Precedential Pennsylvania Decision Deems Nursing Home Arbitration Agreement Unconscionable & Inherently Unenforceable (PA)
In an opinion released on July 5, 2022 in Kohlman, Administratrix for the Estate of Fay A. Vincent, Deceased v. Grane Healthcare Company, et al., 2022 Pa. Super 118, the Superior Court of Pennsylvania issued a precedential decision regarding whether an arbitration agreement between may be considered unconscionable and therefore unenforceable. Despite both Pennsylvania and federal law favoring arbitration enforcement as a matter of public policy, the Superior Court determined that the underlying arbitration agreement in Kohlman was inseverable and unconscionably, inherently unenforceable.
In Kohlman, the daughter of decedent, Faye Vincent (“Vincent”), brought a negligence, survival, and wrongful death action against Highland Park, a skilled nursing home facility in Pittsburg, PA, after her mother, Vincent died therein three (3) months after admission. By way of context, Vincent was admitted directly to Highland from a nearby hospital for care and rehabilitation related to congestive heart failure, diabetes, pressure ulcers, anxiety, depression, lack of focus requiring substantial narcotic medication. Importantly, Vincent had severely impaired vision where, even with glasses, she could not read newspaper headlines. Highland was additionally aware on intake that, due to this, Vincent preferred all decisions on her care be discussed with her family.
In preliminary objections, Highland Park sought to compel the matter to arbitration pursuant to an arbitration clause found in the Nurse Services Agreement (“Arbitration Agreement”) signed by Vincent and Highland’s Admission’s Director. The Allegheny Court of Common Pleas overruled Highland’s objections finding the Arbitration Agreement unconscionable and thereby unenforceable. Highland promptly filed its initial appeal to the Pennsylvania Superior Court who in turn affirmed the trial court with respect to the wrongful death claim but remanded for further discovery regarding particulars of the survival claim. On remand, Allegheny Court of Common Pleas again found the Arbitration Agreement wholly unconscionable. Highland petitioned the Superior Court for reconsideration giving rise to the subject decision.
Generally, per Pennsylvania law and the Federal Arbitration Act, 9 U.S.C § 2, courts must compel arbitration of claims subject to an agreement, unless found otherwise unenforceable through a valid contract defense such as unconscionability. To win on a theory of unconscionability, the party challenging enforcement of the contract must establish procedural unconscionability, they had no meaningful choice in the agreement, and substantive unconscionability, where the terms are unreasonably favorable to the non-challenging party.
On the second and subject appeal, the Pennsylvania Superior Court unequivocally affirmed. Specifically, the court found the Arbitration Agreement was procedurally unconscionable being that Vincent was physically and mentally incompetent upon signing, Highland did not read the entirety of the document to her to ensure she understood, nor did they consult Vincent’s family or even provide Vincent with a copy so someone else could read it to her. Plus, Vincent’s direct transfer from a nearby hospitalization gave her no awareness of other healthcare options, which in tandem, left an absence of any meaningful choice but for Vincent but to sign the Arbitration Agreement.
Further, the Superior Court agreed that the Arbitration Agreement subjected Vincent to undue economic restraint in requiring that her, or her heirs, would pay 50% of all arbitration costs, including the arbitrator’s fees. Typically, agreements are found conscionable in Pennsylvania if they contain a provision requiring payment of 50% of the arbitration costs or the arbitrator’s fee. However, the Superior Court found that implementation of both, especially where the challenger had no opportunity to know, was substantively unconscionable with respect to any cause of action since it imposed additional expenses on bringing a claim that Vincent, otherwise, would not have had to bear in court.
Despite Highland’s argument that the Arbitration Agreement’s severability clause would have rendered the fee language moot making the Agreement otherwise substantively conscionable, the Superior Court did not bite. Rather, it found that requiring nursing home residents to pay 50% of an arbitrator’s fee was so unreasonable that it was per se against public policy and inherently unenforceable. Even if the pertinent clause were to be severed, the Arbitration Agreement would remain silent on the essential term of who is to pay any such fees. The court declined to supplement the Agreement with a reasonable fee sharing alternative, as is possible where a term is omitted, being that this term directly sought to take advantage of Vincent financially.
Through Kohlman, the Superior Court provides precedential guidance for those drafting arbitration agreements subject to Pennsylvania law, and those seeking to enforce or challenge their feasibility in the face of litigation.
Thanks to Kendal Hutchings for her contribution to this article. Should you have any questions, please contact Matthew Care.