Over the past decade, the United States Supreme Court has repeatedly held that the Federal Arbitration Act (“FAA”) preempts state laws on arbitration.
For example, in 2011 the Supreme Court struck down California law regarding the unconscionability of class-arbitration waivers in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). Similarly, the Supreme Court concluded in 2015 that parties could not contract around FAA preemption regarding class-arbitration waivers. DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015).
In February, the Supreme Court heard oral argument in a case out of Kentucky that might give hope to those who would like to see the Court buck the trend toward federal preemption of state laws limiting arbitration. In Kindred Nursing Centers Limited Partnership v. Clark, residents of a Kentucky nursing home signed general power of attorney forms. The forms gave family members broad authority over all future business affairs involving the residents, including the ability to sign contracts as well as the ability to institute or defend suits. However, the documents did not specifically mention arbitration. The individuals given power of attorney then signed arbitration agreements, as attorneys-in-fact, with the nursing home on behalf of the residents.
Disputes arose when some of the residents died in allegedly sub-standard conditions. The attorneys-in-fact for the residents’ estates sought to avoid arbitration in the wrongful death cases that ensued. The Kentucky Supreme Court held that the arbitration agreements were unenforceable because the powers of attorney were not specific enough to bind the residents to arbitration. Of particular concern to the Kentucky Court was that the residents would be unwittingly giving up their constitutional right to a jury trial. Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306, 328 (Ky. 2015), cert. granted sub nom., Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 368 (2016). Read more.