Supreme Court Sides With Nursing Home In Arbitration Case

May 15, 2017, Lydia Wheeler, The Hill - The Supreme Court sided with a Kentucky nursing home Monday in a case challenging the use of forced arbitration agreements in nursing home admissions.  In a 7-1 ruling, the justices said the lower court violated the Federal Arbitration Act when it declined to give effect to the agreements Beverly Wellner and Janis Clark had signed with power of attorney on behalf of their relatives.

When Wellner and Clark’s relatives died, they sued Kindred Nursing Centers L.P. for allegedly providing a substandard level of care, but the nursing home moved to dismiss the lawsuits, arguing that the arbitration agreements prohibited them from bringing their disputes to court.  The Kentucky Supreme Court declared the agreements invalid. The court said power of attorney must expressly allow an agent to deprive the principle of their right to access the courts.

In delivering the majority opinion, Justice Elena Kagan said the lower 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 — namely, a waiver of the right to go to court and receive a jury trial,” she said. 

In a dissenting opinion, Justice Clarence Thomas claimed the Federal Arbitration Act (FAA) does not apply to proceedings in state courts.  “In state-court proceedings, therefore, the FAA does not displace a rule that requires express authorization from a principal before an agent may waive the principal’s right to a jury trial. Accordingly, I would affirm the judgment of the Kentucky Supreme Court,” he said.

Justice Neil Gorsuch took no part in considering or deciding the case.