Amicus Curiae Brief — Kindred Nursing Ctrs. Ltd. P'ship v. Clark, 137 S. Ct. 1421 (2017) (No. 16-32)

No. 16-32 Supreme Court, US.

; ‘Inte Aue 5 208

Supreme Court of the Gnited THE CLERK

KINDRED NURSING CENTERS LIMITED

PARTNERSHIP d/b/a WINCHESTER CENTRE FOR

HEALTH AND REHABILITATION n/k/a FOUNTAIN

CIRCLE HEALTH AND REHABILITATION;

KINDRED NURSING CENTERS EAST, LLC; KINDRED

HOSPITALS LIMITED PARTNERSHIP; KINDRED

HEALTHCARE, INC.; KINDRED HEALTHCARE

OPERATING, INC.; KINDRED REHAB SERVICES, INC.

d/b/a PEOPLEFIRST REHABILITATION,

Petitioners,

Vv.

JANIS E. CLARK, Executrix of the Estate of OLIVE G.

CLARK, deceased, and on behalf of the wrongful death

beneficiaries of OLIVE G. CLARK; and BEVERLY

WELLNER, Individually and on behalf of the

Estate of JOE P. WELLNER, deceased, and on behalf of

the Wrongful Death Beneficiaries of JOE P. WELLNER,

Respondents.

.

On Petition For A Writ Of Certiorari

To The Supreme Court Of Kentucky

.

BRIEF AMICUS CURIAE FOR GENESIS

HEALTHCARE, INC., DIVERSICARE HEALTHCARE

SERVICES, INC., GGNSC LOUISVILLE MT. HOLLY LLC

D/B/A GOLDEN LIVINGCENTER - MT. HOLLY,

BROOKDALE SENIOR LIVING INC., SIGNATURE

HEALTHCARE, LLC, HCR MANORCARE AND

KENTUCKY PARTNERS MANAGEMENT, LLC

IN SUPPORT OF THE PETITIONERS

.

DONALD L. MILLER, I

Counsel of Record

KRISTIN M. LOMOND

QUINTAIROS, PRIETO, Woop & Boyer, PA.

9300 Shelbyville Road, Suite 400

Louisville, KY 49222

(502) 423-6390

dmiller@gpwblaw.com

klomond@gpwblaw.com

Counsel for. Amici Curiae

COCKLE LEGAL BRIEFS (800) 225-6064

WWW COCKLELEGALBRIEFR.COM e new of Congres

1

QUESTION PRESENTED

Whether the FAA preempts a state-law contract rule

that singles out arbitration by requiring a power of at-

torney to expressly refer to arbitration agreements be-

fore the attorney-in-fact can bind her principal to an

arbitration agreement.

il

TABLE OF CONTENTS

Page

SPREE PES We UIT BE Risicecccussssevacssetenssnssssncess i

gv) PF Re ig pe REED iV

IDENTITY AND INTERESTS OF THE AMICT.... 1

STATUTORY PROVISIONS INVOLVED ...........

i REET CPL AROS ch CPU nee oR 4

SUMMARY OF THE ARGUMENT ...................... 7

ARGUMENT IN SUPPORT OF THE PETITION.... 9

I. FORARBITRATION CONTRACTS, WHIS-

MAN APPLIED DIFFERENT RULES AND

DEMANDED SPECIFICITY FOR EN-

FORCEMENT NOT REQUIRED FOR

OTHER CONTRACTS........ ies ddtaadpameamnndalass 10

Il. WHISMAN IGNORES THE FAA’S PROHI-

BITION AGAINST ELEVATED STANDARDS

FOR ARBITRATION CONTRACTS ........... 11

Ill. WHISMAN INCORRECTLY BASED ITS

HOLDING ON A “GOD-GIVEN RIGHT”

TO JURY TRIAL: NO SUCH “RIGHT” EX-

ISTS OR WAS EVER IMPLICATED ......... 12

IV. WHISMAN’S APPLICATION TO VALID

ARBITRATION AGREEMENTS VIOLATES

FUNDAMENTAL CONSTITUTIONAL

I sade ick cihchissonses secdvancsdethneateeenseiaabiaes 15

ii

TABLE OF CONTENTS — Continued

Page

A. Whisman Violates the Due Process

Clause of the Fourteenth Amendment

by Impairing the Fundamental Federal

By OP CR cccivesécoscveisscésoscncensevens 17

B. Whisman Violates the Equal Protec-

tion Clause of the Fourteenth Amend-

ment by Refusing to Treat Long-Term

Care Providers Similarly..................... 19

V. STATE COURT RESTRICTIONS ON

ARBITRATION RIGHTS POSE A SUB-

STANTIAL THREAT TO AN INCREAS-

INGLY IMPORTANT INDUSTRY ............ 22

ID i abisicsntnbteiiecidaititeiiehdiesscrcceabasesgins 24

iv

TABLE OF AUTHORITIES

Page

CASES

Aligeyer v. Louisiana, 165 U.S. 578, 17S. Ct. 427,

ek EE inceninceincide Lindabitinnttenonrepitinenianenes 18

Ally Cat, LLC v. Chauvin, 274 S.W.3d 451 (Ky.

EN iiedsininiaeseindssanbslbengesoausnvenantiaadtuedetinmeiaecasmennatsen 20

AT&T Mobility LLC v. Concepcion, 563 U.S. 333,

131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011)....9, 11, 15

Atlas Roofing Co., Inc. v. Occupational Safety,

Etc., 430 U.S. 442, 97 S. Ct. 1261, 51 L. Ed. 2d

BO Rada sveicn kcnatcal undanatuaeatenisnaddagsvintsbielecnbesnnnissens 13

Brown v. Hoblitzell, 307 S.W.2d 739 (Ky. 1956)......... 12

City of Cleburne, Texas v. Cleburne Living Cen-

ter, 473 U.S. 432, 105 S. Ct. 3249, 87 L. Ed. 2d

Be CE itctecinsicictien ch Gainininteshamnirensnnsiatiienipnteninitismistin 20

Cremin v. Merrill, Lynch, Pierce, Fenner &

Smith, Inc., 957 F. Supp. 1460 (N.D. Ill. 1997)....... 14

DirecTV, Inc. v. Imburgia, 577 U.S. __, 136

S. Ct. 463, 193 L. Ed. 2d 365 (2015)..............-....00000 9

D.F. v. Codell, 127 S.W.3d 571 (Ky. 2003).................. 21

EJS Properties, LLC v. City of Toledo, 698 F.3d

I A TT. cnc nnnokshavdkasesbuaesinneeinepneeeneians 19

Extendicare Homes, Inc. v. Whisman, 478 S.W.3d

I EE iriacncrricionioidicunannessshtnascennens consuinahaie passim

Ferguson v. Skrupa, 372 U.S. 726, 83 S. Ct. 1028,

i rcceenntsiinhainneitnsicebuyeinntyinenaickh 18

Geldermann Inc. v. Commodity Futures Trading

Comm., 836 F.2d 310 (7th Cir. 1987) ...........c000000+ 14

Vv

TABLE OF AUTHORITIES — Continued

Page

Granfinanciera v. Nordberg, 492 U.S. 33, 109

S. Ct. 2782, 106 L. Ed. 2d 26 (1989)................. 13, 14

Grosjean v. Am. Press Co., 297 U.S. 233, 56 S. Ct.

ee ie Be I I brett chaendassescninnncapesonciveuivedes 17

Hines v. Davidowitz, 312 U.S. 52, 61 S. Ct. 399,

Se ek ED gc cisanncestncenpeisensnestenspapsiumeans ds tiie 15

Illyes v. John Nuveen & Co., Inc., 949 F. Supp.

PIS “SII oso 1s so een cam inmmuauivinadsbanntansernbnecn 14

Kentucky Comm’n on Human Rights v. Fraser,

fe of |) eee 13

Kirby v. Lexington Theological Seminary, 426

I te CI eg sinnicnadccnnsniciintaciievnsécupsasscnsaienesnin 18

Kodak Mining Co. v. Carrs Fork Corp., 669

Se A MIE SD inciincsicnnvensécrnsccunncasentmesihdnacaan sees 20

Lochner v. New York, 198 U.S. 45, 25 S. Ct. 539,

a sciihidbbigitncbtin sondceatdgeeicisneraccveacres 18

Marmet Health Care Center, Inc. v. Brown, 132

S. Ct. 1201, 1823 L.. Bd. Bd 42 ([O1Z) ............000000.00005. 9

Marsh v. First USA Bank, N.A., 103 F. Supp. 2d

TIRE TII ID o, cccthccs bs cieditccinemiensnlicadinaebned 14

Martin v. Hunter’s Lessee, 1 Wheat 304, 14 U.S.

ee Rh | ne ee ee Oe rages 5

Medcom Contracting Services, Inc. v. Shepherds-

ville Christian Church Disciples of Christ, 290

S.W.3d 681 (Ky. App. 2009) .....ccccccseccsveccssssseeeseeeveen 20

Miller v. Johnson Controls, Inc., 296 S.W.3d 392

BN IN sti carcsisliadc npcmenanisinaitnaanensanecnaitungptenmesaiabialiised 17

vi

TABLE OF AUTHORITIES — Continued

Page

Nat'l Iranian Oil Co. v. Ashland Oil, Inc., 716

ae BS ee 14

Perry v. Thomas, 482 U.S. 483, 107 S. Ct. 2520,

Oe ie, i 16

Pierson v. Dean, Witter, Reynolds, Inc., 742 F.2d

COE a EE NL Sy a 14

Poggel v. Louisville Ry. Co., 225 Ky. 784, 10

oe RR a ee EN SR 20

Preferred Care of Delaware, Inc. v. Hopkins, 2016

WL 3546407, Case No. 5:15-CV-00191-GNS-

Ce ee Beis IIE Bly BD on eviecnenevicsansncncrecscnnvcice 10

Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

388 U.S. 395, 87 S. Ct. 1801, 18 L. Ed. 2d 1270

2 ER EE ER ASR Arana SA ee eee 16

Reno v. Flores, 507 U.S. 292, 113 S. Ct. 1439, 123

Bs SINE te I ch ptendsdnchtaccoeceaiaiasetcrendectuaabaaeadlest 18

Rutledge v. Electric Hose & Rubber Co., 511 F.2d

| RR AE RSI ee ee ee 13

Schnuerle v. Insight Communications Co., L.P.,

Ue ee Pe I CI ED ie ecncsicinenseccddccscctsvcncessieces 19

Shelley v. Kraemer, 334 U.S. 1, 68 S. Ct. 836, 92

in: Sy BRIE UIE cies bcesscisetubacaseamcouesioxniieainmnccdnaseus 17,18

Southland Corp. v. Keating, 465 U.S. 1, 1048. Ct.

gp ei Ee 16

Sydnor v. Conseco Fin. Servicing Corp., 252 F.3d

BE IE CI, SE Rectnccstsretsaninnsensccdsorsniivenaaiecnienintias 14

vii

TABLE OF AUTHORITIES — Continued

Page

Vision Mining, Inc. v. Gardner, 364 S.W.3d 455

I SEI ic nasccncsanceeeebpienanisaninisinembinadaaeiiens 20, 21

Washington v. Glucksberg, 521 U.S. 702, 117

S. Ct. 2258, 138 L. Ed. 2d 772 (1997)............... 18,19

Yakus v. United States, 321 U.S. 414, 64 S. Ct.

Se, A Bey CEs Ee CID avn cecncbetscnccnoserccasinissdectneses 13

CONSTITUTIONAL PROVISIONS

Article III of the U.S. Constitution............................ 13

Due Process Clause of the Fourteenth Amend-

ment to the U.S. Constitution........... 8, 15, 17, 18, 19

Equal Protection Clause of the Fourteenth

Amendment to the U.S. Constitution8, 15, 19, 20, 21

Supremacy Clause of the U.S. Constitution, Art.

I checlecsdcnch niet base lala once ceaialadiahinted thd atte ee ibiaatiendisie 9

Seventh Amendment to the U.S. Constitu-

ESTE EI Re ee SE PETRA ET Ce 7, 8,14, 15

IT 0 ED icc ccadnsons puenioeninbaahiagsbiiaeiensdenteid 21

RE ee oe ee ee eee 21

UE EO OU apo scteniics sav secsiceeevenscnsctacinesbonnienasl 21

PEPTUCEY COORGBT, © 7 on. ccceceiescecesscccncccensee 7,12, 14,15

PUREE GI OB ooo cca So cateavedwasuasdacsocnanuce 11

vill .

%

TABLE OF AUTHORITIES — Continued

Page

STATUTES

Federal Arbitration Act, 9 U.S.C. §§ 1-16........... passim

Kentucky Revised Statute § 402.050...........0............. 11

Kentucky Revised Statute § 625.090...............0......... 11

RULES AND REGULATIONS

Federal Rule of Civil Procedure 38(d)........................ 12

Kentucky Rule of Civil Procedure 38.04.................... 12

OTHER

5 MOoRE’S FEDERAL PRACTICE 38.08 ..................020000000 13

$65 billion in Medicare cuts to rock U.S. nursing

homes over 10 years, analysis shows, McKnight’s

Long-Term Care News (Aug. 2, 2012), http://

www.mcknights.com/65-billion-in-medicare-

cuts-to-rock-us-nursing-homes-over-10-years-

analysis-shows/article/253036 ..................:cccceeeeeeeees 23

Editorial, When People Sign Away Their Right to

Sue, N.Y. TIMES, July 25, 2016................cccceceeeeeeee ee 21

Philip Moeller, Nursing Homes Squeezed by Med-

icare Cuts, U.S. News Money (Aug. 8, 2011),

http://money.usnews.com/money/blogs/the-best-

life/2011/08/08/nursing-homes-squeezed-by-

I ae na anicumad 23

U.S. Dep’t of Health & Human Servs., Admin, on

Aging, Aging Statistics, http://www.aoa.gov/

aoaroot/aging statistics/index.aspx ...................006- 22

1

AMICUS CURIAE BRIEF IN

SUPPORT OF PETITIONERS

Pursuant to Supreme Court Rule 37.2, Genesis

Healthcare, Inc., Diversicare Healthcare Services, Inc.,

GGNSC Louisville Mt. Holly LLC d/b/a Golden Liv-

ingCenter — Mt. Holly, Brookdale Senior Living Inc.,

Signature HealthCARE, LLC, HCR ManorCare and

Kentucky Partners Management, LLC, respectfully

submit this Amicus Curiae brief in support of Petition-

ers.’

+

IDENTITY AND INTERESTS OF THE AMICI

Amicus curiae Genesis Healthcare, Inc. is a hold-

ing company with subsidiaries that, on a combined ba-

sis, comprise one of the nation’s largest post-acute care

providers with more than 500 skilled nursing centers

and senior living communities in 34 states nationwide.

Genesis subsidiaries also supply rehabilitation ther-

apy to more than 1600 locations in 46 states and the

District of Columbia.

Amicus curiae Diversicare Healthcare Services,

Inc., headquartered in Brentwood, Tennessee, employs

1 Pursuant to Supreme Court Rule 37.2(a), notice of the

Amici’s intent to file this brief was received by all counsel of rec-

ord for all parties more than 10 days before the brief’s due date.

Petitioner and Respondent consented to filing. The undersigned

affirms that no counsel for a party authored this brief in whole or

in part, and no person or entity, other than Amici, their members,

or their counse!, made a monetary contribution specifically for the

preparation or submission of this brief.

2

6300 people offering wide-ranging, post-acute care in

multiple settings, to include: complex medical, skilled

nursing, short-term rehabilitative, long-term resi-

dency, memory assistance, respite and hospice care.

Through a subsidiary, Diversicare operates 55 skilled

nursing and long-term care facilities in nine Southern

and Midwestern states.

Amicus curiae GGNSC Louisville Mt. Holly LLC

d/b/a Golden LivingCenter — Mt. Holly is a member of

a family of companies based in Plano, Texas. The

Golden Living family of companies includes Golden

LivingCenters, Aegis Therapies, AseraCare, and 360

Healthcare Staffing. There are 300 Golden Liv-

ingCenters in 21 states. Golden Living also offers as-

sisted living services at more than 30 of its locations.

Golden Living companies provide services to over 1000

nursing homes, hospitals, and other healthcare organ-

izations in 40 states and the District of Columbia. The

Golden Living family of companies has more than

40,000 employees who provide healthcare to over

60,000 patients daily.

Amicus curiae Brookdale Senior Living Inc., based

in Brentwood, Tennessee, operates 647 senior care

communities in 36 states, including 74 retirement cen-

ters, 440 assisted living communities and 41 continu-

ing care retirement centers. Brookdale communities

have the ability to serve approximately 66,000 resi-

dents daily.

3

Amicus curiae Signature HealthCARE, LLC, is a

Kentucky based long-term health care and rehabilita-

tion company with 143 different facility locations (46

of them in Kentucky) that span across 11 different

states, providing jobs to nearly 24,000 employees. A

growing number of Signature centers are earning five-

star ratings from the Centers for Medicare & Medicaid

Services. Signature was named “Best Places to Work in

KY” in 2014 and 2015 by the Kentucky Chamber of

Commerce, and was nationally awarded by Modern

Healthcare in 2013 and 2015.

Amicus curiae HCR ManorCare is a leading pro-

vider of short-term, post-hospital services and long-

term care with a network of more than 500 skilled

nursing and rehabilitation centers, memory care com-

munities, assisted living facilities, outpatient rehabili-

tation clinics, and hospice and home health care

agencies. Based in Toledo, Ohio, ManorCare employs

more than 50,000 caregivers nationwide.

Amicus curiae Kentucky Partners Management,

LLC, based in Plano, Texas, manages 21 skilled nurs-

ing facilities in the Commonwealth of Kentucky, which

includes 1762 nursing beds. Services offered at these

nursing facilities include skilled nursing, short-term

rehabilitative, long-term residency, and hospice care.

Predispute arbitration agreements represent effi-

cient, cost-effective alternatives to traditional civil lit-

igation, vital to Amici and the entire long-term care

industry. Arbitration agreements aid cost reduction,

retaining more resources for resident care and claim

4

resolution. Amici typically present residents with arbi-

tration agreements upon admission. Some are stand-

alone agreements; some form part of the admissions

agreement. Amici enter into thousands of arbitration

agreements every year, many executed by an attorney-

in-fact for the resident, as in the Whisman cases. Be-

cause of their genuine interest in promoting consistent

enforcement of valid arbitration agreements, Amici

strongly encourage the Court to grant the Petition.

.

STATEMENT

Venue should play no part in substantive law, but

it means everything in Kentucky after Extendicare

Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2016).?

Justice Story long ago premonished the Court's

need to review Whisman:

Judges of equal learning and integrity, in dif-

ferent states, might differently interpret a

statute, or a treaty of the United States, or

even the constitution itself: If there were no

revising authority to control these jarring and

discordant judgments, and harmonize them

into uniformity, the laws, the treaties, and the

constitution of the United States would be dif-

ferent in different states, and might . . . never

2 See Petition at pp. 17-20. Every Kentucky federal district

court to consider Whisman’s rule has held Whisman violates the

FAA. Kentucky state courts are bound by Court Rule to follow

Whisman. See Rules of Kentucky Supreme Court 1.030(8) and

1.040(5). la

5

have precisely the same construction, obliga-

tion, or efficacy, in any two states. The public

mischiefs that would attend such a state of

things would be truly deplorable[.]

Martin v. Hunter’s Lessee, 1 Wheat 304, 348, 14 US.

304, 348, 4 L. Ed. 97 (1816).

Whisman creates precisely the “deplorable” state

envisioned: Kentucky parties to arbitration agree-

ments must “race to the courthouse”: to avoid enforce-

ment of an arbitration agreement, Kentucky state

courthouses. Kentucky’s federal district courts provide

the alternative for those hoping to enforce arbitration

contracts. Unfortunately, Kentucky citizens lacking di-

versity to remove or file an original federal action often

lose their right to enforce valid arbitration contracts.

Amici adopt and rely upon the facts as Petitioners

set forth in their brief, and here provide only a sum-

mary of pertinent facts. Whisman arose from a long-

term care facility’s attempt to enforce arbitration

agreements executed between it and its residents’

agents in Kentucky state courts.’ Pet. App. 7a. The res-

idents’ powers of attorney documents (“POAs”) desig-

nated the agents and their specific grants of power. See

Pet. App. 12a-23a. Each POA granted the power to

make and execute contracts, specifically and without

3 All arbitration agreements considered in Whisrnan were

optional and not a condition of admission. Pet. App. 17a.

6

limitation. Pet. App. 19a; 22a.*,° In both cases ad-

dressed in the Petition, Whisman held these powers to

be insufficient for the attorney-in-fact to enter into, or

enforce, an arbitration contract, specifically. Pet. App.

50a. The Supreme Court of Kentucky refused to en-

force the agent-entered predispute arbitration con-

tracts for reasons not applicable to any other contracts

under Kentucky law, reasoning that arbitration con-

tracts waived a “God-given right” to a jury trial and

such waiver could not be inferred from a “less than ex-

plicit grant” of the power to execute contracts in gen-

eral. Pet. App. 40a; 43a.

* Olive Clark’s “General Durable Power of Attorney to Con-

duct All Business and Personal Affairs of Principal” granted her

attorney-in-fact, “with full power for me and in my name... in

her sole discretion” to “transact, handle, and dispose of all matters

affecting me and/or my estate in any possible way.” Pet. App. 18a.

Her POA granted powers to “draw, make and sign in my name any

and all checks, promissory notes, contracts, deeds or agreements.”

Pet. App. 19a (emphasis added). Her POA granted authority to

“institute or defend suits concerning my property or rights,” and

“Generally to do and perform for me and in my name all that I

might do if present.” Pet. App. 19a.

° Joe Wellner’s Power of Attorney document granted his at-

torney-in-fact powers to “make, execute and deliver deeds, re-

leases, conveyances and contracts of every nature in relation to

both real and personal property, including stocks, bonds and in-

surance.” Pet App. 22a (emphasis added). His POA contained ad-

ditional grants to “demand, sue for, collect, recover and receive all

debts, monies, interest and demands whatsoever now due or that

may hereafter be or become due to me (including the right to in-

stitute legal proceedings therefor).” Pet. App. 21a.

7

SUMMARY OF THE ARGUMENT

Amici request this Court’s review because Whis-

man so disproportionately burdens long-term care pro-

viders given the industry’s regular use of agent-

executed predispute arbitration agreements. A signifi-

cant number of long-term care residents, because of

age or infirmity, utilize powers of attorney designating

individuals authorized to conduct their business and

personal affairs, including the right to enter into all

types of contracts for their resident. The Federal Arbi-

tration Act (“FAA”) says arbitration contracts must be

enforced like all other contracts. Whisman elevates the

standard for enforcement of agent-executed arbitra-

tion contracts beyond that required for enforcement of

any other agent-executed contract. Whisman’s stan-

dard exacerbates the progressively inordinate hard-

ships borne predominately by long-term care entities

seeking enforcement of their federal arbitration rights.

Whisman refused to acknowledge that courts and

legislatures can set higher standards for a multitude

of rights, including constitutionally protected rights,

because no federal law prohibits those elevated stand-

ards. On the contrary, the FAA does prohibit higher

standards for arbitration contracts as opposed to other

contracts.

Whisman grounded its holdimg on the erroneous

premise that a party waives his/rer fundamental

“right to jury trial,” provided by the Seventh Amend-

ment and Section 7 of the Kentucky Constitution, by

8

signing a predispute arbitration agreement. The Sev-

enth Amendment protects and preserves, but does not

confer, a “right” to jury trial. Having executed predis-

pute arbitration agreements to resolve their claims in

a non-judicial forum prior to any claim having arisen,

the “right” to jury trial was never implicated in the

Whisman cases. The very basis of Whisman’s holding

is incorrect.

Whisman by state action violates long-term care

providers’ constitutional right to enter into contracts

as guaranteed by the Due Process Clause of the Four-

teenth Amendment to the U.S. Constitution. Ken-

tucky’s highest court singles out the long-term care

industry in Whisman, targeting its reasoning to “nurs-

ing homes” in violation of the Fourteenth Amend-

ment’s Equal Protection Clause. See Pet. App. 43a; 44a;

46a. The long-term care industry should not be singled

out as required to divert valuable resources to litiga-

tion unnecessarily.

Whisman’s result-oriented reasoning finds no

credible basis in this Court’s precedent. By excepting

agent-executed arbitration contracts as “different”

from all other agent-executed contracts and requiring

a higher standard for their enforcement, Whisman re-

jects this Court’s precedent that arbitration contracts

must be enforced on “equal footing” with other con-

tracts. Kentucky attempted to disguise its discrimina-

tory reasoning as neutral agency law, relying on a

“God-given right” to a jury trial. Whisman all but

taunts this Court’s precedent. Absent review, Whisman

bestows a convoluted loophole for skirting the FAA.

9

Amici request this Court grant review and reverse

Whisman.

+

ARGUMENT IN SUPPORT OF THE PETITION

The Supremacy Clause forbids state courts from

dissociating themselves from federal law they do not

like. Cf, DirecTV, Inc. v. Imburgia, 577 U.S. ___, 136

S. Ct. 463, 468, 193 L. Ed. 2d 365 (2015). “[T] he Judges

of every State shall be bound” by “the Laws of the

United States.” U.S. Constitution, Art. VI, cl.2. Un-

daunted, the Supreme Court of Kentucky “rejected the

notion” that its tortured holding conflicted with this

Court’s decisions in Marmet Health Care Center, Inc. v.

Brown, 132 S. Ct. 1201, 182 L. Ed. 2d 42 (2012), and

AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131

S. Ct. 1740, 179 L. Ed. 2d 742 (2011), on grounds that

“our holding does not prohibit arbitration of any ‘par-

ticular type of claim.’” Pet App. 46a.

The Petition demonstrates convincingly that

Whisman’s decision overtly violates the FAA and con-

flicts with this Court’s arbitration precedents and nu-

merous federal district courts’ holdings that an agent’s

“power to contract” provides authority to contract for

arbitration. Whisman all but proclaims the Kentucky

court’s judicial hostility towards arbitration, moving

district Judge Stivers of the Western District of Ken-

tucky to comment:

Applying Whisman to invalidate the arbitra-

tion agreement signed by Decedent’s husband

10

would run afoul of the FAA. Although the

Kentucky Supreme Court’s antipathy for ar-

bitration was more subtly expressed in its ear-

lier decision in Ping |v. Beverly Enterprises,

Inc., 376 S.W.3d 581 (Ky. 2012)], its true colors

were revealed fully in Whisman.... [T]he

rule expressed in Whisman contravenes the

FAA[.]

Preferred Care of Delaware, Inc. v. Hopkins, 2016 WL

3546407 (W.D. Ky., June 23, 2016).

Whisman particularly flaunted its animus of arbi-

tration contracts used in long-term care settings. Whis-

man’s aftermath leaves a significant jurisprudential

divide between Kentucky’s state and federal trial

courts. Amici support Petitioners’ arguments explain-

ing why Whisman violates the FAA and federal sub-

stantive arbitration law. Amici write separately to

provide additional reasons in support of the Petition.

I. FOR ARBITRATION CONTRACTS, WHIS-

MAN APPLIED DIFFERENT RULES AND

DEMANDED SPECIFICITY FOR ENFORCE-

MENT NOT REQUIRED FOR OTHER CON-

TRACTS

Whisman continues state courts’ campaign io find

nuanced, state-law “loopholes” to avoid arbitration en-

forcement in long-term care settings. Arbitration con-

cerns the forum only, not the claim or the damages

recoverable. Yet Whisman unapologetically champions

a preference for judicial trials over arbitration, disfa-

voring arbitration and violating this Court’s precedent.

11

See Pet. App. 89a (Abramson, J., dissenting). Cf, Con-

cepcion, 63 U.S. 333, 131 S. Ct. 1740, 179 L. Ed. 2d 742.

A significant number of long-term care residents,

because of age or infirmity, utilize powers of attorney

designating individuals to conduct their business and

personal affairs, often including the right to enter into

all types of contracts for the resident. Whisman ele-

vates the standard for enforcing agent-executed arbi-

tration contracts above the standard required for all

other agent-executed contracts. Amici and long-term

care industry members need this Court to act. The

Court has long-recognized that reliance on well-settled

law is an important legal principal and business con-

dition. Whisman’s decision overtly conflicts and even

disregards this Court’s arbitration precedents. As the

Petition shows, Kentucky’s federal district courts

unanimously find Whisman violates the FAA. See Pe-

tition, pp. 17-23. Absent review, the long-term care in-

dustry can count on inconsistent enforcement, at best.

Il. WHISMAN IGNORES THE FAA’S PROHI-

BITION AGAINST ELEVATED STANDARDS

FOR ARBITRATION CONTRACTS

Highlighting the Whisman court’s error is its re-

fusal to acknowledge that courts and legislatures can

indeed set higher standards for parental rights, slav-

ery and marriage, to name a few of Whisman’s “com-

parisons,” because no federal law prohibits those

elevated standards. See, e.g., Pet. App. 42a; see also

KRS § 625.090; Kentucky Const. §25; and KRS

12

§ 402.050. Whisman ignores that the FAA does pro-

hibit higher standards for arbitration contracts as

compared to other contracts. This fact renders mean-

ingless Whisman’s comparison to waivers of other fun-

damental rights. See, e.g., Pet. App. 97a (Abramson, J.,

dissenting). Notwithstanding its dislike for the federal

mandate, “redefining” or “elevating” the standard for

enforcing agent-executed arbitration contracts is

simply preempted by the FAA and this Court’s sub-

stantive arbitration precedent.

Ill. WHISMAN INCORRECTLY BASED ITS

HOLDING ON A “GOD-GIVEN RIGHT” TO

JURY TRIAL: NO SUCH “RIGHT” EXISTS

OR WAS EVER IMPLICATED

Whisman grounded its decision on the erroneous

premise that its agents waived their residents’ “God-

given right” to jury trial under the Seventh Amend-

ment and Section 7 of the Kentucky Constitution by

signing arbitration agreements. Pet. App. 43a. In fact,

no jury waiver occurred because no jury “right” ever

existed with respect to those claims.

Obviously, a jury trial is absolutely not a “God-

given right,” but rather a right provided under the

terms and conditions of a constitution written and

adopted by its people. It is alienable. In fact, one can

easily waive one’s right to jury trial simply by not ask-

ing for it. See Fed. R. Civ. P. 38(d); Kentucky Rule Civ.

P. 38.04. See also Brown v. Hoblitzell, 307 S.W.2d 739

13

(Ky. 1956). Waivers by omission do not violate the Con-

stitution. See Rutledge v. Electric Hose & Rubber Co.,

511 F.2d 668, 674 (9th Cir. 1975) (citing 5 MoorE’s FED-

ERAL PRACTICE 38.08, p. 83, n. 68). This Court stated:

No procedural principle is more familiar to

this Court than that a constitutional right

may be forfeited in criminal as well as civil

cases by the failure to make timely assertion

of the right before a tribunal having jurisdic-

tion to determine it.

Yakus v. United States, 321 U.S. 414, 444, 64 S. Ct. 666,

677, 88 L. Ed. 834 (1944). It follows that a “waiver” by

affirmatively entering into a contract does not violate

the Constitution. The Whisman decision is not sup-

ported by the laws of this Court.

The Seventh Amendment provides that jury trials

in suits at common law are “preserved.” Neither the

Seventh Amendment nor Section 7 of the Kentucky

Constitution creates a jury trial right. Both, by their

terms, simply “preserve” that right as it already ex-

isted at common law. See Atlas Roofing Co., Inc. v. Oc-

cupational Safety, Etc., 430 U.S. 442, 97S. Ct. 1261, 51

L. Ed. 2d 464 (1977). See also Kentucky Comm’n on

Human Rights v. Fraser, 625 S.W.2d 852, 854 (Ky.

1981).

Following the analysis in Granfinanciera v. Nord-

berg, 492 U.S. 33, 109 S. Ct. 2782, 106 L. Ed. 2d 26

(1989), in situations where Congress assigned resolu-

tion of the relevant claim to a non-Article ITI adjudica-

tive body that does not use a jury as a fact finder, there

14

is no right to a jury trial. Jd. at 54, 109 S. Ct. at 2796.

The Seventh Amendment does not confer the right to

a jury trial, only the right to have a jury hear the case

once it is determined that the litigation should proceed

before a court. If claims are properly before an arbitral

forum pursuant to an arbitration agreement, the jury

trial right vanishes. See Cremin v. Merrill, Lynch,

Pierce, Fenner & Smith, Inc., 957 F. Supp. 1460, 1471

(N.D. Ill. 1997).

The right to a trial by jury is necessarily incident

to, and predicated upon, the right to a judicial forum.

See, e.g., Marsh v. First USA Bank, N.A., 103 F. Supp.

2d 909, 921-22 (N.D. Tex. 2000). Consequently, the

“right” to a jury trial, under either the Seventh Amend-

ment or Section 7 of Kentucky’s Constitution, is not

implicated by a contractual provision that precludes

access to a judicial forum. Jd. at 921-22 (citing Gelder-

mann Inc. v. Commodity Futures Trading Comm., 836

F.2d 310, 323 (7th Cir. 1987); Illyes v. John Nuveen &

Co., Inc., 949 F. Supp. 580, 584 (N.D. Ill. 1996). See also

Nat'l Iranian Oil Co. v. Ashland Oil, Inc., 716 F. Supp.

268, 270 (S.D. Miss. 1989). “The ‘loss of the right to a

jury trial is a necessary and fairly obvious consequence

of an agreement to arbitrate.’” Sydnor v. Conseco Fin.

Servicing Corp., 252 F.3d 302, 307 (4th Cir. 2001) (quot-

ing Pierson v. Dean, Witter, Reynolds, Inc. , 742 F.2d 334,

339 (7th Cir. 1984)).

No claims against the nursing home had yet

arisen in any court at the time Ms. Clark’s and Mr.

Wellner’s agents executed the arbitration contracts.

Pet. App. 32a (“An arbitration agreement signed before

15

a cause of action exists cannot be ‘reasonably neces-

sary to the resolution of that cause.”) (Emphasis

added). The Whisman court failed to comprehend the

truth of its errant analysis: no “right” to jury trial ex-

ists until it is determined that litigation should pro-

ceed before a court. Having executed predispute

arbitration contracts before a claim arose, neither the

Seventh Amendment nor Section 7 of the Kentucky

Constitution was ever implicated.

IV. WHISMAN’S APPLICATION TO VALID ARBI-

TRATION AGREEMENTS VIOLATES FUN-

DAMENTAL CONSTITUTIONAL RIGHTS

The Kentucky court, by state action in Whisman,

violated the Due Process Clause of the Fourteenth

Amendment, the Equal Protection Clause of the Four-

teenth Amendment, and the long-term care provider’s

attendant rights thereunder by impairing its funda-

mental right to enter into contracts with agents acting

under powers of attorney, and unfairly discriminating

against enforcement of the long-term care provider’s

arbitration contracts with its residents.

A “state law that ‘stands as an obstacle to the ac-

complishment and execution of the full purposes and

objectives of Congress’ is preempted by the Supremacy

Clause.” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct.

399, 85 L. Ed. 581 (1941). As federal substantive law,

the FAA preempts all contrary or inconsistent state

law. See Concepcion, 563 U.S. 333. The Whisman Court

agreed the FAA governed the arbitration agreement at

16

issue. Pet. App. 24a. As Justice Thurgood Marshall ex-

plained:

A state-law principle that takes its meaning

precisely from the fact that a contract to arbi-

trate is at issue does not comport with this re-

quirement of §2.. .. A court may not, then, in

assessing the rights of litigants to enforce an

arbitration agreement, construe that agree-

ment in a manner different from that in which

it otherwise construes nonarbitration agree-

ments under state law. Nor may a court rely

on the uniqueness of an agreement to arbi-

trate as a basis for a state-law holding that

enforcement would be unconscionable, for this

would enable the court to effect what we hold

today the state legislature cannot.

Perry v. Thomas, 482 U.S. 488, 492 n. 9, 107 S, Ct. 2520,

96 L. Ed. 2d 426 (1987) (citing Prima Paint Corp. v.

Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S. Ct. 1801,

18 L. Ed. 2d 1270 (1967) and Southland Corp. v. Keat-

ing, 465 U.S. 1, 104 S. Ct. 852, 79 L. Ed. 2d 1 (1984)

(emphasis original). Regardless, the Whisman court

likely invalidated countless arbitration contracts

signed by agents under powers-of-attorney without

even considering those ramifications because it so de-

tests the agreements in the nursing home context,

17

A. Whisman Violates the Due Process

Clause of the Fourteenth Amendment

by Impairing the Fundamental Federal

Right to Contract.

The Due Process Clause of the Fourteenth Amend-

ment provides and protects the fundamental right to

enter into contracts, which includes entering contracts

with agents acting under powers of attorney. Whis-

man’s application violates the Due Process Clause by

impairing long-term care providers’, including Amici’s,

federal common law right to enter into contracts.®

The Supreme Court of Kentucky itself previously

acknowledged, “[t]}he term ‘due process’ has two mean-

ings in American jurisprudence: (1) substantive due

process, which is based on the idea that some rights

are so fundamental that the government must have an

exceedingly important reason to regulate them, if at

all, such as the right to free speech or to vote; and (2)

procedural due process, which requires the govern-

ment to follow known and established procedures, and

not to act arbitrarily or unfairly in regulating life, lib-

erty or property.” Miller v. Johnson Controls, Inc., 296

S.W.3d 392, 397 (Ky. 2009). In Shelley v. Kraemer, 334

U.S. 1, 14, 68 S. Ct. 836, 92 L. Ed. 1161 (1948), this

Court explained “[t]hat the action of state courts and

of judicial officers in their official capacities is to be re-

garded as action of the State within the meaning of the

* It is well established that a corporation is a “person” within

the meaning of the due process of law and equal protection clauses

of the Fourteenth Amendment. See Grosjean v. Am. Press Co., 297

U.S. 233, 244, 56 S. Ct. 444, 447, 80 L. Ed. 660 (1936).

18

Fourteenth Amendment, is a proposition which has

long been established by decisions of this Court.” See

also Kirby v. Lexington Theological Seminary, 426

S.W.3d 597, 619 (Ky. 2014) (citing Shelley for the prop-

osition that decisions of both legislature and judiciary

are considered state actions).

The Due Process Clause specially protects those

fundamental rights and liberties which are, objectively,

deeply rooted in this nation’s history and tradition,

and implicit in the concept of ordered liberty, such that

neither liberty nor justice would exist if they were sac-

rificed. See Washington v. Glucksberg, 521 U.S. 702,

720-21, 117 S. Ct. 2258, 2268, 138 L. Ed. 2d 772 (1997).

This Court long ago recognized that the general right

to make a contract in relation to his business is part of

the liberty of the individual protected by the Four-

teenth Amendment of the Federal Constitution.

Allgeyer v. Louisiana, 165 U.S. 578, 17 S. Ct. 427, 41

L. Ed. 832 (1897); see also Lochner v. New York, 198

U.S. 45, 25 S. Ct. 539, 49 L. Ed. 937 (1905) (overruled

on other grounds, Ferguson v. Skrupa, 372 U.S. 726, 83

S. Ct. 1028, 10 L. Ed. 2d 93 (1963)).

The Fourteenth Amendment “forbids the govern-

ment to infringe . . . fundamental’ liberty interests at

all, no matter what process is provided, unless the in-

fringement is narrowly tailored to serve a compelling

state interest.” Reno v. Flores, 507 U.S. 292, 302, 113

S. Ct. 1439, 1447, 123 L. Ed. 2d 1 (1993). The right to

contract is a long-recognized liberty interest. The

“Fourteenth Amendment liberty includes the right...

19

to enter into all contracts which may be proper, neces-

sary and essential” to a citizen’s needs. See EJS Prop-

erties, LLC v. City of Toledo, 698 F.3d 845, 859 (6th Cir.

2012) (citing Glucksberg, 521 U.S. at 760) (internal

quotation marks omitted).

By requiring a specific grant of authority solely for

enforcement of an arbitration contract, versus other

contracts, Whisman flagrantly infringes on a long-term

care provider's right to enter into an arbitration con-

tract with an agent empowered to make all contracts

on her principal’s behalf. Whisman places agent-exe-

cuted arbitration contracts into a special category with

a different standard for enforcement, directly violating

the FAA, and its application impairs Amici’s funda-

mental right to contract. Application of the Whisman

Court’s rule of law virtually eliminates Amici’s right to

enter into arbitration contracts freely with their resi-

dents’ agents — who otherwise hold the unqualified

power to execute “any and all contracts” — violating

Amici’s Fourteenth Amendment substantive due pro-

cess right to make and enter into contracts.

B. Whisman Violates the Equal Protection

Clause of the Fourteenth Amendment

by Refusing to Treat Long-Term Care

Providers Similarly

Kentucky Courts are willing to enforce some arbi-

tration contracts, but apparently not all. In Schnuerle

v. Insight Communications Co., L.P., 376 S.W.3d 561

(Ky. 2012), the court held that “arbitration is a favored

20

method of dispute resolution. ‘Arbitration has always

been favored by the courts.’ Poggel v. Louisville Ry. Co.,

225 Ky. 784, 10 S.W.2d 305, 310 (1928). ‘Kentucky law

favors the enforcement of arbitration agreements.’

Medcom Contracting Services, Inc. v. Shepherdsville

Christian Church Disciples of Christ, 290 S.W.3d 681,

685 (Ky. App. 2009) (citing Kodak Mining Co. v. Carrs

Fork Corp., 669 S.W.2d 917 (Ky. 1984)); see also Ally

Cat, LLC v. Chauvin, 274 S.W.3d 451, 457 (Ky. 2009).”

But, in refusing to honor agent-executed arbitration

contracts involving long-term care facilities, the Whis-

man court brazenly singled out the long-term care in-

dustry in its holding. See Pet. App. 46a (“Nursing home

facilities may still enforce arbitration agreements with

their residents when the resident has signed the agree-

ment or validly authorized his agent to sign in his

stead.”). See also Pet. App. 43a (“A durable power-of-

attorney document often exists long before a relation-

ship with a nursing home is anticipated.”); and Pet.

App. 44a (“It makes no difference that arbitration

clauses are commonplace in nursing home contracts

and that a principal might anticipate that someday his

agent will act to admit him into one.”).

Long-term care providers are entitled to the same

equal protection as any contract signator. The Four-

teenth Amendment commands persons who are simi-

larly situated must be treated alike. See City of

Cleburne, Texas v. Cleburne Living Center, 473 U.S.

432, 439, 105 S. Ct. 3249, 87 L. Ed. 2d 313 (1985). Like-

wise, the Supreme Court of Kentucky affirmed in Vi-

sion Mining, Inc. v. Gardner, 364 S.W.3d 455, 465 (Ky.

21

2011), “[clitizens of Kentucky enjoy equal protection of

the law under the 14th Amendment of the United

States Constitution and Sections 1, 2, and 3 of the Ken-

tucky Constitution” (citing D.F. v. Codell, 127 S.W.3d

571, 575 (Ky. 2003)). Whisman does not even try to

disguise its discrimination against enforcing agent-

entered arbitration contracts utilized in long-term care

settings.

Amici increasingly find their use of arbitration un-

der siege. The New York Times recently campaigned

against use of arbitration agreements in nursing home

settings. See Editorial, When People Sign Away Their

Right to Sue, N.Y. TIMES, July 25, 2016 at A22. The Su-

preme Court of Kentucky, however, should be fulfilling

its duty to enforce the laws equally for all citizens, not

favoring politically-trending views via unconstitu-

tional decisions. In fact no rational basis or substantial

and justifiable reasons exist for treating long-term

care facilities differently from other industries that

rely on arbitration agreements. Whisman’s distinction

creates an arbitrary one between similarly situated in-

dividuals, and thus violates the equal protection guar-

antees of the Federal and State Constitutions. Cf,

Gardner, 364 S.W.3d at 474.

22

V. STATE COURT RESTRICTIONS ON ARBI-

TRATION RIGHTS POSE A SUBSTANTIAL

THREAT TO AN INCREASINGLY IMPOR-

TANT INDUSTRY

The Whisman case virtually eliminates use of

agent-executed, predispute arbitration agreements in

the long-term care industry. Its holding poses a sub-

stantial threat to the long-term care industry at a time

when demographic trends dictate that the provision of

long-term care will become even more important in the

near future. As the U.S. population ages, the long-term

care industry will play an increasingly prominent role

in providing health care to the nation’s elderly.’ Even

as efforts to expand independent living options con-

tinue, it is undisputed that a strong long-term care in-

dustry is essential for the future well-being of the

country’s aging population.

In addition to undue litigation burdens hindering

its ability to enforce its federal arbitration rights, the

nation’s long-term care industry faces a number of

other challenges to threaten it, including economic,

governmental, and regulatory pressures. For example,

' The population age 65 and over has increased from 36.2

million in 2004 to 46.2 million in 2014 (a 28% increase) and is

projected to more than double to 98 million in 2060. By 2040, there

will be about 82.3 million older persons, twice the number in 2000.

People 65+ represented 14.5% of the population in the year 2014

but are expected to grow to 21.7% of the population by 2040. The

85+ population is projected to triple from 6.2 million in 2014 to

14.6 million in 2040. See U.S. Dep’t of Health & Human Servs.,

Admin, on Aging, Aging Statistics, http:/Awww.aoa.gov/aparocot/

aging statistics/index.aspx (updated through 2015).

23

in 2011, the Centers for Medicare & Medicaid Services

implemented a rule cutting payments to skilled nurs-

ing facilities in the 2012 fiscal year by 11.1 percent, af-

fecting provider reimbursement for post-acute care for

seniors who have been hospitalized and require reha-

bilitative services before returning to their homes.®

Moreover, skilled nursing facilities are facing a cumu-

lative Medicare funding reduction worth $65 billion

over the next ten years.°®

Efficient dispute resolution in long-term care set-

tings should be encouraged, not discouraged as in

Whism~n. The long-term care industry is often unable

to seek legislative protection against this onslaught in

states like Kentucky, Illinois, Arkansas, and Georgia,

where state constitutional doctrines are used to defeat

efforts of all tort reform legislation. See Bayer Crop-

Science LP v. Schafer, 2011 Ark. 518, 385 S.W.3d 822

(Ark. 2011); Lebron v. Gottlieb Mem'l Hosp. , 930 N.E.2d

895, 914 (Tl. 2010); Atlanta Oculoplastic Surgery, PC.

uv. Nestlehutt, 691 S.E.2d 218, 220 (Ga. 2010); Williams

v. Wilson, 972 S.W.2d 260, 267 (Ky. 1998).

® Philip Moeller, Nursing Homes Squeezed by Medicare Cuts,

U.S. News Money (Aug. 8, 2011), http://money.usnews.com/

money/blogs/the-best-life/201 1/08/08/nursing-homes-squeezed-by-

medicare-cuts.

® $65 billion in Medicare cuts to rock U.S. nursing homes over

10 years, analysis shows, McKnight’s Long-Term Care News (Aug.

2, 2012), http://Awww.mcknights.com/65-billion-in-medicare-cuts-

to-rock-us-nursing-homes-over-10-years-analysis-shows/article/

253036.

24

The long-term care industry can contract to arbi-

trate personal injury claims, just like any others. Amici

join the Petitioners in asking this Court to grant re-

view.

*

CONCLUSION

For the reasons stated above and in the petition

for a writ of certiorari, the petition should be granted

and the judgment below reversed. Whisman is enor-

mously detrimental to the long-term care industry,

particularly if its reasoning spreads beyond Kentucky

to other states.

Respectfully submitted,

DONALD L. MILLER, IT

Counsel of Record

KRISTIN M. LOMOND

QUINTAIROS, PRIETO, WooD &

Boyer, P.A.

9300 Shelbyville Road, Suite 400

Louisville, KY 40222

(502) 423-6390

dmiller@qpwblaw.com

klomond@qpwblaw.com

Counsel for Amici Curiae