Howell v. NHC Healthcare-Fort Sanders, Inc.
109 S.W.3d 731, 2003 Tenn. App. LEXIS 143 (2003)
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Rule of Law:
An arbitration agreement within a contract of adhesion is unenforceable if its terms are beyond the reasonable expectations of an ordinary person or are otherwise oppressive or unconscionable, particularly when the waiver of the right to a jury trial is not knowingly and clearly explained.
Facts:
- Orangie Howell became ill and required admission to the NHC-Ft. Sanders Nursing Home.
- Her husband, Mr. Howell, who is unable to read or write, went to the nursing home to handle her admission.
- A nursing home representative, Paula Larkins, presented Mr. Howell with an 11-page admission agreement, which was required to be signed before his wife could be admitted.
- Larkins paraphrased the contract for Mr. Howell but did not read it to him verbatim or ask if he could read.
- Larkins did not inform Mr. Howell that by signing the agreement, he was waiving his wife's constitutional right to a jury trial for any future claims.
- The agreement contained an arbitration provision on page ten, written in the same font size as the rest of the contract.
- Mr. Howell signed the agreement under the impression it was solely a contract to get his wife admitted into the facility.
Procedural Posture:
- The executor of the Estate of Orangie Howell filed a lawsuit against NHC-Ft. Sanders Nursing Home in the trial court, alleging abuse and neglect.
- The nursing home filed a Motion to Compel Mediation and Arbitration, based on the admission agreement signed by Mr. Howell.
- The trial court conducted an evidentiary hearing and entered an order denying the nursing home's motion to compel arbitration.
- The nursing home (appellant) was granted an interlocutory appeal to the Tennessee Court of Appeals (this court) to review the trial court's order.
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Issue:
Does an arbitration provision within a nursing home admission agreement constitute an unenforceable contract of adhesion when the signatory is illiterate, the provision is not conspicuous, and the signatory was not explicitly informed that they were waiving the right to a jury trial?
Opinions:
Majority - Unspecified
No. An arbitration provision is unenforceable when the circumstances show it is an unconscionable contract of adhesion. The court determined the nursing home agreement was a contract of adhesion because it was offered on a 'take-it-or-leave-it' basis by a party with superior bargaining power. Following the precedent in Buraczynski v. Eyring, the court found the provision unenforceable because its terms were 'oppressive or unconscionable.' Several factors supported this conclusion: the agreement was presented as a condition of necessary medical treatment, Mr. Howell had no real bargaining power, his inability to read was apparent, and the nursing home's employee undertook to explain the contract but failed to explain the jury trial waiver. The fact that the clause was 'buried' on page ten of a lengthy document, rather than being a conspicuous, stand-alone agreement, further supported the finding of unconscionability.
Analysis:
This decision reinforces that courts will apply heightened scrutiny to arbitration clauses within contracts of adhesion, particularly in healthcare settings where consumers are vulnerable. It affirms that the enforceability of such a clause depends not only on its text but heavily on the circumstances of its execution. The ruling establishes a precedent that a waiver of a fundamental right, like a jury trial, must be knowing and voluntary, placing a significant burden on the drafting party to ensure conspicuousness and clear explanation, especially when dealing with a party with diminished capacity or bargaining power. Future cases involving similar 'buried' clauses in adhesion contracts will likely face similar challenges to their enforceability.
