In a recent decision in Strausberg v. Laurel Healthcare, the Supreme Court of New Mexico held that state courts cannot treat nursing home arbitration agreements differently than other contracts. Prior to this ruling, a New Mexico Court of Appeals held that because potential residents are “at their most vulnerable” when signing an arbitration agreement to enter a nursing home, the nursing home should always have the burden of proving the agreement is conscionable and thus enforceable. Typically, however, only the party challenging a contract or agreement has the burden of showing it is unconscionable and thus unenforceable.

The New Mexico Supreme Court cited the Federal Arbitration Act (FAA) as preempting the state appellate court ruling. Under the FAA, arbitration agreements must be enforced unless they are shown by the party challenging them to be invalid under basic contract law principles. Consequently, the Supreme Court remanded the case back to the appellate court where the resident, as the challenger, would have the burden of showing the nursing home’s arbitration agreement is invalid on a contract law theory.

Similarly, in Ohio, a nursing home resident seeking to invalidate an arbitration agreement would have the burden of proving the agreement does not comply with state common law. Unconscionability represents the primary state common law grounds for revocation of an arbitration agreement. Ohio courts have established several guidelines for determining whether an arbitration agreement is unconscionable and thus unenforceable.

If you or your company have concerns about whether a certain arbitration agreement is enforceable, feel free to contact DLM Legal for more information at 216.635.0002 or info@dlmlegal.com.