Nuts & Bolts | Construction Law Blog

Rule 9 of the Construction Industry Arbitration Rules published by the American Arbitration Association (AAA) empowers the arbitrator to decide issues regarding the “existence, scope, or validity of the arbitration agreement” and “the existence or validity of a contract of which an arbitration clause forms a part.” This is referred to as a delegation clause. Delegation provisions can be found in various standard rules provided by the AAA and other arbitration administration organizations.

In a recent ruling, the U.S. Supreme Court sustained the well-established principle that the Federal Arbitration Act pre-empts state laws that specifically disfavor arbitration agreements.

In Kindred Nursing Centers, L.P. v. Clark, et al, 16-32 (May 15, 2017), the U.S. Supreme Court overruled a Kentucky Supreme Court decision not to enforce arbitration agreements between a nursing home and residents that had been signed by family members on behalf of the residents pursuant to powers of attorney. In the underlying case, two family members each held a power of attorney that designated the family member as an “attorney-in-fact” providing broad authority to manage the affairs of the residents. Notably, one power of attorney provided for the family member to institute legal proceedings and to enter into contracts, and the other power of attorney provided “full power” to the family member to transact, handle and dispose of all matters including entering into contracts. The family members used their powers of attorney on behalf of the residents to sign contracts with the nursing home that contained broad arbitration agreements.