In Marmet Health Care Center, Inc. v. Brown, the US Supreme Court has issued a ruling holding that federal and state courts have to follow the Federal Arbitration Act and support any arbitration agreement that is covered under the statute. The Court said that the FAA pre-empts a state law that doesn’t allow the enforcement of this type of agreement, which requires that personal injury and wrongful claims against nursing homes be resolved outside of court. By holding, the Supreme Court was reaffirming its holding in AT&T Mobility v. Concepcion that FAA displaces conflicting rule when state law doesn’t allow the arbitration of a certain kind of claim.
In this latest ruling, the Court examined three nursing home negligence lawsuits filed by the relatives of patients that died at assisted living facilities. Each family had a signed agreement noting that any disputes, except for those regarding non-payment, would be dealt with via arbitration. Although the trial court rejected the plaintiffs’ claims because of the arbitration agreements, the West Virginia Supreme Court decided to reverse the court’s ruling, holding that public policy of the state prevented a pre-occurrence arbitration agreement in an admission contract for a nursing home that mandated that a negligence claim over wrongful death or personal injury be resolved through arbitration.
By issuing this decision the state’s Supreme Court was rejecting the way the US Supreme Court interpreted the FAA on the grounds that Congress would not have meant for the Act to be applicable to civil claims of injury or death that are tangentially connected to a contract—especially when needed service is a factor.
The US Supreme Court, however, reversed that decision, staying with its own interpretation of the FAA being controlling and a lower court not being able to ignore precedent. The Court sent the case back to state court where inquiry into whether the provision allowing only for arbitration can’t be enforced under state common law principals not specifically addressing arbitration and therefore the FAA wouldn’t pre-empt.
At Shepherd Smith Edwards and Kantas, LTD, LLP, our stockbroker fraud law firm represents individual and institutional investors with securities fraud claims and lawsuits. We have helped thousands of investors recoup their losses via arbitration and through the courts.
With securities fraud, the majority of claims have to be resolved through arbitration. One reason for this is that most investors that sign up for accounts through brokerage firms almost always end up agreeing to binding arbitration clauses.
Read the Supreme Court’s ruling in Marmet Health Care Center, Inc. v. Brown (PDF)
The Federal Arbitration Act
More Blog Posts:
Senate Passes Bill Banning Congressional Insider Trading, Institutional Investor Securities Blog, February 8, 2012
With Confirmation of Richard Cordray as Its Director, The Consumer Financial Protection Bureau Can Finally Get to Work, Institutional Investor Securities Blog, January 4, 2012
SEC and SIPC Go to Court to Over Whether SIPA Protects Stanford Ponzi Fraud Investors, Stockbroker Fraud Blog, February 6, 2012