Miss. Supreme Court indirectly rules thousands of arbitration agreements unenforceable

Posted on August 6, 2009 by Philip Thomas

In an opinion issued today over-ruling the Court of Appeals and striking down an arbitration clause in a nursing home admission agreement, the Mississippi Supreme Court effectively ruled that thousands of consumer arbitration agreements in Mississippi are unenforceable. Here is the opinion in Covenant Health and Rehab. v. Moulds. The Court ruled that an arbitration agreement is not enforceable when the designated arbitration forum is not available:

The rules of the organization referenced in the agreement, the AAA, require that it refuse to administer arbitrations of this type of case, unless the parties agree post-dispute to be bound by arbitration. Thus, not only are our courts being asked to rewrite the agreement in favor of the drafter, but also now to select a forum not anticipated by either party. We decline.

This resulted in the arbitration clause not being enforceable against the nursing home resident.

As previously discussed in this post  and here, the National Arbitration Forum (NAF) recently agreed to stop acting as the forum in all consumer arbitration cases. The NAF was the chosen forum for Mississippi nursing home residents in Golden Living Center Nursing Homes (formerly Beverly Healthcare) and in many consumer credit card agreements. Since the NAF will not accept consumer arbitrations, all agreements that designate the NAF as the arbitration forum are now unenforceable. The Court's opinion, combined with the NAF's recent exit from consumer arbitration, means that thousands of arbitration agreements signed by Mississippi residents with the NAF as the forum are now unenforceable.  

Likewise, many arbitration agreements that designate the American Arbitration Association (AAA) and American Healthcare Lawyers Association (AHLA) as the forum are also no longer enforceable. These organizations do not accept health care cases (medical malpractice and nursing home) involving pre-dispute arbitration agreements. There is also pressure on arbitration forums to follow the NAF and refuse to administer cases involving pre-dispute consumer arbitration provisions. With Congress debating the Arbitration Fairness Act that would declare all consumer arbitration agreements unenforceable and courts continuing to narrow arbitration enforcement, arbitration is in a rapid retreat.

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Oposition to mandatory arbitration grows

Posted on May 12, 2009 by Philip Thomas

The Shreveport Times has an article about a local man's lobbying efforts in support of the Arbitration Fairness Act of 2009. Forced to arbitrate a claim against the builder of a bad home, the man was awarded less than the actual cost to repair the home. The arbitrator then destroyed the evidence so that the man could not appeal. Referencing the battle in Congress over arbitration, the article states:

Supporters of the act claim mandatory arbitration clauses force people into unfair situations where the cards are severely stacked against them.

Opponents say getting rid of arbitration would clog the justice system and open the door to countless frivolous lawsuits.

The opponents' argument is a boilerplate argument trotted out every time big business wants to limit public access to the judicial system. The public is wising up, however, as more instances of unfair arbitration proceedings emerge. I am waiting for the Chamber to explain how a consumer can afford to arbitrate a claim over a $10,000 automobile purchase when the consumer has to pay the arbitrator an hourly fee that is typically $200- $400 per hour to hear the case, in addition to his attorney's fees.

Congressional limitations on mandatory consumer arbitration has bipartisan support and appears sure to pass in some form.

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