State cannot limit enforcement of arbitration agreement signed by agent, US Supreme Court holds

By Lori Irish Bauman
May 17, 2017

Earlier this week, the US Supreme Court again invoked the federal policy of enforcing arbitration agreements.  The Court reversed a Kentucky state court opinion holding that an arbitration agreement is unenforceable if it is signed by an individual with power of attorney, unless the power of attorney expressly authorizes waiver of the right to a jury trial.

In Kindred Nursing Centers LP v. Clark, two individuals who had power of attorney for their elderly relatives signed paperwork to move the relatives into a nursing home.  The paperwork included an agreement to arbitrate any disputes.  When the relatives later sued claiming substandard care, the nursing home moved to dismiss, citing the arbitration clause.  The Kentucky Supreme Court observed that the state constitution declares the right of access to the court and trial by jury to be “sacred” and “inviolate.”  On that basis, the Kentucky court held that an agent – in this case, a person with a power of attorney – cannot deprive her principal of such rights unless it is expressly so provided in the power of attorney.

On review, Justice Kagan, writing for the majority, stated that the Federal Arbitration Act (FAA) requires courts to place arbitration agreements on an equal footing with all other contracts.  Regardless of whether access to court and right to trial by jury are given special status by the state constitution, the Kentucky court’s ruling would impermissibly put arbitration agreements on a different footing than other contracts entered into pursuant to a power of attorney.  On that basis, the lower court’s holding was reversed.   

See our discussion of earlier US Supreme Court cases applying the FAA here and here.

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