Another Reminder from the U.S. Supreme Court About the Importance of Arbitration Clauses

Marmet Health Care Center, Inc. v. Brown, 565 U.S. ___, 132 S.Ct. 1201 (2012).  The Supreme Court of the United States decides many fewer cases now than it did in prior years.  The Court also likes to say that it does not sit to correct errors of lower courts.  But these days the Court seems always to have time for, and the inclination to correct errors regarding, cases involving arbitration clauses.  The five-page per curiam opinion of the Court in this case begins by indicting the Supreme Court of Appeals of West Virginia for “misreading and disregarding the precedents of this Court” interpreting the Federal Arbitration Act, 9 U.S.C. §1 et seq. (“FAA”), and holding “unenforceable all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against nursing homes.”

The case involved three negligence suits against nursing homes in West Virginia.  In each case, family members of a nursing home patient who had died sued the nursing home, alleging that the nursing home’s negligence caused injuries or harm that resulted in the death.  In each case, however, the contract that the patient’s family member had signed with the nursing home contained a clause providing that, except for lawsuits to collect late payments owed by the patient, disputes would be resolved by arbitration.

When the cases reached the Supreme Court of West Virginia, that court ruled that “as a matter of public policy under West Virginia law, an arbitration clause in a nursing home admission agreement adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, shall not be enforced to compel arbitration of a dispute concerning the negligence.”  The United States Supreme Court tersely rejected this decision, finding it inconsistent with that Court’s own decisions under the FAA, such as the misbegotten ruling in AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011). 

As an alternative holding, the Supreme Court of West Virginia found that the arbitration clauses in two of the three cases were unconscionable.  It was “unclear, however, to what degree the state court’s alternative holding was influenced by the invalid, categorical rule discussed above, the rule against predispute arbitration agreements.”  The Court remanded for consideration of whether, absent the mistakenly enunciated general policy of West Virginia against such arbitration clauses, the clauses were “unenforceable under state common law principles that are not specific to arbitration and pre-empted by the FAA.”

The West Virginia court likely did not help its cause by labeling the United States Supreme Court’s views of the FAA “tendentious” and “created from whole cloth.”  Regardless, whatever other rights or persons our nation’s highest Court is or is not protecting, parties who impose arbitration clauses on others can rest easy knowing that the Court is vigilantly enforcing those clauses.