Discovery waives mandatory arbitration clause, court holds

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By PAUL THARP, Staff Writer

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Christine Rodrigues had no idea that a clause on Page 10 of an 11-page nursing home admissions document she signed could bind her elderly mother to mandatory arbitration.

She found out only when she sued the facility, Monroe Square, after her mother, Mary Jane Plumley, died as a result of the facility’s alleged negligence, according to her complaint.

Plumley lived in the facility less than two months. During that time she developed pressure sores and sepsis, broke her hip and femur, and suffered other fall-related injuries that led to her death, according to the complaint.

Rodrigues, the administrator of Plumley’s estate, sued alleging negligence and wrongful death and sought compensatory and punitive damages.

Monroe Square, which is owned jointly by Alterra Healthcare and several other Delaware-based corporations, answered denying negligence and sought detailed information regarding the background and qualifications of Rodrigues’ expert witness pursuant to G.S. § 1A-1, Rule 9(j). The defense also sought to stay the court action and compel arbitration.

Superior Court Judge W. Erwin Spainhour wrote that by availing themselves of judicial discovery procedures, the defendants had waived their right to compel arbitration. The defendants appealed.

In a Nov. 2 unpublished opinion, the Court of Appeals affirmed Judge Spainhour in Rodrigues v. Southern Assisted Living, Inc. (Lawyers Weekly No. 10-16-1066, 7 pp.).

“The discovery available in arbitration is totally at the discretion of the arbitrator,” said Charlotte attorney Sam McGee of Jackson & McGee, who represented Rodrigues. “It is automatic in court.”

That means that when the defense sought information by way of interrogatories regarding Rodrigues’ expert witness, she had to answer. In doing so she consulted with an expert who charged her $750.

“If you send discovery that is not necessarily going to be available in arbitration, you cannot then turn around and seek to compel arbitration,” McGee said. “The defense tried to distinguish Rodrigues from other cases by arguing that ‘this was only one little set of interrogatories.’ But there is no magic number of interrogatories. If you engage in acts that are inconsistent with arbitration, then you waive your right to compel it.”

An attorney for the defendants declined to comment.

The case will now return to Union County for further proceedings.

Unconscionable

McGee said he would have loved to have won the case on the grounds that the mandatory arbitration clause was unconscionable, but the Court of Appeals did not reach that issue.

“That is a huge issue in nursing home litigation,” he said. “Large companies like the defendant in this case put these clauses in their contracts in all of their facilities. The reason is that nationwide they have gotten popped for some significant jury verdicts.”

Judge Spainhour, who found in Rodrigues’ favor on the unconscionability issue, found that the American Health Lawyers Association Dispute Resolution Rules of Procedure were “tailored to meet the unique needs of the healthcare industry.”

The association believes that having lawyers sit on an arbitration panel deciding cases eliminates or severely narrows the possibility of large verdicts against health-care providers, according to McGee.

According to a motion filed by the defendants, Plumley appointed her daughter, Rodrigues, as her attorney-in-fact regarding health-care decisions. At the time Rodrigues signed the resident agreement which stated the terms of Plumley’s residency at Monroe Square, including the procedure for dispute resolution, Plumley was still living in a facility in Arizona.

Judge Spainhour noted that the arbitration clause was on page 10 of an 11-page document, “and is not bolded, italicized or otherwise emphasized.” He also noted that an executed agreement was required before admittance, and the discussion about the agreement lasted less than a minute.

Testimony in the Rodrigues case showed that the arbitration clause was not explained, McGee said. “It was presented on a take-it-or-leave-it basis.”

Judge Spainhour pointed to two documents signed at the admissions meeting, one providing that Plumley would purchase certain medical devices and the next page providing that she declined to do so. That demonstrated that a Monroe Square employee rushed through the documents without any significant explanation, he wrote.

Spainhour also pointed to a “loser pays” provision that would allow the arbitrator to assess the filing fees, arbitrator fees and other costs against the losing party. The arbitration filing fee alone, he wrote, would be $5,375.

Additionally, the higher burden of proof required in arbitration was contrary to the public policy of North Carolina as set forth in the Resident’s Bill of Rights under G.S. § 131D-19, Spainhour wrote.

A question of authority

McGee said whether children have the authority to waive a parent’s right to sue is a separate issue that is rarely addressed in nursing home cases.

Kate Mewhinney, managing attorney of the Elder Law Clinic at Wake Forest University School of Law, said she has worked to address the growing nursing home problem in a proactive way.

“We write a provision into the power of attorney that says if the child places the parent in a nursing home, the child does not have the authority to that bind the parent to mandatory arbitration,” Mewhinney said.

So even if when children sign the boilerplate contract when parents are admitted into the nursing home, “they have not bound that older person to any arbitration provision. The children have the authority to sign the contract, but they do not have legal authority to waive a trial.”

Mewhinney couples the power of attorney with a letter to family members explaining that their authority does not extend to binding parents to mandatory arbitration. If something goes wrong during a parent’s stay at a nursing home, Mewhinney said, “Hopefully they will remember our letter.”

OPINION BRIEF

Case name: Rodrigues v. Southern Assisted Living, Inc.

Court: N.C. Court of Appeals – Unpublished

Judges: Judge Robert N. Hunter Jr.; Judges Linda M. McGee and Donna Stroud, concurring

Date: Nov. 2, 2010

Plaintiff-appellee’s attorney: Sam McGee of Jackson & McGee (Charlotte)

Defendant-appellant’s attorney: Gerald A. Stein of Hedrick, Gardner, Kincheloe & Garofalo (Charlotte)

Issue: Did the trial court err by ruling that the defendants waived their right to compel arbitration by making use of judicial discovery procedures?

Holding: No, by making use of judicial discovery procedures, the defendants waived their right to compel arbitration, therefore the trial court did not err when it denied their motion to stay proceedings and compel arbitration.

Opinion digest: Click here.