Lest anyone think that the preemption doctrine in arbitration has gone dormant, today’s cases should set the record straight.  Courts have recently found the FAA preempted state rules in Pennsylvania, South Carolina, and Alabama.

The Pennsylvania Supreme Court found that one of its rules of civil procedure was preempted by the FAA in Taylor v Extendicare Health Facilities, Inc., __ A.3d ___, 2016 WL 5630669 (Penn. Sept. 28, 2016).  The case involved claims regarding whether a nursing home properly cared for a patient.  The patient had signed an arbitration agreement, and under Pennsylvania law, that meant the “survival claim” on her behalf had to be arbitrated, but her heirs’ wrongful death claims were not subject to arbitration.  However, a rule of state civil procedure required that survival actions be consolidated with wrongful death actions for trial. Relying on that rule, the trial court and intermediate appellate court refused to enforce the arbitration agreement.  After clarifying its feelings about the current state of FAA case law (the court comments that the FAA has implicitly altered the Constitution and created a “preemption juggernaut” with Concepcion), the court acknowledged that it is “bound by the Supreme Court’s directive to favor enforcement over efficiency.”  Therefore, the survival action can proceed in arbitration.

Similarly, the South Carolina Supreme Court reversed two lower courts that had refused to compel arbitration of claims in Parsons v. John Wieland Homes & Neighborhoods of the Carolinas, Inc., __ S.E.2d __, 2016 WL 441112 (S.C. Aug. 17, 2016).  Those courts had relied on the “outrageous tort exception” in South Carolina common law, which allowed “parties whose claims arose out of an opponent’s ‘outrageous’ tortious conduct to avoid arbitration.”   Though a majority of the court did not agree to totally overrule the doctrine, it did decide that it was preempted using the analysis of DirecTV.

The Alabama Supreme Court found one of its insurance regulations preempted by the FAA in African Methodist Episcopal Church v. Smith, __ So. 3d __, 2016 WL 4417268 (Ala. Aug. 19, 2016).  In that case, plaintiffs argued that the arbitration agreement in their group life insurance policy was unenforceable because the company had not included the disclosures required by the Alabama Department of Insurance.  The court found “[a]ny state requirement that an arbitration provision in an insurance contract be specially disclosed . . . is unenforceable; federal law prohibits arbitration provisions from being singled out for such special treatment.”

If you stuck with me this far, here are two bonus cases for you.  Although the FAA is usually the winner in a preemption war, there are times another federal statute overrides the FAA.  For example, the Supreme Court of Arizona held that the Medicare Act preempts the FAA.  United Behavioral Health v. Maricopa Integrated Heath Sys., 2016 WL 4474155 (Ariz. Aug. 25, 2016) (holding that the “administrative appeals process provided under the Medicare Act preempts arbitration of Medicare-related coverage disputes between private healthcare administrators and providers”).  However, the Eleventh Circuit found that the Uniformed Services Employment and Reemployment Rights Act (USERRA) did not preempt the FAA.  Bodine v. Cook’s Pest Control, Inc., 2016 WL 4056031 (11th Cir. July 29, 2016).  Instead, the court found the two statutes could be harmonized, by modifying the aspects of an arbitration agreement that offended USERRA.