For a bench that usually protects arbitration agreements from attack, the U.S. Supreme Court on Wednesday seemed unusually hostile to such arrangements when they are embedded in nursing home contracts.
The court heard arguments in Kindred Nursing Centers v. Clark, in which the Kentucky Supreme Court ruled against enforcing arbitration agreements that were signed on behalf of two nursing home residents by relatives with “power of attorney.”
The families of the deceased residents sued the nursing home company claiming abuse and neglect. The company invoked the arbitration agreements to keep the cases out of court, but the Kentucky Supreme Court ruled that the power of attorney does not include giving them the authority to take away the “inviolate” right to a jury trial under the state constitution.
The Obama administration issued regulations prohibiting nursing homes from requiring patients to sign arbitration agreements in the interest of greater transparency and accountability. But the Trump administration may have a different take on the issue.
In recent decisions like DirecTV v. Imburgia and AT&T Mobility v. Concepcion the court has invoked the Federal Arbitration Act to protect arbitration agreements from being singled out for differential and negative treatment under state law.
But several justices seemed to be singing a different tune on Wednesday.
“The context here seems different from the arbitration cases that we’ve had in recent years,” Justice Samuel Alito Jr. said at one point. “This doesn’t involve an arbitration about the amount that you were charged for your cable bill or for your telephone bill. This involves a situation where an elderly person needs care.”
The nursing home company’s lawyer, Andrew Pincus of Mayer Brown, who won the 2011 Concepcion case, insisted that “the FAA basically says the state doesn’t have the power to treat arbitration agreements specially on the theory that they impose some special burden on the parties to the arbitration agreement.”
Pincus sat down after 20 minutes, leaving 10 minutes for rebuttal—usually a sign that things are going well.
But during his rebuttal, Pincus drew sharp questions from Justice Elena Kagan and Chief Justice John Roberts Jr.
Defending the authority of the Kentucky Supreme Court, Roberts said that court had not singled out arbitration by name in its decision regarding the power of attorney, and could not be presumed to be hostile to arbitration. He suggested such a ruling was different from a legislative act aimed at weakening arbitration agreements. “You haven’t come up with a distinction that persuades me,” Roberts said.
Kagan said the high court’s precedents seek to put arbitration agreements on an equal footing with other contract clauses. But she suggested that Pincus was treating it as a “preferred right” that is immune from interpretation if a court decision deals with the power of attorney. “Are you saying that a court can never announce a generally applicable rule first in an arbitration case?” Kagan asked.
Robert Salyer of Wilkes & McHugh in Kentucky, representing the families of the nursing home residents, also faced tough questioning, but mainly from one justice: Stephen Breyer.
Breyer repeatedly asked Salyer to distinguish between an arbitration agreement that keeps a case out of court—thereby extinguishing the right to a trial—and a settlement agreement before trial that does the same thing. Kentucky was punishing the first but allowing the second, Breyer said.
Salyer failed to answer the question to Breyer’s satisfaction, leading the justice to say, “In my opinion right now you have discriminated against arbitration” in violation of the federal arbitration law.
Breyer added, “I’m highly suspicious, as you can tell from my tone of voice. What I really think has happened is that Kentucky just doesn’t like the federal law. ”