Supreme Court Rejects State Bar Of Nursing Home Arbitration Clauses
February 24, 2012
On February 21, the U.S. Supreme Court vacated a 2011 ruling by West Virginia\’s highest court that found all predispute arbitration clauses in nursing home admission agreements were void as a matter of public policy. In Marmet Health Care Center v. Brown, the Supreme Court held that the Federal Arbitration Act (“FAA”) preempts the West Virginia court\’s stated “public policy” because that policy prohibits the arbitration of a particular type of claim, a result clearly inconsistent with prior Supreme Court decisions interpreting the FAA.
The Supreme Court did leave open the possibility that on remand, the West Virginia court could find the particular arbitration provisions in question to be unenforceable because they are unconscionable under generally applicable state law principles (i.e., not just because they are contained in an arbitration agreement).
Marmet is consistent with the law in New Jersey interpreting the FAA as previously articulated in Estate of Ruszala v. Brookdale Living Communities and Moore v. Woman to Woman Obstetrics & Gynecology, which were discussed here previously. The question remains: will hospitals, physicians and other healthcare providers utilize admission agreements to require their patients to arbitrate later arising negligence claims? Although Marmet confirms that this door is wide open, providers will need to proceed with caution. Among other things:
– Is the provider\’s malpractice insurer on board?
– How far does the provider want to go to assure the arbitration clause will be sufficiently “fair” to be enforceable under state law? Should it contain a patient “opt out” feature?
– Is the clause consistent with the provider\’s existing philosophy towards patient lawsuits?
– Is the provider prepared for the public relations consequences?
– Who will arbitrate claims that are made, under which rules, and how will the arbitrators be selected? (Keep in mind that the American Arbitration Association and the American Health Lawyers ADR Service, as a matter of policy, do not accept patient malpractice claims arising from predispute arbitration agreements.)
These issues will play out for providers all over the country as they struggle to contain malpractice coverage expenses while competing for the ever-shrinking healthcare dollar.
[Image: Justice Icon with crossed gavels, March 6, 2010, by Svgalbertian]