Defending the Compelled Use of Arbitration Agreements
By Jason P. Ferrante, Esq.*
On September 9, 2003, an Ohio appellate court published its opinion in McFarren v. Emeritus at Canton, 2013 Ohio App. LEXIS 4058 (Ohio Ct. App. Sept. 9, 2013). The opinion is contrary to fairly recent United States Supreme Court law that bolstered the compelled application of binding arbitration agreements in long-term nursing facility litigation. During the preceding 18 months, based on Marmet Health Care Center, Inc. v. Brown, 132 S. Ct. 1201 (2012), the plaintiffs’ bar had faced an uphill battle in pursuing lawsuits against nursing homes. The “law of the land” appeared to mandate that arbitration agreements were enforceable, even in wrongful death matters involving beneficiaries who were not a part of the agreement at the time it was signed. A few eyebrows were raised by the recent decision of the Court of Appeals of Ohio. A few plaintiffs’ counsel were certainly thrilled. A few more legal battles are likely to follow.
In order to grasp the impact of the McFarren decision, we need to go back to the beginning. In 2007, the Ohio Supreme Court accepted an appeal to clarify whether an individual decedent could bind his beneficiaries to arbitrate their wrongful death claims against a defendant in Peters v. Columbus Steel Castings Co., 873 N.E.2d 1258 (Ohio 2007). The Peters court’s analysis relied upon two general principles: (1) only those who actually sign the arbitration agreement are bound by the terms of the agreement; and (2) a beneficiary’s wrongful death action is independent of a survival action of the decedent. The court determined that when a decedent agrees to arbitrate his or her claims, the beneficiaries cannot be bound to the terms of the agreement because they did not sign the agreement.
The Peters holding could be viewed as fairly simple but for the actual language contained in most arbitration agreements. It is fairly common to include language that extends to the signee’s beneficiaries. At the very least, most arbitration agreements do, or should, include language demonstrating that the scope of the agreement covers existing and future claims, i.e. wrongful death. Basically, all claims and disputes, every single claim now or later, is covered. Similar language is often found in releases used in case resolutions prior to trial. Many attempts have been made to pursue a wrongful death matter following the resolution of a personal injury matter. This language usually sways a trial court to dismiss the matter and has convinced appellate courts to uphold the decision. The Peters court did not consider these variables in its decision. In doing so, enforcement of arbitration agreements was significantly weakened, particularly in the long-term care setting where litigation commonly follows the death of a resident who actually signed the agreement.
Things changed in February 2012. In Marmet Health Care Center, Inc. v. Brown, the United States Supreme Court revisited the arbitration agreement issue while deciding a case involving three negligence suits against nursing homes in West Virginia. In each case, a family member of a patient signed an agreement with a nursing home, on behalf of the patient, to arbitrate all disputes, and a family member of the patient in each case sued the nursing home, alleging negligence that caused injury resulting in death. Each case was ordered to arbitration and appealed. The West Virginia Supreme Court disagreed with these rulings. The United States Supreme Court vacated the decisions. The defense bar in West Virginia and, based upon our experience, Ohio finally had something to counter plaintiffs’ reliance upon Peters.
The importance of the Marmet decision does not result only from the fact that the Supreme Court allowed for the arbitration of wrongful death claims involving nursing homes. It stems from its reliance upon the Federal Arbitration Act, 9 U.S.C. § 1, et seq. The Marmet court determined that the prohibition against pre-dispute agreements to arbitrate personal injury and wrongful death claims against nursing homes is a categorical rule prohibiting arbitration of a particular type of claim, which is contrary to the terms and coverage of the FAA. To say that this specific analysis was important to nursing homes, which usually include some reference to the FAA in their arbitration agreements, is an understatement.
Returning to the present, the FAA language within the Marmet decision was apparently overlooked by Ohio’s Fifth District Court of Appeals. In the McFarren decision, the Court of Appeals was not affected by that statute’s prohibition of selective arbitration. Instead, the court reverted back to the holding and contractual rational in Peters—that wrongful death beneficiaries who did not sign an arbitration agreement are not bound by that agreement. The court went so far as to hold that Marmet was not controlling, even though that decision was rendered by the United States Supreme Court and specifically relied upon the FAA.
So what happens now? It is important to understand that Ohio courts may not compel arbitration due to a pre-dispute agreement, even under the guidance of Marmet. Many times the agreements are not judicially enforced because of perceived complications caused by allowing the patient’s representative to arbitrate the personal injury claims, while the beneficiaries proceed to trial on wrongful death. The Marmet decision provided hope for the defense bar. The Ohio Supreme Court will likely hear all about it, if and when McFarren comes to their attention.
*Jason, an associate in our Cleveland, Ohio, office, can be reached at 216.912.3808 or firstname.lastname@example.org.
Defense Digest, Vol. 19, No. 4, December 2013
Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2013 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.