5/15/17

Supreme Court Throws Out State Rule Protecting Nursing Home Residents From Having Rights Signed Away

A lot of people in nursing homes have adult children or other trusted people with authority to make financial, legal, and medical decisions on their behalf. However, can folks with power of attorney also sign away someone else’s right to have their day in court? According to the U.S. Supreme Court, yes.

As we’ve covered before, a growing number of nursing homes are including forced arbitration clauses in their residents’ contracts. These provisions prevent the residents from bringing lawsuits against their nursing care provider, and from joining with other residents in a class action.

Compounding concerns for nursing home residents, many of them do not sign their own contracts. Instead, their children have power of attorney over their affairs. These representatives may not realize that they are signing away their loved ones’ constitutional rights.

In 2015, the Supreme Court of Kentucky ruled [PDF] against multiple nursing home operators, concluding that while power of attorney might give someone the authority to sign contracts on your behalf, it doesn’t explicitly allow them to preemptively waive your rights to a jury trial.

“[N]one of the power-of-attorney instruments involved in these cases provide a manifestation of the principal’s intent to delegate that power to his agent,” wrote the Kentucky court. “[W]e conclude that the agent was not so authorized, and that the principal’s assent to the waiver was never validly obtained.”

The Kentucky court held that the country’s founding fathers “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.”

The nursing home operators petitioned the U.S. Supreme Court [PDF] last year, arguing that the Kentucky court’s ruling violates the Federal Arbitration Act.

That 1926 law states that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

And today, in a 7-1 ruling, SCOTUS agreed that their counterparts in Kentucky had indeed violated the FAA by “singl[ing] out arbitration agreements for disfavored treatment.”

Writing for the majority, Justice Elena Kagan that the FAA “preempts any state rule discriminating on its face against arbitration… And not only that: The Act also displaces any rule that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements.”

Justice Clarence Thomas was the lone dissenter, repeating his long-held belief that the FAA does not apply to disputes brought through the state court system. Recently confirmed Justice Neil Gorsuch did not participate.

Last September, the Centers for Medicare & Medicaid Services (CMS) issued a new rule that would have barred most longterm care facilities from using forced arbitration clauses in contracts for new residents.

The nursing home industry subsequently sued to stop the rule and a federal judge has put the regulation on hold, and is currently in legal limbo.

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