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Kindred Nursing Ctrs. Ltd. P'ship v. Clark - 137 S. Ct. 1421 (2017)

Rule:

The Federal Arbitration Act (FAA) makes arbitration agreements valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C.S. § 2. That statutory provision establishes an equal-treatment principle: A court may invalidate an arbitration agreement based on generally applicable contract defenses like fraud or unconscionability, but not on legal rules that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. The FAA thus preempts any state rule discriminating on its face against arbitration—for example, a law prohibiting outright the arbitration of a particular type of claim. And not only that: The FAA also displaces any rule that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements.

Facts:

Beverly Wellner and Janis Clark, the wife and daughter of Joe Wellner and Olive Clark, respectively, each held a power of attorney affording her broad authority to manage her family member's affairs. When Joe and Olive moved into a nursing home operated by petitioner Kindred Nursing Centers L. P., Beverly and Janis used their powers of attorney to complete all necessary paperwork. As part of that process, each signed an arbitration agreement on her relative's behalf providing that any claims arising from the relative's stay at the facility would be resolved through binding arbitration. After Joe and  Olive died, their estates filed suits alleging that Kindred's substandard care had caused their deaths. Kindred moved to dismiss the cases, arguing that the arbitration agreements prohibited bringing the disputes to court. The trial court denied Kindred's motions, and the Kentucky Court of Appeals agreed that the suits could go forward. The Kentucky Supreme Court consolidated the cases and affirmed. The court held that both arbitration agreements were invalid because neither power of attorney specifically entitled the representative to enter into an arbitration agreement. It explained that because the Kentucky Constitution declares the rights of access to the courts and trial by jury to be sacred and inviolate, an agent could deprive her principal of such rights only if expressly provided in the power of attorney.

Issue:

Were the arbitration agreements valid?

Answer:

Yes

Conclusion:

The Supreme Court of the United States reversed the Kentucky Supreme Court's decision in part and vacated it in part, and remanded the case for further proceedings. It held that the Kentucky Supreme Court's decision invalidating clauses in agreements a wife and a daughter entered with an entity that operated nursing homes, using powers of attorney they obtained from family members, which required the family members to submit claims or controversies to binding arbitration, had to be reversed because it violated the FAA by singling out arbitration agreements for disfavored treatment. In ruling that a person holding a general power of attorney was not allowed to enter into an arbitration agreement for the person granting the power unless the representative possessed specific authority to waive his principal’s rights under the Kentucky Constitution to access the courts and to trial by jury, the Kentucky Supreme Court flouted the FAA’s command to place arbitration agreements on an equal footing with all other contracts.

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