In Kindred Nursing Center Ltd. Partnership v. Clark, the United States Supreme Court recently continued its protection of arbitration agreements by holding that the Federal Arbitration Act (FAA) preempted the Kentucky “clear statement” rule, because it disfavored arbitration agreements.
Kindred Nursing Centers operated nursing homes and rehabilitation centers. When two of its former nursing home residents died, the decedents’ children, who held powers of attorney, filed wrongful death suits against the nursing home alleging substandard care. The nursing home moved to dismiss the cases, based on arbitration agreements that the children signed as a condition of their parents moving into the nursing home. The trial court ruled against the nursing home, which then appealed to the Kentucky Court of Appeals and the Kentucky Supreme Court. Both courts affirmed. Kentucky’s Supreme Court held that the arbitration agreements did not authorize the children to waive their parents’ rights to a jury trial. The right to a jury trial, the court held, is “sacred and God-given,” and cannot be waived by an individual with power of attorney, unless in a “clear statement,” the power of attorney document explicitly authorizes it.
The U.S. Supreme Court overturned the Kentucky Supreme Court’s decision, and by a 7-1 vote, soundly rejected the “clear statement” rule. The Supreme Court unequivocally asserted that the FAA, as it did with the “clear statement” rule, preempts any state rule that disfavors or diminishes the enforceability of arbitration agreements. The Supreme Court seemed skeptical of the state court’s sincerity and dismissed the state court’s claim that the rule applied to arbitration agreements and other contracts.
Kindred adheres to a long line of pro-arbitration Supreme Court decisions which have held that arbitration agreements must be treated the same as all other contracts. But Kindred goes even further. Under Kindred, the FAA will not only preempt any state rule that expressly disfavors arbitration agreements, it will also preempt any rule “that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements.”
Kindred’s 7-1 decision illustrates not only the Supreme Court’s continued support for arbitration agreements but also its increasingly aggressive approach to FAA preemption. It sends a clear message that the Supreme Court will not tolerate state rules aimed at circumventing the FAA. And it paves the way for the greater enforcement of arbitration agreements, not only in Kentucky, but all jurisdictions.