Kindred Nursing Centers Limited Partnership v. Clark

Brief Fact Summary.

Plaintiffs brought separate lawsuits on behalf of their loved ones, alleging that Defendant provided substandard care resulting in the deaths of their loved ones. Defendant attempted to dismiss the lawsuits on the ground that the signed arbitration agreements precluded them, but the Kentucky courts found both agreements invalid. The U.S. Supreme Court granted review.

Synopsis of Rule of Law.

The FAA preempts Kentucky state-law precedent that requires a power of attorney agreement to expressly grant an attorney-in-fact the power to bind her principal to an arbitration agreement.

Facts.

When the Plaintiffs admitted their relatives into a nursing home managed by the Defendant, they each used a power of attorney to complete the necessary paperwork. They signed contracts on behalf of their relatives agreeing to arbitrate any disputes related to the care provided by the Defendant. After their relatives died the following year, the Plaintiffs filed separate lawsuits alleging that the Defendant’s substandard care led to the deaths. The Defendant sought to dismiss these lawsuits, arguing that the arbitration agreements barred them. However, Kentucky courts invalidated both arbitration agreements. The Kentucky Supreme Court ruled that the state constitution’s guarantee of an inviolate right to a jury trial requires a power of attorney to explicitly state that the agent can waive this right. The court held that this clear-statement rule was consistent with the Federal Arbitration Act (FAA), even though it imposed different requirements for arbitration agreements compared to other contracts. The U.S. Supreme Court agreed to review the case.

Issue.

Does the FAA preempt Kentucky state-law precedent that requires a power of attorney agreement to expressly grant an attorney-in-fact the power to bind her principal to an arbitration agreement?

Held.

Yes. The court held that the FAA preempts Kentucky’s state-law precedent that requires a clear statement in the power of attorney agreement in order to grant an attorney-in-fact the power to bind her principal to an arbitration agreement.

Discussion.

The FAA preempts state-law precedent that requires a power of attorney agreement to expressly grant an attorney-in-fact the power to bind her principal to an arbitration agreement. Under the FAA, arbitration agreements may only be found invalid and unenforceable based on legal rules that would apply to any contract. Rules that apply only to arbitration agreements, even if they do not do so explicitly but focus on contracts that have the characteristics of arbitration agreements, violate the FAA and are therefore preempted.

Here, Kentucky’s clear statement rule did not put arbitration agreements on equal footing with other contracts, because it focused exclusively on the primary characteristic of an arbitration agreement–the waiver of the right to a jury trial. Because there is a conflict between Kentucky’s clear statement rule (state law) and the FAA (federal law), the FAA preempted it. Therefore, the court must accordingly uphold the arbitration agreements and require Plaintiffs to submit their estate claims to arbitration.