Beverly Wellner and Janis Clark - the wife and daughter, respectively, of Joe Wellner and Olive Clark - each held a power of attorney affording her broad authority to manage her relative’s affairs. When Joe and Olive moved into a nursing home operated by Kindred Nursing Centers, Beverly and Janis used their powers of attorney to complete all necessary paperwork. As part of that process, each signed an arbitration agreementon her relative’s behalf providing that any claims arising from their stay at the facility would be resolved through binding arbitration. After Joe and Olive died, their estates (represented by Beverly and Janis) filed suits alleging that Kindred’s substandard care had caused their deaths. Kindred moved to dismiss the lawsuits, on the grounds that they were barred by the arbitration agreements. The trial court denied Kindred’s motions, the Kentucky Court of Appeals agreed, and the Kentucky Supreme Court consolidated the cases and affirmed. The court initially found that the language of the Wellner power of attorney did not permit Beverly to enter into an arbitration agreement on Joe’s behalf, but that the Clark document gave Janis the capacity to do so on behalf of Olive. Nonetheless, the court held, both arbitration agreements were invalid because neither power of attorney specifically entitled the representative to enter into an arbitration agreement. Because the Kentucky Constitution declares the rights of access to the courts and trial by jury to be “sacred” and “inviolate,” the court ruled that an agent could deprive her principal of such rights only if expressly provided in the power of attorney. The U.S. Supreme Court reversed.
The Federal Arbitration Act, the Court held, 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. A court may invalidate an arbitration agreement based on “generally applicable contract defenses,” 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. The Act thus preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements. The Kentucky Supreme Court’s clearstatement rule failed to put arbitration agreements on an equal plane with other contracts, and by requiring an explicit statement before an agent can relinquish her principal’s right to go to court and receive a jury trial, the court did exactly what the FAA prohibited: adopt a legal rule hinging on the primary characteristic of an arbitration agreement.
The Court remanded for consideration by the Kentucky Supreme Court of the validity of the Wellner document, independent of its application of the flawed rule.
581 U. S. ____ (2017), Thomas, J., dissenting; Gorsuch, J., took no part in the consideration or decision of the case.
About the blogger:
Phil Moss is a member of the State of Maine’s Panel of Mediators, and has been active in alternative dispute resolution since he first entered the legal profession. In 1975, Phil was one of fifty attorneys who volunteered to participate in the pilot mediation program for the Boston Municipal Court, and in subsequent years he volunteered as a participant in pilot mediation projects for the Maine Human Rights Commission and the Maine Superior Court system. As an advocate he participated in well over 100 arbitrations and mediations, involving the hospitality industry, trucking and warehousing, supermarkets and public utilities (including nuclear power), among others. For a number of years prior to his retirement from the active practice of law, Phil was included in New England Super Lawyers, and listed in Chambers USA, America’s Leading Business Lawyers and in The Best Lawyers in America. Phil has worked pro bono publico for a number of organizations, including the Jewish Community Center of Portland, ME, the Pine Tree Council of the Boy Scouts of America and the Maine chapter of NAMI (National Alliance on Mental Illness).