Bruner v. Timberlane Manor Limited Partnership

111 On July 5, 2005, Detra L. Bruner, as next of kin of Leola Bruner, deceased, filed suit against Timberlane Manor Limited Partnership, and its successor in interest, Timberlane Manor Limited Liability Company d/b/a Grace Living Center (nursing home). The petition alleged that the nursing home's negligent care and breach of duties caused Leola Bruner's death. The nursing home moved to dismiss the suit or in the alternative to compel arbitration and stay the proceedings as required by the federal arbitration law. The district court denied the motion. The dispositive question on appeal is whether the Federal Arbitration Act applies to the nursing home's admission contract. To answer this question we must consider the body of federal and state law enforcing arbitration provisions and the body of federal and state law regulating nursing homes. We conclude that the Federal Arbitration Act does not apply to the nursing home admission contract at issue. We affirm the district court's order refusing to compel arbitration. We remand this case to the district court for further proceedings.

I. Proceedings Below

12 The petition initiating this tort action alleged the following facts. Detra L. Bruner, plaintiff{/appellee (plaintiff), is the daughter of Leola Bruner, deceased. On June 22, 2004, plaintiff, as her mother's attorney in fact, signed the contract for her mother to be admitted as a resident patient at Grace Living Center, defendant/appellant, a state licensed nursing care facility in Edmond, Oklahoma. When she was admitted to the nursing home, Leola Bruner was sixty-six years old and physically frail, and her decision-making abilities and mental facilities were impaired. Leola Bruner resided at the nursing home from June 22, 2004 until July 17, 2004, when she was hospitalized. Leola Bruner died on August 31, 2004.

[ 3 The petition further alleged that during her residency at the nursing home, Leola Bruner was dependent upon the nursing home and its agents and employees for proper hydration and nutrition, personal care and attention, and prevention and treatment of any illness and injuries; but the nursing home failed to provide Leola Bruner with adequate and proper daily care and supervision, adequate and appropriate nourishment, and necessary and reasonable medical treatment and services. It also alleged that Leola Bruner suffered injuries and illnesses, including a fractured hip and malnutrition, caused by the nursing home's negligence and breach of duties. The petition asked for actual and punitive damages for the wrongful death of Leola Bruner, allegedly caused by the nursing home's negligence and its violation of the Patients' Bill of Rights in the Oklahoma Nursing Home Act.

'I 4 In response to the petition, the nursing home appeared specially and asked the district court to dismiss the petition and enforce the binding arbitration agreement in the admission contract. The nursing home relied on the dispute resolution provisions in its admission contract which provided that all disputes "arising out of or in connection with the care rendered to the Resident by GLC [Grace Living Center] and/or arising out of or in connection with the Admission Agreement pursuant to which said care is rendered" are to be resolved by binding arbitration. 1

T5 The nursing home took the position that its admission contract involved or affected interstate commerce because in its operation, the nursing home 1) receives Medicare payments that originate outside the state of *20 Oklahoma, 2) complies with federal Medicare and Medicaid licensing rules and regulations, including routine inspections/surveys by out-of-state federal investigators/surveyors, 8) purchases medical and non-medical supplies from out-of-state vendors, and 4) uses instruments of interstate commerce such as telephone lines, internet, airlines and the federal postal service. The nursing home argued that the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1, et seq., and the Oklahoma Uniform Arbitration Act (OUAA), 15 0.9.2001, §§ 801, et seq., govern the nursing home admission application and that the FAA preempts and displaces the state's anti-arbitration statute in the Oklahoma Nursing Home Care Act at 68 0.9.2001, $ 1-1989(D) and (E).

I 6 The district court found that "the nursing home care at issue does not involve interstate commerce, the Federal Arbitration Act does not apply, and Sections 1-1989(D) and (E) of the Oklahoma Nursing Home Care Act, 68 O.S. §§ 1-1901 et seq., are not preempted." Thereupon, the district court found "the arbitration agreement between the parties unenforceable, and Sections 1-1939(D) and (E) of the Oklahoma Nursing Home Care Act remain applicable." The district court denied the nursing home's motion to dismiss or in the alternative to compel arbitration and stay proceedings. The nursing home appealed the interlocutory order which is appealable by right under the OUAA. 12 0.S.8upp.2005, § 1879 2 and Okla. Sup.Ct.R. 1.600), 12 0.8.2001, ch.15, app. Upon plaintiff/appellee's motion, we retained the appeal.

II. Standard of Review

T7 The issues raised on appeal by the nursing home are: 1) whether the district court erred in finding that the nursing home care of Leola Bruner did not involve interstate commerce and that the FAA does not govern the nursing home's admission application; 2) whether a strong federal interest should be presumed in matters in which federal funds, such as Medicare funds, are utilized; 3) whether Oklahoma law recognizes a strong public policy favoring arbitration agreements; and 4) whether the district court erred in finding the arbitration provisions in the nursing home's admission application unenforceable under the Oklahoma Nursing Home Care Act. As to the interstate commerce issue, plaintiff urges that it is a question of fact to be reviewed for abuse of discretion, while the nursing home urges that it requires interpretation of the FAA to be reviewed by a de novo standard. Both parties urge that all other issues should be reviewed by a de novo standard.

18 Generally, the existence of an agreement to arbitrate is a question of law to be reviewed by a de novo standard. Rogers v. Dell Computer Corp., 2005 OK 51, ¶11, 138 P.3d 826, 881. However, an application to compel arbitration may present questions of fact and law as to the existence or the enforceability of an arbitration agreement. See, id. at TM 15-17, 880-831 (delineating procedures on applications to compel arbitration that present questions of fact or law relating to the existence or enforcement of an arbitration agreement). Where the facts are controverted, mixed questions of fact and law may require deferential review standards. Feightner v. Bank of Okla., 2003 OK 20, ¶3, 65 P.3d 624, 627.

19 Whether a transaction involves interstate commerce under the FAA is often a mixed question of fact and law. See Citizens Bank v. Alafabco, Inc., 589 U.S. 52, 128 S.Ct. 2037, 156 L.Ed.2d 46 (2003). Here, plaintiff did not controvert the evidence the nursing home submitted in support of its contention that nursing home care is a transaction involving commerce under the FAA. Where the facts are undisputed, the controversy presents questions of law. Feightner, 2003 OK 20, at ¶3, 65 P.3d at 627. We review questions of law by a de novo standard and without deference to the lower court. Gladstone v. Bartlesville Indep. Sch. Dist. No. 30, 2003 OK 30, ¶5, 66 P.3d 442, 445.

110 We begin with an overview of the United States Supreme Court decisions construing the FAA, the state arbitration law, *21 and the pertinent federal and state nursing home regulations. Against this backdrop, we consider de novo whether the FAA applies to the nursing home's admission contract.

III The Federal Arbitration Act

T11 Pursuant to its power over admiralty and interstate commerce, Congress, in 1925, enacted the FAA to make arbitration agreements as enforceable as other contracts but not more so. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404-405, n. 12-13, 87 S.Ct. 1801, 1806-1807, 18 L.Ed.2d 1270 (1967). 3 The FAA's principal objective was to enforce arbitration agreements made by the parties to interstate commerce and maritime transactions, Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-220, 105 S.Ct. 1238, 1241-1242, 84 L.Ed.2d 158 (1985), 4 and place arbitration agreements in commercial contracts upon the same footing as other contracts. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225-226, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185 (1987). 5

112 Section 2 of the FAA is the substantive section. It is a declaration of a "liberal federal policy favoring arbitration agreements," which effectively creates "a body of federal substantive law of arbitrability applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). 6 Section 2 imposes upon the *22 courts the substantive duty to honor arbitration agreements and order the parties to arbitrate when they have agreed to do so. Id. at 25, n. 32, 108 S.Ct. at 942. Section 2 of the FAA, 9 U.S.C. § 2, reads:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

{13 The United States Supreme Court interpreted § 2 of the FAA as withdrawing from the states the power to require a judicial forum for the resolution of disputes which the contracting parties agreed to resolve by arbitration. Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 858, 79 L.Ed.2d 1 (1984) 7 In a later decision, the Court explained that state law, legislative or judicial, may apply to the arbitration provisions in a contract involving interstate commerce "if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally. A state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with the text of 9 U.S.C. § 2." Perry v. Thomas, 482 U.S. 483, 492, n. 9, 107 S.Ct. 2520, 2527, 96 L.Ed.2d 426 (1987) 8

T14 The United States Supreme Court construed § 2 of the FAA as applying to every arbitration agreement into which private parties had entered within the full reach of the Commerce Clause. 9 Id. at 491, 107 S.Ct. at 2526. The reach of the Commerce Clause and the FAA was most recently addressed in 2008 in Citizens Bank v. Alafabco, Inc., 539 U.S. at 56-57, 123 S.Ct. at 2040. Under Citizens Bank, Congress' Commerce Clause power and the FAA extend to an individual case without showing any specific effect upon interstate commerce if in the aggregate the economic activity involved in that case represents a general practice subject to federal control and the general practice substantially affects interstate commerce. Two earlier arbitration decisions instrumental in the development of the Citizens Bank rule are Bernhardt v. Polygraphic Co. of America, Inc., 350 U.S. 198, 76 S.Ct. 273, 100 L.Ed. 199 (1956), and Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995).

115 Bernhardt involved an employment contract entered into in New York to be performed in Vermont. Bernkardt determined the employment contract did not involve interstate commerce because there was "no showing that petitioner while performing his duties under the employment contract *23 was working 'in' commerce, was producing goods for commerce, or was engaging in activity that affected commerce within the meaning of our decisions." 350 U.S. at 200-201, 76 S.Ct. at 274-275.

T16 Allied-Bruce Terminix involved a lifetime "Termite Protection Plan" purchased by a homeowner in Birmingham, Alabama, from a local office that was a franchisee of Terminix International Company. The Alabama Supreme Court had applied a contemplation-of-the-parties test and had decided that the transaction was local and not substantially interstate and that the FAA did not govern the contract. Interpreting § 2 of the FAA, the United States Supreme Court in Allied-Bruce Terminix concluded that "involving commerce" has broad meaning and is the functional equivalent of "affecting commerce." 513 U.S. at 2738-274, 115 S.Ct. at 839. Observing that the Commerce Clause has been expanded since the enactment of the FAA, Allied-Bruce Terminix also concluded that the seope of the FAA should be expanded along with the expansion of the Commerce Clause power itself, 513 U.S. at 275, 115 S.Ct. at 840. Rejecting the contemplation-of-the-parties test, Allied-Bruce Ter-minix adopted the "commerce in fact" test-that the transaction evidenced by the contract must turn out in fact to have involved interstate commerce even if the parties did not contemplate an interstate commerce connection. 513 U.S. at 281, 115 S.Ct. at 843.

T 17 The parties in Allied-Bruce Terminix did not contest that the transaction in fact involved interstate commerce. 518 U.S. at 280, 115 S.Ct. at 842-848. However, the United States Supreme Court tested the facts established in Allied-Bruce Terminix and found the termite treatment in fact involved interstate commerce in that both Al-Hed-Bruce and Terminix were multistate businesses and the termite-treating and house-repairing materials used by Allied-Bruce came from outside of Alabama.

€18 In adopting the "commerce in fact" test, Allied-Bruce Terminix was mindful of the states' interest in protecting their consumers from overreaching business practices. Allied-Bruce Terminix recognized that Congress, in enacting the FAA, was well aware of consumer needs for a less expensive alternative to litigation to complain about products and relied on comparisons between arbitration and litigation to the effect that arbitration would be cheaper and faster, have more flexibility in scheduling hearings, have simpler procedural and evidentiary rules, minimize hostility and be less disruptive to ongoing and future business dealings between the parties. 513 U.S. at 280, 115 S.Ct. at 842-8483. The Court explained that § 2 of the FAA allows a state to enact general laws to protect its consumers from unfair pressure to agree to unwanted arbitration provisions:

States may regulate contracts, including arbitration clauses, under general contract principles.... What states may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal "footing," directly contrary to the Act's language and Congress' intent.

518 U.S. at 281, 115 S.Ct. at 843.

119 Citizens Bank involved a debt-restructuring agreement executed in Alabama between an Alabama bank and an Alabama construction company for the payment of a series of commercial loans. The Alabama Supreme Court had found the nexus between the debt-restructuring agreement and interstate commerce insufficient to trigger the FAA. In Citizens Bank, the United States Supreme Court reaffirmed that "involving commerce" in the FAA is the functional equivalent of "affecting commerce"-words of art signaling the broadest permissible exercise of the Commerce Clause power, 539 U.S. at 56, 128 S.Ct. at 2040 and aligned the FAA interstate commerce principle with those relating to other federal legislation: 10

*24 Congress' Commerce Clause power "may be exercised in individual cases without showing any specific effect upon interstate commerce" if in the aggregate the economic activity in question would represent "a general practice ... subject to federal control." Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 884 U.S. 219, 236, 68 S.Ct. 996, 92 L.Ed. 1828 (1948). ... Only that general practice need bear on interstate commerce in a substantial way. Maryland v. Wirtz, 892 U.S. 183, 195-196, n. 27, 88 S.Ct. 2017, 20 LEd.2d 1020 (1968); ....

539 U.S. at 56-57, 128 S.Ct. at 2040.

120 Citizens Bank decided the debt-restructuring agreement satisfied the "involving commerce" test: 1) the commercial loans were the underlying economic activity which the construction company used in its business throughout the southeastern states; 2) the restructured debt was secured by an inventory of goods assembled from out-of-state parts and raw materials; and 3) commercial lending, as a general practice, has a broad impact on the national economy which Congress may regulate pursuant to its Commerce Clause power. 539 U.S. at 57-58, 128 S.Ct. at 2040-2041. Explaining Congress' Commerce Clause power over the local concern, Citizens Bank said:

No elaborate explanation is needed to make evident the broad impact of commercial lending on the national economy or Congress' power to regulate that activity pursuant to the Commerce Clause. Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 38-89, 100 S.Ct. 2009, 64 L.Ed.2d 702 (1980). ("[Blanking and related financial activities are of profound local concern.... Nonetheless, it does not follow that these same activities lack important interstate attributes"); Perez, supra, at 154-155, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686 ("Extortionate credit transactions, though purely intrastate, may in the judgment of Congress affect interstate commerce").

539 U.S. at 58, 128 S.Ct. at 2041. 11

121 Even though the courts must enforce arbitration agreements that fall within the broad reach of § 2 of the FAA, those agreements may be overridden by their own terms. An arbitration agreement under the FAA is to be enforced according to its terms, and since parties are generally free to structure contracts as they see fit, an arbitration agreement may limit the issues that will be arbitrated and it may specify the rules under which the arbitration will be conducted. Volt Info. Sci., Inc. v. Bd. of Trustees of the Leland Stanford Junior U., 489 U.S. 468, 109 *25 S.Ct. 1248, 103 L.Ed.2d 488 (1989). 12 In Volt, the United States Supreme Court said:

Where, as here, the parties have agreed to abide by state rules of arbitration, enfore-ing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed where the Act would otherwise permit it to go forward. By permitting the courts to "rigorously enforce" such agreements according to their terms, see Byrd, supra, we give effect to the contractual rights and expectations of the parties, without doing violence to the policies behind by [sic] the FAA.

489 U.S. at 479, 109 S.Ct. at 1256.

122 Further, the FAA standing alone mandates enforcement of agreements to arbitrate statutory claims, but like any statutory directive the FAA's mandate may be overridden by a contrary congressional command. Shearson/American Express, Inc. v. McMahon, 482 U.S. at 226-227, 107 S.Ct. at 2887. The burden is on the party opposing arbitration to show that Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue; an intention discernible from the statute's text or legislative history or "an inherent conflict between arbitration and the statute's underlying purposes." Id.

IV. The State Arbitration Law

123 The state counterpart to § 2 of the FAA is § 1857(A) of the OUAA. It provides that arbitration agreements shall be valid, enforceable and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract. 12 O.S.Supp.2005, § 1857(A). This section is a clear expression of Oklahoma's policy favoring arbitration agreements. See, Voss v. City of Oklahoma City, 1980 OK 148, 618 P.2d 925; Rollings v. Thermodyne Indust., Inc., 1996 OK 6, 910 P.2d 1080.

{24 On the other hand, § 1-1989 of the Nursing Home Care Act conflicts with the command of § 1857 of the OUAA. It provides that any waiver of the right to commence an action against the nursing home owner or licensee for any intentional or negligent act or omission shall be null and void and without legal effect. 68 0.8.2001, § 1-1939. It is a clear rejection of arbitration agreements between nursmg homes and their residents.

%25 Although the United States Supreme Court has decided that the FAA preempts and displaces a state anti-arbitration statute, we have not decided that the OUAA controls over anti-arbitration statutes such as § 1-1939 in the Nursing Home Care Act. Rather, a well established principle in this jurisdiction is that where two statutes address the same subject, one specific and one general, the specific statute will govern over the general. Trimble v. City of Moore, 1991 OK 97, 818 P.2d 889; Hall v. Globe Life and Accident Ins. Co. of Oklahoma, 1999 OK 89, 998 P.2d 608. Under this principle, the specific statute in the Nursing Home Care Act addressing the right to commence an action and to have a jury trial must govern over the more general statute favormg arbitration.

V. The Nfirsing Home Regulations

126 Nursing homes are regulated by a maze of state and federal regulations for the health, safety and welfare of the residents. Historically, regulation of health and safety matters are matters of local concern. Hillsborough County, Florida v. Automated Meddeal Lab., Inc., 471 U.S. 707, 719, 105 S.Ct. 2371, 2378, 85 L.Ed.2d 714 (1985). However, Congress has imposed conditions on the receipt of federal funds for medical care of the aged, disabled and needy 13 and thereby reg *26 ulates the health, safety and welfare of nursing home residents through its spending power 14 To receive the federal funds, the state regulations must conform to the federal regulations. Wilder v. Virginia Hosp. Assoc., 496 U.S. 498, 502, 110 S.Ct. 2510, 2513, 110 L.Ed.2d 455 (1990), explained:

Medicaid is a cooperative federal-state program through which the Federal Government provides financial assistance to States so that they may furnish medical care to needy individuals (42 U.S.C.] § 1396. Although participation in the program is voluntary, the participating States must comply with certain requirements imposed by the Act and regulations promulgated by the Secretary of Health and Human Services (Secretary). To qualify for federal assistance, a State must submit to the Secretary and have approved a "plan for medical assistance," § 18396a(a), that contains a comprehensive statement describing the nature and scope of the State's Medicaid program. 42 CFR § 430.10 (1989).

127 The federal regulations for long-term care facilities apply to nursing homes. 42 C.E.R. § 488.5 (defining "facility"). The regulations concern both the operation of the facility and the care for and rights of the residents. 15 The most pertinent regulations require the facility to be licensed under applicable State and local law, id. § 488.75(a); to provide services in compliance with all applicable Federal, State, and local laws, regulations, and codes, and with accepted professional standards and principles that apply to professionals providing services in such a facility, id. § 488.75(b); and to provide each resident with a written statement of legal rights, including the right to file a complaint with the State survey and certification agency concerning resident abuse and neglect and the right to have the names and addresses of all pertinent state client advocacy groups such as the State survey and certification agency, the State licensure office, the State ombudsman program, the protection and advocacy network, and the medicaid fraud unit. Id. § 488.10. Consistent with the federal statute permitting the states to devise a fair mechanism for hearing appeals on transfers and discharges of residents from nursing facilities, 42 U.S.C. § 1896r(c)(2) and ()(8), the appeal procedure regulations provide that a resident has a right to agency hearings and judicial review as allowed by law. 42 C.E.R. § 431.245. 16

*27 €28 Oklahoma participates in the federal Medicaid program. 17 Oklahoma nursing homes that are reimbursed through the Medicaid program are governed not only by federal law but also by the Nursing Home Care Act (NHCA), 63 0.98.2001, §§ 1-1901, & seq. 18

129 The NHCA requires the State Department of Health to establish a comprehensive system of licensure and certification to protect the health, welfare and safety of the residents and assure accountability for reimbursed care. 68 0.8.2001, § 1-1904. The NHCA enumerates the rights and responsibilities of residents, commonly referred to as the Nursing Home Patients' Bill of Rights. The Estate of Ilar Hicks v. Urban East, Inc., 2004 OK 36, 92 P.3d 88; 63 O.S. 2001, § 1-1918(B). 19 A violation of the Pa *28 tients' Bill of Rights is declared to be a misdemeanor and residents are permitted to commence a private cause of action to redress violations of the Patients' Bill of Rights. 20 The NHCA requires a written contract between the resident and the facility on a general form prescribed by the Department of Health which must provide that the contract terminates if the resident leaves the facility due to physical or mental health or upon the death of the resident. 63 0.8.2001, § 1-1921. And, the NHCA imposes liability upon the nursing home owner and licensed administrator for intentional or negligent injury to a resident. It also declares a resident's waiver of the right to commence an action against the owner or administrator or to have a jury trial thereon to be null, void and without legal effect. 63 00.98.2001, § 1-1939.

VI. The Parties' Arguments

130 The nursing home asserts that both the FAA and the OUAA must be applied because the existence of the arbitration agreement is not disputed. It argues that both the FAA and the OUAA strongly favor arbitration and that the FAA preempts any state law hostile to arbitration. The nursing home also asserts that its evidence 21 established that the nursing home care at issue involves interstate commerce as measured by the "commerce in fact" test in Allied-Bruce Terminix. The interstate commerce connection is the nursing home's pivotal argument.

131 Nursing home argues that the receipt of Medicare payments indicates interstate commerce, relying on Summit Health, Ltd. v. Pinkas, 500 U.S. 322, 111 S.Ct. 1842, 114 L.Ed.2d 366 (1991); McElhinney v. Medical Protective Co., 549 F.Supp. 121 (E.D.Ky. 1982); BCB Anesthesia Care, Ltd. v. Passavant Mem'l Area Hosp. Assoc., 36 F.3d 664 (7th Cir.1994); and state court decisions from Alabama, Mississippi and Texas. The federal district court's ruling in McElhinney affords no support to the nursing home because it was reversed by an unpublished opinion of the Court of Appeals for the Sixth Circuit. 788 F.2d 489 (6th Cir.1984)(Table). For the reasons set out below, we are not persuaded by the other cases relied upon by the nursing home.

132 Summit Health Ltd. addressed the question as to "whether the interstate commerce requirement of antitrust jurisdiction is satisfied by allegations that petitioners conspired to exelude respondent, a duly licensed and practicing physician and surgeon, from the market for ophthalmological services in Los Angeles because he refused to follow an unnecessarily costly surgical procedure." 500 U.S. at 324, 111 S.Ct. at 1844. Summit Health Ltd. only mentioned Medicare payments as an allegation in the complaint along with allegations that Summit owned and operated 19 hospitals and 49 other health care facilities in six other states and Saudi Arabia. 500 U.S. at 827-328, 111 S.Ct. at 1846. The Court said that Summit was unquestionably engaged in interstate commerce, but it did not decide that Medicare payments make the interstate commerce connection.

1133 BCB Amesthesia Care, Ltd. involved a hospital staffing dispute between nurse anesthetists and physician anesthetists. The nurses complained that the Illinois hospital restricted their practice in violation of the *29 Sherman Act. The Seventh Cireuit found that the nurses's allegations that the hospital served nonresident patients and received Medicare and Medicaid payments were sufficient to allege Sherman Act jurisdiction under Summit, but not sufficient to state a claim under the Sherman Act-a claim that the conduct would have "a not insubstantial effect upon interstate commerce." 36 F.3d at 666. In BCB Amesthesia Care, Ltd., the Seventh Cireuit Court explained:

"Although we hesitate to say that [a staffing decision at one hospital] ... can never state an antitrust claim, we believe it is incumbent upon the plaintiff to plead some additional facts from which it can be inferred that the case falls within the ambit of the Sherman Act." Seglin v. Esau, supra, [769 F.2d 1274 (7th Cir.1985)] Before we enlist this court in the micromanagement of the staffing arrangements at Passavant under the aegis of the antitrust laws, we need better reasons than the plaintiffs have given us.

Id. 36 F.3d at 669. This case teaches that a trivial commerce nexus may invoke Sherman Act jurisdiction, but more is needed to trigger the substantive provisions in the Sherman Act. Unlike the Sherman Act, the FAA does not invoke federal court jurisdiction. Inasmuch as the FAA is substantive law, 22 we find BCB Amesthesia Care inconsequential in the instant case.

134 Nursing home also argues that the Medicare connection between health care and interstate commerce was extended to nursing homes in McGuffey Health and Rehab. Center v. Jackson, 864 So.2d 1061 (Ala.2003), followed by Owens v. Coosa Valley Health Care, Inc., 890 So.2d 983 (Ala.2004). The McGuffey court held that Medicare funds moving across state lines should be considered to establish the interstate commerce connection, relying on Summit Health, Ltd., BCB Amesthesia Care, Ltd., and McElhinney. Id. 864 So.2d at 1068. For the reasons already discussed, we disagree that these cases support the McGuffey holding. Owens followed McGuffey, even though there was no proof of Medicare payments. The Owens court said that any doubt as to whether providing nursing home services involved interstate commerce is put to rest by the fact that the transaction is unquestionably economic in nature under Citizens Bank and that purely intrastate economic or commercial transactions can be within the reach of the Commerce Clause. We do not join the Alabama Supreme Court in this reading of the United States Supreme Court's Citizens Bank decision.

135 Nursing home also relies on Vicksburg Partners, L.P. v. Stephens, 911 So.2d 507 (Miss.2005), which extended Citizens Bank to a nursing home admission contract. Unlike the instant case, the defendants in Vicksburg Partners included a Georgia corporation, a Tennessee corporation and a Louisiana corporation, who collectively contributed to the operation of the nursing home. Id. at 515.

136 Finally, nursing home relies on In re Nexion Health at Humble, Inc., 173 S.W.3d 67 (2005). Without any analysis, Nexion summarily ruled that "[blecause 'commerce' is broadly construed, the evidence of Medicare payments made to HHC on John's behalf is sufficient to establish interstate commerce and the FAA's application in this case." Id. at 69. On rehearing, the Texas court left for another day consideration of reverse preemption of the FAA on insurance by the McCarran-Ferguson Act, 15 U.S.C. § 1012(b).

137 Although Medicare funds reimburse nursing homes for care, services and supplies, the Medicare program is a significant social security insurance program for the welfare of the aged and the disabled. Similarly, federal-state-matching Medicaid funds reimburse providers for care, services and supplies, but the Medicaid program is a significant medical program carried out by the states for the welfare of the needy. Congress has not declared the Medicare or Medicaid program to be economic activity the general practice of which may be regulated under the Commerce Clause. The United States Supreme Court has not decided that Medicare or Medicaid funding is an exercise of Congress' Commerce Clause power, nor *30 has it decided that such payments are indicative of interstate commerce. We decline to join Alabama, Mississippi and Texas in treating the federal distribution of medicare insurance funds and state distribution of federal-state-matching medicaid funds as indicia of commerce that triggers the FAA.

138 Plaintiff presents several arguments in supporting the district court's refusal to send this controversy to arbitration. First, plaintiff argues that the nursing home is estopped from seeking enforcement of the arbitration agreement by virtue of the license that requires the nursing home to comply with the NHCA and that the nursing home waived the right to enforce the binding arbitration provision when it applied for and received the license issued pursuant to the NHCA. Waiver and estoppel, plaintiff argues, are general contract principles which exist at law and in equity for revocation. 23

139 Plaintiff also argues that the OUAA does not mandate enforcement of the arbitration provisions. This is so, according to plaintiff, because the OUAA is general law and the NHCA is specific law that prevails over the general, citing Hall v. Globe Life, supra. We agree.

T40 The record before us indicates that the parties selected Oklahoma law to govern the arbitration provisions. The appellate record contains only the two-page dispute resolution part of the nursing home admission contract and the signature page. The dispute resolution part (arbitration agreement) does not mention the FAA, although it acknowledges "that Oklahoma law, as well as decisions of the United States Supreme Court, favor the enforcement of valid arbitration provisions." It does, however, in at least eight different places, provide that arbitration shall be governed by Oklahoma law. 24

{41 Where, as here, Oklahoma law is the choice of law set out in the arbitration agreement, enforcement of the parties' agreement under Oklahoma law is fully consistent with the goals of the FAA. This is so even if the result is that arbitration will not go forward under Oklahoma law and even though the FAA would otherwise permit it to go forward. Volt Information Sciences, Inc., 489 U.S. at 479, 109 S.Ct. at 1256. Enforcement of the arbitration agreement under Oklahoma law is also fully consistent with the federal nursing home regulation's deference to state procedural law. Under Oklahoma law, § 1-1989 of the NHCA specifically addressing the right to commence an action and to have a jury trial must govern over § 1859 of the OUAA generally requiring the enforcement of arbitration agreements. Hall v. Globe Life, supra.

42 Finally, plaintiff argues that the FAA does not preempt and displace § 1- *31 1939 of the NHCA because 1) the nursing home admission contract does not evidence a transaction involving commerce and 2) the nursing home failed to prove that nursing home care substantially affects interstate commerce. Plaintiff argues that the evidence showing the nursing home has some transactions that affect interstate commerce is insufficient, considering that the patient was an Oklahoma resident, the nursing home is an Oklahoma limited partnership with its principal place of business in Oklahoma, and the nursing home is licensed by Oklahoma. We agree.

$483 The nursing home admission contract in this case involves a profoundly local transaction-in-state nursing home care provided to an Oklahoma individual by an Oklahoma entity licensed under Oklahoma law. Citizens Bank fashioned a three-prong test of the reach of the Commerce Clause and the FAA upon such profoundly local activity, The FAA reaches arbitration agreements in contracts evidencing a transaction that is 1) economic activity, 2) which in aggregate is a general practice subject to control under the Commerce Clause, and 3) which in aggregate has a substantial impact on interstate commerce. We acknowledge that nursing home care for a fee is economic activity. However, this case fails the test on the second prong and on the third prong.

{44 On the second prong, the local economic activity in the aggregate must be subject to regulation by Congress' Commerce Clause power. It is true that Congress exercises control over the local activity of delivery of care and treatment to residents in nursing homes through the Medicare/Medicaid statutes. Congress enacted the Medicare/Medicaid statutes through the exercise of its Spending Clause power. See, Suter v. Artist, 503 U.S. at 356, 112 S.Ct. at 1366. Nothing in the Medicare/Medicaid statutes indicates Congress found some overriding national concern and some substantial interstate commerce connection and therefore intended to take nursing home care out of the health and safety local concern category and place nursing home care in the interstate commerce category. See, Perez v. United States, 402 U.S. at 156, 91 S.Ct. at 1362.

45 On the third prong, we have already declined to treat the distribution of medicare insurance funds by a federal agency and federal-state-matching medicaid funds by a state agency as evidence of interstate commerce that triggers the FAA in this case. We recognize the federal interest in federal-Ily-funded programs; however, distribution of Medicare insurance funds by a federal agency does not evidence an effect on interstate commerce subject to federal control under the Commerce Clause and neither does the distribution of Medicaid funds by a state ageney. For a large majority of the United States Supreme Court cases referenced in this opinion, we have noted the facts which the High Court found to evidence a substantial effect on interstate commerce. In comparison, the evidence of interstate commerce in this case demonstrates a de minimus impact on interstate commerce. The facts that the nursing home buys supplies from out-of-state vendors rather than in-state vendors and uses internet and long distance telephone lines do not demonstrate a substantial impact on interstate commerce and are insufficient to impress interstate commerce regulation upon the admission contract for residential care between the Oklahoma nursing home and the Oklahoma resident patient. See, Maryland v. Wirtz, 392 U.S. at 196, 88 S.Ct. at 2024.

146 Even if the nursing home's admission contract were within the broad reach of the Commerce Clause, the FAA's mandate has been overridden by a contrary congressional command. See, Shearson/American Express, Inc. v. McMahon, 482 U.S. at 226-227, 107 S.Ct. at 2337. Consistent with the federal statute permitting the states to devise a fair mechanism for hearing appeals on transfers and discharges of residents from nursing facilities, 42 U.S.C. § 1396r(c)(2) and (£(8), the appeal procedure regulations provide that a resident has a right to agency hearings and judicial review as allowed by state law. 42 C.F.R. § 481.245. Under state law, the arbitration agreement is unenforceable. This result is consistent with the federal Medicare/Medicaid regulatory agency's finding of conflict between the Medicaid regulations and binding arbitration, implying *32 that arbitration proceedings are antithetical to the federal goal of protecting dependent nursing home patients from abuse and neglect. The district court did not err when it found § 1-19839(D) and (E) apply to this arbitration agreement and render it unenforceable.

VII Conclusion

T47 In conclusion, we determine that the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq., does not apply to the arbitration agreement in this case for at least four reasons. First, the arbitration agreement calls for Oklahoma law to govern. Second, Congress regulates nursing homes through its spending power rather than its power over interstate commerce. Third, Congress, in its nursing home regulations, left the states to devise the appropriate administrative or judicial review of nursing home residents' claims against nursing homes. Fourth, the evidence in this case is insufficient to connect the nursing home admission contract with interstate commerce under extant jurisprudence from the United States Supreme Court. We also determine that Oklahoma's Nursing Home Care Act governs over Oklahoma's Uniform Arbitration Act in this case. We hold that the district court did not err in denying the motion to compel arbitration and stay proceeding.

DISTRICT COURT AFFIRMED.