Whether the FAA allows states and federal agencies to penalize the use of arbitration agreements

QUESTIONS PRESENTED The Federal Arbitration Act (FAA) prohibits rules that single out arbitration for disfavored treatment. While Congress can override the FAA in later statutes, it must do so clearly. In the Medicare and Medicaid Acts, Congress did not clearly empower the U.S. Department of Health and Human Services (HHS) to restrict the use of arbitration agreements by long-term care facilities. In fact, Congress has rejected several such proposals. Undeterred, HHS in 2016 invoked decades-old Medicare and Medicaid Act provisions related to health and safety to issue a rule declaring pre-dispute arbitration agreements “unconscionable” and prohibiting facilities from using them as a condition of participation in Medicare and Medicaid. After a federal court blocked that rule, HHS in 2019 invoked the same provisions to promulgate another rule that still singles out arbitration for disfavored treatment and threatens facilities with draconian HHS-imposed penalties for noncompliance. In the decision below, the Eighth Circuit upheld that rule. Splitting from decisions of this Court and three circuits, it held that the FAA allows states and federal agencies to penalize the use of arbitration agreements so long as they leave such agreements theoretically enforceable in court. Then, without mentioning the FAA or statutes that expressly override it, the court afforded Chevron deference to HHS’ anti-arbitration interpretation of the Medicare and Medicaid Acts after declaring their silence about arbitration “ambiguous.” The questions presented are: 1. Whether the FAA is indifferent to rules that penalize parties for using arbitration agreements but ii leave enforceable any theoretical agreements parties enter into despite those penalties. 2. Whether HHS may promulgate a rule that concededly singles out arbitration agreements for disfavored treatment even though Congress has nowhere expressly empowered HHS to override the FAA or its federal policy favoring arbitration.