How Do Maryland Arbitration Clauses Work?

If you have ever read a contract closely, there is frequently a clause included that compels the parties signing the contract to arbitrate, rather than litigate, if a dispute arises. These clauses are most commonly known as arbitration clauses and are often included in all kinds of contracts because arbitration is often less costly and more expedient than a traditional lawsuit when it comes to dispute resolution. The inclusion of an arbitration clause in a contract, however, does not automatically mean it is valid and enforceable. In fact, sometimes, if the terms of the arbitration clause are particularly unfair, the court could determine that the arbitration agreement is unenforceable and invalid.

According to a recent state court opinion, some arbitration clauses contained in nursing home residency agreements may be unenforceable because of unfair terms. The court noted, however, that if the unfair terms are severable, or removable, from the agreement, the arbitration clause could still be enforced. To succeed on a claim that an agreement is unconscionable, or unfair, there must be a showing that the contract was made under deceptive or confusing circumstances for one party so that bargaining power was limited, and if the terms of the contract itself are significantly unfair to one party.

In the case at hand, several terms in the arbitration agreement were deemed “undoubtedly unconscionable” by the court. The unjust terms included a waiver of attorneys’ fees and costs, an inability to appeal, a limitation on discovery, a one-sided arbitration obligation, and a confidentiality provision.

The arbitration agreement, however, also included a severability clause. Because this severability clause held that if any portion of the arbitration agreement were to be deemed invalid, the remaining sections would not be affected. Because the court was able to successfully strike the unfair provisions, they held that the parties were still required to arbitrate because the arbitration agreement remained valid even after the unfair terms were removed.

How do you determine whether an arbitration clause is enforceable?

In Maryland, whether a nursing home arbitration agreement’s terms are enforceable similarly depends on whether the terms are unconscionable, or unfair. To determine unconscionability, the clause must be both procedurally and substantively unconscionable to be held invalid. A procedurally unconscionable clause means a clause is unfair on the basis of hidden fine print, purposefully unclear or convoluted language, or a significantly imbalanced bargaining process in the course of forming the agreement. On the other hand, substantive unconscionability focuses on the actual language of the clause and whether the terms are actually significantly unfair to one party or severely favorable to the more powerful party.

Do You Need a Maryland Nursing Home Attorney?

If you or someone you love may have been roped into an unfair requirement to arbitrate because of an unjust arbitration clause within a nursing home residency agreement or similar contract, contact the attorneys at Lebowitz & Mzhen today for assistance. Our lawyers have years of experience fighting for the injured and will work to provide you with the legal expertise, advice, and support you need to proceed with your claim with ease. To schedule an initial consultation with a member of our team today, contact us at 800-654-1949.

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