Kindred Nursing Centers, L. P. v. Clark

The Kentucky Supreme Court’s clear-statement rule that a power of attorney does not allow a representative to enter into an arbitration agreement without expressly providing that the representative may do so violates the Federal Arbitration Agreement.

Two Respondents each held a power of attorney for their respective family members who were at a nursing home operated by Petitioner. Respondents used their powers of attorney to complete all necessary paperwork, including signing an arbitration agreement with Petitioner. Respondents’ family members died and Respondents sued Petitioner, alleging that Petitioner had delivered substandard care to the deceased family members, causing their deaths. Petitioner argued that the arbitration agreements prevented Respondents from filing the claims. The Kentucky Supreme Court affirmed the denial of Petitioner’s motions, announcing a clear-statement rule that a power of attorney does not allow a representative to enter into an arbitration agreement without expressly providing that the representative may do so. The Federal Arbitration Agreement (FAA) places arbitration agreements on the same footing as other contracts and preempts any state rule that discriminates against arbitration. The U.S. Supreme Court held that the Kentucky Supreme Court’s rule violated the FAA by failing to put arbitration agreements on an equal plane with other contracts. The FAA covers contract formation and therefore applies to the initial validity of the arbitration agreements. The Kentucky Supreme Court must now enforce one of the arbitration agreements that it invalidated because the power of attorney did not specifically authorize Respondent to enter into it. However, for the second arbitration agreement, the Kentucky Supreme Court decided that the power of attorney was insufficiently broad to give Respondent the authority to execute an arbitration agreement. If this determination is independent of the court’s clear-statement rule, then it shall remain undisturbed. REVERSED in part, VACATED in part, and REMANDED.