Kentucky Supreme Court Revisits Nursing Home Arbitration Case Overturned by SCOTUS

In May, the United States Supreme Court overturned the Supreme Court of Kentucky’s decision in Kindred Nursing Centers Limited Partnership v. Clark, No. 16-32, (May 15, 2017).  As described in another Disputing blog post, the lawsuit:

…initially consisted of three separate cases where a family member who held the power of attorney for an individual who was being admitted to a Kentucky nursing home signed a pre-dispute binding arbitration agreement as part of the admission documents.  In each case, the family member later brought individual personal injury and wrongful death lawsuits against the nursing home where their loved one resided claiming the poor care that was provided by the facility directly resulted in the resident’s death.  In response to the three lawsuits, each respective nursing home filed a motion to compel arbitration based on the various agreements that were signed by the family members upon the decedents’ admission to the skilled care facilities.  In all three cases, the nursing home’s motion was denied.

The three lawsuits eventually made it to the Kentucky Supreme Court where they were consolidated into a single interlocutory appeal. With regard to two of the cases, the Kentucky Supreme Court ultimately held “the authority to enter into a pre-dispute arbitration agreement was not among the powers granted to respective attorney-in-fact and, therefore the arbitration agreements were not formed with the assent of the party to be bound thereby.”

The Kentucky high court stated:

We further conclude that without a clear and convincing manifestation of the principal’s intention to do so, we will not infer the delegation to an agent of the authority to waive a fundamental personal right so constitutionally revered as the “ancient mode of trial by jury.” Consequently, because none of the power-of-attorney instruments involved in these cases provide a manifestation of the principal’s intent to delegate that power to his agent, we conclude that the agent was not so authorized, and that the principal’s assent to the waiver was never validly obtained. Accordingly, we deny the motions for interlocutory relief. In so doing, we affirm the orders of the Court of Appeals.

Next, two of the three case were appealed to the U.S. Supreme Court which promptly overturned the Kentucky high court’s decision.  The U.S. Supreme Court stated:

The 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. §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.” AT&T Mobility LLC v. Concepcion, 563 U. S. 333, 339 (2011). The FAA thus preempts any state rule discriminating on its face against arbitration—for example, a “law prohibit[ing] outright the arbitration of a particular type of claim.”  Id., at 341.  And not only that: The Act also displaces any rule that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements.

According to the U.S. court, the Kentucky court’s clear-statement rule failed “to put arbitration agreements on an equal plane with other contracts.”   The nation’s high court added:  “Such a rule is too tailor-made to arbitration agreements— subjecting them, by virtue of their defining trait, to uncommon barriers—to survive the FAA’s edict against singling out those contracts for disfavored treatment.”

After that, one case was subsequently remanded back to the Supreme Court of Kentucky.  On November 2nd, a majority of the court determined its earlier decision was free from the “taint of anti-arbitration bias.” The Kentucky Supreme Court said:

Not a scintilla of our original analysis of the Wellner POA rested upon the premise that the authority to waive constitutional rights (or the corresponding authority to arbitrate a claim) must be clearly stated. Moreover, our analysis clearly expressed the opposite—that whenever reasonably consistent with the principal’s expressed grant of authority, we would infer without a clear statement the power to bind him to an arbitration agreement. Kindred’s agreement failed, not because the Wellner POA lacked a clear statement referencing the authority to waive Joe’s fundamental constitutional rights; it failed because, by its own specific terms it was not executed in relation to any of Joe Wellner’s property, and it was not a document pertaining to the enforcement of any of Joe’s existing claims.

As established by the rationale plainly stated in Extendicare, our conclusion that the Wellner POA was insufficient to vest Beverly Wellner with the power to execute a pre-dispute arbitration agreement as part of Joe Wellner’s admission to a nursing home was wholly independent of the clear statement rule decried by the United States Supreme Court. Therefore, as stated by the United States Supreme Court, that aspect of the Extendicare decision remains undisturbed.

Still, three members of the Kentucky high court dissented based on a belief that the majority “failed to follow the United States Supreme Court’s directive in the penultimate paragraph of its decision forcefully reversing the original majority opinion in this case.”  The dissent added “Arbitration has received its fair share of criticism and some of it is fully justified but adopting the majority’s artificial distinctions regarding language in POAs is a dangerous way to combat the perceived dangers of arbitration.”  Finally, the dissent stated the meaning of the Wellner POA should be reevaluated without a tainted and “negative view of arbitration.”

Hat tip to Liz Kramer at ArbitrationNation!

Photo credit: kevin dooley via Foter.com / CC BY