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United States Supreme Court Strikes Down State Law Categorically Banning Pre-dispute Arbitration Clauses in Health Industry

February 23, 2012

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Following on the far sweeping federal pre-emption of arbitration under the Federal Arbitration Act  ushered in under AT & T Mobility v. Concepcion, the United States Supreme Court in Clarksburg Nursing Home & Rehabilitation  Center v. Marchio et. al., 12 C.D.O.S. 2074 (Feb. 21, 2012) overturned a West Virginia Supreme Court of Appeals decision which on public policy grounds, categorically refused to enforce arbitration of personal injury or death cases, under a pre-dispute arbitration clause in a nursing home admission agreement.  The United States Supreme Court stated that “When this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established.”  It did not help that the state court called this interpretation of the Federal Arbitration Act’s blanket pre-emption of state public policy as “tendentious”.  The Supreme Court will strike down any state law that has as its purpose to insert public policy as a grounds to refuse enforcement of an arbitration clause when that policy is not uniformly applied to all agreements to arbitrate.  Although there can be no public policy exception, the clause could be rendered unenforceable as unconscionable and since that ground had been raised, the case was remanded to determine if the clause would be unenforceable on this state law defense to all contracts and not specific to arbitration agreements.

Based on the federal pre-emption of AT & T Mobility v. Conception, the United States Supreme Court in Sonic-Calabasas A, Inc. v. Moreno, 132 S. Ct. 496 (2011) vacated and remanded a California Supreme Court decision in 51 Cal. 4th 659 (2011) directing that court to reconsider its invalidation of a contractual waiver of a right to a statutory Berman hearing before the Labor Commissioner, in advance of proceeding to contractual arbitration.  The California Supreme Court’s decision in Sonic-Calabasas A, had pre-dated Concepcion and the United States Supreme Court directed that state high court to reconsider its opinion in light of Concepcion, which is currently being briefed by the parties. 

This portends that any statutory restriction on enforcing an agreement to arbitrate of a particular claim, whether based upon statute or public policy, that does not apply to all agreements to arbitrate, violates the United States Supreme Court’s prohibition of state restrictions on arbitration.  This still leaves the defense of unconscionability when an adhesion agreement is found.

For more information, please contact:

Neil Bardack

415-995-5849 Direct Phone
415-995-3570 Fax

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