A Tennessee appellate court enforced a nursing home ADR agreement despite arguments that the agreement was both unconscionable and impossible to perform because the arbitration association named in the agreement had since merged with another association.

In Reagan v. Kindred Healthcare Operating, Inc., No. M2006-02191-COA-R3-CV, 2007 WL 4523092 (Tenn. Ct. App. Dec. 20, 2007), Hazel Rayborn was admitted to Kindred after she broke her leg. Although her son, Ira Reagan, signed many of the admission documents, Rayborn also signed several of them including a separate ADR agreement.

After Rayborn was discharged, Reagan brought suit against Kindred alleging various claims relating to Rayborn's care. Kindred moved to compel arbitration. The trial court denied Kindred's motion to compel without completing findings of fact or conclusions of law. Kindred appealed.

This Court rejected Reagan's arguments that the trial court's order should be affirmed. First, the agreement was not impossible to perform. The fact that the ADR agreement named an arbitration association no longer in existence as a separate entity is not dispositive. See Owens v. National Health Corp, No. M2005-01272-SC-R11-CV, 2007 WL 3284669 (Tenn. Nov. 08, 2007).

The parties expressly provided for such a scenario by allowing for the selection of another arbitration provider in the agreement. Even assuming that was not effective, the court could appoint an arbitrator and apply Tennessee law. See Tenn. Code Ann. § 29-5-304 (2000).

Second, the Court disregarded Reagan's reliance on Howell v. NHC Healthcare-Fort Sanders, Inc., 109 S.W.3d 721 (Tenn. Ct. App. 2003), and held that the ADR agreement was not unconscionable.

Unlike Howell, the circumstances surrounding Rayborn's execution of the ADR agreement, including her poor eye-sight and medicated state, did not shock the conscience.

The arbitration agreement was not a contract of adhesion because Rayborn could still have been admitted if she had not signed the agreement. Moreover, "[t]here is nothing in the record to suggest that…Rayborn was coerced into signing the ADR Agreement, or that she was denied an opportunity for a meaningful choice." It was explained to her that she was waiving a jury trial for disputes. There was no indication that she did not understand or was uncomfortable signing the ADR agreement.

Further, it was unclear whether Reagan had permission to sign the admissions documents. Even if Reagan had such permission, Rayborn was not diagnosed as mentally incompetent to sign the documents, meaning that she could still enter into her own contracts.

Finally, Reagan did not argue that the terms of the agreement were substantively unconscionable. Considering the totality of the circumstances, the Court held that the ADR agreement was not unconscionable. The trial court's ruling was reversed and remanded to enter an order compelling arbitration of Reagan's claims.