Like Trump, arbitration clauses up off the deck
James M. Berklan
Politics makes strange bedfellows. Another great illustration of this could be the many nursing home operators waking up to their previously unrealized love affair with President-elect Trump. That's right: Whether they know it or not, they might just get to really like this Trump guy.
The "why" could be this: His victory and the movement it embodied down ticket could be a game-changer — THE game-changer — when it comes to the fate of arbitration clauses in resident agreements.
The ramshackle ride these controversial clauses have taken over the last week has been nothing less than mind-boggling. Providers have gone from threatened by them, to confident legal victors over them, to uncertain observers of them, to potential receivers of a lifeline concerning them.
The first two steps are well known by now. The Obama administration issued its new 713-page rules of participation, which banned the use of arbitration clauses in admissions agreements. Up went providers' arms in exasperation.
Next came the legal filings seeking to halt what the American Health Care Association calls a governmental agency overreach of power. And what do you know, the AHCA won, at least in the first round. It learned Monday that it had achieved a temporary injunction against the planned Nov. 28 institution of the ban.
The winners, which included the AHCA and every other nursing home operator and advocate out there, duly celebrated. But in the quick analytical aftermath of that widely publicized victory came some cold water: The Appeals Court ruling had sided with providers, but it also laid out a lot of sympathy for consumers and the government's cause. Red flags were waving for anyone keeping close tabs.
While blocking the arbitration ban, Judge Michael Mills also gave its proponents some red meat in his 40-page ruling. He expressed discomfort with not siding with the purported consumer-oriented cause. In the end, the message seemed to be, "The law forces me to side with you now, providers, but it should be only a matter of time before Congress can come up with legislation to outlaw the arbitration clauses."
Most worrisome for providers was the judge's statement that he had personally seen instances where operators could take advantage of unsuspecting clients and their families. More than half of the nation's nursing home residents have been diagnosed with Alzheimer's or other dementias, he noted, citing National Center for Health Statistics.
“Arbitration agreements are contracts, and basic contract law requires that the parties to a contract be mentally competent at the time of execution of the agreement," he pointed out in his decision. "There is no more basic defense to the validity of a contract than lack of mental competency.
“Many nursing homes will obtain signatures from residents in spite of grave doubts about their mental competency, or, more often, they will choose to have relatives of the residents sign the agreements, even when no power of attorney has been executed," he added, citing his experience with the profession.
He further lamented that providers may then later file motion to compel arbitration based on a pre-dispute agreement, a problem that could be solved only with “time-consuming litigation, which serves as a very significant incentive against filing suit in the first place.”
“This court has repeatedly seen these facts play out in its courtroom, and it has seen these fact patterns repeatedly arise in published decisions from other Mississippi courts," the judge seemed to rue.
This, from a court that the AHCA hand-picked for filing its request for a temporary injunction. AHCA got its victory, but it also might have heard a roadmap for overcoming it. The future looked a little rockier than one might have first imagined.
Then came Tuesday's historic elections, with outcomes that seemed to take the breath away from even the most optimistic Republican supporters on Wednesday's post-event talk shows. The GOP upended most forecasters' predictions, not only taking the White House but also retaining control of the Senate while, as expected, keeping the lead in the House again.
The White House and the Senate are the keys to filling the vacant seat on the Supreme Court. If Congress itself isn't strong enough to stave off an assault on arbitration clauses, a soon-to-be right-leaning Supreme Court could have the final say, should arbitration appeals reach that far.
But even before that would come into play, a Republican administration typically means good things for businesses, which nursing homes must be viewed as in this context. Trial lawyers would not catch a break from this crowd, and that's also a good sign for nursing home operators. Republicans are historically strong on tort reform and placing limits on plaintiffs' lawyers.
So while you're calculating wins and losses from the election, be sure to put fans and advocates of arbitration clauses on the "winners" list. What a roller-coaster ride it's been.
Follow James M. Berklan @JimBerklan.