Author: Amy L. Miles
In two separate opinions issued on Wednesday, November 23, 2011, the Florida Supreme Court held that arbitration agreements that place limits on remedies or procedures available to nursing home residents under sections 400.022 and 400.023, Florida Statutes (providing rights for nursing home residents), are void and unenforceable as a matter of law. The opinions, Shotts v. OP Winter Haven, case no. SC 08-1774, and Gessa v. Manor Care of Florida, Inc., case no. SC 09-768, reviewed the conflict between Florida’s Second District Court of Appeal and Florida’s First, Fourth, and Fifth District Courts. For over five years, the Second District Court has enforced arbitration agreements, holding that the question of whether a provision contained in an arbitration agreement was against public policy and therefore unenforceable was a question to be determined by the arbitrator, who could sever any provisions it found to be offensive of public policy. Three other district courts, however, have refused to enforce arbitration agreements containing provisions that those courts have deemed contrary to public policy, holding that it is the court that should determine whether the provisions violate public policy and, therefore, make the agreement unenforceable.
In Shotts, the arbitration agreement required use of the rules promulgated by the American Health Lawyers Association (AHLA) for arbitration—which included a “clear and convincing” standard of proof instead of the statutory “preponderance of the evidence” standard—and included a waiver of rights to claim punitive damages. In Gessa, the agreement capped the award of noneconomic damages to $250,000 and also included a waiver of rights to claim punitive damages. Unlike in Gessa, the Shotts agreement also included a severability clause that provided that if any provision of the agreement was found to be unenforceable, it could be severed from the agreement.
In both cases, the Supreme Court held that the Second District erred in determining that the arbitrator, not the court must decide whether the arbitration agreement is unenforceable based on a violation of public policy. The Court also held that the limitations the agreement placed on liability and the limited standard of proof under the AHLA rules violated public policy as a matter of law. “[A]ny arbitration agreement that substantially diminishes or circumvents these remedies [provided by the residents’ rights statutes] stands in violation of the public policy of the State of Florida and is unenforceable.” Shotts at p. 3. Finally, the Supreme Court held that the Shotts provision, requiring use of the AHLA rules, went to the “essence of the agreement” and could not be severed despite the severability provision in the arbitration agreement. Likewise, although the Gessa agreement had no severability provision, the Court opined that the liability limitations contained in that agreement would not have been severable because they were the “financial heart of the agreement.”
Are arbitration agreements between nursing homes and their residents now a thing of the past? The answer is no, however these Supreme Court decisions have declared void and unenforceable any agreements that contain liability or procedural provisions that limit nursing home residents’ rights contrary to sections 400.022 and 400.023. Therefore, many currently-existing arbitration agreements will be deemed void under these decisions. Further, these decisions require the courts—not the arbitrators—to determine whether other agreement provisions are contrary to public policy and, if so, whether those provisions go to the heart of the agreement making it void or whether they are severable and arbitration can proceed. Therefore, we may see residents or their representatives challenging other provisions, which have been overlooked while the courts focused on the limitations considered in these cases, in an attempt to force the courts into making additional public policy decisions.