State cannot limit enforcement of arbitration agreement signed by agent, US Supreme Court holds

By Lori Irish Bauman
May 17, 2017

Earlier this week, the US Supreme Court again invoked the federal policy of enforcing arbitration agreements.  The Court reversed a Kentucky state court opinion holding that an arbitration agreement is unenforceable if it is signed by an individual with power of attorney, unless the power of attorney expressly authorizes waiver of the right to a jury trial.

In Kindred Nursing Centers LP v. Clark, two individuals who had power of attorney for their elderly relatives signed paperwork to move the relatives into a nursing home.  The paperwork included an agreement to arbitrate any disputes.  When the relatives later sued claiming substandard care, the nursing home moved to dismiss, citing the arbitration clause.  The Kentucky Supreme Court observed that the state constitution declares the right of access to the court and trial by jury to be “sacred” and “inviolate.”  On that basis, the Kentucky court held that an agent – in this case, a person with a power of attorney – cannot deprive her principal of such rights unless it is expressly so provided in the power of attorney.

On review, Justice Kagan, writing for the majority, stated that the Federal Arbitration Act (FAA) requires courts to place arbitration agreements on an equal footing with all other contracts.  Regardless of whether access to court and right to trial by jury are given special status by the state constitution, the Kentucky court’s ruling would impermissibly put arbitration agreements on a different footing than other contracts entered into pursuant to a power of attorney.  On that basis, the lower court’s holding was reversed.   

See our discussion of earlier US Supreme Court cases applying the FAA here and here.

Are your confidentiality agreements up to date?

By Stacey Mark
April 27, 2017

The Defend Trade Secrets Act (DTSA) provides an important tool for protecting trade secrets from misappropriation by affording owners a federal right of action for misappropriation of trade secrets related to a product or service used, or intended for use in interstate or foreign commerce.  The DTSA provides a variety of remedies that track those available under state uniform trade secret statutes, such as actual damages, damages for unjust enrichment, royalties, injunctive and exemplary relief, and attorney fees.     

However, the DTSA differs from uniform state laws in some significant respects.  The DTSA provides, in extraordinary circumstances, for the ex parte seizure of property to prevent the propagation or dissemination of the trade secret.  The DTSA further expands trade secret protection by enabling trade secret owners to seek nationwide relief, without preempting state law remedies. Another significant feature of the DTSA is the immunity from criminal and civil liability it provides to whistleblowers who comply with the Act's reporting provisions.  

Employers are required to notify employees and contractors who are subject to confidentiality agreements of the DTSA's immunity provisions.  An employer may comply by including the notice in the confidentiality agreement, or by including a cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for suspected violations of the law.  An employer that fails to comply with the notice requirement may not be awarded exemplary damages or attorney fees in an action under the DTSA.  The statute applies to contracts governing confidentiality entered into on or after May 11, 2016.

Confidentiality provisions are commonly included in employment and independent contractor agreements, confidentiality/proprietary rights agreements, noncompete and nonsolicitation agreements, and in separation/release agreements, among other employment documents. Employers who have written contracts with employees or contractors entered into on or after May 11, 2016, containing confidentiality obligations should consider adding the DTSA disclosure and perhaps also reviewing their handbook.

Employers may contact Ater Wynne's employment group for assistance with DTSA compliance.