In affirming a lower court order denying a nursing home’s motion to compel arbitration, an Illinois appellate court held that the Federal Arbitration Act (FAA) did not preempt the lower court’s public policy refusal to enforce the arbitration agreement because the statute underlying the public policy determination, though disallowing waiver of the right to a jury trial, is not specifically targeted at arbitration agreements but also reaches other agreements to waive a jury trial.

In Carter v. SSC Odin Operating Co., 885 N.E.2d 1204 (Ill. App. Ct. Apr. 4, 2008), Joyce Gott died during her residency in a nursing home owned by SSC Odin (Odin). Her estate sued Odin for wrongful death and under the Nursing Home Care Act. Odin moved to compel arbitration pursuant to an arbitration agreement signed by Gott’s legal representative. The trial court denied the motion on various grounds, including public policy.

On appeal, Odin argued that the FAA preempted the lower court’s ruling that enforcement of the arbitration agreement would violate public policy. More specifically, Odin argued that the Nursing Home Care Act specifically targets arbitration agreements and thus cannot be the basis for a public policy refusal to enforce an arbitration agreement.

As the Court noted, the Nursing Home Care Act disallows any waiver of the right to a jury trial for claims arising under the Act. See 210 Ill. Comp. Stat. 45/3-607. The Court found that this statutory provision does not specifically target arbitration agreements because it would also apply to any other agreement waiving the right to a jury trial, such as an agreement to resolve disputes via a bench trial. Based on that reasoning, the Court found that the FAA did not preempt the public policy determination premised on this statutory provision.

The Court’s view of FAA preemption is unduly limited. Even if one accepts the premise that the statutory provision does not specifically target arbitration agreements, the provision undermines the purpose of the FAA by erecting a barrier to the enforcement of arbitration agreements. As such, it is subject to FAA preemption.