U.S. Supreme Court Enforces Arbitration Clause in Kentucky Nursing Home Admission Documents

On May 17, 2017, the United States Supreme Court reversed a decision from the Kentucky Supreme Court in a 7-1 vote finding that the arbitration clause contained in a nursing home’s admission documents for a patient was enforceable under the Federal Arbitration Act. Kindred Nursing Limited Partnership v. Clark, May 15, 2017, 2017 U.S. Lexis 2948. The significance of this holding is that if a person holds a power of attorney for another and uses that power of attorney to execute a document that includes an arbitration clause, the power of attorney is not required to include express language that the attorney-in-fact has the authority to waive the principal’s right to a jury trial.

In the state court action, two residents of a Kindred operated nursing home had executed powers of attorney designating their family members as their respective attorneys-in-fact. Those designees signed the admittance paper work on behalf of their family members to be admitted to the nursing home. Included in those documents was a signed, separate agreement which stipulated that any disputes arising out of the residents’ stay would be resolved in arbitration.

After the patients died, their estates filed lawsuits alleging negligent care against the nursing home. The nursing home sought to enforce the arbitration agreement, but the Kentucky courts held that because the power of attorney documents did not expressly give the attorneys-in- fact the ability to waive the right to a jury, which is protected under the Kentucky constitution, the arbitration agreement was therefore unenforceable and the claims would have to proceed in state court. The lower court held that because the Kentucky constitution declares the rights of access to the courts and trial by jury to be “sacred and inviolate”, the court determined that an agent could only deprive her principal of such rights if it was expressly provided in the power of attorney.

The United States Supreme Court reversed the Kentucky Supreme Court finding the Kentucky’s court’s “clear statement rule” violates the Federal Arbitration Act by singling out arbitration agreements for disfavored treatment. The United States Supreme Court found that the Kentucky court’s holding failed to put arbitration agreements on an equal plane with other contracts as required by the FAA. Such a ruling by the Kentucky Supreme Court would not be applicable to other contracts but, instead, they singled out the arbitration agreement as if it was related to an attorney-in-fact’s ability to waive the right to a jury and go to arbitration. Thus, such a ruling was in violation of the FAA which preempts any state law interpretation on this issue.

Thus, if a person is utilizing a power of attorney to execute written contracts or agreements, such as a nursing home admission document, and those contracts include an arbitration clause which waives the right to a jury trial, the U.S. Supreme Court has now ruled that it is not grounds to deny enforcement of the arbitration clause simply because the power of attorney did not expressly state that the attorney-in-fact was given the authority to waive the right to a jury trial and enter into arbitration agreements. Accordingly, it would be no defense to the enforcement of an arbitration agreement that the attorney-in-fact did not have the express authority in the power of attorney document to waive the right to have their claims adjudicated by a judge or jury.

This is also an important case as it relates to the supremacy of the FAA and that federal courts will make efforts to enforce arbitration agreements and not allow courts to make a clear statement that singles out arbitration agreements for disfavored treatment.