W.Va. SC backs off previous ruling over nursing home contracts

Jessica M. Karmasek Jun. 14, 2012, 9:30am


CHARLESTON, W.Va. (Legal Newsline) - The West Virginia Supreme Court of Appeals has reversed and remanded a set of lawsuits over arbitration agreements in nursing home contracts.

The Court, in a consolidated opinion this week, sent the lawsuits back to circuit courts in light of a U.S. Supreme Court ruling in February that said the Court misinterpreted the Federal Arbitration Act.

Last June, the state's high court ruled that a section of the state's Nursing Home Act -- which, in part, prohibited arbitration clauses in nursing home contracts -- was preempted by the FAA.

The three cases at issue, consolidated in the Court's updated opinion Wednesday, each arose from a nursing home's attempt to compel a plaintiff to participate in arbitration, pursuant to a clause in an admission contract.

Generally, in each of the three lawsuits, a family member of a patient who had died sued a nursing home in circuit court, alleging that the nursing home's negligence had caused injuries to the patient resulting in death.

Plaintiff Clayton Brown and plaintiff Jeffrey Taylor each brought suits against defendant Marmet Health Care Center, and plaintiff Sharon Marchio brought suit against defendant Clarksburg Nursing Home and Rehabilitation Center.

The nursing homes, in response, asserted before the circuit courts that a family member of each patient had signed an admission agreement with the nursing home on behalf of the patient.

Each admission agreement included a clause requiring the plaintiffs to arbitrate any disputes that may arise. The defendants insisted that the lower courts were obligated to dismiss the plaintiffs' suits and refer their claims to binding arbitration.

The Kanawha County Circuit Court dismissed Brown and Taylor's suits. The Harrison County Circuit Court refused to dismiss or compel arbitration of Marchio's suit. Instead, it certified a question to the state's high court.

In its June 2011 ruling, the Court said although arbitration may be an expeditious way of resolving some disputes, it is also a way for the nursing home industry to resolve FAA violations out of the public's eye.

It also found -- in two of the three cases -- that the arbitration clauses were unconscionable and unenforceable.

The defendant nursing homes in all three cases sought review of the Court's opinion in the U.S. Supreme Court.

Specifically, they challenged Syllabus Point 21 of the Court's opinion, in which it questioned whether the FAA applies to personal injury or wrongful death actions.

In a per curiam opinion, the nation's high court found Syllabus Point 21 to be "both incorrect and inconsistent with clear instruction in the precedents of this Court," and reversed the West Virginia Court's opinion.

"The Supreme Court -- without elucidating how and why the FAA applies to negligence actions that arise subsequently and only incidentally to a contract containing an arbitration clause -- summarily concluded that the above holding in Brown I is a categorical rule that 'is contrary to the terms and coverage of the FAA,'" Chief Justice Menis Ketchum wrote Wednesday. Ketchum also authored the Court's prior ruling.

The U.S. Supreme Court remanded the cases to the West Virginia Supreme Court to consider whether the arbitration clauses at issue "are unenforceable under state common law principles that are not specific to arbitration and preempted by the FAA."

In its opinion this week, the state's high court backed off its previous ruling.

"We have carefully examined the record developed in the courts below, and the briefs and arguments of the parties. In accordance with the Supreme Court's mandate, we overrule Syllabus Point 21 of Brown I," Ketchum wrote.

However, the Court otherwise reaffirmed all of its other holdings from last June's opinion.

"The doctrine of unconscionability that we explicated in Brown I is a general, state, common-law, contract-law principle that is not specific to arbitration, and does not implicate the FAA," Ketchum wrote.

After a "thorough examination" of the record, the Court reversed the Kanawha Circuit Court's orders in both the Brown and Taylor cases.

"The circuit court's order in Brown's case is devoid of any findings of fact or conclusions of law on the question of unconscionability. The circuit court's order in Taylor's case has some findings of fact, but the circuit court has not had the opportunity to comprehensively analyze the question of unconscionability under the guidelines we developed in Brown I," Ketchum explained.

"We conclude the correct course is to remand these cases to the circuit courts for the taking of evidence, the full development of a record, and proper consideration of whether the clauses are unconscionable."

In the Marchio case, the Court said the issue of unconscionability was not considered by the trial court, but may be raised by the parties on remand.

Still, the Court noted its concern over the nursing home industry's arbitration agreements.

"Many contracts for admission are signed by a patient or family member in a tense and bewildering setting," Ketchum wrote.

"It may be disingenuous for a nursing home to later assert that the patient or family member consciously, knowingly and deliberately accepted an arbitration clause in the contract, and understood the clause was intended to eliminate their access to the courts if the nursing home negligently injured or killed the patient."

Justice Brent Benjamin, deeming himself disqualified, did not participate in the ruling. Judge Phillip D. Gaujot, who currently sits on the Monongalia County Circuit Court, sat by temporary assignment.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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