Ballard Spahr LLP: Arbitration Enforcement Trend Continues At Supreme Court

By the Consumer Financial Services Group

For the fourth time in less than a year, the U.S. Supreme Court has championed the "emphatic federal policy in favor of arbitral dispute resolution" and vacated a state appellate court's decision on the grounds that it contravened the Federal Arbitration Act (FAA).

The February 21, 2012, per curiam decision in Marmet Health Care Center, Inc. v. Brown overturns a decision by the West Virginia Supreme Court of Appeals that declared unenforceable on public policy ground all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against nursing homes.

The arbitration agreements at issue were contained in patients' nursing home admission agreements. The state supreme court held that the FAA did not preempt state public policy because "Congress did not intend for the FAA to be, in any way, applicable to personal injury or wrongful death suits that only collaterally derive from a written agreement that evidences a transaction affecting interstate commerce, particularly where the agreement involves a service that is a practical necessity for members of the public."

That ruling was vacated in Marmet because the FAA "includes no exception for personal-injury or wrongful-death claims." The Court held that, by "misreading and disregarding the precedents of this Court interpreting the FAA," including AT&T Mobility LLC v. Concepcion, the West Virginia court "did not follow controlling federal law implementing th[e] basic principle" that arbitration agreements must be enforced as written. (See our previous alert on the Concepcion decision.)

In May 2011, in the wake of Concepcion, we issued an alert when the Supreme Court vacated decisions of the Missouri Supreme Court and the South Carolina Supreme Court which, had refused to enforce class action waivers in consumer arbitration agreements. In November 2011, we published an alert when the justices vacated a decision of the Florida Court of Appeal, which had refused to enforce an arbitration agreement in its entirety merely because two of four claims asserted by the plaintiffs were found to be non-arbitrable.

And, just last month, we discussed the trend again when the Supreme Court reversed the Ninth Circuit Court of Appeals' decision in CompuCredit Corp. v. Greenwood and held that claims under the Credit Repair Organizations Act are subject to arbitration.

The message of Marmet is clear and unmistakable: "State and federal courts must enforce the [FAA] ... with respect to all arbitration agreements covered by that statute," and a "state court may not contradict or fail to implement the rule so established" by Concepcion and other U.S. Supreme Court precedent interpreting the FAA.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its skill in litigation defense, its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

The group also produces the CFPB Monitor, a blog that focuses exclusively on important CFPB developments. To subscribe, use the link provided to the right.

For further information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com; Martin C. Bryce, Jr., at 215.864.8238 or bryce@ballardspahr.com; Mark J. Levin, 215.864.8235 or levinm@ballardspahr.com; Burt M. Rublin at 215.864.8116 or rublin@ballardspahr.com; or Daniel J.T. McKenna, 215.864.8321 or mckennad@ballardspahr.com.


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