Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.
Pre-dispute arbitration agreements in nursing home admission packages present a recurring and consequential battleground in elder-care litigation. The Federal Arbitration Act's preemptive force has been the dominant feature of this landscape since Marmet Health Care Center, Inc. v. Brown, 565 U.S. 530 (2012), but the doctrines most useful to plaintiffs—lack of capacity, absence of proper authorization, and common-law unconscionability untainted by anti-arbitration bias—remain available under both Florida and Alabama law. Practitioners on both sides must understand how the CMS regulatory framework interacts with these defenses.
I. The FAA Preemption Framework: Marmet
In Marmet Health Care Center, Inc. v. Brown, 565 U.S. 530 (2012) (per curiam), the Supreme Court unanimously vacated a West Virginia Supreme Court ruling that had categorically prohibited pre-dispute arbitration agreements covering personal injury and wrongful death claims against nursing homes. The West Virginia court had held that such agreements were against public policy—a categorical exemption from arbitration for a particular type of claim. The Supreme Court held that such a blanket prohibition conflicted directly with the FAA's command that arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2.
The Marmet holding is straightforward: a state court cannot single out nursing home arbitration agreements for disfavored treatment based on the subject matter of the dispute. The subsequent decision in Kindred Nursing Centers L.P. v. Clark, 581 U.S. 246 (2017), reinforced this principle by invalidating a Kentucky Supreme Court rule that required an explicit statement in a power of attorney before the agent could waive the principal's constitutional right to a jury trial in an arbitration agreement. The Court held that any rule specifically targeting arbitration agreements—rather than contracts generally—is preempted.
The practical consequence: Categorical challenges to nursing home arbitration agreements, framed in terms of public policy or the subject matter (personal injury, wrongful death), will fail. Successful challenges must be grounded in contract defenses that apply generally to all contracts, not specifically to arbitration.
II. The CMS Regulatory History: 2016 Rule, Vacatur, and 2019 Replacement
Understanding the CMS regulatory history is essential to arguments about whether a nursing home's conduct in presenting an arbitration agreement to a resident or family member was procedurally proper.
2016 Rule: The Obama-era CMS promulgated regulations in 2016, effective November 28, 2016, that prohibited Medicare and Medicaid-participating long-term care (LTC) facilities from entering into pre-dispute binding arbitration agreements with residents at all. 81 Fed. Reg. 68,688 (Oct. 4, 2016), codified at 42 C.F.R. § 483.70(n). That prohibition was challenged in federal court and preliminarily enjoined by the Northern District of Mississippi before it took effect. The rule was never fully implemented.
2019 Rule: On July 18, 2019, CMS promulgated a replacement rule that repealed the 2016 ban on pre-dispute arbitration and instead imposed procedural safeguards. See Medicare and Medicaid Programs; Revision of Requirements for Long-Term Care Facilities Arbitration Agreements, 84 Fed. Reg. 34,718 (July 18, 2019).
The current federal framework requires that:
- The arbitration agreement must not be a condition of admission or continued care;
- This prohibition on conditioning must be explicitly stated in the agreement;
- The agreement must be explained to the resident or representative in a form and manner they understand, including in a language they understand;
- The resident or representative must acknowledge understanding;
- The agreement may not contain language prohibiting or discouraging communication with federal or state surveyors or the ombudsman;
- The facility must retain signed agreements and arbitration decisions for five years, available for CMS inspection;
- Both parties must agree on a neutral arbitrator and convenient venue.
The 2019 rule's procedural requirements create litigation footholds. An agreement that conditions admission on signing the arbitration clause—or that fails to include the explicit language stating it is not a condition—violates 42 C.F.R. § 483.65 (renumbered in the 2019 rulemaking). Whether that regulatory violation voids the agreement as a matter of contract law or merely subjects the facility to regulatory sanction is a question that Florida and Alabama courts will resolve under state contract law, not preempted by the FAA.
III. Capacity Defenses
The most potent plaintiff-side defense, when the facts support it, is lack of contractual capacity at the time of execution. A contract formed by an individual lacking mental capacity to understand its nature and consequences is voidable under the common law of both Florida and Alabama.
The capacity standard at execution: Florida follows the general rule that a party must have sufficient mental capacity to understand the nature and effect of the transaction at the time of signing. In nursing home contexts, this standard is often provable by reference to the resident's medical records contemporaneous with admission: physician assessments of cognitive function, dementia diagnoses, MMSE scores, and documented behavioral deficits are all relevant.
Alabama applies a similar test. A contract is voidable if the party, at the time of execution, was incapable of understanding in a reasonable manner the nature and consequences of the transaction, or if the party was unable to act in a reasonable manner in relation to the transaction and the other party knew or had reason to know of the condition. See Restatement (Second) of Contracts § 15.
Critical issue: Capacity to sign an arbitration agreement vs. admission agreement. Frequently, a nursing home admission is signed by a family member on behalf of a cognitively impaired resident. If the family member had authority to contract on the resident's behalf, the arbitration agreement may bind the resident. If the family member lacked authority, it does not.
Healthcare power of attorney scope: A healthcare POA authorizes an agent to make healthcare decisions on the principal's behalf. It does not, without more, authorize the agent to waive a legal right in a contract. Courts in multiple jurisdictions have held that a healthcare POA does not confer authority to bind the principal to pre-dispute arbitration agreements. See, e.g., the line of authority following the Kindred Nursing Centers remand, which left the scope-of-POA question to state law.
Florida's Healthcare Surrogate Act, Fla. Stat. §§ 765.101 et seq., defines the scope of healthcare surrogate authority. A surrogate is authorized to make "healthcare decisions"—decisions about medical care, including admission to and discharge from healthcare facilities, but the authority to execute a pre-dispute arbitration agreement is not self-evidently a "healthcare decision." Florida litigants should carefully analyze whether the specific POA instrument was broad enough to encompass waiver of the resident's right to a jury trial on personal injury claims.
Alabama's durable POA statute, Ala. Code § 26-1A-101 et seq. (Uniform Power of Attorney Act, effective 2012), creates a similar framework. An agent under a general durable POA may have authority to execute contracts, but the scope depends on the instrument's specific grants of authority.
The practical upshot: when the resident lacked capacity at admission and a family member signed both the admission agreement and the arbitration clause, the plaintiff's lawyer should conduct a detailed analysis of the scope of the representative capacity claimed, the instrument under which it was exercised, and whether the nursing home confirmed the representative's authority before relying on the signature.
IV. Unconscionability Challenges
Because Marmet and Kindred foreclose categorical anti-arbitration arguments, practitioners have turned to unconscionability—a generally applicable contract defense that survives FAA preemption when applied evenhandedly to all contracts, not specifically to arbitration.
Procedural unconscionability asks whether the process of formation was so unfair as to make enforcement inequitable. Relevant factors in the nursing home context include:
- Was the agreement presented at the time of admission when the family was in crisis and had no realistic alternative to signing?
- Was the arbitration clause buried in a long admission packet with no separate explanation?
- Was the resident or family member told the agreement was not optional (contrary to 42 C.F.R. § 483.65)?
- Was the agreement presented in a language the signatory did not understand?
- Was the clause in fine print or formatted to obscure its nature?
Substantive unconscionability asks whether the terms are so oppressive as to be unconscionable regardless of the process. Relevant factors include:
- Does the clause permit the facility to choose the arbitration forum or arbitrator while giving the resident no meaningful input?
- Does the clause impose prohibitive arbitration fees or bar class treatment in a way that renders individual claims impractical?
- Does the clause eliminate punitive damages or statutory remedies that Florida or Alabama law provides?
Courts in the Eleventh Circuit and in Florida and Alabama state courts have applied these general unconscionability principles without targeting arbitration specifically. The practitioner's task is to build a record demonstrating that the agreement would be unconscionable under the state's general contract law—a formulation that survives FAA preemption under Marmet's own remand instruction, which directed courts to consider whether agreements were unenforceable "under state common-law principles that are not specific to arbitration and pre-empted by the FAA."
V. Florida and Alabama Arbitration Cases: Nursing Home Context
Florida: Florida courts applying the FAA have generally enforced nursing home arbitration agreements that comply with the formal requirements of valid contract formation. Where family members signed without proper authority, Florida courts have sometimes found that the authority to make admission decisions does not necessarily encompass authority to waive jury trial rights. See generally the line of Florida decisions examining the scope of healthcare surrogate authority under § 765.101 et seq.
A recurring Florida issue is the signature by an adult child who was present at admission but held no written POA. Florida courts apply an apparent authority analysis: if the nursing home reasonably believed the family member had authority to act, the arbitration agreement may bind the resident. Plaintiffs should scrutinize whether the nursing home actually verified the representative's authority or simply accepted the signature.
Florida arbitration procedure is governed by both the FAA (for agreements involving interstate commerce—which virtually all nursing home agreements do) and, where the FAA does not displace it, the Florida Arbitration Code, Fla. Stat. § 682.01 et seq. (substantially adopted from the Revised Uniform Arbitration Act).
Alabama: Alabama courts similarly apply the FAA to nursing home arbitration agreements meeting the commerce element. Alabama state arbitration law is codified at Ala. Code §§ 6-6-1 et seq. Where the FAA governs, federal substantive arbitration law applies, but Alabama procedural rules govern how motions to compel arbitration are litigated in state court.
Alabama practitioners have successfully challenged arbitration agreements on capacity grounds when the resident's cognitive deficits were well-documented at admission. Courts have also examined whether the facility's agents misrepresented the arbitration clause as required or as a formality—a fraud-in-the-inducement argument that survives Marmet because it challenges the formation of the contract, not the enforceability of an otherwise valid arbitration clause.
VI. Practice Notes
For plaintiff's counsel: Begin the arbitration analysis immediately. Obtain the complete admission packet—typically discoverable before any decision is made on a motion to compel arbitration. Identify: (a) the date and circumstances of signing; (b) the signer's identity and legal authority; (c) the resident's cognitive status on that date; (d) whether the facility disclosed that signing was optional; and (e) any procedural defects under 42 C.F.R. § 483.65.
For defense counsel: Ensure pre-suit that signed arbitration agreements meet the 2019 CMS requirements—particularly the explicit non-conditioning language—and that the facility's files document the signatory's authority. Identify early whether the FAA or state arbitration law applies to enforcement and whether the motion to compel belongs in federal or state court.
Delegation clauses: Many modern nursing home arbitration agreements include delegation clauses—provisions delegating to the arbitrator the threshold questions of enforceability (including capacity and unconscionability). Under Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019), a valid delegation clause requires the court to send even threshold enforceability questions to the arbitrator. Plaintiffs should challenge the delegation clause itself—arguing it is separately invalid for incapacity, fraud, or the unconscionable circumstances of execution.
VII. Open Questions
The intersection of the 2019 CMS regulations with contract formation defenses remains unsettled. A violation of the non-conditioning requirement might arguably constitute fraud in the inducement (misrepresenting that signature is required) or might support an unconscionability finding—but whether it independently voids the agreement or merely subjects the facility to regulatory penalty is unresolved in Florida and Alabama.
The scope of healthcare POA authority will continue to generate litigation as courts parse specific POA instruments and state statutes against the backdrop of Kindred Nursing Centers' implicit instruction that scope-of-authority is a state law question.
Conclusion
Pre-dispute arbitration in nursing home cases is enforced broadly under the FAA after Marmet, but capacity, authority, and unconscionability defenses grounded in general contract principles remain available. The practitioner who identifies genuine incapacity at execution, absence of documented representative authority, or a procedurally oppressive presentation of the arbitration clause will find courts receptive—provided those arguments are framed as general contract challenges, not as disguised attacks on arbitration as a class of dispute resolution.
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Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.