On February 21, 2012, the U.S. Supreme Court decided an issue involving arbitration agreements in nursing facilities which has been swirling around the nation for years. For the past several years, an increasing number of state courts have found pre-dispute arbitration agreements (i.e., signed before any dispute arises, and often during the admission process) signed by residents or family members of residents in nursing facilities void and unenforceable, finding them offensive to sound public policy. These decisions often focus on the stress involved in the nursing facility admission process, lack of understanding of the rights residents are waiving in signing such agreements, and other similar factors.
In Marmet Health Care Center, Inc et al. v. Clayton Brown, et al., the U.S. Supreme Court found such arbitration agreements enforceable, even in the face of state laws that try to preclude them. The case involved families of three deceased residents, each of whom sued a nursing facility for medical negligence allegedly causing the death of their family member. In each case, a family member, acting for the resident, had signed at admission an arbitration agreement that required all disputes, other than actions for nonpayment for services provided, to be submitted to arbitration, and included waivers of the right to sue in state court for damages.
The West Virginia Supreme Court found all three arbitration agreements void and unenforceable, as offensive to the state’s public policy. The U.S. Supreme Court clearly and unequivocally reversed the West Virginia Supreme Court, noting that the Federal Arbitration Act embodies a national policy favoring arbitration over traditional lawsuits, unless the Act provides a clear exemption for the type of case at issue. The Court noted that no such exemption exists in the Act for personal injury or wrongful death cases brought on behalf of a deceased nursing facility resident. The Court also said the West Virginia court ignored clear precedent of the U.S. Supreme Court holding that the Act preempts state law and “public policy” decisions that purport to preclude enforcement of nursing facility pre-dispute arbitration agreements.
The Supreme Court remanded the case to the West Virginia court to reconsider an “additional ground” the West Virginia court said it considered in voiding the arbitration agreements, but noted in doing so that the “additional basis” seemed to be based on the same public policy argument that the Supreme Court soundly rejected in reversing the West Virginia Supreme Court decision.
North Carolina’s Court of Appeals in 2006 upheld the validity and enforceability of arbitration agreements in long term care, specifically in the assisted living setting, in the case of Raper v. Oliver House. Resident advocates and plaintiffs’ lawyers have been trying for years to pass a national statute that would preclude arbitration agreements signed during the admission process, and all pre-dispute arbitration agreements, between long term care facilities and residents.
This important decision by the U.S. Supreme Court stems the tide of state laws and state court decisions, voiding or precluding long term care arbitration agreements. It may, however, also fuel efforts in Washington to enact federal legislation precluding such agreements.