Mayhew-Hite Report        Kindred Nursing Centers Limited Partnership v. Clark

Amanda M. Morris

The Supreme Court recently released an opinion on consolidated cases out of Kentucky in which the Federal Arbitration Act (FAA) was found to preempt a state rule targeting arbitration agreements in nursing home contracts. This decision is in line the Court’s previous FAA preemption cases, which hold that arbitration agreements must not be treated differently than other contracts.[1]

Background: Kindred Nursing Centers Limited Partnership v. Clark[2] arose out of cases originating in Kentucky state courts. The estates of two residents filed cases against a nursing home facility alleging wrongful death and personal injury claims.[3] The defendants filed a motion to dismiss and compel arbitration.[4] The Kentucky Supreme Court consolidated the cases and affirmed the lower courts’ denial for interlocutory relief to compel arbitration.[5] The Kentucky Supreme Court held that the right to a trial is a “God-given” and “sacred right” which a principal cannot waive without granting explicit authority to agents to enter arbitration agreements in a power of attorney.[6]

Before the Supreme Court, the question presented was “[w]hether the FAA preempts a state-law contract rule that singles out arbitration by requiring a power of attorney to expressly refer to arbitration agreements before the attorney-in-fact can bind her principal to an arbitration agreement.”[7]

Decision: Justice Kagan authored the opinion which held that the Kentucky “clear-statement rule” violated the Federal Arbitration Act by “singl[ing] out arbitration agreements for disfavored treatment.”[8] The Court noted that the rule would allow “States to undermine the Act.”[9] The Court was not persuaded by the argument that the Kentucky Court’s decision created a broad contract rule.[10] The FAA prevents enforcement of “any rule that covertly accomplishes the same objective by disfavoring contracts that . . . have the defining features of arbitration agreements.”[11] Therefore, by requiring power of attorneys to expressly grant consent to enter arbitration agreements, the rule necessarily violated the FAA.[12]

Conclusion: In a predictable continuation of the arbitration line of cases, Kindred reaffirmed the Supreme Court’s position that arbitration agreements must be “on equal footing” as other contracts per the Federal Arbitration Act.[13]

[1] See e.g. AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468–69 (2015); see also Federal Arbitration Act, 43 Stat. 883 (1925) (codified as amended 9 U.S.C. §§ 1–16).
[2] Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S.Ct. 1421 (2017) (Thomas, J., dissenting). Justice Gorsuch had no role in the decision and as expected, Justice Thomas dissented in line with his previous FAA dissents stating that the FAA is not applicable in state court proceedings. Id.
[3] See Extendicare Homes v. Adams, 478 S.W.3d 306, 329 (2015).

[4] See Id.
[5] See Id.
[6] Id. at 329–30.

[7] Petition for Writ of Certiorari, Kindred, 2016 WL 3640709 (No. 16–32) at i.
[8] Kindred, 137 S.Ct. at 1425, 1427.
[9] Id. at 1428.
[10] See Id.; see also Extendicare, 478 S.W.3d 306.
[11] Id. at 1426.
[12] See Id.
[13] Buckeye Check Cashing v. Cardegna, 126 S.Ct. 1204, 1207 (2006).