Enforceability of Senior Living Facilities’ Arbitration Agreements Remains a Hot Issue in Florida’s Appellate Courts

Arbitration is thought to be a way to resolve disputes more quickly and without the burdens of litigation and appeals in court proceedings. More than 10 years ago, assisted living facilities and nursing homes in Florida began including arbitration agreements among the admissions documents new residents are required to sign. But judging from the seemingly endless litigation over their enforceability, these arbitration agreements have done anything but streamline litigation against such facilities.

Early versions of their agreements not only sought to prevent litigation through the court system, but also to preclude residents from taking advantage of some of the remedies available under the Florida Nursing Home Residents Rights Act, Florida Statutes § 400.01 et seq., and the Florida Assisted Living Facilities Act, Florida Statutes § 429.01 et seq., by including punitive damages waivers and caps on non-economic damages. But appellate courts have generally found such waivers unenforceable – particularly with regard to punitive damages. E.g., Romano v. Manor Care, Inc., 861 So. 2d 59 (Fla. 4th DCA 2004); Alterra Healthcare Corp. v. Estate of Linton, 953 So. 2d 574 (Fla. 1st DCA 2007).

Nonetheless, senior facilities apparently continue to believe arbitration offers advantages to them over litigating in the court system, and they continue to require residents to sign arbitration agreements. Perhaps for the same reasons, lawyers for injured residents continue to believe that proceeding in arbitration disadvantages their clients, and continue to challenge enforcement.

A decision by the Florida Supreme Court in one of those challenges, Laizure v. Avante at Leesburg, No. 10-2132, which is expected soon, could have potentially major ramifications. The main issue in Laizure is whether a resident’s agreement to arbitrate claims is binding on his/her estate when the estate brings a wrongful death claim against the facility.

In October 2010, the 5th DCA ruled that an estate’s wrongful death claim is derivative of care given to and injuries suffered by the resident, so the resident’s agreement to arbitrate is binding on his/her estate. But the court certified the issue to the Florida Supreme Court as a question of Great Public Importance, and the Supreme Court agreed to hear the case. The petitioners also argue that the arbitration agreement is unconscionable.

In the meantime, Florida’ District Courts of Appeal continue to confront challenges to arbitration agreements on other bases. Three decisions in such cases were handed down last week, with mixed results.

Successful Challenges to Signatory Authority

Both the Second and Fourth District Courts of Appeal ruled in favor of plaintiffs who challenged the ability of the signer to bind other parties.

In Estate of Irons v. Arcadia Healthcare, L.C., No. 2D10-5712 (Fla. 2d DCA Aug. 5, 2011), the 2nd DCA refused to enforce an arbitration agreement because a nursing home resident’s daughter, who signed the arbitration agreement on her behalf, lacked authorization to enter into the agreement. The court concluded that the power of attorney (PoA) through which the resident appointed her daughter as her “healthcare surrogate” did not authorize her daughter to bind her to an arbitration agreement.

Although the PoA authorized her daughter “to make all health care decisions” for the resident, the resident remained “liable for signing admission or treatment papers for my health care, as I alone shall be responsible for such costs.” The 2nd DCA noted that courts must strictly construe the language of a PoA, and that a person’s attorney-in-fact can’t bind him/her to an arbitration agreement unless the PoA confers that power on the appointed person.

The PoA, the court explained, granted powers that related exclusively to healthcare decisions, not managing the resident’s property or legal claims. “We can say that the POA authorized Mrs. Springer to make health care decisions for her mother. The language of the POA, however, supports no conclusion that Mrs. Irons intended to authorize her daughter to act for her in matters related to her property rights or potential litigation with health care providers.” As such, she lacked the ability to sign the arbitration agreement on her mother’s behalf.

The Fourth District in LePisto v. Senior Lifestyle Newport L.P., No. 4D10-16 (Fla. 4th DCA Aug. 3, 2011) also refused to enforce an arbitration agreement based on a relative’s inability to represent the resident’s interests in signing the agreement. But in LePisto, the defect stemmed from the structure of the agreement rather than from limitations in a PoA.

In that case, in the admissions agreement (to which the arbitration agreement was an addendum), the resident’s wife “agree[d] to act as the ‘Financially Responsible Party’ and/or…the ‘Resident’s Representative.’” But she signed the arbitration agreement in the space designated for the “Financially Responsible Party” only, not the space designated for the “Resident’s Representative.”

Thus, the 4th DCA concluded, she agreed to arbitration only on her own behalf in her capacity as the “Financially Responsible Party.” Because she didn’t sign in her capacity as her husband’s representative, he wasn’t bound by the arbitration agreement. As such, the assisted living facility could not compel him to arbitrate claims relating to injuries he suffered while a resident.

An Attempt to Void for Unconscionability Falls Short

In FL–Carrollwood Care, LLC v. Gordon, No. 2D10–5751 (Fla. 2d DCA Aug. 5, 2011), however, the 2nd DCA found an arbitration agreement was not unconscionable, and enforced it over the objection of the estate of a former resident. The court rejected the contention that the arbitration agreement’s silence as to punitive damages meant that it precluded such damages, so it wasn’t unconscionable on that basis.

Although the agreement limited noneconomic damages to $250,000 and limited the resident’s ability to obtain discovery, the court questioned whether those limitations alone could render the agreement unconscionable. It noted however, that they did not preclude enforcement of the agreement, because an arbitrator could sever those portions of the agreement if it deemed them unconscionable.

Implications?

What do these decisions mean for Laizure? Probably very little. Prior to Carrollwood, I didn’t think the petitioners’ unconscionability argument was likely to prevail, especially after the U.S. Supreme Court’s Concepcion decision (which I’ve covered previously) gave state courts good reasons to hesitate before declaring arbitration agreements to be unconscionable. The 2nd DCA’s decision is in line with that thinking.

Perhaps the other two decisions might give hope to the petitioners, in expressing judicial hesitance to allow a representative to bind others to an arbitration agreement. But the question in Laizure is more about the nature of a wrongful death cause of action than anything. And just how the Florida Supreme Court will understand that cause of action remains to be seen.

However the Court rules, though, I expect that senior living facilities will continue to require residents to sign arbitration agreements, and that residents (and their families) will continue to contest those agreements enforceability.