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... But Door Left Open for Future Arbitration Agreements to be Upheld

On Aug. 18, 2011, the Fifth District Court of Appeals held that the arbitration agreement at issue in this Illinois Nursing Home Care Act and Wrongful Death case was invalid as it lacked mutuality making it unenforceable.  However, the court left the door open as to whether future arbitration agreements would be binding for cases brought under the Illinois Nursing Home Care Act.  Carter v. SSC Odin Operating Company, LLC, 2011 Il. App (5th) 070392B; 2011 Ill.App. LEXIS 890.

Procedural History
The plaintiff (daughter of the decedent) signed a “Health Care Arbitration Agreement” during her mother’s first admission to a long term care facility located in Oden, Ill. The resident herself signed a similar agreement during a second admission to the facility.   The resident died, and shortly thereafter the plaintiff filed a two-count complaint against the facility under the Illinois Nursing Home Care Act/Survival Act and Wrongful Death Act. The defense filed an Affirmative Defense and Motion to Compel Arbitration based on the arbitration agreements.  The plaintiff contested the motion arguing the arbitration agreements were void and in violation of public policy as set forth in the Illinois Nursing Home Care Act.  The circuit court entered an order denying the defendant’s motion to compel arbitration.  The Fifth Circuit Court of Appeals affirmed the circuit court’s order holding that the arbitration agreements were void as they are against public policy in the Illinois Nursing Home Care Act.  The Illinois Supreme Court reversed the decision holding the that Federal Arbitration Act preempts the Illinois Nursing Home Care Act and remanded the case for consideration of whether the arbitration agreement was enforceable on other issues not addressed in the first appeal.

Federal Arbitration Act does preempt Illinois Nursing Home Care Act
In this opinion, the Fifth Circuit held that the arbitration agreement did involve interstate commerce; thus, the Federal Arbitration Act does preempt the Nursing Home Care Act.  The primary basis for this finding seemed to be that Medicare payments were received by the facility. The office that processed the payments was located in Nebraska;  thus, interstate commerce was involved. This is an important finding as it seems to hold that arbitration agreements are enforceable in nursing home cases where Medicare payments, or other interstate commerce, are at issue.

Mutuality of contract necessary for enforcement of arbitration contract
However, the Fifth Circuit ultimately held that the arbitration agreement itself was invalid as it did not meet the basic contract requirement of mutuality.  This particular arbitration agreement provided the parties would agree to arbitrate their claims against each other, but the agreements exclude “any dispute where the amount in controversy is less than $200,000.00.”  Thus, the court held that the defendant’s promise to arbitrate was not mutual as it was limited to only cases in excess of $200,000 making it “illusory.”

Arbitration agreement invalid to plaintiff in Wrongful Death suit unless agreement signed by plaintiff in individual capacity.
The Fifth Circuit also held that an arbitration agreement would not apply to the plaintiff (daughter of decedent) since she did not sign the arbitration agreement in her individual capacity but rather as her mother’s “legal representative.”

Conclusion and Practice Tip
The take away from this case is that Illinois courts have left open the option of enforcing an arbitration agreement in a case involving Illinois Nursing Home Care Act and Survival Act, assuming the contract is valid and properly executed.  Additionally, the door is left open to enforce an arbitration agreement for a Wrongful Death Act case provided all the heirs execute the agreement in their individual capacity and not simply as the representative of the resident.  It is critically important that your arbitration agreement be drafted as a valid contract and that the proper entities sign the agreement in their individual capacity which would include the resident and any known heirs who might become future plaintiffs.