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nursing homes, powers of attorney, arbitration: kindred nursing centers v clark May 15, 2017

Posted by Bradley in : dispute resolution , trackback

In the Fall of 2015 I assigned Extendicare Homes v Whisman to my contracts students as an interesting basis for exploring the extent to which contract formation issues might fall outside the pre-emption ruling in AT&T v Concepcion, an issue that many courts had focused on. The Supreme Court has now held (in Kindred Nursing Centers v Clark) that the critical issue is not whether the contract law issue relates to formation or not but whether the relevant rule is a rule that focuses on arbitration (the court points out that in AT&T v Concepcion the court had discussed duress, which applies in the context of contract formation). The Kentucky rule that required specific authority to the grantee of a power of attorney to waive the constitutional right to a jury is a rule that focuses on arbitration and is thus pre-empted by the FAA. Arbitration agreements should be treated “on an equal footing with all other contracts.” Justice Kagan emphasizes in the opinion that there is nothing new here: this is entirely consistent with the Court’s prior decisions.

I think it’s pretty clear that the decision is consistent with this prior case law, and that the court is correct that allowing this sort of getting round the pre-emption issue would invite further acts that could undermine the idea of pre-emption entirely.

But at the same time, duress and lack of authority of an agent to enter into a contract seem to me to involve two very different sorts of formation issue. The language of section 2 of the FAA, “save upon such grounds as exist at law or in equity for the revocation of any contract” seems more applicable to duress (where there seems to be a contract which is treated by the court, in its discretion, as unenforceable) than to the agent’s authority where the court would merely recognize that there was never any valid contract because the party concluding it id not have the power to do so. Conflating the two types of case is not analytically clearly correct. And recognizing this also shows that the floodgates argument – to allow this sort of approach would end up undermining pre-emption altogether – is completely oversold.

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