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Resistance Or Retaining Shred of Dignity? Kentucky Responds On Kindred

By Liz Kramer | November 10, 2017 in Validity of Arbitration Agreement

If I had to choose a favorite subset of arbitration cases, it might be the ones that come after SCOTUS remands to a state supreme court.  How does a state high court full of accomplished professionals, the cream of the legal crop in their state, respond after the U.S. Supreme Court has found their previous arbitration opinion was flawed?  Often, they find a way to stick to their guns.  We already saw that once in 2017, when Hawaii affirmed its arbitration decision, despite the GVR from SCOTUS.  And now Kentucky has followed suit.

In Kindred Nursing Centers Ltd P’ship v. Wellner, 2017 WL 5031530 (Ky. Nov. 2, 2017), the Kentucky Supreme Court addressed what was left of its Extendicare decision after SCOTUS took it apart in May of this year.  But not much was left.  The original decision had consolidated three separate actions: one was not appealed to SCOTUS, one was reversed by SCOTUS, and only the third was remanded by SCOTUS.  In the remanded matter, the Kentucky Supreme Court had rested its decision on two alternative grounds–the ground that SCOTUS found was preempted (that a power of attorney must clearly grant the right to give up a court or jury trial in order to have a valid arbitration agreement executed by the agent), and a finding that the language of the power of attorney at issue was not broad enough to encompass entering into a pre-dispute arbitration agreement.  So, the job on remand was to determine whether the second ground could stand up on its own, or whether it was “impermissibl[y] taint[ed]” by the preempted ground.

A majority of the Kentucky Supreme Court found there was no taint.  The nursing home relied on two provisions in the power of attorney, one giving power to demand or collect money and institute legal proceedings, and another giving the power to make contracts “in relation to both real and personal property.”  The court found that the arbitration agreement “was not the enforcement…of something then due or to become due” “nor was it the making of a contract…pertaining to” property.  As a result, “that aspect of the Extendicare decision remains undisturbed.”

While four members signed the majority opinion, three members of the court dissented, complaining that the majority failed to follow SCOTUS’s directive.  The dissent wrote “this Court’s distinction between pre-dispute arbitration agreements as not pertaining to a principal’s property rights . . . is simply another attempt to single out arbitration for ‘hostile’ treatment under the guise of Kentucky contract and agency law.”

Indeed, the majority had not completed edited out its hostility to SCOTUS’s arbitration case law from the decision.  For example, it criticized the Supreme Court’s

perception that our application of the clear statement rule, rather than the manifestation of our profound respect for the right of access to the Court of Justice explicitly guaranteed by the Kentucky Constitution and the right to trial by jury designated as “sacred” by Section 7 of the Kentucky Constitution, demonstrated instead a hostility to federal policies implicit in the Federal Arbitration Act and a resulting aversion to any implication of authority to make an arbitration agreement.

Pro tip to Kentucky: edit out any future references to jury trials being sacred if you want to avoid another certiorari petition in an arbitration case.

 

 

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