How does a nursing home compel arbitration of a resident dispute when the local court is potentially hostile to arbitration? The arbitration agreement between Kindred Nursing Centers Limited Partnership and the nursing home client stated arbitration would be employed in the event of a dispute. But when a dispute arose, the nursing home client ignored the arbitration agreement and instead filed a 500-count complaint in state court against more than 50 defendants. Based on the anticipated discovery costs in such a complex case, the prospect of defending the state court action was daunting for the client.
AGG implemented a novel strategy of filing a new federal lawsuit against the resident’s family to compel arbitration of the state court case. Utilizing diversity jurisdiction, this federal lawsuit sought to compel arbitration under the Federal Arbitration Act (the FAA) and to require the resident’s estate to submit its state court claims to arbitration.
The creative approach to the problem resulted in a decision of first impression by the U.S. District Court Southern District of Georgia that compelled arbitration. The District Court found that it had jurisdiction to decide the arbitration issues, notwithstanding the already pending state court action. Responding to the many arguments against arbitration, the court found that:
- The arbitration agreement was a valid and enforceable waiver of the resident’s right to a jury trial;
- The agreement did not result in prohibited “additional consideration” under the Medicare plans;
- The parties’ mutual promise to arbitrate constituted sufficient consideration for the arbitration agreement;
- Public policy does not prohibit arbitration of medical liability claims;
- The agreement was not unconscionable; and
- Even though one of the arbitration services specified in the agreement is no longer handling consumer disputes, the agreement specified four alternative services that would accept the claim.
Under the principles of full faith and credit and the Supremacy Clause, the state court followed the federal court’s order and dismissed the resident claims against Kindred, thereby extricating Kindred from the procedurally daunting liability case.