New Jersey Court Green Lights Provider-Patient Arbitration Agreements

       In two rulings handed down over the last two weeks, the Appellate Division of the Superior Court of New Jersey removed any doubt that New Jersey healthcare providers can enter into enforceable, pre-dispute agreements to arbitrate medical malpractice claims.


        Estate of Ruszala v. Brookdale Living Communities involved an arbitration clause in a nursing home admissions agreement, which on its face violated a 2003 New Jersey statute barring such agreements. The Court found that the New Jersey statute was preempted by the Federal Arbitration Act (a result consistent with recent, similar rulings by the Supreme Courts of Illinois and Missouri), and went on to state that there is nothing about such agreements to render them unenforceable, per se. The Ruszala Court did strike down aspects of the arbitration agreement found to be unconscionable and against public policy in New Jersey, i.e., a cap on compensatory damages, limited discovery and a ban on punitive damages.

       Moore v. Woman to Woman Obstetrics & Gynecology concerned the ability of a physician to enforce an agreement to arbitrate signed by a patient as part of the physician's patient intake process. The Moore Court ruled that such an agreement was not, per se, unenforceable. Once again, the Court made clear that such agreements must be judged on a case by case basis to determine whether the patient's rights to due process have been preserved. Issues such as the patient's receipt of a copy of the agreement and the circumstances of her signing the agreement were remanded to the trial court for findings of fact.

       I wrote here previously about the growing practice among physicians to require patients to sign pre-dispute arbitration agreements. Ruszala and Moore make it clear that there is nothing to prevent New Jersey hospitals, nursing homes, physicians and other healthcare providers from requiring that patients agree to arbitrate future disputes, including malpractice claims. To be sure, providers choosing this path would do well to tailor their agreements to accomplish their primary objective: shifting the forum for the resolution of malpractice disputes from a jury to an arbitrator (or panel of arbitrators). Piling on other impediments to the patient's claim, such as limitations on non-economic damages, discovery and punitive damages remain suspect, and are ill-advised. Care should also be taken in assuring that the patient fully understands what he or she is signing, and has a realistic right to "opt out."

       Absent an appeal and reversal by the New Jersey Supreme Court, or federal legislation along the lines of the proposed Arbitration Fairness Act of 2009, pre-dispute agreements to arbitrate malpractice claims in New Jersey are here to stay. Two major providers of ADR services, the American Arbitration Association and the American Health Lawyers Association have policies against accepting medical malpractice claims arising under pre-dispute agreements to arbitrate. Accordingly, providers and counsel considering the use of such agreements must carefully address the language governing the arbitrator selection process.

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Comments (4) Read through and enter the discussion with the form at the end
Steven I. Kern - August 25, 2010 10:26 AM

The langauge in the Appellate Division decisions make it far from clear that arbitration agreements will likely be upheld when reviewed on a case by case basis. One substantial hurdle is a finding by the Appellate Division that when presented with such agreement the patient has a right to assume that the physician is acting in the patient's best interest. If a plaintiff's attorney is able to demonstrate that the agreement is not in the patient's best interest that can pose significant problems, not only in terms of enforceability of the contract, but also in terms of the physician's duty to the patient.

As such, I must disagree that these decisions "green light" provider patient arbitration agreements.

Rich Webb - August 25, 2010 2:36 PM

Your point is well taken, Steve. The devil will be in the details. However, the court could have simply thrown out these agreements on the basis that any such provider-patient agreement is inherently unconscionable or against New Jersey public policy. By not doing so the court opened the door. It would make no sense for the court to call for a case by case analysis and then conclude that every attempt will fail. The key will be to keep it simple and do it right. More to come!

Ne'fertiti Hearns - September 2, 2010 2:28 PM

Steven, first of all, does a client not also have the right to assume their attorney is acting in their (the client's) best interest? Yet NJ attorneys can require future disputes with their clients to be resolved through arbitration.

It sounds like some are operating under the assumption that arbitration is bad for plaintiffs.

Like Florida and California and many other states before it, New Jersey courts have recognized that signing a pre-dispute agreement to arbitrate does not require a party to forego any substantive rights but merely specifies the forum for resolution of the claim.

Secondly, as the Ruszala court shows, when agreements are found to contain one-sided provisions (damage caps) and the plaintiff's attorney is able to successfully demonstrate that the agreement is not in the patient's best interest, the court's response is to sever the offending provisions and order the parties to arbitrate.

Peter Leone - September 7, 2010 2:09 PM

It seems we should focus on the benefit to the public not the loss to the plaintiff's bar. There is no question binding arbitration represents many benefits to the public. A recent study in Modern Health Care reports 55 billion paid annually due to defensive medicine. Anything that limits this practice is good for all of us.
On an individual basis the patient is more likely to recover, recoverery comes in 6-12 months not 5 years, it results in retention of the relationship with the physician (Keiser patients keep their doctor 80% of the time post arbitration.) Limits the doctor's liability and reduces the stresses on him/her personally, financially and psychologically.
Personally I find those greatly affected financially will attack it...very few attorneys have the ability and money to handle a malpractice case. But any personal injury attorney can handle an arbitration. With 60% of very dollar not going to the plaintiff and having to wait 5 years or more and only obtaining a settlement 25% of the time how can you argue binding arbitration is not more beneficial to all involved.

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