EMAIL TO A FRIEND COMMENT

 

Arbitration Agreement Not Valid between Nursing Home and Residents


Separately, three people executed a power-of-attorney document designating a family member as their attorney-in-fact. The first power-of-attorney document provided that the attorney-in-fact had full power to draw, make, and sign any checks, contracts, notes, mortgages, agreements, or any other document including tax returns and to institute or defend suits concerning the person’s property or rights. The second power-of-attorney document provided that the attorney-in-fact had 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 “to make ... contracts of every nature in relation to both real and personal property, including stocks, bonds, and insurance.” The third power-of-attorney document provided that the attorney-in-fact had the power “to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way” and “[g]enerally to do and perform for me in my name all that I might if present.”

 

Subsequently, each person was admitted as a resident at a nursing home. The respective attorneys-in-fact executed the documents required by the nursing home for the person’s admission. Each attorney-in-fact also signed an alternative dispute resolution agreement presented by the nursing home’s admission staff. The document stated that signing the agreement was not a condition of admission to the nursing home; it stated that the parties understood that by signing the document they were waiving their constitutional right to have disputes decided by a court of law or to appeal any decision resulting from alternative dispute resolution; and it provided a list of covered disputes, which included wrongful death, personal injuries suffered by the nursing home resident, and violations of Kentucky law.

 

After admission to the nursing home, each person died. Separately, the estates sued the nursing homes and their parent companies. The complaints alleged personal injuries to the nursing home resident caused by negligence, violations of Kentucky law, and wrongful death.

 

Based on the arbitration agreements, the nursing homes and their parent companies, moved to dismiss the lawsuits and to order the estates to submit their respective claims to arbitration. They argued that the authority to institute or defend suits concerning a person’s property or rights included the authority to enter into the pre-dispute arbitration agreement. The estates argued that the power-of-attorney documents did not vest the attorneys-in-fact with the authority to commit the nursing home residents’ claims to arbitration. The Trigg Circuit Court and Clark Circuit Court denied the motions of the nursing homes and their parent companies. The trial courts concluded that the power-of-attorney documents did not give the attorneys-in-fact the understanding that their 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 courts noted that there was nothing in the power-of-attorney documents that authorized the attorneys-in-fact to settle claims or disputes or expressly addressed dispute resolution.

 

The Kentucky Court of Appeals denied the appeals of the nursing homes and their parent companies. The appellate court noted that the explicit authority to institute or defend suits concerning the nursing home residents’ property or rights did not imply the authority to initiate a claim in arbitration, or, correspondingly to waive the nursing home residents’ right to seek redress in a court of law.

 

The Supreme Court of Kentucky affirmed the appellate decision. The court held that, based on the language of the particular power-of-attorney instruments, an arbitration agreement was not validly formed between the respective nursing home facility and the resident whose interests were thereby affected; the expression of authority in the power-of-attorney document to institute or defend suits concerning the nursing home residents’ property rights did not confer the authority to enter into a pre-dispute arbitration agreement; 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” did not confer the authority to enter in a pre-dispute arbitration agreement; the powers to “to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way” and “[g]enerally to do and perform for me in my name all that I might if present” were broad enough and clear enough, unless otherwise prohibited, to encompasses the signing of a pre-dispute arbitration agreement; and none of the power-of-attorney documents conferred the authority to waive the nursing home resident’s constitutional rights of access to the courts by judge or jury and to appeal to a higher court.

 

Based on the language of the particular power-of-attorney instruments, an arbitration agreement was not validly formed between the respective nursing home facility and the residents whose interests were thereby affected. The court explained that 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 cannot be provided by the attorney-in-fact. Whether the principal’s assent to the arbitration agreement was obtained is a question of law that depends entirely upon the scope of authority set forth in the written power-of-attorney instrument. An arbitration agreement entered into by an attorney-in-fact, which exceeded the grant of authority conferred by his principal, is no agreement at all.

 

The expression of authority in the power-of-attorney document to institute or defend suits concerning the nursing home residents’ property rights did not confer the authority to enter into a pre-dispute arbitration agreement. The court reasoned that the signing of the pre-dispute arbitration agreement when no personal injury or property rights were in dispute did not resemble the institution of a property rights claim. The court also reasoned the phrase “instituting suits concerning my property rights” manifested a specific intention to pursue one’s rights in the courts of law, not by private arbitration. Similarly, 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)” did not confer the authority to enter in a predispute arbitration agreement. An agent charged with the responsibility of managing a claim in litigation would ordinarily need the ability to settle the claim. The court reasoned that although this element of the power-of-attorney may have implicitly conferred the right to settle claims, entering into a pre-dispute arbitration agreement, is not settling a claim. The court explained that initiating arbitration is the commencement of a legal battle; whereas, 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.

 

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” did not confer the authority to enter in a pre-dispute arbitration agreement. The court explained 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. The power to “to draw, make and sign any and all checks, contracts, notes, mortgages, agreements, or any other document including state and Federal tax returns” related to the conduct of the nursing home residents’ financial and banking affairs, and not to the vindication of unanticipated causes of action that might arise in the future. Similarly, the power “to make ... contracts of every nature in relation to both real and personal property, including stocks, bonds, and insurance” did not confer the authority to enter into a pre-dispute arbitration agreement applicable to future personal injury claims. A personal injury claim constitutes personal property. The pre-dispute arbitration agreement was not a contract made in relation to a property claim. The agreement did nothing to affect any of the nursing home resident’s property or property rights. The agreement expressly stated that it was made in relation to the nursing home resident’s constitutional right to access the courts and to trial by jury. Constitutional rights are not personal property. The attorney-in-fact’s authority to deal with the nursing home resident’s real and personal property did not translate into the power to relinquish the nursing home resident’s constitutional rights.

 

The powers to “to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way” and “[g]enerally to do and perform for me in my name all that I might if present” were broad enough and clear enough, unless otherwise prohibited, to encompass the signing of a pre-dispute arbitration agreement. The court reasoned that a literal comprehension of the extraordinarily broad grant of authority expressed by these provisions required no inference about what the scope of authority encompassed within the expressed power. This extremely broad, universal delegation of authority encompassed the nursing home resident’s forfeit of her right of access to the courts and to a jury trial, such that entering into a pre-dispute arbitration agreement was covered. While not expressly providing the authority to bind the principal to an arbitration agreement, this language implicitly does so.

 

None of the power-of-attorney documents conferred the authority to waive the nursing home resident’s constitutional rights of access to the courts by judge or jury and to appeal to a higher court. An agent’s authority to waive the principal’s constitutional right to access the courts and to trial by jury must be clearly expressed by the principal. This authority was not explicitly set out in the power-of-attorney document which conferred the powers to “to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way” and “[g]enerally to do and perform for me in my name all that I might if present.” Because none of the power-of-attorney instruments involved in these cases provided a manifestation of the principal’s intent to delegate that power to the agent, the court concluded that the agent was not so authorized, and that the principal’s assent to the waiver was never validly obtained.

 

The Supreme Court of Kentucky affirmed the appellate court’s refusal to compel arbitration of disputes between nursing homes and the estates of deceased nursing home residents.

 

See: Extendicare Homes, Inc. v. Whisman, 2015 WL 5634309 (Ky., September 24, 2015) (not designated for publication).  

 

 

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