Supreme Court Accepts Preemption Case Involving State Power-of-Attorney Rule

The question in Kindred Nursing Centers v. Clark is whether the Federal Arbitration Act preempts Kentucky’s rule that an “attorney-in-fact” may bind a principal to an arbitration agreement only if the power-of attorney document expressly refers to arbitration agreements.

A number of parents executed power-of-attorney documents designating one of their children “attorney-in-fact.” While some of these documents gave the children broad rights to act on their parent’s behalf (“to do and perform for me in my name all that I might if present”), none explicitly gave their children the authority to agree to arbitration (rather than a jury trial) to resolve disputes regarding their parent’s legal rights.

All the children signed an arbitration agreement when their parents were admitted to nursing homes. After the parents died in the nursing homes, the children wanted to sue the nursing homes—and avoid arbitration—for various claims.

Per the Federal Arbitration Act all valid arbitration agreements must be enforced. The Kentucky Supreme Court concluded that the arbitration agreements in this case were invalidly formed. The children did not have the authority to agree to arbitration where the power-of-attorney documents did not express state they had that authority.

The Kentucky Supreme Court reasoned that it would be “strange” if a broad grant of authority in a power-of-attorney document allowed the “attorney-in-fact” to waive the principal’s civil rights or right to worship or allowed the “attorney-in-fact” to terminate the principal’s parental rights. So why should an “attorney-in-fact” be “authorized to bargain away his principal's rights of access to the courts and to a jury trial”?

In the Kentucky Supreme Court’s words: “It bears emphasis that the drafters of our Constitution deemed the right to a jury trial to be inviolate, a right that cannot be taken away; and, indeed, a right that is sacred, thus denoting that right and that right alone as a divine God-given right.”

As of right now this is the only preemption case the Supreme Court has agree to hear this term.