The Pennsylvania Supreme Court held on Oct. 27, 2015 that a nursing home that had required arbitration of disputes “in accordance with the National Arbitration Forum Code of Procedure” could not compel arbitration of claims of abuse and neglect. Wert v. Manorcare of Carlisle, Pa., LLC, No. 62 MAP 2014.
When plaintiff admitted her mother into defendant’s skilled nursing facility, she signed an agreement that all disputes be resolved by arbitration exclusively “in accordance with the National Arbitration Forum Code of Procedure.” Within six months, plaintiff’s mother died, allegedly due to abuse and neglect. Plaintiff filed suit and the nursing home filed preliminary objections, seeking to enforce the arbitration agreement. The trial court overruled the objections, finding the agreement unenforceable because NAF had entered into a consent decree in 2009 that barred it from administering arbitrations of consumer disputes. The court held that this provision was integral to the agreement and was therefore not severable from the remainder of the arbitration agreement. The Pennsylania Superior Court affirmed, and the Pennsylvania Supreme Court granted review.
The American Association for Justice filed an amicus curiae brief supporting plaintiff, authored by CCL Senior Counsel Jeffrey R. White. The brief emphasized that the nursing home was not simply asking the court for a substitute arbitrator, but for an alternative arbitral forum and administrator, which would require extensive rewriting of the parties’ agreement. Moreover, § 5 of the Federal Arbitration Act, which the nursing home heavily relied upon as authority for appointing a substitute arbitrator, does not authorize the court to appoint a substitute arbitral forum.
The Pennsylvania Supreme Court affirmed in a 3-2 decision. The court found the NAF designation integral and non-severable, “[d]oing otherwise would require this Court to rewrite the Agreement.” The court noted AAJ’s argument regarding the scope of § 5 of the FAA, but found it unnecessary to reach that issue. “Regardless of whether Section five may apply where there is a lapse in the administrator, by its own rules, the NAF must administer its code unless the parties agree to the contrary.” The court also held that plaintiff’s own testimony that she did not read the agreement was not relevant to whether the NAF designation was integral. “[P]remising the integrality of a contractual term on the subjective understanding of a far less sophisticated non-drafting party is ill-advised public policy that would further distort an already lopsided balance of power.”