A publication of the Arkansas Trial Lawyers Association
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Stephanie Malone Editor
Katie Clifford
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Jennifer Irwin
Publications Committee (2024-2025)
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Taylor Chaney
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George Wise
Chris Heil
Carter Stein
Sarah Jewell
Geoff Hamby
Corey McGaha
Jim Lyons
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Drake Mann
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Tim Watson
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Geoffrey Kearney
Whitney Cossio
Daniel Holland
ATLA Docket is published quarterly by the Arkansas Trial Lawyers Association, PO Box 3486, Little Rock, AR 72203. Telephone (501) 376-ATLA. All rights reserved. Statements or expressions of opinions are those of contributors and are not necessarily those of the Arkansas Trial Lawyers Association or the editor of ATLA Docket. The editor of ATLA Docket reserves the right to edit and condense all materials herein. All advertising copy is the sole responsibility of the advertisers.
As I sit at my computer typing out my final article as President of this great organization,
I remember that it is each and every one of you that makes it great, not me nor any past president. Sure, we have had great past presidents that have done great things, but no single is greater than the whole. I thought of Lou Gehrig’s Farewell to Baseball Address, where after receiving his diagnosis that he described as a “bad break,” he proudly announced, “Today, I consider myself the luckiest man on the face of the earth.” He went on to describe how fortunate he felt for the people in his personal and professional life, from the managers of his teams to the groundskeepers, and even to his mother-in-law. For me. this organization is filled with great people, and I feel fortunate for each and every one I have met along the way.
I want to also remind you of the great work you have all done this year. Despite the kicking and sometimes screaming of some of the more mature members like me, we have moved The Docket into the age of technology by taking it online, which has only added to its success. It has allowed for better access and substantial savings for this organization. We have again had a successful Leadership Academy training and educating our younger members for when their time comes to take a leadership role in Arkansas Trial Lawyers. We changed our dues for the first time in many years and implemented a method that allows that to be revisited on a timely basis, and we did that without any impact on the number of members. We had wonderfully planned and executed CLE seminars at Chenal County Club and Oaklawn.
My biggest anxiety about this position was that I would be president during a session year. I thought about how hard past presidents had worked and strived for the clients we represent. My single biggest fear was that there would be some legislation that would negatively affect those all of us represent. One of the nicest things that has been reminded to me though out the year is that none of us win by ourselves in this organization, and none of us lose by ourselves. Are there things I wish would have happened differently this year? Of course there are, but I am also very proud of the successes we had. Our legislative team, which each of you in one way or another helped assemble, has worked tirelessly
By Rob Beard, Esquire, ATLA President & Justice PAC Chair
to accomplish more than has been seen. Our legislative team has truly put their hearts and soul into this effort and given their best efforts to put the interests of our clients above their own. To all of you who have offered an encouraging word, any help needed, a pat on the back, the time to drive to Little Rock (some of you again and again), or reached out to one of our politicians, I sincerely thank you.
So, as I finish typing this last argument, I feel a little bit sad and a little bit happy. It is time to pass the baton, and I am very confident in the upcoming leadership. This organization is great hands, and Jessica Virden will do a superb job. I feel like I blinked and the whole year went past. I am grateful I had this opportunity, but I am more grateful that we have great leaders in line to follow. My theme this year has been that there is room for all trial lawyers under our tent, and that if we all thought the same way and always got along, we would not meet our potential. The diversity of our backgrounds, experiences, and ideas will continue to allow us to grow. All of you have been like a family to me, united for a common purpose greater than any individual. I hope I have done the same for a few of you. Oscar Wilde said, “Some cause happiness wherever they go; others whenever they go.” As I leave, I hope I have done a little of both, and for those that have been before and follow after, THANK YOU.
Happy April!
April is probably my favorite month. I get to celebrate my birthday and anniversary. We get to watch The Masters. It’s usually the month the General Assembly adjourns. And, of course, it’s the month of the ATLA Annual Convention! This year’s convention starts on April 23 and ends on the perfect date, April 25. It’s not too hot, it’s not too cold, and all you need is a light jacket.
I want to start on commending Stephanie and the entire lobby team for all of their hard work this session. We took a punch with the passage of the collateral source bill, which became Act 28, but it was a close fight. It passed by just one vote in the Senate and really could have gone either way. If not for the hard work on ATLA’s behalf, it probably would have been a landslide. We are able to fight the good fights through everyone’s contributions to Justice PAC. It’s a new year, which means we need to boost our coffers again.
I also want to give a big thanks to those who donated to the response effort. We met our fundraising goal, and the response committee has been hard at work analyzing Act 28 and the best approach to challenge it. If you have questions about how to deal with Act 28 in your cases and how best to help your clients, please contact me or Stephanie. We will be happy to put you in touch with the best person to give you advice. I believe there will be a presentation at ATLA Convention as well.
Speaking of Convention, make sure you’re registered! As always, there is a great line up of speakers (excluding myself, but I’ll do my best). The (in)famous hospitality suite is generously sponsored again by Denton, Zachary, and Norwood. Forge has sponsored the opening night reception. We’re switching things up with an awards brunch sponsored by Milner Settlements, because let’s be real, hotel brunch food is way better than lunch, especially if you’re allergic to beef like me (squeaky green beans do not a meal make). And we can all use some hearty breakfast food after a night in the hospitality suite.
By Jess Virden Mallett, Esquire, ATLA President-Elect
I may be a little partial, but the President’s Party on Thursday night should not be missed! Flashback is making their return to the ATLA Convention and will be rocking at the “haunted” Crescent Hotel. We will have a shuttle taking folks back and forth, but at less than a mile on the same level as the Inn of the Ozarks, it is also walkable. We’ll have food and a bar and of course the live auction. It’s going to be fun!
So, if you haven’t registered, do so! Let’s celebrate the best month of the year with amazing CLE and camaraderie that can’t be beat. I’m looking forward to seeing everyone in Eureka!
Arbitration
By Todd Turner
The American justice system has historically protected consumers against unfair business practices. Almost fifty years ago, the Supreme Court recognized the need for private legal actions to promote public policy. 1 Statutory remedies allow for treble damages and attorney’s fees to encourage victims to act as “private attorneys general.” 2 The availability of statutory damages is designed to encourage private enforcement of the law, allowing citizens to further the legislative goals of eradicating unfair trade practices. 3 Courts have long recognized the need for plaintiffs to aggregate similar claims 4 and federal and state courts expressly sanction class action proceedings. 5
Over the last two decades, consumer-protections have eroded as courts have increasingly demonstrated a strong propensity to force consumers into individual private arbitrations. These courts have declared the existence of a “liberal federal policy favoring arbitration.” 6 Our State’s appellate courts have followed suit by announcing that “as a matter of public policy, arbitration is strongly favored in Arkansas because it offers a ‘less expensive and more expeditious means of settling litigation and relieving docket congestion.’” 7
Even if there is a “liberal policy favoring arbitration,” does that policy now overwhelm all others? And if arbitration is such a great method of resolving disputes, why do most companies seek relief in court when they have disputes with a customer but only demand arbitration when the customer files suit?
Parties should be free to mutually agree to arbitrate a dispute. 8 Indeed, that was the reason for the passage of the FAA in 1947. The FAA simply provides that parties may enter into a written agreement to reflect their mutual assent to arbitrate any “controversy thereafter arising out of such contract.” 9 The FAA enabled maritime companies to agree to avoid litigation 10 and was used primarily by sophisticated businesses dealing at arms’ length.
Consumer-protection laws and the threat of class-action claims have protected the public by deterring improper conduct. But around 2000, certain companies decided to add arbitration provisions to their adhesion contracts. These companies did not want arbitration because they thought it was a fair and inexpensive means of resolving disputes. They simply wanted to shield themselves from lawsuits.
Payday lenders were among the first to employ this tactic in Arkansas. 11 Since these companies were making small loans at exorbitantly high interest rates, it made perfect sense for them to look for ways to avoid the courtroom.
Fortunately, the Arkansas Supreme Court issued a series of rulings which prevented payday lenders from using unfair, one-sided agreements to shield themselves against usury claims. The court recognized that arbitration could provide a less expensive means for resolving disputes but made it clear that such agreements were improper when they were designed merely as a “shield against litigation by one party.” 12
Unable to use arbitration to shield themselves from classaction lawsuits, the payday lenders eventually stopped operating in Arkansas. If their arbitration arguments had been successful, they would probably still be in business and still collecting 1,000% interest on short-term loans.
Although arbitration did not protect the payday lenders in 2000, it has now become corporate America’s most trusted shield against litigation. Today, almost every consumer is subject to forfeiting the right to seek relief in court if they use any modern necessities such as a bank account, a credit card, cell phone or internet service.13 According to Consumer Reports, 81 of the largest 100 companies in America now use arbitration clauses. 14
Despite this rapid increase, studies have demonstrated that consumers usually have no idea that they have “agreed” to arbitration. 15 This is because most customers are never presented with any written contract or agreement. Instead, companies create websites, receipts or monthly bills that contain language indicating that if you use a product or pay your bill, you are providing your consent to all of the company’s boilerplate terms and conditions. In fact, even if someone is an existing customer, a company can add a statement to a new bill that says, if you pay your bill or keep using our product, you now agree to everything on our website. Then, by paying a regular bill, your consent can be presumed even if you never received anything resembling a contract, never visited the company’s website or never even had access to the internet.
In 2015, Altice USA acquired Suddenlink Communications 16 and promised government officials that it would maintain a superior level of reliability and customer support. 17 Soon, Altice was bragging that Suddenlink’s 47% profit margins were the highest in the U.S. cable industry. 18 Suddenlink supplied internet, telephone and cable television to Arkansas consumers. Some or all of those services were provided pursuant to exclusive franchise agreements with at least 59 cities in Arkansas. 19 Some of these cities made formal complaints about Suddenlink’s services and in February, 2020, over one hundred angry citizens gathered in Jonesboro for a town hall meeting to vent about Suddenlink complaints. 20
By 2021, almost 16,000 complaints had been filed against Suddenlink with the BBB and hundreds had been lodged with the Arkansas Attorney General. 21 Many of these complaints led to lawsuits.
In one instance, customers alleged that Suddenlink had violated Arkansas’ price-gouging law by drastically raising internet rates during a time of emergency. 22 In that case, Suddenlink admitted that thousands of its Arkansas customers had seen their rates increase by 10% or more during the COVID pandemic.23 Some customers filed suit because they had signed up for services based on ads promising service at $54.99 a month for life.24 Others alleged claims based on improper credits, late fees and bogus charges.25 Since these customers had never received or signed any contracts, their lawsuits were filed in circuit court. In fact, Suddenlink’s ads and its websites consistently declared that Suddenlink did not require contracts.26 But in each case, Suddenlink argued that it actually did have contracts with its customers because each time someone paid their monthly bill, they were agreeing to all the terms and conditions which appeared on one of the company’s websites.
J.R., a disabled adult, had used the same cable TV account (which was her only option for basic service) for over fifteen years. After Suddenlink took over the account, her monthly bill for basic cable skyrocketed from $28.00 to $385.00. 27 J.R.’s parents (who served as her legal guardians) filed suit after they were unable to get any refund or explanation for this drastic rate increase. It was undisputed that neither they nor their daughter had ever signed (or even received) any contract with any cable provider. In fact, J.R. had no internet service and had never used a computer. However, the Arkansas Court of Appeals reversed the lower court’s denial of arbitration because it found that J.R. or her parents must have agreed to the terms and
conditions on Suddenlink’s website because someone had paid the bill. 28
It is virtually impossible to disprove that you may have visited a website. But a company can use that bare allegation to deprive individuals of their federal and state constitutional rights. Fortunately, the Arkansas statute of frauds (which applies to all contracts) requires that any agreement that results in the waiver of a constitutional right must be in writing and signed by the party to be charged. 29 Since none of Suddenlink’s customers were ever presented with a written document, much less signed anything, this law should have protected them from Suddenlink’s arbitration demands. However, the Court of Appeals ruled that when customers paid their monthly bills (which the customers had been doing for years) there was “clear and convincing evidence” of “contract performance” after Suddenlink had added the fine print to the monthly billing statements. 30
The Court of Appeals also accepted Suddenlink’s argument that none of the customers had properly opted out of the arbitration clause in the lengthy website terms and conditions. Of course, the customers who lacked internet access had no way to review the website terms in the first place. According to the website terms, a customer could only opt out by providing written notice “within 30 days of the effective date of this agreement.”31 But since the court accepted Suddenlink’s argument that a new contract was formed each time a customer paid her bill, even if someone visited Suddenlink’s website and wished to “opt out,” she would have to “opt-out” each and every month. If the customer “had previously entered into an arbitration agreement with Suddenlink” (i.e. had ever paid a bill), then opting out was impossible.32
Suddenlink’s website terms limited remedies, applied New York State law and required mandatory, individual
arbitration. Suddenlink was able to impose these onerous terms on its customers by simply adding some fine print to its monthly bills which declared: “Bill payment confirms your acceptance of the Residential Services Agreement, viewable at suddenlink.com/terms.policy.” Even though some customers had been paying for the same cable TV service for decades, the court of appeals accepted Suddenlink’s argument that the inclusion of that language on a monthly bill meant that all Suddenlink customers had automatically become bound by any new website terms.
The website terms also allowed Suddenlink to change any of the terms at any time and it had no obligation to provide customers with notice of any of these changes. The only way a customer would know about any changes would be for her to re-read the website every single day. And, even if a customer discovered any changes, she would still be bound by those new terms because her ongoing “use” of the service would be construed as her manifestation of consent.
Under normal contract law and the basic notions of fairness, the ability of one party to unilaterally change any and every term of a written agreement would render it unenforceable.33 However, this undeniable unfairness has not prevented courts from enforcing these agreements to eliminate citizens’ access to court.
After losing on appeal, J.R.’s parents could have still pursued an individual arbitration to try to find out why their daughter’s monthly bill had gone from $28 to $385.34 But unfortunately, Suddenlink had already made several changes to its arbitration provision. When the case was first filed, the website terms provided that Suddenlink would pay “all arbitration filing, administrative, and arbitrator fees” if a customer sought arbitration.35 Later, Suddenlink modified those terms to require customers to pay a portion of the fees and added a new clause to allow
for “bellwether proceedings” if similar claims were raised by multiple customers.36 In short, individual arbitration was simply not a viable remedy for J.R. or any customer with a relatively small claim.
The same folks who brag about the fairness and effectiveness of arbitration also argue that if consumers do not want to arbitrate, they can just do business with someone else. But this is simply not true. In many instances, all of the available service providers require mandatory arbitration. 37 Additionally, some companies operate under a municipal franchise which effectively gives them a monopoly in certain areas.
Arbitration proponents also claim that consumers who do not want to agree to boilerplate terms and conditions can simply choose to do without a particular service or product. But who in modern America could do without the internet, especially during a global pandemic when millions of American adults were forced to work from home while their children participated in school on-line?
You may not know it, but if you buy a ticket to watch a playoff game or marching band competition at any Arkansas public school, you are waiving your constitutional rights. This is because the Arkansas
Activities Association has contracted with an out-of-state company which requires that tickets must be purchased through the company’s website. 38 If you take the time to click on and read the website’s terms and conditions, you will learn that buying a ticket reflects your agreement that you are submitting to the laws of the state of Georgia, must arbitrate any disputes and will promise to indemnify the company from any loss.39 If you don’t want to agree to those and many other “terms,” you don’t have to. You can just stay home instead of going to a public place to watch your child participate in extracurricular activities.
Meanwhile, when most companies want relief for themselves, they elect to sue their customers in court. But if a company is accused of wide-spread harm, it can still raise individual arbitration to defeat a class action claim. This proves that the only real purpose of the arbitration clause is to create a shield against litigation.
In 2021, Westlake Services, LLC sued a customer in Pulaski District Court to attempt to collect a deficiency judgment plus contract interest at 21.79%. 40 While this litigation was pending, Westlake never once mentioned arbitration. Instead, it simply asked the court for a judgment. But when the customer raised usury and other
Tschiemer Legal Briefing
Robert Tschiemer is the author of the Arkansas Bar Association Weekly Case Summaries available at www.arkbar.com robert@tschiemerlegalbriefing.com www.tschiemerlegalbriefing.com
consumer-protection claims, Westlake quickly changed its tune and demanded arbitration.41 Even though Westlake had sued its customer in court, the Arkansas Court of Appeals held that when the customer filed her own lawsuit, that claim could be forced into an individual arbitration.42
Westlake, like the payday lenders discussed above, went to court when it sought relief against a customer. Many other companies do the same thing.43 This is why the typical arbitration clause now says that either party may elect to arbitrate. This allows a company to sue its customers, but then demand arbitration if the customers sue it back. But why would a company choose court when it wants relief, but demand arbitration when the customer seeks relief? The answer is clear-- Because arbitration is designed merely as a shield against litigation.
The current legal trend seems to be that arbitration clauses should be enforced at all costs, regardless of whether consumers ever had
actual notice that they were waiving their constitutional rights. In October, a New Jersey appellate court held that a couple who were injured in a vehicle accident were required to arbitrate their personal injury claims because their twelve-year-old daughter had placed an online pizza delivery order a few months before the accident.44 The court ruled that when the twelve-year-old used an Uber Eats website, that obligated her family to arbitrate any future disputes with Uber.45 This is simply absurd.
Disney recently attempted to use its website terms to force arbitration of a wrongful death claim.46 After a doctor died because of an allergic reaction at a Disney resort, her husband filed suit.47 Several years earlier, the husband had created an online account in order to get a free trial to a Disney Plus streaming service.48 Disney argued that the husband had agreed to an arbitration provision in Disney’s website terms which prevented him from filing suit over the loss of his wife years later. Disney dropped its arbitration defense in the wake of adverse media attention and public outrage.49 However, based on the recent trend of arbitration rulings, its arbitration defense would have likely succeeded.
In the Disney case, the plaintiff had allegedly clicked a box confirming consent to all of the website terms. In the Suddenlink cases discussed above, some customers were ordered to individual arbitration even though they had no internet access and had never even visited any of Suddenlink’s websites.50
Maybe it makes good sense to allow businesses the right to sue their customers while those same customers are limited to individual arbitration. I mean, who wants to live in a world where an everyday citizen has the same access to court as a wealthy corporation?
A company that has the right to elect individual arbitration any time a customer takes it to court, can engage in price-gouging, usury, ticket scalping or outright fraud without any concern about customer lawsuits. Our Seventh Amendment right to participate in the public judicial system is just as vital as our right to own a firearm or attend a church. Hopefully we can educate the public about the rapid erosion of this right and the effects it is having on consumer affairs.
Finally, in case you have not paid attention to my references, please direct your attention to footnote number eight which simply explains that if you read any part of this article, that means that you and your heirs and assigns, for now and forevermore, have agreed to all of the terms and conditions located on my law firm’s website which I have the right to unilaterally change at any time in the future. █
Endnotes
1 Alyeska Pipeline Service Company v. Wilderness Society 8212 1977, 421 U.S. 240, (1975).
2 Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, (1987).
6 AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011).
7 Westlake Services, LLC. v. England, 2024 Ark. App. 271, 689 S.W.3d 664 quoting Courtyard Gardens Health & Rehab., LLC v. Arnold, 2016 Ark. 62, 6 485 S.W.3d 669, 673.
8 If you read some or any part of this article, that means that you and your heirs and assigns, for now and forevermore, have agreed to all of the terms and conditions located on my law firm’s website at tantlaw.net, and I reserve the right to unilaterally change those terms at any time in the future.
9 9 U.S.C. §2.
10 Brasch, Ben, Disney seeks to dismiss wrongful-death suit over app’s fine print, Washington Post, August 15, 2024.
11 See Showmethemoney Check Cashers, Inc. v. Williams, 372 Ark. 112, 27 S.W.3d 361 (2000)
12 Showmethemoney Check Cashers, Inc. v. Williams, 372 Ark. 112, 121, 27 S.W.3d 361, 367.
13 “Forced Arbitration: A Clause for Concern,” Consumer Reports, Jan. 30, 2020, Mendintz, Scott.
14 Id
15 Id
16 Suddenlink later changed its name to Optimum.
17 Edens v. Cebridge Acquisition, LLC, (S.D., W.V. 2:22-cv-00101), Compl., ¶ 15, filed February 28, 2022.
18 Murphy v. Cebridge Acquisition, LLC, et al. S.C. N.Y. (County of Queens), Compl. ¶ 24, filed March 22, 2022.
19 Kelley v. Altice USA, Inc., Clark County Case No. 10CV-21-19.
20 Gilsovic, Marine, Angry Arkansas customers come face-to-face with Suddenlink representatives, KATV.com, March 13, 2020.
21 City of Gurdon v. Altice USA, Inc., Compl., filed February 21, 2021.
22 Leeper, et al. v. Altice USA, Inc., Case No. 6:20-cv-06119 (W.D. Ark. 2020).
23 Id. According to Suddenlink, these increased rates generated over $3.6 million in revenue over a nine-month period.
24 Altice USA, Inc. v. Peterson, 2023 Ark. App. 116, 661 S.W.3d 699
25 Altice USA, Inc. v. Campbell, 2023 Ark. App. 123, 661 S.W.3d 720; Altice USA, Inc. v. Johnson, 2023 Ark. App. 120, 661 S.W.3d 707.
26 Altice v. Peterson, 2023 Ark. App. 116; Altice v. Campbell, 2023 Ark. App. 123; Altice. v. Johnson, 2023 Ark. App. 120.
27 Pam Runyan and Jesse Runyan v. Altice USA, Inc., Clark County No. 10CV-21-75.
28 Altice USA, Inc. v. Runyan, 2023 Ark. App. 124, 662 S.W.3d 247,
29 Ark. Code Ann. § 4-59-101.
30 Altice USA, Inc. v. Johnson, 2023 Ark. App. 120, 12, 661 S.W.3d 707, 717.
31 Runyan, Clark County No. 10CV-21-75
32 Id
33 Reg’l Care of Jacksonville, 2014 Ark. 361, *7, 444 S.W.3d 356, 360 (A contract “that leaves it entirely optional with one of the parties as to whether he will perform his promise would not be binding on the other.”).
34 After using arbitration to defend lawsuits all over the country, Suddenlink made a tactical decision to enter into a class-action settlement in New Jersey state court to secure a release of any and all past, present or future claims. Seale et al. v. Altice USA, Inc. et al, Docket No. MER-L-618-23, Superior Court of the State of New Jersey, Mercer County. Suddenlink asked a court—not an arbitrator—to approve a one-time payment of $10 to $27 to customers.
35 Runyan, Clark County No. 10CV-21-75.
36 www.optimum.com/terms-of-service. The terms state that the company will “consider” reimbursing the customer’s share of fees if the customer indicates that she cannot afford them.
40 Westlake Services, LLC v. England, 2024 Ark. App. 271, 689 S.W.3d 664. Westlake was the assignee of a vehicle financing contract.
41 Id. at 4, 689 S.W.3d at 668.
42 Id. at 17, 689 S.W.3d at 674
43 See e.g. U.S. Bank N.A. v. Wayman, 2015 WL 5772730 (S.D. Cal. 2015) (U.S. Bank filed suit in court over a dispute about uncredited funds in a customer’s account); Andre v. U.S. Bank, 2021 WL 3598737 (C.D. Cal. May 20, 2021) (U.S. Bank moved to compel arbitration when customer sued it over overdraft charges).
44 Fadulu, Lola, Their Uber Driver Crashed. A Pizza Order Unraveled Their Injury Lawsuit, New York Times, Oct. 4, 2024.
45 Id.
46 Brasch, Ben, Disney seeks to dismiss wrongful-death suit over app’s fine print, Washington Post, August 15, 2024.
47 Id.
48 Id.
49 Brasch, Ben, Disney yields, won’t try to block wrongful-death suit over fine print,” Washington Post, August 20, 2024.
50 Runyan, 2023 Ark. App. 124.
SO YOU THINK ARBITRATION IS ALWAYS FAVORED—
NOT SO FAST!
By Jeff Priebe Rainwater, Holt & Sexton
"Arbitration is always favored.” Such a phrase is a commonly used line in all motions and briefs in which a nursing home, or similar type facility, seeks to bully a family or resident into litigating their claim in a “friendlier” arbitration forum. This phrase is repeated ad nauseum in printed words and orally by nursing home attorneys at hearings and arguments. Apparently by repeating this phrase over and over, the phrase itself becomes legal jurisprudence. However, in the famous words spoken of a Saturday morning sport’s commentator – “Not so fast!” While this arbitration-favoritism phrase may be often repeated, there is a lengthy process that one must go through to determine whether the arbitration agreement is an actual enforceable contract.
This article will examine certain arguments to determine whether a purported arbitration agreement is enforceable under Arkansas law. We will also look at cases in which the Arkansas appellate courts have addressed and ruled on some of the issues related to the enforceability of arbitration agreements. While some courts may favor arbitration, all courts favor enforceable contracts.
When faced with an arbitration agreement, the first question that should be asked is “whether the arbitration agreement an enforceable contract?” As explained by the Arkansas Supreme Court, “[i]n deciding whether to grant a motion to compel arbitration, two threshold questions must be answered. First, is there a valid agreement to arbitrate between the parties? Second, if such an agreement exists, does the dispute fall within its scope?” Courtyard Gardens Health and Rehabilitation, LLC v. Arnold, 2016 Ark. 62, 8 (Ark. 2016) (citing to HPD, LLC v. Tetra Technologies, Inc., 2012 Ark. 408, 6 (Ark. 2012)). To begin this analysis, one must start by recognizing the basic elements of contract law. During the first semester of Contracts in law school, we learned
that the elements of a contract are: (1) competent parties; (2) subject matter; (3) legal consideration; (4) mutual agreement; and (5) mutual obligations. See Alltel Corporation v. Sumner, 360 Ark. 573, 577 (2005). As recently stated by the Arkansas Court of Appeals “[t] he federal policy in favor of arbitration is to make ‘arbitration agreements as enforceable as other contracts, but not more so.’” Waters of White Hall, LLC v. Wiegand, 2023 Ark. App. 172, 5-6 (2023) (citing to Morgan v. Sundance, Inc., 142 S. Ct. 1708, 1713 (2022)). If these basic contractual elements are not met --- no contract exists, no arbitration agreement can be enforced, and the arbitration agreement is not favored.
In recent years, a majority of Arkansas appellate court decisions addressing the enforceability of nursing home arbitration agreements have focused on the contractual elements of mutual agreement and mutual obligations. This focus has developed a string of cases that address certain issues: (1) does the arbitration agreement list all of the parties and is the arbitration agreement signed by all of the parties; (2) do the signatories of the arbitration agreement have legal authority; and (3) are the terms of the arbitration agreements mutual or are there “carve outs” that destroy mutuality. These issues have been and are continually being examined by the courts. Each will be addressed below.
In the contractual analysis, one must remember that 99% of all nursing home admission paperwork, including arbitration agreements, are typed form contracts generated by the nursing homes’ corporate offices. Any ambiguity in the wording, formation, or signing of these form contracts must be viewed in light most favorable to the resident or family member. As stated in Innisfree Health & Rehab, LLC v. Jordan, 2020 Ark. App. 518 (2020), “if there is uncertainty or ambiguity in an agreement, or it is susceptible to more than one reasonable construction, our courts construes it most strongly against
the party who drafted it.” Id. at 6. As we know, these purported arbitration agreements are just a few pages of the dozens, if not hundreds, of pages that a family must complete upon admission of a loved one into a facility. This highly stressful and highly emotional time presents an overwhelming environment for families who are simply seeking to place their loved ones in a nursing home. Given the setting and environment when families and residents are forced to sign the admission documents and arbitration agreements, fairness dictates that the arbitration agreements must be viewed in the light most favorable to the family member or resident.
While included in a vast variety of admission documents, the courts have continued to rule that the arbitration agreement alone must satisfy the basic elements of a contract referenced above. Thus, courts will look at the language contained in the specific arbitration agreement at issue to determine enforceability, not at the entire admission paperwork. See Pine Hills Health & Rehabilitation, LLC v. Matthews, 2014 Ark. 109 (2014). Even when the nursing home seeks to use other “admission” documents to support its enforceability argument, the Court should limit its analysis to the language contained solely in the arbitration agreement. See Robinson Nursing and Rehabilitation Center, LLC v. Phillips, 2019 Ark. 305 (2019).
(1) Does the arbitration agreement list the partis and have they signed?
Although it might appear simplistic, not all arbitration agreements list all of the parties involved, nor are the agreements signed by all of the parties. These are likely the most fatal flaws to enforceability of an arbitration agreement.
In Lakeside Nursing & Rehabilitation Center, Inc. v. Rufkahr, 2019 Ark. App. 142 (2019), the Arkansas Court
of Appeals affirmed a trial court’s refusal to order arbitration when the arbitration agreement did not include the name of the nursing home or the name of the resident and where the arbitration agreement had blanks for both to be listed. In affirming the trial court, the Court of Appeals noted a complete absence of authority to justify enforcing an arbitration agreement where the parties were not listed in a nursing home’s form arbitration agreement. Id. at 7-8.
In Pine Hills Health & Rehabilitation, LLC v. Matthews, 2014 Ark. 109 (2014), the Arkansas Supreme Court upheld the denial of the enforcement of an arbitration agreement when the agreement was not signed by a representative of the nursing home. The Pine Hills arbitration agreement was a form agreement that contained a blank for the signature of a representative of the nursing home. Id. at 6. The Arkansas Supreme Court agreed that without a signature, there was no evidence of the nursing home’s assent to arbitration. Id. at 8. The mere fact that a resident was admitted into the nursing home was not sufficient evidence of assent to enforce the arbitration agreement.
The Pine Hills Health & Rehabilitation, LLC v. Matthews decision was relied upon five years later in the Arkansas Supreme Court’s decision in Robinson Nursing and Rehabilitation Center, LLC v. Phillips, 2019 Ark. 305 (2019). Even though Matthews was clear precedent, the nursing home in Robinson Nursing and Rehabilitation Center still attempted to enforce unsigned arbitration agreements (unsigned contracts). The Arkansas Supreme Court stated:
It is a matter of basic contract law that, without its signature, Robinson is unable to demonstrate such mutual assent. . . . While Robinson argues that it demonstrated its assent by admitting residents to its facility and providing services, the arbitration agreement was a separate contract from the admissions agreement, regardless
of whether it was incorporated into or operated as an addendum to the admissions agreement.
Robinson Nursing and Rehabilitation Center, LLC v. Phillips, 2019 Ark. 305, 19 (2019). While the Robinson Nursing and Rehabilitation Center case addressed numerous arbitration agreements in the context of a class action, the Arkansas Supreme Court required that the arbitration agreements still meet the elements of a contract.
The courts’ reasoning in these cases likewise applies to unrelated third-party defendants who seek to “piggyback” on a nursing home’s arbitration agreement. In Sherwood Nursing & Rehabilitation Center, Inc. v. Cazort, 2022 Ark. App. 65 (2022), the Arkansas Court of Appeals refused to extend the terms of an arbitration agreement to a hospice company that was also a named defendant in that case. The Court determined that a hospice company was not a named party in an arbitration agreement and the hospice company could not seek to make itself a party or try to enforce an arbitration agreement that was between the nursing home and the resident. Id. at 10.
As demonstrated, an arbitration agreement first must be examined to determine if the proper parties are identified in the agreement and if the parties signed the agreement. Failure to do either can, and should, lead to a denial of a motion to compel arbitration, as the arbitration agreement fails to meet the basic elements of a contract.
(2) Do the signatories to the arbitration agreement have authority?
Authority always presents a question for the courts to address when it comes to determining the enforceability of an arbitration agreement. Nursing homes typically seek to enforce arbitration agreements signed by anyone and everyone (and at times no one) on behalf of a resident. However, courts have correctly and consistently required
proof of authority – that the person who signs on behalf of the resident has some type of actual legal authority in which to bind the resident. Courts have repeatedly ruled that just because you are family, absent some legal authority, your familial status does not give you authority to bind your loved one or waive your loved one’s constitutional right to a trial by jury.
In Innisfree Health & Rehab, LLC, v. Jordan, 2020 Ark. App. 518 (2020), a wife signed an arbitration agreement on behalf of her husband when he was admitted into a nursing home. When she signed the arbitration agreement, neither she nor the nursing home indicated if she was signing in her individual capacity, as a power of attorney, or on any other legal basis. The Arkansas Court of Appeals upheld the denial of the motion to compel arbitration when it determined that being a wife, alone, is insufficient authority to bind a husband to arbitration:
Nowhere does the arbitration agreement indicate that [the wife] signed as her husband's power of attorney or that she had any legal authority to bind him. Agency is not presumed, and if there is uncertainty or ambiguity in an agreement, or it is susceptible to more than one reasonable construction, our courts construes it most strongly against the party who drafted it.
Because we hold that there is ambiguity in the agreement before us, we construe this contract most strongly against appellants and affirm the circuit court's conclusion that [the wife] did not sign in a representative capacity with the legal authority to bind [the husband].
Id. at 6-7 (internal citations omitted). Even though case law is clear that a familial relationship alone is insufficient to bind a loved one to an arbitration agreement, nursing homes have continued to attempt to enforce arbitration agreements signed by family members. See Sherwood Nursing & Rehabilitation Center, Inc. v. Cazort, 2022 Ark. App. 65 (2022) (holding that
a daughter cannot bind mother to an arbitration agreement on the basis of familial status); Faulkner-Progressive Eldercare Services v. Carson (2023 Ark. App. 162) (2023) (holding that a son cannot bind his father to an arbitration agreement where there was no evidence of legal authority); and LNH One, LLC v. Gaspar, 2024 Ark. App. 93 (2024) (holding that a granddaughter did not have authority to bind her grandmother to a nursing home arbitration agreement).
Nursing homes have also tried and will continue to try to stretch the authority contained in a medical or healthcare power of attorney to be sufficient authority on which a family member can bind a loved one to an arbitration agreement. However, in Sherwood Nursing & Rehabilitation Center, Inc. v. Cazort, 2022 Ark. App. 65 (2022), the Arkansas Court of Appeals upheld the denial of a motion to compel arbitration when the nursing home argued that a medical power of attorney giving authority for “medical decisions” provided sufficient authority to bind a resident to an arbitration agreement. The Court found the argument unpersuasive as the medical power of attorney did not give authority for non-medical decisions. Id. at 9. Thus, medical or healthcare powers of attorney alone fails to provide sufficient authority to bind a resident to an arbitration agreement.
If the arbitration agreement is signed, courts must determine if the signatory had the legal authority to bind a resident. As evidenced by the decisions referenced above, the status of being a family member or a holder of a medical power of attorney is insufficient authority and should lead to a denial of a motion seeking to compel arbitration.
(3) Does the arbitration agreement contain a “carve out” that destroys mutuality?
When a resident is admitted into a nursing home, the resident’s nursing home bills are typically paid for by Medicare, Medicaid, or some other type of insurance or program. If there are any bills that are not covered by these programs, such bills are typically minimal in comparison to damages sought for a tort claim against a nursing home. Although nursing homes seek to force residents into arbitration, nursing homes have also tried to retain their ability to file collection lawsuits against residents and their families for any unpaid bills. To achieve this goal, some arbitration agreements include a “carve out” provision that requires all disputes between the nursing home and resident to be arbitrated except those disputes involving the collection of small and/or unpaid bills.
In 2014 the Arkansas Supreme Court issued its opinion in Regional Care of Jacksonville, LLC v. Henry , 2014 Ark. 361 (2014), one of the first nursing home arbitration cases involving such a “carve out” provision. In Regional Care of Jacksonville , the Arkansas Supreme Court affirmed a denial of a motion to compel arbitration in that nursing home arbitration agreement. The Regional Care of Jacksonville arbitration agreement provided, in part:
Resident, Responsible Party and Guarantor understand that the result of this arbitration agreement is that claims, other than those dealing with billing or collection matters, but including malpractice claims Resident, Responsible Party, and Guarantor may have against the Facility and its employees and agents, cannot be brought as a lawsuit in court before a judge or jury, and agree that all such claims will be resolved as described in this section.
Id. at 4 (emphasis added). The Supreme Court explained that a nursing home cannot use an arbitration agreement to shield itself from certain litigation but also allow it to utilize the court system to pursue collection and billing claims against its own residents. Id . at 7. The Court ruled:
By reserving the right to litigate billing or collection disputes, [the nursing home] excluded from arbitration the only likely claim it might have against a resident . . . . The fact remains that [the nursing home] retained the right to litigate its billing and collection claims, while strictly limiting the residents to arbitration. Thus, the clause imposes no real liability on [the nursing home] to arbitrate its own claims. For these reasons, the arbitration
clause offends our law requiring mutuality of obligation and cannot be enforced.
Id . at 9 (emphasis added).
After the Regional Care of Jacksonville decision, nursing homes attempted to use different wording in the “carve out” provisions to include a specific dollar amount that would theoretically apply to all parties. In 2018, the Arkansas Court of Appeals examined such a nursing home arbitration agreement “carve out” provision that provided that all claims, disputes, and controversies “in an amount of or greater than thirty thousand dollars and no cents ($30,000)” between the nursing home and the resident would be subject to binding arbitration. Hickory Heights Health & Rehab, LLC v. Adams , 2018 Ark. App. 560, 2 (2018). Although the nursing home argued that the $30,000 carve out applied equally to both parties, the Arkansas Court of Appeals found that argument “disingenuous.” The Court determined that the $30,000 carve out was designed to shield the nursing home from litigation while allowing the nursing home to pursue its own claims against its residents in a court of law. Id. at 7.
The Hickory Heights Health & Rehab decision was then adopted by the Arkansas Supreme Court in Robinson Nursing and Rehabilitation Center, LLC. v. Phillips , 2019 Ark. 305 (2019). In Robinson Nursing and Rehabilitation Center the Court affirmed the denial of the enforcement of a nursing home arbitration agreement that contained the same $30,000 carve out language as referenced above.
When the $30,000 “carve out” did not work, different nursing home arbitration agreements attempted to utilize a smaller dollar amount. However, the courts have applied the same reasoning to this lower dollar amount “carve out” provision. See Waters of White Hall, LLC v. Wiegand , 2023 Ark App. 172 (2023) (affirming
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the denial to enforce an arbitration agreement that contained a $25,000 carve out); and Hot Springs Nursing & Rehabilitation v. Hooker , 2024 Ark. App. 80 (2024) (ruling that a $25,000 carve out in an arbitration agreement failed to meet the mutuality contract element and was unenforceable).
Most recently, in 2024, the Arkansas Court of Appeals relied on this reasoning and line of cases in its decision in Eldercare of Arkansas, IV, Inc. v. Gore , 2024 Ark. App. 542 (2024). In Eldercare of Arkansas , the Arkansas Court of Appeals addressed the enforcement of an arbitration agreement that was included in
the admission documents for an assisted living facility. In that case, the arbitration agreement mandated that all claims between the parties would be sent to binding arbitration. The arbitration agreement, however, specifically excluded “ any claims for payment, nonpayment, or refund for services rendered to the Resident by the Facility .” The Court ruled that this provision failed the mutuality test because it shielded the facility from arbitrating the claims it most likely had against residents. Id . at 8. Although this decision addressed the enforcement of an arbitration agreement in an assisting living facility, the same reasoning applies when discussing mutuality in the nursing home arbitration agreement context.
Will nursing home and related facilities continue to re-write the “carve out” provisions in arbitration agreements? Sure. The facilities want to be able to both utilize the courts for collection actions while also forcing families to bring their claims in binding arbitration. Even with anticipated future revisions of these “carve out” clauses, whether it be to change the dollar amount or limit the carve out to “small claims” courts, the same logic applies. If the “carve out” provision shields the facility from liability while preserving the facility’s right to go to court to bring a collection case, courts are more likely to conclude that the arbitration agreement is not enforceable.
CONCLUSION
The next time you are told “arbitration is always favored,” be sure to look at the specifics of the arbitration agreement. If the arbitration agreement does not contain all of the elements of a basic contract, there is no enforceable arbitration agreement. As the case law continues to evolve, so will the language used in arbitration agreements, and so must our arguments on behalf of residents and their families. █
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