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

Supreme WOurt, U5.

FILED

DEC - 7 206

LORMCE OF THE Cure |

In the Supreme Court of the Anited States

No. 16-32

KINDRED NURSING CENTERS LIMITED PARTNERSHIP,

DBA WINCHESTER CENTRE FOR HEALTH AND

REHABILITATION, NKA FOUNTAIN CIRCLE HEALTH AND

REHABILITATION, ET AL.,

Petitioners,

Vv.

JANIS E. CLARK AND BEVERLY WELLNER, ET AL.,

Respondents.

On Writ of Certiorari to the

Supreme Court of Kentucky

BRIEF FOR PETITIONERS

ANDREW J. PINCUS

Counsel of Record

ARCHIS A. PARASHARAMI

DANIEL E. JONES

Mayer Brown LLP

1999 K Street, NW

Washington, DC 20006

(202) 263-3000

apincus@mayerbrown.com

Counsel for Petitioners

2 moose of Congres

i

QUESTION PRESENTED

Whether the Federal Arbitration Act 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.

‘3

RULE 29.6 STATEMENT

The parent corporations of Kindred Nursing Cen-

ters Limited Partnership are Kindred Nursing Cen-

ters East, LLC and Kindred Hospital Limited Part-

nership. The parent corporation of Kindred Nursing

Centers East, LLC is Kindred Healthcare Operating,

Inc.; and the parent corporations of Kindred Hospital

Limited Partnership are Kindred Hospital West,

LLC and Kindred Nursing Centers Limited Partner-

ship. The parent corporation of Kindred Healthcare

Operating, Inc. is Kindred Healthcare, Inc.

Kindred Healthcare, Inc. is a publicly traded cor-

poration with no parent corporation. No publicly

traded company owns 10% or more of the stock of

Kindred Healthcare, Inc.

ill

TABLE OF CONTENTS

Page

QUESTION PRESENTED.................csssssosscscsescececeores i

RULE 29.6 STATEMENT ...................cccscccececeesereeeeees ii

TABLE OF AUTHORITIES. ...............cccccccccesecereneneeee Vv

CP OY wcencccncsescsnccteecsnsiesshinniniaemineamamall 1

FEE nececcinccntsececiscsuacserttiniginiimssecsetinin as 1

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED ..................cc2000eeeeeeeeee 2

ERIE, drcinttcictiniennteisineiniiantnmiiaiaimnaan 2

Be, FROG TINIE. secncncncvstenssccininneinisieaccctian 4

B. Proceedings Below. .............:ssccosssscesesesecsavseceses 5

SUMMARY OF ARGUMENT. .......0..............0eeeeeeeeeees 10

TERI, sccccsscsncsssscintpcininnsisiniisidimmiaausesanaean 12

I. The Decision Below Conflicts With The

FAA And Defies This Court’s Precedents. ......... 12

A. This Court Has Repeatedly Held That

State-Law Rules That Disfavor

Arbitration Are Preempted By The

IPT > svcsicctatsimesinsercisitiisiniabiitiaiailidiainiahdaiis ataleaeaiaas 13

B. The Kentucky Court’s Explicit-

Reference Rule Singles Out Arbitration

For Suspect Status. ..............cccecccccssseeeeeeeeeeeee 17

1. The Explicit-Reference Rule Is Not

Applicable To Contracts Generally.......... 19

2. The Explicit-Reference Rule Cannot

Be Salvaged By The Kentucky

Court’s Reference To “Fundamental

Constitutional Rights.” ............:2ccceceeeeeeees 24

iv

TABLE OF CONTENTS—continued

Page

C. Upholding The Decision Below Would

Enable States To Impose Numerous

Discriminatory Burdens On The

Enforcement Of Arbitration

scenes 29

Il. The FAA Applies To The Question Of

Contract Enforceability Presented Here............ 31

ESSE EE 34

v

TABLE OF AUTHORITIES

CASES

14 Penn Plaza LLC v. Pyett,

I enealll 14, 28

Allied-Bruce Terminix Cos. v. Dobson,

I 13, 18

Am. Health Care Ass'n v. Burwell,

--- F. Supp. 3d ----, 2016 WL 6585295

ns a, i a cemsnbienael 33

Am. Heritage Life Ins. Co. v. Orr,

294 F.3d 702 (6th Cir. 2002)....................csseseeseees 27

Arthur Andersen LLP v. Carlisle,

Ee a 18

AT&T Mobility LLC v. Concepcion,

RRS ETE SE ee es passim

Brandenburg Health Facilities, LP v.

Mattingly,

2016 WL 3448733 (W.D. Ky. June

Schade ccetieienisace aeasainiela ecticesakadsicincsdniieeaibisibditiaintiinin 29

Button v. Drake,

Be Ee le i icccncnceccsncnscsscecsasscencescosss 23

Caley v. Gulfstream Aerospace Corp.,

428 F.3d 1359 (11th Cir. 2006)............................ 27

CompuCredit Corp. v. Greenwood,

iin tnrinctsciessaeenenaniinaenangiel 13

Cooper v. MRM Inv. Co.,

367 F.3d 498 (Gth Cir. 2004)................cccccccceeceeeees 27

vi

TABLE OF AUTHORITIES—continued

Page(s)

DIRECTV, Inc. v. Imburgia,

Re passim

Doctor’s Assocs., Inc. vy. Casarotto,

gs LL passim

EEOC v. Waffle House, Inc.,

Reena 13

GGNSC Louisville Hillcreek, LLC v.

Watkins,

2016 WL 815295 (W.D. Ky. Feb. 29,

Gilmer v. Interstate/Johnson Lane

Corp.,

eee 28

Howlett ex rel. Howlett v. Rose,

cae 20

IFC Credit Corp. v. United Bus. &

Indus. Fed. Credit Union,

512 F.3d 989 (7th Cir. 2008).............0000.---secereeee 27

International Shoe Co. v. Washington,

i eninnineiianmaneiaieied 26

James v. Kentucky,

ene 20

Kimble v. Marvel Enitm't, LLC,

cen 19

Logan v. Zimmerman Brush Co.,

| Te ome 23

Marmet Health Care Center, Inc. v.

Brown,

132 S. Ct. 1201 (2012) (per curiam) .............. 12, 16

vi

TABLE OF AUTHORITIES—continued

Page(s)

Mastrobuono v. Shearson Lehman

Hutton, Inc.,

EERSTE ER re eS aD ey 16

Mitsubishi Motors Corp. v. Soler

Chrysler—Plymouth, Inc.,

sk cee eee 27

Mullane v. Central Hanover Bank &

Trust Co.,

I ad ssiasciesloniiboaale 23

Nitro-Lift Techs., L.L.C. v. Howard,

133 S. Ct. 500 (2012) (per curiam) ................ 12, 14

Owensboro Health Facilities, L.P. v.

Henderson,

2016 WL 2853569 (W.D. Ky. May 13,

| EERE Se RP een ene eee ene E 29

Perry v. Thomas,

Ec eeaane passim

Pine Tree Villa, LLC v. Coulter,

2016 WL 3030185 (W.D. Ky. May 25,

Ping v. Beverly Enterprises, Inc.,

376 S.W.3d 581 (Ky. 2012)......000-.000.... 6, 21, 22

Preferred Care of Delaware, Inc. v.

Hopkins,

2016 WL 3546407 (W.D. Ky. June

ERE Re aS EEN eR 29

Preferred Care, Inc. v. Bleeker,

2016 WL 6636854 (E.D. Ky. Nov. 8,

il adiciin:NetGdcelaniinddalodonbniadnaiamadeedinhiadiinensaditeniimeenstidd 22

TABLE OF AUTHORITIES—continued

Page(s)

Preferred Care, Inc. v. Howell,

2016 WL 4470746 (E.D. Ky. Aug. 19,

IG iccccteeiigdinimacstonshinnmeunnibagiahieratoniitedsduies neato 22

Preston v. Ferrer,

innate 13, 17

Rent-A-Center, West, Inc. v. Jackson,

I i cacidncinnitsiintniinils 18

Riney v. GGNSC Louisville St.

Matthews, LLC,

2016 WL 2853568 (W.D. Ky. May 13,

ERE) Sa Tit A ee 29

Saturn Distribution Corp. v. Williams,

905 F.2d 719 (4th Cir. 1990)..............2...ccccceeeeeeeee 32

Scherk v. Alberto-Culver Co.,

i ceacianeiimedadle 18

Sec. Indus. Ass’n v. Connolly,

883 F.2d 1114 (1st Cir. 1989) ...........0000.0 ee. 32

Shearson/Am. Express, Inc. v.

McMahon,

I erence 28

Snowden vy. CheckPoint Check Cashing,

290 F.3d 631 (4th Cir. 2002) .............ccccccccceceeeeeeee 27

Southland Corp. v. Keating,

SS 13, 16, 18, 30

Volt Info. Scis., Inc. v. Bd. of Trs. of

Leland Stanford Junior Univ.,

|) & |, 2c aaa 18

CONSTITUTION AND STATUTES

Se aericenreshsincieeiiiuhitlpindinieiicinialeiathitindgetbhgelidasechbi passim

ix

TABLE OF AUTHORITIES—continued

Page(s)

i I soso ocnccnitaiciccanionsascnbeadeaneniimanabeniieete 2

Ky. Const

I ainda cetinpentshinncepestanteninbiiabeaaioiaipadibadnheagenbatiiaaiiadl 11, 25

SOIT -scsscnisesnantisdtedigibesnaiingeeeaniginisninnambeiineniiigebadennalith 25

I insncdietaenshsnindesepatbannpasaténiibeemeiensnpnednnsienicamedadlinl 25

Et I catesiindhinnndantsdyedieddedddepnnninnenisaanateinnbnanminieaneitd 25

Ky. Rev. Stat.

SII iisient sinipiemiauaieioiaiuenienduneniannsainiiainbedenel 5

ins nce inaerereniinnieannindatiniowniieenbinesonnneeiintia 22

Mont. Code Ann. § 27-5-114(4) .0.............cccceceeceeeeeeee 29

OPINIONS BELOW

The opinion of the Supreme Court of Kentucky

(Pet. App. 3a-118a) is reported at 478 S.W.3d 306.

The order of the Supreme Court of Kentucky denying

rehearing (Pet. App. la-2a) is unreported.

The following orders in Clark are all unreported:

(1) the order of the Kentucky Court of Appeals deny-

ing interlocutory relief (Pet. App. 119a-125a); (2) the

November 15, 2012 order of the Circuit Court deny-

ing the motion to dismiss and compel arbitration

(Pet. App. 126a-127a); and (3) the January 9, 2012

order of the Clark County Circuit Court granting

dismissal and compelling arbitration (Pet. App. 128a-

130a).

The following orders in Wellner are all unreport-

ed: (1) the order of the Kentucky Court of Appeals

denying interlocutory relief (Pet. App. 131la-137a); (2)

the November 19, 2012 order of the Circuit Court

denying the motion to dismiss and compel arbitra-

tion (Pet. App. 138a-139a); and (3) the January 9,

2012 order of the Clark County Circuit Court grant-

ing dismissal and compelling arbitration (Pet. App.

140a-142a).

JURISDICTION

The judgment of the Supreme Court of Kentucky

was entered on September 24, 2015. Pet. App. 3a.

That court denied rehearing on February 18, 2016.

Pet. App. la-2a. On May 9, 2016, Justice Kagan ex-

tended the time for filing a petition for a writ of cer-

tiorari to and including July 1, 2016. The petition ior

a writ of certiorari was filed on July 1, 2016 and

2

granted on October 28, 2016. This Court’s jurisdic-

tion rests on 28 U.S.C. § 1257(a).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Supremacy Clause of the Constitution, art.

VI, cl. 2, provides in pertinent part:

This Constitution, and the Laws of the Unit-

ed States which shall be made in Pursuance

thereof * * * shall be the supreme Law of the

Land; and the Judges in every State shall be

bound thereby, any Thing in the Constitution

or Laws of any State to the Contrary not-

withstanding.

Section 2 of the Federal Arbitration Act (“FAA”),

9 U.S.C. § 2, provides in pertinent part:

A written provision in * ** a contract evi-

dencing a transaction involving commerce to

settle by arbitration a controversy thereafter

arising out of such contract or transaction,

* * * or an agreement in writing to submit to

arbitration an existing controversy arising

out of such contract, transaction, or refusal,

shall be valid, irrevocable, and enforceable,

save upon such grounds as exist at law or in

equity for the revocation of any contract.

STATEMENT

This Court has repeatedly held that the FAA

“preclude[s] States from singling out arbitration pro-

visions for suspect status.” Doctor’s Assocs., Inc. v.

Casarotto, 517 U.S. 681, 687 (1996); see also DI-

RECTYV, Inc. v. Imburgia, 136 S. Ct. 463, 468-69

(2015); AT&T Mobility LLC v. Concepcion, 563 U.S.

3

333, 339 (2011); Perry v. Thomas, 482 U.S. 483, 492

n.9 (1987).

Yet the Kentucky Supreme Court, by a divided

vote, did just that, refusing to enforce two arbitration

agreements entered into by individuals who had

been given express authority to accept “contracts” on

behalf of their principals. Specifically, the court held

that a power of attorney broadly authorizing an at-

torney-in-fact to enter into contracts extends to any

kind of contract except a dispute-resolution agree-

ment. An explicit reference to arbitration in a power-

of-attorney document is required to authorize an at-

torney-in-fact to enter into an arbitration contract,

the court said, because (in the court’s view) such an

agreement waives the principal’s “sacred,” “invio-

late,” and “God-given” right to a jury trial.

That anti-arbitration approach cannot be

squared with this Court’s precedents, which hold

that Section 2 of the FAA preempts state-law rules

that are “restricted to [the] field” of arb‘tration and

do not “place[] arbitration contracts on equal footing

with all other contracts.” Imburgia, 136 S. Ct. at 468-

69 (quotation marks omitted); see also Concepcion,

563 U.S. at 339; Casarotto, 517 U.S. at 687; Perry,

482 U.S. at 492 n.9.

Indeed, by tying its requirement of express refer-

ence to arbitration contracts to the waiver of a jury

trial—the absence of which is a key defining charac-

teristic of an arbitration proceeding—the majority

below applied a rationale that, if permitted to stand,

would open the door to numerous state-law rules

erecting obstacles to the enforcement of arbitration

agreements. As one of the dissenting Justices below

put it, the Kentucky Supreme Court’s decision makes

a “clever contribution to thfe] new genre” of state-

43

court decisions seeking to evade this Court’s prece-

dents interpreting the FAA. Pet. App. 99a (Abram-

son, J., dissenting).

The Kentucky court’s ruling defies three decades

of this Court’s settled precedent by imposing improp-

er obstacles to the enforcement of arbitration agree-

ments. The Court should reverse the decision below.

A. Factual Background.

Petitioners Kindred Nursing Centers Limited

Partnership, et al. (collectively “Kindred”) operate

nursing homes and rehabilitation centers, including

the Winchester Centre for Health and Rehabilitation

(a/k/a Fountain Circle Health and Rehabilitation).

Pet. App. 6a. Respondents Janis Clark and Beverly

Wellner represent, respectively, the estates of Olive

Clark and Joe Paul Wellner, two now-deceased resi-

dents of the Winchester Centre.!

Before the residents were admitted to the Win-

chester Centre, they had executed powers of attorney

designating respondents Clark and Wellner, respec-

tively, as their attorneys-in-fact. These powers of at-

torney conferred broad authority upon the attorneys-

in-fact to enter into transactions and agreements re-

lating to their principals’ affairs.

Janis Clark’s power of attorney, in pertinent

part, conferred the power “[t]o draw, make, and sign

in my name any and all checks, promissory notes,

contracts, deeds or agreements; * * * and Generally to

do and perform for me and in my name all that I

might do if present.” J.A. 7-8 (emphases added). Bev-

' Janis Clark is the daughter of Olive Clark, and Beverly

Wellner is the wife of Joe Wellner. See Pet. App. 16a, 20a.

5

erly Wellner’s power of attorney authorized her to

“make, execute and deliver deeds, releases, convey-

ances and contracts of every nature in relation to both

real and personal property.” J.A. 10-11 (emphases

added).

When their respective principals were admitted

to the Winchester Centre, respondents signed the

admission paperwork on their principals’ behalf. Pet.

App. 6a-7a. Each also executed a separate agreement

titled “Alternative Dispute Resolution Agreement

Between Resident and Facility (Optional).” Id. at

17a; J.A. 14-27. This arbitration agreement provided

that any disputes arising out of the “[rlesident’s stay

at the Facility” would be resolved in arbitration. J.A.

14, 21. It also explained that “execution of this [arbi-

tration] Agreement is not a precondition to the fur-

nishing of services to the Resident by the Facility.”

J.A. 19, 26.

B. Proceedings Below.

Respondents brought suit against petitioners, al-

leging state statutory and common-law claims aris-

ing out of their principals’ deaths while residing at

the Winchester Centre. Each respondent asserted

causes of action for wrongful death, personal injury,

and violations of Ky. Rev. Stat. § 216.510 et seq.,

which enumerates certain rights of long-term care

residents. Pet. App. 17a, 20a. In each case, petition-

2 Under Kentucky law, the wrongful death claims belong to the

respondents themzelves, not their principals. See Pet. App. 8a-

12a. Because respondents themselves did not agree to arbitra-

tion, the arbitrability of those wrongful death claims waa not

challenged m the Kentucky Supreme Court (Pet. App. 100a

(Noble, J., dissenting)); nor is it at issue here. This cage involves

6

ers moved to dismiss or stay the lawsuits, seeking to

enforce the arbitration agreements between petition-

ers and the residents. Jd. at 17a, 21a.

1. The state trial court initially dismissed each

lawsuit in favor of arbitration. Pet. App. 18a, 21a.

Subsequently, the Supreme Court of Kentucky held

in Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581,

592-94 (Ky. 2012), that broad language in a power of

attorney authorizing the attorney-in-fact to perform

“every act and thing whatsoever requisite and neces-

sary to be done” was limited by the specific authori-

zations to manage the principal’s “financial affairs”

and “health-care decisions,” and did not include the

authority to bind the principal to an optional arbitra-

tion agreement.*

Respondents moved for reconsideration of the

dismissal orders. In each case, the trial court granted

reconsideration and reversed its prior ruling, holding

that the arbitration agreements were unenforceable

because respondents lacked authority to bind their

principals to arbitration. Jd. at 18a, 21a.

2. Petitioners sought interlocutory review of both

decisions in the Kentucky Court of Appeals. That

court denied relief in both cases, holding that under

Ping, respondents lacked authority under their pow-

the arbitrability of the remaining claims, which respondents

are asserting on behalf of their deceased principals’ estates.

’ Ping did not have occasion to consider whether the powers of

attorney at issue here—including documents that conferred ex-

press authority to make contracts—include the authority to en-

ter into an arbitration agreement. As we discuss in more below

(at 21-22), the decision in Ping thus provided no basie for the

explicit-reference rule announced by the Kentucky Supreme

Court here.

7

ers of attorney to bind their principals to arbitration.

Pet. App. 19a-21a.

Petitioners then applied to the Supreme Court of

Kentucky for interlocutory relief. Jd. at 19a-20a, 23a.

The state supreme court consolidated the two cases

with a third case presenting similar issues, but in-

volving a nursing home and rehabilitation facility

that is not one of the petitioners.

3. A divided Supreme Court of Kentucky af-

firmed the Court of Appeals’ orders denying interloc-

utory relief to compel arbitration, by a 4-3 vote.

The majority first considered whether the text of

the powers of attorney at issue appeared to authorize

the attorneys-in-fact to enter into arbitration agree-

ments on their principals’ behalf. It held that the

power of attorney in Wellner did not provide the req-

uisite authorization. Although the Wellner power of

attorney authorized the attorney-in-fact to make

“contracts” related to “personal property,” and alt-

hough the majority acknowledged that legal claims

are a form of personal property, the majority con-

cluded that an arbitration agreement does not “re-

late” to personal property, but rather solely to the

principal’s “constitutional right to access the courts

and to trial by jury.” Pet. App. 37a.

The majority held that the Clark power of attor-

ney, by contrast, did convey the necessary authority,

concluding that in light of its broad language, “it

would be impossible to say that entering into a pre-

dispute arbitration agreement was not covered.” Id.

at 39a.

The majority then proceeded to consider, in

Clark “as well as the other cases,” the “extent to

which the authority of an agent to waive his princi-

8

pal’s fundamental constitutional rights to access the

courts, to trial by jury, and to appeal to a higher

court, can be inferred from a less-than-explicit grant

of authority.” Pet. App. 40a. It held that only a grant

of authority to enter into arbitration agreements ex-

plicitly “expressed in the text of the power-of-

attorney document” is sufficient to authorize an at-

torney-in-fact to agree to arbitration. Id. at 41a.

The majority opined that it would be “strange” to

conclude that a general power of attorney authorized

an attorney-in-fact to “waive the principal’s civil

rights; or the principal’s right to worship freely; or

enter into an agreement to terminate the principal's

parental] rights; put her child up for adoption; con-

sent to abort a pregnancy; consent to an arranged

marriage; or bind the principal to personal servi-

tude.” Pet. App. 42a. Equating agreements to resolve

disputes by arbitration with the relinquishment of

fundamental rights such as freedom from slavery,

familial and reproductive rights, and religious free-

dom, the majority held that courts may not infer

from a general power of attorney the authority to

waive a principal’s right to a jury trial. Jd. at 43a.

The majority went on to say that the drafters of

the Kentucky Constitution had “deemed the right to

a jury trial to be inviolate, a right that cannot be

taken away; and, indeed, a right that is sacred, thus

denoting that right and that right alone as a divine

God-given right.” Pet. App. 43a (last emphasis add-

ed). Based on this assessment of the status of the

right to a jury trial, the majority concluded that an

express grant of authority is needed before an attor-

ney-in-fact can enter into an arbitration agreement

on behalf of her principal.

9

The majority then “reject[ed] the notion” that its

decision conflicted with the FAA or this Court’s prec-

edents. For example, it described Concepcion as hold-

ing only that state law is preempted only when it

“prohibits outright the arbitration of a particular

type of claim,” and stated that its ruling did not run

afoul of that prohibition because arbitration agree-

ments between nursing homes and residents could

still be enforced as long as they were signed by the

resident or an attorney-in-fact with explicit authority

to enter into arbitration agreements. Pet. App. 46a

(quotation marks omitted). And the majority denied

that its decision was “hostile” to arbitration, stating

that its new rule “merely reflects a long-standing and

well-established policy disfavoring the unknowing

and involuntary relinquishment of fundamental con-

stitutional rights.” Id. at 47a-48a.

Chief Justice Minton and Justices Abramson and

Noble dissented, with Justices Abramson and Noble

each authoring a dissenting opinion.

The principal dissent, written by Justice Abram-

son and joined by the other two dissenting justices,

explained that under the “clear precedent” of this

Court, the majority was “not at liberty to conclude

that in Kentucky a power of attorney that gives the

agent express authority to contract does not include

the authority to contract for arbitration * * *.” Pet.

App. 78a (Abramson, J., dissenting). Rather,

“{[w|hether one sympathizes with the majority's dis-

like of federally imposed arbitration or not, the ines-

capable fact remains that the majority has disre-

garded controlling law” under the FAA and that the

arbitration agreements must be enforced. Id. at 99a.

The dissent concluded that the majority’s holding

“flfies] in the face of federal law and [is] preempted

10

by the Supremacy Clause because it [is] clearly not

* * * 4 state-law principle applicable to ‘any contract’

but rather one that singles out arbitration agree-

ments for disfavored treatment.” Jd. at 78a.4

SUMMARY OF ARGUMENT

The decision below stands in stark defiance of

this Court's repeated holdings that the FAA

preempts state-law rules that disfavor arbitration

agreements. By requiring that a power of attorney

contain an explicit statement authorizing the attor-

ney-in-fact to enter into an arbitration agreement—.

even though Kentucky law does not impose that re-

quirement as to a power of attorney to enter into

other types of contracts—the Kentucky court flatly

violated the FAA’s mandate that courts must “placef]

arbitration agreements on equal footing with all oth-

er contracts.” Imburgia, 136 S. Ct. at 468; see also

Casarotto, 517 U.S. at 686-87; Perry, 482 U.S. at 492

n.9.

The Kentucky court sought to avoid FAA

preemption by describing its rule as one of general

applicability. Specifically, it claimed both that its

rule is an application of general agency law and that

Kentucky would require express authority before an

attorney-in-fact could waive any constitutional right

of the principal.

4 Justice Noble “joinfed] Justice Abramson’s dissent for its rea-

soning on the main points in these cases,” but separately dis-

sented “to begin correcting any confusion about agency Jaw by

the part of our Ping decision that was actually not determina-

tive in the result of the case.” Pet. App. 116a. Unless otherwise

noted, references to the “dissent” refer to Justice Abramson’s

dissenting opinion.

11

But these justifications are squarely precluded

by this Court’s precedents. First, there is no general

principle of Kentucky agency law (or any jurisdic-

tion’s agency law, for that matter) that would sup-

port the illogical conclusion that the authority to en-

ter into “contracts” delegates the power to enter into

any contract except a dispute-resolution agreement.

Accordingly, the state court’s interpretation is like

the one declared preempted in Jmburgia, in which

this Court explained that “nothing in the [state

court’s] reasoning suggestied]” that a court in that

State “would reach the same interpretation * * * in

any context other than arbitration.” 136 S. Ct. at 469.

Second, the only constitutional rights to which

the court’s reasoning applies are the rights to a jury

trial and access to courts—the waiver of which, not

by happenstance, are the most defining characteris-

tics of an arbitration agreement. The court’s explicit-

authorization rule does not apply, for example, even

to other constitutional rights that are relevant to

contracting—such as Kentucky’s constitutional right

“of acquiring and protecting property.” Ky. Const. § 1;

see also Pet. App. 93a (Abramson, J., dissenting).

Nor does it apply to forum-selection clauses that se-

lect a forum in which a party would not otherwise be

subject to personal jurisdiction—even though such a

choice of forum waives that partys due process

rights. Thus, the Kentucky court’s rule is a contract

defense that specifically targets arbitration agree-

ments and is accordingly preempted by the FAA.

Indeed, if the decision below were affirmed,

States would have virtual carte blanche authority to

impose discriminatory barriers to the enforcement of

arbitration agreements. For example, the Montana

statute rejected in Casarotto—requiring notice of an

12

arbitration provision to be highlighted and capital-

ized on the first page of a contract-——could be resur-

rected by simply recharacterizing it as a rule that

special notice is required for any contract waiving

the rights to a jury trial and access to courts. Along

those lines, States would be free to conjure up new

hurdles to arbitration agreements, such as requiring

that any waiver of a jury trial be signed in triplicate

form to be effective. And a State could outlaw

predispute arbitration agreements entirely by adopt-

ing the rule that, as a matter of state law, advance

waivers of the right to a jury and other constitutional

rights are invalid.

At the end of the day, the decision below is yet

another in a long line of state court decisions seeking

to evade the FAA’s prohibition against discriminato-

ry burdens on the enforcement of arbitration agree-

ments. See, e.g., Imburgia, 136 S. Ct. 463; Nitro-Lift

Techs., L.L.C. v. Howard, 133 S. Ct. 500 (2012) (per

curiam); Marmet Health Care Center, Inc. v. Brown,

132 S. Ct. 1201 (2012) (per curiam). As Justice

Abramson observed in dissent, the decision makes “a

clever contribution to this new genre” of recent cases

that have attempted “to ‘rule around’ the FAA.” Pet.

App. 99a (Abramson, J., dissenting). Such end-runs

improperly flout this Court's precedents. The Ken-

tucky court’s decision accordingly should be reversed.

ARGUMENT

I. The Decision Below Conflicts With The FAA

And Defies This Court’s Precedents.

The Kentucky Supreme Court’s rule requiring

powers of attorney to contain specific language that

expressly authorizes attorneys-in-fact to enter into

13

arbitration agreements cannot be squared with the

FAA’s mandates.

A. This Court Has Repeatedly Held That

State-Law Rules That Disfavor Arbitra-

tion Are Preempted By The FAA.

Congress enacted the FAA to “reverse the

longstanding judicial hostility to arbitration agree-

ments,” “to place [these] agreements upon the same

footing as other contracts,” and to “manifest a liberal

federal policy favoring arbitration agreements.”

EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002)

(quotation marks omitted); see also CompuCredit

Corp. v. Greenwood, 132 S. Ct. 665, 668 (2012) (the

FAA was “enacted in 1925 as a response to judicial

hostility to arbitration”) (citing Concepcion, 563 U.S.

at 339); Allied-Bruce Terminix Cos. v. Dobson, 513

U.S. 265, 272 (1995) (explaining that the FAA “seeks

broadly to overcome judicial hostility to arbitration

agreements’).

Section 2 of the FAA therefore commands that

“[aJn agreement to arbitrate is valid, irrevocable, and

enforceable as a matter of federal law, * * * ‘save up-

on such grounds as exist at law or in equity for the

revocation of any contract.” Perry, 482 U.S. at 492

n.9 (quoting 9 U.S.C. § 2). “Section 2 ‘declare[s] a na-

tional policy favoring arbitration’ of claims that par-

ties contract to settle in that manner.” Preston v.

Ferrer, 552 U.S. 346, 353 (2008) (quoting Southland

Corp. v. Keating, 465 U.S. 1, 10 (1984)).

“By enacting § 2, * * * Congress precluded States

from singling out arbitration provisions for suspect

status” (Casarotto, 517 U.S. at 687) or from imvali-

dating arbitration provisions through state-law rules

that “apply only to arbitration or that derive their

14

meaning from the fact that an agreement to arbitrate

is at issue.” Concepcion, 563 U.S. at 339; see also

Imburgia, 136 S. Ct. at 469 (FAA preempts state-law

interpretation of a contract that is “restricted to th[e]

field” of arbitration); Perry, 482 U.S. at 492 n.9 (“A

state-law principle that takes its meaning precisely

from the fact that a contract to arbitrate is at issue

does not comport with * ** § 2.”). Nor may States

apply generally applicable state-law doctrines “in a

fashion that disfavors arbitration.” Concepcion, 563

U.S. at 341.

The FAA also precludes reliance on “judicial poli-

cy concern[s] as a source of authority” for refusing to

enforce arbitration agreements. 14 Penn Plaza LLC

v. Pyett, 556 U.S. 247, 270 (2009); see also Concep-

cion, 563 U.S. at 342 (explaining that the FAA was

enacted to eliminate the “great variety’ of ‘devices

and formulas’ declaring arbitration against public

policy”). Thus, it is immaterial that the discriminato-

ry rule here derives from common law rather than a

statute; the FAA preempts any “state law, whether

of legislative or judicial origin,” that disfavors arbi-

tration. Perry, 482 U.S. at 492 n.9 (emphasis added);

see Casarotto, 517 U.S. at 687 n.3.

Based on these well-established principles, this

Court repeatedly has overturned decisions by state

courts when, as here, they either have ignored or re-

fused to apply the FAA and this Court’s precedents

interpreting it. As the Court has explained, because

“[s]tate courts rather than federal courts are most

frequently called upon to apply the * * * FAA,” “[i]t is

a matter of great importance *** that state su-

preme courts adhere to a correct interpretation of the

legislation.” Nitro-Lift, 133 S. Ct. at 501.

15

Just last Term, this Court reversed a decision of

the California Court of Appeal that had adopted a

dubious interpretation of an arbitration agreement

in the course of declaring the agreement unenforcea-

ble. Imburgia, 136 S. Ct. at 468-71. This Court con-

cluded that the California courts would not have

reached the same interpretation of the contract “in

any other context other than arbitration”; instead,

the California court’s analysis was “restricted to that

field”—precisely the kind of state-law discrimination

against arbitration that the FAA flatly forbids. Id. at

469. And the Court underscored that “[t]he Federal

Arbitration Act is a law of the United States,” and,

“[cJonsequently, the judges of every State must follow

it.” Id. at 468.

Two decades ago, in Casarotto, the Court reached

the very same conclusion, holding that “threshold

limitations placed specifically and solely on arbitra-

tion provisions” are unenforceable because they are

“antithetical to” the “goals and policies’ of the FAA

to promote arbitration by treating arbitration as fa-

vorably as any other contract.” 517 U.S. at 688.

Thus, the FAA preempted a Montana statute requir-

ing special notice of an arbitration provision on the

first page of a contract, because the statute “singl[ed]

out arbitration provisions for suspect status.” Jd. at

687.

The Court refused to excuse this special notice

requirement as a particular application of a general

state policy that purportedly unexpected contract

terms must be conspicuous, and instead reiterated

that “a court may not ‘rely on the uniqueness of an

agreement to arbitrate as a basis for a state-law

holding that enforcement would be unconscionable,

for this would enable the court to effect what * * *

16

the state legislature cannot.” Casarotto, 517 U.S. at

687 n.3 (quoting Perry, 482 U.S. at 492 n.9).

Similarly, the Court has recognized that the FAA

preempts and forbids enforcement of state-law rules

categorically “prohibiting arbitration of a particular

type of claim,” because such state-law bars are “con-

trary to the terms of and coverage of the FAA.”

Marmet, 132 S. Ct. at 1204. In Marmet, this Court

vacated and remanded a decision of “the Supreme

Court of Appeals of West Virginia,” which had de-

clared “unenforceable all predispute arbitration

agreements that apply to claims alleging personal in-

jury or wrongful death against nursing homes.” 132

S. Ct. at 1202. “[Bly misreading and disregarding the

precedents of this Court interpreting the FAA,” the

West Virginia court “did not follow controlling feder-

al law implementing th[e] basic principle” that both

“[s]tate and federal courts must enforce the Federal

Arbitration Act.” Jbid.; see also id. at 1203 (“The

West Virginia court’s interpretation of the FAA was

both incorrect and inconsistent with clear instruction

in the precedents of this Court.”).

Moreover, Casarotto and Marmet are far from

alone: On several other occasions, this Court has de-

clared state law preempted when it runs afoul of the

FAA. See e.g., Mastrobuono v. Shearson Lehman

Hutton, Inc., 514 U.S. 52, 56 (1995) (FAA preempted

state law requiring judicial resolution of claims in-

volving punitive damages); Perry, 482 U.S. at 489-

491 (FAA preempted state law requiring that liti-

gants be provided a judicial forum for wage dis-

putes); Southland, 465 U.S. at 10 (“In enacting § 2 of

the [FAA], Congress declared a national policy favor-

ing arbitration and withdrew the power of the states

to require a judicial forum for the resolution of

17

claims which the contracting parties agreed to re-

solve by arbitration,” including for claims brought

under state franchise-investment law); cf. Preston,

552 U.S. at 358-59 (FAA preempted state law requir-

ing claims under California’s Talent Agents Act to be

submitted to the Labor Commissioner in the first in-

stance, rather than to arbitration (or litigation)).

In sum, the Court has not hesitated to strike

down the sweeping panoply of rules and devices that

States—including state supreme courts—have craft-

ed to evade the FAA. As we next explain, this Court

should reach the same conclusion here.

B. The Kentucky Court’s Explicit-

Reference Rule Singles Out Arbitration

For Suspect Status.

The Kentucky Supreme Court’s decision in this

case similarly failed to adhere to the FAA and this

Court’s precedents interpreting that statute.

In both of the individual cases consolidated be-

fore the Kentucky court (Clark and Wellner), an at-

torney-in-fact for the resident had been granted au-

thority to enter into “contracts” on the resident’s be-

half. Pet. App. 19a, 22a. The majority below nonethe-

less held that those attorneys-in-fact could not enter

into arbitration agreements—even though they did

have the power to enter into other kinds of con-

tracts—because the power of attorney did not specifi-

cally mention arbitration agreements. This explicit-

reference rule clearly “places arbitration agreements

in a class apart from ‘any contract,’ and singularly

limits their validity.” Casarotto, 517 U.S. at 688.

Indeed, it is hard to imagine a more fundamental

precept under the FAA than this Court’s repeated

admonition that arbitration provisions must “be

18

placed ‘upon the same footing as other contracts.” Id.

at 687 (quoting Scherk v. Alberto-Culver Co., 417

U.S. 506, 511 (1974)). Accord, e.g., Imburgia, 136 S.

Ct. at 468; Concepcion, 563 U.S. at 339; Rent-A-

Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010);

Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630

(2009); Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440, 443 (2006); Allied-Bruce, 513 U.S. at

271; Volt Info. Scis., Inc. v. Bd. of Trs. of Leland

Stanford Junior Univ., 489 U.S. 468, 478 (1989); Per-

ry, 482 U.S. at 482 n.9; Southland, 465 U.S. at 16 &

n.11.

The parallels to Casarotto are striking. The Mon-

tana statute struck down in that case required con-

tracts with arbitration clauses to provide notice of

the clauses in underlined capital letters on the first

page of the contract. The Court held that this height-

ened-notice requirement “directly conflict[ed] with

§ 2 of the FAA because the State’s law condition[ed]

the enforceability of arbitration agreements on com-

pliance with a special notice requirement not appli-

cable to contracts generally.” 517 U.S. at 687.

The Kentucky Supreme Court’s rule similarly

conditions the enforceability of arbitration agree-

ments signed by attorneys-in-fact on an explicit-

reference requirement that is not applicable to other

kinds of contracts. See also Pet. App. 78a (Abramson,

J., dissenting) (noting that the majority’s rule requir-

ing an explicit mention of arbitration “singles out ar-

bitration agreements for disfavored treatment in the

same vein as the statutes and judicially-created

rules” that this Court has previously held preempted

by the FAA).

To sustain the decision below would thus require

the Court to over more than three decades of prece-

19

dent. Yet “[o]verruling precedent is never a small

matter,” and stare decisis—“a foundation stone of the

rule of law”—‘“carries enhanced force when a decision

*** interprets a statute” such as the FAA; when

“Congress has spurned multiple opportunities to re-

verse” this Court’s precedents if it so chose; and in

“cases involving property and contract rights,” “be-

cause parties are especially likely to rely on such

precedents when ordering their affairs.” Kimble v.

Marvel Entm’t, LLC, 135 S. Ct. 2401, 2409-10 (2015)

(quotation marks omitted).

The majority below offered two principal reasons

for excusing its explicit-reference rule’s discriminato-

ry treatment of arbitration: (1) it deemed the rule to

be both a general application of Kentucky agency law

and a construction of powers of attorney in general;

and (2) it asserted that the explicit-reference rule

applies to the waiver of all fundamental constitu-

tional rights. Neither explanation for the state-law

rule saves the holding below from preemption.

1. The Explicit-Reference Rule Is Not Appli-

cable To Contracts Generally.

Like the court below here, the plaintiffs in

Imburgia pointed to the California Court of Appeal’s

purportedly neutral interpretation of the phrase “law

of your state” in a consumer contract. This Court

recognized, of course, that “California courts are the

ultimate authority on [California] law.” Imburgia,

136 S. Ct. at 468. Nonetheless, it was for this Court

to “decide whether the decision of the California

court places arbitration contracts “on equal footing

with all other contracts.” Ibid. (quoting Buckeye, 546

U.S. at 443).

20

In other words, to assess whether the FAA’s dic-

tates have been honored, the Court must determine

whether a state court would in fact “interpret con-

tracts other than arbitration contracts the same

way, rather than simply accepting the state court’s

professions of neutrality. Id. at 469; see also ibid.

(“Since the interpretation of a contract is ordinarily a

matter of state law to which we defer * * * we must

decide not whether [the state court’s] decision is a

correct statement of California law but whether (as-

suming it is) that state law is consistent with the

Federal Arbitration Act.”); Perry, 482 U.S. at 492 n.9

(explaining that, as a matter of “choice-of-law,” “the

principles of federal common law” embodied by the

FAA trump “state-law holding{s]” if those holdings

“rely on the uniqueness of an agreement to arbitrate

as a basis” for resisting enforcement).5

Applying that standard, this Court held in

Imburgia that the FAA precluded the California

Court of Appeal’s interpretation of the term “law of

your state” to exclude the preemptive force of federal

law because “nothing in the [state court’s] reasoning

suggestied]” that a court in that state “would reach

a ——

5 Im other contexts, such aa the independent-and-adequate-

state-grounds doctrine, this Court likewise is not obligated to

accept at face value a state court’s reasoning. In that context,

the Court instead inquires whether the state procedural] rule

purportedly precluding federal review has been “firmly estab-

lished and regularly followed.” James vy. Kentucky, 466 U.S.

341, 348 (1984); see also, e.g., Howlett ex rel. Howlett v. Rose,

496 U.S. 356, 369 (1990) ("A state court may not deny a federal

right, when the parties and controversy are properly before it,

in the absence of ‘valid excuse.”); id. at 369 n.16 (collecting cas-

es).

21

the same interpretation of ‘law of your state’ in any

context other than arbitration.” 136 S. Ct. at 469.

That same principle controls the outcome here.

The majority below’s description of its rule as an

application of the “general principle[{] * * * that an

attorney-in-fact may not act beyond the powers he

has been granted under the power-of-attorney in-

strument” (Pet. App. 45a) is therefore not controlling.

A rule characterized as a particular application of

generally-applicable contract doctrines is still

preempted when that rule is “applied in a fashion

that disfavors arbitration” (Concepcion, 563 U.S. at

341) or that is “restricted to that field” (mburgia,

136 S. Ct. at 469).

And there can be no doubt that the majority’s ex-

plicit-reference rule fits that description: As the dis-

sent below explained, the rule “burdens agent-

entered arbitration agreements more heavily than

either agent-entered contracts generally, or judicial

forms of agent-initiated dispute resolution.” Pet.

App. 92a (Abramson, J., dissenting). In fact, we are

not aware of—nor have been able to find—any Ken-

tucky decisions holding that any other types of con-

tracts are subject to this explicit-reference rule. In

other words, we have located no other decision draw-

ing the (illogical) conclusion that the authority to en-

ter into “contracts” really means the authority to en-

ter into all contracts except one specific kind of con-

tract.

The Kentucky Supreme Court’s earlier decision

in Ping, for example, offers no support for the explic-

it-reference rule. That case held that an attorney-in-

fact lacked authority to enter into an optional arbi-

tration agreement because “the only decisions specif-

22

ically provided for in the document” were “to make

financial and health-care decisions.” 376 S.W.3d at

591. The defendant had relied on general language

that the attorney-in-fact had “full and complete pow-

er and authority to do and perform any, all, and eve-

ry act and thing whatsoever requisite and necessary

to be done,” but the court rejected the claim that this

language provided “a sort of universal authority be-

yond thle] express provisions.” Jd. at 590-92. What-

ever the merits of that decision, it is clearly inappli-

cable here, as the powers of attorney in this case ex-

plicitly authorized the attorneys-in-fact to make or

enter into contracts. See also Pet. App. 70a-72a

(Abramson, J., dissenting) (distinguishing Ping on

this basis, and collecting cases doing the same).

It is also significant that Kentucky law erects no

similar barriers to allowing state-appointed guardi-

ans—as opposed to attorneys-in-fact—to enter into

arbitration agreements on behalf of their wards. As a

federal court in Kentucky recently explained in en-

forcing an arbitration agreement entered into by a

guardian, “a disabled person, once appointed a

guardian, is stripped of several rights—including ‘the

right * * * to enter into contractual relationships.”

Preferred Care, Inc. v. Howell, 2016 WL 4470746, at

*3 (E.D. Ky. Aug. 19, 2016) (quoting Ky. Rev. Stat.

§ 387.590(10)). “So it follows that these rights, once

taken from the ward, are vested in the guardian to

care for him”—and this right to enter into contractu-

al relationships generally includes the right to enter

into arbitration agreements, even though the Ken-

tucky guardianship statute does not explicitly refer-

ence arbitration. Jbid.; accord Preferred Care, Inc. v.

Bleeker, 2016 WL 6636854, at *4 (E.D. Ky. Nov. 8,

2016) (same).

23

Finally, in one of the two cases consolidated be-

fore the court below, Wellner, the majority identified

a second reason for refusing to enforce the arbitra-

tion agreement. Even though the Wellner power of

attorney authorized the attorney-in-fact to make con-

tracts “in relation to * * * personal property,” Pet.

App. 22a—and the majority “certainly agree[d]” that

“personal injury claim[s]” and other “choses-in-

action are personal property,” id. at 36a (quoting

Button v. Drake, 195 S.W.2d 66, 69 (Ky. 1946))—the

majority nonetheless held the power to agree to arbi-

tration outside the scope of the attorney-in-fact’s au-

thority. Instead, the majority said, an agreement to

arbitrate the principal’s legal claims somehow did

not “relat[e] to” the claims, but rather solely to the

principal’s “constitutional right” to trial by jury,

which is not “personal property.” Id. at 37a.

This conclusion not only defies common sense,

but also is preempted by the FAA, because the rea-

soning would not apply to any agreement other than

an agreement to arbitrate. In light of Kentucky's

long-standing recognition that causes of action are

personal property (see Button, 195 S.W.2¢ at 69), it

is unthinkable that Kentucky courts would interpret

the phrase “contracts * ** in relation to * * * per-

sonal property” to exclude any other kind of agrec-

ment relating to an individual's legal claims. See Pet.

App. 85a (Abramson, J., dissenting); cf. Logan vy.

Zimmerman Brush Co., 455 U.S. 422, 428 (1982)

(recognizing “that a cause of action is a species of

property protected by the Fourteenth Amendment's

Due Process Clause”) (citing Mullane v. Central

Hanover Bank & Trust Co., 339 U.S. 306, 313

(1950)). In short, the decision below impermissibly

discriminated against arbitration in its treatment of

both the Clark and Wellner powers of attorney.

24

2. The Explicit-Reference Rule Cannot Be

Salvaged By The Kentucky Court’s Refer-

ence To “Fundamental Constitutional

Rights.”

Similarly unavailing is the majority's rationale

that its explicit-reference rule does not disfavor arbi-

tration because the rule applies to all “fundamental

constitutional rights.” Pet. App. 48a. That rationale

falters for several reasons.

First, the majority's own reasoning does not ap-

ply to all constitutional rights, but rather singles out

only those rights that are inherently affected by arbi-

tration agreements. The majority describes the right

to a jury trial as the one and only “sacred” constitu-

tional right in Kentucky. Pet. App. 43a (“[T]he draft-

ers of our Constitution deemed the right to a jury

trial * * * and that right alone as a divine God-given

right.” (emphasis added)). There is nothing in the

majority opinion to suggest that its reasoning would

apply to any waiver of a constitutional right other

than the right to a jury trial—which is “the one right

that just happens to be correlative to the right to ar-

bitrate.” Id. at 95a (Abramson, J., dissenting) (em-

phasis omitted).®

® The dissent also explained in detail that, as a matter of Ken-

tucky law and history, the majority's elevation of the right to a

Jury trial to sacrosanct status is substantially overstated in civil

cases like this one. Rather, “the ‘sacredness’ of the jury-trial

guarantee had much more to do with the protection it afforded

criminal defendants” in felony cases, not civil plaintiffs. Pet.

App. 89a-90a n.26 (Abramson, J., dissenting) (emphasis added).

The dissent further noted that as a matter of Kentucky prac-

tice, the right to a jury trial in civil cases is waived by default—

a litigant must file a timely written notice demanding a jury

trial to preserve the right—further undermining the majority's

25

In Concepcion, moreover, this Court gave as an

example of a preempted state law one that would

classify as unconscionable an arbitration agreement

that “disallow[s] an ultimate disposition by a jury.”

563 U.S. at 342. The Court thus recognized that

foregoing a jury trial in favor of informal dispute res-

olution is an inherent feature of arbitration. As the

dissent below summarized, the FAA and this Court’s

precedents preclude courts from “either disfavoring

arbitration directly under state law, or disfavoring it

indirectly by favoring its correlative opposite—a ju-

dicial trial.” Pet. App. 89a (Abramson, J., dissenting).

The other rights under the Kentucky Constitu-

tion principally relied upon by the majority to justify

its explicit-reference rule also fall within the catego-

ry of such “rights” inherently affected by arbitration

agreements. According to the majority, “[t]he need

for specificity” in a power of attorney “is all the more

important when the affected fundamental rights in-

clude the right of access to the courts (Ky. Const.

§ 14) [and] the right of appeal to a higher court (Ky.

Const. § 115).” Pet. App. 41a. The absence of these

judicial procedures are—like the absence of a jury

trial—also inherent characteristics of arbitration.

By contrast, Kentucky's Constitution includes

other protections as to which an explicit authoriza-

tion is not required. For example, the Kentucky Con-

stitution confers the “inherent and alienable right{]

* * * of acquiring and protecting property” (Ky. Const.

§ 1) and guarantees that no law shall be enacted

“impairing the obligation of contracts” (id. § 19). Yet

as Justice Abramson explained, attorneys-in-fact in

elevation of that right “to a heretofore unrecognized status.” Jd.

at 98a-99a.

26

Kentucky “routinely exercise, compromise, and waive

fundamental constitutional rights on behalf of their

principals”—-such as the right to acquire and dispose

of property. Pet. App. 93a (Abramson, J., dissenting).

The majority’s opinion likewise does not indicate

that explicit authorization is necessary to confer the

authority to enter into a forum selection clause—and

we are aware of no other Kentucky decision so hold-

ing—even though such clauses may waive a party's

constitutional due process rights by selecting a forum

in which that party would otherwise not be subject to

personal jurisdiction. See, e.g., International Shoe

Co. v. Washington, 326 U.S. 310, 316 (1945) (“[D]ue

process requires” that, in order to subject a defend-

ant to personal jurisdiction in a forum, the defendant

must “have certain minimum contacts with it such

that the maintenance of the suit does not offend ‘tra-

ditional notions of fair play and substantial jus-

tice.”).

Thus, there is no evidence that generally-

applicable principles of Kentucky law require powers

of attorney to make explicit reference to the authori-

ty to affect or waive any of the principal’s constitu-

tional rights. That should “lead [this Court] to con-

clude that the [Kentucky] court’s” explicit-reference

rule “is unique” and “restricted to thfe] field” of arbi-

tration. Imburgia, 136 S. Ct. at 469.7

7 It is also telling—and entirely consistent with this Court's

precedents—-that federal circuit courts have repeatedly rejected

arguments that a heightened standard requiring a “knowing

and voluntary” waiver of the Seventh Amendment right to a ju-

ry should apply to the enforcement of an arbitration agreement.

As the Fourth Circuit put it, “[c]lommon senae dictates that we

reject” the argument that a plaintiff “could not have knowingly

27

Second, and relatedly, the majority “ma[d]e plain

the hostility to arbitration” that underlies its holding

(Pet. App. 97a (Abramson, J., dissenting)) when it

justified its explicit-reference rule by comparing ar-

bitration agreements—-favored under federal law—to

binding the principal to “personal servitude”; termi-

nating “the principal’s parental rights”; “put/ting]

her child up for adoption”; or stripping the principal

of her “right to worship freely” (Pet. App. 42a).

These inflammatory and unsupportable analo-

gies reflect precisely the type of hostility to arbitra-

tion as a means of dispute resolution that this Court

has repeatedly declared out of bounds under the

FAA. As the Court emphasized over three decades

ago, “we are well past the time when judicial suspi-

cion of the desirability of arbitration and the compe-

tence of arbitral tribunals inhibited the development

of arbitration as an alternative means of dispute res-

olution.” Mitsubishi Motors Corp. v. Soler Chrysler—

and voluntarily waived her Seventh Amendment rights to a ju-

ry trial” because the “loss of the right to a jury trial ie a neces-

sary and fairly obvious consequence of an agreement to arbi-

trate.” Snowden v. CheckPoint Check Cashing, 290 F.3d 631,

638 (4th Cir, 2002) (citation omitted); see also, e.g., IFC Credit

Corp. v. United Bus. & Indus. Fed. Credit Union, 512 F.3d 989,

994 (7th Cir. 2008) (“[A]n agreement to arbitrate * * * surren-

ders not only a jury trial but also the right to a judicial forum],]

[yet] [cjourts do not impose special negotiation requirements on

arbitration clauses in form contracts.”); Caley v. Gulfstream

Aerospace Corp., 428 F.3d 1359, 1370-73 (Lith Cir. 2006) (ex-

plicitly rejecting a “knowing and voluntary” requirement for the

waiver of jury trial rights pursuant to an arbitration agree-

ment); Cooper v. MRM Inv. Co., 367 F.3d 493, 506 (6th Cir.

2004) (same); Am. Heritage Life Ins. Co. v. Orr, 294 F.3d 702,

711 (5th Cir. 2002) (“[B]ly agreeing to arbitration, Appellants

have necessarily waived * * * their right to a judicial forum;

and * * * their corresponding right to a jury trial.”).

28

Plymouth, Inc., 473 U.S. 614, 626-27 (1985); see also,

e.g., 14 Penn Plaza, 556 U.S. at 266-67 (“reliance on

* * * overt hostility to the enforcement of arbitration

agreements would be ill-advised”); Gilmer v. Inter-

state/Johnson Lane Corp., 500 U.S. 20, 30 (1991)

(“generalized attacks on arbitration [that] rest on

suspicion of arbitration” as a means of dispute reso-

lution are “far out of step with our current strong

endorsement of the federal statutes favoring this

method of resolving disputes”) (quotation marks and

alterations omitted); Shearson/Am. Express, Inc. v.

McMahon, 482 U.S. 220, 231-32 (1987) (“it is difficult

to reconcile” earlier decisions’ “mistruct of the arbi-

tral process with this Court’s subsequent decisions

involving the [Federal] Arbitration Act”).

Third, even if the majority's explicit-reference

rule genuinely did apply to such constitutional rights

as the right to “worship freely” or the right against

involuntary “personal servitude”—rather than being

a concocted, post-hoc hypothetical—the majority’s

protestations of neutrality would still rest on a false

equivalence. The majority’ fanciful examples de-

scribe “rights that an ordinary attorney-in-fact is

rarely, if ever, asked to address on the principal’s

behalf.” Jd. at 97a (Abramson, J., dissenting). By

contrast, arbitration agreements “are commonplace.”

Ibid. Thus, as Justice Abramson summarized, “the

application of [the explicit-reference] rule will clearly

have a disproportionate effect on the ability of agents

to enter arbitration agreements (as opposed to other

contracts).” Jd. at 98a. This “disproportionate impact”

29

is impermissible under the FAA. Concepcion, 563

U.S. at 342.8

C. Upholding The Decision Below Would

Enable States To Impose Numerous Dis-

criminatory Burdens On The Enforce-

ment Of Arbitration Agreements.

If invoking the right to a jury trial or access to a

court could provide sufficient grounds to subject arbi-

tration agreements to legal! rules not applicable to

other contracts, States would be free to discriminate

against arbitration in countless ways—even though

decades of this Court’s precedents hold the exact op-

posite.

For example, the Montana statute at issue in

Casarotto declared arbitration agreements unen-

forceable unless “[n]otice that [the] contract is sub-

ject to arbitration” is “typed in underlined capital let-

ters on the first page of the contract” (Mont. Code

Ann. § 27-5-114(4)). If the decision below were af-

firmed, Montana could simply revise that law to re-

place the word “arbitration” with the term “waiver of

8 For the reasons just discussed, every federal district judge in

Kentucky that has addressed the question has held that the

state-law rule announced by the decision below is wholly irrec-

oncilable with this Court’s precedents and therefore preempted

by the FAA. See Preferred Care of Delaware, Inc. v. Hopkins,

2016 WL 3646407, at *2-4 (W.D. Ky. June 23, 2016); Branden-

burg Health Facilities, LP v. Mattingly, 2016 WL 3448733, at *4

& n.3 (W.D. Ky. June 20, 2016); Pine Tree Villa, LLC v. Coulter,

2016 WL 3030185, at *3 n.1 (W.D. Ky. May 25, 2016); Owensbo-

ro Health Facilities, L.P. v. Henderson, 2016 WL 2853569, at *4

(W.D. Ky. May 13, 2016); Riney v. GGNSC Louisville St. Mat-

thews, LLC, 2016 WL 2853568, at *3 (W.D. Ky. May 13, 2016);

GGNSC Louisville Hillcreek, LLC v. Watkins, 2016 WL 815295,

at *5 n.3 (W.D. Ky. Feb. 29, 2016).

30

a jury trial” in order to invoke the constitutional

right relied upon by the Kentucky court here. Yet

that revised statute would be no different than the

special notice rule this Court held preempted two

decades ago. See 517 U.S. at 683, 687-88.

And endorsing the rationale below would open

the door to discriminatory state laws far more bur-

densome than notice requirements. For example,

without ever mentioning the word “arbitration,”

States could ban predispute waivers of a jury trial or

access to a judicial forum—perhaps invoking the the-

ory that a party will not appreciate the importance of

such rights until after a dispute has arisen (and

knowing full well that a plaintiff who has already

brought a lawsuit in court is not likely to agree ex

post tw arbitrate his claims). That would invalidate

all predispute arbitration agreements.

Applying the fig leaf of referring to waivers of ju-

ry trials or access to courts does not change the sub-

stance of such an anti-arbitration rule. “The ‘goals

and policies’ of the FAA *** are antithetical to

threshold limitations placed specifically and solely on

arbitration provisions.” Casarotto, 517 U.S. at 688

(quoting Southland, 465 U.S. at 10).

In short, the Kentucky court cannot avoid the

preemptive force of the FAA simply by

recharacterizing its heightened explicit-reference re-

quirement as one that is not trained on arbitration

but instead is targeted towards rights (like the waiv-

er of a jury trial and access to courts) that are fun-

damental characteristics of arbitration.

31

Ill. The FAA Applies To The Question Of Con-

tract Enforceability Presented Here.

Unable to show that the decision below comports

with the FAA, respondents at the petition stage ar-

gued that the FAA does not apply here at all (see

Opp. 16)—a position that even the majority below

did not endorse. See Pet. App. 44a-48a (applying the

FAA). According to respondents, the FAA applies on-

ly to “dispute[s] regarding an arbitration agreement's

validity,” not to “dispute[s] as to whether an agree-

ment was ‘ever concluded.” Opp. 16 (quoting Buck-

eye, 546 U.S. at 444 n.1).

Respondents’ contention is mistaken for multiple

reasons. To begin with, there is no contract-

formation dispute here: each of the attorneys-in-fact

undisputedly entered into a written arbitration

agreement on behalf of her principal, and the ques-

tion is only whether those agreements should be en-

forced. That question is squarely governed by Section

2 of the FAA. See 9 U.S.C. § 2 (providing that written

agreements to arbitrate disputes are “enforceable,

save upon such grounds as exist at law or in equity

for the revocation of any contract”); see also Pet. App.

100a (Noble, J., dissenting) (remarking that the ma-

jority’s elevation of the jury trial right and explicit

reference rule does not “actually affect[] the /for-

mation of a contract to arbitrate”).

In any event, parties cannot circumvent the FAA

by attempting to characterize discriminatory state-

law rules governing the enforceability of arbitration

agreements as rules of contract formation. Indeed,

this Court rejected an analogous attempt by the re-

spondents in Imburgia, who contended that the FAA

was inapplicable because the dispute there involved

the “threshold question of whether there’s an arbi-

32

tration agreement in the first place.” Tr. of Oral Arg.

at 30, Imburgia, 2015 WL 6552642, at *30; see al-

so id. at *41, 46-47.

This Court squarely rebuffed that attempt to lim-

it the FAA’s reach, recognizing that the question be-

fore it was whether the California court’s “interpreta-

tion of [the] contract *** is consistent with the

[FAA].” Imburgia, 136 S. Ct. at 468 (emphas-s add-

ed). It should do the same here.

Even if the issue here were genuinely one of con-

tract formation, that would still make no difference.

In Saturn Distribution Corp. v. Williams, 905 F.2d

719 (4th Cir. 1990), for example, the court consid-

ered—and squarely rejected—the argument “that the

scope of FAA preemption is limited to laws covering

existing arbitration agreements, and does not extend

to laws that prohibit or regulate the formation of ar-

bitration agreements.” Jd. at 723 (emphasis added).

Striking down a Virginia law “that prohibit[ed] au-

tomobile manufacturers and dealers from entering

into agreements that contain mandatory alternative

dispute resolution provisions,” the Saturn court ex-

plained that “[t]o restrict the FAA to existing agree-

ments would be to allow states to ‘wholly eviscerate

Congressional intent to place arbitration agreements

upon the same footing as other contracts.” Jd. at 722,

723 (quotation marks omitted); accord Sec. Indus.

Ass'n v. Connolly, 883 F.2d 1114, 1117 (1st Cir. 1989)

(holding that the FAA preempts state regulation re-

stricting securities firms from entering into future

arbitration agreements).

These holdings make sound practical sense: If re-

spondents were correct, a State could enact a law ex-

pressly forbidding attorneys-in-fact to enter into ar-

bitration agreements under any circumstances, or a

33

law providing that consumers lack the capacity to

enter into arbitration agreements unless they receive

prior court approval, and those laws would be im-

mune from federal scrutiny even if they blatantly

disfavor arbitration. The FAA’s protections cannot be

nullified simply by dressing up state-law hostility to

arbitration in the garb of “contract formation.”?

*In a supplemental brief filed at the petition stage, we ex-

plained why this case is not affected by a rule promulgated by

the Centers for Medicare & Medicaid Services that would pro-

hibit Medicare-participating skilled nursing facilities and Medi-

caid-participating nursing facilities from entering into new pre-

dispute arbitration agreements with residents at their facilities.

First, that rule applies only prospectively, to contracts entered

into after its November 28, 2016 effective date. Pet. Supp. Br. 1.

Second, the rule’sa validity is the subject of a pending lawsuit

and, in a decision rendered after the filing of the supplementa!

brief, the district court issued a preliminary injunction barring

enforcement of the rule, holding that the plaintiffs had shown a

substantial likelihood of success on the merits of their claims

that the rule violates the FAA and exceeds the agency s author-

ity. See Am. Health Care Ass'n v. Burwell, --- F. Supp. 3d ----,

2016 WL 6585295 (N.D. Miss. Nov. 7, 2016).

34

CONCLUSION

The judgment of the Kentucky Supreme Court

should be reversed.

Respectfully submitted.

ANDREW J. PINCUS

Counsel of Record

ARCHIS A. PARASHARAMI

DANIEL E. JONES

Mayer Brown LLP

\ 1999 K Street, NW

Washington, DC 20006

(202) 263-3000

apincus@mayerbrown.com

Counsel for Petitioners

DECEMBER 2016