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The Illinois Supreme Court Clarifies the Application of Arbitration Agreements in Nursing Home Contracts

January 1, 2013

On September 20, 2012, the Illinois Supreme Court filed its opinion in the Carter v. SSC Odin Operating Co. case, 2012 IL 113204. In the case, the Court revisited the issue of whether arbitration agreements contained within nursing home contracts are enforceable. The Court upheld the general applicability of such agreements within the nursing home context but found that they did not apply to actions for damages under the Illinois Wrongful Death Act.

The case involved the care of Joyce Gott, deceased, at Odin Healthcare Center, a nursing home in Odin, Illinois. Ms. Gott was a resident in the home for several months in 2005 and 2006 prior to her death. Two arbitration agreements were executed with respect to Ms. Gott’s nursing home care: plaintiff Sue Carter executed an agreement on behalf of Ms. Gott in 2005, and Ms. Gott executed one on her own in 2006. After Ms. Gott died in 2006, the plaintiff filed a lawsuit in the Circuit Court of Marion County alleging violations of the Illinois Nursing Home Care Act resulting in personal injuries to Ms. Gott. The plaintiff also brought a claim under the Illinois Wrongful Death Act, alleging damages to Ms. Gott’s heirs resulting from her wrongful death.

The nursing home filed a motion to compel arbitration of the claim. The trial court denied that motion, finding that the arbitration agreements were unenforceable. The court found that the agreements violated public policy as set forth in sections 3-606 and 3-607 of the Illinois Nursing Home Care Act. These sections set forth that any waiver of the right to a jury trial by a resident or his representative shall be null and void. The trial court in Carter also found the arbitration provisions unenforceable because they lacked mutuality of obligation and that the wrongful death claims were not arbitrable. Further, the trial court found that the agreements did not evince a transaction involving commerce within the meaning of the Federal Arbitration Act (FAA). The defendant nursing home appealed to the appellate court. In 2008, the appellate court, Fifth District, affirmed the ruling of the trial court denying the motion to compel arbitration.

In 2010, the Illinois Supreme Court initially ruled on the case. The Court held that the anti-waiver provisions of the Nursing Home Care Act are the functional equivalent of anti-arbitration legislation which is preempted by the FAA and U.S. Supreme Court precedent. The Illinois Supreme Court therefore reversed the decision of the appellate court, upheld the Odin arbitration agreements and remanded the case to the appellate court for resolution of the remaining issues.

The Debate Over Enforcing Arbitration

In 2011, the appellate court ruled on the case again and once again upheld the trial court’s decision to deny the motion to compel arbitration. The court did find that the arbitration agreements evinced a transaction involving interstate commerce, so they would be subject to the FAA. However, the court found against the nursing home for other reasons. The court found that the agreement did not involve mutuality of obligation, because it applied only to claims equal to or greater than $200,000. The court found that this would mean that many, if not all, of the claims that Ms. Gott had against the home would not be subject to arbitration, while personal injury claims she had against the home almost certainly would be. Therefore, there were not mutually binding promises under the contract. Finally, the appellate court found that plaintiff’s wrongful death claims could not be subject to arbitration, as plaintiff had not signed off on the agreement in her individual capacity.

The case then went up to the Supreme Court again, resulting in the 2012 opinion. The Court reversed the appellate court opinion in part and upheld it in part. The Court reversed that portion of the opinion with respect to the mutuality of obligation under the arbitration agreements. The Court applied contract principles and found that there was consideration for the agreement by Ms. Gott to arbitrate claims greater than $200,000, and therefore, mutuality of obligation. Consideration has been defined as bargained-for exchange of promises or performances. In this agreement, Ms. Gott would receive benefits of attorneys’ fees, payment of the arbitrators’ fees and choice of the location of the arbitration. The Court found that due to the mutual, if not necessarily reciprocal, promises made by both parties, the agreement had consideration and was enforceable.

The Issue of Arbitrating Wrongful Death Claims

The Court then addressed the issue of whether the plaintiff could be compelled to arbitrate the wrongful death claims. The Wrongful Death Act allows for claims to be made after the death of a decedent due to injuries suffered by the next of kin as a result of the loss of the decedent. The Court found that such claims were not subject to the arbitration agreements at issue. The claims were not for Ms. Gott’s own personal injuries, which she had agreed to arbitrate. Rather, plaintiff Carter brought this action on behalf of the heirs, for their injuries. Plaintiff Carter had not signed the arbitration agreement with respect to such a claim and never agreed to arbitrate such a claim.

While there is reference in the statutes to wrongful death actions being assets of the estate of a decedent, they are not treated that way beyond the filing of the action. A wrongful death claim is not an asset of the estate for the purpose of satisfying creditors. A wrongful death action is not one that the decedent can control while she is alive, so she could not have controlled whether or not it would be arbitrated.

The Court also refused to force arbitration on the plaintiff due to the derivative nature of wrongful death action. The Court found that such an action does not mean that the plaintiff would be subject to any and all contractual limitations that are applicable to the decedent. Arbitration is a function of contract, so only the parties to the arbitration contract will be bound to arbitrate.

The Supreme Court therefore held that the plaintiff was bound to arbitrate the personal injury claims of Ms. Gott that survived her death and which were brought for the benefit of her estate. The plaintiff was not bound by the arbitration agreement with respect to the wrongful death claims brought on behalf of the next of kin. The case was remanded back to the trial court for further proceedings.

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