A Summary of Nancy Reynolds’ Recent Presentation
Nancy Reynolds, Esq. presented with Donna Fudge, Esq., Fudge Broadwater, PC; and James Haines, Esq., of American HealthCare, LLC on the topic of “Drafting Effective Arbitration Agreements That Will Withstand Attack” at the ACI Long Term Care & Senior Care 9th Annual Forum in Miami on January 24. The program contained valuable information summarized below.
According to the Federal Arbitration Act (FAA), which pre-empts state law, arbitration agreements are valid, irrevocable and enforceable, except for reasons that exist for revoking any contract. The challenge is creating an arbitration agreement that cannot be revoked by controlling contract law. That law is typically state law, and many state courts loathe arbitration agreements.
Learning from the successful challenges to arbitration agreements, the “must have” components of these agreements include specification of the laws governing the agreements.
- The FAA and any state laws that are favorable to arbitration should be identified as controlling.
- The requirement that all disputes be referred to the arbitrator should be included to prevent state courts from carving out disputes, allowing them to prevent arbitration.
- The agreements should be in plain language and explained clearly to the resident and responsible party, with a certification signature line affirming that the agreement was explained and understood.
- An immediate or limited-duration revocation clause can be included to avoid claims that the agreements are one-sided.
- The fact that a jury trial is waived should be in highlighted type to ensure that waiver of a jury was apparent.
- State law damages caps should be included by language incorporating generally state substantive law on damages.
- Third party beneficiary language can be included to make the resident and family members third party beneficiaries to the agreement, thereby avoiding claims related to improper execution or nonaccrual of claims.
- The nature of the claims that are subject to the arbitration agreement, such as all negligence claims, should be spelled out in detail to avoid challenges that the type of claim asserted is not covered by the agreement.
The most successful challenges to arbitration agreements are based on execution deficiencies. When the agreement is signed by a person without authority, state courts have found them almost consistently unenforceable. This means that communities must be diligent in ensuring the correct person is signing the documents. If the wrong person signed for the resident, the documents should be re-executed by the person with authority. Further, training of admissions personnel is essential to protecting the validity of the arbitration agreements. Having a third party beneficiary clause may not defeat a claim that the agreement was void at its inception.
While we have learned from litigation on arbitration agreements, the landscape changes with each new challenge. We still need to focus on the execution of the agreements and how to fine-tune that process.
If you have questions about arbitration agreements, contact Nancy Reynolds at email@example.com or (540) 983-7605.
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