US Supreme Court Holds That “Sacred” and “Inviolate” Right to Jury Trial is Subject to Waiver in Favor of Arbitration

US Supreme Court Holds That “Sacred” and “Inviolate” Right to Jury Trial is Subject to Waiver in Favor of Arbitration

      Last m onth, the United States Supreme Court issued an opinion reversing a decision of the Kentucky Supreme Court with respect to the enforcement of arbitration agreements. The Kentucky Supreme Court had held that certain agreements to arbitrate disputes arising out of care in nursing homes were not subject to arbitration because the powers of attorney, pursuant to which the admission documents were executed, did not specifically reference a right to enter into arbitration agreements on behalf of the principal. Rather, it held, that only a specific authority in the power of attorney to enter into arbitration would be effective to waive the “sacred” and “inviolate” right to a jury trial as enshrined in the Kentucky Constitution. The United States Supreme Court rejected that analysis, holding that an agreement to arbitrate could not be treated as different than any other agreement entered into on behalf of the principal pursuant to a power of attorney. Kindred Nursing Centers Limited Partnership v Clark, No. 16-32 (U.S. May 15, 2017).

       Under federal law and specifically the Federal Arbitration Act (the “FAA”), agreements to arbitrate disputes are fully enforceable on the same terms as is any other agreement. Put another way, courts are not allowed to single out agreements to arbitrate for special scrutiny or limitation. It may not do so directly and it may not do so indirectly. For example, in AT&T Mobility LLC v Concepcion, 563 U.S. 333, 342 (2011), the Supreme Court rejected a hypothetical law that declared invalid any contract that “disallow[ed.] in ultimate disposition [of the dispute] by a jury.”

      It was on that basis that the court struck down the Kentucky ruling, finding that its decision served “to safeguard a person’ ‘rght to access the courts and to trial by jury.’”.

      The Court also rejected the assertion that the FAA’ policy in favor of the enforcement of agreements to arbitrate should not apply with respect to the formation of the contract to arbitrate. In effect, while acknowledging that the FAA would require the enforcement of an agreement to arbitrate, they argued that the FAA did not apply to whether a contract to arbitrate had been entered into, that being exclusively a point of state contract law. The Supreme Court rejected this rule, finding:

A rule selectively finding arbitration contracts invalid because improperly formed fairs no better under the Act than a rule selectively refusing to enforce those agreements once properly made.

      This decision by the US Supreme Court is yet another in a line of decisions in recent years reinforcing the enforceability of agreements to arbitrate. Within the Commonwealth of Kentucky, the Supreme Court has clearly rejected the significant number of decisions in which, on a variety of bases, agreements to arbitrate nursing home and other healthcare disputes, those agreements having been entered into via powers of attorney, are invalid. In consequence, it should be expected that many of those disputes will now go to arbitration. There is, however, an additional cost that must be recognized. While the decedent's claim against the healthcare facility may now be resolved in arbitration, claims of spouses and children for consortium losses will continue to be litigated in state court, those claims not being subject to the decedent’s agreement to arbitrate.