Law Offices of John C. Lane
Supreme Court Again Favors Arbitration
The Federal Arbitration Act mandates that agreements to arbitrate disputes are “valid, irrevocable, and enforceable.” The Act preempts any state law or rule that singles out arbitration agreements and seeks to prohibit or limit such an agreement entered into validly. In Kindred Nursing Centers v. Clark (May 15, 2017), the Supreme Court of the United States overturned a Kentucky Supreme Court decision that ruled that an arbitration agreement involving a nursing home and its patients was barred by the state constitution’s guarantee to a jury trial. That state ruling, says the Supreme Court, was applied, in particular, to invalidate the arbitration clause, and that violates the Federal Arbitration Act’s premise that courts must place arbitration agreements “on equal footing with all other contracts.”
Two nursing home patients entered into nursing home agreements through their personal representatives using powers of attorney. The Kentucky court held that the powers of attorney did not specifically permit the representatives to waive their principals’ right to a jury trial and bind them to arbitration of any disputes with the nursing home. It was that specific ruling that required reversal by the Supreme Court.
Courts in states such as New Jersey have issued decisions refusing to enforce arbitration agreements in certain settings, such as consumer and employment agreements, and even in nursing home agreements. One recent unreported appellate decision, nearly identical in its facts to Kindred, ruled against arbitration. The author of the landmark 2014 New Jersey Supreme Court Atalese opinion, which barred arbitration in a consumer setting, defended that ruling at a talk in May at the State Bar convention, saying that the decision complies with federal rulings such as Kindred Nursing. Other commentators disagree and suggest that New Jersey and other States are not in step with the Supreme Court of the United States. The debate will continue.
© June 2017, Law Offices of John C. Lane