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A nursing home that allegedly killed one of its residents will have to defend itself in court, and not before a secret arbitral panel. Yesterday, the New Mexico Supreme Court denied review of a decision by the New Mexico Court of Appeals that had rejected arbitration, adopting arguments made by CCL.

“Nursing homes cannot bury their dead in private. The victim’s family will have its day in court,” said CCL attorney John Vail, counsel for plaintiffs in the case.

The Court of Appeals had ruled that the unavailability of the discredited National Arbitration Forum (NAF) rendered the arbitration agreement unenforceable. Although the agreement between the victim and the nursing home did not designate NAF as the arbitrator, it did require that NAF’s rules be used in any arbitration.  CCL pointed out that the NAF rules provided that no one but NAF was allowed to use them, and that therefore there was no difference between this agreement and one that did designate NAF.

The NM Supreme Court had previously held that an agreement designating NAF as arbitrator was unenforceable because they had agreed with the Minnesota Attorney General not to administer consumer arbitrations after the Attorney General charged NAF with running a biased arbitral scheme. Yesterday’s denial of the nursing home’s petition for certiorari reaffirms that ruling.

Dusti Miller and Jennifer Foote of the Miller Law Firm in Albuquerque are co-counsel with CCL on the case.

In a decision one justice called a “betrayal of our precedents,” the Supreme Court today ruled that corporations can use arbitration clauses to insulate themselves from liability.  

The decision culminates a thirty-year judicial effort by the Court to turn an innocuous 1920s statute, the Federal Arbitration Act, into a weapon used to thwart enforcement of rights by consumers, employees, and small businesses. 

In American Express v. Italian Colors Restaurant, http://www.supremecourt.gov/opinions/12pdf/12-133_19m1.pdf, a restaurant filed a class action complaining that American Express had used monopoly power to force merchants to accept credit cards at rates approximately 30% higher than the fees for competing credit cards, in violation of antitrust statutes.  American Express moved to compel arbitration based on a clause in its agreement with the restaurant that provided, in part, “[t]here shall be no right or authority for any Claims to be arbitrated on a class action basis.”

The restaurant, invoking a line of Supreme Court cases that held open the possibility that courts could invalidate arbitration clauses that effectively precluded vindication of federal statutory rights, opposed arbitration.  It demonstrated that costs of litigating an individual claim were “’at least several hundred thousand dol­lars, and might exceed $1 million,’ while the maximum recovery for an individual plaintiff would be $12,850, or $38,549 when trebled,” and argued that preclusion class resolution effectively precluded it from vindicating its claim. 

The Second Circuit agreed with the restaurant, having held that “the only economically feasible means for . . . enforcing [respondents’] statutory rights is via a class action.” The Supreme Court reversed.

The Court, with Justice Scalia writing for a five-person majority, first found nothing specific in the antitrust laws  - no “congressional command “ - requiring the Court  to reject the waiver of class arbitration: “The antitrust laws do not ‘evinc[e] an intention to pre­clude a waiver’ of class-action procedure.”

The Court also found no “entitlement to class proceedings for the vindication of statutory rights” flowing from congressional approval of Rule 23, noting that in AT&T Mobility v. Concepcion it already had rejected the argument that “federal law secures a nonwaivable opportunity to vindicate federal policies by satisfying the procedural strictures of Rule 23 or invoking some other informal class mechanism in arbitration.”

Turning to doctrine that seemingly permitted ignoring a class action ban the Court noted, “It would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable.”  But, the Court continued, “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”

Justice Kagan, writing in dissent and joined by Justices Ginsberg and Breyer (Justice Sotomayor took no part in the case), called the majority decision “a betrayal of our precedents, and of federal statutes like the antitrust laws.” 

She found that the arbitration clause in question “imposes a variety of procedural bars that would make pursuit of the antitrust claim a fool’s errand. So if the arbitration clause is enforceable, Amex has insulated itself from antitrust liability—even if it has in fact violated the law.”

She noted that, under the majority decision, “The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.”

CCL’s John Vail participated in the filing of an amicus curiae brief in the case on behalf of Public Justice, AARP, and the American Association for Justice.  Today’s decision effectively leaves only Congress to provide recourse.

A nursing home that allegedly killed one of its residents will have to defend itself in court, and not before a secret arbitral panel, the New Mexico Court of Appeals ruled today, adopting arguments made by CCL.

“This is another good decision saying that nursing homes cannot bury their dead in private,” said CCL attorney John Vail, counsel for plaintiffs in the case.

While numerous issues were before the Court, it focused on one narrow one:  whether the unavailability of the discredited National Arbitration Forum (NAF) rendered the arbitration agreement unenforceable. 

The agreement in question did not designate NAF as the arbitrator, but it did require that NAF’s rules be used in any arbitration.  CCL pointed out that the NAF rules provided that no one but NAF was allowed to use them, and that therefore there was no difference between this agreement and one that did designate NAF. 

The NM Supreme Court already had held that an agreement designating NAF as arbitrator was unenforceable because they had agreed with the Minnesota Attorney General not to administer consumer arbitrations after the Attorney General charged NAF with running a biased arbitral scheme. 

Dusti Miller and Jennifer Foote of the Miller Law Firm in Albuquerque are co-counsel on the case.

The Consumer Financial Protection Bureau (CFPB) should ban mandatory arbitration in consumer contracts, CCL attorney John Vail told lawyers from state attorney general offices at a symposium at the George Mason University law school.

 “A mandatory arbitration agreement with a class action ban is not a get out of jail free card; it’s a slip $500 to the parole board and get out of jail card,” Vail told the assembled audience, explaining that the clauses have the purpose and effect of suppressing claims.

Mandatory arbitration also undermines democratic values, Vail asserted.  “We are fifty states and one federated nation, each of which made the conscious choice to vest this kind of decision-making in citizen-jurors.  Mandatory arbitration transfers that power to a group of salaried elites.”

Vail emphasized that the CFPB should not hesitate to exercise the power Congress gave it to ban mandatory arbitration clauses in consumer contracts, as “Congress never intended that the Federal Arbitration Act apply to consumer contracts at all.”

The symposium brought together academics and practitioners to discuss how the CFPB might use its powers to alter the balance of power between consumers and businesses.  It was sponsored by the law and economics program at GMU.

Despite demonstrating little support for consumer interests in frequent pronouncements on mandatory arbitration, the Supreme Court denied review of a nursing home wrongful death case, preserving the day in court for the aggrieved family.  CCL lawyer John Vail was counsel for the successful plaintiff.  Court watchers had identified the case as one the Court might take and reverse.

In the case the Kentucky Supreme Court had decided that the decedent’s signature on an arbitration agreement could not bind the persons damaged by the decedent’s death because they press their own claims, not the claim of the person who was killed.

“The Kentucky court said, in effect:  you have to own the Brooklyn Bridge before you can pass title to someone else,” Vail said.

The Kentucky court also had ruled that a power of attorney which granted authority to do things “necessary” for another person did not grant authority to sign an arbitration agreement that was not required as a condition of admission to a nursing home. 

The nursing home argued that the Kentucky court had discriminated against arbitration and had created obstacles to fulfilling the purposes of the Federal Arbitration Act.

The Supreme Court had summarily reversed three state arbitration decisions in the last eighteen months, a result that the nursing home sought here and that court watchers expected could be achieved

The case is Beverly Enterprises v. Ping, No. 12-652.  Steve O’Brien of Lexington, Kentucky, was counsel in the Kentucky courts.  The case will return to the Kentucky courts to move toward trial by jury.

When Massachusetts passed a law making it easier for family members to make health care decisions for their incapacitated relatives, it did not authorize family members to make decisions about litigation, CCL’s John Vail told the Massachusetts Supreme Judicial Court in a brief filed today.

Dalton Johnson gave his wife, Barbara, a proxy allowing her to make “health care decisions” if he became incapacitated.  At issue in the case is whether that proxy gave her authority to bind him to an arbitration clause she signed when arranging nursing home care for him, before there was any dispute about his care.

The Massachusetts statute at issue limits “health care decisions” to decisions consistent with good medical practice.  This excludes arbitration, Vail’s brief told the court, because it is not medical practice.  The brief noted that predispute arbitration clauses like the one here have, in fact, been condemned by the medical profession.  

The plaintiffs are represented, in addition to Vail, by David J. Hoey and Nicole Paquin of North Reading, MA.  The case is Johnson v. Kindred Healthcare, Inc.  Oral argument has not yet been scheduled.

In a November 28, 2012 article, The National Law Journal quoted CCL attorney John Vail on why a five-page, unsigned U.S. Supreme Court opinion reversing the Oklahoma Supreme Court in Nitro-Lift Technologies v. Howard represents a troubling trend in the Court's treatment of arbitration issues.  In the field of arbitration, the Court seems to issue per curiam opinions overturning state supreme court decisions that favored consumers regularly. 

Vail told the paper that the this approach trend was “is not really the court's role, and its resources are better devoted elsewhere."   The Court’s primary function is resolving conflicts on important issues in the lower courts and other doctrinal issues, not simply correcting errors. 

Vail has written previously about the way the Supreme Court has misinterpreted the Federal Arbitration Act to create a body of law that favors mandatory arbitration and threatens the fair and public resolution of consumer and employee claims.

In CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012), the Supreme Court ruled that claims arising under the federal Credit Repair Organizations Act are subject to arbitration pursuant to a valid arbitration agreement. In an amicus brief for the American Association for Justice, filed in support of respondents, John Vail of CCL argued that such claims should not be subject to arbitration. The amicus brief was cited favorably in Justice Ginsburg’s dissent.