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.