The United States Supreme Court has long upheld the validity and enforceability of arbitration agreements. Thus, it was no surprise when the Court reversed a decision from the Kentucky Supreme Court that declined to recognize arbitration agreements executed by individuals pursuant to powers of attorney. In Kindred Nursing Centers LP. v. Clark, the Court held that family members with powers of attorney may enter into arbitration agreements on behalf of nursing home residents.
In Kindred Nursing Centers, two separate families admitted their elderly family members, (hereafter “the residents”) to a Nursing Home. In both cases, the family members completed admission paperwork on behalf of the residents, pursuant to powers of attorneys. The admission paperwork included an arbitration agreement, which provided that “any 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. When the residents subsequently died, their estates brought lawsuits against the Nursing Home. The Nursing Home moved to compel arbitration.
The Kentucky Supreme Court held that the arbitration agreements were invalid. In so holding, the Kentucky Supreme Court purported to create a “clear statement rule.” Under the “clear statement rule,” the Kentucky Supreme Court held that the family members could only enter into arbitration agreements on behalf of the residents, if the powers of attorney expressly gave them the right to enter into arbitration agreements. Because neither power of attorney expressly addressed arbitration agreements, the Kentucky Supreme Court found them insufficient to authorize the family member to waive the residents’ right to a jury. The United States Supreme Court reversed.
On appeal, the United States Supreme Court explained that the Federal Arbitration Act (FAA) makes arbitration agreements valid, irrevocable, and enforceable. While arbitration agreements are subject to generally applicable contract defenses, they cannot be invalidated pursuant to rules that apply only to arbitration agreements. The Supreme Court then held that Kentucky’s “clear statement rule” ran afoul of the FAA because it required arbitration agreements to be expressly authorized by powers of attorney when other contracts did not require such express authorization. This violates the FAA because the FAA requires that arbitration agreements be on equal footing as all other contracts.
The United States Supreme Court then analyzed the specific powers of attorney at issue. The first power of attorney authorized the family member to (among other things) “institute legal proceedings” and “make contracts of every nature in relation to both real and personal property.” On remand, the United States Supreme Court instructed the Kentucky Supreme Court to evaluate whether the forgoing language encompassed the ability to execute arbitration agreements. The second power of attorney authorized the family member to “transact, handle, and dispose of all matters affecting [the resident] and/or [the resident’s] estate in any possible way” including the power to “draw, make, and sign in [the resident’s] name any and all … contracts, deeds or agreements.” The Supreme Court held that this second power of attorney was broad enough to encompass the execution of an arbitration agreement. Thus, the second resident’s arbitration agreement must be enforced.
Kindred Nursing Centers removes any doubt that nursing homes may enforce arbitration agreements executed on a resident’s behalf by their attorney-in-fact, provided that the underlying power-of-attorney provides sufficient contracting authority.