Plaintiffs in the original case were former residents of Princeton Place Rehabilitation and Healthcare, a San Antonio-based nursing and longterm care facility managed by The Williamsburg Care Company. The plaintiffs sued alleging, among other things, gross negligence and abuse. Williamsburg moved to compel arbitration under the individual residents’ contracts, under the Federal Arbitration Act. These arbitration agreements, however, did not comport with section 74.451 of the Texas Civil Practices and Remedies Code. Section 74.451 requires an arbitration agreement between health care providers and their patients to have a 10-point font, boldfaced notice and requires that same agreement to contain a signature from the patient’s attorney. Neither of these provisions was met. The plaintiffs contended that the FAA did not preempt section 74.451 because the Texas law regulates insurance, and the McCarran-Ferguson Act (MFA) protects those laws from preemption by the FAA. The trial court denied Williamsburg’s motion to compel arbitration, and the court of appeals affirmed, holding that section 74.451 was enacted for insurance regulation purposes, was covered by the MFA, and was protection from preemption.
Issue: Whether the MFA exempted section 74.451 from FAA preemption as a law enacted to regulate the business of insurance.
The court of appeals below consolidated this case with two others, Fredericksburg Care Co. v. Lira, and Fredericksburg Care Co. v. Perez, which contained similar complaints and legal questions. In its ruling in Perez, the Texas Supreme Court held that the purpose of section 74.451 of the Texas Civil Practice and Remedies Code was not to regulate the business of insurance, and therefore, section 74.451 was not protected from FAA preemption under the McCarran-Ferguson Act. Because the trial court did not grant Williamsburg’s motion to compel arbitration, it erred. The Court found that its rulings in Perez and Lira also applied to the facts above, reversed the rulings of the trial court and court of appeals, and remanded to the trial court.