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SUPREME COURT OF THE UNITED STATES
_________________
No. 16–32
_________________
KINDRED NURSING CENTERS LIMITED PARTNER-SHIP,
dba WINCHESTER CENTRE FOR HEALTH AND REHABILITATION, nka FOUNTAIN
CIRCLE HEALTH AND REHABILITA-TION, et al., PETITIONERS
v. JANIS E. CLARK et al.
on writ of certiorari to the supreme court of
kentucky
[May 15, 2017]
Justice Kagan delivered the opinion of the
Court.
The Federal Arbitration Act (FAA or Act)
requires courts to place arbitration agreements “on equal footing
with all other contracts.”
DIRECTV, Inc. v.
Imburgia,
577 U. S. ___, ___ (2015) (slip op., at 6) (quoting
Buckeye
Check Cashing, Inc. v.
Cardegna, 546 U. S. 440, 443
(2006) ); see 9 U. S. C. §2. In the decision below, the
Kentucky Supreme Court declined to give effect to two arbitration
agreements executed by individuals holding “powers of
attorney”—that is, authorizations to act on behalf of others.
According to the court, a general grant of power (even if seemingly
comprehensive) does not permit a legal representative to enter into
an arbitration agreement for someone else; to form such a contract,
the representative must possess specific authority to “waive his
principal’s fundamental constitutional rights to access the courts
[and] to trial by jury.”
Extendicare Homes, Inc. v.
Whisman, 478 S. W. 3d 306, 327 (2015). Because
that rule singles out arbitration agreements for disfavored
treatment, we hold that it violates the FAA.
I
Petitioner Kindred Nursing Centers L. P.
operates nursing homes and rehabilitation centers. Respondents
Beverly Wellner and Janis Clark are the wife and daughter,
respectively, of Joe Wellner and Olive Clark, two now-deceased
residents of a Kindred nursing home called the Winchester
Centre.
At all times relevant to this case, Beverly and
Janis each held a power of attorney, designating her as an
“attorney-in-fact” (the one for Joe, the other for Olive) and
affording her broad authority to manage her family member’s
affairs. In the Wellner power of attorney, Joe gave Beverly the
authority, “in my name, place and stead,” to (among other things)
“institute legal proceedings” and make “contracts of every nature
in relation to both real and personal property.” App. 10–11. In the
Clark power of attorney, Olive provided Janis with “full power
. . . to transact, handle, and dispose of all matters
affecting me and/or my estate in any possible way,” including the
power to “draw, make, and sign in my name any and all
. . . contracts, deeds, or agreements.”
Id., at
7.
Joe and Olive moved into the Winchester Centre
in 2008, with Beverly and Janis using their powers of attorney to
complete all necessary paperwork. As part of that process, Beverly
and Janis each signed an arbitration agreement with Kindred on
behalf of her relative. The two contracts, worded identically,
provided that “[a]ny and all claims or controversies arising out of
or in any way relating to . . . the Resident’s stay at
the Facility” would be resolved through “binding arbitration”
rather than a lawsuit.
Id., at 14, 21.
When Joe and Olive died the next year, their
estates (represented again by Beverly and Janis) brought separate
suits against Kindred in Kentucky state court. The complaints
alleged that Kindred had delivered substandard care to Joe and
Olive, causing their deaths. Kindred moved to dismiss the cases,
arguing that the arbitration agreements Beverly and Janis had
signed prohibited bringing their disputes to court. But the trial
court denied Kindred’s motions, and the Kentucky Court of Appeals
agreed that the estates’ suits could go forward. See App. to Pet.
for Cert. 125a–126a, 137a–138a.
The Kentucky Supreme Court, after consolidating
the cases, affirmed those decisions by a divided vote. See 478
S. W. 3d, at 313. The court began with the language of
the two powers of attorney. The Wellner document, the court stated,
did not permit Beverly to enter into an arbitration agreement on
Joe’s behalf. In the court’s view, neither the provision
authorizing her to bring legal proceedings nor the one enabling her
to make property-related contracts reached quite that distance. See
id., at 325–326;
supra, at 2. By contrast, the court
thought, the Clark power of attorney extended that far and beyond.
Under that document, after all, Janis had the capacity to “dispose
of all matters” affecting Olive. See
supra, at 2. “Given
this extremely broad, universal delegation of authority,” the court
acknowledged, “it would be impossible to say that entering into
[an] arbitration agreement was not covered.” 478
S. W. 3d, at 327.
And yet, the court went on, both arbitration
agreements—Janis’s no less than Beverly’s—were invalid. That was
because a power of attorney could not entitle a representative to
enter into an arbitration agreement without
specifically
saying so. The Kentucky Constitution, the court explained, protects
the rights of access to the courts and trial by jury; indeed, the
jury guarantee is the sole right the Constitution declares “sacred”
and “inviolate.”
Id., at 328–329. Accordingly, the court
held, an agent could deprive her principal of an “adjudication by
judge or jury” only if the power of attorney “expressly so
provide[d].”
Id., at 329. And that clear-statement rule—so
said the court—complied with the FAA’s demands. True enough that
the Act precludes “singl[ing] out arbitration agreements.”
Ibid. (internal quotation marks omitted). But that was no
problem, the court asserted, because its rule would apply not just
to those agreements, but also to some other contracts implicating
“fundamental constitutional rights.”
Id., at 328. In the
future, for example, the court would bar the holder of a
“non-specific” power of attorney from entering into a contract
“bind[ing] the principal to personal servitude.”
Ibid.
Justice Abramson dissented, in an opinion joined
by two of her colleagues. In their view, the Kentucky Supreme
Court’s new clear-statement rule was “clearly not . . .
applicable to ‘any contract’ but [instead] single[d] out
arbitration agreements for disfavored treatment.”
Id., at
344–345. Accordingly, the dissent concluded, the rule “r[a]n afoul
of the FAA.”
Id., at 353.
We granted certiorari. 580 U. S. ___
(2016).
II
A
The FAA makes arbitration agreements “valid,
irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” 9
U. S. C. §2. That statutory provision establishes an
equal-treatment principle: A court may invalidate an arbitration
agreement based on “generally applicable contract defenses” like
fraud or unconscionability, but not on legal rules that “apply only
to arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue.”
AT&T Mobility LLC
v.
Concepcion, 563 U. S. 333, 339 (2011) . The FAA thus
preempts any state rule discriminating on its face against
arbitration—for example, a “law prohibit[ing] outright the
arbitration of a particular type of claim.”
Id., at 341. And
not only that: The Act also displaces any rule that covertly
accomplishes the same objective by disfavoring contracts that (oh
so coinciden-tally) have the defining features of arbitration
agreements. In
Concepcion, for example, we described a
hypothetical state law declaring unenforceable any contract that
“disallow[ed] an ultimate disposition [of a dispute] by a jury.”
Id., at 342. Such a law might avoid referring to arbitration
by name; but still, we explained, it would “rely on the uniqueness
of an agreement to arbitrate as [its] basis”—and thereby violate
the FAA.
Id., at 341 (quoting
Perry v.
Thomas,
482 U. S. 483 , n. 9 (1987)).
The Kentucky Supreme Court’s clear-statement
rule, in just that way, fails to put arbitration agreements on an
equal plane with other contracts. By the court’s own account, that
rule (like the one
Concepcion posited) serves to safeguard a
person’s “right to access the courts and to trial by jury.” 478
S. W. 3d, at 327; see
supra, at 3–4. In ringing
terms, the court affirmed the jury right’s unsurpassed standing in
the State Constitution: The framers, the court explained,
recognized “that right and that right alone as a divine God-given
right” when they made it “the
only thing” that must be
“ ‘held sacred’ ” and “ ‘inviolate.’ ” 478
S. W. 3d, at 328–329 (quoting Ky. Const. §7). So it was
that the court required an explicit statement before an
attorney-in-fact, even if possessing broad delegated powers, could
relinquish that right on another’s behalf. See 478
S. W. 3d, at 331 (“We say only that an agent’s authority
to waive his principal’s constitutional right to access the courts
and to trial by jury must be clearly expressed by the principal”).
And so it was that the court did exactly what
Concepcion
barred: adopt a legal rule hinging on the primary characteristic of
an arbitration agreement—namely, a waiver of the right to go to
court and receive a jury trial. See 563 U. S., at 341–342; see
also 478 S. W. 3d, at 353 (Abramson, J., dissenting)
(noting that the jury-trial right at the core of “the majority’s
new rule” is “the one right that just happens to be correlative to
the right to arbitrate” (emphasis deleted)). Such a rule is too
tailor-made to arbitration agreements—subjecting them, by virtue of
their defining trait, to uncommon barriers—to survive the FAA’s
edict against singling out those contracts for disfavored
treatment.[
1]
And the state court’s sometime-attempt to cast
the rule in broader terms cannot salvage its decision. The
clear-statement requirement, the court suggested, could also apply
when an agent endeavored to waive other “fundamental constitutional
rights” held by a principal. 478 S. W. 3d, at 331; see
supra, at 4. But what other rights, really? No Kentucky
court, so far as we know, has ever before demanded that a power of
attorney explicitly confer authority to enter into contracts
implicating constitutional guarantees. Nor did the opinion below
indicate that such a grant would be needed for the many routine
contracts—executed day in and day out by legal
representatives—meeting that description. For example, the Kentucky
Constitution protects the “inherent and inalienable” rights to
“acquir[e] and protect[ ] property” and to “freely
communicat[e] thoughts and opinions.” Ky. Const. §1. But the state
court nowhere cautioned that an attorney-in-fact would now need a
specific authorization to, say, sell her principal’s furniture or
commit her principal to a non-disclosure agreement. (And were we in
the business of giving legal advice, we would tell the agent not to
worry.) Rather, the court hypothesized a slim set of both patently
objectionable and utterly fanciful contracts that would be subject
to its rule: No longer could a representative lacking explicit
authorization waive her “principal’s right to worship freely” or
“consent to an arranged marriage” or “bind [her] principal to
personal servitude.” 478 S. W. 3d, at 328; see
supra, at 4. Placing arbitration agreements within that
class reveals the kind of “hostility to arbitration” that led
Congress to enact the FAA.
Concepcion, 563 U. S., at
339. And doing so only makes clear the arbitration-specific
character of the rule, much as if it were made applicable to
arbitration agreements and black swans.[
2]
B
The respondents, Janis and Beverly, primarily
advance a different argument—based on the distinction between
contract formation and contract enforcement—to support the decision
below. Kentucky’s clear-statement rule, they begin, affects only
contract formation, because it bars agents without explicit
authority from entering into arbitration agreements. And in their
view, the FAA has “no application” to “contract formation issues.”
Supp. Brief for Respondents 1. The Act, to be sure, requires a
State to enforce all arbitration agreements (save on generally
applicable grounds) once they have come into being. But, the
respondents claim, States have free rein to decide—irrespective of
the FAA’s equal-footing principle—whether such contracts are
validly created in the first instance. See
id., at 3 (“The
FAA’s statutory framework applies only
after a court has
determined that a valid arbitration agreement was formed”).
Both the FAA’s text and our case law
interpreting it say otherwise. The Act’s key provision, once again,
states that an arbitration agreement must ordinarily be treated as
“valid, irrevocable, and enforceable.” 9 U. S. C. §2; see
supra, at 4. By its terms, then, the Act cares not only
about the “enforce[ment]” of arbitration agreements, but also about
their initial “valid[ity]”—that is, about what it takes to enter
into them. Or said otherwise: A rule selectively finding
arbitration contracts invalid because improperly formed fares no
better under the Act than a rule selectively refusing to enforce
those agreements once properly made. Precedent confirms that point.
In
Concepcion, we noted the impermissibility of applying a
contract defense like duress “in a fashion that disfavors
arbitration.” 563 U. S., at 341. But the doctrine of duress,
as we have elsewhere explained, involves “unfair dealing at the
contract formation stage.”
Morgan Stanley Capital Group Inc.
v.
Public Util. Dist. No. 1 of Snohomish Cty., 554
U. S. 527, 547 (2008) . Our discussion of duress would have
made no sense if the FAA, as the respondents contend, had nothing
to say about contract formation.
And still more: Adopting the respondents’ view
would make it trivially easy for States to undermine the
Act—indeed, to wholly defeat it. As the respondents have
acknowledged, their reasoning would allow States to pronounce
any attorney-in-fact incapable of signing an arbitration
agreement—even if a power of attorney specifically authorized her
to do so. See Tr. of Oral Arg. 27. (After all, such a rule would
speak to only the contract’s formation.) And why stop there? If the
respondents were right, States could just as easily declare
everyone incompetent to sign arbitration agreements. (That
rule too would address only formation.) The FAA would then mean
nothing at all—its provisions rendered helpless to prevent even the
most blatant discrimination against arbitration.
III
As we did just last Term, we once again “reach
a conclusion that . . . falls well within the confines of
(and goes no further than) present well-established law.”
DIRECTV, 577 U. S., at ___ (slip op., at 10). The
Kentucky Supreme Court specially impeded the ability of
attorneys-in-fact to enter into arbitration agreements. The court
thus flouted the FAA’s command to place those agreements on an
equal footing with all other contracts.
Our decision requires reversing the Kentucky
Supreme Court’s judgment in favor of the Clark estate. As noted
earlier, the state court held that the Clark power of attorney was
sufficiently broad to cover executing an arbitration agreement. See
supra, at 3. The court invalidated the agreement with
Kindred only because the power of attorney did not specifically
authorize Janis to enter into it on Olive’s behalf. In other words,
the decision below was based exclusively on the clear-statement
rule that we have held violates the FAA. So the court must now
enforce the Clark-Kindred arbitration agreement.
By contrast, our decision might not require such
a result in the Wellner case. The Kentucky Supreme Court began its
opinion by stating that the Wellner power of attorney was
insufficiently broad to give Beverly the authority to execute an
arbitration agreement for Joe. See
supra, at 3. If that
interpretation of the document is wholly independent of the court’s
clear-statement rule, then nothing we have said disturbs it. But if
that rule at all influenced the construction of the Wellner power
of attorney, then the court must evaluate the document’s meaning
anew. The court’s opinion leaves us uncertain as to whether such an
impermissible taint occurred. We therefore vacate the judgment
below and return the case to the state court for further
consideration. See
Marmet Health Care Center, Inc. v.
Brown, 565 U. S. 530, 534 (2012) (
per curiam)
(vacating and remanding another arbitration decision because we
could not tell “to what degree [an] alternative holding was
influenced by” the state court’s erroneous, arbitration-specific
rule). On remand, the court should determine whether it adheres, in
the absence of its clear-statement rule, to its prior reading of
the Wellner power of attorney.
For these reasons, we reverse in part and vacate
in part the judgment of the Kentucky Supreme Court, and we remand
the case for further proceedings not inconsistent with this
opinion.
It is so ordered.
Justice Gorsuch took no part in the
consideration or decision of this case.
