Nursing home decision offers ‘path’ for challenging arbitration agreements

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PROVIDENCE, RI — Nursing homes commonly include mandatory arbitration agreements in the paperwork they have new patients sign, but the practice is increasingly the target of court challenges across the country. Much of the criticism centers on how the facilities obtain the signatures from ailing patients or their proxies, who are often vulnerable family members.

A recent Superior Court decision, Baker, et al. v. Pawtucket Skilled Nursing and Rehabilitation, LLC, et al., show the case law established by one state – in this case, Rhode Island – on the divisive subject. Last month, a judge denied a nursing home’s motion to compel arbitration of a wrongful death suit filed by the deceased resident’s family.

Kathleen Fonseca had signed an arbitration agreement the day after she was admitted to Pawtucket Center in September 2013 to recover from hip surgery. After she died that November, her daughter and estate administratrix, Kristen Baker, filed a wrongful death case against Pawtucket Center, its corporate parent, Genesis HealthCare, and several related corporate entities. Fonseca’s husband, Amadeu, joined the case with a loss of consortium claim.

In ruling for the plaintiffs, the judge found that the evidence they presented showed that Fonseca lacked the mental capacity to enter into a binding arbitration agreement on the date she signed the document. Moreover, the nursing home employee who gave Fonseca the paperwork and directed her to sign it had no legal or medical training.

Judge Richard A. Licht found that while the arbitration agreement did not appear to be unfair on its face, it was “unfair in its presentation.”

“In other words, while the Court does not believe that the Arbitration Agreement is substantively unconscionable, it does conclude from the evidence and testimony presented that it is procedurally unconscionable,” Licht wrote.

Cranston lawyer Laura J. Bottaro, who represented the plaintiffs, specializes in personal injury and nursing home litigation. She recently spoke about the ruling.

What were some of the challenges in litigating this case?

The first challenge was getting discovery, which Judge Licht granted on a limited basis, to determine the circumstances under which the agreement was presented, and also to understand Kathleen Fonseca’s medical condition at the time of the alleged signing.

The second challenge was in presenting the defenses to the arbitration agreement. Unconscionability is not always easy to prove. It is a claim that says the circumstances under which a person is asked to sign a contract were fundamentally unfair. It’s a whole totality of looking at who was present, when it was signed, and, in this case, Mrs. Fonseca’s mental and medical state at the time and what information she was provided.

In this case, Genesis HealthCare, the corporate defendant, had an employee who presented the agreement to Mrs. Fonseca, but who had no memory of presenting it to her. So what the court had to rely on was what the employee stated was her custom and practice in presenting agreements. In the end, we were able to show that, based on a Genesis employee’s custom and practice — at least as she testified — that the circumstances under which they were presenting all their patients with arbitration agreements were unfair.

Which arguments do you think had the most impact on how the judge ultimately ruled?

There were two. The first was expert testimony from Dr. Francis Sparadeo, an internationally recognized neuropsychologist, who stated that Mrs. Fonseca was cognitively impaired based on the totality of her medical history and the observations of family members who saw her the day the agreement was signed. Her medical history and her risk factors for cognitive impairment were important evidence, which demonstrated that she was unable to understand the nature and effects of what she signed.

The other strength of the evidence was that the circumstances of the signing created an unequal bargaining situation with a vulnerable, elderly woman. She was 67 years old and recovering from hip surgery just five days prior, was brought to the nursing home by ambulance, and was heavily medicated. She was put in a position where she was basically handed documents to sign.

The employee who obtained the patient’s signature on the arbitration agreement had no legal or medical training. How important do you think that was to Licht’s ruling?

It was very important to the ruling. As Judge Licht pointed out, [the employee] did not understand what arbitration meant. She was not trained in, and had no experience in, presenting arbitration agreements to patients. She could not explain the complexities of the kind of legal documents that she presented to Mrs. Fonseca in the case. She was not able to do that from a legal perspective.

The fact that she had no medical expertise also limited the employee because she would have no way of knowing whether Mrs. Fonseca was in a state by which she would have had the capacity to sign the agreement.

This is the other defense that Judge Licht said invalidated the agreement: that Kathleen Fonseca was cognitively impaired and could not understand the nature and effects of what she was signing when the agreement was signed.

What were some of the interesting legal issues that arose in the case?

One is that getting a patient’s signature to binding arbitration is fundamentally different and more important than obtaining the patient’s permission for basic things like salon care and cable television. The legal issue that the judge has pointed out here is that we have a fundamental right being affected, and arbitration agreements cannot be treated like other admission documents in a rote way where the employee fills in the blanks and hands the document to the patient to sign and moves on to the next document. It requires a more careful, detailed review and understanding of the impact of that agreement.

The other important legal issue that Judge Licht addressed is that unconscionability is a defense where procedurally the process of presenting a contract to someone, or the process of presenting the arbitration agreement to the patient here, is unfair based on the circumstances. The Rhode Island Supreme Court has never specifically stated the standard for unconscionability when it comes to arbitration agreements.