COMMENTARY

Your Malpractice Advisor: An Antilawsuit Tactic Takes a Major Step Forward

Michael B. Carcaise

Disclosures

August 31, 2010

In This Article

Introduction

Two recent rulings from the New Jersey appellate court represent notable progress made toward establishing an alternative to costly and emotionally taxing medical malpractice trials.

Predispute binding arbitration agreements are contracts that shift the disputes between doctors and patients away from the "slip-and-fall" tort environment of a jury trial to a reliable, efficient system that fairly compensates patients for harm suffered through negligence. The judge and jury are replaced by a panel of three arbitrators who are usually attorneys well versed in medical malpractice law.

Unlike other tort reform proposals, binding arbitration can be pursued without new legislation being passed in Trenton. The laws that give patients and physicians the rights to contractually agree to arbitrate disputes outside of court have existed in New Jersey since before the state's first medical malpractice crisis, but only now have the New Jersey courts been given the opportunity to explicitly apply those laws to medical malpractice issues.

These 2 rulings are only the beginning, and more cases must be heard to "flesh out" the body of law. But the court has provided a blueprint for New Jersey physicians to replace the broken jury trial system with one that works better for doctors and their patients.

Recent Cases Show Clear Progress

On August 10, 2010, a New Jersey appeals court ruled that medical negligence disputes between nursing home facilities and their residents can be arbitrated despite a state law banning the practice.

The Federal Arbitration Act (FAA) was passed by the US Congress in 1925 to codify support for arbitration as a preferred means of resolving disputes outside of the court system, and the FAA preempts state laws that are inconsistent with its guidelines. The most important of these guidelines requires state courts to enforce arbitration agreements according to the same rules as applied to any other contract.

In 2003, the New Jersey legislature passed the Nursing Home Responsibilities and Rights of Residents Act, which included a provision that bars nursing home facilities from requiring residents to arbitrate medical negligence disputes.

In the recently decided matter Estate of Ruszala v. Brookdale Living Communities, the court ruled that the FAA preempts New Jersey's nursing home law. The court ordered the parties to arbitrate their dispute.

However, the court removed clauses in the agreement that capped compensatory damages, limited discovery, and banned punitive damages on the grounds that such terms were unconscionable and against public policy.

"The lesson to physicians from the Ruszala matter is that serious consideration should be given before limitations on damages and discovery are written into arbitration contracts," said Joel I. Fishbein, Esq., counsel for Brookdale in the Ruszala case.

"While these provisions attempt to provide an upper limit on financial responsibility, eliminating them might cause courts to look more favorably upon arbitration clauses when they are challenged," said Mr. Fishbein.

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