Fate of Obama-Era Arbitration Rules Under Current Republican President and Congress

Perry Cooper, of Bloomberg News, writes  “A half dozen Obama-era rules to limit mandatory arbitration have met a variety of fates in the four months since Donald Trump became president.”

Arbitration Update: CFPB Rule Uncertain, Mixed Fates for Others goes on to say:

1. "The Consumer Financial Protection Bureau rule, which covers financial products, hasn’t been finalized yet and is in a perilous position."
2. "Congress reversed the federal contractor rule under the Congressional Review Act in March."
3. Anti-arbitration rules covering nursing homes and communication contracts have been put on hold by their originating agencies, while rules that apply to for-profit colleges and financial advisers "appear to be in the clear, at least for now."

Supreme Court: Federal Arbitration Law Preempts State Law on Nursing Home Power of Attorney

By a 7-1 vote, the U.S. Supreme Court reversed a Kentucky Supreme Court decision refusing to enforce nursing-home arbitration agreements entered into by agents with power of attorney on behalf of their principals.

The Kentucky Supreme Court "fails to put arbitration agreements on an equal plane with other contracts," according to the opinion, authored by Justice Elana Kagan. "By requiring an explicit statement before an agent can relinquish her principal’s right to go to court and receive a jury trial, the court did exactly what this Court has barred: adopt a legal rule hinging on the primary characteristic of an arbitration agreement."

Commentary by University of North Carolina law professor Mark Weidemaier

The Hill coverage

SCOTUS blog coverage

Nursing Home Arbitration

A federal court prevented a proposed regulation basically prohibiting nursing home arbitration agreements.

Pro-plaintiff commentary on the rule from noted Alabama plaintiffs' lawyers Beasley Allen.

Supreme Court to Decide Nursing Home Arbitration Power-of-Attorney Case

The US Supreme Court agreed to hear Kindred Nursing Centers LP v. Clark, to review a Kentucky Supreme Court decision declining to give effect to an arbitration agreement signed by family members on behalf of a nursing home resident who had executed powers of attorney in favor of those family members.

Suit Challenging Rule Prohibiting Nursing Home Arbitration

The American Health Care Association (AHCA) sued the Department of Health and Human Services whose Centers for Medicare and Medicaid Services (CMS) issued a rule barring nursing homes from entering into pre-dispute arbitration agreements with residents.

The suit, citing the Federal Arbitration Act, asks that the court find the arbitration rule unlawful and stop enforcement of the rule after its effective date of November 28, 2016.  

Coverage of this suit by National Public Radio, and the National Law Review.

Nursing Home Arbitration Soon to End?

A new federal rule bars any nursing home that receives federal funding from requiring that its residents resolve any disputes in arbitration, instead of court. Many nursing homes receive Medicare and Medicaid funding so the rule will affect nursing homes with 1.5 million residents, according to the NY Times.

The rule is by the Department of Health & Human Services Centers for Medicare & Medicaid Services.

While nursing home arbitration agreements tend to raise all the issues raised by other adhesive agreements--plus more due to the importance of the contract compared to, say, a cellphone's--they are nevertheless agreements.

The Times unfortunately perpetuates its distorted coverage of arbitration by implying that arbitration necessarily "stymie[s] the families of nursing home residents from getting justice." One would need to know arbitrators' rulings in particular cases, and know the facts and law of the cases, to develop an informed view of the extent to which justice was done in those cases. Same with cases ruled on by judges and juries in court.  

Nursing Home Arbitration

Will courts enforce arbitration agreements covering wrongful death claims? Generally, yes, if the patient signed the agreement. But what if a family member signed on the patient's behalf? The New York Times discusses: Plaintiffs' lawyers "argued that unless family members had power of attorney, they lacked the authority to agree to arbitration." This argument often works: "Appeals courts across the country have been throwing out arbitration agreements signed by family members of nursing home residents." Basically an agency law question, although with undertones of unconscionability.

Nursing Home Arbitration Enforced

The South Carolina Supreme Court recently enforced a nursing home's arbitration agreement, in
Dean v. Heritage Healthcare of Ridgeway, LLC, __S.E.2d__, 2014 WL 2771300 (S.C. June 18, 2014).

As Liz Kramer explains:

the agreement said that “any arbitration proceeding that takes place under this [] Agreement shall follow the rules of the [AAA]“.  However, the AAA stopped accepting personal injury disputes based on pre-injury arbitration agreements in 2003.  The nursing home moved to compel arbitration and the trial court denied the motion.  It found that the language about the AAA rules meant that the dispute should be heard by the AAA and since the AAA was not available, the arbitration agreement was invalid.  The Supreme Court of South Carolina reversed.  But before the supremes could get to the merits, they had to overrule their own 1993 decision, which held that nursing home contracts did not involve interstate commerce.  After reviewing the intervening cases from SCOTUS, the court found the nursing home agreement does involve interstate commerce and is governed by the FAA.  On the merits, the court found that the availability of the AAA to administer the arbitration was not a material term and instead the parties’ agreement simply calls for the arbitration to be governed by the AAA rules, regardless of what entity administers the proceeding.