The United States Supreme Court recently dealt a blow to the West Virginia Supreme Court’s ruling on nursing home negligence. Back in June, the West Virginia Supreme Court ruled that nursing homes should not be able to insert arbitration clauses into contracts that prevent families of residents from suing if they believe that residents are being mistreated. The U.S. Supreme Court claimed that West Virginia’s decision did not conform to the requirements of the Federal Arbitration Act (FAA) of 1925.
The FAA provides that parties can agree via contract to deal with certain state and federal disputes through arbitration rather than litigation. In particular, the FAA states that state law that disfavors arbitration will be preempted by the FAA, unless the arbitration clause is found unconscionable. With arbitration, instead of a judge presiding over the case, an arbitrator — who is frequently neither a judge nor a lawyer — hears from both sides and makes a decision. Arbitration clauses are becoming increasingly common: once mainly inserted into employment contracts, they are now regularly inserted into consumer contracts and contracts for other services. In AT&T Mobility v. Concepcion (2011), the Supreme Court upheld the right of AT&T to insert an arbitration clause that barred class action lawsuits.
The West Virginia Supreme Court had found that the FAA did not apply to nursing homes because Congress never intended the FAA to apply to wrongful death or injury lawsuits. The U.S. Supreme Court disagreed, stating that West Virginia’s interpretation ” was both incorrect and inconsistent with clear instruction in the precedents of this Court.” The U.S. Supreme Court ordered the West Virginia Supreme Court to reconsider its decision using the FAA as a framework.
We at the Wolfe Law Firm applauded the West Virginia Supreme Court’s earlier decision, and hope that the Court is able to issue a similarly just ruling after looking to the language of the FAA. While arbitration may offer some benefits, such being faster and less expensive, there are certain things that arbitrators should not be allowed to consider. Personal injury and wrongful death situations are very fact-intensive and often the outcome relies upon the type of evidence. These cases demand a longer, more drawn out litigation process so that a West Virginia personal injury attorney can gather all of the necessary documents and witnesses. In arbitration, while both parties may be represented by an attorney, it is not required. This can easily result in situations where the employee or customer is at a disadvantage compared with the company. Furthermore, there is evidence that because arbitration organizations have a contract for services with the company, their arbitrators are inclined to be biased toward the companies in hope of maintaining business. While arbitrators may be experts in a field, nothing requires them to have certain credentials, or even to know the law that is at issue. Worst of all, compared with the court system, the FAA provides for very limited review. A party on the wrong end of an arbitration decision has just three months to appeal to court for review, or the court will confirm the decision and make it binding.
Many critics argue that the FAA was never meant to have the all-encompassing power that the U.S. Supreme Court has given it. Even though the FAA permits arbitration clauses to be struck down for unconscionability, the Supreme Court in AT&T would not accept an unconscionability finding in certain situations (like class actions). It is time for the U.S. Supreme Court to permit a more flexible view of the FAA, one that provides more equal footing to those who are most vulnerable in contract situations — employees, customers, and relatives of loved ones in nursing homes.