Mississippi Litigation Review & Commentary : Mississippi Personal Injury Lawyer & Attorney : Phillip W. Thomas Law Firm : MS Litigation Review & Commentary

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In a shocking development in the world of arbitration the National Arbitration Forum (NAF) has agreed to exit the consumer arbitration business only days after the Minnesota Attorney General filed a detailed lawsuit alleging shocking bias on the NAF's part in favor of business litigants. Here is a Business Week article reporting the news. The article states:

The settlement with the National Arbitration Forum comes after the Minnesota AG sued the firm on July 14 for consumer fraud, deceptive trade practices, and false advertising. The civil suit, filed in state district court in Minneapolis, alleged conflicting ties between the NAF and debt-collection law firms that represented major credit-card companies. The suit also alleged that New York hedge fund Accretive LLC owned stakes in such collection law firms and the NAF, sending arbitration business between the two.

The NAF is left with virtually nothing:

 The only business NAF can now be involved with is in arbitrating Internet domain disputes, a business it has long been in.

This lawsuit followed on the heels of a lawsuit against the NAF by a former employee who alleged that the NAF was biased in favor of business parties at the expense of consumers (regular people). Here is the WSJ's story on that lawsuit. In that case the former NAF employee alleged the following examples of favoritism by the NAF for business parties:

• instructing arbitrators to change decisions they had issued that were adverse to the [business parties];
• ensuring that arbitrators who had ruled against the [business parties] did not get more cases;
• drafting claim forms for the [business parties].

The NAF presided over arbitrations in Mississippi involving credit card disputes and nursing home abuse and neglect cases, including cases against Golden Living Centers, formerly known as Beverly Healthcare. The NAF effectively conceding that it was crooked is a huge blow to arbitration proponents.

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 In October 2008 the Department of Justice intervened in a qui tam action against national nursing home chain Beverly Enterprises/ Golden Gate, LLC that was originally filed in 2004. Here is the government's complaint filed in the Northern District of Mississippi. Mississippi attorneys Cliff Johnson and Brad Pigott filed the original complaint on behalf of a private citizen.

The government alleges that Beverly/ Golden Gate and other companies submitted false claims to Medicare arising from illegal kickbacks and the establishment of sham durable medical equipment supplier companies. No one who has studied Beverly / Golden Gate will be surprised by these allegations. Beverly has run afoul with DOJ previously and in 1999 agreed to pay $175 million to settle Medicare fraud charges. Beverly's entire operating system is built around squeezing Medicare dollars from the government by, among other things, only performing skilled therapy on residents who are eligible for high-rate Medicare reimbursement. The company now operates nursing homes under the name Golden Living Centers. The only thing golden about these places is the pot of gold in the operator's pockets.

The current action looks bleak for Beverly/ Golden Gate, which is owned by the hedge fund Fillmore Capital Partners. My understanding of qui tam actions is that if the government intervenes, the defendants are DOA and almost always settle.