By Alex Stein
Arbitration clauses in nursing home agreements are pretty much standard. Whether such a clause precludes tort actions complaining about the resident’s wrongful death is consequently an important issue. The Pennsylvania Supreme Court has recently addressed this issue in Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490 (Pa. 2016). In that case, the resident’s family members sued the nursing home in their individual capacity as derivative victims of the alleged tort (the wrongful death action) and as representatives of the resident’s estate (the survival action). In the wrongful death action, the plaintiffs sought compensation for the emotional harm they sustained from losing their loved one prematurely and possibly for their economic losses as the resident’s dependents (the Court’s decision provides no details on that). The survival suit, on the other hand, focused on the resident’s entitlement to be compensated for pain and suffering and other harms she sustained from the alleged negligence. This entitlement belonged to the resident’s estate rather than her successors as individuals.
The agreement between the resident and the nursing home contained a standard compulsory arbitration provision that covered any resident’s suit against the nursing home. This provision consequently extended to the survival action, but not to the wrongful death suit filed by the nonparties to the agreement. However, under Pennsylvania Rule of Civil Procedure 213(e), wrongful death and survival actions cannot be bifurcated and must be tried together. Based on that rule, the trial court decided that the two actions must be consolidated, and because one of the actions fell outside the scope of the arbitration provision, both actions should go to trial.
The Pennsylvania Supreme Court overturned this decision for failure to account for the Federal Arbitration Act (FAA), as interpreted (inter alia) in Southland Corp. v. Keating, 465 U.S. 1, 3 (1984); Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (1983); Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985); AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011); and KPMG LLP v. Cocchi, 132 S.Ct. 23, 26 (2011).
The Court ruled that FAA preempts Rule 213(e) and that the wrongful death and survival actions must be considered separately and not together. The wrongful death action must go to court. The survival action goes to arbitration.
The Court reasoned that –
“We recognize that Rule 213(e) is a procedural mechanism to control case flow, and does not substantively target arbitration. However, the Supreme Court directed in Concepcion that state courts may not rely upon principles of general law when reviewing an arbitration agreement if that law undermines the enforcement of arbitration agreements. We cannot require a procedure that defeats an otherwise valid arbitration agreement, contrary to the FAA, even if it is desirable for the arbitration-neutral goal of judicial efficiency. See Concepcion, 563 U.S. at 351, 131 S.Ct. 1740 (“States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.”). Declining to bifurcate the wrongful death and survival actions against Extendicare in the interest of efficiency would nullify the ADR Agreement, a result not permitted by the Supreme Court’s FAA jurisprudence. …. Collectively, Moses H. Cone, Dean Witter and KPMG instruct that the prospect of inefficient, piecemeal litigation proceeding in separate forums is no impediment to the arbitration of arbitrable claims. Indeed, where a plaintiff has multiple disputes with separate defendants arising from the same incident, and only one of those claims is subject to an arbitration agreement, the Court requires, as a matter of law, adjudication in separate forums.”
The Court also cited in this connection Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (“[T]he [FAA] requires district courts to compel arbitration of pendent arbitrable claims when one of the parties files a motion to compel, even where the result would be the possibly inefficient maintenance of separate proceedings in different forums.”).
The upshot of this decision is maximal enforcement of the nursing homes’ arbitration clauses. To avoid arbitration, plaintiffs must rely on federal, rather than state, law. For example, FAA Section 2 authorizes state courts to set aside arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract.” In AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011), the Supreme Court explained this provision by saying that it “permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability [as opposed to] defenses that apply only to arbitration.” Moreover, nursing home agreements designating disputes to be arbitrated before the National Arbitration Forum (NAF) and according to NAF’s rules, are unlikely to be enforced following the consent judgment in the litigation between NAF and Minnesota’s Attorney General, according to which NAF agreed that it would not administer, process, or participate in any consumer arbitration filed on or after July 24, 2009. See here and here.