Shortly after her admission to an Extendicare skilled nursing facility, Anna Marie Taylor died. When Ms. Taylor was admitted, her family had signed an arbitration agreement. Ms. Taylor’s beneficiaries brought a wrongful death and survival action against Extendicare (and others) in state court. The trial court denied Extendicare’s motion to sever the claims and compel arbitration of the survival claim. After losing this same argument at the intermediate appellate court, Extendicare prevailed at the Pennsylvania Supreme Court.
Under Rule 231(e) of the Pennsylvania Rules of Civil Procedures, wrongful death and survival actions “may be enforced in one action, but if independent actions are commenced they shall be consolidated for trial.” But, under the Federal Arbitration Act (FAA), 9 U.S.C. § 2, arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Relying on AT & T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), the Pennsylvania Supreme Court held that the FAA preempted Rule 231(e).
The Supreme Court’s decision in Concepcion grappled with the FAA’s two primary purposes: (1) enforcement of Alternative Dispute Resolution agreements and (2) efficiency. When there is a conflict between the FAA’s two purposes, enforcement wins out over efficiency. Additionally, according to Concepcion, the FAA’s savings clause, which preserves generally applicable contract defenses, does not apply to state-law rules impede the FAA’s objectives.
The Pennsylvania Supreme Court held that the FAA’s savings clause did not apply to Rule 213(e). But even if it did, in light of Concepcion, the Rule would be preempted by the FAA because application of Rule 213(e) would prohibit arbitration of the survival claim. The court said that where a survival claim is subject to an arbitration agreement it must be bifurcated from a wrongful death claim that could be brought in court. Here, the court remanded the case to the trial court to determine whether the arbitration agreement was valid and enforceable. The court also noted that its opinion was consistent with recent federal court precedent on the same topic.
It is worth noting that after the opinion was issued, the U.S. Department of Health and Human Resources, Center for Medicare and Medicaid issued a final rule that bars federally funded long-term care facilities (like Extendicare) from imposing mandatory pre-dispute resolution agreements (i.e. arbitration clauses).