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 Plaintiffs moved their loved ones into a nursing home operated by Defendant, each held a power of attorney used to complete all the paperwork. Each signed a contract on her relative’s behalf agreeing to arbitrate any disputes arising out of living at Defendant. When both relatives died the following year, Plaintiffs brought separate lawsuits on behalf of their loved ones, alleging Defendant provided substandard care resulting in their deaths. Defendant attempted to dismiss the lawsuits on the ground that arbitration precluded them, but the Kentucky courts found both arbitration agreements invalid. Specifically, the Kentucky Supreme Court found that because the state constitution guarantees an inviolate right to a jury trial, a power of attorney must clearly state the agent may deprive the principal of that right to do so. The court concluded that clear-statement rule complied with the Federal Arbitration Act (FAA) even though it treated entering arbitration agreements differently than other types of contracts. The U.S. Supreme Court granted review.

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.