Philpot v. Tennessee Health Management, Inc.
279 S.W.3d 573, 2007 Tenn. App. LEXIS 765, 2007 WL 4340874 (2007)
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Rule of Law:
An arbitration agreement in a nursing home admission contract, even if it is a contract of adhesion, is enforceable if its terms are not unconscionable or oppressive. Factors indicating enforceability include prominent disclosure of the jury trial waiver, mutuality of the arbitration obligation, and a provision allowing the weaker party to revoke the agreement within a reasonable time.
Facts:
- Prior to January 6, 2005, Virginia Miller was a resident at Vaneo Manor Nursing Center.
- On January 6, 2005, following a hospital stay, Miller's son, Gary Philpot, sought to admit her to NHC Healthcare, Hendersonville.
- Philpot possessed a Durable Power of Attorney for Health Care and a general durable power of attorney for his mother, Virginia Miller.
- On the day of admission, Philpot, acting as his mother's attorney-in-fact, executed an admission contract with NHC.
- As part of the admission packet, Philpot signed a separate, two-page document titled "JURY TRIAL WAIVER AND DISPUTE RESOLUTION PROCEDURE."
- This document mandated binding arbitration for disputes exceeding the Small Claims Court's jurisdictional limit and included a clause allowing either party to revoke the arbitration provision within 10 business days.
- Virginia Miller became a resident of the NHC Hendersonville facility.
- On March 24, 2005, Virginia Miller died while she was a resident at the NHC facility.
Procedural Posture:
- Gary Philpot, on behalf of Virginia Miller's estate, filed a wrongful death lawsuit against NHC Healthcare/Hendersonville, LLC and other related entities in a Tennessee trial court.
- The NHC defendants filed a Motion to Compel Arbitration and Stay Proceedings based on the arbitration agreement.
- After discovery and a hearing, the trial court denied the defendants' motion, finding the arbitration agreement was unenforceable because it was an unconscionable contract of adhesion.
- The NHC defendants, as appellants, appealed the trial court's order denying arbitration to the Court of Appeals of Tennessee.
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Issue:
Is an arbitration agreement signed as part of a nursing home admission contract unenforceable as an unconscionable and oppressive contract of adhesion when it contains a jury trial waiver and a 10-day revocation clause?
Opinions:
Majority - Clement, Jr., J.
No. The arbitration agreement is not unenforceable as an unconscionable and oppressive contract of adhesion. While the agreement is a contract of adhesion, its terms are not so one-sided as to be oppressive or beyond the reasonable expectations of an ordinary person. The court's reasoning focused on several key factors: the arbitration and jury trial waiver provisions were not hidden but were prominently disclosed in bold, capitalized letters in a separate, clearly labeled document. A party is presumed to know the contents of a contract they sign and has a duty to read it. The agreement was mutual, applying equally to both parties, despite the plaintiff's argument that it practically favored the nursing home. The plaintiff failed to carry his burden of proving that arbitration would be prohibitively expensive, as his only evidence was a fee schedule for an arbitration association not mandated by the agreement. Finally, the 10-day revocation clause, consistent with the precedent in Buraczynski v. Eyring, was a significant factor supporting enforceability because it provided the plaintiff with a meaningful opportunity to opt out of the arbitration provision after signing, thus mitigating the 'take it or leave it' nature of the agreement.
Analysis:
This decision reinforces Tennessee's strong public policy favoring the enforcement of arbitration agreements, even in contexts with significant disparities in bargaining power, such as nursing home admissions. It clarifies that for a contract of adhesion to be deemed unconscionable, the challenger must show more than just unequal bargaining power; they must demonstrate substantive unconscionability where the terms are so oppressive that no fair person would accept them. The case establishes that procedural safeguards like prominent disclosure of key terms and the inclusion of a revocation clause can validate an adhesion contract against claims of unconscionability. This ruling places a heavy burden on parties seeking to invalidate such agreements to provide specific evidence of oppressive terms, such as prohibitive costs, rather than relying on general arguments about the circumstances of the signing.
