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Arbitration versus litigation: Nursing-home lawsuit touches issues of federal law, states' rights

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Poor health plagued Anna Marie Taylor in her final years.

Her medical woes worsened through 2012, when her son, William, found himself sitting behind a 50-page stack of papers at a large nursing home chain, according to court documents.

He scribbled his signature where the admission coordinator told him to sign. With a few strokes of a pen, he had admitted his mother to a home where, he hoped, she could receive the care she needed.

But her health quickly declined in the facility’s care. She died a few months later.

William Taylor and his brother, Daniel, filed wrongful death and survival claims against the Havencrest Nursing Center and its parent company, Extendicare Health Facilities. That was when they realized the full implications of one document tucked in that 50-page stack: an arbitration agreement.

What has followed is a complicated legal battle over whether the courts can separate the wrongful death and survival claims, sending the wrongful death claims to trial and the survival claims to arbitration.

Wrongful death claims generally compensate individual family members for the financial and emotional loss caused by a family member’s death. Survival claims, meanwhile, compensate the victim’s estate for pain, financial loss and other grievances the victim suffered while alive.

The Taylor case, which could be on its way to the nation’s highest court, could have far-reaching implications in an era when, some believe, state courts have grown used to honoring arbitration agreements at the expense of state laws.

Arbitration vs. trial

At the heart of the case is a national dispute over whether a federal law, the Federal Arbitration Act, trumps state laws that let certain cases proceed to trial, bypassing arbitration.

During arbitration, both parties choose who will oversee and decide the case. Many legal professionals tout this process as a less costly, more streamlined alternative to a jury trial.

Arbitration, however, typically takes place outside the public eye — a concern for someone who might want to expose a company’s wrongdoing to other potential victims — and offers the parties involved fewer opportunities to appeal.

The Taylors filed two kinds of claims against Extendicare in 2012: wrongful death and survival.

Both types of claims stem from the Taylors’ belief that alleged negligence at Havencrest, the Extendicare-owned nursing home in Washington County where their mother spent some of her final days, caused Anna Marie Taylor’s death.

The courts, however, have yet to address whether Ontario-based Extendicare is truly responsible for the woman’s passing. Instead, they have tried to figure out which, if any, of the claims belong in arbitration, and which should go to a jury trial.

The Taylors’ attorneys have argued that both claims must go to trial because of a Pennsylvania law requiring the courts to combine them.

Extendicares’ attorneys, meanwhile, believe they can separate the claims, essentially sending the wrongful death actions to trial and the survival claims to arbitration. They can do this, they said, because the Federal Arbitration Act essentially cancels out anything the state has to say in the matter.

Although two lower courts agreed with the Taylors that the claims belonged together in court, the Pennsylvania Supreme Court ruled in September that Extendicare could, indeed, split them up.

The Taylors’ legal counsel is now asking the U.S. Supreme Court to take a look at the case.

What's at stake?

The Pennsylvania Supreme Court’s ruling in the Taylor case has flung several similar cases of alleged nursing home negligence back to the lower courts. That includes cases in the midstate, like a 2012 wrongful death suit filed against ManorCare of Carlisle.

But the case’s implications stretch far beyond the borders of the Keystone State, said Stephen Trzcinski of Wilkes & McHugh, the firm representing the Taylors.

Many courts, he argued, are confused about the scope of the Federal Arbitration Act — the grounds on which Pennsylvania’s Supreme Court let Extendicare kick some of the claims to arbitration. Legal experts nationwide have specifically questioned whether the act always trumps conflicting state laws and to what extent it requires courts to rule in favor of arbitration agreements.

This confusion has led courts to increasingly err on the side of arbitration, even in cases where, Trzcinski believes, both sides could save time and money by combining claims in a single jury trial.

“It creates a mess, and it creates a lot more work and cost,” Trzcinski said of rulings that split claims between a trial and arbitration. “The only people that actually benefit are the civil defense attorneys.”

Even the Pennsylvania Supreme Court expressed concerns about the consequences of the trend toward arbitration, saying in its own majority ruling in the Taylor case that such judgments threaten wrongful death beneficiaries’ constitutional right to a jury trial.

This trend is especially worrisome in cases of alleged nursing home neglect, in which elderly people’s loved ones often sign arbitration agreements in a “crisis-driven, stress-laden event” where the nursing home has most of the bargaining power, the court notes.

Still, arbitration serves a legitimate, and often mutually beneficial, role in the world of conflict resolution.

As companies increasingly look for ways to avoid lawsuits, pre-dispute arbitration agreements — like the one William Taylor signed before he admitted his mother — have become an increasingly attractive option for all kinds of businesses, from construction companies to nursing homes, like the Extendicare chain, hoping to protect themselves against an increasing number of lawsuits.

Claims against assisted living homes have especially grown in recent years, with Pennsylvania facilities seeing a 9.6 percent increase in the number of claims filed between 2015 and 2016, according to Aon, a national risk management firm.

“Nursing facilities are often the target of frivolous lawsuits,” said W. Russell McDaid, president and CEO of the Pennsylvania Health Care Association, an advocacy group for people and businesses working in elder care.

Out-of-state law firms — including Wilkes & McHugh, which is based in Florida — often initiate these claims, McDaid said. They often do so by advertising unrealistic claims about what consumers should expect from a particular nursing home and, he believes, convincing otherwise content consumers to file unnecessary suits.

These claims put facilities on a constant defensive and strain their budgets at a time when they already receive significantly less money than they need from government programs like Medicaid, McDaid said.

Arbitration agreements help protect them from these losses. They also help families receive settlements without going through a trial lawyer as a middleman, McDaid said.

“I think trial lawyers’ biggest beef with arbitration agreements is it takes money out of their pockets,” he said.

Trzcinski’s concern in the Taylor case, however, is not with arbitration agreements per se, but rather the way the courts decide when they should and should not apply. For him, the Pennsylvania Supreme Court’s ruling, based on similar rulings across the country, points toward a troubling trend of favoring federal law over state law in arbitration cases.

He also believes such rulings misread the intent of the Federal Arbitration Act, which is meant to put arbitration agreements on equal footing with other contracts.

“I think it would be too narrow to characterize this is as a consumers’ rights issue,” he said.

What's next?

Trzcinski hopes the U.S. Supreme Court will take the case and resolve what he sees as a nationwide conflict between state and federal arbitration laws.

But the issue still has a long road to travel before it even has a chance of reaching the justices’ desks.

Trzcinski filed a petition explaining the case to the court just before Christmas. Extendicare’s legal counsel, which did not return requests for comment for this story, will have an opportunity to respond, and the Taylors will be able to reply to that response.

That back-and-forth will take months. Then the Supreme Court has to decide if it even wants to take the case.

The court receives between 7,000 and 8,000 requests per year, of which it hears arguments in about 80. If it decides not to look at the case, the decision of the lower court stands.

Trzcinski believes the Taylors’ case is worth taking.

“This isn’t just happening in Pennsylvania; this is happening all over the country,” he said.

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Jennifer Wentz

Jennifer Wentz

Jennifer Wentz covers Lancaster County, York County, financial services, taxation and legal services. Have a tip or question for her? Email her at jwentz@cpbj.com. Follow her on Twitter, @jenni_wentz.

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