In response to increasing runaway verdicts with large awards for punitive damages, many nursing homes are including arbitration clauses in their admission agreements. The U.S. Supreme Court’s decision in Marmet Health Care Center v. Brown, 132 S.Ct. 1201 (Feb. 2012), held that these agreements are enforceable because the Federal Arbitration Act (FAA) preempts both state laws and judicially established public policies that prohibit contracts that require arbitration to resolve personal injury lawsuits. The only exceptions are if the party seeking to enforce the agreement took advantage of the other or the terms are so one-sided that the clause is “unconscionable.”
The issue of enforceability of the contract, however, is deferred to the state courts to apply their own contract principles and laws to determine if the contract between the nursing home and the patient is so unconscionable it cannot be enforced under the FAA.
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