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Kentucky Supreme Court Splits on Kindred Remand from SCOTUS: Clark Dispute Will Be Arbitrated; Wellner Will Not
Posted on Categories Arbitration, Arbitration Agreements, Court Decisions, News, Non-Securities Arbitration, StateTags , , , , ,

The Kentucky Supreme Court accepts SCOTUS's striking its "clear statement" rule as arbitration-hostile, but a majority insists arbitration denial on alternative grounds was righteous.

Recall that the Supreme Court on May 15th ruled 7–1 in Kindred Nursing Centers v. Clark & Wellner, 137 S.Ct. 1421, that a Kentucky rule of law requiring that a power of attorney specifically authorize nursing home agreements to arbitrate was preempted by the Federal Arbitration Act, because the judge-made "clear statement" rule mostly impacted predispute arbitration agreements (“PDAA”) (see our May 19th blog post: We Called It! SCOTUS Rules that FAA Preempts Kentucky Rule of Law Impinging on Arbitration). At the same time, SCOTUS remanded another Kindred case, dealing with deceased patient Joe P. Wellner, for further consideration by the Kentucky Supreme Court. That Court's review in Kindred Nursing Centers v. Wellner, No. 2016-SC-000032-I, was announced in a 21-page decision, dated November 2, 2017, that denies arbitration.

Wellner POA "Insufficiently Broad"

The difference between the Clark and Wellner decisions, from an arbitration viewpoint, rests on the grounds that the Kentucky Supreme Court relied upon in denying arbitration under the Kindred agreements. In the Clark case, the Court relied wholly upon the "clear statement" or specific authorization pronouncement and that is the proposition that SCOTUS rejected. In the Wellner case, the Court relied upon the "clear statement" rule, but also stated an alternative ground for rejecting the pre-dispute arbitration clause in Beverly Wellner's power of attorney: it was "insufficiently broad." Thus, in remanding Wellner, SCOTUS instructed: "The [Kentucky Supreme] court's opinion leaves us uncertain.... On remand, the court should determine whether it adheres, in the absence of its clear-statement rule, to its prior reading of the Wellner power of attorney [POA]."

Split Decision -- The Majority

In a 4-3 Opinion, the state Court rules that its earlier finding that the POA was focused and too restricted in its scope to contemplate arbitration stands "wholly independent" of the "clear statement" finding. It points out that it started its decision in Wellner with the "insufficiently broad" finding and it re-traces its analysis to illustrate its solid foundations. "Kindred's agreement failed," the majority writes, "not because the Wellner POA lacked a clear statement referencing the authority to waive Joe's fundamental constitutional rights; it failed because, by its own specific terms, it was not executed in relation to any of Joe Wellner's property, and it was not a document pertaining to the enforcement of any of Joe's existing claims." As such, the decision to deny arbitration stands (ed: The majority mentions Clark and accepts that arbitration should be ordered in that case.)

A Strong Dissent

The dissent vigorously disagrees with the Court's refusal to budge, calling the distinction it makes to avoid reversing itself "is simply another attempt [ed: the first one being the "clear statement" rule??] to single out arbitration for 'hostile' treatment under the guise of Kentucky contract and agency law." The dissent, written by Justice Hughes is joined by the Chief Justice and Judge VanMeter; the Opinion runs one page longer than the majority's -- there's a real taffy pull going on here!

(ed: *This reminds us a bit of Doctor's Associates v. Casarotto, 517 U.S. 681(1996), where the Montana Supreme Court also stuck to its guns on remand in a somewhat similar situation, and was reversed – again – by SCOTUS. **The majority Opinion starts off fairly persuasive, if a bit fulsome in its denials, but it soon loses traction and becomes enmired in muddied distinctions. ***Still, the power to construe contracts or interpret the reasonable expectations of the parties is the province of state courts and, on a case-by- case basis, such rulings as this are well-nigh untouchable. If Kindred seeks review of Wellner II, we'd expect SCOTUS to pass.) (SAC Ref. No. 2017-42-02)

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