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New Jersey Nursing Home May Enforce Arbitration Agreements

As any family with a loved one in a nursing home is well aware, it can be difficult to monitor the care situation from a distance or when visiting in short increments. Therefore, nursing home neglect is not easy to identify or stop. This inevitably leads to many lawsuits by residents and family members against nursing homes. After a recent New Jersey appellate court decision, however, plaintiffs may be limited in their available courses of action against negligent nursing homes.

In 2003, the New Jersey legislature passed the Nursing Home Responsibilities and Rights of Residents Act to protect residents' rights to justice against negligent nursing homes. The law prohibits elder facilities from requiring residents to sign an agreement waiving or limiting in any way their right to sue the nursing home for any reason. Therefore, nursing homes are prohibited from entering into contracts, such as arbitration agreements, in which they waive their right to sue and agree on another course of action.

The 2003 law was passed in response to the U.S. government's Federal Arbitration Act (FAA), which was first passed in 1925. The FAA requires states to enforce arbitration agreements as they would any other contract, and is reflective of the federal government's increasing preference for arbitration over litigation. There are many benefits to arbitration, including increased opportunity, reduced cost, and less complicated rules of procedure and evidence. However, arbitration also carries an increased chance of unfairness to parties.

One important caveat of the FAA is that it preempts state law. In light of this, a New Jersey appellate court recently ruled that nursing homes may enforce binding agreements to arbitrate nursing home negligence disputes, despite the New Jersey state law.

However, in that case against Brookdale Living Communities, Inc., the court did find that certain provisions of the arbitration agreement were unconscionable, and refused to enforce them. Those prohibited provisions included limitations on discovery and compensatory damages, and a prohibition on punitive damages.

Source: U.S. Politics Today, "New Jersey Courts Rule on Required Arbitration Agreements for Patients", 5 November 2010

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