Nursing Home Arbitration Agreements Upheld at High Court

WASHINGTON (CN) – In its latest backing of arbitration powers, the Supreme Court ruled Monday against the estates of nursing home residents whose children waived their right to sue.

“As we did just last term, we once again ‘reach a conclusion that … falls well within the confines of (and goes no further than) present well-established law,’” Justice Elena Kagan wrote for the 7-1 court, citing DirecTV Inc. v. Imburgia, a 2015 reinforcement of the Federal Arbitration Act.

In the case at hand, the Kentucky Supreme Court had effectively hamstrung arbitration agreements by saying an agent could not deprive his principal of an adjudication by judge or jury unless the power of attorney provided for this expressly.

The majority determined Monday, however, that this so-called clear-statement rule “fails to put arbitration agreements on an equal plane with other contracts.”

Using stronger language later, Kagan said the court had “flouted the FAA’s command to place those agreements on an equal footing with all other contracts.” Her 10-page opinion draws parallels between the Kentucky rule and the one struck down in the 2011 decision AT&T Mobility LLC v. Concepcion.

“The court,” she wrote, “did exactly what Concepcion barred: adopt a legal rule hinging on the primary characteristic of an arbitration agreement — namely, a waiver of the right to go to court and receive a jury trial. 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.”

Kagan cut through what she called the court’s attempt salvage its decision by casting the rule in broader terms.

Questioning what other constitutional right the clear-statement rule could protect, Kagan noted that “no Kentucky court, so far as we know, has ever before demanded that a power of attorney explicitly confer authority to enter into contracts implicating constitutional guarantees.”

Nowhere, for example, did the state court caution “that an attorney-in-fact would now need a specific authorization to, say, sell her principal’s furniture or commit her principal to a nondisclosure agreement.”

“Were we in the business of giving legal advice,” Kagan added in parentheses, “we would tell the agent not to worry.”

Kagan said Kentucky’s rule “hypothesized a slim set of both patently objectionable and utterly fanciful contracts that would be subject to its rule.”

“Placing arbitration agreements within that class reveals the kind of ‘hostility to arbitration’ that led Congress to enact the FAA,” Kagan added. “And doing so only makes clear the arbitration-specific character of the rule, much as if it were made applicable to arbitration agreements and black swans.”

In the case at hand, the Kentucky Supreme Court had consolidated a pair of lawsuits brought against Kindred Nursing Centers by residents of its Winchester Centre for Health and Rehabilitation.

Kindred had been sued by Beverly Wellner, on behalf of the estate of her husband, Joe Wellner, and by Anis Clark, on behalf of the estate of her mother, Olive Clark. A third suit, which did not go to the Supreme Court, involved the estate of Shady Lawn Nursing Home resident Van Adams against a parent company called Extendicare.

In each case, despite written arbitration agreements executed by the residents’ attorneys-in-fact, the circuit court sided with all three estates, and the Court of Appeals affirmed.

Kagan noted Monday, however, that the high court is reversing only the judgment in favor of the Clark estate.

“Our decision might not require such a result in the Wellner case,” the opinion states. “The Kentucky Supreme Court began its opinion by stating that the Wellner power of attorney was insufficiently broad to give Beverly the authority to execute an arbitration agreement for Joe. If that interpretation of the document is wholly independent of the court’s clear-statement rule, then nothing we have said disturbs it. But if that rule at all influenced the construction of the Wellner power of attorney, then the court must evaluate the document’s meaning anew. The court’s opinion leaves us uncertain as to whether such an impermissible taint occurred. We therefore vacate the judgment below and return the case to the state court for further consideration. On remand, the court should determine whether it adheres, in the absence of its clear-statement rule, to its prior reading of the Wellner power of attorney.”

Justice Neil Gorsuch had not yet won Senate confirmation when the court heard oral arguments. He did not participate in Monday’s ruling.

Justice Clarence Thomas signed a brief dissent that says it is his belief that the FAA “does not apply to proceedings in state courts.”

“In state-court proceedings, therefore, the FAA does not displace a rule that requires express authorization from a principal before an agent may waive the principal’s right to a jury trial,” Thomas added. “Accordingly, I would affirm the judgment of the Kentucky Supreme Court.”

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