Judge rejects arbitration in nursing home death case

A state law governing landlord-tenant relations blocked enforcement of a nursing home arbitration clause under a judge’s ruling in a Richmond wrongful death case.

That ruling by Richmond Circuit Judge Margaret P. Spencer will stand for the time being, now that the nursing home owner has withdrawn its pre-trial appeal of the decision.

The nursing home owner withdrew the appeal after Virginia Supreme Court justices indicated they might uphold the ruling on other grounds, possibly limiting the application of arbitration clauses for nursing home claims in death cases.

The Richmond case arises from a patient’s 2012 fall at a nursing home owned by Retirement Unlimited Inc.

The lawsuit alleged that an RUI employee pushing a medicine cart knocked into Dorothy Williams and caused her to fall and break her hip.

After Williams’ death in January of last year, the suit was amended to combine both a survival claim for personal injury and a wrongful death claim, according to lawyers involved in the appeal.

The nursing home owner filed a plea in bar, asking Spencer to dismiss the case because the lease Williams had signed called for any negligence claims to be resolved through arbitration under the Federal Arbitration Act.

Such arbitration clauses are common in nursing home leases, and they purport to apply, not just to the patient who signs, but to successors, assigns and legal representatives.

The lawyer for Williams’ family pointed to other language in the nursing home lease, however. A preliminary paragraph stated the lease was “within the purview” of the Virginia Residential Landlord and Tenant Act.

That Act, in Va. Code § 55-248.9, bars rental provisions in which the tenant agrees to waive or forego rights and remedies under the Act.

The nursing home owner contended the state landlord-tenant law was preempted by the Federal Arbitration Act. Spencer held however that, under federal case law, parties can agreed to incorporate state law provisions into their contracts that will not be preempted by federal law.

She ruled the state landlord-tenant law barred the application of the arbitration clause.

“Under the Virginia Residential Landlord Tenant Act, the defendant was precluded from inserting terms or provision in the Lease which limited the Tenant’s remedies to mandatory arbitration,” Spencer said in a Jan. 23, 2014, order.

The nursing home owner appealed, using a provision of Virginia law that allows interlocutory appeals to resolve arbitration issues.

Prompted by the appeal briefs, the Supreme Court expanded the scope of the inquiry beyond the landlord-tenant law.

At oral argument April 14, it did not take long for the justices to question whether the case should be considered, not on the landlord-tenant law, but on whether the arbitration clause effectively died with the nursing home resident.

“In this case, … the parties in interest are the beneficiaries, not the estate,” said Chief Justice Donald W. Lemons, suggesting the arbitration clause might not bind the claimants in a wrongful death action.

Later, Lemons suggested the court might declare that Spencer was correct in her ruling, but for a different reason than she cited.

Two public policy considerations weighed against enforcement of the arbitration clause, argued Roger T. Creager of Richmond on behalf of Williams’ beneficiaries.

A fundamental principle of contract law is that, “You can’t bind a stranger to the contract,” Creager told the court.

Another key policy was that the FAA cannot preempt Virginia contract law, he said.

Before the justices could rule on the arbitration issue, however, the nursing home owner pulled the plug on the appeal.

On May 5, RUI moved to withdraw the appeal awarded by the court and to have the case sent back to Richmond Circuit Court for further proceedings.

The court granted the motion May 15, remanding the case “for the purpose of setting a date for a trial on the merits and for such other relief as may be deemed appropriate.”

“We feel that it’s important to resist and oppose this arbitration provision vigorously, especially when it purports to restrict the jury trial rights of people who were not party to the agreement,” Creager said in an interview.

Creager handled the appeal for the plaintiff. Charles A. Gavin of Richmond was trial counsel for the Williams’ family.

Charles Y. Sipe of Charlottesville, who represented RUI, said arbitration serves an important role for both defendants and plaintiffs in resolving disputes quickly and privately. He noted both federal and state courts have approved the use of arbitration.

“Because the Supreme Court seemed most concerned during oral argument with a tangential issue raised by the appellee as an alternate basis for the trial court’s ruling, and because some of the arguments raised by the justices related to that issue had not been fully addressed in the parties’ briefs, we decided to withdraw our appeal,” Sipe said.

Spencer’s order rejecting the plea in bar based on the arbitration clause is Williams v. Retirement Unlimited Inc. (VLW 015-8-058).