Federal Laws Stump State Laws

Nursing Home Resident Must Arbitrate Dispute
In yet another victory for arbitrators over courts, an appellate court in Illinois recently held that federal laws governing arbitration trump state laws protecting nursing home residents.

The case involved an Illinois woman who was injured while at a nursing home. She sued, but the nursing home argued that she had given up her right to do so when she signed a contract requiring that all disputes about the quality of her care be arbitrated rather than heard in court. The family of the injured woman responded by arguing that state laws protecting nursing home residents did not allow injured residents to give up their right to a jury trial and that the arbitration provision could therefore not be enforced.

In finding for the nursing home, the court applied a federal law known as the Federal Arbitration Act (FAA). It is possible to avoid an agreement to arbitrate that is subject to the FAA for only two reasons: (1) if the agreement to arbitrate is not part of a contract involving "commerce," or (2) if there is some legal or equitable basis to revoke the contract. In examining the transaction, the court found that the family of the injured nursing home resident waived the right to argue that the contract did not involve commerce, and it held that there were no grounds for revoking the contract and, therefore, that it would have to be enforced.

The court also rejected the argument that the provisions of state law precluded enforcing the agreement to arbitrate. When Congress passes a law relating to a matter of federal concern, a state law that conflicts with the federal law is "preempted," i.e., trumped by the federal law. Based on prior Supreme Court precedent, the court found that the FAA (which strongly favors arbitration) preempts conflicting state laws that would prevent arbitration and, thus, even though Illinois law might have guaranteed the injured woman a jury trial, the FAA did not allow it.

Preemption is a concept that has been around for a long time, but, as Congress passes more and more laws (and as arbitration under the FAA gets to be more and more common), we are likely to see more cases where rights guaranteed by a state law are preempted because they conflict with a federal law.

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