W.Va. trial lawyers happy with arbitration decision

By Jessica M. Karmasek | Jun 30, 2011


CHARLESTON, W.Va. (Legal Newsline) - A trial lawyers group says it commends the West Virginia Supreme Court for its recent decision in a set of cases stating that arbitration agreements in nursing home contracts were "unconscionable and unenforceable."

On Wednesday, the state's highest court filed its 99-page opinion in the cases Clayton Brown v. Genesis Healthcare Corp., et al.; Sharon A. Marchio v. Clarksburg Nursing & Rehabilitation, et al.; and Jeffrey Taylor v. MHCC, Inc., f/k/a Marmet Health Care Center, et al.

The three cases involve arbitration clauses within nursing home admission agreements.

In each case, a plaintiff alleges that a nursing home negligently caused the death of a nursing home resident. In each case, a representative for the resident had signed an agreement, admitting the resident to the nursing home for treatment, which contained a clause stating that any disputes arising from negligent treatment by the nursing home would be submitted to arbitration. And in each case, the nursing home is arguing that any claims arising from the death of the resident must be dismissed from the circuit court and resolved by an arbitrator.

The plaintiffs argued that the arbitration clauses are prohibited by, and null and void under, Section 15(c) of West Virginia's Nursing Home Act.

The defendant nursing homes argued that Section 15(c) is preempted by Section 2 of the Federal Arbitration Act.

The Court sided with the nursing homes, finding that Section 15(c) is preempted by the FAA.

"The economic activities of these nursing home facilities have a significant impact on general practices subject to federal control, such as interstate commerce and transportation. Hence, the FAA applies to our examination of this case," Justice Menis Ketchum wrote for the Court.

The Court said it believes that Section 15(c) conflicts with the FAA's "intended purpose" of putting arbitration clauses on "equal footing" with other commercial clauses.

"By adopting Section 15(c), the West Virginia Legislature clearly intended for the right of a nursing home resident to pursue a civil action in court to be unwaivable, a right that the resident (or the resident's representative) could not be compelled to relinquish as a condition of admission to a nursing home," it wrote.

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.

Also in its decision, the Court concluded that, in two of the cases on appeal, the arbitration agreements at issue are "unconscionable and unenforceable" as a matter of law. In the third case, the issue of unconscionability was not considered by the trial court, but may be raised by the parties on remand, it said.

By definition, the doctrine of unconscionability means that, because of an overall and gross imbalance, one-sidedness or lop-sidedness in a contract, a court may be justified in refusing to enforce the contract as written.

"Congress did not intend for arbitration agreements, adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, and which require questions about the negligence be submitted to arbitration, to be governed by the Federal Arbitration Act," the Court wrote.

"We therefore hold that, as a matter of public policy under West Virginia law, an arbitration clause in a nursing home admission agreement adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, shall not be enforced to compel arbitration of a dispute concerning the negligence."

The Court remanded the cases back to Kanawha County Circuit Court.

"The admission agreements in this case contain arbitration clauses that eliminate a fundamental constitutional right: the right of the parties to have a jury trial in the West Virginia circuit court system on the plaintiffs' personal injury claims against the defendant nursing homes," it concluded.

The West Virginia Association of Justice, which represents more than 500 trial lawyers in private practice and public service in the state and surrounding states, was pleased with the Court's ruling.

Most consumers, the WVAJ says, are unaware that they have signed mandatory, binding arbitration agreements because they are buried in the contracts' small print.

"The right to a jury trial is in our constitution right next to the right to bear arms. The West Virginia Supreme Court listened to the arguments on both sides and ruled that no small print can take away our constitutional rights. Democracy works," Paul T. Farrell, Jr., WVAJ president, said in a statement Wednesday.

Justice Robin Davis, deeming herself disqualified, did not participate in the ruling. Justice Brent Benjamin, deeming himself disqualified, also did not participate.

Judge Phillip D. Gaujot sat by temporary assignment.

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.

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