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Nursing Home Arbitration: The Foreseeable Headache of Obtaining Your “Deciding” Arbitrator

August 23, 2013

Arbitration is here to stay.  If anything, arbitration of any number of potential disputes will become even more common as its use becomes more desirable to a particular industry that deems jury trials as not in their best interest.

And, it has and will continue to become even more common where one “contracting” party has the advantage of unilaterally demanding arbitration as an exclusive remedy for any dispute.  (I use the term “unilaterally demand” when two opposing parties truly do not hold equal bargaining power for the contract and rather, if one side wants any relationship with the other, the other gets to make all of the rules of the relationship.)

For example, if you have been paying any attention to the banking industry’s trends, you will find that almost every note and/or mortgage executed in the last 10-20 years, now requires any borrower to waive their right to jury trial and instead, accept binding arbitration for any dispute between the bank and the borrower.  Guess which party demanded that provision?  And, guess how many notes or mortgages were granted to any borrower who objected?

Nursing home issue disputes are presently, overwhelmingly, being referred to mandatory and exclusive arbitration for this exact reason.  Once the industry determined that jury verdicts were not, to them, objective enough, little by little the industry moved to demanding that any applicant for nursing home care, in their application/contract for care, also agrees to arbitration as their exclusive remedy for any dispute.  And, of course, a major number of these dispute/issues arising in nursing homes fall within the special environment of nursing home injuries and death.

Despite the one-sidedness of many types of contracts, and the clearly unequal bargaining positions of many parties to such contracts, our courts have still almost universally opted to enforce any written contract, where at all possible, citing the sanctity of a written contract as the rule where the parties had any option of almost any kind.

This inequality of contracting positions can be seen most clearly in nursing home contracts.  Not necessarily in its usual requirement of the waiver of jury trial, but rather in their total lack of uniformity of terms.  (It would seem some of these issues could be eased by legislation, but similar to the insurance industry, so far, Florida’s legislature has ducked any contractual uniformity.)  Most persons applying for care, or more commonly, applying for care for a loved one, rarely read all of the terms of their application/contract.  And, most, even if they read them do not/cannot really know how it really may affect them.  And, realistically, what choices do they often even have?

But the real trouble for lawyers, certainly in Florida, only begins with this mandatory waiver of jury trial by their client.  The real “headache” of nursing home mandatory arbitration is actually to be found in the general total lack of structure of most such contracts as to how the mandatory arbitration is to be accomplished?

And,  just who is really going to be “selecting” the likely ultimate “decider” of the dispute?

This lack of uniformity results in such agreements/contracts that can range from provisions for full adoption of the AAA (American Arbitration Association) arbitration rules and procedures, to merely stating (usually single arbitrator or panel arbitrator)  “Arbitration (undefined) as the exclusive remedy”, with literally no other procedures specified.  And every combination or lack thereof in between.

If you are lucky (some would say), adopting AAA procedures can be a very welcome place to find some structure of timing and procedure.  But, more often than not, there is no mention of AAA or any other governing structure in many nursing home agreements.  Thus, likely only general state arbitration laws apply.

Some states have clear procedures and even penalties for failing to follow the procedures.  In Florida, Florida’s Arbitration Code, Chapter 682, is quite succinct.  And, quite simplistic.  That can be good or bad, depending upon your arbitration issue.

The issue I call to your attention to consider today is the usual lack of timing requirements or procedural structure for opposing parties to actually “select” that arbitrator who will most likely decide their issue(s)!

Oh, there is a “structure” in writing.  It just does not work well in actual practice.

And, the default mode for both sides is that a Court (or some Third-Party) will likely be picking your deciding arbitrator, not you!

Here is the problem:

Once you are consigned to mandatory arbitration by your contract, in Florida, the contract, i.e. the Nursing Home Agreement, will provide for how your arbitrator or a panel of three arbitrators will be selected.  Normally, the least of these terms will refer to as “chosen by the opposing parties”.

But, unless the AAA  rules and procedures are cited to be followed, there is virtually no specific procedure, nor worse, no timing requirement, as to just how the opposing parties choose!  Not all parties play nice.

In the end, then, whether selecting one “deciding” arbitrator, or a panel of three (of which usually the “third” arbitrator becomes the “decider”), unless all parties voluntarily agree to the characteristics of their decider-arbitrator, procedures for and the timing of the opposing-party selection process, any party can simply bring the “party selection” process to a complete halt by simply not cooperating in the process!  Intentionally or even unintentionally.

Presently, if these characteristics and procedures are not specified in your nursing home agreement/contract, you are simply at the mercy of your opposition or some third-party decision.

The AAA’s procedures have reasonable time requirements, but, if there is no cooperation amongst the parties, it is still the AAA who ends up “selecting” for the parties!

Worse, Florida’s procedure in such circumstances, has no time requirements and also simply provides for a Court to make the selection for the parties if the parties cannot agree.  682.04, Florida Statutes.

In short, if one party will not play nice, neither party gets a fair role in the selection process of the deciding arbitrator.

Whether you are the attorney representing a client who faces arbitration, or one of the two “one-party” selected arbitrators trying to work with your opposite to “select” a third, “neutral” arbitrator, you need to think about this major “selection issue” of your deciding arbitrator early in your representation.

In the absence of real procedural structure to the applicable agreement, you are facing, at the least, a lot of wasted time,  extra expense, and likely a great deal of frustration.

And, the very worst:  neither side may get to pick the arbitrator that will be deciding your clients’ dispute!

I am working on some suggestions to ease the pain of this process for both sides.  But for now, and the confines of the purpose of my blog to merely educate, I advise you to simply look very carefully at any Nursing Home Agreement for any dispute you intend to pursue or defend.

At least be forewarned.

There are some real headaches coming to everyone if specific and timely procedures for selection of your deciding arbitrator are not spelled out in your nursing home contract.

Dan, from Wauchula, Florida.

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