UPDATE – January 2017: The ban on mandatory arbitration agreements has been temporarily blocked. U.S. District Judge Michael Mills, who sits in the Northern District of Mississippi, granted a preliminary injunction, which keeps the rule from being implemented. Martinson & Beason, P.C. will continue to monitor the status of the rule as it makes its way through the court system.
Nursing home patients and their families won a major victory Wednesday when the Department for Medicare and Medicaid Services banned arbitration clauses in nursing home agreements for all nursing homes that receive federal funds. The decision will allow nursing home victims of elder abuse, sexual abuse, wrongful death, and other forms of mistreatment to pursue justice in a court of law, rather than being relegated to secretive arbitration. Admitting a family member into a nursing home is often an extremely stressful time, and families rarely have the chance to negotiate the binding arbitration provision in the admittance contract.
An arbitration agreement is a contractual provision between a consumer and a corporation where the parties agree to settle any potential legal disputes in a private proceeding with limited recourse. In contrast to the regular court system, arbitration settlements are kept confidential and parties do not have the right to appeal. Arbitration also allows a company to keep embarrassing and potentially costly mistakes and practices from being heard by the public. It is a system favored by many corporations that prevents a consumer access to the court system.
Consumers often agree to binding arbitration without knowing they are giving up important legal rights. Arbitration agreements are often embedded in form contracts where the consumer has little opportunity to bargain or negotiate the terms of the agreement. In recent years, however, pushback from consumer and patient’s rights groups has led to some important reforms. The Consumer Protection Bureau is currently considering a rule to ban arbitration agreements in certain circumstances for financial institutions, including credit card companies.
The nursing home rule change was made by the Centers for Medicare and Medicaid Services, a division of Health and Human Services, and does not require congressional approval. We should point out that the new ban on arbitration clauses could potentially be subject to lawsuits, but until that happens, the new rule will take effect in November. As an additional consideration, the rule against arbitration agreements will only apply to nursing home admittances after November. Prior cases of abuse are likely still subject to a binding arbitration agreement.
Under the current system, even flagrant and egregious nursing home abuse is still subject to the arbitration agreement. The New York Times recently identified two incidents, one in which a nursing room resident was strangled by a roommate, and another involving death from a head wound, where the victim’s family still had trouble accessing the courts.
Arbitration agreements are favored by corporations in many industries including insurance, banking, consumer lending, mobile phone services, nursing homes, auto sales, and a number of others, as a way to avoid costly litigation. Many companies say arbitration is also a time effective alternative to court. However, arbitration sessions often take place with an arbitrator chosen by the corporation. They sometimes even take place at the company’s or their attorney’s offices – not exactly a level playing field for consumers.
The new rule banning arbitration agreements for nursing homes that receive federal funds restores nursing home victims and their families their fundamental right to present their case in court. If you or a loved one has suffered abuse while in a nursing home, you deserve to have your case heard. Our attorneys at Martinson & Beason have extensive experience handling these types of claims and will work tirelessly in seeking justice. Contact us today for a free case evaluation.