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Supreme Court: Federal Arbirtation Act Preempts State Public Policy

Boulder Business Attorney | Boulder Business LawyerThe Supreme Court of the United States overturned a West Virginia Supreme Court’s ruling that the Federal Arbitration Act (FAA) does not preempt the state public policy against predispute arbitration agreements that apply to claims of personal injury or wrongful death against nursing homes.

In Marmet Health Care Center, Inc. v. Brown, (three similar cases were consolidated before the W.Va. Supreme Court) family members of patients requiring extensive nursing care had signed agreements with the nursing homes that required the parties to arbitrate all disputes for personal injury or wrongful death.

The West Virginia Supreme Court held that such “predispute” arbitration agreements were against West Virginia public policy and therefore unenforceable.

In a decision concerning all three cases, the state court held 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.” Brown v. Genesis Healthcare Corp. (Citations omitted).

The West Virginia Supreme Court also concluded that the state’s public policy against such predispute arbitration agreements, as they apply to personal injury and wrongful death claims, was not preempted by the FAA.

The Supreme Court of the United States held that the “West Virginia court’s interpretation of the FAA was both incorrect and inconsistent with clear instruction in the precedents of this Court.”

The FAA provides that a “written provision in . . . a contract evidencing a transac­tion involving commerce to settle by arbitration a contro­versy thereafter arising out of such contract or transaction. . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”  The statute’s text includes no exception for personal-injury or wrongful-death claims. … As this Court reaffirmed last Term, “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” AT&T Mobility LLC v. Concep­cion.  That rule resolves these cases.  (Citations omitted).

The take away from the Marmet and the AT&T Mobility cases is that a state’s prohibition against predispute agreements – even those predicated on public policy – to arbitrate particular types of claims are indeed categorical rules prohibiting arbitration of a particular type of claim, and thus contrary to the terms and coverage of the FAA.

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