On Monday, in The Fredericksburg Care Co., L.P. v. Perez, et al., 2016 WL 100844, the Supreme Court declined to review a decision of the Supreme Court of Texas that enforced a pre-dispute arbitration clause in an agreement a patient signed with a nursing home pre-admission.  After the patient died, her family sued the nursing home in state court alleging negligent care and wrongful death.  The nursing home moved to compel arbitration; the trial court denied the motion (and the intermediate appellate court affirmed).  The lower courts reasoned that a Texas law regulating agreements to arbitrate health care liability claims governed the clause, rather than the Federal Arbitration Act (FAA).  The state courts reasoned that the McCarran-Ferguson Act (MFA) protected the state law from preemption.  The MFA exempts from preemption state statutes enacted for the purpose of regulating the business of insurance.

The Texas Supreme Court reversed.  Following a detailed statutory analysis, the court ruled that the Texas law regulating the arbitration agreement was not enacted for the purpose of regulating the business of insurance, and thus the MFA did not exempt that law from FAA preemption.

While the Supreme Court could have denied the petition for a writ of certiorari for many reasons, given the Court’s proclivity towards pro-arbitration decisions, it is not at all surprising that it denied cert. in this case.  It is likely that a majority of the Court would uphold the Texas Supreme Court, as its decision was pro-arbitration and consistent with SCOTUS’ FAA jurisprudence.  Under that jurisprudence, the FAA preempts states’ attempts to restrict the enforcement of arbitration clauses in nursing home agreements.  States that are trying to protect the elderly from arbitration clauses will have to try another route.

Jill Gross is a Professor of Law and the Director of the Investor Rights Clinic at Pace Law. She teaches the Investor Rights Clinic and Seminar, Mediation and Arbitration, Professional Responsibility, and Securities Litigation and Enforcement. She has published numerous law review articles in the area of dispute resolution and investor justice, and has been quoted in the national media on issues relating to securities arbitration. She is also a contributor to ADR Prof Blog.