Argument analysis: Justices dubious of state-court decision limiting pre-dispute arbitration contracts
on Feb 23, 2017 at 10:44 am
Yesterday’s argument in Kindred Nursing Centers Limited Partnership v. Clark had the justices retracing some pretty familiar terrain, as they considered whether the Federal Arbitration Act pre-empts a decision of a state supreme court holding an arbitration agreement unenforceable based on the lower court’s thinly disguised hostility to pre-dispute arbitration agreements. This particular contract called for arbitration of disputes between Kentucky nursing homes and their residents. Representatives of the residents routinely signed those contracts, relying on broadly written general powers of attorney granted by the residents. The Kentucky court held that the powers of attorney were not broad enough to authorize execution of arbitration agreements, explaining that powers of attorney would need to mention arbitration contracts specifically because arbitration contracts involve a waiver of fundamental constitutional rights (like the right to a jury trial).
The bench approached the argument largely from the perspective offered by Andrew Pincus, representing the nursing homes, who argued that the decision of the Kentucky Supreme Court must be reversed if it failed to put arbitration contracts on an “equal footing” with contracts in general. Two distinct threads of discussion dominated the argument. First, several of the justices besieged Robert Salyer, arguing on behalf of Janis Clark and Beverly Wellner, the residents, with questions reflecting a widely shared skepticism that the Kentucky opinion could be read as an evenhanded treatment of arbitration.
By far the most acerbic was Justice Stephen Breyer. He pressed two of his typically extended hypotheticals. The first one asked whether a contract that granted an attorney the right to litigate a dispute would include the right to seek a bench trial or mediation, both of which would involve a waiver of the right to a jury trial. When Salyer answered that the attorney’s authorization would include a right to make those strategic decisions, Breyer responded pointedly: “I will tell you in my opinion right now you have discriminated against arbitration.” Salyer attempted to backtrack, but Breyer cut him off caustically:
I’m testing out whether it’s really true [that you’re not discriminating against arbitration]. 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, … you’re going to say no, they would never do that. … [But i]t seems to me that arbitration as a means of settlement of a … dispute, mediation as a means of settling a dispute, a judge as a means of settling a dispute, are equally and no different in the respect that none of those three involves a trial by jury.
A few minutes later, Breyer returned with a hypothetical about patent litigation, perhaps thinking of the opinion in Life Technologies Corporation v. Promega Corporation announced minutes before the argument. This time, he posited a contract authorizing an attorney to manage a patent, which resulted in litigation that terminated in a settlement containing a confidentiality agreement limiting the client’s rights to cast aspersions on a competitor’s patent. Breyer suggested that perhaps under Kentucky law the power of attorney would not authorize the settlement because the settlement waived rights of free speech. This time, Salyer quickly agreed. But that did not pacify Breyer any more than Salyer’s previous responses. Still unsatisfied, Breyer retorted: “Every time I think of examples that would be very weird, … you say, oh, well, yeah, that’s right. You can’t do that anymore in Kentucky. And every time you say that, the law of Kentucky in terms of … powers of attorney is getting more and more peculiar. That’s why I suspect something is going [on] there.”
A second theme in the argument, which occupied much of the time Pincus spent at the podium, was an apparent effort to explore and define boundaries to a decision reversing the Kentucky court. The problem troubling the justices was that it is difficult to distinguish between an opinion discriminating against arbitration and an opinion announcing a broad and non-discriminatory rule calling for a narrow reading of powers of attorney. Summarizing the situation, Justice Anthony Kennedy put the problem this way: “In other words, for a number of years Kentucky allowed powers of attorney and the first time that one was called into question under this theory was with reference to arbitration.”
Viewed that way, as Chief Justice John Roberts explained, the Kentucky court’s opinion “doesn’t single out arbitration. That happens to be the issue before it. It seems to me what it’s coming down to is you just don’t believe the Kentucky Supreme Court when it says this is the general principle. And you’re saying, well, I really think you’re hostile to arbitration because I haven’t heard that principle before.” Similarly, Justice Elena Kagan noted that “[u]sually we don’t presume that State courts are acting in ways that are not in accordance with law. Actually, we usually give them the benefit of a kind of good faith presumption.”
If any single statement epitomized the argument, it was a question Breyer posed to Pincus near the end of his rebuttal argument: “Now, sometimes courts don’t write enough in the opinion for us to make the decision as to whether or not it is being discriminated against, in which case we send it back and ask them to write more. So is that what we should do?” That certainly leaves open the possibility that a desire to give state courts the benefit of the doubt will lead a majority of the justices to take the Kentucky court more or less at its word. But I for one would be surprised to see that result later this spring. The long string of summary reversals and evasive state-court opinions in the area suggests that most of the justices would feel duped if they let this case pass without reversal.