Arbitration…Is Prohibitive Expense a Defense?
Often, upon admission to a nursing home, the individual who enters the nursing home signs a contract which compels arbitration in case of disputes. In the recent case of Darcell Wick v. Orange Park Mgt, LLC, the court answered the question of whether the child of the nursing home resident was bound by such a clause in the contract.
Darcell Wick (” Darcell”), as personal representative of his mother’s estate, sued a nursing home after his mother’s death for negligence, wrongful death and a violation of the nursing home’s residents’ bill of rights. Upon entry to the nursing home, Darcell’s mother signed a contract with the defendant, Orange Park Mgt. et. al (“Orange Park”) which compelled arbitration for any action, dispute, claim or controversy of any kind.
Darcell argued the arbitration clause did not apply because the cost of arbitration was so expensive that it rendered the arbitration clause invalid (the Prohibitive Expense Defense) and the clause was void as a matter of public policy. Orange Park argued that the Prohibitive Expense Defense was not a stand alone defense to arbitration but had to be combined with the defense of unconscionability.
The lower court agreed with Orange Park and granted a motion to compel arbitration.
The appellate court affirmed the lower court on both issues.
The appellate court determined that arbitration agreements are favored in Florida. The court determined the only way such a clause would not be enforceable is if there was fraud, duress or unconscionability. As Darcell did not raise the issues of fraud and duress, the appellate court addressed Darcell’s argument of unconscionability.
The appellate court agreed with the lower court that the Prohibitive Expense Defense was NOT a stand alone defense. It must be combined with procedural and substantial unconscionability.
Darcell argued that the Federal Arbitration Act (“FAA”) established the Prohibitive Expense Defense as a stand alone defense and thus, equally applied to an arbitration clause under Florida law. Darcell also argued that the arbitration clause was void as a matter of public policy.
The appellate court stated that the Florida Supreme Court has not addressed the issue of whether Prohibitive Expense Defense is enough to invalidate the arbitration agreement but referenced a Second District and a Fifth District decision that permitted the Prohibitive Expense Defense. However, the court then referred to a Fourth District decision which reached an opposite conclusion.
The appellate court found that, after review of the decisions, there was “no persuasive authority for extending the judicially crafted … prohibitive-cost defense to an agreement governed by FAC and presenting a claim arising under state law.” The appellate court also determined that the arbitration agreement was not void as a matter of public policy.
ADVICE: If you or your family are concerned about arbitration, then be sure and read the contract before the admission to the facility. It is going to be hard to negotiate that provision out of the contract if admission is necessary. While there are defenses to avoid arbitration, it appears to be an uphill battle in the Third District. As conflict exists between the District Courts, perhaps the Florida Supreme Court will ultimately resolve the issue.
WORD OF THE WEEK: If a contract is unfair or oppressive to one party in a way that suggests abuses during its formation, a court may find it unconscionable and refuse to enforce it. A contract is most likely to be found unconscionable if both unfair bargaining and unfair substantive terms are shown.
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