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Thursday, February 23, 2012

Supreme Smack Down of West Virginia on the FAA

In yet another arbitration case, on Tuesday the Supreme Court decided per curiam Marmet Health Care Center, Inc. v. Brown.  The Court chastised West Virginia’s Supreme Court of Appeals for handing down three decisions that disregarded the Court’s interpretations of the Federal Arbitration Act (FAA).  The Court vacated the West Virginia rulings, which had held unenforceable pre-dispute arbitration agreements that apply to claims alleging personal injury or wrongful death at nursing homes.

In all three cases, a family member of a deceased patient sued the nursing home for negligent injuries or harm resulting in the patient’s death.  The nursing homes sought to compel arbitration.  The cases were consolidated, and the West Virginia Supreme Court of Appeals held, as a matter of public policy, that no agreement could compel arbitration of a claim of negligence that results in personal injury or wrongful death.   Calling the Supreme Court’s interpretation of the FAA “tendentious” and reasoning that Congress did not intend for the FAA to apply to personal-injury or wrongful-death suits, the West Virginia Supremes refused to compel arbitration.  

Tendentious?

 

The Court pointed out that the FAA does not contain exceptions for wrongful-death or personal-injury claims.  Instead it enforces the parties’ bargain to arbitrate disputes and “reflects an emphatic federal policy in favor of arbitral dispute resolution.”  Furthermore, the court explained that in AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court held that “when state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward:  The conflicting rule is displaced by the FAA.”

Although the West Virginia Court had also found the arbitration agreements invalid because unconscionable, the U.S. Supremes remanded on that issue, indicating suspicion that the West Virginia had held the agreement unconscionable because it violated West Virginia public policy, a notion the Court held preempted under the FAA.  On remand the state court must decide if the arbitration clauses at issue are unconscionable under state common law principles that somehow escape federal preemption.

[JT and Janelle Thompson]

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