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Supreme Court Reaffirms FAA's Pro-Arbitration Policy

In a harshly worded per curiam decision, the U.S. Supreme Court recently reaffirmed the broad reach of the Federal Arbitration Act ("FAA") and restated that the FAA "reflects an emphatic federal policy in favor of arbitral dispute resolution." The FAA is the federal statute that regulates the relationship between the judicial process and arbitration.

The case came before the Court after the Supreme Court of Appeals of West Virginia held three arbitration clauses contained in nursing home patient contracts unenforceable. The case centered on negligence claims brought by family members of deceased nursing home patients. The patients' contracts with the nursing homes included mandatory arbitration clauses. The state court held that compelling arbitration of negligence claims would contradict existing West Virginia public policy against the enforcement of predispute arbitration agreements that apply to claims of personal injury or wrongful death against nursing homes.

In its decision, the state court held that the Federal Arbitration Act's pro-arbitration thrust did not preempt West Virginia's public policy against compelling arbitration of negligence claims against nursing homes, calling the Supreme Court's expansive interpretation of the federal statute "tendentious" and "created from whole cloth."

Not surprisingly, the Supreme Court took issue with that view, vacated the state court judgment, and remanded the case for further proceedings, stating, "When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA. That rule resolves these cases. West Virginia's prohibition against predispute agreements to arbitrate personal-injury or wrongful-death claims against nursing homes is a categorical rule prohibiting arbitration of a particular type of claim, and that rule is contrary to the terms and coverage of the FAA."

By its terms, the Federal Arbitration Act makes written arbitration agreements in contracts "evidencing a transaction involving interstate commerce" enforceable, unless the contract would be unenforceable on common law grounds. According to the Supreme Court's decision in Marmet Health Care and other cases, the FAA "requires courts to enforce the bargain of the parties to arbitrate."

All said, while it offers a stinging criticism of the West Virginia court's decision, the Supreme Court's ruling in Marmet Health Care Center, Inc. v. Brown is nothing new. Parties executing contracts containing an arbitration provision should pay special attention to the scope of the arbitration agreement in light of what types of claims could arise in the future between the parties. If necessary, specific categories of claims may be expressly included or excluded in the contract's arbitration provision. As the Marmet Health Care decision makes clear, if litigated, most disputes over the scope of an arbitration clause will be resolved in favor of arbitrability.

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