The Superior Court of Pennsylvania (“Pennsylvania Appellate Court”) held in its July 5, 2022 opinion that the defendant nursing home’s arbitration agreement signed by a new resident was unconscionable after a nursing home wrongful death lawsuit was filed by the resident’s daughter.
At the time of admission to the nursing home, the resident was 67-years-old and was suffering from a number of conditions, including congestive heart failure, diabetes, and pressure ulcers. The nursing home reported that the resident at the time of her admission was alert and oriented and had no memory problems or dementia, but that she was also suffering from anxiety and sometimes had trouble concentrating. Her vision was impaired to the point that even with glasses, she was not able to see newspaper headlines but could identify objects and listed as one of her diagnoses blindness in both eyes. The resident expressed that it was very important to her to have her family or a close friend involved in discussions about her care.
The resident signed a number of documents at the time of her admission to the nursing home, including a seven-page Nursing Services Agreement, a two-page Agreement to Arbitrate Disputes (“Arbitration Agreement”), and a Resident Representative Agreement concerning the handling of her finances, in which she designated herself as her representative.
The resident died approximately three months after she was admitted to the defendant nursing home, Her daughter filed a nursing home negligence lawsuit against the nursing home, a hospital that had treated her mother, and the hospital’s affiliates, asserting survival and wrongful death claims. The defendant nursing home filed preliminary objections that sought to compel arbitration of the plaintiff’s claims.
Unconscionability
To invalidate or bar enforcement of a contract (e.g., the Arbitration Agreement) based on unconscionability, the party challenging the contract must show both an absence of meaningful choice, also referred to as procedural unconscionability, and contract terms that are unreasonably favorable to the other party, known as substantive unconscionability. Procedural and substantive unconscionability are assessed under a sliding-scale approach, with a lesser degree of substantive unconscionability required where the procedural unconscionability is very high.
The Pennsylvania Appellate Court stated, “The incompleteness of the information that was orally provided to Decedent and the fact that Decedent had no family member with her and was not given a copy for a family member to review are particularly significant here given Decedent’s physical inability to read the Arbitration Agreement and other documents that she was signing … Given Decedent’s lack of ability to read the Arbitration Agreement, our decisions holding that nursing home arbitration agreements were not procedurally unconscionable are inapposite here. In those cases, there was no evidence or claim that the individuals who signed the arbitration agreements lacked the ability to read them and the written agreements that the signers could have read clearly stated that signing the arbitration agreement was not required for nursing home admission, that they had right to consult a lawyer before signing, and that they had a right to revoke the arbitration agreement.”
The Pennsylvania Appellate Court held: “Here, in contrast, although the Arbitration Agreement contains such provisions, the record shows that those provisions were omitted from or not fully and accurately stated in the oral information given to Decedent, which was the only information that Decedent had when she decided to sign the Arbitration Agreement. Because Decedent was not fully orally advised of this information and was denied the ability to obtain assistance from a family member or other person not employed by Highland Park who could read the Arbitration Agreement, the process by which Decedent’s signature was obtained denied her a meaningful choice and therefore was procedurally unconscionable.”
“On the issue of substantive unconscionability, the trial court found that the provision requiring that Decedent pay one-half of the costs of any arbitration, including one-half of the arbitrator’s fees, was substantively unconscionable because it imposed additional expenses for bringing a claim that Decedent would not have to bear in a court action … We agree that imposing this additional expense on all claims for damages brought by a resident unreasonably favors the nursing home and is sufficient to satisfy the requirement of substantive unconscionability where, as here, the record establishes that the resident was not given full information concerning her choices or any opportunity to inform herself of what she was signing or to exercise those choices.”
The Pennsylvania Appellate Court held: “Because the circumstances under which Highland Park obtained Decedent’s signature on the Arbitration Agreement imposed terms unfavorable to her without giving her any meaningful choice to accept or reject the Arbitration Agreement, the trial court correctly concluded that the Arbitration Agreement was unconscionable as a matter of law.”
Source Kohlman v. Grane Healthcare Company, 2022 PA Super 118.
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