Health Law Alert: Supreme Court Endorses Nursing Home’s Use of Pre-Dispute Arbitration Agreement


The United States Supreme Court recently affirmed – in strong terms – the broad reach of the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) as applied to predispute arbitration agreements between nursing homes and residents’ families. In Marmet Health Care Center, Inc. v. Brown, ___ S. Ct. ___, 2012 WL 538286 (Feb. 21, 2012) (per curiam), the Supreme Court sharply criticized a decision by West Virginia’s Supreme Court of Appeals that had refused to enforce such arbitration agreements on the ground that they violated state public policy. The Supreme Court’s decision should encourage health care providers to consider pre-dispute arbitration agreements as a risk management strategy.

The FAA generally requires both federal and state courts to enforce arbitration agreements in transactions with a sufficient nexus to interstate commerce. Despite the FAA, and a long line of federal court cases upholding the validity of arbitration agreements, numerous state courts and state legislatures have been openly hostile toward arbitration. While state courts have used various rationales for disregarding arbitration agreements, many courts, including the West Virginia court in this case, have asserted that the enforcement of arbitration agreements – signed before a dispute arises between the parties to the arbitration agreement - is against the state’s “public policy.” That rationale, however, is not a legitimate basis for courts to reject arbitration agreements. The FAA reflects federal policy in favor of arbitration, and the FAA preempts state law to the contrary, except when the arbitration agreement is invalid under principles of law that apply to contracts generally....

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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