Although, this case does not arise in the long term care setting, if it
stands, it may have a significant negative impact on the enforcement of
arbitration agreements based on the FAA where Kentucky is not designated
as the place where the arbitration is to take place.

The Kentucky Court of Appeals  Opinion  discusses the inter-play between
the FAA and KAA, and examines the question of whether the FAA “occupies
the field” so as to pre-empt state law once it is determined that the
FAA applies.  It also discusses the distinction between procedural and
substantive law as between application of FAA versus KAA.  Here, the
Arbitration Agreement failed to specifically provide for arbitration in
Kentucky.  The Court found that the FAA applied to the exclusion of the
KAA (per Ally Cat), but that the Kentucky state court had no
jurisdiction to enforce the Agreement.   The Court of Appeals affirmed
the trial court in denying the motion to stay litigation and enforce the
Arbitration Agreement.

As the dissent points out, this decision makes no sense at all.  The FAA
gives state courts jurisdiction to enforce arbitration agreements under
the FAA.  It shouldn’t render the FAA inapplicable in state courts just
because a particular agreement doesn’t state where the agreement is to
take place.

The lesson from the case is that arbitration agreements, even those
based entirely on the FAA must specify Kentucky as the location for the
arbitration.

Robert Y. Gwin

401 W. Main Street
Suite 1000
Louisville, Kentucky 40202
Direct: (502) 618-5708
Main: (502) 618-5700
Facsimile: (502) 618-5701

 

Author: KY Court of Appeals from Court of Appeals

loggedout