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The Supreme Court Addresses Nursing Home Arbitration Agreements... Nothing New For Minnesota

On May 15, the U.S. Supreme Court waded into the ongoing battle over whether nursing home care disputes can be resolved through arbitration instead of the courts. The decision is good news for nursing homes and will likely have little impact in Minnesota.

In the new case, the Court was asked to review a Kentucky supreme court decision that a person holding a power of attorney ("POA") cannot enter into an arbitration agreement on behalf of another unless the POA document specifically grants such authority - a provision that is absent from the vast majority of POAs. The Kentucky court's decision imposed a much higher standard for the creation of a contract to arbitrate than exists for the creation of any other contract. The Supreme Court struck down the decision and reiterated that a court may invalidate an arbitration agreement based upon generally applicable contract defenses, but not legal rules that apply only to arbitration or that are based upon the fact that an agreement to arbitration is at issue. In short, a court examining whether an arbitration agreement is valid must apply the same analysis as it would to determine whether any other contract is valid.

The Supreme Court's decision - while important to reign in judges' hostile arbitration - creates nothing new for Minnesota. Minnesota's courts already recognize that when considering whether an arbitration agreement is valid, the court is limited to two questions: 1) whether the subject matter of the specific dispute is within the scope of the arbitration agreement; and 2) whether a valid agreement to arbitrate exists between the parties. When answering these questions, ordinary state-law contract principles apply.

While there are no bright-line rules for crafting nursing home arbitration agreements, there are several factors that will help ensure that an agreement is found to be valid if subject to judicial review:
  • The resident should be able to raise the same claims in arbitration as could be brought in a lawsuit;
  • The agreement should not cap damages;
  • The agreement should not impose undue financial burden upon the resident;
  • The arbitration should be held in a location convenient for the resident;
  • The agreement should clearly advise the resident he or she is waiving a constitutional right and has the right to consult an attorney;
  • The resident should be allowed to revoke the agreement within a set period of time;
  • The agreement should be separate from the admission agreement;
  • The agreement should not be a condition of admission or treatment;
  • The facility should explain the agreement to the resident at the time it is presented.

 Please contact Ryan Burt if you have any questions regarding nursing home arbitration agreements or other nursing home issues by email or phone at (612) 305-1437

About the Author

Ryan is the Co-Chair of the Health Care Practice Group at DeWitt.  He specializes in advising health industry clients in health law, regulatory compliance and risk management, legislative affairs, and insurance and ERISA litigation.  

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