South Carolina Nursing Home Blog : South Carolina Nursing Home Lawyer & Attorney : Poliakoff & Associates Law Firm : Elderly Care, Senior Care

Dave Johnson wrote on the Huffington Post on June 17, 2008 the following article about how arbitration screws consumers and victims of corporate malfeasance.

Does your credit card or bank loan agreement have an "arbitration clause?" More and more consumer-oriented contracts and "agreements" have clauses specifying that disputes must go to arbitration rather than our civil justice system. The justification for this is that arbitration saves the time and expense of working within our legal system. But here's the thing: the corporations choose the arbitrators and every arbitrator knows they will never, ever, ever, ever (ever) get another job if they rule against the corporations. Never.  And guess what: 98.8% of arbitrations end up in favor of the corporations. This is not a surprise.

The Progressive States Network's newsletter has a story about this today, Arbitration:"Set up to squeeze small sums of money out of desperately poor people".

The headline above is a quote from former West Virginia Supreme Court Justice Richard Neely, describing what his role was as an arbitrator at the National Arbitration Forum (NAF), a for-profit company hired to enforce mandatory arbitration clauses for credit card consumer loans. "NAF is nothing more than an arm of the collection industry hiding behind a veneer of impartiality," says Richard Neely.

In a devastating expose by BusinessWeek, Neely and other former arbitrators describe an arbitration system stacked completely against consumers -- a system where creditors win 99.8% of all disputes involving companies ranging from Bank of America to Sears to Citgroup. Arbitration clauses buried in the fine print of credit card offers means consumers lose the right to have disputes decided in an independent court and instead are forced into corporation-selected arbitration firms.

The BusinessWeek story mentioned in the Progressive States Network story is titled, Banks vs. Consumers (Guess Who Wins).

This story about credit card companies taking unfair advantage of consumers is one more attack on citizen rights to access our own legal system (one more of so many attacks). Think about what is happening here. First the big corporations fought against "regulations" which are the rules that We, the People set up requiring safe workplaces or environmental standards, or products that do not injure people, etc. Then when fewer regulations of course resulted in worker or consumer injuries or toxic spills or other harms the inured parties filed more lawsuits asking the companies to make good. So in response to these lawsuits the corporate-financed "tort reform" movement came along, working to limit the ability of citizens to be compensated for the results of corporate bad behavior. The result has been fewer regulations preventing harms and more restrictions on citizen access to courts where we can seek damages after we are harmed.

I didn't even bring up the corporate-conservative movement efforts to install their own business-friendly judges in the courts.

But even those erosions of our access to justice has not been enough for the greedy corporations. Now there is arbitration: clauses that show up in contracts and agreements that remove your ability to take a dispute to the courts at all! And the judges in these courts are dependent on the corporations for their livelihood!

Deregulation, tort reform and now arbitration that is rigged against the consumer. Drip, drip, drip. One after another the big corporations are eroding the rights of citizens.

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David McGuffey is a great nursing home and elder law attorney from Tn.  He is kind enough to share with other nursing home attorney his summary of important cases and legal theories.  Recently he wrote an article about direct liability of parent corporations in the nursing home industry.  Below are excerpts:

In Forsythe v. Clark USA, Inc., 864 N.E.2d 227 (Ill. Sup Ct. February 16, 2007), the Illinois Supreme Court affirmed the court of appeals, finding that a parent corporation may be directly liable where it exerts budgetary control over its subsidiary. In Forsythe, the court said the parent “can be held liable if, for its own benefit, it directs or authorizes the manner in which its subsidiary’s budget is implemented, disregarding the discretion and interests of the subsidiary, and thereby creating dangerous conditions.”  Mere ownership alone by a parent corporation is insufficient, as is having individuals serving on boards of both the parent and the subsidiary. Setting budgetary goals is likely insufficient. However, where a parent corporation specifically disrespects the actions of its subsidiary, using its ownership interest to command, then direct liability may be imposed over a specific controlled transaction. Under this theory, a parent is held liable for its own actions against a third party through “the agency of subsidiaries.”

So how is Forsythe applied to nursing home cases? In Heritage Hous. Dev., Inc. v. Carr, 199 S.W.3d 560 (1st Dist. Tex. App. August 3, 2006), the court held that the evidence was legally insufficient to support a verdict against the nursing home’s parent corporation and reversed a $2.2 million verdict. In support of the verdict, Plaintiff argued that the employment paperwork the nursing home staff completed that had the parent corporation’s name (HHD) on it, or refers to HHD as the employer, demonstrates HHD's employment of the nursing home staff and establishes HHD's vicarious liability. Plaintiff pointed to employment-at-will statements, job description acceptance forms, substance abuse policy notices, Equal Opportunity Employment statements, acknowledgment of time clock procedures, no solicitation policy notices, ethics and conduct policies, disciplinary and termination forms, and receipt of employee handbook acknowledgments as evidence supporting a finding that HHD employed the nursing home staff. Plaintiff also observed that the nursing home used administrative manuals containing HHD's policies and procedures, thus further indicating that HHD controlled the details of the work performed.” This, however, was insufficient because there was no evidence that HHD controlled “the details of the care.” The transaction specific inquiry found some elements of control (the first element), but none that related to the negligent care itself (the second element).

Where an injury results from insufficient staffing, if the parent assumes budgetary control which limits staffing, then the parent is controlling the details of care. There are now ample studies linking quality of care to appropriate staffing making dangers imposed by short staffing foreseeable. See, e.g., AHRQ, Nurse Staffing and Quality of Patient Care (March 2007) (See also Press Release describing study on how chain planning practices can hurt patient care). In light of a subsidiary’s contractual quality of care obligation to the Medicare and Medicaid programs, control that prevents the subsidiary from providing quality care under its provider agreements is likely eccentric.

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