Many nursing homes ask residents or their agents to sign arbitration agreements. These agreements state that any disputes between the resident and the nursing home must be handled through the arbitration process. Nursing homes use these types of agreements because arbitration generally favors the companies instead of the plaintiffs, and the homes can avoid the publicity of a trial when arbitration is compelled. However, as the case of Lopez v. Bartlett Care Center, LLC, Cal. Ct. App. No. G056427 shows, some arbitration agreements are unenforceable and may be thrown out by the court, leaving the parties to litigate through the court process.
Factual and procedural background
Irene Lopez was admitted to the Bartlett Care Center, a skilled nursing facility, on Oct. 5, 2016. She had a history of dementia, diabetes, end-stage renal disease, muscle weakness, and other medical problems. Irene Lopez had a brief stay in the hospital at the end of October and was readmitted to the nursing home on Nov. 4, 2016, where she remained until Jan. 15, 2017.
After Lopez’s second admission to the nursing home on Nov. 4, her daughter, Jasmine Lopez, was asked to sign an arbitration agreement which was titled “Resident-Facility Arbitration Agreement” by an employee of the nursing home named Mariana Godinez. Jasmine signed the document on the line marked resident/agent but did not date it. Godinez also signed the document and dated it Nov. 14, 2016. Irene’s signature was not on the document.
On Jan. 15, 2017, Irene Lopez was transferred to a hospital because of generalized pain. The doctor at the hospital diagnosed her with stage IV decubitus ulcers on her foot and sacrococcyx area of her lower back. She also had wet gangrene of her right lower leg and sepsis. Her condition was so poor that the doctor had to perform debridement of the ulcer on her lower back and to amputate her right leg. She died on Feb. 7, 2017.
Jasmine Lopez filed a lawsuit against the facility, two entities that managed it, and several unlicensed and licensed nursing home employees as Irene Lopez’s successor in interest. In her individual capacity, she also filed a wrongful death claim against all of the defendants. The nursing home filed a motion to compel arbitration with the Superior Court. The home claimed that the arbitration agreement that Jasmine Lopez signed compelled her to submit all of her claims to arbitration both as Irene Lopez’s successor in interest and in her individual capacity.
The arbitration agreement contained a clause in article four that said that the agents of residents who signed the document would be bound to arbitration in their individual capacities for claims arising from personal injury, elder abuse, negligence, and wrongful death. Elsewhere in the arbitration agreement was a carve-out clause allowing the nursing home to sue residents in court for evictions.
The nursing home attached a statement by Godinez stating that Jasmine Lopez signed the arbitration agreement during the readmission process on Nov. 4 in the presence of and with the consent of Irene Lopez. Godinez claimed that she heard Irene Lopez give her verbal authorization for Jasmine Lopez to sign the document as her agent. Jasmine Lopez responded that this never took place and that she did not sign the document during the admissions process. She said that she instead signed it at a later date after her mother was readmitted, and her mother was not present in the room and did not authorize her to sign the document.
The trial court found that a valid arbitration agreement did not exist for the claims against the nursing home as successor in interest because there was substantial evidence that Jasmine Lopez did not have the authority to sign the document on her mother’s behalf. The court also found that the arbitration agreement did not apply to Jasmine Lopez’s wrongful death claim in her individual capacity because it was unconscionable. The nursing home filed an appeal of the trial court’s decision, alleging several grounds of error.
Issues: (1) Whether Jasmine Lopez had the authority to sign the agreement on her mother’s behalf? (2) Whether the agreement was unconscionable and unenforceable in regards to Jasmine Lopez’s wrongful death claim in her individual capacity?
On appeal, the nursing home argued that the trial court judge erred in finding that Jasmine, as Irene Lopez’s successor in interest, was not compelled to arbitrate her claims. It also argued that the agreement contained a clause that compelled Jasmine Lopez to arbitrate the wrongful death claim in her individual capacity.
Rule: (1) The substantial evidence standard applies when the trial court’s decision about an arbitration agreement is based on facts. (2) An arbitration clause purporting to bind people to arbitration in their individual capacities is not enforceable when it is substantively and procedurally unconscionable.
Two different standards apply to decisions about whether an arbitration agreement should be enforced. When the court’s decision is based on fact, the court evaluates the decision based on substantial evidence. When the court’s decision is based on a decision of law, a de novo standard is used. For an arbitration clause to be unconscionable, it must have both substantive unconscionability and procedural unconscionability.
Analysis
Since the trial court made its decision about the arbitration clause based on fact, the appeals court used the substantial evidence standard. The nursing home argued that it had met its burden of proof to provide substantial evidence that Jasmine Lopez had the authority to sign for her mother based on Godinez’s statement. The appeals court noted that Godinez dated the arbitration agreement on Nov. 14, 2016, which was 10 days after Irene Lopez was readmitted to the nursing home rather than during the admissions process as she had claimed. The appeals court looked at Jasmine Lopez’s statement and concluded that it was more believable than the statement by Godinez and that Jasmine Lopez did not have the authority to sign the arbitration agreement on her mother’s behalf.
The court then looked at the clause that stated agents waived their rights to sue in their individual capacities. It noted that the clause was not highlighted in any way and that the entire agreement purported to be an agreement between a resident and the nursing home. The court found that Jasmine Lopez was not a party to the agreement, making the clause procedurally unconscionable. The court then looked at the carve-out clause that allowed the nursing home to sue residents for evictions in court and found that the inclusion of that clause made the agreement substantively unconscionable because the nursing home was preserving its right to pursue litigation in court against residents while trying to compel people who had valid claims of neglect, abuse, personal injury, and death to arbitrate their claims.
Conclusion
The appeals court ruled that the nursing home’s arguments were without merit. It affirmed the ruling of the trial court and returned the case for further proceedings. It also ordered the nursing home to pay Jasmine Lopez’s costs on appeal.