Florida Supreme Court Rules Courts Must Decide Whether Nursing Home Arbitration Applies - Shotts v. OP Winter Haven


December 12, 2011

As a Philadelphia injury lawyer, I often handle nursing home lawsuits in which the victim or a relative has signed an arbitration agreement with the nursing home. This is an agreement to settle disputes in a private version of the public courts we're used to, and it is often bad for the victim and family because it allows the nursing home some opportunity to "buy" the ruling it prefers or limit families' rights. As a result, many families are challenging these contracts, especially when they were signed under suspicious circumstances. In the Florida Supreme Court's Shotts v. OP Winter Haven, the family challenged the legality of a nursing home arbitration agreement, and the trial court allowed the arbitrator to decide whether the agreement was valid. The Florida Supreme Court reversed this, finding that the courts should decide whether to enforce such contracts.

Gayle Shotts was for many years the caretaker of her uncle, Edward Henry Clark, who suffered brain damage in a car crash in 1977. He later entered a nursing home, where he died in 2003. The opinion does not detail his death, but Shotts sued for wrongful death and the home moved to compel arbitration under an agreement Shotts signed on Clark's admission. The agreement required rules of the American Health Lawyers Association to be used; that no punitive damages could be awarded; and that any voiding of one provision would not void others. It also expressly said it would be governed by the Federal Arbitration Act. Shotts contended that the agreement was unenforceable because it violates Florida public policy, particularly the limitations on her remedies. The trial court granted the motion to compel arbitration, and the appeals court agreed that the contract was not unconscionable. It added that while the punitive damages portion could be unconscionable, arbitrators could sever it without nullifying the contract.

Shotts appealed. She argued that other Florida courts have found that courts, not arbitrators, must decide whether contracts are enforceable; and that other courts have found arbitration contracts unenforceable. The Florida Supreme Court agreed. Under its own precedent and other Florida precedent, it said, courts must decide whether a valid agreement to arbitrate exists -- even if arbitrators are permitted to decide on other issues of the contract. The high court cited with approval a concurring opinion in the Second District Court of Appeal, arguing that arbitrators should not make these decisions because of the power imbalance under which contracts are signed and the nursing home's ability to write itself a favorable contract. The high court noted that its decision conforms to that of most Districts. On the limitations of remedies, the court also agreed that they violate public policy, echoing several Districts. Some courts have even ruled against the specific limitations on punitive damages and which rules should be used.

Thus, the high court found that Shotts was correct to contend that the contract was unconscionable for violating public policy. Several provisions directly undermine the state Nursing Home Residents Rights Act, the court said. It ruled that any such arbitration contract is unenforceable. It then ruled that under Florida caselaw, the portions of the agreement that violate public policy are not severable, because they are fundamental to the contract. Two judges dissented, arguing that the Federal Arbitration Act should have been controlling and provided a different outcome.

As a Pennsylvania nursing home lawyer, I'm pleased with this outcome. Particularly in the analysis of the conditions under which nursing home contracts are signed, its analysis reminds me of the analysis in the West Virginia Supreme Court, which ruled this year that arbitration clauses in at least three nursing home arbitration clauses were unconscionable. As a rule, families place their loved ones in nursing homes because they cannot care for them at home anymore. Thus, they don't necessarily have the luxury of shopping around; they must make a decision quickly. In addition, most families don't have the legal background to read these arbitration agreements carefully, which means they may not fully understand what they're signing. This opens the door to allow nursing homes to face no repercussions from serious Pennsylvania nursing home abuse. As a Philadelphia medical malpractice lawyer, I hope other states take notice.

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