Published: October 7, 2016
Over the past year, I have reported on cases in which the Superior Court of Pennsylvania refused to require arbitration of wrongful death and survival actions, despite the existence of an arbitration agreement with a nursing home facility, arising from the alleged action or inaction of the nursing home causing the death of a resident. On September 28, 2016, the Supreme Court of Pennsylvania in Taylor v. Extendicare Health Facilities, Inc., 2016 WL 5630669 (Pa. Sep. 28, 2016), disagreed with those prior decisions and reversed the Superior Court of Pennsylvania in Taylor.
By way of background, in the reversed decision from the Superior Court of Pennsylvania, Taylor v. Extendicare Health Facilities, Inc., 113 A.2d 317 (Pa. Super. 2015), the Superior Court previously held that a survival claim arising from the death of Anna Marie Taylor at an Extendicare Facility could not be separated (or bifurcated) from the wrongful death claim of her beneficiaries. The court held this despite William Taylor, pursuant to a power of attorney authorizing him to act on Mrs. Taylor’s behalf, signing an arbitration agreement requiring the arbitration of all disputes arising out of Ms. Taylor’s stay at the Extendicare Facility as part of the admissions paperwork. In so holding, the Superior Court of Pennsylvania relied on Pennsylvania Rule of Civil Procedure 213(e), which requires the consolidation of survival and wrongful death actions for trial.
In reversing the Superior Court, the Supreme Court of Pennsylvania focused on the Federal Arbitration Act (“FAA”), which Congress passed in 1925. According to the Supreme Court of Pennsylvania, the FAA “provides that arbitration agreements ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'” Taylor, 2016 WL 5630669 at *1. After reviewing opinions issued by the United States Supreme Court pertaining to the preemptive effect of the FAA on conflicting state laws, the Supreme Court of Pennsylvania concluded “that the FAA preempts the application of Rule 213(e), and requires arbitration of the survival claim against Extendicare.” Id.
The Supreme Court of Pennsylvania did express sympathy for nursing home residents subject to arbitration agreements and stated “the contract formation process that attends nursing facility admission can be a crisis-driven, stress-laden event involving the superior bargaining power of one party over the other. … Indeed, nursing home defendants have reaped significant benefits from channeling medical malpractice claims into arbitration to the detriment of medical malpractice victims.” Id. at *16. Nevertheless, the Supreme Court of Pennsylvania ultimately stated that it could not disregard or defy controlling precedent from the United States Supreme Court. Id.
What is the effect of Taylor in Pennsylvania? For now, it appears that survival actions subject to nursing home arbitration agreements will likely have to go through the arbitration process when Pennsylvania substantive law applies, unless the plaintiff can prove a common law defense such as mistake, lack of consideration, impracticability, unconscionability etc.
Fortunately, as I reported in my prior post, on September 28, 2016, which was the same day of the Taylor decision, the Centers for Medicare and Medicaid Services, which is part of the U.S. Department of Health and Human Services, announced that it issued a final rule prohibiting the use of pre-dispute binding arbitration agreements as to long-term care facilities / nursing homes that receive federal funding from Medicare and Medicaid. The new rule goes into effect on November 28, 2016, but, unfortunately, is not retroactive, so the Pennsylvania Supreme Court’s reversal in Taylor will still affect arbitration agreements entered into prior to November 28, 2016.