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SCOTUS Hears Oral Argument in Kindred Nursing Centers FAA Preemption Case. Lots of Questions for Both Sides
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Oral argument took place February 22nd before the Supreme Court in Kindred Nursing Centers v. Clark, No. 16-32.

To review, the Court granted certiorari last October in related preemption cases involving an arbitration agreement in a nursing home admission agreement signed by an attorney-in-fact (SAC Ref. No. 2016-41-03). The issue as framed in the Petition for Certiorari: “The question presented is: Whether the FAA preempts a state-law contract rule that singles out arbitration by requiring a power of attorney to expressly refer to arbitration agreements before the attorney-in-fact can bind her principal to an arbitration agreement.” We perused the 51-page oral argument transcript and offer a few representative questions posed by the Justices. We used a page: line number convention in parentheses. Both attorneys were peppered with questions within a minute of uttering “May it please the Court…”

Questions to Petitioners’ Counsel

Justice Kennedy (3:23): “If the rule takes its meaning from a characteristic other than arbitration, to give an example, if a State had a law that said all consumer contracts have to be in at least 10-point type, surely the court -- the State could apply that law to an arbitration agreement associated with a consumer contract.”

Justice Sotomayer (5:10): “Under Kentucky law, let's say, the power of attorney requirements are strictly construed. That was one of the principles that the court below used to interpret at least one of the contracts. And as a general matter, it states that the State requires express consent to confer power to waive any fundamental constitutional right. Would this general principle be preempted by the FAA?”

Justice Alito (9:15): “But the context here seems different from the arbitration cases that we've had in recent years. 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... But you see the problem? This is really taking the arbitration precedents that we have handed down in recent years into a different category of interests.”

Justice Ginsburg (11:10): “What do you do with the argument that this doesn't have to do with the enforcement of an arbitration agreement? It goes to the question of whether the agreement was ever formed or made. That is, if it takes outside the power of attorney, the power to enter into arbitration agreements, so it's a question that goes to making that enforcement.”

Chief Justice Roberts (47:13): “The first time the [Kentucky] statute is applied, it happens to be to an arbitration case. It happens to be to this case. But you can't say oh, look in the background of it. It's all about hostility to arbitration. You can't…”

Questions to Respondent’s Counsel

Justice Ginsburg (19:4): “Is there an explicit reference -- to be effective, you've just told us, the power of attorney has to explicitly state that disputes will be settled by an arbitration. My question is whether there is any other contract that in order to be made effectively in Kentucky, it must be an explicit reference in the power of attorney.”

Justice Kennedy (19:24): “In other words, for a number of years Kentucky had allowed powers of attorney and the first time that one was called into question under this theory was with reference to the arbitration."

Justice Breyer (23:16): “Of course 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. That's what I suspect. So they're not going to follow it. Now, that, of course, you're going to say, no, they would never do that.”

Justice Ginsberg (35:19): “But what about the principle that making an arbitration agreement harder to form than other agreements violates the Federal Arbitration Act. As [Petitioners’ Counsel] mentioned, the main rule is equal footing. Arbitration we thought to be on the same footing as all other contracts. If you make the arbitration agreement harder to form because you have to have this explicit reference than other contracts, doesn't that discriminate against arbitration agreements?”

(ed: *As we’ve said many times before, you can go poor in a hurry betting on SCOTUS cases, but our money is still on a reversal, even with the current 4-4 Court composition. The key indicators to us are the questions posed by Justices Breyer and Ginsberg. **Audio recordings are generally posted at the end of the week; they can be found here. ***Perhaps we were correct when we said President Trump is closely following arbitration developments. Ivanka Trump and her daughter Arabella were present at the oral argument and tweeted about it! ****We will of course track this one and keep our readers and followers informed.) (SAC Ref. No. 2017-08-01)

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