Many states have enacted statutes automatically invalidating, under one set of circumstances or another, contracts which seem to require mandatory arbitration of disputes. In a 5-0 decision today (with two justices not participating), the Illinois Supreme Court cast such statutes in doubt, holding that two clauses of the Illinois Nursing Home Care Act were preempted by the Federal Arbitration Act. Carter v. SSC Odin Operating Company.

Plaintiff’s decedent and plaintiff herself, as special administrator, executed contracts providing that disputes over decedent’s care while she lived in the defendant’s nursing home would be decided in arbitration. After decedent’s death, plaintiff sued for wrongful death and violations of the Nursing Home Care Act. The defendant moved to compel arbitration, relying upon section 2 of the Federal Arbitration Act.

At first glance, the Illinois Nursing Home Care Act would seem to have required the Circuit Court to deny defendant’s motion. The Act invalidates any waiver by a resident or his or her legal representative of the right to sue under the Act, and also invalidates any waiver of the right to trial by jury for an action under the Act. But not so fast: according to the Federal FAA, mandatory arbitration terms are valid "save upon such grounds as exist at law or in equity for the revocation of any contract."

So was the Nursing Home Care Act’s language grounds equally applicable to revocation of any contract? No, according to the Illinois Supreme Court.

The sort of defense Congress had in mind, the Court wrote, was fraud or lack of consideration — general defenses that had nothing specifically to do with arbitration. But the FAA strips the states of any power to invalidate arbitration clauses per se. According to the unanimous Court, that national policy is to be applied in broad terms: any statute requiring that a dispute be resolved in court is invalid if the underlying contract had a mandatory arbitration clause.

The lesson for defense counsel is clear. If a statute forbids waiver of a cause of action, or requires a jury trial, and the contract at issue contains an arbitration clause, the underlying statute is probably preempted. Under the Court’s reasoning, a statute apparently aimed at protecting a certain class of plaintiffs — whether nursing home residents, or seniors, or consumers — from mandatory arbitration clauses will almost never prevail against the FAA.