight against one-sided binding arbitration agreements.

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