Recent Tennessee Court Of Appeals Decision Offers Guidance For Drafting Arbitration Provisions In Nursing Home Contracts

Arbitration agreements between nursing homes and their

residents have long been permitted by Tennessee courts as long

as the agreements are not "unconscionable."†

Unfortunately, Tennessee courts have generally failed to define

what makes a nursing home admission agreement with arbitration

provisions unconscionable, and this absence of guidance has

left nursing home operators without a roadmap for drafting

arbitration provisions that will be enforceable.†

Fortunately, opinions rendered in a recent case before the

Tennessee Court of Appeals offer some insight into the judicial

process of determining whether arbitration provisions in

contracts between nursing homes and their residents are

unconscionable.

The opinions rendered by the Honorable Patricia J. Cottrell

and the Honorable Frank G. Clement, Jr. focused on three facts

that may ultimately determine whether an arbitration provision

in an admission agreement is enforceable or unconscionable:

The advance payment of arbitration fees

The compelling time constraint experienced by the

resident

The inability of the resident to revoke the arbitration

provision

With respect to arbitration fees in this case, the nursing

home admission agreement contract required the resident to

remit arbitration fees in advance of any proceedings she

commenced or abandon her legal remedies.† The contract

specified that the arbitration fees could be as high as

$18,000.† The opinions found this requirement to be

onerous when contrasted with the minuscule sum the resident

would have been required to spend to commence a civil action

seeking the same relief.† The opinions also held that the

resident's immediate need for nursing home care created a

compelling time constraint in her deciding whether to waive her

right to a jury trial, especially when considered in light of

her inability to revoke the arbitration provision.† The

opinions point out that Tennessee courts have been reluctant to

enforce arbitration agreements which have the effect of

requiring a patient to choose between forever waiving the right

to a trial by jury or foregoing necessary medical

treatment.† In order to reduce such time constraints and

to help establish the reasonableness of their contracts, the

opinions suggest that nursing home operators either move

arbitration provisions into a separate freestanding agreement

or include a reasonable period of time to revoke the

arbitration provision.

Of equal interest were the facts that the opinions did not

...