A recent New Jersey court ruling was a split decision for assisted living residents. Cases against two assisted living facilities were referred to arbitration as the facilities had requested, but the facilities’ arbitration agreement was modified to delete provisions that were unfair to residents.

The facilities are operated by Alterra Healthcare Corporation. The facilities’ arbitration agreements directed that lawsuits against the facilities be decided by an arbitrator, instead of by a jury. The agreements also limited discovery and compensatory damages, and entirely prohibited punitive damages.

Two residents had died at the Alterra facilities; in response, the residents’ representatives filed suit against the facilities and Alterra. In their defense, the facilities argued that the residents’ admission agreements called for arbitration, but the trial court ruled that the a New Jersey law did not allow nursing home residents to give up their right to a jury trial.

The assisted living facilities appealed, and the appeals court found that the New Jersey law was trumped by the Federal Arbitration Act. As a result, the facilities could force the residents’ claims to be heard by an arbitrator rather than by a jury.

On the other hand, the appeals court also ruled that the arbitration agreement was unfair in limiting discovery and compensatory damages, and in prohibiting punitive damages. Each of these provisions was so unfair that it could not be enforced. Estate of Ruszala v. Brookdale Living Communities, Inc., 2010 WL 3118695. 2010 N.J. Super. LEXIS 167 (N.J. Super. Ct. App. Div. 2010).