How Do Courts Handle Unenforceable Clauses in an Arbitration Agreement?

arbitrationThe determination of whether a nursing home abuse lawsuit is fought in court or through binding arbitration is often the very first fight in a long battle that many Maryland nursing home residents and their families face when trying to hold an abusive or neglectful nursing home accountable for their actions. Historically, nursing homes fare better when their claims are heard through arbitration. Thus, Maryland nursing homes do everything they can to get cases against them in front of an arbitrator.

Over the years, more and more nursing homes began to include arbitration agreements in their pre-admission paperwork. Often, these clauses are written in small print and included in the middle of large blocks of text. The idea being that the signing party will not take the time to thoroughly read through the entire document.

For a long time, courts were upholding these agreements based on the fact that they were signed. However, over the recent years, courts have been willing to intervene when arbitration agreements are either substantively unfair or were presented to the signing party in an unfair manner. However, arbitration contracts often contain a number of terms. And in some cases, a court will only take issue with a few of the terms in the overall agreement. In these cases, there is significant litigation over whether the whole agreement is invalid or whether the offending clause can be “severed” from the rest of the agreement. A recent case discussed this very issue.

Court Wrestles with “Severability” Issue in Recent Nursing Home Case

Recently, the estate of a woman who died while in the care of the defendant nursing home filed a case against the home. The woman, prior to her death, executed an arbitration agreement. Contained in that agreement was a choice-of-laws provision, indicating what laws would be applied by the arbitrator.

Specifically, the agreement stated that substantive Florida law would apply, as would Florida’s choice-of-remedy provision. This means that the actual laws being applied and the remedies available to the estate would be determined under Florida law. However, the agreement also stated that the Alabama rules of evidence would apply.

Under Alabama law, the estate would not be eligible for compensatory damages, and would only be able to recover punitive damages. However, in Florida the estate would be permitted to seek both types of damages. The plaintiff argued that by applying Alabama rules of evidence, all evidence tending to prove compensatory damages would be inadmissible as irrelevant, and thus it would be precluded from obtaining any compensatory benefits.

The court agreed, and determined that the choice-of-laws clause applying the Alabama rules of evidence was not enforceable. However, the court rejected the estate’s argument that the entire agreement should be voided. The explained that when making the determination of whether the whole agreement should be thrown out based on one enforceable clause, the court considers whether the clause went to the “very essence” of the agreement. Here, the court held that the choice-of-laws provision did not go to the very essence of the agreement, and only stated which laws would apply to the claim. Thus, the court upheld the arbitration agreement.

Is Your Loved One at Risk?

If you have a loved one in a Maryland nursing home, and you fear that they are not receiving the care and consideration that they need and deserve, contact the Maryland nursing home abuse and neglect attorneys at the law firm of Lebowitz & Mzhen, LLC. At Lebowitz & Mzhen, we have decades of experience standing up for the rights of Maryland nursing home residents, and fight aggressively on behalf of all of our clients’ rights to use the court system to resolve their claims. To learn more, call 410-654-3600 to schedule a free consultation today.

More Blog Posts:

Court Upholds Validity of Nursing Home Arbitration Contract in Recent Personal Injury Case, Maryland Nursing Home Lawyer Blog, published July 20, 2018.

Maryland Nursing Home Arbitration Clauses May Be Procedurally or Substantively Invalid, Maryland Nursing Home Lawyer Blog, published July 6, 2018.

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