Fifteen States Ask Federal Government To Prohibit Binding Arbitration Provisions In Nursing Home Contracts

One of the founding principles of the United States is trial by jury.  Thomas Jefferson famously said:

“I consider trial by jury as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.”

Thomas Jefferson to Thomas Paine, 1789.

I’ve written before about “arbitration provisions” and how unfair they are. (See here for one of my prior blog posts on this subject.)

Binding arbitration clauses are provisions typically buried in the fine print of business contracts, in which the customer gives up all of their rights to sue the business in court and have a jury decide the case.  Sometimes these provisions are actually put in pages the customer never even sees, such as when an unsuspecting customer clicks on the “I agree” button on websites or software.
The provisions typically provide a completely inadequate substitute, called binding arbitration. In binding arbitration, the company that’s being sued gets to pick who makes the decision. Not surprisingly, the company typically picks a decision-maker  on their side, and  frequently actually has a vested financial interest in keeping the company happy.

There have even been situations where a business which is being sued sets up a sham arbitration company to decide the disputes between customers and the business. This is like having the one of the competitors in an event also act as the referee.   When the decision-maker is  under the control or influence of the company being sued, the decisions are  sure to be unfair.

As an illustration of how bad the situation has become, the Attorneys General of 15 different states have now joined together and asked the federal government to prohibit nursing homes from including binding arbitration provisions in their patient contracts.  The Attorneys General point out that typically nursing home contracts are signed in a tumultuous period in a family’s life, where neither the patient nor the patience children have the presence of mind to negotiate the fine print in a very long, detailed contract.

I applaud the Attorneys General for their actions, and while this is a good start, it’s also insufficient.  The fact is that almost no consumer ever actually reads the fine print in their cell phone contract, credit card contract, airline ticket agreements, software agreements, or any of the other numerous important contracts they sign.  And there is a very good reason why almost no one reads those contracts: they’re completely nonnegotiable.

If I walked into a Verizon store and started to actually read the contract pulled up on that tiny little LCD  display, he might get impatient or roll his eyes. But if I tried to get him to change one of the terms of the contract, he’d actually laugh at me.  He would tell me to forget it, that he that he has absolutely no authority or ability to modify my particular agreement, and that all 20 million of Verizon’s customers all have the same contract, word-for-word.

Legally, the inability to negotiate the terms of such a contract is very important. Companies argue that binding arbitration provisions should be enforced because they were the product of arm’s-length negotiations. But they only say that because they need to do that in order to make the provisions enforceable. The reality is that these contracts are not at all negotiable,  which is  precisely why  they should not be permitted to bury unfair provisions in the fine print.

While I do sincerely applaud these 15 Attorneys General for taking this stance, it’s not enough.   Because binding arbitration provisions go directly against one of the primary and basic founding principles of the United States, the federal government should prohibit ALL binding arbitration provisions, period,  not just those in nursing home contracts.

Click here to read an article about how Wisconsin’s Attorney General became the 15th Attorney General to request federal government intervention  to prevent these unfair contract provisions.