Extendicare Homes, Inc. v. Belind Whisman and Kimdred Nursing Extendicare Homes, Inc.

This decision consolidates three cases accepted by this Court for

discretionary review pursuant to CR 65.09. By way of motions for interlocutory

relief under CR 65.09, Extendicare Homes, Inc. d/b/ / Shady Lawn Nursing

Home ("Extendicare"), and its affiliated entities,' and Kindred Nursing Centers

Limited Partnership d/b/a Winchester Centre For Health and Rehabilitation

n/k/a Fountain Circle Health and Rehabilitation ("Kindred") and its affiliated

entities,2 seek relief from orders of the Court of Appeals refusing to compel

arbitration of disputes pending in Clark Circuit Court and the Trigg Circuit

Court.

Each of the three cases originated with the filing of an action in the

circuit court asserting claims against the nursing home for personal injuries

suffered by the nursing home resident, violations of KRS 216.510 et seq.,3 and

for wrongful death of the resident. In each case, at the time of the resident's

admission to the nursing home, an attorney-in-fact for the resident executed a

written document providing that any claims or disputes arising out of the

relationship between the resident and the nursing home would be submitted to

arbitration, rather than adjudication in the courts. Upon the commencement

of each case in circuit court, the defendant nursing home facility moved the

Extendicare, Inc.; Extendicare Health Network, Inc.; Extendicare Reit; Extendicare L.P.; Extendicare Holdings, Inc.; Extendicare Health Services, Inc.; Extendicare Health Facility Holdings, Inc.; John Does 1 Through 5; and Unknown Defendants.

2 Kindred Nursing Centers East, LLC; Kindred Hospitals Limited Partnership; Kindred Healthcare, Inc.; and Kindred Health Care Operating, Inc.

3 KRS 216.515 enumerates certain enforceable rights extended to nursing home residents.

court to dismiss the action and compel the parties to submit the claims to a

formal arbitration proceeding. In each case, citing our opinion in Ping v.

Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012), cert. denied, 134 S.Ct.

705, 187 L.Ed.2d 567 (2013), the circuit court denied the motion on the

grounds that the respective power-of-attorney instruments did not authorize

the resident's attorney-in-fact to waive the resident's right to access to the

courts for the resolution of disputes.

Kindred and Extendicare each sought interlocutory relief in the Court of

Appeals pursuant to CR 65.07. The Court of Appeals declined to grant the

requested relief. Kindred and Extendicare then sought relief in this Court.

The central issue is whether, based upon the language of the particular

power-of-attorney instrument, an arbitration agreement was validly formed

between the respective nursing home facility and the resident whose interests

were thereby affected. For the reasons set forth below, we conclude in two of

the cases, Extendicare Homes, Inc., et al, v. Whisman (Case No. 2013-SC-426-I)

and Kindred Nursing Centers Limited Partnership, et al., v. Wellner (Case No.

2013-SC-431-I), that the authority to enter into a pre-dispute arbitration

agreement was not among the powers granted to respective attorney-in-fact

and, therefore the arbitration agreements were not formed with the assent of

the party to be bound thereby. Lacking the essential element of assent, we

conclude that the arbitration agreements in those cases were never validly

formed.

We further conclude that without a clear and convincing manifestation of

the principal's intention to do so, we will not infer the delegation to an agent of

the authority to waive a fundamental personal right so constitutionally revered

as the "ancient mode of trial by jury." 4 Consequently, because none 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, we conclude that

the agent was not so authorized, and that the principal's assent to the waiver

was never validly obtained. Accordingly, we deny the motions for interlocutory

relief. In so doing, we affirm the orders of the Court of Appeals.

At the outset, however, it is appropriate that we direct our attention

specifically to the cause of action pled in each case for wrongful death.

We held in Ping, and we reiterate today: the decedent whose death becomes the

basis of a wrongful death claim had no authority during his lifetime, directly or

through the actions of his attorney-in-fact, to prospectively bind the

beneficiaries of the wrongful death claim to an arbitration agreement.

I. THE WRONGFUL DEATH BENEFICIARIES ARE NOT BOUND BY THE ARBITRATION AGREEMENTS IN ISSUE HERE

In Ping, 376 S.W.3d at 597-600, we squarely confronted the question of

whether a decedent, by her own action or through the action of her attorney-in

fact, could enter into contracts of any kind that would bind the rights of the

beneficiaries of wrongful death claims made in connection with her own death.

Based upon well-settled precedent and upon the constitutional and statutory

4 Ky. Const. § 7.

5

structure of Kentucky's wrongful death law, we determined that a wrongful

death claim does not "derive from any claim on behalf of the decedent, and [the

wrongful death beneficiar -7‘ ies] do not succeed to the decedent's dispute

resolution agreements." Id. at 600.

Section 241 of the Kentucky Constitution declares: "The General

Assembly may provide how the recovery [from a wrongful death action] shall go

and to whom belong." In KRS 411.130(2), the General Assembly designated

the persons to whom such claims belong. In Ping, we quoted Moore v. Citizens

Bank of Pikeville, 420 S.W.2d 669, 672 (Ky. 1967), holding that "the wrongful

death action is not derivative . . . [It] is distinct from any [cause] that the

deceased may have had if he had survived." Id. We recently reaffirmed that

holding in Pete v. Anderson:

Under the plain language of the statute, the cause of action `belongs' to the beneficiaries of the wrongful death claim, as the amount recovered in a wrongful death action 'shall be for the benefit of and go to the kindred of the deceased[.]' KRS 411.130(2) . . . . With no interest in the recovery, the personal representative is a "nominal" party, as the 'real parties in interest are the beneficiaries whom [the personal representative] represents."' (citing Vaughn's Administrator, 179 S.W.2d 441, 445. (1944)).

413 S.W.3d 291, 299 (Ky. 2013). Moreover, Pete expressly and explicitly noted

that "Ping . . . puts to rest any dispute as to whether the statutory beneficiaries

are the real parties in interest to a wrongful death action." Pete, at 300.

Under Kentucky law, a wrongful death claim is a distinct interest in a

property right that belongs only to the statutorily-designated beneficiaries.

Decedents, having no cognizable legal rights in the wrongful death claims

6

arising upon their demise, have no authority to make contracts disposing of,

encumbering, settling, or otherwise affecting claims that belong to others. The

rightful owners of a wrongful death claim, the beneficiaries identified in KRS

411.130(2), cannot be bound to the contractual arrangements purportedly

made by the decedent with respect to those claims. 5 A decedent has no more

authority to bind the wrongful death beneficiaries to an arbitration agreement

than he has to bind them to a settlement agreement fixing or limiting the

damages to be recovered from the wrongful death action, limiting the persons

against whom a claim could be pursued, or an agreement on how and to whom

to allocate the damages recovered in a wrongful death claim. 6 Our analysis in

Ping was thorough, complete, correct, and unanimous. We reaffirmed it in Pete

and we have no reason to retreat from it now. 7

5 See McWethy's Adm'x v. McCright, 133 S.W. 1001, 1002 (1911) ("A child has no interest in property of the parent while the latter is living; and this court has frequently held that the child cannot incumber [sic], sell, or otherwise dispose of a mere expectancy in the estate of the parent.").

6 We note here, as we did in Ping, that it is of no consequence that the person signing the arbitration agreement in her representative capacity as attorney-in-fact, is individually, one of the statutorily-designated wrongful death beneficiaries. By explicitly signing in that representative capacity, the agent does not bind herself, personally, to the terms of the agreement, and care must be taken not to "conflate" the two distinct entities involved. See Ping, 376 S.W.3d at 599 ("By executing the arbitration contract, Ms. Ping purported to agree on her mother's behalf, not her own, to arbitrate her mother's claims. Even were her mother's agreement valid, Ms. Ping's having executed it as her mother's representative would not preclude Ms. Ping, as representative of the wrongful death beneficiaries, from litigating their entirely separate claim.").

7 We are aware that at least one federal trial judge takes issue with our analysis in Ping. See Golden Gate Nat. Senior Care, LLC v. Addington, 14-CV-327-JMH, 2015 WL 1526135, at *8-9 (E.D. Ky. Apr. 3, 2015). The judge in that case contends that Ping's holding with respect to the rights of the wrongful death beneficiaries is wrong because it "effectively nullif[ies] arbitration in the wrongful death context" and runs counter to Marmet Health Care Center, Inc. et al v. Clayton Brown et al. —U U.S.

7

In contrast with the wrongful death claims, the personal injury and

statutory claims arising under KRS 216.510 et seq. belong to the decedents;

and the respective estates succeeded to those claims, at least to the extent that

such claims survive the decedent's death pursuant to KRS 411.140 8 and

216.515(26). 9 We now redirect our attention to those claims, to determine

based on Ping and other applicable law, whether the attorneys-in-fact in these

cases had the authority to enter into a pre-dispute agreement to arbitrate any

claims arising between the respective principals and the nursing home facilities

providing their care.

132 S.Ct. 1201, 1203, (2012) and Marmet's "emphatic federal policy in favor of arbitral dispute resolution" and concludes that the FAA "includes no exception for personal-injury or wrongful-death claims." The fallacy of that position is obvious: 1) arbitration agreements in wrongful death cases are not nullified because wrongful death beneficiaries are free, as they always have been, to enter into arbitration agreements regarding their wrongful death claims; and 2) as we explained in Ping, the ownership status of a wrongful death varies from state to state depending upon the statutory and constitutional provisions that create the right. Ping, at 598. The federal and state policies favoring arbitration do not displace well-settled principles of contracts, property, and due process that bar individuals from making contracts that dispose of rights and property interests belonging to other people.

8 KRS 411.140 provides: "No right of action for personal injury or for injury to real or personal property shall cease or die with the person injuring or injured, except actions for slander, libel, criminal conversation, and so much of the action for malicious prosecution as is intended to recover for the personal injury. For any other injury an action may be brought or revived by the personal representative, or against the personal representative, heir or devisee, in the same manner as causes of action founded on contract."

9 See also Overstreet v. Kindred Nursing Centers Limited Partnership, 2013-SC000620-DG, 2015 WL 4967188 at *7 (Ky. Aug. 20, 2015) (holding that claims asserted under KRS 216.515 for violations of a nursing home resident's rights, except for personal injury or property damage claims falling within the protective scope of KRS 411.140, may be brought only by "the resident or his guardian" during the resident's lifetime. KRS 216.515(26)).

8

II. FACTUAL AND PROCEDURAL BACKGROUND—POWERS GRANTED TO THE RESPECTIVE ATTORNEYS-IN-FACT

The facts as relevant to the issues we review in each case are remarkably

similar. Of course, the law relating to arbitration agreements and powers-of

attorney instruments applies equally to each case. However, because each of

the power-of-attorney instruments involved in the three cases expresses the

authority delegated by the principal to the attorney-in-fact in different terms,

each instrument requires a separate analysis. We proceed with a review of the

essential facts of each case.

A. Extendicare Homes, Inc. d/b/a Shady Lawn Nursing Home v. Whisman, Case No. 2013-SC-426-I.

On February 21, 2011, Van Buren Adams executed a power-of-attorney

document (the Adams-Whisman POA) designating his daughter, Belinda

Whisman, as his attorney-in-fact. About a month later, Adams was admitted

as a resident at Extendicare's Shady Lawn Nursing Home. As Adams' attorney

in-fact, Whisman executed the documents required by Extendicare for Adams'

admission to the nursing home. She also signed a four-page document

presented by Extendicare's admission staff, styled "Alternative Dispute

Resolution Agreement." We refer to that document as "Extendicare's

arbitration agreement." At the top of the first page, in all-capital letters and in

underlined font, the document states that "SIGNING THIS AGREEMENT IS

NOT A CONDITION OF ADMISSION TO OR CONTINUED RESIDENCE IN THE

CENTER." On the second page, the document declares in capital letters that:

THE PARTIES UNDERSTAND, ACKNOWLEDGE AND AGREE THAT BY ENTERING INTO THIS AGREEMENT, THEY ARE GIVING UP

9

THEIR CONSTITUTIONAL RIGHT TO HAVE THEIR DISPUTES DECIDED BY A COURT OF LAW OR TO APPEAL ANY DECISION OR AWARD OF DAMAGES RESULTING FROM THE ALTERNATIVE DISPUTE RESOLUTION PROCESS, EXCEPT AS PROVIDED HEREIN.

Extendicare's arbitration agreement also provided a comprehensive list of

"covered disputes" which included the same statutory and common law claims

later asserted in this action.

Adams died less than three months after his admission to Shady Lawn.

The co-administrators of his estate, Belinda Whisman and Tony Adams,

brought suit in the Trigg Circuit Court, naming as defendants the various

entities that owned and operated Shady Lawn Nursing Home. The complaint

alleged personal injuries to Adams caused by negligence, violations of KRS

216.510 et seq. , and wrongful death. Based upon the arbitration agreement,

Extendicare moved the court to dismiss the lawsuit and to order the plaintiffs

to submit their claims to arbitration. The plaintiffs argued that the power-of

attorney document did not vest Whisman with the authority to commit Adams'

claims to arbitration. As relevant in this case, and as relied upon by

Extendicare, the instrument provided as follows:

I, VAN BUREN ADAMS . . . appoint my daughter, BELINDA WHISMAN, . . . my true and lawful attorney-in-fact, with full power for me and in my name and stead, . . . to draw, make and sign any and all checks, contracts, notes, mortgages, agreements, or any other document including state and Federal tax returns; . . . [and] to institute or defend suits concerning my property or rights, . . . [.]

(emphasis added).

10

Extendicare argued below, as it does here, that the authority "to institute

or defend suits concerning my property or rights" implicitly carried with it the

authority to enter into the pre-dispute arbitration agreement. The Trigg Circuit

Court denied Extendicare's motions and concluded that the Adams-Whisman

POA "would not give Ms. Whisman the understanding that her authority would

apply to . . . a waiver of the important right of bringing a lawsuit before a jury

rather than before an arbitration panel."

The trial court reasoned that, despite the differences between the Adams

Whisman POA and the POA involved in Ping, nevertheless, the general

principles governing Ping also applied here. The circuit court expressly noted

our cautionary statement in Ping that "[a]bsent authorization in the power of

attorney to settle claims and disputes or some such express authorization

addressing dispute resolution, authority to make such a waiver is not to be

inferred lightly." Id. at 593.

Fi-om this adverse ruling of the trial court, Extendicare sought immediate

interlocutory relief in the Court of Appeals pursuant to CR 65.07. The Court of

Appeals denied the motion, expressed its agreement with the trial court's

application of Ping, and further grounded its opinion on Ping's comprehensive

references to the law of agency, especially Restatement (Third) of Agency § 2.02

comment h. (2006):

[S]ome acts that are otherwise legal, create legal consequences for a principal that are significant and separate from the transaction specifically directed by the principal. A reasonable agent should consider whether the principal intended to authorize the commission of collateral acts fraught with major legal implications

11

for the principal, such as granting a security interest in the principal's property or executing an instrument confessing judgment. In such circumstances, it would be reasonable for the agent to consider whether a person in the principal's situation, having the principal's interests and objectives, would be likely to anticipate that the agent would commit such a collateral act, given the nature of the principal's specific direction to the agent.

The Court of Appeals concluded, quoting both Ping and Restatement

(Third) of Agency, that "an arbitration agreement would 'create legal

consequences for a principal that are significant and separate from the

transactions specifically directed by the principal,"' further noting that the

explicit authority "'to institute or defend suits concerning my property or rights'

did not imply the authority to initiate a claim in arbitration, or, correspondingly

to waive Adams' right to seek redress in a court of law."

B. Kindred Nursing Centers Limited Partnership d/b/a Winchester Centre for Health and Rehabilitation v. Clark, Case No. 2013-SC-430-I.

On August 31, 2006, Olive G. Clark executed a power-of-attorney

document (the Clark POA) designating her daughter, Janis Clark, as her

attorney-in-fact. Nearly two years later, on August 16, 2008, Olive Clark

became a resident of Kindred's Winchester Centre for Health and Rehabilitation

a/k/a Fountain Circle Health and Rehabilitation ("Winchester Centre"). Janis,

as Olive's attorney-in-fact, executed for Olive the paperwork Kindred required

for Olive's admission to Winchester Centre. At the same time, Janis, acting as

Olive's attorney-in-fact, also signed a four-page document styled "Alternative

Dispute Resolution Agreement Between Resident and Facility (Optional)." We

refer to this document as "the Kindred arbitration agreement."

12

The Kindred arbitration agreement stipulates that "[a]ny and all claims or

controversies arising out of or in any way relating to this ADR Agreement . . . or

the Resident's stay at the Facility . . . shall be submitted to alternate dispute

resolution as described in this Agreement." The document also defines

"alternate dispute resolution" to include "binding arbitration." In the same

nondescript font as the rest of the provisions, the document warns that

"[b]inding arbitration means that the parties are waiving their right to a trial,

including their right to a jury trial, their right to trial by a Judge and their right

to appeal the decision of the arbitrator(s)." In its final paragraph, the

agreement provides that "execution of this Agreement is not a precondition to

the furnishing of services to the Resident by the Facility."

Olive died about eight months later. Janis Clark, as executrix of Olive's

estate and on behalf of the wrongful death beneficiaries, filed suit in the Clark

Circuit Court against Kindred. The complaint asserted causes of action for

personal injury, violations of KRS 216.510 et seq., and wrongful death.

Kindred moved to dismiss the action or, alternatively, to stay the action

pending arbitration pursuant to the Kindred arbitration agreement.

In January 2012, the Clark Circuit Court granted Kindred's motion and

entered a final order dismissing the pending lawsuit and compelling arbitration

of the claims. However, following the August 23, 2012 rendition of Ping, and

upon consideration of Janis's CR 60.02 motion, the circuit court vacated the

order of dismissal. Based expressly upon the principles set forth in Ping, in

13

November 2012, the trial court ruled that the Clark POA did not provide Janis

Clark with the authority "to waive Olive Clark's jury trial rights."

As relevant here, Olive's POA endowed Janis with:

[the] full power for me and in my name, place, and stead, in her sole discretion, to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way. Without limiting or derogating from this general power, I specifically authorize my attorney in fact for me and in my name, place, and stead, in her sole discretion: To prepare and complete administrative documents necessary to secure or preserve any and all governmental benefits available to me; To lease, sell, or convey any real or personal property that I may now or ever own; To mortgage my property as she sees fit; To receive and receipt for any money which may now or heredfter be due to me; To retain and release all liens on real or person property; To draw, make, and sign in my name any and all checks, promissory notes, contracts, deeds or agreements; To invest or reinvest my money for me; To institute or defend suits concerning my property or rights; To file all tax returns (including, without limitation, state and federal income tax returns); To enter all safe deposit boxes; To transfer assets of mine to any trust created by me for addition to trust principal; and Generally to do and perform for me and in my name all that I might do if present. Also, without limiting or derogating from this general power, I authorize my attorney in fact to make all decisions regarding my health care and medical treatment.

(emphasis added).

Kindred sought relief in the Court of Appeals pursuant to CR 65.07. The

Court of Appeals denied Kindred's application for relief, relying upon the same

rationale set out in its Extendicare opinion: namely, its interpretation of agency

law as provided by the Restatement (Third) of Agency and our decision in Ping.

14

Like Extendicare, Kindred now seeks further review in this Court pursuant to

CR 65.09. Kindred also asserts the additional claim that the attempt of the

Clark Circuit Court to resurrect the dismissed case under CR 60.02 was

ineffective because the circuit court had lost jurisdiction of the case following

the entry of its January 2012 order dismissing the case.

C. Kindred Nursing Centers Limited Partnership d/b/a Winchester Centre for Health and Rehabilitation v. Weliner, Case No. 2013-SC-431-I.

On May 15, 2008, Joe Paul Wellner executed a power-of-attorney naming

his wife, Beverly M. Wellner, as his attorney-in-fact. Three months later, he

was admitted to Kindred's Winchester Centre. Beverly signed the Kindred

admission documents as Joe's attorney-in-fact. She also signed Kindred's

optional arbitration agreement. Joe resided at Winchester Centre for the next

thirteen months, until a few days before his death on June 19, 2009. Beverly,

individually, and as administratrix on behalf of her husband's estate and the

wrongful death beneficiaries, brought suit in the Clark Circuit Court asserting

the above-referenced claims.

The Wellner case shares many common elements with the Clark

litigation. The complaints in both cases arise out of the same nursing home

facility and assert the same causes of action—personal injury, wrongful death,

and violations of KRS 216.510, et seq. The two cases were filed *

contemporaneously in the Clark Circuit Court; the parties on both sides of the

two cases are represented by the same lawyers, and both cases were heard by

the same circuit court judge, Hon. Jeanne C. Logue.

15

Like the Clark case, Judge Logue initially dismissed the Wellman case in

favor of arbitration. After Ping, the judge reconsidered the case pursuant to CR

60.02 and reversed the prior ruling. Upon review, the Court of Appeals

affirmed. Of course, the most determinative feature of this case, as well as the

others, is the language of the power-of-attorney document. Not surprisingly,

the power-of-attorney instrument in this case differs from those found in the

other cases under review. In pertinent part, it provides Beverly M. Wellner with

authority to exercise the following powers on behalf of Joe:

1. To receive, take receipt for, and hold in possession, manage and control all property, both real and personal, which I now or may hereafter own, hold, possess or be or become entitled to with full power to sell, mortgage or pledge, assign, transfer, invest and reinvest the same or any part thereof in forms of investment, including bonds, notes and other obligations of the United States deemed prudent by my said wife in her discretion, with full power to retain the same without liability for loss or depreciation thereof.

2. To demand, sue for, collect, recover and receive all debts, monies, interest and demands whatsoever now due or that may hereafter be or become due to me (including the right to institute legal proceedings therefor).

3. To make, execute, deliver and endorse notes, drafts, checks and order for the payment of money or other property from or to me or order in my name.

4. To make, execute and deliver deeds, releases, conveyances and contracts of every nature in relation to both real and personal property, including stocks, bonds, and insurance.

5. To have access to my safe deposit boxes, act as my proxy with power of substitution to vote all stocks or securities in my name in relation to any individual or corporate action, to deposit any stocks or securities in connection with any plans of prospective or reorganization committees, to accept and exercise all rights, to subscribe for securities and to sell same.

16

6. To receive and receipt for all rents and income to which I am or may become entitled, pay therefrom all necessary expenses for the maintenance, upkeep, care and protection of my property, deduct therefrom her own reasonable compensation, and pay the net income from time to time to me or in such manner as I shall direct, or in the absence of such payment to me or at my discretion, to invest the same for me in her judgment in the manner above described.

7. To prepare, execute and file federal or state income tax returns and other real and personal property tax lists and to pay all such taxes.

8. In the event of my illness, incapacity or other emergency to have full power to make all health care decisions for me and in my stead; this power shall encompass the power to make any decision which I might myself make in authorizing or refusing treatment, surgery or other health care. My Attorney-in Fact shall have the right to refuse the administration of nutrition and hydration.

9. If I should every need a guardian or curator or similar person or entity to assist me if I am unable to fully handle all of my affairs, and if this Power of Attorney should not be sufficient therefor, I nominate my wife, BEVERLY M. WELLNER, as my guardian, curator, etc., and I specifically provide that surety not be required on her bond as such.

10. I hereby further grant unto my Attorney-in-Fact full power in and concerning the above premises and to do any and all acts as set forth above as fully as I could do if I were personally present, and at my decease to pay, transfer and deliver over to my personal representative, all principal and income then in his possession and control, and I do ratify and confirm whatever my said Attorney-in-Fact shall lawfully do under these presents, provided however, that my attorney shall not bind me as surety, guarantor for accommodation nor give away any of my estate, whatsoever, nor shall my attorney be authorized to accept service of process for or on my behalf . . . .

(emphasis added).

Like the other two cases, the Wellner case comes to this Court pursuant

to CR 65.09. As in the Clark case, Kindred also challenges in Wellner the

jurisdiction of the circuit court to set aside, pursuant to CR 60.02, the original

order of dismissal entered several months earlier.

17

III. ANALYSIS

As in Ping, our disposition of these cases requires no consideration of the

specifics of the respective arbitration agreements. There is no dispute that if

the arbitration agreements were validly formed, they are enforceable as written

under both the Kentucky Uniform Arbitration Act (KUAA), KRS 417.050 et seq.,

and the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., at least with

respect to the decedents' claims for personal injury and statutory violations.

Consequently, the disputes before us are not about the enforcement of validly

formed arbitration agreements covered by the KUAC and the FAA. Rather, the

disputes are about the formation of the arbitration agreements; and specifically,

whether the agent purporting to sign the arbitration agreement on behalf of his

principal had the authority to do so.

All three of the arbitration agreements involved here provide that the

Kentucky Arbitration Act shall govern, with secondary reliance upon the

Federal Arbitration Act if the Kentucky law is found to be inapplicable. Choice

of law provisions are generally valid in arbitration clauses. Hathaway v.

Eckerle, 336 S.W.3d 83, 87 (Ky. 2011). However, as applicable to this case,

there is no material difference between the FAA and the KUAC.

Like its federal counterpart, Kentucky law favors the enforcement of

arbitration agreements. Ally Cat, LLC v. Chauvin, 274 S.W.3d 451, 457 (Ky.

2009) ("We do not by this opinion signify any retreat from our recognition of the

prevalent public policy favoring enforcement of agreements to arbitrate.").

Doubts about the scope of issues subject to arbitration should be resolved in

.18

favor of arbitration. See Louisville Peterbilt, Inc. v. Cox, 132 S.W.3d 850, 855

(Ky. 2004) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S.

1 (1983)).

Nevertheless, before the enforcement of an arbitration agreement can be

addressed, it must be established that an arbitration agreement was formed.

Mt. Holly Nursing Center v. Crowdus, 281 S.W.3d 809, 813 (Ky. App. 2008).

Unless an arbitration agreement was validly formed, there is no arbitration

agreement to be enforced. Questions concerning the formation of an

arbitration agreement are resolved in accordance with the applicable state law

governing contract formation. See JPMorgan Chase Bank, N.A. v. Bluegrass

Powerboats, 424 S.W.3d 902, 907 (Ky. 2014) ("[E]ven the federal authorities

agree that whether there is a valid arbitration agreement is a matter of state

contract law, so long as the state law in question does not single out

arbitration agreements."). We clarified in Ping:

a party seeking to compel arbitration has the initial burden of establishing the existence of a valid agreement to arbitrate .. . [T]hat initial showing is addressed to the court, not the arbitrator[] . . . and the existence of the agreement depends on state law rules of contract formation . . . . An appellate court reviews the trial court's application of those rules de novo, although the trial court's factual findings, if any, will be disturbed only if clearly erroneous. [citing North Fork Collieries v. Hall, 322 S.W.3d 98, 102 (Ky. 2010)].

376 S.W.3d at 590 (citations omitted).

The fundamental principle of contract formation is that "[t]o create a

valid, enforceable contract, there must be a voluntary, complete assent by the

parties having capacity to contract." Conners v. Eble, 269 S.W.2d 716, 717-18

19

(Ky. 1954). This principle applies with no less vigor when the issue is

formation of an arbitration contract. "Assent to be bound by the terms of an

[arbitration] agreement must be expressed." Ally Cat, 274 S.W.3d at 456. A

person's assent to a contractual agreement can be provided by an agent acting

as an attorney-in-fact, if the authority to do so was duly conferred upon the

attorney-in-fact by the power-of-attorney instrument. Conversely, if that

authority was not so conferred by the principal, the requisite assent, of course,

cannot be provided by the attorney-in-fact.

Whether the principal's assent to the arbitration agreement was obtained

is, in each of the cases under review, a question of law that depends entirely

upon the scope of authority set forth in the written power-of-attorney

instrument. Ping, at 590. Ping further clarifies:

The scope of [the agent's] authority is thus left to the principal to declare, and generally that declaration must be express . . . [E]ven a "comprehensive" durable power would not be understood as implicitly authorizing all the decisions a guardian might make on behalf of a ward. Rather, we have indicated that an agent's authority under a power of attorney is to be construed with reference to the types of transaction expressly authorized in the document and subject always to the agent's duty to act with the "utmost good faith."

Id. at 592. (citations omitted).

Focusing even closer on the question of whether, by way of a durable

power-of-attorney, a principal vested his agent (his attorney-in-fact) with the

authority to select arbitration and its concomitant waiver of the constitutional

right of access to the courts, Ping cites to Restatement (Third) of Agency § 2.02

20

comment h. (2006). 10 We said that "a collateral agreement to waive the

principal's right to seek redress of grievances in a court of law" 11 was an act

10 Restatement (Third) Of Agency § 2.02 (2006)

h. Consequences of act for principal. Even if a principal's instructions or grant of authority to an agent leave room for the agent to exercise discretion, the consequences that a particular act will impose on the principal may call into question whether the principal has authorized the agent to do such acts.

Three types of acts should lead a reasonable agent to believe that the principal does not intend to authorize the agent to do the act. First are crimes and torts. If a principal authorizes the agent's commission of a crime or an intentional tort, the principal will be subject to liability for the agent's wrongdoing. See § 7.04. The agent, additionally, will be subject to individual liability. See § 7.01. An agent is under no duty to obey a direction from the principal to commit such an act. See § 8.09(2). The bounds of the law are applicable to all, including principals, whether or not individuals. See Principles of Corporate Governance: Analysis and Recommendations § 2.01 and Comment g.

Second, acts that create no prospect of economic advantage for a principal, such as gifts and uncompensated uses of the principal's property, require specific authorization. This is so even if an agent has notice that the principal acts philanthropically as to matters unconnected to the agency. Moreover, if it is normally not reasonable to believe that the principal will benefit from an act, a reasonable agent should not infer that the principal wishes the agent to do the act and therefore should not commit the act unless the principal communicates specifically that the principal wishes the act to be done. Thus, an agent should not infer that the principal wishes gifts to be made from the principal's property from the fact that the principal has authorized the agent to manage the principal's property and has given the agent discretion in making management decisions. For treatment of the authority of an agent to make gifts under a durable power of attorney, see Restatement Third, Property (Wills and Other Donative Transfers) § 8.1, Comment 1.

Third, some acts that are otherwise legal create legal consequences for a principal that are significant and separate from the transaction specifically directed by the principal. A reasonable agent should consider whether the principal intended to authorize the commission of collateral acts fraught with major legal implications for the principal, such as granting a security interest in the principal's property or executing an instrument confessing judgment. In such circumstances, it would be reasonable for the agent to consider whether a person in the principal's situation, having the prinCipats interests and objectives, would be likely to anticipate that the agent would commit such a collateral act, given the nature of the principal's specific direction to the agent.

11 By "collateral" agreement we referred to the separate, optional arbitration agreement signed in conjunction with, but not incorporated into, the other contractual

21

"with significant legal consequences." We emphasized: "Absent authorization

in the power of attorney to settle claims and disputes or some such express

authorization addressing dispute resolution, authority to make such a waiver is

not to be inferred lightly." Id. at 593.

Ping faithfully applied the age-old principle that a power-of-attorney must

be strictly construed in conformity with the principal's purpose. Harding v.

Kentucky River Hardwood Co., quoting U.S. Fidelity Co. v. McGinnis, 145 S.W.

1112 (Ky. 1912), states:

It is the law that a formal instrument conferring authority will be strictly construed, and can be held to include only those powers which are plainly given, and those which are necessary, essential and proper to carry out those expressly given. It will be presumed that the principal, in conferring a power intended to confer with it the right to do those things without the object contemplated could not be accomplished, but beyond this the authority will not be extended by construction.

265 S.W. 429, 431 (Ky. 1924) (citations omitted). We apply these same venerable principles to the cases at hand. We look

now at the specific language of the respective POA documents that, as claimed

by Extendicare and Kindred, authorized the agents to enter into arbitration

agreements.

1. The Adams - Whisman. POA

Extendicare identifies only two expressions of authority mentioned in the

Adams/Whisman POA to support its claim that Adams had authorized

arrangements for residential care. The arbitration agreements involved in this case are "collateral" agreements.

22

Whisman to enter into a pre-dispute arbitration agreement. First, Extendicare

points to the power to "institute or defend suits concerning [Adams'] property

or rights." Second, Extendicare relies upon Whisman's power "to draw, make

and sign any and all checks, contracts, notes, mortgages, agreements, or any

other document including state and Federal tax returns."

a. The power to "institute or defend suits concerning my property rights" did not confer the authority to enter in a pre-dispute arbitration agreement.

Extendicare posits that the grant of specific authority to "institute or

defend suits concerning my property rights" is an express authorization by

Adams giving Whisman the power to choose arbitration as the mode for

resolving disputes over his property rights. We disagree for several reasons.

First, at the most elementary level, even if we agreed that the conduct of

initiating an arbitration proceeding for personal injury claims was functionally

equivalent to instituting a suit concerning Adams's property rights, the act that

required authorization was not the act of initiating an arbitration proceeding.

Obviously, Whisman never initiated an arbitration proceeding. The action

under review is the signing of the pre-dispute arbitration agreement when no

personal injury or property rights were in dispute. That conduct does not

remotely resemble the institution of a property rights claim.

We agree that the power to "institute or defend suits concerning my

property rights" would necessarily encompass the power to make litigation

related decisions within the context of a suit so instituted, including the

decision to submit the pending dispute to mediation or arbitration. But that,

23

too, is not what Whisman did. Whisman's action, at the time it was taken, had

absolutely nothing to do with the institution or defense of claims concerning

Adams property rights. Instituting "suits concerning my property rights" is not

practically or conceptually similar in any way to making an agreement that

future claims will be taken to arbitration.

Secondly, the current edition of Black's Law Dictionary defines "suit" as

"[a]ny proceeding by a party or parties against another in a court of law." SUIT,

BLACK'S LAW DICTIONARY (10th ed. 2014) (emphasis added). By way of

comparison, an earlier edition of Black's Law Dictionary defines "suit" as "any

proceeding by one person or persons against another or others in a court of

justice in which a plaintiff pursues, in such court, the remedy the law affords

him for the redress of an injury or the enforcement of a right[.]" BLACK'S LAW

DICTIONARY, 1603 (4th ed. 1968) (emphasis added). There is no doubt that in

the language of the law, a "suit" occurs in a court of law; arbitration by its very

purpose and design is intended to avoid suits in a court of law; it is the

antithesis of a suit in a court of law.

The New Oxford American Dictionary defines "suit" in the context that

concerns us, as "short for lawsuit." 12 In turn, "lawsuit" is defined as "a claim

or dispute brought to a court for adjudication." 13 See Shepherd v. Standard

Motor Co., 92 S.W.2d 337, 337 (Ky. 1936) ("This term ['lawsuit] is defined and

12 NEW OXFORD AMERICAN DICTIONARY 1740 (Oxford University Press, 3d ed.

13 NEW OXFORD AMERICAN DICTIONARY 989 (Oxford University Press, 3d ed. 2010).

24

2010).

generally recognized as a suit at law or in equity; an action or a proceeding in a

civil court; a process in law instituted by one party to compel another to do him

justice.") (citations omitted).

Thus, in both common and legal parlance, "instituting suits concerning

my property rights" manifests a specific intention to pursue one's rights in the

courts of law, not by private arbitration. Instituting a suit is not the same

thing as initiating a claim in arbitration; the two are mutually exclusive

actions. Far from being consistent with the explicitly-stated authority to

institute a lawsuit, Extendicare's arbitration agreement expressly prohibits

Whisman from doing the very thing that Adams's POA unequivocally

authorized her to do.

Extendicare's position is that the "institute or defend suits" language of

the Adams/Whisman POA is a general authorization for engaging in litigation,

which implicitly provides the authority to do whatever is incidental to the suit

or reasonably necessary to achieve the purpose of the litigation. See

Restatement (Second) of Agency § 35 (1958) ("Unless otherwise agreed,

authority to conduct a transaction includes authority to do acts which are

incidental to it, usually accompany it, or are reasonably necessary to

accomplish it."). However, we cannot rationally say that signing an arbitration

agreement was "incidental to" a claim concerning Adams' property rights when

the specific right, to which the claim is allegedly "incidental," did not exist. An

act cannot be "incidental" to something that does not exist or has not

happened. An arbitration agreement signed before a cause of action exists

25

cannot be "reasonably necessary" to the resolution of that cause. Whisman's

execution of the arbitration agreement was not "incidental" to or "reasonably

necessary" in the furtherance of any claim at all concerning Adams' property

rights.

We agree that the "institute or defends suits" provision in the POA would

authorize the attorney-in-fact to do what is reasonably necessary in the

management of an actual claim or lawsuit, including the authority to settle or

compromise the claim. Like countless other decisions required in the

management of a lawsuit, settling a claim is within the ambit of the power

expressly granted here. Nothing in our analysis would prevent Whisman or

any similarly-situated attorney-in-fact from exercising her judgment in that

regard. However, an agreement to submit a dispute to arbitration is the

diametrical opposite of "settling" a claim. Settling a claim ends the controversy,

whereas arbitrating a claim means fighting it out before an arbitrator rather

than a judge and jury.

Whisman's act of signing Extendicare's arbitration agreement was not

"incidental" to or "reasonably necessary" to the institution or defense of a "suit"

concerning Adams' property rights. Instead, it expressly forfeited Adams'

constitutional rights to have disputes decided in a court of law and to appeal

any decision or award of damages arising therefrom, a point that we address in

further detail in Part IV of this opinion.

26

b. The power "to draw, make and sign any and all checks, contracts, notes, mortgages, agreements, or any other document including state and Federal tax returns" does not confer the authority to enter in a pre-dispute arbitration agreement.

Extendicare also argues that Whisman had the authority to sign a pre

dispute arbitration agreement as an exercise of the express power set forth in

the Adams-Whisman POA to "to draw, make and sign any and all checks,

contracts, notes, mortgages, agreements, or any other document including

state and Federal tax returns." Ping squarely refutes that argument.

We held in Ping that powers granted expressly in relation to the

management of the principal's property and financial affairs, and to health-care

decisions, "did not give [the attorney-in-fact] a sort of universal authority

beyond those express provisions." Id. at 592. Citing to Rice v. Floyd, 768

S.W.2d 57, 58 (Ky. 1989), we said "an agent's authority under a power of

attorney is to be construed with reference to the types of transaction expressly

authorized in the document[.]" Id.; see also Restatement (Second) of Agency §

37(1) (1958) ("Unless otherwise agreed, general expressions used in authorizing

an agent are limited in application to acts done in connection with the act or

business to which the authority primarily relates."). It is self-evident that the

power relied upon here by Extendicare relates to the conduct of Adams'

financial and banking affairs, and not to the vindication of unanticipated

causes of action that might arise in the future.

In summary, we agree with the Trigg Circuit Court and the Court of

Appeals that Whisman was not authorized by her father to enter into

Extendicare's arbitration agreement. Adams cannot therefore be deemed to

27

have given his assent to the agreement, and in the absence of that assent there

was not a valid agreement to be enforced.

2. The Weliner POA

In support of its argument that Beverly Wellner was authorized to

execute on Joe's behalf the Kindred arbitration agreement, Kindred relies upon

two provisions of the Wellner POA: 1) the power "to demand, sue for, collect,

recover and receive all debts, monies, interest and demands whatsoever now

due or that may hereafter be or become due to me (including the right to

institute legal proceedings therefor)"; and, 2) the power "to make, execute and

deliver deeds, releases, conveyances and contracts of every nature in relation to

both real and personal property, including stocks, bonds, and insurance."

a. The power "to demand, sue for, collect, recover and receive all debts, monies, interest and demands whatsoever now due or that may hereafter be or become due to me (including the right to institute legal proceedings therefor)" does not confer the authority to enter in a predispute arbitration agreement.

Kindred acknowledges that this provision of the Wellner POA granting

the power to "demand, sue for, collect, recover and receive all . . . demands

whatsoever" and "to institute legal proceedings" did not expressly authorize

Beverly to sign the pre-dispute arbitration agreement. Instead, Kindred argues

that such authorization must be implied because arbitration is "reasonably

necessary or incidental," as Kindred puts it, to "the ability to settle suits that

have been brought pursuant to Joe's intended grant of authority." Kindred

argues, "it would be an absurd result to recognize an agent's power to bring

28

suit . . . and then deny that she has the power to settle those very claims." We

do not disagree; but "arbitrating" is not "settling."

An agent charged with the responsibility of managing a claim in litigation

would ordinarily need the ability to settle the claim. But, as we said above in

reference to the Whisman case, initiating an arbitration proceeding—or more

precisely, entering into .a pre-dispute arbitration agreement, is a far cry from

"settling" a claim. Initiating arbitration is the commencement of a legal battle;

settling a claim is the resolution of a legal battle. A pre-dispute arbitration

agreement "settles" nothing in relation to present and future claims of the

principal.

b. The power "to make . . . contracts of every nature in relation to both real and personal property, including stocks, bonds, and insurance does not confer the authority to enter into a pre-dispute arbitration agreement applicable to future personal injury claims."

Kindred next contends that Beverly was authorized to provide Joe's

assent to the arbitration agreement because it gave her the power "to make .

contracts of every nature in relation to both real and personal property,

including stocks, bonds, and insurance." (emphasis added). We certainly

agree that a personal injury claim is a chose-in-action, and therefore

constitutes personal property. Kentucky has long acknowledged that "choses

in action are personal property." Button v. Drake, 195 S.W.2d 66, 69 (Ky.

1946).

In Button, our predecessor court examined several definitions of

"property" from a variety of sources, this being, perhaps, the ; 'broadest one,

29

taken from Commonwealth v. Kentucky Distilleries & Warehouse Co., 136 S.W.

1032, 1037 (Ky. 1911):

The term (property) is therefore said to include everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal, choses in action as well as in possession, everything which has an exchangeable value, or which goes to make up one's wealth or estate.

(emphasis added).

The Court in. Button also cites to this definition from Trimble v. City of Mt.

Sterling, 12 S.W. 1066, 1067 (Ky. 1890): "The words 'personal property' mean

money, goods, chattels, things in action, and evidences of debt." Button, at 69.

Joe's personal injury claim was personal property and Beverly had the

authority to make contracts relating to it. But the Kindred pre-dispute

arbitration agreement was not a contract made "in relation" to a property

claim. The agreement did nothing to affect any of Joe's property or his property

rights. The arbitration agreement does not even purport to be a "contract .. .

in relation to both real and personal property." As clearly expressed within the

agreement itself," the agreement was made in relation to Joe's constitutional

right to access the courts and to trial by jury. Constitutional rights are

decisively not "personal property" as we have defined the term. They are not

"money, goods, chattels, things in action, and evidences of debt;" nor do they

have "an exchangeable value, or which goes to make up one's wealth or estate."

14 The Kindred arbitration agreement states: "Binding arbitration means the parties are waiving their right to trial, including their right to a jury trial, their right to a trial by a Judge, and their right to appeal the decision of the arbitrator(s)."

30

Beverly's authority to deal with Joe's real and personal property does not

translate into the power to relinquish his constitutional rights. Consequently,

we conclude that Beverly was not authorized to provide Joe's assent to an

agreement waiving his constitutional rights by committing his future personal

injury claims to arbitration.

3. The Clark POA

Kindred argues that Janis Clark was expressly authorized to enter into

its pre-dispute arbitration agreement on behalf of her mother, Olive, by virtue

of the language of the POA providing Janis with the power "Rio draw, make,

and sign in my name any and all checks, promissory notes, contracts, deeds or

agreements; . . . and Generally to do and perform for me and in my name all

that I might do if present;" and "No institute or defend suits concerning my

property or rights."

a. The power "to institute or defend suits concerning my property rights" does not confer the authority to enter in a pre-dispute arbitration agreement.

For the reasons cited in the foregoing analysis of the "institute or defend

suits" provisions of the Adams-Whisman POA and the "institute legal

proceedings" of the Wellner POA, we conclude that this provision, granting the

power "to institute or defend suits concerning my property rights," cannot be

construed as supporting the authority for the attorney-in-fact to sign a pre

dispute arbitration agreement binding the principal and his estate to arbitrate

future personal injury claims.

31

b. The powers to "to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way[ " and "[gJenerally to do and perform for me in my name all that I might if present" are broad enough and clear enough, unless otherwise prohibited, to encompasses the signing of a pre-dispute arbitration agreement.

In Ping, we reiterated the general rule that an express authorization in a

power-of-attorney document for an attorney-in-fact to engage in specified

activities implies that acts "reasonably necessary" to the specified activity are

also authorized. 376 S.W.3d at 594. We cautioned, however, with reference to

Restatement (Third) of Agency § 2.02 comment h. (2006), that given the

"significant legal consequences" arising from an agreement waiving the

principal's rights of access to the courts and to trial by jury, "authority to make

such a waiver is not to be inferred lightly." Id. at 593. Our holdings

throughout this opinion, as in Ping itself, serve to highlight our reservation

about casually inferring a power laden with such consequences.

However, a literal comprehension of the extraordinarily broad grant of

authority expressed by these provisions—"to transact, handle, and dispose of

all matters affecting me and/or my estate in any possible way" and "to do and

perform for me in my name all that I might if present"—requires no inference

about what the scope of authority encompassed within the expressed power.

One might entertain considerable doubt about whether Olive consciously

intended to forfeit her right of access to the courts and to a jury trial, but the

language of her POA encompasses that result regardless of Olive's actual

intent. Given this extremely broad, universal delegation of authority, it would

32

be impossible to say that entering into a pre-dispute arbitration agreement was

not covered.

D. Summary

In summation, we conclude that Clark POA's universal grant of

authority, while not expressly providing the authority to bind the principal to

an arbitration agreement, it implicitly does so. The more limited grants of

authority provided in the Adams-Whisman POA and the Wellner POA do not

provide the attorneys-in-fact with that authority. Based upon these

conclusions, we affirm at this point the order of the Court of Appeals in

' Extendicare Homes, Inc., et al, v. Whisman (Case No. 2013 - SC -426- I).

However, our analysis continues because, in Kindred Nursing Centers

Limited Partnership, et al., v. Wellner (Case No. 2013 - SC -431 -I) and Kindred

Extendicare Homes, Inc., et al. v. Clark (Case No. 2013 - SC -426 - I), we must

further consider the additional issue of whether the trial court had jurisdiction

to enter an order pursuant to CR 60.02 vacating the earlier dismissal. With

respect to Kindred Extendicare Homes, Inc., et al. v. Clark, as well as the other

cases, we also consider the extent to which the authority of an agent to waive

his principal's fundamental constitutional rights to access the courts, to trial

by jury, and to appeal to a higher court, can be inferred from a less-than

explicit grant of authority.

33

IV. AN AGENT'S AUTHORITY TO WAIVE HIS PRINCIPAL'S CONSTITUTIONAL RIGHT TO ACCESS THE COURTS AND TO TRIAL BY JURY WILL NOT BE INFERRED BUT MUST BE CLEARLY EXPRESSED BY THE PRINCIPAL

In the cases before us we address the question of whether a person will

be deemed to have waived fundamental constitutional rights when, in his

stead, his attorney-in-fact signed a pre-dispute arbitration agreement. Our

focus has been, and remains, upon the scope of the powers expressed in the

power-of-attorney document, and whether those expressed powers are

sufficient to supply the principal's assent needed to form an agreement, which

on its face, forfeits those fundamental constitutional rights.

Upon review of these cases, we are convinced that the power to waive

generally such fundamental constitutional rights must be unambiguously

expressed in the text of the power-of-attorney document in order for that

authority to be vested in the attorney-in-fact. The need for specificity is all the

more important when the affected fundamental rights include the right of

access to the courts (Ky. Const. § 14), 15 the right of appeal to a higher court

(Ky. Const. § 115), 16 and the right of trial by jury, which incidentally is the only

thing that our Constitution commands us to "hold sacred." See Ky. Const. § 7

("The ancient mode of trial by jury shall be held sacred, and the right thereof

15 "All courts shall be open, and every person for an injury done him in his lands, goods, person or reputation, shall have remedy by due course of law, and right and justice administered without sale, denial or delay."

16 "In all cases, civil and criminal, there shall be allowed as a matter of right at least one appeal to another court."

34

remain inviolate, subject to such modifications as may be authorized by this

Constitution.").

There are limits to what we will infer from even the broadest grants of

authority that might be stated in a power-of-attorney instrument. Lest there be

any doubt concerning the propriety of drawing a line that limits the tolerable

range of inferences we would allow from such a universally broad grant as that

contained in the Clark POA, it is worth considering how we would react when

other fundamental rights are at stake.

It would be strange, indeed, if we were to infer, for example, that an

attorney-in-fact with the authority "to do and perform for me in my name all

that I might if present to make any contracts or agreements that I might make

if present" could enter into an agreement to waive the principal's civil rights; or

the principal's right to worship freely; or enter into an agreement to terminate

the principal's parental rights; put her child up for adoption; consent to abort a

pregnancy; consent to an arranged marriage; or bind the principal to personal

servitude. It would, of course, be absurd to infer such audacious powers from

a non-specific, general, even universal, grant of authority. So too, it would be

absurd to infer from a non-specific, universal grant, the principal's assent to

surrender of other fundamental, even sacred, liberties.

In this vein, we would not seriously entertain the claim that an agent had

the implied power to enter a plea agreement pleading his principal guilty to a

criminal offense. We are not aware of any other circumstances in which a

generic grant of authority to make contracts or to do "whatever I might do if

35

present," would be deemed to imply a conscious decision to forego fundamental

constitutional rights. Absent a clearly expressed, knowing, and voluntary

waiver, we do not conclude that an individual has waived his constitutional

right to remain silent in the face of police questioning; to have the assistance of

counsel during a trial; to plead guilty to a crime and thereby waive his right to

a trial. See Brady v. United States, 397 U.S. 742, 748, (1970) ("Waivers of

constitutional rights not only must be voluntary but must be knowing,

intelligent acts done with sufficient awareness of the relevant circumstances

and likely consequences.").

Without any doubt, one may expressly grant to his attorney-in-fact the

authority to bargain away his rights to access the courts and to trial by jury by

entering into a pre-dispute arbitration agreement. No one challenges that; we

accept such authorized waivers often in the context of criminal cases. We will

not, however, infer from the principal's silence or from a vague and general

delegation of authority to "do whatever I might do," that an attorney-in-fact is

authorized to bargain away his principal's rights of access to the courts and to

a jury trial in future matters as yet not anticipated or even contemplated. A

durable power-of-attorney document often exists long before a relationship with

a nursing home is anticipated. It bears emphasis that the drafters of our

Constitution 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.

36

It is argued that the power-of-attorney documents we see in this case

would endow the attorneys-in-fact with the authority to waive any and all

constitutional rights of his principal as he may deem proper, at least insofar as

the waiver can be effectuated by a " .contract" or an "agreement." However, as

illustrated by our decision in Ping, it is fundamental that we will not read

provisions into a contract that were not put there by the principal.

We held in Rice v. Floyd, 768 S.W.2d 57, 59 (Ky. 1989), that even ,a

"comprehensive" durable power-of-attorney would not be construed to

implicitly authorize any and all decisions a guardian might make on behalf of

his ward. Infusing the authority to enter into "any contract or agreement" with

the authority to waive fundamental constitutional rights eviscerates our long

line of carefully crafted jurisprudence dictating that the principal's explicit

grant of authority delineated in the power-of-attorney document is the

controlling factor in assessing the scope of the powers of the attorney-in-fact.

It makes no difference that arbitration clauses are commonplace in

nursing home contracts and that a principal might anticipate that someday his

agent will act to admit him into one. This reality does not vitiate our

conclusion that to cloak the agent with authority to waive the fundamental

right to an adjudication by judge or jury, the power-of-attorney document must

expressly so provide. The inclusion of such a provision, when it comports with

the principal's intent and expectation, would be no burden.

The FAA provides that a "written provision in . . . a contract evidencing a

transaction involving commerce to settle by arbitration a controversy thereafter

37

arising out of such contract or transaction . . . shall be 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 (emphasis added). As noted above, the

question of whether an arbitration agreement was ever formed is a matter of

state law, "so long as the state law in question does not single out arbitration

agreements." See Bluegrass Powerboats, 424 S.W.3d at 907; and Arthur

Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009) (State law is applicable

to determine which contracts are binding and enforceable under the FAA "if

that law arose to govern issues concerning the validity, revocability, and

enforceability of contracts generally . . . ." quoting Perry v. Thomas, 482 U.S.

483, 493, n. 9 (1987)).

Pursuant to our holding in Ping, an arbitration "agreement" entered into

by an attorney-in-fact which exceeds the grant of authority conferred by his

principal is no agreement at all. This principle derives from the general

principles of law and equity that an attorney-in-fact may not act beyond the

powers he has been granted under the power-of-attorney instrument. It follows

that there are specific and concise grounds as exist at law or in equity,

applicable to the formation of contracts generally, for establishing the invalidity

of the three arbitration agreements at issue because each of them was signed

by an agent lacking his principal's authority to bargain away fundamental

constitutional rights. Neither the KUAA nor the FAA is offended by that

principle.

38

We are, of course, well aware that arbitration is not only sanctioned, but

indeed promoted, by the Kentucky Constitution. Section 250 states: "It shall

be the duty of the General Assembly to enact such laws as shall be necessary

and proper to decide differences by arbitrators, the arbitrators to be appointed

by the parties who may choose that summary mode of adjustment." This

Constitutional endorsement of arbitration does not vitiate the elementary rule

that an attorney-in-fact may not waive his principal's fundamental

constitutional rights absent an explicit power to do so. Nor does § 250 in any

way reduce the power and force of § 7 deeming the right to a jury trial to be

inviolate and sacred. The operative phrase of § 250 is that the parties "may

choose" this mode of dispute resolution, signifying that waiving one's right to

trial by judge or jury is his personal choice. In the circumstances we address,

the principals did not "choose" this mode of adjustment; neither did they

choose the corresponding waiver of their sacred right to a jury trial. More

importantly, they did not authorize their respective attorneys-in-fact to

"choose" it for them.

We reject the notion that this holding conflicts with the decisions of the

United States Supreme Court in Marmet Health Care Center, Inc. v. Brown, 132

S.Ct. 1201 (2012), and AT & T Mobility LLC v. Concepcion, 131 S.Ct. 1740,

(2011). Concepcion struck down a California doctrine that explicitly declared

unconscionable, and thus unenforceable, all arbitration clauses in consumer

contracts containing class action waivers. The Supreme Court held that

"[w]hen state law prohibits outright the arbitration of a particular type of claim,

39

the analysis is straightforward: The conflicting rule is displaced by the FAA."

Id. at 1747. To the contrary, our holding does not prohibit arbitration of any

"particular type of claim." Consistent with Concepcion and the FAA's

requirement for the existence of a valid arbitration agreement, we decline to

compel arbitration only when the assent of a party, purportedly bound by the

agreement, has not been validly obtained. Nursing home facilities may still

enforce arbitration agreements with their residents when the resident has

signed the agreement or validly authorized his agent to sign in his stead.

Marmet applied the rule of Concepcion to strike down West Virginia's

explicit policy of refusing to enforce any "arbitration clause in a nursing home

admission agreement adopted prior to an occurrence of negligence that results

in a personal injury or wrongful death." Marmet, 132 S.Ct. at 1203. Before

Marmet, a pre-dispute arbitration clause between a nursing home and a

resident could not be enforced in West Virginia to compel arbitration of any

claim based upon personal injury or wrongful death. Our rule does nothing

that even approaches that kind of restraint on arbitration. We simply require,

as we do with any contract, that the parties to be bound by the agreement

validly assented. Nursing home residents may still enter into pre-dispute

arbitration agreements and those agreements will be enforced, like any

contract, if the agreement of the persons to be bound thereby has been

obtained, either directly in person or by a duly authorized agent. 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.

40

A straight-forward application of our rule that an attorney-in-fact cannot

act beyond the powers granted in the power-of-attorney document stands in

stark contrast to the blanket prohibitions against arbitration agreements

condemned in Marmet and Concepcion. Whatever hostility our rule evinces is

not against the federal policy favoring arbitration; indeed, Kentucky shares that

same policy, as we have proclaimed on several occasions. 17 Our rule merely

reflects a long-standing and well-established policy disfavoring the unknowing

and involuntary relinquishment of fundamental constitutional rights regardless

of the context in which they arise.

V. THE CLARK CIRCUIT COURT HAD JURISDICTION PURSUANT TO CR 60.02 TO GRANT RELIEF FROM ITS ORDER COMPELLING THE PARTIES TO SUBMIT THE CONTROVERSIES TO ARBITRATION

This issue affects Only the two cases originating in the Clark Circuit

Court: Kindred Nursing Centers Limited Partnership d/ b/ a Winchester Centre

for Health and Rehabilitation v. Wellner (Case No. 2013 - SC -431 -I) and Kindred

Nursing Centers Limited Partnership d/ b/ a Winchester Centre for Health and

Rehabilitation v. Clark (Case No. 2013 - SC-430 -I); it does not involve Extendicare

Homes, Inc. d/ b/ a Shady Lawn Nursing Home v. Whisman (Case No. 2013 - SC

426-I).

■

17 For example: Louisville Peterbilt, Inc. v. Cox, 132 S.W.3d 850, 854 (Ky. 2004) ("Kentucky and national policy have generally favored agreements to arbitrate."); Ally Cat, LLC v. Chauvin, 274 S.W.3d 451, 457 (Ky. 2009) ("We do not, by this opinion, signify any retreat from our recognition of the prevalent public policy favoring enforcement of agreements to arbitrate."); Schnuerle v. Insight Communications Co., L.P., 376 S.W.3d 561, 577 (Ky. 2012) ("[O]ur state Constitution and statutes favor the enforceability of arbitration agreements.").

41

Upon its initial consideration of the Clark and Wellner cases, in January

2012, the Clark Circuit Court granted Kindred's motions to dismiss the cases

and compel the parties to submit the pending claims to arbitration. Although

not expressly designated as final and appealable orders, the circuit court's

orders were, by all indications, final.

CR 60.02 provides that upon specified grounds, 18 a trial court "may,

upon terms as are just, relieve a party . . . from its final judgment, order, or

proceeding[.]" After the September 2012 rendition of our opinion in Ping,

counsel for Clark and Wellner moved the Clark Circuit Court for relief pursuant

to CR 60.02 from the January orders compelling arbitration, citing the greater

elucidation of the subject provided by Ping as cause.

The trial court was sufficiently moved by the argument such that it

exercised its authority to grant relief from the final judgment and reconsider

the issue, resulting in its ultimate decision to overrule Kindred's motions to

dismiss and compel arbitration. Kindred argues that the trial court lacked

jurisdiction for its action. Clearly, CR 60.02 vests the trial court with the

jurisdiction to act.

18 The grounds stated by CR 60.02 are: (a) mistake, inadvertence, surprise or excusable neglect; (b) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59.02; (c) perjury or falsified evidence; (d) fraud affecting the proceedings, other than perjury or falsified evidence; (e) the judgment is void, Or has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (f) any other reason of an extraordinary nature justifying relief.

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Motions under CR 60.02 are addressed to the sound discretion of the

trial court. See Fortney v. Mahan, 302 S.W.2d 842, 843 (Ky. 1957), citing Tozer

v. Charles A. Krause Milling Co., 189 F.2d 242 (3 Cir. 1951). We review trial

court decisions under CR 60.02 for abuse of discretion. "Given the high

standard for granting a CR 60.02 motion, a trial court's ruling on the motion

receives great deference on appeal . . . ." Barnett v. Commonwealth, 979

S.W.2d 98, 102 (Ky. 1998) (citing Brown v. Commonwealth, 932 S.W.2d 359,

361 (Ky. 1996)). To amount to an abuse of discretion, the trial court's decision

must be "arbitrary, unreasonable, unfair or unsupported by sound legal

principles." Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999). We

are unable to conclude that the trial judge abused her discretion in her

consideration of the respective CR 60.02 motions.

Based upon the forgoing analysis, we affirm the orders of the Court of

Appeals insofar as they deny the requests for interlocutory relief. It is hereby

ORDERED as follows: 1) The CR 65.09 motion of Extendicare Homes, Inc., et al., in Case No. 2013- SC-426-I for interlocutory relief compelling arbitration is DENIED, based upon our conclusions that the powers vested in Belinda Whisman did not encompass the power to enter into an arbitration agreement regarding the claims of the decedent, Van Buren Adams, and because the authority to waive Adams'

constitutional rights of access to the courts by judge or jury and to appeal to a

higher court was not explicitly set out in the power-of-attorney document, and

because Whisman was not authorized to enter into an arbitration agreement on

behalf of the wrongful death beneficiaries;

2) The CR 65.09 motion of Kindred Extendicare Homes, Inc., et al., in Case No.

2013-SC-426-I is DENIED, based upon our conclusion that the authority to

waive Olive Clark's constitutional rights of access to the courts by judge or jury

and to appeal to a higher court was not explicitly set out in the power-of

attorney document, and because Janis Clark was not authorized to enter into

an arbitration agreement on behalf of the wrongful death beneficiaries;

3) The CR 65.09 motion of Kindred Nursing Centers Limited Partnership, et al.,

in Case No. 2013-SC-431-I for interlocutory relief compelling arbitration is

DENIED, based upon our conclusions that the powers vested in Beverly

Wellner did not encompass the power to enter into an arbitration agreement

regarding the claims of the decedent, Joe Wellner, and because the authority to

waive Joe Wellner's constitutional rights of access to the courts by judge or

jury and to appeal to a higher court was not explicitly set out in the power-of

attorney document, and because Beverly Wellner was not authorized to enter

into an arbitration agreement on behalf of the wrongful death beneficiaries.

Barber, Cunningham, and Keller, JJ., concur. Abramson, J., dissents by

separate opinion in which Minton, C.J. and Noble, J., join. Noble, J., dissents

by separate opinion in which Minton, C.J., joins.

ABRAMSON, J., DISSENTING: Relying on a "God-given right" to a jury

trial, the majority announces a new rule that contravenes the United States

44

Constitution and controlling precedent from the Supreme Court of the United

States. To posit that the right to a jury trial is the preeminent right in our

Kentucky Constitution (apparently superior to the rights that precede it in that

document including, for example, the rights to life, liberty, religious freedom,

assembling for the common good, and acquiring property) and, accordingly,

prohibit an agent acting under an unrestricted general "power to contract" from

entering into an arbitration agreement is at best seriously misguided. For the

reasons stated herein, I strongly dissent. 19

Although arbitration has been constitutionally based in Kentucky since

1799 and both federal and state statutes evince a legislative policy favoring

arbitration, the existence of a binding agreement to arbitrate is necessarily a

threshold consideration for a trial court faced with a motion to compel

arbitration. Disposition of that issue, as both the United States Supreme

Court and this Court have long recognized, implicates state law contract

principles. In Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012), this

Court deemed an arbitration agreement signed by Ms. Ping upon her mother's

admission to a nursing home unenforceable because the authority granted Ms.

Ping in her mother's durable power of attorney did not extend to entering into

an optional contract for arbitration. The three cases consolidated for the

Court's consideration today similarly involve the scope of an agent's authority

19 However, I do concur in the majority's adherence to our holdings in Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012), and Pete v. Anderson, 413 S.W.3d 291 (Ky. 2013), that the wrongful death claims are distinct from the claims of the various estates. As the parties note, however, that question is not before us.

45

under a power of attorney executed pursuant to Kentucky law and, more

specifically, whether the agent is authorized to execute an arbitration

agreement on behalf of his or her principal. As in Ping, each agent's authority

is necessarily derived from the power of attorney instrument executed by his or

her principal. Not surprisingly, the three separate power of attorney

instruments at issue contain differing language and require individual analysis.

However, the underlying principles of state and federal law are the same in

each case. Despite these principles, the majority has created a newly found

rule that an agent cannot "waive" a principal's constitutional right to a jury

trial unless the power of attorney contains a "specific" and "express" statement

to that effect and, in doing so, the majority has wrought a change in Kentucky

law - a significant change with potentially disruptive implications far beyond

the relatively narrow confines of these nursing home admission cases.

Furthermore, the majority has worked this change in apparent disregard of the

Federal Arbitration Act (FAA) and numerous decisions by the United States

Supreme Court invalidating under the FAA any State rule meant to hinder the

enforcement of arbitration agreements.

This decision consolidates three cases accepted by this Court for
discretionary review pursuant to CR 65.09. By way of motions for interlocutory
relief under CR 65.09, Extendicare Homes, Inc. d/b/ / Shady Lawn Nursing
Home ("Extendicare"), and its affiliated entities,' and Kindred Nursing Centers
Limited Partnership d/b/a Winchester Centre For Health and Rehabilitation
n/k/a Fountain Circle Health and Rehabilitation ("Kindred") and its affiliated
entities,2 seek relief from orders of the Court of Appeals refusing to compel
arbitration of disputes pending in Clark Circuit Court and the Trigg Circuit
Court.
Each of the three cases originated with the filing of an action in the
circuit court asserting claims against the nursing home for personal injuries
suffered by the nursing home resident, violations of KRS 216.510 et seq.,3 and
for wrongful death of the resident. In each case, at the time of the resident's
admission to the nursing home, an attorney-in-fact for the resident executed a
written document providing that any claims or disputes arising out of the
relationship between the resident and the nursing home would be submitted to
arbitration, rather than adjudication in the courts. Upon the commencement
of each case in circuit court, the defendant nursing home facility moved the
Extendicare, Inc.; Extendicare Health Network, Inc.; Extendicare Reit; Extendicare L.P.; Extendicare Holdings, Inc.; Extendicare Health Services, Inc.; Extendicare Health Facility Holdings, Inc.; John Does 1 Through 5; and Unknown Defendants.
2 Kindred Nursing Centers East, LLC; Kindred Hospitals Limited Partnership; Kindred Healthcare, Inc.; and Kindred Health Care Operating, Inc.
3 KRS 216.515 enumerates certain enforceable rights extended to nursing home residents.
3
court to dismiss the action and compel the parties to submit the claims to a
formal arbitration proceeding. In each case, citing our opinion in Ping v.
Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012), cert. denied, 134 S.Ct.
705, 187 L.Ed.2d 567 (2013), the circuit court denied the motion on the
grounds that the respective power-of-attorney instruments did not authorize
the resident's attorney-in-fact to waive the resident's right to access to the
courts for the resolution of disputes.
Kindred and Extendicare each sought interlocutory relief in the Court of
Appeals pursuant to CR 65.07. The Court of Appeals declined to grant the
requested relief. Kindred and Extendicare then sought relief in this Court.
The central issue is whether, based upon the language of the particular
power-of-attorney instrument, an arbitration agreement was validly formed
between the respective nursing home facility and the resident whose interests
were thereby affected. For the reasons set forth below, we conclude in two of
the cases, Extendicare Homes, Inc., et al, v. Whisman (Case No. 2013-SC-426-I)
and Kindred Nursing Centers Limited Partnership, et al., v. Wellner (Case No.
2013-SC-431-I), that the authority to enter into a pre-dispute arbitration
agreement was not among the powers granted to respective attorney-in-fact
and, therefore the arbitration agreements were not formed with the assent of
the party to be bound thereby. Lacking the essential element of assent, we
conclude that the arbitration agreements in those cases were never validly
formed.
We further conclude that without a clear and convincing manifestation of
the principal's intention to do so, we will not infer the delegation to an agent of
the authority to waive a fundamental personal right so constitutionally revered
as the "ancient mode of trial by jury." 4 Consequently, because none 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, we conclude that
the agent was not so authorized, and that the principal's assent to the waiver
was never validly obtained. Accordingly, we deny the motions for interlocutory
relief. In so doing, we affirm the orders of the Court of Appeals.
At the outset, however, it is appropriate that we direct our attention
specifically to the cause of action pled in each case for wrongful death.
We held in Ping, and we reiterate today: the decedent whose death becomes the
basis of a wrongful death claim had no authority during his lifetime, directly or
through the actions of his attorney-in-fact, to prospectively bind the
beneficiaries of the wrongful death claim to an arbitration agreement.