Monday, May 22, 2017

10th Amendment as Race to the Top?: National Tort Reform, the Federal Arbitration Act, and Workers’ Compensation

Workers’ compensation is an area of traditional state sovereignty. I have become increasingly concerned about the onslaught of what I term “empty preemption,” the supersession of substantive state law by substantively empty federal statutes. Because of my ongoing concern about what I see as the undervaluation of a remedy for negligent infliction of injury on the human body, I find it especially alarming when empty preemption works against state remedies for physical injury. At the very root of workers’ compensation opt-out, for example, is the project to utilize substance-less federal law (ERISA) to preempt substantive state law. The substance of law to which I refer is sometimes called “rights.” And in my mind, rights matter.

Last week the Supreme Court continued its underwriting of a states’-rights-eviscerating machine known as the Federal Arbitration Act. The Kentucky-based case—Kindred Health Centers—involved a fairly simple fact pattern. Two close family members of nursing home admittees unwittingly signed arbitration agreements at the time of admission. When the admittees died, the family members attempted to bring wrongful death suits. The nursing homes raised the arbitration agreements as a subject matter jurisdiction defense and sought compulsion of arbitration. The Kentucky courts—all the way to the Kentucky Supreme Court—said “no”: with respect to waivers of access to jury trials (a fundamental right under Kentucky law), a clear statement is required for release. The U.S. Supreme Court overturned on the theory that the “clear statement” requirement served as back-door discrimination against the federal policy strongly (much too strongly, in my opinion) favoring arbitration.

Arbitration is empty preemption because judicial review of arbitration awards under the Federal Arbitration Act (the “FAA”) is virtually non-existent. My students’ collective eyebrows raise whenever I compare an arbitration to a governmental proceeding protected by due process. If you are somehow consigned to arbitration as a “plaintiff,” you are in deep trouble, and all of the statistics show it. Kindred suggests that a state measure need not even take aim at arbitration directly, it can be found by implication. Suppose there was a movement to require employees to assent to arbitration of workers’ compensation cases subject only to FAA review. How could a state enact a law forbidding the practice without suffering FAA preemption? 

I have recently been very concerned (and have written on this blog previously) about looming empty preemption in the realm of national tort reform. Members of the House of Representatives have been very interested in federal preemption of state tort law. This has implications for workers’ compensation, too, since the whole question of “adequacy” of workers’ compensation benefits was originally tethered to tort damages. Quid pro quo may mean less if torts damages are sufficiently reduced. Federally imposed tort damage ceilings, in other words, beg the question of other kinds of top-down federal mandates.

Which brings me to the 10th Amendment. There is strong opposition to national tort reform coming from conservative scholars. What business is it of the national government to dictate to states what their tort ceilings will be? Of course, the argument is easily turned around. If you want the Feds out of the business of ceiling-setting, you had better be prepared to extend the thinking to damage floors. The distinction here, though, is that at a certain point the reduction in damages (or workers’ compensation benefits) may call into question the very existence of a right. In any event, I do not think that I am willing to concede that large, generous states are incapable of driving a benefits race to the top, especially if ERISA preemption is loosening, as some have been arguing.

Michael C. Duff

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