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

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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 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 DIB/A GOLDEN LIVINGCENTER - MT. HOLLY,

BROOKDALE SENIOR LIVING INC., SIGNATURE

HEALTHCARE, LLC, HCR MANORCARE AND

KENTUCKY PARTNERS MANAGEMENT, LLC

IN SUPPORT OF THE PETTTIONERS

DONALD L. MILLER, I

*Counsel of Record

KRISTIN M. LOMOND

QUINTAIROS, PRIETO, Wood & Boyer, P.A.

9300 Shelbyville Road, Suite 400

Counsel for Amici Curiae December 12, 2016

ph ty ey A

aaa atte cent iibery af Congress

Law UBeery

QUESTION PRESENTED

Whether the FAA preempts a state-law contract

rule that singles out arbitration by requiring a power

of attorney to expressly refer to arbitration agree-

ments before the attorney-in-fact can bind her princi-

pal to an arbitration agreement.

TABLE OF CONTENTS

Page

* 8) ye 8 By : -. 5 5: ) ENDED nENE i

po FF as oi, See eer lil

IDENTITY AND INTEREST OF THE AMIC7...... 1

SUMMARY OF ARGUMENT ......................2eeeeee es 6

ae IN SUPPORT OF THE PETITION- ;

eshninaninsinaieiateaiateiesenininastieieladtadiaiabenessimuiadiuiineananeeinentns 0

I. WHISMAN’S RESTRICTIONS ON ARBI-

TRATION RIGHTS POSE A SUBSTANTIAL

THREAT TO THE ENTIRE LONG-TERM

A. Nursing Home Arbitration Agreements

Benefit All Parties Involved in Claims.... 12

B. Whisman Results in Uncertainty in

a cael eahaainame 17

Il. THE KENTUCKY COURT'S DECISION IN

WHISMAN CONSTITUTES THE STATE’S

LATEST ATTEMPT TO EVADE CONCEP-

CION AND THE FAA ..........ccccccceeeseeseneeeeeees 22

Itl. KENTUCKY’S FEDERAL DISTRICT COURTS

UNANIMOUSLY DISAGREE WITH WHIS-

MAN’S REASONING, RESULTING IN

RACE TO COURTHOUSE .................ccceeeees 26

SED wiihcdhic ck nitidesocinsstnincsasininasdilcascndbechihciinisileentetas 33

ili

TABLE OF AUTHORITIES

Page

CASES

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

RE, Ee eee ianens 13

Allied-Bruce Terminix Companies, Inc. v. Dob-

son, 513 U.S. 265, 115 S. Ct. 834, 130 L. Ed. 2d

Be ieicsibesincotpuicanipihtinanipéidisaiieacvugiennanis 3, 12,13

American Health Care Association et al. v. Bur-

well, Case 3:16-cv-00233-MPM-RP (N.D. MI

SR SEED, Pree Sh SS 21 Se Eee eee 21

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

131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011) ....7, 10, 23, 25

Atlanta Oculoplastic Surgery, P-C. v. Nestlehutt,

Se ee PE Rs Se icnicicecicicsicercsictesnnssnantonbiencsens 22

Bayer CropScience LP v. Schafer, 2011 Ark. 518,

REE Se oe 22

Brandenburg Health Facilities, LP v. Maitingly,

2016 WL 3448733 (W.D. Ky. June 20, 2016)........... 28

Buckeye Check Cashing, Inc. v. Cardegna, 546

US. 440, 126 S. Ct. 1204, 163 L. Ed. 2d 1038

EIU csddsicsisbitepanhaudindesnbigiieeapiidindaindubabupaiiediinhninabueitnces 5

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

463, 193 L. Ed. 2d 365 (2015) ...............ccccccsseseeseeees 10

Diversicare Highland, LLC v. Lee, 2016 WL

3512256 (W.D. Ky. June 21, 2016)...............: cece 28

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

Ne re ictthicicniessnesnebdiienipneiatinniontineniaboteiiah passim

TABLE OF AUTHORITIES — Continued

Page

Fidelity Federal Sav. and Loan Ass’n v. de la

Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73

ile I icciindsiuvsiichnianicssicigbnibieivumnmnsanss 8

GGNSC Louisville Hillcreek, LLC v. Watkins,

2016 WL 815295 (W.D. Ky. Feb. 29, 2016) ........ 28, 31

GGNSC Louisville Mt. Holly, LLC v. Leslie Guess

Mohamed-Vall, Case No. 3:16-cv-136-DJH (W.D.

Be ee I hina chietintiniisedintinseiadiintincndemiantnictuele 28, 32

GGNSC Stanford, LLC v. Gilliam, ___ F-. Supp. 3d

___, 2016 WL 4700135 (E.D. Ky. Sept. 7, 2016).......... 28

Hall St. Associates, L.L.C. v. Mattel, Inc., 552

U.S. 576, 128 S. Ct. 1396, 170 L. Ed. 2d 254

Tae a GR Ta panei ROTTS PL NI GAS AAT AG = CEP Re 5

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

Se deans I EIEN sristinenctcineitincdicenistabbianihionmdédninaiense 25

Kindred Healthcare, Inc. v. Cherolis, 2013 WL

5583587 (Ky. App. Oct. 11, 2013), vacated on re-

mand by Kindred Healthcare, Inc. v. Cherolis,

2016 WL 6134910 (Ky. App. Oct. 21, 2016)............. 18

Lebron v. Gottlieb Mem’l Hosp., 930 N.E.2d 895

IE sasecicacdasinpascinoamssininidiabanietbadauiaeabeuidnideasbebiisntaineis 22

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

S. Ct. 1201, 182 L. Ed. 2d 42 (2012).......... 7, 8, 10, 25

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614, 105 S. Ct. 3346, 87 L. Ed. 2d

Nitro-Lift Techs., L.L.C. v. Howard, 133 S. Ct.

EET TITEL AIAN I ASNEEAIR AE CAE AE See 7

TABLE OF AUTHORITIES — Continued

Page

Owensboro Health Facilities, L.P. v. Henderson,

2016 WL 2853569 (W.D. Ky. May 13, 2016)...... 28, 32

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

Be i Be Se Pe IEF ctcicccensacascissscaichiactiiisienseconsos 24

Pine Tree Villa, Inc., LLC d/b/a Regis Woods v.

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

SEIT intevsiiaiiebsinardssnubindensamensioiaiddansaneeeniinbienasiondin 28, 32

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

ic sceuieicisoahssiniitnasstbainnndsbimmnnindicatasbinediaanitonadions 23, 24

Preferred Care of Delaware, Inc. v. Crocker, 173

F. Supp. 3d 505 (W.D. Ky. 2016)...... 18, 27, 28, 31, 32

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

WL 3546407 (W.D. Ky. June 23, 2016)........ 28, 32, 33

Riney v. GGNSC Louisville St. Matthews, LLC

d/b/a Golden Living Center —- St. Matthews,

2016 WL 2853568 (W.D. Ky. May 13, 2016)......28, 32

Robert Lawrence Co. v. Devonshire Fabrics, Inc.,

BT Fe SE GG CAE, TRG) cccccccccccccnessescascssescccosecesces 7

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

By FP Be, Be Me Fh COE oo cctccccccecnossvencracaeccnecesessers 24

Truax v. Corrigan, 257 U.S. 312 (1921)..............0.e. 28

Williams v. Wilson, 972 S.W.2d 260 (Ky. 1998).......... 22

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

es a ee I I I a sansscennsinivccsinsinencndonsancen 30

TABLE OF AUTHORITIES — Continued

Page

CONSTITUTIONAL PROVISIONS

U.S. CONST. AMEND. XIV, Due Process Clause............13

U.S. Const. art. VI, cl.2, Supremacy Clause .............. 10

BEPTCCEES COCUD. © TIO sce s.ccsecscnsisesasenncasepiceaigibensannaaai 13

STATUTES

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

Kentucky Revised Statute § 1.030(8).....................00 26

Kentucky Revised Statute § 1.040(5)......................... 26

Kentucky Revised Statute § 386.093...........00...0........ 18

REGULATIONS

42 CFR Part 483, Subpart B — Requirements for

Late TOPEA COre PRGIGIOD occcccececesconscoccnseccsessesenctus 16

OTHER

$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), available

online at: http://www.mcknights.com/65-billion-

in-medicare-cuts-to-rock-us-nursing-homes-over-

10-years-analysis-shows/article/253036................. 22

American Health Care Association, A Report on

Shortfalls in Medicaid Funding for Nursing

Center Care, available online at: https://www.

ahcancal.org/research_data/funding/Pages/2015-

Medicaid-Shortfall-Report.aspx ..............ccccceseeeeeees 4

Vii

TABLE OF AUTHORITIES — Continued

American Health Care Association Special Study

on Arbitration in the Long Term Care Indus-

try, AON Global Risk Consultants, June 16,

2009, available online at: https:/Awww.ahcancal.

org/research_data/liability/Documents/2009%20

Special%20Study%200n%20Arbitration%20in%

Page

20Long%20Term%20Care. pdf ................... 12, 15, 17

CMS Nursing Home Data Compendium 2015, avail-

able online at: https://www.cms.gov/Medicare/

Provider-Enrollment-and-Certification/Certification

andComplianc/Downloads/nursinghomedata

compendium_ 508-2015. pdf.....................ccccceeeeeee

Frank B. Cross, Shattering the Fragile Case for

Judicial Review of Rulemaking, 85 Va. LAw

I eesuusomeene

Wayne A. Logan, A House Divided: When State

and Lower Federal Courts Disagree on Federal

Constitutional Rights, 90 NoTRE DAME LAw

REVIEW 235 Appendix (2014) ...............ccccceeeeeeseees

Long Term Care — 2015 General Liability and

Professional Liability Actuarial Analysis, AON

Global Risk Consulting, available online at:

https:/Awww.ahcancal.org/research_data/liability/

%20Professional%20Liability%20Actuarial%20

Analysis%20Report. pdf........................cccece00s 14, 15, 16

Medicare and Medicaid Programs; Reform of

Reuirements for Long-Term Care Facilities;

Arbitration Rule, 81 Fed. Reg. 68,688 (Oct. 4,

a ccenenesenunennnns

vill

TABLE OF AUTHORITIES — Continued

Population Ageing in the United States of Amer-

ica: Implications for Public Programmes, Ox-

ford International Journal of Epidemiology,

2002, Vol. 31, Issue 4, pp. 776-781, available

online at: http:/Aje.oxfordjournals.org/content/

Recent Trends in the Nursing Home Liability In-

surance Market, U.S. Department of Health

and Human Services Assistant Secretary for

Planning and Evaluation Office of Disability,

Aging and Long-Term Care Policy, June 2006,

available online at: http://Aspe.Hhs.Gov/Daltcp/

U.S. Department of Health & Human Services,

Admin., on Aging, Aging Statistics (updated

through 2015), available online at: http:/Awww.

aoa.gov/aoaroot/aging_statistics/index.aspx.......... 21

AMICUS CURIAE BRIEF IN

SUPPORT OF PETITIONERS

Pursuant to Supreme Court Rule 37.3, 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, respect-

fully submit this Amicus Curiae brief in support of Pe-

titioners.’

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

at present. Genesis subsidiaries also supply rehabili-

tation therapy to more than 1,700 locations in 45

states and the District of Columbia.

Amicus curiae Diversicare Healthcare Services,

Inc., headquartered in Brentwood, Tennessee, employs

9,000 people offering wide-ranging post-acute care in

' Pursuant to Supreme Court Rule 37.3, Amici provided no-

tice of intent to file this brief to counsel of record for the parties,

who provided their written consent to its 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 counsel, made a monetary contribution specifically for the

preparation or submission of this brief.

multiple settings, to include: complex medical, skilled

nursing, short-term rehabilitative, long-term residency,

memory assistance, respite and hospice care. Through

a subsidiary, Diversicare operates 76 skilled nursing

and long-term care facilities in ten Southern and Mid-

western 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 Living-

Centers in 21 states. Golden Living also offers assisted

living services at more than 30 of its locations. Golden

Living companies provide services to over 1,000 nurs-

ing 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.

Amicus curiae Signature HealthCARE, LLC, is a

Kentucky based long-term healthcare 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 reha-

bilitation clinics, and hospice and home healthcare

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 1,762 nursing beds. Services offered at these

nursing facilities include skilled nursing, short-term

rehabilitative, long-term residency, and hospice care.

The Court has long recognized the many ad-

vantages of arbitration, including expense savings. See,

e.g., Allied-Bruce Terminix Companies, Inc. v. Dobson,

513 U.S. 265, 280, 115 S. Ct. 834, 843, 130 L. Ed. 2d 753

(1995) (“The advantages of arbitration are many: it is

usually cheaper and faster than litigation; it can have

simpler procedural and evidentiary rules; it normally

minimizes hostility and is less disruptive of ongoing

and future business dealings among the parties; it is

often more flexible in regard to scheduling of times and

places of hearings and discovery devices... .”). These

features are particularly important for an industry so

heavily reliant on government payor sources. For in-

stance, in the fourth quarter of 2014, 15,634 nursing

homes participated in the Medicare and Medicaid pro-

grams. See, e.g., CMS Nursing Home Data Compen-

dium 2015.?

An April 2016 American Health Care Association

(“AHCA”) commissioned study, A Report on Shortfalls

in Medicaid Funding for Nursing Center Care, noted

the nation’s projected unreimbursed Medicaid costs to

exceed $7 billion in 2015.° This shortfall amounts to

approximately $22.46 per Medicaid patient/per day. Id.

The 2015 projected shortfall increased 6.0% from the

preceding year’s projection. Jd. For a typical 100-bed

facility, where 63% of residents rely on Medicaid for

coverage, this shortfall places losses at more than

$1,415 dollars each day, exceeding $516,000 annually.

On average, Medicaid reimbursed nursing center pro-

viders only 89.4%, or 89 cents on the dollar, of their

projected allowable costs incurred on behalf of Medi-

caid patients. Id. at p.4.

This matter presents issues of significant impor-

tance to Amici because long-term care facilities enter

into thousands of predispute arbitration agreements

? Available online at: https://www.cms.gov/Medicare/Provider-

Enrollment-and-Certification/CertificationandComplianc/Downloads/

nursinghomedatacompendium_508-2015.pdf.

8 Available online at: https://www.ahcancal.org/research_data/

funding/Pages/2015-Medicaid-Shortfall-Report.aspx.

every year, many executed by an attorney-in-fact

for the resident like the underlying cases here. Predis-

pute arbitration agreements represent efficient, cost-

effective alternatives to traditional civil litigation and

are vital to Amici and the entire long-term care indus-

try. However, following the Supreme Court of Ken-

tucky’s Opinion in Extendicare Homes, Inc. v. Whisman,

478 S.W.3d 306 (Ky. 2016), Kentucky state courts now

refuse to enforce otherwise valid arbitration agree-

ments. Amici encounter significant burdens from state

courts’ refusals to enforce arbitration contracts, like in

Kentucky, whether because of state court hostility, mis-

understanding of federal law and preemption, uncon-

scionability principles, or other judicially-enacted state

laws intentionally designed to avoid arbitration con-

tract enforcement.

Congress passed the Federal Arbitration Act

(“FAA”) to combat the open judicial hostility to arbitra-

tion agreements so apparent here. See Hall St. Associ-

ates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 581, 128 S. Ct.

1396, 1402, 170 L. Ed. 2d 254 (2008) (citing Buckeye

Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126

S. Ct. 1204, 163 L. Ed. 2d 1038 (2006)). Whisman em-

bodies Kentucky state courts’ latest creative attempt

to avoid the FAA’s preemptive mandate requiring ar-

bitration contracts to be enforced on equal footing with

other contracts and according to their terms. The Ken-

tucky court refused to acknowledge this Court’s arbi-

tration precedent applies to it, and instead denounced

the FAA as inapplicable to its reinvented intei ,reta-

tion of “state agency law.” The Whisman court simply

ignored the well-established fundamental legal princi-

ple that, via the Supremacy Clause of the United

States Constitution, Kentucky state law contrary to

the FAA is invalid.

Amici have a genuine interest in the outcome of

this case and in seeking uniform application of the

FAA and consistent enforcement of valid arbitration

agreements across the United States. Congress recog-

nized arbitration contracts needed heightened protec-

tion to prohibit the flagrant hostility that — in fact —

occurred here. Congress enacted the FAA as a method

to resolve disputes quickly, efficiently and economi-

cally. Yet, Kentucky’s highest state court acted with

no regard for the FAA or the body of federal substan-

tive law interpreting it. Instead, the Kentucky state

court definitively denounced agent-executed arbitra-

tion contracts as neither favored nor protected in Ken-

tucky. The Kentucky court’s decision frustrates this

Court’s arbitration precedent and the FAA’s policies

and goals. Amici join Petitioners and encourage this

Court to reverse the Supreme Court of Kentucky’s de-

cision in Extendicare Homes, Inc. v. Whisman, 478

S.W.3d 306 (Ky. 2016).

SUMMARY OF THE ARGUMENT

For the past ninety years, this Court has repeat-

edly rebuked the very “widespread judicial hostility to

arbitration” that Congress enacted the Federal Arbi-

tration Act to counter. See, e.g., AT&T Mobility LLC v.

Concepcion, 563 U.S. 333, 131 S. Ct. 1740, 179 L. Ed. 2d

742 (2011). In Marmet Health Care Center, Inc. v.

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

Court mandated, “State and federal courts must en-

force the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et

seq., with respect to all arbitration agreements covered

by that statute.” Again, in Nitro-Lift Techs., L.L.C. v.

Howard, 133 S. Ct. 500, 501 (2012) (per curiam), the

Court proclaimed, “[s]tate courts rather than federal

courts are most frequently called upon to apply the

[FAA], including the Act’s national policy favoring ar-

bitration. It is a matter of great importance, therefore,

that state supreme courts adhere to a correct interpre-

tation of the legislation.”

Seemingly undaunted by these reprimands, state

courts continue to exhibit the same hostilities that

prompted the FAA, employing “‘a great variety’ of ‘de-

vices and formulas’” to avoid enforcing arbitration

agreements. Concepcion, 563 U.S. at 342, 131 S. Ct. at

1747 (quoting Robert Lawrence Co. v. Devonshire

Fabrics, Inc., 271 F.2d 402, 406 (2d Cir. 1959)). Extend-

icare Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky.

2016) emerges as the Supreme Court of Kentucky’s

latest and most elaborate “device,” disguised as an in-

terpretation of state agency law to avoid enforcing

agent-executed arbitration contracts, particularly those

utilized in long-term care settings.

Despite Concepcion’s, Marmet Health’s and Nitro-

Lift’s stern admonitions, Kentucky and other state

courts persist with their interpretations of contract de-

fenses, unconscionability concerns, state public policy

proclamations and similar rationales to avoid enforc-

ing arbitration contracts under the FAA’s mandate.

For instance, Whisman found, “it would be impossible

to say that entering into a pre-dispute arbitration

agreement was not covered,” by the authority granted

in the resident’s power of attorney document. Pet. App.

39a. Nevertheless, the court did the “impossible” and

refused to enforce the agent-entered predispute arbi-

tration contract for reasons not applicable to any other

type of contracts under Kentucky law. Pet. App. 42a.

The court reasoned arbitration contracts waived a

“God-given right” to jury trial and such waiver could

not be inferred from a “less than explicit grant” of the

power “to execute contracts” in general. Pet. App. 40a;

43a. Whisman’s result, holding the same grant of

agency authority authorized enforcement of contracts

— just not arbitration contracts — violates the FAA via

the Supremacy Clause of the U.S. Constitution. State

law simply cannot ignore the federal law’s preemptive

effect. See, e.g., Fidelity Federal Sav. & Loan Ass’n v. de

la Cuesta, 458 U.S. 141, 157 & fn.12, 102 S. Ct. 3014,

73 L. Ed. 2d 664 (1982). Nor may Kentucky “opt out” of

the Supremacy Clause: “When this Court has fulfilled

its duty to interpret federal law, a state court may not

contradict or fail to implement the rule so established.”

Marmet Health, 132 S. Ct. 1201, 1202.

Amici, as long-term care providers in today’s soci-

ety, frequently find themselves under an increasing

onslaught of legal, political and policy maneuvers de-

signed and determined to eliminate predispute arbi-

tration as a favorable option to courtroom litigation.

The Supreme Court of Kentucky’s latest judicial policy-

making effort is only one of several hurdles presented

to Amici as efforts to block their right to contract freely

for arbitration grow. Attorneys general, state senators,

the Centers for Medicare & Medicaid Services, an ag-

gressive plaintiff’s bar — to name only a few — take all

steps available designed to avoid the FAA’s application

and enforcement. In Kentucky especially, Amici’s right

to contract for arbitration lacks the protection Con-

gress intended by enacting the FAA.

Venue should play no part in substantive law, but

it means everything in Kentucky after Extendicare

Homes, Inc. v. Whisman. In Whisman’s wake, Kentucky

is left with the new reality of a modern day “race to the

courthouse.” Kentucky parties to arbitration agree-

ments must “race to the courthouse” to achieve their

desired result. For parties seeking to avoid the enforce-

ment of arbitration agreements, the preferred venue is

Kentucky state courthouses. Kentucky’s federal dis-

trict courts provide the alternative for those hoping to

enforce them. Unfortunately, Kentucky citizens lack-

ing diversity to remove, or the ability to file an original

federal action, often lose their right to enforce valid ar-

bitration contracts.

The Whisman court attempted to disguise its rul-

ing as an application of state contract law. In essence,

the court determined the FAA need not be invoked if

it defines state agency law to prevent contract for-

mation in the first place. This Court must prohibit the

Kentucky court’s flagrant end-around the FAA and re-

verse Whisman.

ARGUMENT IN SUPPORT

OF THE PETITIONERS

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. Unre-

pentantly, the Supreme Court of Kentucky “rejected

the notion” that its tortured holding conflicted with

this Court’s decisions in Marmet Health, 132 S. Ct.

1201, and Concepcion, 563 U.S. 333, 131 S. Ct. 1740, on

grounds that “our holding does not prohibit arbitration

of any ‘particular type of claim.” Pet. App. 46a. Whis-

man’s overt rejection of federal substantive arbitration

law deserves no deference and must be overturned.

Kentucky state courts must not be permitted to carve

exceptions into the FAA’s preemptive mandate.

Whisman’s decision, expressly denying that an

agent’s unrestricted “power to contract” for her prin-

cipal inherently provides the authority to contract

“for arbitration,” overtly violates the FAA and conflicts

with this Court’s arbitration precedents and numerous

federal district courts’ holdings. Whisman’s aftermath

leaves a significant jurisprudential divide between Ken-

tucky’s state and federal trial courts. Amici support

Petitioners’ arguments explaining why Whisman vio-

lates the FAA and federal substantive arbitration

law and must be reversed. Amici write separately to

provide their perspective on these pressing circum-

stances.

I. WHISMAN’S RESTRICTIONS ON ARBI-

TRATION RIGHTS POSE A SUBSTANTIAL

THREAT TO THE ENTIRE LONG-TERM

CARE INDUSTRY.

Enveloping uncertainty predominates as Whis-

man’s legacy. A significant number of long-term care

residents, because of age, infirmity, or good estate plan-

ning principles utilize powers of attorney designating

individuals authorized to conduct their business and

personal affairs, including the right to enter into all

types of contracts related to their principals’ residen-

cies at healthcare facilities. The Federal Arbitration

Act (“FAA”) requires arbitration contracts be enforced

like all other contracts. Whisman carves an exception

to that mandate by elevating the standard for enforce-

ment of agent-executed arbitration contracts beyond

that required for enforcement of any other agent-

executed contract. Whisman’s standard exacerbates

the progressively inordinate hardships encountered by

long-term care entities seeking enforcement of their

federal arbitration rights.

A. Nursing Home Arbitration Agreements

Benefit All Parties Involved in Claims

Congress enacted the Federal Arbitration Act be-

cause it recognized arbitration to be an effective and

economical alternative to litigation. Arbitration discov-

ery is typically narrowed to the core of the dispute, and

arbitration usually proceeds much more quickly than

traditional litigation, which is subject to trial docket

delays. By contrast, particularly in Kentucky, trial lit-

igation is frequently encumbered by overly broad

discovery virtually unlimited in scope or relevancy,

resulting in extreme costs and lengthy delays. Most

importantly, arbitration neither limits the types of

claims that can be asserted nor the recoveries or dam-

ages available; it merely provides an alternative forum

for resolution of the parties’ dispute. See American

Health Care Association Special Study on Arbitration

in the Long Term Care Industry, AON Global Risk Con-

sultants, June 16, 2009, p.5.

Public policy also supports the use of long-term

care arbitration agreements. In Amici’s experience,

most long-term care litigation cases resolve through

settlement. When compared to traditional litigation in

Kentucky, Amici find arbitration is more efficient, less

adversarial, and reduces time to settlement.

This Court previously noted, “arbitration’s advan-

tages often would seem helpful to individuals, . . . who

need a less expensive alternative to litigation.” Allied-

Bruce Terminix Co. v. Dobson, 13 U.S. 265, 280 (1995).

In accord with Amici’s position, the Dobson Court

continued, “|t|he advantages of arbitration are many:

it is usually cheaper and faster than litigation; it can

have simpler procedural and evidentiary rules; it nor-

mally minimizes hostility and is less disruptive of on-

going and future business dealings among the parties;

it is often more flexible in regard to scheduling of times

and places of hearings and discovery devices... .” Id.

Respondent/Appellee posits that the Court should

uphold Whisman’s result, contrary to existing federal

law, allowing predispute arbitration agreements exe-

cuted by agents (and especially in the long term care

industry) to be enforced under a separate standard

from all other contracts. This notion is at odds with

Kentucky residents’ constitutionally-protected right to

contract for arbitration, as well as the fundamental

right to contract protected by the Due Process Clause

of the Fourteenth Amendment. See Kentucky Consti-

tution Section 250 (“It shall be the duty of the General

Assembly to enact such laws as shall be necessary and

proper to decide differences by arbitrators, the arbitra-

tors to be appointed by the parties who may choose

that summary mode of adjustment”). See also, US.

CONST. AMEND. XIV, § 1. This Court has long recognized

the general right of an individual to contract in rela-

tion to his business is part of the liberty of the individ-

ual protected by the Fourteenth Amendment. Allgeyer

v. Louisiana, 165 U.S. 578, 17 S. Ct. 427, 41 L. Ed. 832

(1897).

Arbitration has been proven to reduce costs vastly,

as well as enable patients and their families to retain

a greater proportion of any settlement than with

traditional litigation contingency fee contracts. Ken-

tucky has the highest loss rate (annual amount per oc-

cupied bed required to defend, settle or litigate claims

in a year) of the states profiled in AON’s 2015 General

Liability and Professional Liability Actuarial Analysis.

Although AON reported the average projected 2016

loss rate to be $2,150 per bed, in Kentucky that num-

ber skyrockets to $9,820 per bed and is projected to

grow by 5.0% annually.‘ This means that less than half

of the dollars spent on liability is actually going to the

patients and their families. Jd. at 30-31. Therefore, de-

creased arbitration costs mean more of the award goes

to the patient or resident, not his/her legal representa-

tive.

Kentucky ranks at or near the bottom in all cate-

gories concerning claim severity, costs and loss rates.

For instance, Kentucky’s claim severity was the worst

of all states surveyed in the AON 2015 study and

has averaged above $340,000 per claim since 2008,

reaching as high as $401,000 per claim in 2015. Id. at

p.31. Another AON study concluded that, as compared

to traditional litigation, average long-term care pro-

vider expenses for claims arbitrated are 41% lower

than those litigated. Moreover, arbitration challenges

result in the highest associated expense: claims re-

solved after the court holds the arbitration agreement

* Long Term Care — 2015 General Liability and Professional

Liability Actuarial Analysis, AON Global Risk Consulting, p.4,

available online at: https//www.ahcancal.org/research_data/liability/

Documents/2015%20General%20Liability%20and%20Professional®

20Liability%20Actuarial%20Analysis%20Report. pdf.

unenforceable have much higher total costs than those

resolved following enforcement of the arbitration

agreement. See American Health Care Association

Special Study on Arbitration in the Long Term Care In-

dustry, AON Global Risk Consultants, June 16, 2009,

p.4.®

Claims subject to arbitration settle three months

sooner. See AON’s 2015 General Liability Analysis, at

p.2. Claim frequency increases by 2% each year. Jd.

Amici support use of arbitration as a dispute resolu-

tion tool to counter the highly aggressive litigation cli-

mate facing long-term care facilities today. However,

changing political climates, healthcare reform uncer-

tainties and aggressive campaigns from the plaintiff’s

bar continue to provide major obstacles for Kentucky

providers’ ever-dwindling arbitration options. Re-

cently, on October 4, 2016, the Centers for Medicare &

Medicaid Services (“CMS”) promulgated a rule, ac-

tively advocated by several members of Congress as

well as several states’ Attorneys General, asking CMS

to ban predispute arbitration agreements in the long-

term care setting, resulting in precisely that action.

See Medicare and Medicaid Programs; Reform of Re-

quirements for Long-Term Care Facilities; Arbitration

Rule, 81 Fed. Reg. 68,688 (Oct. 4, 2016).*®

° Available online at: https://Awww.ahcancal.org/research_data/

hability/Documents/2009%20S pecial%20Study%200n%20Arbitration

%20in%20Long%20Term%20Care. pdf.

® See footnote 10, infra.

Even ten years ago, a federal government review

of long-term care liability issues concluded:

At the root of this policy issue are the views

and perceptions of the American public. In ne-

gotiating settlements, plaintiffs and defen-

dants make decisions about compensation for

damages based upon their shared judgments

of what juries would decide if cases were to go

to trial. Most every person interviewed during

this study, whether they were associated with

the plaintiff side or the defendant side of the

issue, agreed that the decisions of juries in

nursing home negligence cases are virtu-

ally impossible to predict.

Recent Trends in the Nursing Home Liability Insur-

ance Market, U.S. Department of Health and Human

Services Assistant Secretary for Planning and Evalua-

tion Office of Disability, Aging and Long-Term Care

Policy, June 2006.’ Regardless, the long-term care in-

dustry is a highly regulated industry, subject to gov-

ernment inspections, licensing, and ratings, among

other compliance mandates. This regulation, not capri-

cious litigation results, deters substandard care and

provides quality care incentives. See, e.g., 42 CFR Part

483, Subpart B — Requirements for Long Term Care

Facilities.

Finally, state and federal taxpayers actually bear

the cost of long-term care litigation and concomitant

rising liability insurance expenses because long-term

care is overwhelmingly reimbursed by Medicare and

" Available online at: http://Aspe.Hhs.Gov/Daltcp/Reports/2006/

Nhhab.pdf.

Medicaid. In Kentucky, the loss rates as a percentage

of Medicaid reimbursement amounted to 14.66% in

2015, again the highest among the states profiled. See

AON 2015 Long Term Care Liability Study, p.31. There-

fore, in the best interests of Kentucky’s citizens as well

as its long-term care providers, the Court should reverse

Whisman to preserve arbitration as a fair, efficient and

economically sound alternative for Kentucky long-

term care providers and their residents alike.

B. Whisman Results in Uncertainty in Ken-

tucky Law

Petitioners and the Amici belong to a highly-

regulated industry. Provider facilities rely daily upon

identifiable factors to operate while anticipating a

multitude of contingencies. Long-term care entities

provide protection, housing, medical treatment, ther-

apy, companion services, nutritional! fulfillment, coun-

seling and numerous other services to their residents

daily. Amici must be able to rely on their abilities to

plan, budget and prepare for a myriad of scenarios, in-

cluding litigation and insurance costs. As an industry,

Amici count on their ability and right to contract, to

include contracts for arbitral resolution of claims. As

shown above, the anti-arbitration climate makes plan-

ning and preparing increasingly uncertain and diffi-

cult.

Pre-Whisman, long-term care providers in Ken-

tucky could identify the number of residents admitted

by agents under powers of attorney, who also agreed to

arbitration for any potential claims. Kentucky estab-

lished durable general powers of attorney by statute

and recognized the authority authorized therein. See

KRS § 386.093. Courts enforced those grants of author-

ity. See, e.g., Kindred Healthcare, Inc. v. Cherolis, 2013

WL 5583587 (Ky. App. Oct. 11, 2013), vacated on re-

mand from the Kentucky Supreme Court in light of

Whisman, by Kindred Healthcare, Inc. v. Cherolis, 2016

WL 6134910 (Ky. App. Oct. 21, 2016). Pre-Whisman

status quo provided Amici a respectable level of cer-

tainty for business tracking, planning and budgeting.

However, post-Whisman, regardless of the express

grant of authority given by the principal therein, an

agent acting under a written power of attorney no

longer affords certain authority. The determination as

to whether a Kentucky court will enforce the arbitra-

tion agreement now, in fact, depends almost entirely on

whether the case is filed in federal or state court. See,

e.g., Preferred Care of Delaware, Inc. v. Crocker, 173

F. Supp. 3d 505, 521 (W.D. Ky. 2016) (currently on ap-

peal in Sixth Circuit Court of Appeals, Case No. 16-

6179) (Ms. Crocker filed personal injury claim in state

court; Preferred Care sought to enforce arbitration

contract and compel arbitration in federal court. State

court ruled first, holding ADR contract unenforceable

in accordance with Whisman, and federal district

court’s subsequent finding of enforceable ADR contract

later held barred by res judicata principles). See Sec-

tion III, infra, for additional discussion.

Whisman severely restricted the Amici’s ability to

contract as an industry. Amici and residents voluntar-

ily enter into thousands of predispute arbitration

agreements every year, many executed by attorneys-

in-fact on the resident’s behalf like the underlying

cases here. Predispute arbitration agreements repre-

sent efficient, cost-effective alternatives to traditional

civil litigation, vital to Amici and the entire long-term

care industry. Arbitration, both because it is quicker

and procedurally simpler, reduces transaction expenses

retaining more resources for resident care and claim

resolution. Amici typically present residents with arbi-

tration agreements upon admission. Some are stand-

alone agreements; some form part of the admissions

agreement.

Pursuant to the Supremacy Clause of the U.S.

Constitution, the FAA is the law in all states — not “all

states except Kentucky.” Nevertheless, the Whisman

court refused to apply the FAA’s body of federal sub-

stantive law and specifically rejected the FAA as not

applicable to the facts presented. Given its stated rea-

soning, it appears the Whisman court would have

found Ms. Clark’s attorney-in-fact had power to bind

Ms. Clark to any other contract — just not an arbitra-

tion contract. Pet. App. 39a-40a. Stated otherwise, the

Whisman court did not consider, as it claimed, the

agent’s “authority to form any contract,” but instead

heightened the conditions under which it vowed to

enforce arbitration contracts, only, by defining height-

ened standards to be applied when the contract in-

volves arbitration. Pet. App. 42a-44a.

The Whisman court’s interpretation of the FAA

and its application to this matter holds ramifications

far beyond this case. The state court’s holding, if al-

lowed to stand, will continue to generate disparate re-

sults, especially as between state and federal courts,

create uncertainty, irreparable harm and confusion

within the realm of general public interest. Individuals

and businesses alike will be unable to rely upon their

constitutionally-protected right to contract for arbitra-

tion in both commercial and private contexts. Con-

tracts previously made in good faith under prevailing

laws will be subject to immediate invalidation. Amici

are aware of multiple cases currently on appeal in

Kentucky’s courts concerning the interpretation and

enforcement of arbitration contracts executed under

powers of attorney.

Additionally, Whisman’s holding poses a substan-

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

when demographic trends dictate that the provision of

long-term care will become increasingly important. Be-

cause of rapid healthcare improvements, the United

States is an ageing society. The need for long-term care

increases daily as our population lives longer. Between

2000 and 2050, the number of older people is projected

to increase by 135%. Moreover, the population aged 85

and over, which is the group most likely to need health

and long-term care services, is projected to increase by

350%. Over this time period, the proportion of the pop-

ulation that is over the age of 65 will increase from

12.7% in 2000 to 20.3% in 2050; the proportion of the

population that is age 85 and older will increase from

1.6% in 2000 to 4.8% in 2050. See Population Ageing in

the United States of America: Implications for Public

Programmes, Oxford International Journal of Epide-

miology, 2002, Vol. 31, Issue 4, pp.776-781.° As the U.S.

population ages, the long-term care industry will play

8 Available online at: http://ije.oxfordjournals.org/content/3 1/4/

776.full.

a prominent role in providing healthcare to the na-

tion’s elderly.’ It is virtually undisputed that the future

well-being of the country’s aging population depends

on a strong long-term care industry.

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 which threaten it, including economic,

governmental, and regulatory pressures. As discussed,

in 2016, the Centers for Medicare & Medicaid Services

proposed a rule to prohibit predispute arbitration

contracts in long-term care settings. See Medicare

and Medicaid Programs; Reform of Requirements for

Long-Term Care Facilities; Arbitration Rule, 81 Fed.

Reg. 68,688 (Oct. 4, 2016).'° Moreover, skilled nursing

® 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 (updated through 2015), availa-

ble online at: http:/Avww.aoa.gov/aoaroot/aging statistics/index.aspx.

Mississippi temporarily enjoined CMS from enforcing a rule that

bans predispute arbitration contracts and facially violates the

FAA, the matter is not yet resolved and will continue to percolate

through the courts, providing still more proof of ongoing arbi-

tration hostility. See American Health Care Association et al. v.

Burwell, Case 3:16-cv-00233-MPM-RP, Doc. 44, PageID#: 8583-

8622.

facilities face a cumulative Medicare funding reduc-

tion worth $65 billion over the next six years."

The long-term care industry cannot seek legisla-

tive protection against this onslaught in states like

Kentucky, Illinois, Arkansas, and Georgia, where state

constitutional doctrines exist and defeat all efforts at

tort reform legislation aimed at deterring the filing of

meritless claims and providing incentives for meritor-

ous claims. See Williams v. Wilson, 972 S.W.2d 260, 267

(Ky. 1998); Bayer CropScience LP v. Schafer, 2011 Ark.

518, 385 S.W.3d 822 (2011); Lebron v. Gottlieb Mem’

Hosp., 930 N.E.2d 895, 914 (Ill. 2010); Atlanta Oculo-

plastic Surgery, P.C. v. Nestlehutt, 691 S.E.2d 218, 220

(Ga. 2010). Courts should encourage efficient dispute

resolution in long-term care settings. Amici join the Pe-

titioners in asking this Court to reverse Whisman.

il. THE KENTUCKY COURT’S DECISION IN

WHISMAN CONSTITUTES THE STATE’S

LATEST ATTEMPT TO EVADE CONCEP.

CION AND THE FAA.

The Kentucky court attempted to evade FAA pre-

emption, this time under the guise of state law contract

formation. This latest result procreates “the judicial

hostility towards arbitration that prompted the FAA

(which has] manifested itself in ‘a great variety’ of

'! $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), available online at: http:/Awww.mcknights.com/65-

billion-in-medicare-cuts-to-rock-us-nursing-homes-over-10-years-

analysis-shows/article/253036.

‘devices and formulas’ declaring arbitration against

public policy.” Concepcion, 131 S. Ct. at 1747.

Concepcion explained how Congress carefully

tempered the FAA’s mandate to respect parties’ free-

dom of contract by including in the FAA a saving

clause that preserves generally applicable contract de-

fenses from preemption. Jd. at 1748. But even a de-

fense that a state court characterizes as generally

applicable to all contracts, as does the Whisman court,

is preempted by the FAA if the defense “stand|s] as an

obstacle to the accomplishment of the FAA’s objec-

tives.” Id. at 1747-48. This is the main reason why

Whisman cannot stand.

When a contract defense nominally considered to

be arbitration-neutral disproportionately invalidates

arbitration agreements, that defense offends the FAA’s

objectives and is preempted. See id. Even prior to

Whisman, Kentucky’s highest court historically re-

sisted Concepcion in less obvious, but no less troubling,

ways. For example, in 2012, the Kentucky Supreme

Court rendered Ping v. Beverly Enterprises, Inc., 376

S.W.3d 581 (Ky. 2012). Ping severely limited (and quite

possibly confused) Kentucky law of agency concerning

specific versus general powers of attorney to reach its

desired result. Ping re-characterized a general] durable

power of attorney containing broad, general grants of

authority from the principal as one granting powers

specifically over healthcare, business and finances. /d.

at 588-89. Working within this now-narrowed frame,

Ping refused to hold that a POA granting limited pow-

ers could be interpreted to allow the attorney-in-fact to

sign an optional predispute arbitration agreement on

her principal’s behalf when not required for the long-

term care admission. Jd. at 592. The Kentucky court

even then asserted its “authority” to denounce the FAA

as enforceable subject to contrary state law, repudiat-

ing this Court’s precedent. See, e.g., Perry v. Thomas,

482 U.S. 483, 489-90, 107 S. Ct. 2520, 96 L. Ed. 2d 426

(1987); Mitsubishi Motors Corp. v. Soler Chrysler-Plym-

outh, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87

L. Ed. 2d 444 (1985); Southland Corp. v. Keating, 465

U.S. 1, 10-11, 16 & fn.11, 104 S. Ct. 852, 79 L. Ed. 2d 1

(1984). Ping exposed the Supreme Court of Kentucky’s

unbridled bias and hostility towards arbitration. Whis-

man confirmed its continued, jurisprudential preva-

lence. Interestingly, Ping’s author dissented from the

Whisman majority and stated that Whisman did not

follow Ping’s limitation and interpretations applying

to agency law, but rather extended it in a manner

violating the FAA. See Whisman, Pet. App. 69a-74a

(Abramson, J., dissenting.).

The Whisman court noted the FAA was implicated

only if a contract was formed between the parties. Pet.

App. 24a. Although the state court acknowledged the

principals empowered their agents with express au-

thority “to sign contracts,” the court held this grant of

power insufficient to create an arbitration contract, in

particular, because arbitration contracts carry implica-

tions beyond those of other contracts. Pet. App. 42a.

Whisman thus elevated the standard for enforcing ar-

bitration contracts by requiring something different

from other contracts. Jd. In doing so, the court pur-

ported to rely on state law contract and agency princi-

ples (e.g., requirements for contract formation with

agents) and overtly rejected contrary holdings of this

Court and federal courts. See Pet. App. 24a-48a; but see

Concepcion, 563 U.S. at 352 (if an otherwise neutral

contract defense “stand|s} as an obstacle to the accom-

plishment of the FAA’s objectives,” the FAA preempts

it) (citing Hines v. Davidowitz, 312 U.S. 52, 67,615. Ct.

399, 85 L. Ed. 581 (1941)).

In particular, the Whisman court “rejected the no-

tion” that its tortured holding conflicted with this

Court’s decisions in Marmet Health, 132 S. Ct. 1201,

and Concepcion, 563 U.S. 333, 131 S.Ct. 1740, on

grounds that “our holding does not prohibit arbitration

of any ‘particular type of claim.’” Pet. App. 46a. The

Kentucky court appears to have misunderstood Con-

cepcion’s test requires an additional level of analysis

to pass muster. See Concepcion, 563 U.S. at 339 (“This

[9 U.S.C. § 2] saving clause permits agreements to

arbitrate to be invalidated by “generally applicable

contract defenses, such as fraud, duress, or unconscion-

ability,” but not by defenses that apply only to arbitra-

tion or that derive their meaning from the fact that an

agreement to arbitrate is at issue.”). Accord, Crocker,

173 F. Supp. 3d 521 (“Though the second inquiry under

Concepcion is “more complex,” this Court believes that

the Kentucky Supreme Court’s decision in Whisman

fails the second inquiry and, therefore, is invalid.”).

Otherwise, it brazenly disregarded this Court’s prece-

dent as “inapplicable,” Pet. App. 24a, and confirms the

judicial hostility to arbitration the FAA originally

sought to extinguish still thrives in Kentucky.

This Court should reverse and instruct the Ken-

tucky court and other state courts to follow the Su-

premacy Clause and the policy of the FAA by enforcing

arbitration agreements as written, even when this

leads to a result at odds with state public policy, state

unconscionability doctrines, or other principles of state

law.

Ill. KENTUCKY’S FEDERAL DISTRICT COURTS

UNANIMOUSLY DISAGREE WITH WHIS-

MAN’S REASONING, RESULTING IN RACE

TO COURTHOUSE.

Every U.S. District Court in Kentucky that has

considered the application of Whisman’s reasoning/

result has reached the conclusion that Whisman’s

holding is invalid and its decision violates the FAA and

Supremacy Clause, prohibits enforcement of valid ar-

bitration contracts and cannot be enforced to that

result.'* Unfortunately, lower Kentucky state courts

remain bound by Kentucky Supreme Court Rule to fol-

low and apply Whisman. See SCR 1.030(8) (Court of

Appeals is bound by and shall follow applicable prece-

dents established in the opinions of the Supreme

Court), and SCR 1.040(5) (circuit and district courts

—+—

Amici has found no Kentucky federal district court opinion

that enforced Whisman’s rule or application. Rather, the U.S. Dis-

trict Courts in the Eastern and Western Districts of Kentucky

have unanimously held Whisman is invalid.

are bound by and shall follow applicable precedents es-

tablished in the opinions of the Supreme Court and

Court of Appeals).

Venue should play no part in substantive law, but

it means everything in Kentucky after Extendicare

Homes, Inc. v. Whisman. In Whisman’s wake, Kentucky

parties to arbitration agreements must now “race to

the courthouse” — to avoid enforcement of an arbi-

tration agreement, Kentucky state courthouses. Ken-

tucky’s federal district courts provide the alternative

for those hoping to enforce arbitration contracts. Un-

fortunately, Kentucky citizens lacking diversity to re-

move or file an original federal action often lose their

right to enforce valid arbitration contracts. See, e.g.,

Crocker, 173 F. Supp. 3d 505 (on appeal in Sixth Circuit

Court of Appeals, Case No. 16-6179) (Crocker filed per-

sonal injury claim in state court; Preferred Care

sought to compel arbitration in federal court. State

court ruled first, holding ADR contract unenforceable

in accordance with Whisman, and federal district

court’s subsequent finding of enforceable ADR contract

later held barred by res judicata principles).

Intrastate “conflicts undercut basic rule of law ex-

pectations. Allowing the content of national constitu-

tional law to depend on . .. whether a case is filed in

state or federal court is at odds with the core expecta-

tion of horizontal consistency in the law’s content and

application.” Wayne A. Logan, A House Divided: When

State and Lower Federal Courts Disagree on Federal

Constitutional Rights, 90 NOTRE DAME LAW REVIEW

235, 258, Appendix (2014) (citing Frank B. Cross, Shat-

tering the Fragile Case for Judicial Review of Rule-

making, 85 Va. LAW REVIEW 1243, 1249 (1999)). “The

Constitution was intended, its very purpose was, to

prevent experimentation with the fundamental rights

of the individual.” Truax v. Corrigan, 257 U.S. 312, 338

(1921).

These U.S. District Courts in the Eastern and

Western Districts of Kentucky found Whisman to be

invalid: GGNSC Louisville Hillcreek, LLC v. Watkins,

2016 WL 815295 (W.D. Ky. Feb. 29, 2016); Preferred

Care of Delaware, Inc. v. Crocker, 173 F. Supp. 3d 505

(W.D. Ky. 2016); GGNSC Louisville Mt. Holly, LLC v.

Leslie Guess Mohamed-Vall, Case No. 3:16-cv-136-DJH

(W.D. Ky. April 6, 2016); Owensboro Health Facilities,

L.P. v. Henderson, 2016 WL 2853569 (W.D. Ky. May 13,

2016); Riney v. GGNSC Louisville St. Matthews, LLC

d/b/a Golden Living Center — St. Matthews, 2016 WL

2853568 (W.D. Ky. May 13, 2016); Brandenburg Health

Facilities, LP v. Mattingly, 2016 WL 3448733 (W.D. Ky.

June 20, 2016); Preferred Care of Delaware, Inc. v. Hop-

kins, 2016 WL 3546407 (W.D. Ky. June 23, 2016); Pine

Tree Villa, Inc., LLC d/b/a Regis Woods v. Coulter, 2016

WL 3030185 (W.D. Ky. May 25, 2016); GGNSC Stan-

ford, LLC v. Gilliam, ___ F. Supp. 3d ___, 2016 WL

4700135 (E.D. Ky. Sept. 7, 2016); Diversicare Highland,

LLC v. Lee, 2016 WL 3512256 (W.D. Ky. June 21, 2016).

In light of these recent opinions, this Court should

also consider the very concerns Justice Abramson (now

Hughes) expressed in her Whisman dissent.

Unlike the majority's examples, all of which

suppose the waiver or compromise of a basic,

personal substantive right (rights that an or-

dinary attorney-in-fact is rarely, if ever, asked

to address on the principal’s behalf), arbitra-

tion agreements, which are commonplace

these days, involve no substantive waiver. The

principal’s substantive rights remain intact,

only the forum for addressing those rights is

affected. The majoritys apparent presump-

tion that the arbitration agreement has sub-

stantive implications adverse to the principal

(and thus belongs on the list of hard-to-waive

substantive rights) is the very presumption

Congress sought to counteract with the FAA.

Thus, while it may well be possible to frame a

rule under state law to the effect that a pre-

sumption exists against an agent’s authority

to waive certain substantive rights of the

principal, it does not follow that state law

would include the right to civil trial among

those presumptively non-waivable rights; and

even if, as the majority would have it, the

state rule did purport to hold sacrosanct the

principal’s right to trial in civil cases, under

Concepcion and the FAA, the saving clause of

which is not to be construed as a self-destruct

mechanism, that aspect of the state rule

would be preempted by federal law.

See Pet. App. 97a-98a (Abramson, J., dissenting).

While principals are free to discriminate against

arbitration or certain types of contracts in their POA’s,

the FAA absolutely prohibits courts from doing what

the principal did not do: inferring that discrimination.

“Evidence” of discrimination against arbitration can-

not arise from the POA’s mere omission of certain

“waiver” language when this Court has affirmed that

the right to jury trial can be waived, constitutionally,

by similar omission. See, e.g., Yakus v. United States,

321 U.S. 414, 444, 64S. Ct. 660, 677 (1944).

Joe Wellner’s Power of Attorney document granted

his attorney-in-fact powers to “make, execute and de-

liver deeds, releases, conveyances and contracts of

every nature in relation to both real and persona! prop-

erty, including stocks, bonds and insurance.” Joint Ap-

pendix 10-11 (emphasis added). His POA contained

additional grants to “demand, sue for, collect, recover

and receive all debts, monies, interest and demands

whatsoever now due or that may hereafter be or be-

come due to me (including the right to institute legal

proceedings therefor).” Joint App. 10. Likewise, 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.” Joint App. 7. Her POA

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

any and all checks, promissory notes, contracts, deeds

or agreements.” Joint App. 7 (emphasis added). Her

POA also granted authority to “institute or defend

suits concerning my property or rights,” and “Gener-

ally to do and perform for me and in my name all that

| might do if present.” Pet. App. 19a. Either Mr. Wellner

or Ms. Clark could have limited his or her agent’s abil-

ity to enter into arbitration contracts, but neither

did. Both specifically empowered execution of “con-

tracts” (“of every nature” and “any and all”) without

exception.

Kentucky’s federal district courts agree. In Wat-

kins, Judge Hale found Whisman inapplicable to the

ultimate result but questioned the Whisman Majority

Opinion’s reasoning as not consistent with applicable

federal law, citing Whisman, 478 S.W.3d at 354

(Hughes, J., dissenting) (“[A]s the United States Su-

preme Court has made absolutely clear, what state law

cannot do directly — disfavor arbitration — it also can-

not do indirectly by favoring arbitration’s correlative

opposite, a judicial trial. Since that is the express pur-

pose of the rule the majority pronounces and since the

application of that rule will clearly have a dispropor-

tionate effect on the ability of agents to enter arbitra-

tion agreements (as opposed to other contracts), the

majority's new rule is plainly invalid.”). See Watkins,

2016 WL 815295, at *5, at fn.3.

In Crocker, Judge Russell went a step further

and held Whisman to be “invalid” as violative of the

FAA:

[Tlhis Court believes that the Kentucky Su-

preme Court’s decision in Whisman fails the

second inquiry |of Concepcion] and, therefore,

is invalid. The rule established by Kentucky’s

highest court conflicts with the goals and pol-

icies of the FAA, as they are “antithetical to

threshold limitations placed specifically and

solely on arbitration.” Doctor’s Associates (Inc.

v. Casarotto|, 517 U.S. (681, 688 (1996)]. The

Kentucky Supreme Court’s requirement that

a principal in his power of attorney explicitly

convey to an attorney-in-fact the right to en-

ter into a pre-dispute arbitration agreement

“places arbitration agreements in a class

apart from ‘any contract,’ and singularly lim-

its their validity.” Jd. Consequently, the court’s

rule is “inconsonant with, and is therefore

preempted by, the federal law.” Jd.

Crocker, 173 F. Supp. 3d at 521.

The Mohamed-Vall court also rejected Whisman:

“The FAA’s purpose .. . is ‘to place arbitration agree-

ments upon the same footing as other contracts.’ |Cita-

tion omitted.| Accordingly, the Court will not apply

Whisman to the extent that it conflicts with U.S. Su-

preme Court precedent by treating an agreement to

arbitrate differently than any other contract.” Mohamed-

Vall, at p.9 of 14 (Page [D#: 347). And in both Hender-

son and Riney, Judge McKinley of the Western District

of Kentucky adopted verbatim Judge Russell’s reason-

ing in Crocker, finding Whisman’s holding “invalid.”

See Henderson, at pp.7-8 of 9 (Page ID#: 209-210);

Riney, at pp.6-7 of 8 (Page ID#: 90-91). Hopkins and

Coulter also join with Crocker’s reasoning. See Hop-

kins, 2016 WL 3546407, at *4; Coulter, 2016 WL

3030185, at *3. The Kentucky court’s opinion moved

Judge Stivers of the Western District of Kentucky to

comment:

Applying Whisman to invalidate the arbitra-

tion agreement signed by Decedent’s husband

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 was

wrongly decided.

The Whisman court and Respondent erroneously

posit the FAA is not implicated here because the par-

ties never formed a contract under Kentucky’s state

law of agency. Yet, every Kentucky federal district

court analyzing Whisman’s rule of law rejects that ar-

gument and agrees: Whisman targets enforcement of

arbitration contracts, specifically, and flagrantly vio-

lates the FAA. Regardless of Whisman’s attempt to dis-

guise its anti-arbitration ruling, Kentucky’s federal

district courts rightfully recognize that Whisman’s

holding actually elevates enforcement standards for

valid, agent-executed arbitration contracts, implicat-

ing and violating the FAA.

CONCLUSION

For the reasons stated above and in the petition

for a writ of certiorari, the judgment below must be

reversed. Whisman is enormously detrimental to the

long-term care industry, particularly if its reasoning

spreads beyond Kentucky to other states.

Respectfully submitted,

DONALD L. MILLER, II

*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

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.