(CN) - West Virginia's high court misread and disregarded precedent on the Federal Arbitration Act, the U.S. Supreme Court ruled Tuesday, vacating a decision that unnecessarily limited the statute.
The five-page summary order concerns three negligence suits brought against West Virginia Nursing homes by the family members of patients who had died.
"In each case, a family member of a patient requiring extensive nursing care had signed an agreement with a nursing home on behalf of the patient," according to the unanimous, unsigned decision.
The contracts for Clayton Brown and Jeffrey Taylor contained identical arbitration clauses that required the parties to arbitrate all disputes, other than claims to collect late payments from patients. Though the contract for Sharon Marchio also contained an arbitration provision, it differed by not mentioning filing fees.
When Marchio's case went before the Supreme Court of Appeals of West Virginia on other issues, the justices consolidated it with Brown and Taylor's cases. The court then held that state law will not compel arbitration of negligence claims that resulted in personal injury or wrongful death.
It reached the finding by finding that the Federal Arbitration Act did not pre-empt the state law.
On Tuesday, the U.S. Supreme Court rejected this conclusion.
"The West Virginia court's interpretation of the FAA was both incorrect and inconsistent with clear instruction in the precedents of this court," the justices wrote.
Citing its 2011 resolution of the arbitration claims in AT&T Mobility v. Concepcion, the justices said they painted a clear path for the West Virginia judiciary to follow.
"West Virginia's prohibition against predispute agreements to arbitrate personal-injury or wrongful-death claims against nursing homes is a categorical rule prohibiting arbitration of a particular type of claim, and that rule is contrary to the terms and coverage of the FAA," the court held.
Though the West Virginia bench held, alternatively, that the patients had signed "unconscionable" arbitration clauses, the high court would not let that decision stand since it might have been influenced by "the invalid, categorical rule discussed above."
"On remand, the West Virginia court must consider whether, absent that general public policy, the arbitration clauses in Brown's case and Taylor's case are unenforceable under state common law principles that are not specific to arbitration and pre-empted by the FAA," the justices wrote.
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