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Fox Farley Willis & Burnette Attorneys At Law
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TN Court: Arbitration Agreement Is “Unconscionable” But Still Enforceable


It has become common practice for nursing homes to pressure their residents into signing binding arbitration agreements. These agreements strip residents of their right to sue nursing homes for medical malpractice or other forms of negligence in favor of a private arbitration proceeding. In many cases, these arbitration agreements require residents to pay high up-front fees just to get their cases heard.

Court of Appeals: Defendant’s Offer to Pay Plaintiff’s Arbitration Costs After-the-Fact Does Not Make It Okay

In some cases, these fee provisions may be deemed “unconscionable” by an actual Tennessee court. But that does not necessarily mean the overall arbitration agreement is unenforceable. Depending on the specific language of an arbitration clause, an illegal fee provision can be “severed” from the rest of the agreement.

This is precisely what happened in a recent case decided by the Tennessee Court of Appeals, Stokes v. Allenbrooke Nursing and Rehabilitation Center LLC. In this case, the plaintiff alleged he contracted sepsis due to the negligence of a nurse employed by the defendant. As a result of developing sepsis, the plaintiff said he “suffered severe and permanent injuries including maiming, disfigurement, [and] multiple amputations.”

The defense immediately moved to compel arbitration, citing two written agreements the plaintiff signed. Among other provisions, the agreement required a 50-50 split of all expenses related to the arbitration. The plaintiff asked the court to find the arbitration agreement unconscionable, explaining that he had “no income and sizable monthly living expenses” and therefore could not afford the costs of arbitration.

The defense actually conceded that a fee-splitting rule in an arbitration agreement may be illegal if it prevents the plaintiff from having their case heard. But to alleviate that problem here, the defendant offered to pay “the entire costs of the arbitration.” The circuit court, however, said that was not good enough and denied the defendant’s request to compel arbitration due to the “unconscionable” fee-splitting provision.

On appeal, the Tennessee Court of Appeals agreed with the circuit court that the fee-splitting rule was unconscionable. There was no doubt the plaintiff could not afford the arbitration costs. And the defendant’s “after-the fact offer to pay the costs of arbitration” did not, in the Court of Appeals’ view, render the original fee-splitting provision any less unconscionable. As far as the law was concerned, the appellate court said what mattered was the “circumstances as they existed at the time the parties signed the contract.”

That said, the Court of Appeals also pointed to a provision in the arbitration agreement that said if any single provision “is held to be unenforceable by reason of law, the provision will be modified to reflect the parties’ intent to arbitrate their claims, and all remaining provisions shall remain in full force and effect.” This language was sufficient to “save” the arbitration agreement from the unconscionable fee-splitting clause, the appellate court concluded, so it ordered the case to arbitration.

Speak with a Tennessee Personal Injury Lawyer Today

Before signing any agreement that may affect your legal rights, it is always advisable to consult with a knowledgeable attorney. And if you plan to pursue any claims against a healthcare provider, you should always speak first with a qualified Clinton personal injury lawyer. Contact the offices of Fox, Farley, Willis & Burnette, to schedule a free consultation with a member of our team.


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