The U.S. Supreme Court’s recent decision in Kindred Nursing Centers Limited Partnership v. Clark reaffirmed the Court’s protective stance toward arbitration agreements. The Court firmly rejected a Kentucky decision that adopted a “clear-statement” rule under which an agent could deprive her principal of the rights of access to courts and trial by jury through an arbitration agreement only if expressly stated in the power of attorney. The Court held that the clear-statement rule violated the Federal Arbitration Act (FAA) by singling out arbitration agreements for disfavored treatment.
The FAA requires that an arbitration agreement be placed on “equal footing” with other contracts. Any state rule that expressly discriminated against arbitration (e.g., a law banning arbitration of a particular type of claim), or that covertly accomplished the same objective by disfavoring contracts having the defining features of arbitration agreements, are preempted by the FAA.
The Court questioned the sincerity of the Kentucky Supreme Court’s rationale supporting its clear-statement rule. The Kentucky Supreme Court’s “sometime-attempt” to apply the rule in broader terms to “other fundamental constitutional rights” was emphatically (and sarcastically) rejected. For instance, writing for the majority, Justice Kagan responded: “But what other rights, really? No Kentucky court, so far as we know, has ever before demanded that a power of attorney explicitly confer authority to enter into contracts implicating constitutional guarantees.” Justice Kagan also noted that “[n]othing in the decision below (or elsewhere in Kentucky law) suggests that explicit authorization is needed before the attorney-in-fact can sign a settlement agreement or consent to a bench trial on her principal’s behalf.” The Court concluded that the arbitration-specific character of the clear-statement rule—“much as if it were made applicable to arbitration agreements and black swans”—violated the FAA.