The Illinois Appellate Court enforces an arbitration agreement referencing the American Arbitration Association’s rules after a woman attempted to sue her nursing home for negligence. In Rotan v. Unlimited Development (Ill. App. Ct., NO. 5-22-0182, February 22, 2023).
Edith Rotan filed a personal injury complaint against her nursing home, Parkway Manor. The nursing home moved to compel arbitration and stay the proceedings according to the residency and arbitration agreements.
The trial court found it had the authority to decide whether the case must go to arbitration or could proceed in court. Then concluding that the residency and arbitration agreements failed to incorporate each other, the trial court denied the nursing home’s motion to compel arbitration. Parkway Manor appealed.
The issue on appeal is which decision maker — the arbitrator or the court — has the power to determine whether arbitration or litigation is appropriate to resolve the matter. To answer this question, the court examines whether the agreement between Ms. Rotan and Parkway Manor delegated the question of arbitrability to an arbitrator. Relying on the American Arbitration Association’s rules, the nursing home argued that the authority to decide the arbitrability issue rests with the arbitrator, not the trial court.
The court of appeals agrees with Parkway Manor. Under Illinois Supreme Court Case Rent-A-Center, the trial court’s focus on the separateness of the residency and arbitration agreements was unnecessary. Under Rent-A-Center, the trial court did not have to decide whether the arbitration agreement was part of the nursing home admission documents. Since Ms. Rotan did not challenge the provision giving the arbitrators authority, the court must treat the arbitration agreement as valid and enforce it.
The agreement’s incorporation of the American Arbitration Association’s rules provided clear and unmistakable evidence that the parties intended to delegate the arbitrability decision to an arbitrator, not the court. The AAA rules allow the arbitrator to rule on its jurisdiction.
When a contract assigns arbitrability to arbitrators, the court must respect it unless it is invalid. Ms. Rotan did not argue that the arbitration agreement was unconscionable. While she asserted that the arbitration agreement did not apply to her lawsuit, this goes to the scope of the agreement, not its validity, and the arbitrator resolves scope questions. Because the contract referenced the AAA rules, which allow the arbitrator to decide on its jurisdiction, and Ms. Rotan did not argue that the contract was invalid, the court must respect the contract and uphold arbitration.
Allowing arbitration to move forward, the appellate court vacates the trial court’s findings and reverses its order.
Dissenting, Justice Cates disagrees with the majority’s conclusion that the reference to the AAA rules delegated the arbitrability question to an arbitrator. The American Arbitration Association has many sets of rules, and it is unclear to which rules the agreement refers. Mandating arbitration would render the provision in the contract that calls for a bench trial in case of litigation obsolete. As an unsophisticated party, Ms. Rotan did not understand the AAA regulations.