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Nursing home arbitration agreement signed by patient’s daughter not enforceable.

Where a daughter signed admission paperwork for her mother upon the mother’s admission to a nursing home, but the mother was mentally competent and did not give the daughter authority to sign the paperwork, an arbitration agreement included in the paperwork was unenforceable.

In Manley v. Humboldt Nursing Home, Inc., No. W2019-00131-COA-R3-CV (Tenn. Ct. App. Sept. 18, 2020), plaintiff filed a wrongful death action against defendant nursing home after her mother passed away. Defendant filed a motion to compel arbitration based on an arbitration agreement included in the admission paperwork. It was undisputed that the admission paperwork was signed by the daughter, even though the mother was “competent when she was admitted” and the daughter “did not possess a power of attorney to act on behalf of her mother.”

According to the daughter, the mother was “immediately whisked away” upon entering the facility and she was asked by Angela Bodkins, the facility representative, to complete the admission paperwork. The daughter testified in her deposition that she had completed medical documents for her mother before, but that “on all previous occasions, her mother had been present and an active participant in the decision-making process.” On this occasion, the daughter had not discussed the paperwork with her mother and the mother had not authorized the daughter to sign.

Ms. Bodkins testified that the mother’s records did not reflect that the daughter had authority to sign, and that she could not recall asking whether the daughter had authority to sign. She stated, though, that it was “her standard practice when a new resident was admitted to the facility…to obtain permission from the resident for a family member to sign the admissions documents.” Ms. Bodkins thus alleged that “she must have obtained permission” even though it was not noted in the file.

Based on the depositions, the trial court denied the motion to compel arbitration, finding that defendant “failed to prove the existence of a valid arbitration agreement.” The Court of Appeals affirmed.

The Court first addressed defendant’s assertion that “the enforceability of the arbitration agreement was an issue for the arbitrator to decide, not the trial court.” The Court noted that while “courts must refrain from deciding disputes that have been expressly delegated to an arbitrator,” when “a party claims it never concluded an agreement at all, the court, not the arbitrator, determines whether the parties formed an agreement to arbitrate.” (internal citations omitted). Because this was a “fundamental formation issue,” the trial court did not err by addressing it.

Next, the Court moved on to whether an arbitration agreement was formed, which hinged in this case on whether the daughter had the authority to sign the agreement for the mother. The Court first analyzed whether the daughter had actual authority. Although it was fairly clear that there was no express actual authority in this case, as there was no written or verbal authority given by the mother, defendant argued that there was implied authority here. “Implied authority…denotes actual authority either to do what is necessary to accomplish the agent’s express responsibilities, or to act in a matter that the agent reasonably believes the principal wishes the agent to act, in light of the principal’s objectives and manifestations.” (internal citation omitted). While implied authority can be based on “conduct or a course of dealing between the principal and agent,” it must be “predicated on some act or acquiescence of the principal rather than the actions of the agent.” (internal citations omitted).

The Court of Appeals ruled that implied authority could not be established here because defendant relied “heavily on [the daughter’s] assumption that it was okay to sign the admission documents[.]” Implied authority, however, must be based on the principal’s actions, and “an agent’s belief that she had authority is not sufficient to establish actual authority.” Because the mother and daughter had never discussed the documents and the daughter had never executed documents for her mother without her mother present, there was no actual authority here.

The Court next looked at apparent authority, which also “must be shown through the acts of the principal rather than those of the agent.” (internal citation omitted). As discussed above, defendant’s allegations focused on the actions of the daughter/agent, not the mother/principal. The Court noted that there was “no evidence in this record of an overt affirmation of agency” by the mother, and that defendant’s representative could not recall the mother saying anything about the daughter having permission to sign for her. (internal citation omitted). Accordingly, there was no apparent authority in this case.

Because the daughter lacked authority to sign the arbitration agreement for her mother, denial of the motion to compel arbitration of this wrongful death action was affirmed.

We have seen several nursing home arbitration agreement cases come through the Court of Appeals lately, with varying results. Any party seeking to either enforce or invalidate one of these agreements would be wise to review these recent opinions.

For your convenience, here is a couple of links our summary of two cases:

Nursing Home Agreement to Arbitrate – Who Can Bind Patient?

 

Unconscionable fee-splitting provision in arbitration agreement could be severed from agreement as a whole.

NOTE: This opinion was published one year after oral argument.

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