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

: No. 16-32 matte

Jn the Supreme Court of the United States

KINDRED NURSING CENTERS

LIMITED PARTNERSHIP, ET AL., PETITIONERS

v.

JANIS E. CLARK AND BEVERLY WELLNER, ET AL.

ON WRIT OF CERTIORARI TO THE

SUPREME COURT OF KENTUCKY

BRIEF FOR THE

AMERICAN HEALTH CARE ASSOCIATION

AND THE KENTUCKY ASSOCIATION OF

HEALTH CARE FACILITIES AS AMICI

CURIAE SUPPORTING PETITIONERS

JAMES F. SEGROVES

Counsel of Record

KELLY A. CARROLL

DAVID J. VERNON

HOOPER, LUNDY & BOOKMAN, PC

401 Ninth Street, NW, Suite 550

Washington, DC 20004

(202) 580-7700

ELIZABETH A. JOHNSON jsegroves@health-law.com

KENTUCKY ASSOCIATION

OF HEALTH CARE MARK E. REAGAN

FACILITIES HOOPER, LUNDY & BOOKMAN, PC

9403 Mill Brook Road 575 Market Street, Suite 2300

Louisville, KY 40223 San Francisco, CA 94105

(502) 425-5000 (415) 875-8500

A LR aN

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 — WASHINGTON, D. C. 20002

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.

(i)

ii

TABLE OF CONTENTS

Page

INTEREST OF AMICI CURIAE .00.0.0...0.0.00c6.60cccccccsecseee 1

SUMMARY OF ARGUMENT .................0cc0ccccccceeeeeeeee 3

i conbaveosouens 5

I. THELTC PROFESSION HAS LONG USED

ARBITRATION AS A MEANS OF OBTAINING

DISPUTE RESOLUTION THAT IS BOTH

I csuseonnennneccosoosoes 5

Il. THE PLAIN-STATEMENT RULE ADOPTED BY

THE MAJORITY BELOW IS PLAINLY WRONG .......... 8

a ceusuucumesoned 12

TABLE OF AUTHORITIES

Cases:

AT&T Techs., Inc. v. Commc’n Workers of Am..,

a sedenoetoocs 11

Bowen v. Georgetown Univ. Hosp.,

ES 9,10

Carter v. SSC Odin Operating Co.,

a 6

Cuozzo Speed Techs. v. Lee,

ncsasoceusenovaneets 10

Delimuth v. Muth,

a auceooopenns 10

DIRECTV, Inc. v. Imburgia,

I esseuiononsenss 10

Cases—Continued: Page

Marmet Health Care Ctr., Inc. v. Brown,

132 S. Ct. 1201 (2012) (per curiam) ............... 2,10

Moses H. Cone Mem Hosp. v. Mercury Constr.

i, Ge I 0 GE trtsccasceciccnsesiemsuntienentinicte 11

Perry v. Thomas,

|, RES EN eee 11

Preston v. Ferrer,

I cia 10

Southland Corp. v. Keating,

I a saa estaiineinedinell 11

Ware v. Hylton,

Ge De GFE ccccvvcccccccessectscccsdecesenseent 9

Constitution and Statutes:

U.S. Const. art. VI, cl. 2 (Supremacy Clause)......4, 9

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

STII tT isso ciearescnseiahetgeeieatineieummnaancatiaeliiaiddal 3

Other Authorities:

AON Global Risk Consulting, American Health

Care Association Special Study on Arbitration

in the Long Term Care Industry (June 2009) ......5

AON Global Risk Consulting, Long Term Care:

General Liability and Professional Liability

Actuarial Analysis (Nov. 2015)...............c00cscseeeeees 7

Br. Amicus Curiae for AHCA in Supp. of Pet’rs,

Clarksburg Nursing & Rehab. Ctr., Inc. v.

Marchio, No. 11-394 (U.S. Oct. 28, 2011),

EE ET orinicnedssspanssoniisiaianianbadmnienoepengeniie 2

iv

Other Authorities—Continued: Page

The Federalist No. 44 (James Madison)

1

INTEREST OF AMICI CURIAE

The American Health Care Association (AHCA) is

the Nation’s leading association of long-term care

and post-acute care providers, representing the

interests of more than 12,000 non-profit and proprie-

tary facilities. AHCA’s members are dedicated to

improving the delivery of professional and compas-

sionate care to more than 1.5 million frail, elderly,

and disabled Americans who live in skilled nursing

facilities, assisted living residences, subacute cen-

ters, and homes for persons with mental retardation

and developmental disabilities. AHCA advocates for

quality care and services for frail, elderly, and disa-

bled Americans. In order to ensure the availability of

such services, AHCA also advocates for the continued

vitality of the long-term and post-acute care provider

community.”

One way in which AHCA promotes the interests

of its members is by participating as an amicus

curiae in cases before this Court with far-ranging

consequences for its members. Such cases include

those involving application of the Federal Arbitration

Act (FAA), 9 U.S.C. §§ 1-16, in response to state

judicial rulings inhibiting the use of arbitration to

resolve disputes fairly and efficiently. See, e.g., Br.

Amicus Curiae for AHCA in Supp. of Pet’rs, Clarks-

burg Nursing & Rehab. Ctr., Inc. v. Marchio, No. 11-

* No counsel for a party authored this brief in whole or in

part, and no person other than the amici curiae, their members,

or their counsel made a monetary contribution intended to fund

the preparation or submission of this brief. The petitioners’ and

respondents’ written consents to the filing of this brief have

been filed with the Clerk.

2

394 (U.S. Oct. 28, 2011), 2011 WL 5189096; see also

Marmet Health Care Ctr., Inc. v. Brown, 132 S. Ct.

1201, 1203—04 (2012) (per curiam) (granting Clarks-

burg petition in curve-lined cases where state court

of last resort erroneously held that the FAA does not

protect pre-dispute arbitration agreements covering

claims of personal injury or wrongful death against a

nursing facility, summarily vacating state court’s

judgment, and remanding for further proceedings).

The Kentucky Association of Health Care Facili-

ties (KAHCF) is a non-profit trade association repre-

senting approximately 200 licensed and certified

nursing facilities throughout Kentucky. Founded in

1954, KAHCF is the primary advocacy organization

for nursing facilities in Kentucky. KAHCF’s mission

is to promote quality long-term and post-acute care

services and supports through advocacy, member

services, education, and quality-achievement recog-

nition. KAHCF advocates for its members in legisla-

tive, regulatory, and judicial settings to further the

overall goals of its membership.

AHCA, KAHCF, and their respective members

have a significant interest in the question presented

by this case, which is why AHCA and KAHCF previ-

ously filed an amicus brief supporting the petition for

a writ of certiorari filed by Kindred Nursing Centers

Limited Partnership, et al. (collectively, Kindred).

The four-to-three decision of the Supreme Court of

Kentucky at issue here held that powers of attorney

authorizing attorneys-in-fact to enter into contracts

do not include the authority to enter into one par-

ticular type of contract: arbitration agreements.

Instead, the majority below ruled that in light of the

Kentucky Constitution’s protection of the right to a

3

trial by jury, powers of attorney must contain explic-

it, unambiguous language specifically authorizing

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

ments.

That erroneous decision is emblematic of the

struggle members of the long-term and post-acute

care profession (collectively, LTC Profession) cur-

rently face in seeking judicial enforcement and

protection of their federal arbitration rights. The

majority decision below also is emblematic of the

lengths to which certain state courts will go to im-

pede the exercise of those rights by creating novel

legal rules that single out arbitration for special,

disfavored treatment in spite of the FAA’s command

that arbitration agreements “shall be valid, irrevoca-

ble, and enforceable, save upon such grounds as exist

at law or in equity for the revocation of any contract.”

9 U.S.C. § 2.

SUMMARY OF ARGUMENT

Kindred’s brief explains in detail why the rule

adopted by the majority below cannot be reconciled

with the FAA or this Court’s long line of decisions

interpreting the statute’s preemptive effect. Rather

than repeat those arguments, AHCA and KAHCF

wish to emphasize two additional reasons for revers-

ing the judgment of the Supreme Court of Kentucky

in this case.

First, the LTC Profession has long used arbitra-

tion as a means of obtaining dispute resolution that

is both efficient and fair. No profession or industry is

perfect. Humans and organizations can, and do,

make mistakes. When disputes arise involving the

LTC Profession, arbitration permits the parties to

appoint subject-matter experts to serve as arbitra-

4

tors who can quickly resolve the issues such disputes

often entail, including questions regarding the scope

of professional duties of care, whether such duties

were breached, and whether such a breach caused

the injury complained of. Many members of the LTC

Profession use arbitration agreements containing

elements similar to the agreements at issue here,

which grant the resident or resident representative a

significant period of time to rescind the agreement

and provide that the facility will incur most, and

sometimes all, of the costs of arbitration. And as

demonstrated by one recent study, such claimants

often recover significant amounts, with the highest

proportion of recoveries falling in the $25,000 to

$250,000 range.

Second, the plain-statement rule adopted by the

majority below is plainly wrong. It not only ignores

the fact that the Supremacy Clause of the United

States Constitution requires a state constitutional

provision to give way to contrary federal law, the

majority's plain-statement rule is the opposite of

what the rule must be under the FAA. In light of the

emphatic federal policy in favor of arbitral dispute

resolution, a power of attorney that authorizes an

attorney-in-fact to enter into contracts must unam-

biguously exclude the authority to enter into arbitra-

tion agreements before such an instrument can be

held not to convey such authority in a case subject to

the FAA. That rule, which is consistent with the

plain-statement rule adopted by this Court in the

context of interpreting contract language controlling

the scope of disputes subject to arbitration, puts

arbitration agreements on equal footing with all

other contracts as Congress intended.

5

Accordingly, the judgment of the Supreme Court

of Kentucky should be reversed.

ARGUMENT

I. THE LTC PROFESSION HAS LONG USED ARBI-

TRATION AS A MEANS OF OBTAINING DISPUTE

RESOLUTION THAT IS BOTH EFFICIENT AND FAIR

A significant percentage of individuals who re-

quire care by the LTC Profession are incapable of

contracting for themselves, whether because of such

things as accidental injury or disability resulting

from the normal aging process. Many individuals

have planned for such an eventuality by preparing

general powers of attorney that give designated

individuals whom they trust authority to, among

other things, enter into contracts on their behalf. The

LTC Profession, in turn, depends on such powers of

attorney to deliver timely care and to order its busi-

ness affairs on a daily basis.

Arbitration agreements are a common and essen-

tial component of contracting in the LTC Profession.

Like many industry sectors, the LTC Profession has

long used arbitration agreements as a means of

facilitating timely and efficient dispute resolution.

See, e.g., AON Global Risk Consulting, American

Health Care Association Special Study on Arbitration

in the Long Term Care Industry 5 (June 2009) (de-

scribing history of LTC Profession’s use of arbitra-

tion agreements and benefits of same), available at

https://www.ahcancal.org (last visited Dec. 11, 2016).

The two arbitration agreements at issue here even

share certain attributes of the model arbitration

agreement AHCA makes available to its members

nationwide. For example, in addition to not being a

condition of admission to the nursing facility, each

6

arbitration agreement is a document separate from

the admission agreement and grants the resident or

resident representative 30 days to rescind the arbi-

tration agreement. J.A. 19, 26. Like the arbitration

agreements at issue here, it also is common for

arbitration agreements in the LTC Profession to

provide that the facility will pay all or most of the

costs of arbitration, including the arbitrators’ fees.

See J.A. 17, 24 (provisions in arbitration agreements

at issue here providing that the facility will pay all

such fees up to five days of hearing, with subsequent

fees being divided equally between the parties); see

also, e.g., Carter v. SSC Odin Operating Co., 976

N.E.2d 344, 349 (Ill. 2012) (describing arbitration

agreement providing that nursing facility would pay

all arbitration fees).

Moreover, disputes involving the LTC Profession

are particularly well-suited for resolution using

arbitration. When such disputes arise involving

residents or their representatives, they most often

sound in tort and involve an alleged breach of the

professional standard of care. Many such cases are

limited in temporal scope and focus on relatively

modest factual disputes, as well as disagreements in

expert testimony regarding the scope of the profes-

sional duty in question, whether it was breached,

and whether any such breach proximately caused the

injury complained of. The parties often are able to

appoint arbitrators who have specialized expertise in

resolving such disputes, including former judges.

Arbitration also provides a better mode of dispute

resolution for the typical claimant than traditional

court-based litigation. For example, a recent study

performed by a leading provider of risk-management

7

and insurance services found that claims involving

the LTC Profession that are subject to arbitration

resolve three months faster on average than claims

not subject to arbitration. AON Global Risk Consult-

ing, Long Term Care: General Liability and Profes-

sional Liability Actuarial Analysis 10 (Nov. 2015),

available at https://)www.ahcancal.org (last visited

Dec. 11, 2016). In addition, the same study found

that such claimants can, and often do, recover signif-

icant amounts. As demonstrated by the following

table reproduced from the study, almost 50 percent

of claims subject to arbitration resulted in recoveries

falling in the $25,000 to $250,000 range:

No Payment 233| 27.5%| 267| 20.2%

$25,000 to 407| 48.0% 41.0%

$250,000

Greater than 7 0.8% 1.9%

$1,000,000

Claims with | 615 | 72.5% | 1,053 79.8%

| Payment |

Id. at 11. Accordingly, the contention made by some

anti-arbitration advocates that arbitration involving

the LTC Profession is somehow categorically unfair

to claimants has no basis in fact.

8

Il. THE PLAIN-STATEMENT RULE ADOPTED BY THE

MAJORITY BELOW Is PLAINLY WRONG

The narrow majority of the Supreme Court of

Kentucky held that, before Kentucky’s courts will

enforce an arbitration agreement entered into by an

attorney-in-fact pursuant to a power of attorney, the

power of attorney must contain an explicit, unam-

biguous statement specifically authorizing the attor-

ney-in-fact to enter into arbitration agreements. Pet.

App. 4la. Language vesting an attorney-in-fact with

authority to enter into contracts is insufficient. Jd. at

42a. The majority crafted its novel legal rule because

the “drafters of [Kentucky’s] Constitution 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.” Jd. at 43a.

As Kindred’s brief explains in detail (at 12—29),

the rule adopted by the majority below cannot be

reconciled with the FAA or this Court’s jurispru-

dence interpreting the statute’s preemptive force. At

a more fundamental level, however, the “constitu-

tional right” line of reasoning used by the majority

below ignores the fact that the foundation for this

Court’s preemption jurisprudence—the Supremacy

Clause of the United States Constitution—applies

even if the contrary state rule is embodied in a state

constitution.

In relevant part, the Supremacy Clause provides

that the “Laws of the United States ... 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

notwithstanding.” U.S. Const. art. VI, cl. 2 (emphasis

9

added). From the earliest days of our Nation, the

Supremacy Clause has been understood to require

that a state constitutional provision must give way to

a contrary federal law. See, e.g., Ware v. Hylton, 3

U.S. (3 Dall.) 199, 236-37 (1796) (opinion of Chase,

J.) (“If the Constitution of a State (which is the

fundamental law of the State, and paramount to its

Legislature) must give way to a treaty, and fall

before it; can it be questioned, whether the less

power, an act of the State Legislature, must not be

prostrate?”). A contrary rule would create a “mon-

ster, in which the head was under the direction of

the members.” The Federalist No. 44, at 254 (James

Madison) (George Stade ed., 2006).

In those instances in which this Court has adopt-

ed a plain-statement rule similar to that adopted by

the majority below, it has done so in recognition of

the fact that a default legal principle of great signifi-

cance requires the use of express, unambiguous

language if that default principle is to be overcome.

For example, in Bowen v. Georgetown University

Hospital, 488 U.S. 204 (1988), the Court was asked

to decide whether Congress had granted a federal

agency authority to promulgate rules with retroac-

tive effect. In finding that Congress had not granted

the agency such authority, the Court explained:

Retroactivity is not favored in the law. Thus, con-

gressional enactments and administrative rules

will not be construed to have retroactive effect un-

less their language requires this result. ... By the

same principle, a statutory grant of legislative

rulemaking authority will not, as a general mat-

ter, be understood to encompass the power to

10

promulgate retroactive rules unless that power is

conveyed by Congress in express terms.

Id. at 208.'

The default legal principle of great significance

that controls here is not the Kentucky Constitution’s

language regarding the right to a jury trial. Instead,

the default legal principle that controls is that arbi-

tration is favored as a matter of federal law. As this

Court has held time and again, the FAA “establishes

a national policy favoring arbitration when the

parties contract for that mode of dispute resolution.

The [FAA] supplies not simply a procedural frame-

work applicable in federal courts; it also calls for the

application, in state as well as federal courts, of

federal substantive law regarding arbitration.”

Preston v. Ferrer, 552 U.S. 346, 349 (2008); see also

DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 471

(2015) (explaining that “due regard” must be given to

the “federal policy favoring arbitration”) (internal

quotation marks and citation omitted); Marmet

Health Care Ctr., Inc. v. Brown, 132 S. Ct. 1201,

1203 (2012) (per curiam) (explaining that the FAA

' Other examples of this Court’s use of plain-statement

rules or their near equivalents have involved similar instances

of needing to overcome a default legal principle of great signifi-

cance. See, e.g., Cuozzo Speed Techs. v. Lee, 136 S. Ct. 2131,

2140 (2016) (explaining that the “strong presumption in favor of

judicial review” of agency action must be overcome by “clear

and convincing indications”) (internal quotation marks and

citation omitted); Dellmuth v. Muth, 491 U.S. 223, 228 (1989)

(“Congress may abrogate the States’ constitutionally secured

immunity from suit in federal court only by making its inten-

tion unmistakably clear in the language of the statute.”)

(internal quotation marks and citation omitted).

11

“reflects an emphatic federal policy in favor of arbi-

tral dispute resolution”) (internal quotation marks

and citation omitted); Perry v. Thomas, 482 U.S. 483,

489 (1987) (explaining that the FAA “embodies a

clear federal policy” in favor of arbitration); South-

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

ing that by enacting the FAA, “Congress declared a

national policy favoring arbitration”).

This Court has previously applied what amounts

to a plain-statement rule that promotes arbitration

in recognition of the fact that arbitration is favored

as a matter of federal law. For example, the Court

has explained that the FAA “establishes that, as a

matter of federal law, any doubts concerning the

scope of arbitrable issues should be resolved in favor

of arbitration, whether the problem at hand is the

construction of the contract language itself or an

allegation of waiver, delay, or a like defense to arbi-

trability.” Moses H. Cone Mem’! Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24-25 (1983) (emphasis

added); see also AT&T Techs., Inc. v. Commce’n Work-

ers of Am., 475 U.S. 643, 650 (1986) (explaining that

an order compelling arbitration “should not be de-

nied unless it may be said with positive assurance

that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute”). The

Court should adopt a similar plain-statement rule

here that is the converse of the rule adopted by the

majority below, such that a power of attorney author-

izing an attorney-in-fact to enter into contracts on

behalf of the principal must unambiguously exclude

the authority to enter into arbitration agreements

before such an instrument will be held not to convey

such authority in a case subject to the FAA.

12

CONCLUSION

For the foregoing reasons and those contained in

Kindred’s brief, the judgment of the Supreme Court

of Kentucky should be reversed.

Respectfully submitted.

JAMES F. SEGROVES

Counsel of Record

KELLY A. CARROLL

DAVID J. VERNON

HOOPER, LUNDY & BOOKMAN, PC

401 Ninth Street, NW, Suite 550

ELIZABETH A. JOHNSON Washington, DC 20004

KENTUCKY ASSOCIATION (202) 580-7700

OF HEALTH CARE jsegroves@health-law.com

FACILITIES

9403 Mill Brook Road MARK E. REAGAN

Louisville, KY 40223 HOOPER, LUNDY & BOOKMAN, PC

(502) 425-5000 575 Market Street, Suite 2300

San Francisco, CA 94105

DECEMBER 2016 (415) 875-8500