Finally, a Win for Long-Term Care Facilities: United States Supreme Court Invalidates Kentucky Rule Singling Out Arbitration Agreements

by Reminger Co., LPA

Anyone familiar with long term care litigation knows that the number of disputes regarding the use and enforcement of arbitration agreements in the context of assisted living/nursing home admissions has risen sharply over the last several years.  Attorneys for residents and their families often want to invalidate a signed arbitration agreement once the dispute has arisen, preferring to make a negligence case to a jury.  Facilities generally want to enforce the agreement, for obvious reasons (reduced litigation costs, preference for a neutral arbitrator, the possibility of limited discovery and/or a confidential verdict, etc.).

Over the last decade, the Kentucky Supreme Court has repeatedly declined to enforce arbitration agreements signed by the power of attorney (“POA”) for a nursing home resident where the written POA did not specifically mention authority to bind the principal to an arbitration agreement as one of the agent’s enumerated powers.  Even where the POA granted the agent broad authority to do “anything and everything” the agent might do on his or her own behalf, the Kentucky Supreme Court held that this did not give the agent power to bind the principal to an arbitration agreement.  Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306, 312 (Ky. 2015) and Kindred Nursing Centers Limited Partnership v. Clark, 2016 Ky. LEXIS 76 (Ky. 2016). 

Kentucky federal district courts were quick to conclude that the Whisman/Clark rule ran afoul of the Federal Arbitration Act (“FAA”), which requires courts to treat arbitration agreements just like any other contract.  See e.g., Preferred Care of Del., Inc. v. Crocker, 173 F. Supp. 3d 505 (W.D. Ky. Mar. 24, 2016) (holding that the FAA preempts Whisman because it singles out arbitration agreements and requires more to enforce an arbitration agreement than other contracts); GGNSC Stanford, LLC v. Gilliam, 2016 U.S. Dist. LEXIS 120365, 2016 WL 4700135 (E.D. Ky. Sept. 7, 2016) (same).  Despite these federal decisions, the vast majority of Kentucky state courts continued to follow Whisman and refused to enforce arbitration agreements signed by the POA of a nursing home resident unless the POA specifically stated that the agent had authority to bind the principal to an arbitration agreement.

Until now. On May 15, 2017, the United States Supreme Court issued its slip opinion in Kindred Nursing Centers Limited Partnership v. Clark, 581 U.S. ___ (2017), reversing in part and vacating in part both Clark and Whisman. In this decision, the Court reaffirmed that the FAA requires courts to place arbitration agreements “on equal footing with all other contracts.” The Court also reiterated that the FAA preempts any state rule which, on its face, discriminates against arbitration agreements.  This is precisely what the Whisman rule did, which conflicts with the letter and spirit of the FAA.  That, the Court explained, makes the rule invalid.

This decision is a significant win for long term care facilities which offer arbitration agreements to residents upon admission. Such agreements are frequently signed by the resident’s POA, but the written POA rarely (if ever) specifically mentions arbitration. Under Whisman, those agreements were not enforceable in Kentucky.  Now, as a general rule, the same arbitration agreements will be enforceable (subject to other state law requirements for all contracts) should a resident or his/her estate want to bring claims against the facility at a later date.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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