NJ Appeals Court Refuses to Enforce Nursing Home’s “Dense and Meandering” Arbitration Provision

A state appeals court has ruled a nursing home’s arbitration is void in part because its language is “dense and meandering,” which prevented a meeting of the minds.  In Estate of Bright v. Aristacare at Cherry Hill, No. A-3640-18T3 (N.J. Super. Ct. App. Div., February 26, 2020), a New Jersey woman, Bright, was discharged from the hospital to a nursing home, Aristacare.  At the time of her admission to Aristacare, Bright was apparently on several medications, experiencing hallucinations, and lacked awareness regarding her surroundings.  The following day, Bright’s daughter was asked to sign admission paperwork on Bright’s behalf.  The paperwork included an agreement to arbitrate any future disputes with Aristacare.  Bright’s daughter was not her guardian and did not hold Bright’s power of attorney.

Later, Bright’s estate filed a negligence lawsuit against Aristacare in the Superior Court of New Jersey, Law Division.  The care facility responded to the lawsuit by filing a motion to compel arbitration and dismiss the case based on the arbitral provision included in the company’s admission paperwork.  In support of its motion, Aristacare produced admission paperwork that was signed by both Bright and her daughter.  Bright’s signature was undated and it was unclear when she signed the document.

The Law Division denied Aristacare’s motion to compel arbitration and dismiss the case.  After that, the company filed an appeal with the Superior Court of New Jersey, Appellate Division.  The Appellate Division found:

To put it bluntly, this arbitration provision posed a number of problems. Among other things, the first sentence is over two hundred words in length, making it difficult, if not impossible to follow. While the provision purports to bar the patient from seeking redress in court, the same prohibition does not apply to Aristacare, which remains free to bring collection actions outside the auspices of an arbitration process. The provision also improperly bars the patient from seeking punitive damages, which renders that portion of it unconscionable. Estate of Anna Ruszala ex. re. Mizerak v. Brookdale Living Cmtys., Inc., 415 N.J. Super. 272, 299 (App. Div. 2010).

Perhaps most egregiously, the provision states that arbitration will be conducted “according to the rules of the American Arbitration Association” (AAA). In 2003, however, the AAA stopped conducting arbitrations in nursing home cases involving disputes “between individual patients and healthcare service providers that relate to medical services, such as negligence . . . unless all parties agreed to submit the matter to arbitration after the dispute arose.” Therefore, the AAA has no rules governing arbitrations involving nursing home patients. Aristacare did not specify what alternative rules might be applied and did not attach a copy of the rules to the admission document.

In addition, the Appellate Division stated:

In September 2018, Aristacare gave the estate a copy of the admission documents, including the arbitration provision described above. For the first time, Charmaine saw her mother’s signature on the form, above where she had signed it. The document does not set forth the date on which Maureen signed the form, and Aristacare has never provided any information describing how Maureen’s signature came to be placed on the document.

Aristacare thereafter filed a motion to compel arbitration.  After oral argument, the trial judge determined that the arbitration agreement could not be enforced because Aristacare had not carried its burden of showing there was a meeting of the minds between the parties to the arbitration provision. In his oral decision, the judge found that Charmaine and her mother were both emotionally upset when Charmaine was presented with the agreement. The judge noted that the arbitration clause was vague and referred to AAA rules which were no longer in effect. The judge also found that the arbitration clause provided that “arbitration must be requested in writing within one (1) year from the date the party initiating the arbitration knew or should have known about the claim or dispute[.]” Here, the estate sent three letters to Aristacare advising it of a potential claim in October 2016, but Aristacare did not seek to move the matter to arbitration until October 2018. Thus, the judge concluded that Aristacare’s request for arbitration was untimely. This appeal followed.

After reviewing the facts of the case, the Appellate Division held there was no meeting of the minds between the parties:

Here, the idiosyncratic facts of this case overwhelmingly support the judge’s conclusion that there was no meeting of the minds between Charmaine and Maureen on the one side, and Aristacare on the other. As noted above, Charmaine had no legal authority to bind Maureen to anything set forth in the agreement because she did not hold Maureen’s power of attorney. While Maureen’s signature was later added to the form on an unspecified date, Aristacare provided no details concerning how that was accomplished. Aristacare did not give a copy of the agreement to Charmaine or her mother, and does not assert that it explained the forms to either of them. Aristacare also did not advise Charmaine that she could consult with an attorney before signing the documents.

Contrary to the requirements of Atalese, the arbitration provision is written in a way that would not lead to a nursing home patient obtaining a “clear and mutual understanding of the ramifications of” agreeing to it. Atalese, 219 N.J. at 442-43. The dense and meandering first sentence is simply too lengthy to ensure comprehension, especially in the absence of any assistance from the facility. Aristacare directed Charmaine to sign the forms where indicated even though she was emotionally distraught by her mother’s condition. Although we do not know when Aristacare obtained Maureen’s signature, the record indicates that at the time of her admission, the facility’s nursing staff was aware that Maureen was heavily medicated, suffering hallucinations, and unaware she was in a nursing home.

It is also well established that when the arbitration forum the parties select in the arbitration agreement is not available at the time the contract is formed, there is no meeting of the minds. Kleine, 445 N.J. Super. at 552-53; see also Flanzman, 456 N.J. Super. at 617 (holding there was no meeting of the minds because a forum was not included in the arbitration agreement, thus arbitration could not be compelled). Aristacare’s arbitration provision stated that any arbitration would be conducted according to the rules of the AAA. However, that was not possible because the AAA ceased conducting nursing home arbitrations in 2003 and has no rules governing these matters. Thus, Charmaine and her mother would not have been able to ascertain what rules might apply even if they had been able to understand they were giving up their right to pursue any future claims in court.

Finally, the Superior Court of New Jersey, Appellate Division affirmed the Law Division’s order denying Aristacare’s motion to compel arbitration and dismiss the case.

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