Twin Decisions From Florida Supreme Court Throw One-Two Punch at Nursing-Home Arbitration Agreements
The Supreme Court of Florida has moxie. It issued two new decisions the day before Thanksgiving which go out of their way to sidestep and distinguish the U.S. Supreme Court’s decision in Rent-A-Center, West v. Jackson, 130 S. Ct. 2772 (2010), in order to find that nursing home residents may not be compelled to arbitrate under an arbitration agreement that undermines their statutory rights. Shotts v. OP Winter Haven, Inc., __ So. 3d __, 2011 WL 5864830 (Fla. Nov. 23, 2011); Gessa v. Manor Care of Fla., Inc., __ So. 3d. __, 2011 WL 5864823 (Fla. Nov. 23, 2011). Florida’s current action feels especially bold as it comes just five years after the U.S. Supreme Court reversed a different attempt by the Florida Supreme Court to distinguish federal arbitration precedent. See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (reversing the Florida Supreme Court and holding that, pursuant to Prima Paint, arguments about a contract’s legality may only be heard by courts if they are specifically directed at the parties’ arbitration agreement).
The new cases, Shotts and Gessa, both involve negligence claims against nursing homes. In both, the nursing homes moved to compel arbitration of the claims based on stand-alone arbitration contracts, signed along with many other agreements at the time the nursing home residents entered the facilities. In each contract, the nursing home’s liability was limited — either by precluding punitive damages or also limiting “noneconomic damages” to $250,000. Because Florida’s Nursing Home Resident’s Rights Act provides for punitive damages and contains no cap on pain and suffering damages, the Florida Supreme Court found the limitations of liability in the arbitration contracts “undermine specific statutory remedies created by the Legislature” and are unenforceable. In doing so, Florida followed West Virginia’s lead in curtailing the enforcement of arbitration agreements in nursing home agreements.
That substantive conclusion is less surprising than the fact that the Florida Supreme Court found it could address the enforceability of the arbitration contract at all. Just last year, the U.S. Supreme Court looked at a stand-alone arbitration contract in the Rent-A-Center case, and found that attacks to that arbitration contract as a whole must be heard by an arbitrator. The Supreme Court found there were multiple agreements to arbitrate different issues within the single arbitration contract and that Rent-A-Center was only trying to enforce one of those multiple agreements (the one that held the arbitrator would decide any dispute about the validity of the arbitration contract — called the “delegation provision”). Because there was no allegation that the delegation provision was invalid, the Supreme Court enforced that delegation provision and sent all the remaining complaints about the unconscionability of the arbitration contract to the arbitrator. Rent-A-Center, West v. Jackson, 130 S. Ct. 2772, 2779 (2010)
Shotts and Gessa limit Rent-A-Center’s application to arbitration agreements containing delegation provisions. Furthermore, the decisions conclude that the stand-alone arbitration contracts in Shotts and Gessa constitute single arbitration agreements, while Rent-A-Center involved multiple arbitration agreements within one arbitration contract. Shotts at *22. With that analytical move, the Florida court was able to consider the nursing home residents’ complaints levied at the arbitration contract as a whole — “it is for the court, not the arbitrator, to decide whether an arbitration agreement violates public policy.” Shotts at *7.
A third interesting piece of the Shotts decision is that the arbitration contract had a “severability clause” within it. (“In the event that any portion of this Agreement will be determined to be invalid or unenforceable, the remainder of this agreement will be deemed to continue to be binding.”) Despite that language, the Florida Supreme Court refused to sever the aspects of the agreement that it found violate Florida’s public policy. The court applied Florida state contract law on severability and concluded that one of the unenforceable parts of the provision (the application of American Health Lawyers Association rules) “goes to the very essence of the agreement,” and therefore could not be severed.
These decisions are interesting because they continue the recent trend of courts carving particular types of cases out of arbitration (like complaints about care by nursing homes) and because they continue the trend of limiting the Rent-A-Center decision to arbitration contracts with clear delegation provisions. Stay tuned to see if the Supreme Court grants cert in either of these cases.