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High Court rules against nursing home arbitration

ALBUQUERQUE, N.M. — The state Supreme Court this week determined a nursing home agreement requiring residents to arbitrate their most likely claims, while allowing the facility to file suit over its most likely claims, is unenforceable.

The attorney for the plaintiffs said the opinion issued Monday sends an important message to New Mexico consumers that they can dispute arbitration agreements, and it gives a clear process for doing that.

The ruling comes in a case against multiple defendants, including the Rehabilitation Center of Albuquerque, which included in its 78-page admission agreement a clause stating that all claims, including allegations of negligent care, must go to mediation and then to arbitration rather than to court, according to the opinion. But it included an exception for claims involving disputes over the collection of money or discharge of patients – the claims the business would most likely file against its residents.

The attorney representing the defendants could not be reached for comment.

The plaintiff in the case, Keith Peavy, entered into the agreement on behalf of his mother, which specified that parties would attempt to mediate a claim first, and move on to arbitration before a panel of three arbitrators if necessary. Arbitration is a less formal, private form of dispute resolution.

Peavy filed a wrongful death lawsuit against the facility and others after his mother’s death in 2010. The defendants responded with a motion to dismiss and to compel arbitration. A District Court judge ultimately found that the agreement was “substantively unconscionable.”

The Supreme Court affirmed that order Monday, saying there was not enough evidence to show that the one-sidedness of the agreement was justified.

“We conclude that under New Mexico conscionability law a presumption of unfair and unreasonable one-sidedness arises when a drafting party excludes its likeliest claims from arbitration, while mandating that the other party arbitrate its likeliest claims,” the opinion written by Justice Shannon Bacon states. “This presumption stems from the lack of mutuality that correlates with overly one-sided contracts.”

That presumption can be overcome if the drafter can show that the exceptions are reasonable and fair.

The case will be sent back to the 2nd Judicial District Court.

Attorney Jeff Pitman, who represents the plaintiffs in the case, said nursing homes often use arbitration agreements, which are frequently included in a bulky admission packet and often don’t get explained very well.

“They’re asked to sign here, sign here, sign here, and usually we find that you’ve got an arbitration agreement tucked in there somewhere,” he said.

Refusal to sign, he said, sometimes means you can’t be admitted into the nursing home.

He said the ruling is big for New Mexico consumers at a time when arbitration agreements are ubiquitous.

“I think it’s important that consumers know that they have the right to dispute these agreements in New Mexico,” Pitman said. “And now we have a very clear process for them to do that.”

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