Kindred v. Clark involves two Kentucky cases, in which family members of deceased Kindred nursing home residents, Joe Wellner and Olive Clark, filed lawsuits against Kindred. They alleged that Kindred’s substandard care led to the deaths of the decedents. In response, the nursing home moved to dismiss the cases, claiming that arbitration agreements barred the plaintiffs from asserting their claims in court.

The arbitration agreement was identical in both the Wellner and Clark cases. It stated that “any and all claims or controversies arising out of or in any way relating to … the Resident’s stay at the Facility” were to be resolved through binding arbitration, rather than by a lawsuit.

In both cases, the arbitration agreements had been signed by the residents’ agents under powers of attorney. The Wellner power of attorney gave the agent the authority to “institute legal proceedings” and to enter into “contracts of every nature.…” The Clark power of attorney gave the agent “full power… to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way,” including the authority to “draw, make, and sign in my name… contracts, deeds, or agreements.”

The Kentucky Supreme Court had consolidated the two cases and affirmed the lower courts’ rulings that the arbitration agreements were invalid. The Kentucky Supreme Court reasoned that the powers of attorney did not specifically authorize the agents to enter into an arbitration agreement, and that the right to a jury trial is a “sacred” and “inviolate” right protected by the Kentucky Constitution. Thus, the Kentucky court expressed what the U.S. Supreme Court later characterized as a “clear-statement rule”: only a power of attorney that expressly authorized an agent to enter into an arbitration agreement (or any other fundamental constitutional right) would allow the agent to deprive the principal of that right. The court justified this ruling as complying with the Federal Arbitration Act (“FAA”) (which requires courts to place arbitration agreements “on equal footing with all other contracts”) because it would apply to all contracts that implicated fundamental constitutional rights.

The Supreme Court of the United States rejected the Kentucky ruling. It found that the FAA “preempts any state rule discriminating on its fact against arbitration,” and dictates that a court may not invalidate an arbitration agreement “on legal rules that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” The Court continued that covert attempts to accomplish this result are also impermissible.

The Court found that the Kentucky court’s clear-statement rule had been 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.” As such, it was “too tailor-made to arbitration agreements… to survive the FAA’s edict against singling out those contracts for disfavored treatment.” The Supreme Court declared that “the [Kentucky] court thus flouted the FAA’s command to place [arbitration] agreements on an equal footing with all other contracts.”

It reversed the Clark decision, and remanded the Wellner case for the state court to consider whether the power of attorney was sufficiently broad to give the agent authority to enter into the arbitration agreement, but cautioned that this analysis must not be “impermissibly tainted” by its now rejected “clear-statement rule.”

Notably, although it warned that arbitration agreements must be placed on equal footing with other contracts, the U.S. Supreme Court specifically stated that “a court nevertheless may invalidate an arbitration agreement based on ‘generally applicable contract defenses’ like fraud or unconscionability.”

The case was argued on February 22, 2017 and decided May 15, 2017. Kagan, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy, Ginsburg, Breyer, Alito, and Sotomayor, JJ., joined. Thomas, J., filed a dissenting opinion. Gorsuch, J., took no part in the consideration or decision of the case.

The U.S. Supreme Court opinion is annexed here – Kindred Nursing Centers v. Clark

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