June 01, 2017

Justice Kagan and the Kindred Spirit


Surely you sometimes wonder why Elena Kagan is a Justice of the Supreme Court and a former Dean of the Harvard Law School, while you, on the other hand, plod along in your quotidian existence as a world-renowned, universally-esteemed, brilliant and magnificently accomplished international arbitrator.  Well, you should read Justice Kagan’s masterful opinion for the nearly-unanimous* Supreme Court in Kindred Nursing Centers v. Clark, 137 S.Ct. 1421, 2017 WL 2039160 (May 15, 2017). If you could write such compelling prose, you might have had a different destiny. (Note: It helps to breathe the air of Manhattan’s Upper West Side, as Justice Kagan did in her youth, and your Commentator has done each day for 28 years. But the Justice re-read Jane Austen’s Pride and Prejudice every year in her youth, whereas for your Commentator that masterpiece remains on a very long to-do list).

You need not read Kindred Nursing to discern any change in US arbitration law. It is a reaffirmation of first principles, a smack-down of a State court that was trying to be too clever by half in its hostility to arbitration. Arbitration agreements stand on equal footing with other contracts under the FAA, and shall not be invalidated or denied enforcement by the individual States on grounds not generally applicable to all contracts. You knew that (or else you have been practicing arbitration law under a rock since 1925).

2017 is the year of alternative facts, and the Supreme Court of Kentucky had contrived a set of alternative facts about why it was OK to deny arbitration where a nursing home made an arbitration agreement with an elderly resident through the agency of a compos mentis relative of the resident who held a valid and broad power of attorney. Presumably so that the outcome would not have the appearance of being the handiwork of the conservative wing of the Court supporting the nursing home industry in the vicitimization of the elderly, the task of writing the opinion of the Court fell to a member of the Blue State liberal quartet.

Referring to the Kentucky court’s so-called “clear statement rule” that a power of attorney must declare in express terms a delegation of authority to enter into a contract that would waive the “sacred” and “God-given” right to a trial by jury, Justice Kagan wrote that the Kentucky court “adopted 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.” The requirement of special express authorization to delegate such contractual power to an attorney-in-fact “subject[s] [agreements to arbitrate] by virtue of their defining trait, to uncommon barriers …” And answering the arguments advanced by Respondent in support of the Kentucky court’s decision, that the “clear statement rule” applied equally to other kinds of contracts that could forfeit fundamental rights – the examples given at argument were contracts sacrificing freedom of worship, providing for an arranged marriage, or committing the principal to personal servitude – Justice Kagan characterized these examples as “a slim set of both patently objectionable and utterly fanciful contracts that would be subject to its rule.”  She continued: “Placing arbitration agreements within that class reveals the kind of ‘hostility to arbitration’ that led Congress to enact the FAA. … 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.”

I intend to read, and then re-read, Pride and Prejudice….and to breathe more Upper West Side air. Anything for a chance at such vivid clarity in legal writing.

 

*Justice Thomas insists the FAA does not apply in courts of the individual States. Justice Gorsuch arrived too late participate.

 

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