New Obstacles to Arbitration

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Carin MarneySponsored Legal Report

It is common practice in long term care and other health care facilities for a resident or a resident’s family member to sign an arbitration agreement upon admission. Such agreements require the resident to arbitrate any dispute that may arise out of his or her stay or care received at the facility. Arbitration agreements have proven to be a cost-effective and efficient method for resolving disputes.

Arbitration agreements have long been favored under Washington state law. However, in May 2010, the Washington Court of Appeals in the Woodall case limited enforcement to claims asserted by the resident and/or statutory beneficiaries who actually signed the agreement. Prior to this, courts routinely enforced arbitration agreements in total by virtue of the resident’s signature, even as to claims asserted by non-signatory heirs. As a result, Washington courts are now splitting up, or bifurcating, claims asserted in lawsuits against health care providers.

In Woodall, nursing home resident Henry Woodall, 86, voluntarily signed a “resident and facility arbitration agreement,” in which he agreed to submit to binding arbitration in the event of a dispute. The arbitration agreement bound “all persons,” including “any spouse, children or heirs” of Mr. Woodall. After Mr. Woodall died in July 2007, his son sued the nursing home, bringing survivorship claims on behalf of his father and wrongful death claims on behalf of Mr. Woodall’s heirs. When the nursing home requested that the trial court compel Mr. Woodall’s son to participate in arbitration pursuant to the clear language of the arbitration agreement, the court denied the request, in part.

The court upheld the arbitration agreement, holding that Mr. Woodall’s survivorship claims, meaning those that he could assert on his own behalf had he survived, must be arbitrated because he signed the arbitration agreement. However, the wrongful death claims asserted by his surviving heirs who did not sign the agreement were not subject to arbitration.

The Court of Appeals upheld the trial court’s ruling, beginning with this basic principle: “[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” With that principle in mind, the court held that: (1) because the survival claim was essentially Mr. Woodall’s own claim, it was covered by Mr. Woodall’s arbitration agreement with the nursing home; and (2) the wrongful death was a separate cause of action that belonged exclusively to Mr. Woodall’s heirs. Since Mr. Woodall’s heirs were not parties to the arbitration agreement, the court concluded that the wrongful death claims were not subject to binding arbitration.

The holding in Woodall reflects that arbitration agreements are indeed enforceable. However, the Woodall ruling has resulted in a cumbersome outcome. The claims of the resident and statutory heirs who signed the agreement are being tried in private arbitration, while the claims of the heirs who did not sign the agreement will be tried separately in the court system. Despite the court’s acknowledgment that public policy favors arbitration and resolution of claims in one forum, it determined that such a consideration does not overcome the policy that one who is not a party to an agreement to arbitrate cannot generally be required to arbitrate.

Providers must be aware that the traditional outcome of these agreements—arbitrating the claims of all plaintiffs in a wrongful death or personal injury lawsuit at one time—is not achievable at this time absent all potential heirs signing an arbitration agreement with the health care provider. While this process is not perfect, the advantages to arbitrating claims against health care providers still outweigh these new obstacles.

 

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Legal Briefs: Women in the C-Suite

Legal Briefs: Women in the C-Suite

It's good business.
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The underrepresentation of women on boards of directors and in the C-suite is astounding in a world driven by analytics aimed at increasing the bottom line. Of the nearly 22,000 companies examined in a 2014 study conducted by the Peterson Institute for International Economics, approximately 60 percent had no female board members, more than half had no women holding executive-level positions and fewer than 5 percent had a female CEO. Aside from the imbalance posed by these statistics, a growing body of literature posits that the business community has yet to fully embrace the financial impact associated with increased female representation within the highest levels of company management.

One crucial metric — the proportion of women represented in upper-level management, particularly with regard to representation in the C-suite — is positively correlated with improved financial performance. The Peterson study suggests that once a company reaches a minimum threshold of female representation in executive-level management positions — at least 30 percent of all such positions — that company could expect an increase of 1 percent to net margin compared to companies with no female representation. While that number appears small, given that companies in the data set produced an average profit margin of 6.4 percent, a 1 percent increase in net margin results in a 15 percent jump in profitability.

First Round Capital, a national venture capital fund, found that of its 300 series seed investments made between 2005 and 2015, portfolio companies with at least one female founder performed 63 percent better than their all-male counterparts when measuring the value at exit against First Round’s initial investment. The Diana Project, an analysis conducted by Babson College and Ernst & Young, found that companies with female entrepreneurs on the executive team experience higher valuations than those lacking such representation — 64 percent higher at the first round of funding and 49 percent higher at the last round of funding.

Given the above, the unanswered question is why is female representation at the highest levels of company management positively correlated with enhanced financial performance? One theory rests in data suggesting that men and women — whether due to experiential or genetic differences — approach and resolve certain business issues in different ways. Men, for example, are more prone to risk than women. According to the Ratio Institute, companies run by male executives have been shown to take on greater amounts of debt and are more likely to undertake risky acquisitions as compared to their female-led counterparts.

These varying approaches to the resolution of crucial issues facing any board or executive team highlight the value proposition of executive-level management represented by female leadership. The purpose of a board of directors is to collectively oversee and direct the most crucial decisions facing a company.

Highly functioning boards and executive teams are those that take the time and effort to analyze critical issues from every conceivable angle — angles which, according to the above, are analyzed differently by women and men. 

To be clear, a shift in hiring practices will not, in itself, result in any guaranteed financial return on a company by company basis. What has been, and will continue to be, a crucial indicator of success is company leadership’s ability to hire the best and brightest to manage the business’ affairs. Bluntly speaking, it is our belief that the best and brightest are often women, and companies paving the way to equal gender representation are currently reaping the rewards of their forward-looking hiring practices.