Supreme Court Rules in Favor of Arbitration Agreements for Nursing Homes

On May 15, 2017, the U.S. Supreme Court ruled that a state court could not invalidate a nursing home resident’s agreement to arbitrate disputes on the grounds that the resident’s power of attorney document did not expressly mention arbitration agreements. The Supreme Court ruled that a contrary decision by the Kentucky Supreme Court violated the Federal Arbitration Act (FAA), by singling out arbitration agreements for disfavored treatment. The U.S. Supreme Court determined that the FAA establishes an equal treatment principle, that a court may invalidate an arbitration agreement based on generally applicable contract defenses, but not on legal rules that apply only to arbitration provisions. By requiring an explicit statement before an agent can relinquish his or her principal’s right to go to court and receive a jury trial, the Kentucky court failed to put arbitration agreements on an equal plane with other contracts, which violates the FAA.

The case arose from two separate arbitration agreements signed by attorneys-in-fact for residents of a Kentucky nursing home. Upon the deaths of the residents, the estates of the residents brought personal injury/wrongful death actions against the nursing home. The nursing home moved to dismiss the cases, arguing that the arbitration agreements were enforceable. Ultimately, the Supreme Court agreed. The Supreme Court’s decision is significant in that it strengthens the FAA, and specifically its application to nursing homes. The decision is Kindred Nursing Centers, L.P. v. Clark, U.S., No. 16-32.

In a related issue, the Trump administration is considering repealing a 2016 rule issued by the Centers for Medicare & Medicaid Services which bars nursing homes from receiving federal funding if the nursing home forces residents to sign arbitration agreements. Due to a federal court injunction, the rule has never gone into effect.