A Tennessee appellate court affirmed a trial court's holding that a nursing home arbitration agreement was unconscionable because it imposed large upfront costs on the party seeking arbitration, was a contact of adhesion, and was not prominently placed in the admissions contract or clearly explained to the patient.

In Hill v. NHC HealthCare/Nashville, LLC, No. M2005-01818-COA-R3-CV, 2008 WL 1901198 (Tenn. Ct. App. Apr. 30, 2008), Bridget Hill, a nursing home resident, died during ambulance transport from NHC to the hospital. Her children filed a wrongful death suit against NHC and the ambulance provider.

NHC moved to compel arbitration based on the arbitration agreement contained within the nursing home admission contract. The trial court determined that the arbitration agreement was unconscionable and denied NHC's motion. NHC appealed.

After a lengthy discussion of the applicable precedent to this case, this Court agreed with the trial court that the agreement was unconscionable.

First, the agreement was substantively unconscionable. Here, the costs of initiating arbitration had the potential of rising to $18,000, which the court considered cost-prohibitive. This might create a benefit for NHC, the drafter, as the high cost might cause a party seeking arbitration to be precluded from seeking relief "due to the expense that would not accompany the initiation of litigation."

Second, there were several issues of procedural unconscionability. As an initial matter, the contract in the instant case was a contract of adhesion. Hill did not have bargaining power because she would not have been admitted to the nursing home without signing the agreement. Moreover, she was not given time to clarify or rescind her agreement to arbitrate.

Nor was the agreement prominent or clear. Unlike in other cases, the arbitration agreement was not a stand-alone document, but contained on the eleventh page of an admissions contract.

Notably, the agreement designated the American Arbitration Association as the arbitration provider, which had stopped providing these types of arbitrations six months prior to the date of this contract.

Further, neither the agreement nor the NHC staff explained arbitration or notified the patient of the potentially high costs necessary to initiate arbitration.

Based on the totality of the circumstances, the Court held the agreement was unconscionable.