Supreme Court Showdown Over Nursing-Home Arbitration

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By Scott Nelson, Public Citizen

About a million-and-a-half Americans, mostly elderly, are in nursing homes. Mortality rates in nursing homes are high, and abuse and neglect are common.

When victims and their families sue nursing homes for deaths or injuries resulting from improper care, they often find their path to court blocked by arbitration agreements the nursing homes had them sign at the time of admission. Arbitration agreements require people to give up their rights to go to court and force them to resolve cases through arbitration instead. In arbitration, cases are decided by private arbitrators who rely on companies such as nursing homes for repeat business. Arbitrators are bound by neither precedent nor rules of court procedure, and their decisions usually cannot be appealed. Because nursing homes think they have a better chance in front of a paid arbitrator than a judge and jury, nursing-home arbitration agreements have proliferated in recent years.

A federal law called the Federal Arbitration Act, or “FAA,” generally makes agreements to arbitrate enforceable, the same as other contracts. But there is a wrinkle in the nursing-home setting: Contracts signed when a patient is admitted to a nursing home are often not signed by the patient, but by a relative or some other representative. Whether a nursing home can use the FAA to make arbitration agreements signed by a patient’s representative stick will be argued before the U.S. Supreme Court this week in a case called Kindred Nursing Centers v. Clark.

The Kindred case started out as two cases in the Kentucky state courts, when the estates of two nursing-home residents who had died within months of admission to a Kindred Nursing Centers facility in Winchester, Kentucky, sued Kindred. The injuries they alleged included falls, skin sores, infections, medication errors, dehydration, and malnutrition—just the kinds of things nursing homes try to keep as far from juries as possible. True to form, Kindred asked the courts to compel arbitration, pointing out that relatives of both patients had signed arbitration agreements on their behalf when they were admitted.

The relatives were acting under written “powers of attorney” that defined their authority to enter into transactions on the patients’ behalf. But neither power of attorney said anything about agreeing to arbitrate. So were the arbitration agreements signed by the representatives binding on the patients?

The Supreme Court of Kentucky said no, applying Kentucky state law about powers of attorney. In one of the cases, the court found no language in the power of attorney that would authorize an arbitration agreement. In the other, the court recognized that language authorizing the representative to enter into contracts would, read literally, encompass the power to agree to arbitrate. But the court determined that such general language does not reasonably include authorization to waive a patient’s fundamental rights to access the courts and receive a trial by jury.

Kindred convinced the U.S. Supreme Court to take the case to decide whether the FAA’s requirement that arbitration agreements be enforced “preempts” the Kentucky courts’ state-law ruling that the representatives in these cases didn’t have authority to agree to arbitrate. Kindred relies on rulings in previous cases holding that the FAA preempts state contract-law rules that treat arbitration agreements worse than other kinds of contracts.

But the plaintiffs point out that the FAA doesn’t say anything about who has authority to enter into contracts on behalf of someone else. Moreover, the Supreme Court has repeatedly said that the FAA doesn’t require anyone to arbitrate unless he or she has agreed to do so. Requiring a power of attorney to be clear about whether it authorizes arbitration is perfectly consistent with that principle. If patients want their representatives to be able to agree to arbitration, it is easy enough to say so expressly. If they don’t want to authorize arbitration, the FAA doesn’t require them to.

The Supreme Court has for a number of years taken a very broad view of the FAA. But the outcome in this case is clouded because the Court currently has only eight members, and if there were a four-four tie, the state court’s ruling would stand. Moreover, Justice Thomas takes the idiosyncratic view that the FAA has no application in state-court cases like this one. And in several cases, the more liberal Justices have read the FAA more narrowly than the conservative bloc.

Whether it is ever fair to bind a nursing home patient to an arbitration agreement entered into at the very stressful time of admission to a facility is controversial. This case won’t settle that issue (which itself is the subject of an Obama Administration regulation now tied up in the courts). Whether a patient can be bound by an arbitration agreement entered into by someone else who didn’t have that authority ought to be a simpler question. Unfortunately, the Supreme Court’s overbroad reading of the FAA in previous creates doubt even over this fundamental issue.

Originally posted here.

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