California Appellate Court Rules CCRC Residents Are Protected From Mandatory Arbitration

For more than ten years it is probably fair to say that the most ubiquitous appellate "elder law" cases are those involving attempts by nursing homes to compel arbitration, rather than court-based litigation, usually raised as a defense to personal injury suits brought by residents or family members of residents.  Admission contracts routinely include mandatory arbitration clauses.  Arbitration is often promoted by nursing homes to prospective customers as offering efficient, cost-effective resolution for any disputes; however, seasoned attorneys also know that limiting disputes to arbitration is a means by which care-providers avoid trials by jury, publicly reported trials, and most court-based rules on procedure, rights to discovery and admissibility of evidence.   

This month, a California appellate court (Second District, Division 6) ruled that residents of continuing care communities are protected because of California laws interpreted as prohibiting mandatory arbitration in "rental agreements."  From the June 1, 2020 opinion in Harris v. University Village Thousand Oaks, CCRC, LLC:

Civil Code section 1953, subdivision (a), states, “Any provision of a lease or rental agreement of a dwelling by which the lessee agrees to modify or waive any of the following rights shall be void as contrary to public policy: [¶] ... [¶] (4) [Their] procedural rights in litigation in any action involving [their] rights and obligations as a tenant.”

 

... The plain language of Civil Code sections 1940 and 1953 applies to the continuing care contracts here because the fees paid by appellants include payment for the right to live in a residence. Appellants are thus “persons who hire dwelling units.” (Civ. Code, § 1940, subd. (a).) Thus, the protections for “boarders” and “lodgers” (Civ. Code, § 1940, subd. (a)) apply to the “board, or lodging” portions of continuing care contracts (Health & Saf. Code, § 1771, subd. (m)(1)). Because the allegations in the complaint here include claimed violations of “rights and obligations as a tenant” (Civ. Code, § 1953, subd. (a)(4)), the arbitration agreements are void.

The court discussed the reasons legislatures enacted statutory laws to "protect the rights of tenants."  It continued:

Elders entering continuing care contracts are entitled to the same protection as mobile home owners. Both groups face significant economic barriers to relocating. The Legislature recognizes that “elderly residents often ... expend a significant portion of their savings in order to purchase care in a continuing care retirement community,” and that there is a need “to protect the rights of the elderly.” (Health & Saf. Code, §§ 1770, subd. (b), 1776.)

The court acknowledged that CCRC residents also have some express statutory protections under state laws regulating CCRCs, but concluded that the lack of any bar on arbitration in that statutory scheme does not preclude protection for residents under landlord-tenant law.  

Moreover, the continuing care contract statutes “shall be liberally construed for the protection of persons attempting to obtain or receiving continuing care.” (Health & Saf. Code, § 1775, subd. (e). To deny residents of a continuing care retirement community the protection given others who contract for lodging would be inconsistent with this express policy. The legislative purposes of both the landlord-tenant laws and the continuing care contract laws are best served by applying the arbitration prohibition to the housing component of continuing care contracts.

The full opinion is currently available on Westlaw at 2020 WL 2831923.