U.S. Supreme Court Says State’s Arbitration Law is Preempted by the Federal Arbitration Act

In this case, the Kentucky Supreme Court’s clear-statement rule was held to violate the Federal Arbitration Act by singling out arbitration agreements for disfavored treatment.

The Federal Arbitration Act (the Act) makes arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,” 9 U.S.C. ¶ 2, establishes an equal-treatment principle: A court may invalidate an arbitration agreement based on “generally applicable contract defenses,” but not on legal rules that “apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue,” AT&T Mobility, LLC v. Concepcion, 563 U.S. 333, 339.

The Act thus preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements.

The Kentucky Supreme Court’s clear-statement rule fails to put arbitration agreements on an equal plane with other contracts. By requiring an explicit statement before an agent can relinquish her principal’s rights to go to court and receive a jury trial, the court did exactly what this court has barred: adopt a legal rule hinging on the primary characteristic of an arbitration agreement.

Because the Kentucky Supreme Court invalidated the Clark-Kindred arbitration agreement in this nursing home matter, based exclusively on the clear-statement rule, the court must now enforce that agreement. But because it is unclear whether the court’s interpretation of the document was wholly independent of its rule, the court should determine on remand whether it adheres, in the absence of the rule to its prior reading of that power of attorney. Accordingly, the court reversed in part, vacated in part and remanded the case for further disposition.

Kindred Nursing Centers, L.P. v. Clark, In the United States Supreme Court, No. 16-32 (May 15, 2017).

Kreisman Law Offices has been successfully handling nursing home abuse cases, nursing home negligence cases and medical malpractice cases for individuals, families and loved ones who have been injured, harmed or killed by the negligence of a medical provider for more than 40 years, in and around Chicago, Cook County and surrounding communities, including Morton Grove, Winfield, Westchester, Hillside, Hanover Park, Inverness, Vernon Hills, Maywood, Homewood, Bolingbrook, Highwood, Highland Park, Lake Bluff, Libertyville, Chicago (Rogers Park, Andersonville, Jefferson Park, Wicker Park, South Loop, West Town, Little Italy, Back of the Yards), Long Grove, Wilmette and Niles, Ill.