Kindred Nursing Centers v. Clark – May
15, 2017 – U.S. Supreme Court
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.
(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,” . . . . 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 Concepcion, 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 ClarkKindred arbitration
agreement based exclusively on the clearstatement 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, 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.
