Beware: Arbitration Clauses Might Not Be The Costs-Saving Solution In The Long Run

• Jurisdiction: California,United States
• Law Firm: Wood Smith Henning & Berman LLP
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Author: Frances O'Meara and Holly Teel
• Published date: 25 May 2023

If the person suing can't afford to pay, defendants may be required to pick up the tab. Nursing home that successfully compelled arbitration proceedings with family of decedent client was required to pay for all fees and costs or waive arbitration, where the patient was indigent. Hang v. RG Legacy I, LLC, No. G061265 (Cal. Ct. App. Feb. 8, 2023).

Factual Background

Jimmy Hang, as a successor-in-interest and along with decedent's surviving wife, Weiping Wu, filed a complaint against RG Legacy Suites, a skilled nursing facility. Hang claimed that RG Legacy was negligent in the care of his father while he was a resident at their facility. The complaint also alleges that this neglect ultimately led to the patient's' death. Hang sued as the successor in interest for negligent hiring and supervision as well as elder abuse. Plaintiffs also included a claim for wrongful death. RG Legacy filed a petition to compel arbitration pursuant to the facility's contract, which the court granted.

As the legal power of attorney for his father, Hang signed the arbitration agreement on his behalf. The arbitration agreement in addition to requiring arbitration for the resolution of any disputes, also provided that "each party shall bear its own costs and fees for the arbitration." Despite this Hang and his Father's wife filed an opposition to the petition to compel arbitration. They argued that because their father and husband had died indigent and the estate lacked the funds to pay for arbitration fees and costs, they should not be forced to arbitrate their claims. They also argued in the alternative, that if the court did compel arbitration, it should require RG Legacy to pay all costs and fees associated with it for both sides. The trial court granted RG Legacy's petition to compel arbitration and took under submission the issue if whether Hang as the successor in interest would be required to pay his portion of the arbitration costs.

Hang supplied the court with information on the typical cost of arbitration in an elder abuse case as well as a declaration regarding the zero balance of available funds in his father's account. He explained that his father's only source of income from 2017 until the time of his death was his $826.00 monthly social security check, which went to his father's care at the RG Legacy facility. At the time of his death his father's trust account had accumulated about $7,000 which was used to pay for his father's burial and funeral expenses. Hang also...