Another Blow to Nursing Home Arbitration Agreements

Boler v. Security Health Care, L.L.C., — P.3d — (Okla. 2014)

Most, if not all, nursing homes have their residents sign an agreement to arbitrate any dispute or disagreement arising out of or in connection with the care rendered to the resident by the nursing home, including claims by the resident involving, and/or arising out of conduct committed by the nursing home and/or its agents, employees, or others for whom and/or which the nursing home is, may be, or is asserted to be, legally responsible. Such agreements also stipulate that they will apply to and bind any and all persons and/or entities who and/or which may assert a claim on behalf of, or derived through, the resident, including, without limitation, the resident’s legal representative, guardians, heirs, executors, administrators, estate(s), successors and assigns.

Ostensibly, such agreements compel arbitration on the resident’s survivors who claim that the resident died prematurely as a result of the nursing home’s neglect. The Federal Arbitration Act (FAA), as interpreted in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), seems to support this observation. This Act requires state and federal courts to enforce arbitration agreements similarly to other contracts. Pursuant to this Act, when a resident’s survivor files a wrongful death suit against the nursing home, the court must stay the proceeding and direct the parties to arbitration.

However, a recent decision of the Oklahoma Supreme Court, Boler v. Security Health Care, L.L.C., — P.3d —- (Okla. 2014), has shown that this appearance is misleading. The Court held that the arbitration agreement will only be effective when the survivor’s suit is wholly derivative, as opposed to being independent or only partly derivative. Under the “wholly derivative” criterion, the survivor will be bound by the arbitration agreement only when she inherits the decedent’s entire suit against the nursing home and has no independent suits of her own. That is, when the survivor stands in the decedent’s shoes as his or her heir, she must arbitrate; but when she sues the nursing home based on her own legal entitlement, the arbitration agreement between the decedent and the nursing home does not bind her.

In the case at bar, the resident’s survivors filed their action under Oklahoma law that distinguishes survivor actions (those that could be brought by the decedent while alive) from suits for wrongful death maintained by the decedent’s surviving spouse, children, and parents. Suits for wrongful death are filed to realize the plaintiff’s direct, as opposed to derivative, claims for the following damages: “the loss of consortium and grief of the surviving spouse; … the pecuniary loss to the survivors based on the projected duration of the decedent’s life, which must inure to the exclusive benefit of the surviving spouse and children; and grief and loss of companionship of the parents and children of the decedent.”

These independent claims do not belong to the decedent, and for that reason, the decedent cannot bind the beneficiaries to arbitrate those claims. As the Court explained, “although the FAA favors arbitration when it is the parties’ contractual choice of a remedial forum, courts will not impose arbitration upon parties where they have not agreed to do so.” Based on these reasons and precedents from other states—in particular, Carter v. SSC Odin Operating Co., LLC, 976 N.E.2d 344 (Ill. 2012)—the Court decided that the survivors are not bound by the arbitration agreement.