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Kindred Nursing Centers Limited Partnership v. Clark

United States Supreme Court

May 15, 2017

KINDRED NURSING CENTERS LIMITED PARTNERSHIP, DBA WINCHESTER CENTRE FOR HEALTH AND REHABILITATION, NKA FOUNTAIN CIRCLE HEALTH AND REHABILITATION, ET AL., PETITIONERS
v.
JAMS E. CLARK ET AL.

          Argued February 22, 2017

          ON WRIT OF CERTIORARI TO THE SUPREME COURT OF KENTUCKY

         Respondents 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 family member's affairs. When Joe and Olive moved into a nursing home operated by petitioner Kindred Nursing Centers L. P., Beverly and Janis used their powers of attorney to complete all necessary paperwork. As part of that process, each signed an arbitration agreement on her relative's behalf providing that any claims arising from the relative's 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 cases, arguing that the arbitration agreements prohibited bringing the disputes to court. The trial court denied Kindred's motions, and the Kentucky Court of Appeals agreed that the suits could go forward.

         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 determined, an agent could deprive her principal of such rights only if expressly provided in the power of attorney.

         Held:

The Kentucky Supreme Court's clear-statement rule violates the Federal Arbitration Act by singling out arbitration agreements for disfavored treatment. Pp. 4-10.

         (a) The FAA, which 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, establishes an equal-treatment principle: 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. Conception, 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 clear-statement rule fails to put arbitration agreements on an equal plane with other contracts. 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 this Court has barred: adopt a legal rule hinging on the primary characteristic of an arbitration agreement. Pp. 4-7.

         (b) In support of the decision below, respondents argue that the clear-statement rule affects only contract formation, and that the FAA does not apply to contract formation questions. But the Act's text says otherwise. The FAA cares not only about the "enforce [ment]" of arbitration agreements, but also about their initial "valid[ity]"-that is, about what it takes to enter into them. 9 U.S.C. §2. Precedent confirms the point. In Conception, the Court noted the impermissibility of applying a contract defense like duress "in a fashion that disfavors arbitration." 563 U.S., at 341. That discussion would have made no sense if the FAA had nothing to say about contract formation, because duress involves "unfair dealing at the contract formation stage." Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527, 547. Finally, respondents' view would make it trivially easy for States to undermine the Act. Pp. 7-9.

         (c) Because the Kentucky Supreme Court invalidated the Clark-Kindred arbitration agreement based exclusively on the clear-statement rule, the court must now enforce that agreement. But because it is unclear whether the court's interpretation of the Wellner document was wholly independent of its rule, the court should determine on remand whether it adheres, in the absence of the rule, to its prior reading of that power of attorney. Pp. 9-10. 478 S.W.3d 306, reversed in part, vacated in part, and remanded.

          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.

          OPINION

          Kagan, JUSTICE

         The Federal Arbitration Act (FAA or Act) requires courts to place arbitration agreements "on equal footing with all other contracts." DIRECTV, Inc. v. Imburgia, 577 U.S.__, __ (2015) (slip op., at 6) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)); see 9 U.S.C. §2. In the decision below, the Kentucky Supreme Court declined to give effect to two arbitration agreements executed by individuals holding "powers of attorney"-that is, authorizations to act on behalf of others. According to the court, a general grant of power (even if seemingly comprehensive) does not permit a legal representative to enter into an arbitration agreement for someone else; to form such a contract, the representative must possess specific authority to "waive his principal's fundamental constitutional rights to access the courts [and] to trial by jury." Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306, 327 (2015). Because that rule singles out arbitration agreements for disfavored treatment, we hold that it violates the FAA.

         I

         Petitioner Kindred Nursing Centers L. P. operates nursing homes and rehabilitation centers. Respondents Beverly Wellner and Janis Clark are the wife and daughter, respectively, of Joe Wellner and Olive Clark, two now-deceased residents of a Kindred nursing home called the Winchester Centre.

         At all times relevant to this case, Beverly and Janis each held a power of attorney, designating her as an "attorney-in-fact" (the one for Joe, the other for Olive) and affording her broad authority to manage her family member's affairs. In the Wellner power of attorney, Joe gave Beverly the authority, "in my name, place and stead, " to (among other things) "institute legal proceedings" and make "contracts of every nature in relation to both real and personal property." App. 10-11. In the Clark power of attorney, Olive provided Janis with "full power ... to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way, " including the power to "draw, make, and sign in my name any and all ... contracts, deeds, or agreements." Id., at 7.

         Joe and Olive moved into the Winchester Centre in 2008, with Beverly and Janis using their powers of attorney to complete all necessary paperwork. As part of that process, Beverly and Janis each signed an arbitration agreement with Kindred on behalf of her relative. The two contracts, worded identically, provided that "[a]ny and all claims or controversies arising out of or in any way relating to . . . the Resident's stay at the Facility" would be resolved through "binding arbitration" rather than a lawsuit. Id., at 14, 21.

         When Joe and Olive died the next year, their estates (represented again by Beverly and Janis) brought separate suits against Kindred in Kentucky state court. The complaints alleged that Kindred had delivered substandard care to Joe and Olive, causing their deaths. Kindred moved to dismiss the cases, arguing that the arbitration agreements Beverly and Janis had signed prohibited bringing their disputes to court. But the trial court denied Kindred's motions, and the Kentucky Court of Appeals agreed that the estates' suits could go forward. See App. to Pet. for Cert, l25a-l26a, l37a-l38a.

         The Kentucky Supreme Court, after consolidating the cases, affirmed those decisions by a divided vote. See 478 S.W.3d, at 313. The court began with the language of the two powers of attorney. The Wellner document, the court stated, did not permit Beverly to enter into an arbitration agreement on Joe's behalf. In the court's view, neither the provision authorizing her to bring legal proceedings nor the one enabling her to make property-related contracts reached quite that distance. See id., at 325-326; supra, at 2. By contrast, the court thought, the Clark power of attorney extended that far and beyond. Under that document, after all, Janis had the capacity to "dispose of all matters" affecting Olive. See supra, at 2. "Given this extremely broad, ...


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