Per Supreme Court, Anti-Discrimination Principles Apply to Arbitration Agreements

Thursday, May 25, 2017

In a decision that seems to draw inspiration from equal protection jurisprudence, the Supreme Court has reiterated that federal law bars discrimination against arbitration agreements.  State law rules that "single out" arbitration agreements for "disfavored treatment" violate federal law.  The opinion, Kindred Nursing Centers, L.P. v. Clark, 581 U.S. __ (2017), reinforces and strengthens a line of Supreme Court precedent making clear that arbitration agreements receive special protection by virtue of the Federal Arbitration Act and that state attempts to nibble away at such agreements will not stand.

The underlying case involved a family's attempt to have a jury decide whether a nursing home provided bad care to their relatives, causing their deaths.  The Kentucky Supreme Court declined to apply an arbitration clause contained in nursing home paperwork, under a state law rule that effectively singled out arbitration agreements for special (disfavored) treatment.

On appeal, the Supreme Court said that any state law rule that "on its face" or "covertly" disfavors arbitration agreements violates the Federal Arbitration Act.  The Court also made clear that the same anti-discrimination-in-arbitration principle applies to contract formation and contract enforcement.

The bottom line is that any state court interpreting the scope, application, or enforcement of an arbitration agreement -- or pretty much anything about arbitration agreements -- had better rely on case law having nothing to do with arbitration agreements and show that it treats other garden variety types of contracts the same way that it treats contracts to arbitrate.