Protecting Against Forced Arbitration

Forced arbitration provisions deprive American citizens of the right to have their grievances decided by a jury. By slipping mandatory arbitration clauses into form contracts, corporations are ensuring that they will have a decided advantage in any dispute with their customers. Nursing homes are following this disturbing trend by including these provisions in applications for admission. In Texas, the enforceability of these forced arbitration provisions is an unsettled question, at least until the Texas Supreme Court issues an opinion in the Fredricksburg Care Company v. Perez case. Fredricksburg Care will decide whether Texas law, which limits enforceability of these provisions, is trumped by the Federal Arbitration Act. In view of the unsettled state of the law, estate planners may want to consider other avenues to ensure that the forced arbitration clauses are not enforceable. One opportunity for eliminating forced arbitration is when a elderly client is executing a Power of Attorney that grants a family member the right to manage their financial affairs in the event of the client’s incapacity. A Power of Attorney is an essential means for protecting the client, by granting someone the power to pay bills, sell property, make medical decisions, or handle potential legal issues that may arise at a time when the client is unable to take these actions on their own behalf. These Power of Attorney forms are often used to permit a family member to apply for admission to a nursing home when the client’s health deteriorates to the point that the client can no longer manage their own affairs. If the Power of Attorney form specifically excludes the ability to agree to forced arbitration, any such clauses slipped into the nursing home’s admission forms may be unenforceable. Accordingly, every elder law attorney should consider the following language for any Power of Attorney form: “NO POWER TO AGREE TO BINDING ARBITRATION-–Although I have given my attorney-in-fact this general and durable power of attorney, I specifically withhold from my attorney-in-fact the power to agree or consent prior to the actual occurrence of controversy to binding arbitration therefor, nor to agree in advance to any other process that would preclude the right to have a jury decide any issue in controversy concerning my person or my property, nor to limit in advance in any way my procedural rights to litigate such claims and the damages to which I may be entitled if successful. This does not, however, preclude non-binding alternative dispute resolution processes such as mediation nor does it preclude submitting a dispute after it has occurred to an arbitration following the advice of counsel.” By including such a clause in the Power of Attorney, the client may preserve their right to a jury trial, rather than subjecting themselves to a dispute resolution forum that drastically favors the nursing home. Nursing home contracts often include an arbitration clause forcing any patient’s legal claims to be brought before a private arbitrator of the nursing home’s choosing, but the nursing home’s admission staff may not realize the guardian’s potential lack of authority to agree to such a provision. In such a case, the forced arbitration provision may not be enforceable. While there is a risk that the limited Power of Attorney may lead to some nursing homes denying admission, the preservation of the right to a jury trial would, in most cases, be in the client’s best interest.


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