In its opinion filed on October 27, 2015, the Supreme Court of Pennsylvania Middle District (“the Court”) upheld the lower court’s refusal to enforce a nursing home arbitration agreement because the arbitration agreement expressly relied, as part of an essential term, upon the National Arbitration Forum (“NAF”) Code procedures that were void at that time with respect to consumer arbitration disputes because the NAF had entered into a consent decree eight months earlier in which it agreed to not accept consumer arbitration disputes, and that provision was an essential provision of the nursing home arbitration agreement.
The Nursing Home Arbitration Agreement
The nursing home arbitration agreement in this case stated, in relevant part: “[A]ny and all claims, disputes, and controversies . . . shall be resolved exclusively by binding arbitration to be conducted at a place agreed upon by the Parties, or in the absence of such an agreement, at the Facility, in accordance with the National Arbitration Forum Code of Procedure, which is hereby incorporated into this Agreement[ ], and not by a lawsuit or resort to court process. This agreement shall be governed [by] and interpreted under the Federal Arbitration Act, 9 U.S.C. Sections 1-16 . . . . In the event a court having jurisdiction finds any portion of this agreement unenforceable, that portion shall not be effective and the remainder of the agreement shall remain effective.”
The NAF Code of Procedure
NAF Code of Procedure, Rule 1(A) states: “Parties who contract for or agree to arbitration provided by the Forum or this Code of Procedure agree that this Code governs their arbitration proceedings, unless the Parties agree to other procedures . . . . This Code shall be administered only by the [NAF] or by any entity or individual providing administrative services by agreement with the [NAF].”
The Court noted the parties’ respective positions with regard to the appeal: the appellee argues that the NAF’s participation was integral to the nursing home arbitration agreement, which therefore cannot be salvaged by the agreement’s severability clause, while appellants argued that arbitration was the overarching goal and need not be adjudicated by the NAF itself.
The Court stated that when a written contract is clear and unequivocal, its meaning must be determined by its contents alone. It speaks for itself and a meaning cannot be given to it other than that expressed. Where the intention of the parties is clear, there is no need to resort to extrinsic aids or evidence. Hence, where language is clear and unambiguous, the focus of the interpretation is upon the terms of the agreement as manifestly expressed rather than as, perhaps, silently intended. The Court stated that arbitration clauses are no more or less valid, enforceable, or irrevocable than any other contractual provision. Thus, the parties’ subjective understanding of the contract is irrelevant.
In the case it was deciding, the Court stated that the nursing home arbitration agreement provided that arbitration shall be conducted “exclusively . . . in accordance with the [NAF] Code of Procedure, which is hereby incorporated into this Agreement[ ], . . . [and that t]his agreement shall be governed [by] and interpreted under the [FAA], 9 U.S.C. Sections 1-16.”
The Court held that the question of whether the appellants can compel arbitration must be answered by the relevant NAF and FAA provisions, not the subjective intent of the parties. The Court declined to read an ambiguity into an agreement that could easily have been addressed by the appellants within its express terms.
The Court held that the parties here agreed that any disputes “shall be resolved exclusively by binding arbitration to be conducted . . . in accordance with the [NAF] Code of Procedure, which is hereby incorporated into this Agreement[.]” Therefore, the Court found the provision integral and non-severable; doing otherwise would require the Court to rewrite the nursing home arbitration agreement.
Source Wert v. Manorcare of Carlisle PA, LLC, et al., J-24-2015 (No. 62 MAP 2014).
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