Document Category:
State: New York
Subject Matter: New York Appellate Court Upholds the Enforceability of Arbitration Clause in Nursing Home Admission Agreement
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In Friedman v. Hebrew Home for the Aged, 2015 NY Slip Op
06478 (Aug. 11, 2015), the Appellate Division, First Department held that an
arbitration clause in a nursing home admission agreement was valid and
enforceable under New York law, unanimously reversing the Bronx lower court’s
contrary determination.

Plaintiff, David Friedman, on behalf of his mother, Helaine
Friedman, a Hebrew Home resident, commenced a personal injury lawsuit against
the facility.  In response, The Hebrew Home moved to stay the litigation
pending arbitration, pursuant to an arbitration clause in the admission
agreement executed by Mr. Friedman.  Rejecting the argument that Public
Health Law §2801-(d) prohibits the enforceability of arbitration clauses, the
Court held the Federal Arbitration Act (FAA) pre-empts  Public Health Law
§2801-d, as The Hebrew Home is engaged in interstate commerce.  The Court
also determined the arbitration clause was "not unconscionable,"
satisfying the procedural and substantive requirements for enforcement. 
Under New York law, parties will not be compelled to arbitrate absent a
"clear, explicit, and unequivocal agreement to do so." See, Matter
of Waldron [Goddess],
61 N.Y.2d 181, 183, 473 N.Y.S.2d 136, 461 N.E.2d 273
(1984).

Friedman follows the US Supreme Court’s unanimous holding in Marmet
Health Care Ctr., Inc. v. Brown,
565 U.S. ___, 132, S.Ct. 1201, 182 L.Ed.2d
42 (2012), invalidating state law "public policy" prohibitions
against pre-dispute arbitration agreements as to personal injury and wrongful
death claims against nursing homes.  The High Court held that such
prohibitions are inconsistent with and pre-empted by the FAA. 
  

    

Friedman will further enable New York nursing homes to utilize arbitration
as a means of resolving personal injury claims, which have precipitously
increased for more than a decade.  Since it is the first appellate
decision to directly address the enforceability of arbitration clauses and
conclude the FAA pre-empts the Public Health Law, it will stand as the
prevailing precedent unless and until other appellate departments take on the
issue, or the case is addressed by The Court of Appeals. The decision itself is
brief and does not directly set forth how the court concluded the nursing home
was engaged in interstate commerce, but in light of the strong federal
oversight and reimbursement of nursing homes, there was likely substantial
evidence submitted to support this reasoning.  Notwithstanding the
favorable Friedman decision, New York courts will not universally compel
arbitration, as the enforceability of arbitration clauses is largely
fact-sensitive, involving the application of state contract law and agency
principles.  In Friedman, however, the First Department determined
the arbitration clause met the procedural and substantive requirements for
enforcement.  Of course, the wording of specific arbitration provisions is
often variable and the First Department, in its decision, did not specifically
provide details of the provision at issue.  In our experience, however, in
drafting these provisions, caution should be taken in assuring that such are
not crafted to be too overreaching and onerous, while, at the same time, their
terms are indeed clear and explicit.  Moreover, it should also be
recognized that while there are certainly advantages to arbitration in the
right setting, potential drawbacks exist as well, including a very narrow right
of appeal.         

We hope this information is helpful to you and your
colleagues.  If you would like further information, or would like us to
send a copy of this decision, please feel free to contact:

Steven
D. Weiner (sweiner@kbrlaw.com )

Keith L. Kaplan (kkaplan@kbrlaw.com)

 


Document Author: Steven Weiner and Keith Kaplan
Firm/Company: KBR
Document Date: Aug 20 2015
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