Appellate
Court Holds that Federal Arbitration Act Preempts Illinois Nursing Home
Care Act, Affirms the Validity of Arbitration Provisions in Resident
Admission Contracts

On May 8, 2009, the Illinois Appellate Court, Second District, released its opinion in the case ofMarie Fosler v. Midwest Care Center II, Inc., No. 2-08-1005,
and held that arbitration provisions in nursing home admission
contracts are not invalidated by the Illinois Nursing Home Care Act. 
In so holding, the court noted its explicit disagreement with the Fifth
District’s holding in Carter v. SSC Odin Operating Co., LLC, which had reached the opposite conclusion.

In Fosler,
as part of her admission to the nursing facility, the patient entered
into a written agreement containing a provision stating that any
dispute arising from the patient’s stay would be resolved through
arbitration, as governed by the Federal Arbitration Act.  The patient
subsequently filed a complaint against the facility for relief under
the Nursing Home Care Act.  The facility answered the complaint with a
motion to enforce the arbitration provision, arguing that the patient
had waived her right to sue.  The trial court, following the Carter decision, denied the defendant facility’s motion.

The Second District examined the rationale behind the Carter decision in detail, and ultimately determined thatCarter was wrongly decided and could not be reconciled with the United States Supreme Court decision ofPerry v. Thomas, which held that the FAA preempts state
statutes that require “that litigants be provided a judicial forum for
resolving…disputes.”

Sections 3-606 and 3-607 of the Illinois Nursing Home Care Act provide
that a resident’s waiver of the right to sue or right to a jury trial
is null and void.  Section 2 of the FAA provides that that arbitration
provisions in “a contract evidencing a transaction involving commerce”
shall be valid, irrevocable, and enforceable, with the exception of the
usual remedies for revocation of any contract.  By enacting section 2
of the FAA, Congress declared a national policy favoring arbitration
and withdrew the power of the states to require a judicial forum for
the resolution of claims which the contracting parties agreed to
resolve by arbitration.

The basis of the Fosler court’s
decision rests with the supremacy clause of article VI of the United
States Constitution, which provides that the “Laws of the United
States…shall be the supreme Law of the Land; and the Judges in every
State shall be bound thereby, any Thing in the Constitution or Laws of
any State to the Contrary notwithstanding.”  As such, when a state law
conflicts with a federal statute, the state law is preempted under the
supremacy clause and application of the state law is unconstitutional. 

In
this case, the Illinois Nursing Home Care Act’s provisions voiding any
arbitration or other alternative dispute resolution clauses in patient
admission contracts for nursing homes are in direct conflict with the
FAA’s declaration that arbitration provisions are valid and irrevocable
with the exception of general defenses to contract enforceability.  TheFosler court noted that until the United States Supreme Court
was persuaded that a state statute manifesting a public policy in favor
of a judicial forum for particular classes of cases is a general
defense to contract enforceability for purposes of the FAA, the court
was compelled to follow the Supreme Court’s proclamation and reject theCarter decision.

Fosler
has important implications for Illinois nursing homes, as it opens the
door for enforceability of arbitration provisions in nursing home
admission contracts.  Additionally, although Fosler did not address
the Illinois Healthcare Arbitration Act, which applies to all
healthcare arbitration agreements, this decision places the
enforceability of that Act in question, as well.  The First District
has not yet issued an opinion on the preemption issues surrounding
either the Nursing Home Care Act or the Healthcare Arbitration Act, and
it is unclear whether it would follow the rationale set forth inFosler or that in CarterIn the meantime,
nursing homes and other healthcare providers should check their
admissions contracts for arbitration provisions and ensure their
defense counsel are aware of any such provisions so appropriate
defenses can be raised in any pending litigation.  If you have any
questions regarding your admission contracts, please feel free to
contact me at 312.894.3200.
 

Sincerely,

Carmel M. Cosgrave
Chair, Health Care Practice Group

References
Fosler v. Midwest Care Center II, Inc.,  No. 2-08-1005 (2d Dist.)
Carter v. SSC Odin Operating Co., LLC, 381 Ill. App. 3d 717 (2008)
Perry v. Thomas, 482 U.S. 483 (1987)
Federal Arbitration Act, 9 U.S.C. §1 et seq. (2000)
Illinois Nursing Home Care Act, 210 ILCS 45/1-101 et seq.
Illinois Healthcare Arbitration Act, 710 ILCS 15/1 et seq.

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Shared with permission from Attorney Carmel Cosgrave

 

Author: Carmel Cosgrave from Smith Amundsen Chicago IL
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