SUPREME COURT REVERSES STATE COURT RULE INVALIDATING NURSING HOME ARBITRATION AGREEMENTS SIGNED BY P

On May 15, 2017, the Supreme Court of the United States (SCOTUS) announced its decision in Kindred Nursing Centers v. Clark. SCOTUS held that a Kentucky high court’s ruling violated the Federal Arbitration Act by singling out arbitration agreements for disfavored treatment. This case began with the filing of two nursing home malpractice cases. In both cases the contract between the resident and facility contained an arbitration clause. The contracts were signed by powers of attorney (POA). The nursing home defendant sought to enforce the arbitration agreements and the plaintiffs argued that they were unenforceable. The POA documents provided the POA with general authority to enter into contracts on behalf of the principal.

However, in siding with the plaintiffs the Kentucky Supreme Court held that the arbitration clause was unenforceable because the POAs did not delineate the specific authority to enter into arbitration or to waive a jury trial. SCOTUS rejected this analysis citing prior recent decisions supporting the preemption of the Federal Arbitration Act over state law. SCOTUS reasoned that the Act obligates state courts to put arbitration agreements on an “equal footing” with other contracts.

This case illustrates a tension between proponents of the Federal Arbitration Act which favors pre-trial resolution of disputes to avoid the costs and risks of litigation versus conflicting state laws which often disfavor such agreements.

Contact an attorney at Holy & Schultz if you have questions related to an arbitration clause in a nursing home contract.

Disclaimer: The following is for informational purposes only. No statement, opinion or commentary is intended to provide legal advice to any specific person, organization or entity. Only a written attorney-client agreement will create an attorney-client relationship. Please contact Michael C. Holy or Carl M. Schultz to discuss all potential legal matters.