Justices Bend Toward Arbitration in Nursing Home Case

WASHINGTON (CN) – Poised to reinforce arbitration powers, the Supreme Court seemed inclined Wednesday to block lawsuits against nursing homes by residents whose children waived their right to sue.

The battle against Kindred Nursing Centers and Extendicare in Kentucky hinges on a contract law that says that attorneys-in-fact cannot bind their principals to arbitration unless the power of attorney expressly refers to arbitration agreements.

Though the broad powers of attorney include “the power to make contracts,” the Kentucky Supreme Court did not find this sufficient to waive a “divine God-given right” to a jury trial.”

Attorneys for the nursing homes contend that Kentucky’s law is pre-empted by the federal Arbitration Act, and the Supreme Court seemed receptive at oral arguments Wednesday.

“What I really think happened is that Kentucky just doesn’t like the federal law,” Justice Stephen Breyer said. “That’s what I suspect. So they’re not going to follow it.”

Andrew Pincus, representing the nursing homes for the Washington firm Mayer Brown, faced little argument from the court Wednesday.

“The question in this case is whether the Federal Arbitration Act precludes Kentucky from erecting the special obstacle to enforce arbitration agreements signed by an attorney-in-fact,” Pincus said. “To ask that question, we believe, is to answer it. That’s the very reason that Congress enacted the FAA, to prevent discriminatory rules targeting arbitration agreements.”

The Federal Arbitration Act opened up arbitration as a method to settle disputes when it was passed in 1925.

Pincus said the problem is not that the Kentucky ruling regulates the use of arbitration agreements, but that it singles them out from all other types of contracts for special treatment. He said there would not be a problem if, for example, the state had a law that declared all contracts have to be in 10-point type and the court applied that law to arbitration agreements.

“The problem, obviously, arises if there’s some gerrymandering that puts arbitration in a special category,” Pincus said.

Some justices questioned Pincus about whether his argument drew too tightly to recent Supreme Court precedent favoring arbitration clauses.

“This is really taking the arbitration precedence that we have handed down in recent years into a different category of interests,” Justice Samuel Alito told Pincus.

Breyer kept the other side on the defensive almost singlehandedly Wednesday, skeptical that more than a century of Kentucky common law supports his clients’ case.

Robert Salyer, an attorney for the residents with the Lexington firm Wilkes and Mchugh, called Kentucky “a common-law state in the development of its power-of-attorney interpretive law.”

“It is not a uniform power-of-attorney act state,” Salyer said. “Therefore, over time, the Kentucky Supreme Court and the lower courts of Kentucky developed Kentucky’s interpretive rules regarding powers of attorney case by case, again, over time. And this is the rule that the Kentucky has established in this case below. The power to waive generally fundamental constitutional rights must be unambiguously expressed in the text of a power of attorney.”