It is no mystery that businesses typically prefer arbitration – hence those clauses in so many standard-form contracts. On the other hand, consumer groups and plaintiff lawyers often want to avoid arbitration. More confusing, there are studies and journal articles which tout the fairness of arbitration while others denounce them as star chambers.

Why do we chase our tail again with this discussion?

We are provoked by the Second District's (Davis, Whatley, LaRose) recent case of Angela Gessa by and through Miriam Falatek v. Manor Care of Florida, Inc; Manorcare of America; Manor Care of Carrollwood; et al. Indeed, it brings up questions of arbitration analysis (unconscionability vs. public policy) and the different perspectives of Florida courts on the issue of proper arbitration enforcement. These differences appear to lead the same (or similar) arbitration clauses to be treated differently depending on whether the dispute is in Tampa or West Palm Beach. Meanwhile, based upon the careful drafting of opinions, one questions whether the Florida Supreme Court will find a "direct and express" conflict in order to resolve the squabble.

Let us first lay the factual groundwork common to these cases: A nationwide nursing home has a standard form admission agreement. During a resident’s admission process, the resident/responsible party is presented with several forms to sign. In one case, the arbitration agreement itself has an arbitration section and a limitation of liability section. In five other cases, the nursing home presents a document, separate from the admission agreement, which bears two sections, an arbitration agreement and a limitation of liability. Whether included in the same document or separate, the wording of the limitation provisions are similar, if not identical.

ROMANO V. MANOR CARE

In 2003, the Fourth District (Warner, Stone and Stevenson) issued its opinion in Romano v. Manor Care, Inc. et al., declining to enforce arbitration. The admission process reportedly included the signing of eight "separate" documents including a "six-page arbitration agreement." The first page of that "separate" document made reference to a waiver of statutory rights. It barred punitive damages and capped non-economic damages at $250,000. The court held that the liability limitations would not vindicate the resident's statutory rights and it held that to be substantively unconscionable. The words “public policy” do not appear in the opinion.

An interesting question about Romano: the court mentioned that, as part of its substantive unconscionability analysis, the agreement improperly prevented the arbitrators from awarding attorney's fees. Interestingly, however, the same Fourth District has twice held that arbitrators do not have the authority to award attorney's fees anyway. Hence, the purported denial of their ability to award fees might have been meaningless rather than substantially unconscionable.

LACEY V. HCR

In November 2005, the Fourth District (Taylor, Gunther and Farmer) revisit this situation in Est. of Jessie E. Lacey v. Healthcare and Retirement Corporation of America. The court affirmatively stated that the arbitration agreement in Lacey was “identical” to the agreement at issue in Romano; the court specifically referenced the $250,000 cap on non-economic damages and bar on punitive damages.

However, oddly enough, the court also claimed that, in Romano, it had found the agreement “unconscionable and violative of public policy.” Again, “public policy” never appeared in the Romano decision (open the PDF and do a word search). Why the sudden insertion of public policy? It’s unclear. Was it simply a case of revisionist history in order to fit nicely with the “public policy” theory which the same court had created only five months prior in the May 2005 decision of Blankfeld v. Richmond Healthcare? (per curiam, with a stirring concurrence by Farmer)

Weirder still, that same court, in the forgotten 2004 case of Richmond Healthcare v. Digati (Farmer, Taylor, Gross) had previously said that it was "unable to find any statutory authority allowing judges to refuse to enforce valid arbitration provisions in nursing home admission contracts of competent parties for reasons other than unconscionability." Digati was less than a year before Blankfeld created the theory that public policy trumps contractual limitations of liability. In all fairness however Digati and Blankfeld could be read as harmonious if you take Digati literally: there is no “statutory” authority to decline arbitration on any ground other than unconscionability hence the need to create a public policy authority which accomplishes the same task.

Back to Lacey. The court held that the liability limitations ran contrary to statutory rights and therefore was barred as a matter of policy. The opinion notes that two Second District opinions from 2004-2005 have differing opinions (“but see…”) but the Fourth avoided framing their new theory as being in express and direct conflict.

The agreement was entitled, “arbitration and limitation of liability agreement” and had no severance clause. For that reason, the court found that the offending limitations went to the essence of the agreement and could not be severed.

PRIETO v. HCR

One month after the Fourth decided Lacey, the Third District (Gersten, Fletcher and Ramirez) issued Est. of Valentin Prieto v. Healthcare and Retirement Corporation of America. Therein, the court reversed enforcement of “an agreement which provided for arbitration and a limitation of liability.” Again, in describing the circumstances surrounding admission, the responsible party was confronted with “a package of forms” including the arbitration/limitation document which was described as including terms which capped non-economic damages at $250k and barred punitives.

The Prieto court described how the plaintiff attacked the agreement on unconscionability terms. The Third referenced Romano and acknowledged that the liability limitations “appreciably diminish[ed] the statutory rights” and therefore was unconscionable. The court did not mention public policy.

BLAND V. HCR

We move forward in time to May 2006 where the Second District (LaRose, Stringer and Silberman) decided Bland v. Health Care and Retirement Corporation. In this case, the responsible party again signed “a number of documents” upon admission, including an “arbitration and limitation of liability” agreement which was “separate from other documents.” The wording of that agreement was set out clearly in the opinion, where section A dealt with “arbitration provisions” and section B dealt with a “limitation of liability provision.”

In Bland, the court employed both unconscionability and public policy arguments as grounds to review the arbitration provisions. The court declined to find unconscionability and punted the public policy argument to the arbitrator. The court said that the plaintiff’s “reliance on Romano is unavailing” because the Second District “eschews the sliding scale approach” to unconscionability used in Romano. The Second District likewise cited but skirted the Blankfeld public policy analysis because, in the Second District, they had already decided that remedial limitations are for the arbitrator.

WOEBSE v. HCR and MANOR CARE

We jump forward to February 2008 where the Second District (Salcines, Altenbernd and Silberman) took up Woebse as Personal Representative of David Kramer v. Health Care and Retirement Corp. and Manor Care et al. There, the responsible party was faced with paperwork which included “a consecutively numbered, thirty seven page document entitled Admission Agreement.” Later, it was mentioned that “an arbitration agreement [was] contained in the package.”

The Second District picked up on the difference in this case (a 37-page consecutively numbered document) as opposed to the “separate document” in Bland. That said, plaintiff’s counsel told the court that the arbitration agreement was “the same” as in Romano (the Court placed the relevant wording in a footnote).

Under the factual scenario presented, the Second District “agreed with and adopted” Romano and denied enforcement of the arbitration agreement – despite the fact that the same court has “eschewed” Romano only years before. Moreover, the Woebse panel further described the references to public policy in Bland were dicta.

GESSA v. MANORCARE

Moving to the present day, the Second District (Davis, Whatley and LaRose) issued an opinion on January 30, 2009 in Angela Gessa v. Manor Care, Inc. et al. In that case, the Resident’s power of attorney signed a 9-page admission agreement as well as a separate document which had no title but was captioned with a warning that it waived statutory rights. This case presents the first instance where the separate document is mentioned as not having a title. The court’s description of that document references that it was section (a) Arbitration Provision and section (b) Limitation of Liability Provision which included a cap on non-economic damages and a bar on punitive recovery.

The trial court found that there was no procedural unconscionability but that the limitation provisions could be severed – even without a severance clause. The Plaintiff appealed, focusing on public policy and severance, not unconscionability. Manor Care responded by saying that the court properly pushed the public policy analysis to the arbitrator, consistent with prior Second DCA precedent.

The Panel found that the court only ruled on unconscionability and did not decide anything relative to public policy. While the trial court said the dispute provisions could be severed, it did not actually sever them.
The Second District avoided citation to the prior Manor Care cases. It made no reference to the fact that its precedent was to have the arbitrator decide public policy contrary to the Fourth District’s method of taking up that issue. A footnote acknowledged that issue was “unsettled.” Instead, it ruled that clauses which do not go to the essence of a contract can be severed as long as there remain valid legal promises on both sides. In this instance, the trial court’s finding that the limitation provision was not an integral part of the agreement was supported by competent evidence.

The Gessa decision leaves open several issues: (1) is there a direct and express conflict among these cases relative to severance?; (2) is there a direct and express conflict over the Second and Fourth Districts’ handling of public policy analysis?; (3) is the Second District reconsidering its own public-policy-is-decided-by-the arbitrator analysis or did it simply bury the issue to avoid a conflict which might permit Supreme Court review?; and (4) are the courts reviewing the same contract each time or is it revised? That said, the Second, Third and Fourth Districts have all agreed that the non-economic damages cap and bar on punitives are not enforceable.

As these issues develop, keep an eye on nursing home arbitration decisions coming out of the same two courts (2nd and 4th DCAs). Consider, for example, Slusser v. Life Care Centers of America (Fourth District Feb 2008) or Shotts v. Tandem Health Care (Second District June 2008).

What remains, however, is the distinct impression that the same dispute over the same (or similar) nursing home arbitration and limitation provisions will be assessed differently depending upon whether the parties are before the Second or Fourth District.