On February 21, the U.S. Supreme Court issued an important decision concerning states’ ability to declare arbitration agreements or clauses unenforceable. The case, Marmet Health Care Center, Inc. v. Brown et al., came to the Court from the Supreme Court of West Virginia. That court held that a clause to arbitrate all disputes in a nursing home admission agreement was not enforceable in a claim of negligence (personal injury) against the nursing home due to state public policy concerns.

Specifically, the West Virginia Supreme Court reasoned that the Federal Arbitration Act (FAA), which offers a presumption of enforceability for arbitration clauses, was preempted by the state’s own public policy against enforcing arbitration clauses for negligence and wrongful death claims when the party seeking arbitration is involved in providing a service that is a “practical necessity for members of the public.”

The U.S. Supreme Court rejected the West Virginia Supreme Court’s rationale for denying arbitration, citing the fact that the FAA preempts a state’s arbitration policies and that this federal act includes no exception for personal injury or wrongful death claims. The Court explained that West Virginia’s public policy-rooted prohibition against enforcing arbitration clauses in these kinds of claims against a nursing home is a categorical rule. A state categorical rule that prohibits enforcement of an arbitration clause based on the nature of a claim violates the FAA.

Unlike West Virginia, Ohio has not created a categorical rule prohibiting enforcement of arbitration clauses when plaintiffs bring a personal injury or wrongful death claim against a nursing home. In fact, the Ohio legislature has enacted R.C. 2711.01(A), which provides that an arbitration agreement is enforceable unless grounds exist at law or in equity for revoking the agreement.

In Ohio, unconscionability represents the primary state common law grounds for revocation of an arbitration agreement. Ohio courts have established several guidelines for determining whether an arbitration agreement is unconscionable and thus unenforceable.
If you or your company have concerns about whether a certain arbitration agreement is enforceable, feel free to contact DLM Legal for further information at 216.635.0002 or info@dlmlegal.com.