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A Publication of the Georgia Office of Dispute Resolution


CaseWatch for Arbitrators:
Supreme Court Overrules West Virginia on FAA Preemption

The U.S. Supreme Court, in a February 21, 2012, per curiam opinion, has reinforced the preemption of the Federal Arbitration Act with respect to all arbitration agreements governed by the statute.

In Marmet Health Care Center v. Brown et al. 565 U.S. _________________(2012), representatives of three nursing home patients had signed admission agreements that included a broad arbitration provision for resolving disputes.  After the patients died, their representatives sued in state court asserting tort claims for negligence and wrongful death.  The West Virginia Supreme Court of Appeals refused to enforce the arbitration agreement based on public policy, as well as an alternative suggestion of unconscionability under state contract law.  It held:

[A]s 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 negligence.

The West Virginia court also considered and rejected the notion that the state’s public policy had been preempted by the FAA, but rather held that Congress had not intended the FAA to be applicable to personal-injury or wrongful-death arbitrations.  Therefore, the court concluded, that there was no preemption of the state public policy against enforcement of predispute arbitration agreements for personal injury and wrongful death.

The U.S. Supreme Court reversed, saying that the West Virginia court’s interpretation of the FAA was both “incorrect and inconsistent with clear instruction in the precedents” provided by the Supreme Court.  The Court said there is no exception in the FAA that would exclude personal-injury or wrongful-death claims from enforceable arbitration agreements.  Quoting from its decision in AT&T v. Concepcion, 563 U.S. ______ (2011), the Court said:

[W]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward:  The conflicting rule is displaced by the FAA.

The Court cited a number of its cases to which it applied the preemption standard:

          -- A limitation imposed by a state statute granting exclusive jurisdiction to a state commissioner;

          -- A state statute granting exclusive jurisdiction to courts to resolve punitive damages;

          -- A state law requirement that litigants use a judicial forum for wage disputes; and

          -- A state prohibition on arbitration of financial investment claims.

In each case, the Supreme Court ruled that the FAA preempts state law requirements that would interfere with the federal policy favoring arbitration of disputes by the parties.

The Court also addressed the West Virginia court’s alternative suggestion that the arbitration agreements were not enforceable because the contract terms were unconscionable.  The Court remanded the case on this issue for reconsideration and clarification by the West Virginia tribunal.

It is unclear, however, to what degree the state court’s alternative holding was influenced by the invalid, categorical rules [against personal injury and wrongful death predispute arbitration agreements] discussed above …

The case has been remanded, and the West Virginia court was directed to consider whether there are in fact any common law principles that support the court’s public policy assertion.

Note to Georgia arbitrators:  The U.S. Supreme Court has strongly emphasized the principles of preemption where the FAA applies.  In the absence of the parties’ designation of the Georgia Arbitration Code in lieu of the FAA, it is unlikely that assertions of state law will successfully prevent the enforcement of pre-dispute arbitration agreements voluntarily entered by the parties.


John Allgood is of counsel at Ford & Harrison.  For more than 20 years he has arbitrated and mediated cases in commercial, employment, construction and securities law, as well as in real estate and anti-trust matters.  An adjunct professor of ADR at Emory University School of Law, he was a member of the U.S. Olympic Committee panel of arbitrators during the 1996 and 1998 Olympic Games.

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