Marmet Health Care Center v. Brown, 132 S. Ct. 1201 (2012). Marmet began as three seperate cases in West Virginia. In each case, a family member of a nursing home resident signed an admission agreement which included an arbitration clause buried within the text. The Plaintiffs argued the arbitration provision was void because it violated the West Virginia Nursing Home Act. by requiring nursing home residents to agree to arbitration prior to the occurrence of an injury. In a four-and-one-half page decision that omitted virtually all of the facts recounted in the 99 page decision below, the Supreme Court held that West Virginia’s law which out-right prohibited pre-dispute arbitration agreements was unconstitutional in light of the Federal Arbitration Act’s policy favoring arbitration. “On remand, the West Virginia court must consider whether, absent that general public policy, the arbitration clauses in Brown’s case and Taylor’s case are unenforceable under state common-law principles that are not specific to arbitration and pre-empted by the FAA.” Ses D. McGuffey, Marmet Health Care Center v. Brown: Nursing Home Arbitration Agreements, 8 NAELA Journal 239 (2012).

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006). This is not a nursing home case. Justice Scalia, writing for the Court, framed the issue as whether a court or an arbitrator should consider a claim that the contract containing an arbitration agreement is void for illegality. Customers of a check cashing company had signed agreements including an arbitration clause. A class of customers argued that the agreement was illegal because the company was charging usurious interest rates and that the agreement violated various Florida lending and consumer protection laws. The trial court denied the motion to arbitrate, the Florida Court of Appeals reversed, and then the Florida Supreme Court reversed reasoning that enforcement of the agreement to arbitrate could breathe life into a contract that not only violates State law but is criminal in nature. The court found there are two types of challenges to the validity of an arbitration agreement: (1) a challenge to the arbitration agreement itself and (2) a challenge to the contract as a whole. Relying on Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) and Southland Corp. v. Keating, 465 U.S. 1 (U.S. 1984), the Court addressed the issue at bar by finding: “First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Second, unless the challenge is to the arbitration clause itself, the issue of the contract’s validity is considered by the arbitrator in the first instance. Third, this arbitration law applies in state as well as federal courts.” Applying these principles, where the challenge is to the agreement, but not specifically to the arbitration provision, the challenge is considered by the arbitrator rather than the Court. The Court rejected an argument that this is a procedural rule, finding that it is federal substantive law, applying in federal and State courts. The Federal Arbitration Act covers putative contracts as well as valid contracts because, otherwise, a court might deny effect to an arbitration provision in a contract that the court might later find to be enforceable. The Florida Supreme Court was reversed.

Note: This ruling, dated February 21, 2006, will likely result in streamlined arbitration agreements. Questionable provisions, such as limitations on damages, will likely begin appearing in other sections of the admissions agreement. It has already found its way into nursing home negligence jurisprudence. See Alterra Healthcare Corp. v. Estate of Linton, 2007 Fla. App. LEXIS 2727 (Fla. 1st DCA 2007), infra.

McCauley v. Highland Nursing & Rehab. Ctr., 2006 U.S. Dist. LEXIS 85627 (D. Mo. 2006). Former employee of a nursing home alleged sexual harassment. Her employment agreement included an arbitration agreement. She moved to compel arbitration and the nursing home opposed, arguing plaintiff failed to meet a condition precedent and because plaintiff waived her right to arbitration when she commenced a civil action instead of initiating arbitration. Plaintiff argued the nursing home’s objections should be addressed and the court agreed. Arbitration was compelled. Plaintiff then contended that four other defendants who were not parties to the agreement should also be compelled to arbitrate because they were “her joint employer or single employer … Plaintiff states that all of the corporate defendants have the same principal place of business and the exact same board of directors. Plaintiff contends that all of the defendants to this action were her employer and that they operated as a single employer and or joint employer within the meaning of the law. As a result, she argues that they are all governed by the written arbitration agreement she signed.” Citing CD Partners, LLC v. Grizzle, 424 F.3d 795 (8th Cir. 2005), and Thomson-CSF, S.A. v. American Arbitration Ass’n, 64 F.3d 773 (2d Cir. 1995), the court found that a willing signatory seeking to arbitrate with a non-signatory that is unwilling must establish at least one of the following theories: 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter-ego; and 5) estoppel. Plaintiff moved for limited discovery to establish one of these theories, which was granted.

Note: An example of how the nursing home industry seeks arbitration when it is convenient and opposes it when arbitration is deemed against its interests.

Washburn v. Beverly Enterprises-Georgia, Inc., 2006 U.S. Dist. LEXIS 88628 (S.D. Ga. 2006). After Plaintiff filed suit, Defendant filed a motion to dismiss, compel arbitration and stay discovery. The magistrate entered a report and recommendation that the motion be denied. Before the magistrate the plaintiff raised enough evidence to question the nursing home resident’s capacity to enter into an arbitration agreement. The plaintiff also argued that because a wrongful death claim does not belong to the deceased, she could not bind a non-signatory. The district court accepted the conclusions of the magistrate, but substituted its own reasoning in denying the motion to arbitrate. First, because there was enough evidence to create a colorable issue, the plaintiff’s were entitled to discovery on the issue of the resident’s capacity and the arbitrator could not determine the validity of the contract since his own authority is derived from it. Second, in Georgia, a wrongful death is separate from the resident’s own claims and, since no privity existed between the nursing home and the wrongful death claimants, they could not be compelled to arbitrate. Magistrate’s opinion is at Washburn v. Beverly Enterprises-Georgia, Inc., 2006 U.S. Dist. LEXIS 73267 (S.D. Ga. 2006).

Beverly Enterprises-Mississippi, Inc. v. Powell, 2006 U.S. Dist. LEXIS 8739 (D. Miss. 2006). Facility sought to compel arbitration after suit was filed. Resident was alone when admitted to the facility. He was illiterate, but purportedly executed an arbitration agreement. Although illiteracy alone will not invalidate an arbitration agreement, the Estate contended that the resident did not place the “X” on the agreement and the facility employees could not recall with specificity which documents he marked. Further, one of the employees testified in deposition that she may have failed to inform the resident he was signing an arbitration agreement, which may constitute fraud in the inducement. The court found there was sufficient evidence to indicate that the resident may not have agreed to arbitration and denied the motion to compel. Decided: February 16, 2006.

Buie v. Mariner Health Care, Inc., 2006 U.S. Dist. LEXIS 94139 (D. Miss. 2006). Buie filed a wrongful death action after resident’s death. Buie signed an agreement for arbitration on the line for a legal representative, but not on the line where she would sign for herself. Defendants argued that the case should be dismissed under Rule 12(b)(1) because all claims were subject to arbitration; Defendants moved to compel arbitration. Mariner provided no evidence that the resident authorized or otherwise gave Buie express authority to sign the arbitration agreement. “Additionally, as there has been no showing that Buie was empowered, either by court order or statute, to make legal decisions regarding McNickles’ affairs, the Court finds that Defendants have likewise failed to establish their claim that Buie signed the subject Agreement as the personal representative of, or in a fiduciary capacity for, McNickles.” The motion to compel arbitration was denied. The court found that diversity existed, so the motion to dismiss was also denied.

Note: This case might have a different outcome following Covenant Health Rehab of Picayune, L.P. v. Brown, 2007 Miss. LEXIS 43 (Miss. 2007), reviewed below.

Mariner Health Care, Inc. v. Weeks, 2006 U.S. Dist. LEXIS 50106 (D. Miss. 2006). When Dan Weeks entered the nursing home, Murry Weeks, his legal representative signed an “an agreement to arbitrate any dispute that might arise between Dan Weeks (“Resident”) and/or Murry W. Weeks (“Legal Representative” and [Greenwood Health and Rehabilitation Center](“Facility”)(“Facility” includes the particular facility where the Resident resides, its parents, affiliates, and subsidiary companies, owners, officers, directors, medical directors, employees, successors, assigns, agents, attorney and insurers.).” Apparently he contended he did not see it or read it, but the court determined a party is bound by his contract nonetheless. Citing the Federal arbitration Act, the court granted Defendant’s motion to compel arbitration.

Mariner Healthcare, Inc. v. King, 2006 U.S. Dist. LEXIS 40782 (D. Miss. 2006). Defendant moved to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 4. Under 5th Circuit precedent, the court must first determine whether the parties agreed to arbitrate and whether the dispute in question falls within the scope of the agreement. Here, the resident’s daughter signed the arbitration agreement without a power of attorney. Citing Mariner Healthcare, Inc. v. Green, 2006 U.S. Dist. LEXIS 37479 (D. Miss. 2006), the court denied Defendant’s motion finding that Mariner failed to show that the daughter had authority to sign away her father’s legal right to a jury trial.

JPMorgan Chase & Co. v. Conegie, 2006 U.S. Dist. LEXIS 38937 (D. Miss. 2006). Plaintiff filed a State court action alleging nursing home negligence at a home controlled by JPMorgan. When admitted, Plaintiff’s mother filed a conspicuous arbitration clause, introduced in bold-faced font stating “ARBITRATION – PLEASE READ CAREFULLY.” After the State court action was filed, JPMorgan filed a federal action to compel arbitration. The only argument considered was whether the resident’s mother had authority to sign the arbitration agreement. Citing Mariner Health Care, Inc. v. Estate of Rhodes, 2005 U.S. Dist. LEXIS 42650 (D. Miss. 2005), the court found that resident’s mother had no legal authority to sign the agreement and denied the motion and that doctrines of express agency, implied agency and apparent agency did not apply since there was neither evidence of a writing authorizing the mother to sign nor any evidence that the resident caused the nursing home to believe her mother had apparent authority to sign.

Mariner Health Care, Inc., v. Ferguson, 2006 U.S. Dist LEXIS 47021 (N.D. Miss. 2006). Defendants in a State court action filed a declaratory judgment action in federal court seeking a declaration as to the validity of an arbitration agreement. The resident’s sister had signed the Agreement for Arbitration. The court found it clear that resident could not have signed the agreement herself due to HIV, CVA with right-side hemiparis, Hyponatremia and dysphagia. The estate, defendant in the federal action, alleged that the sister had no authority to sign the agreement, that Mariner could not prove there was a binding arbitration agreement, that the contract was unconscionable and that it was a contract of adhesion. The court found that there was no power of attorney or other express authority to act and, in the absence of authority, there was no actual or implied agency. Next, applying a three prong test, the court found no apparent authority to act because the resident did nothing to indicate an express or apparent authority existed. Finally the court looked at Mississippi statutes to determine whether there was statutory authority as a health care surrogate to sign the arbitration agreement. Finding that the Mississippi Supreme Court had not reached the issue, the court reviewed cases from other jurisdictions and distinguished authority to make health care decisions from authority to terminate legal rights. The court found that resident’s sister did not have authority to terminate legal rights. There was no authority to create a binding agreement. The action to compel arbitration was dismissed.

Note: This case might have a different outcome following Covenant Health Rehab of Picayune, L.P. v. Brown, 2007 Miss. LEXIS 43 (Miss. 2007), reviewed below.

Mariner Healthcare, Inc. v. Green, 2006 U.S. Dist. LEXIS 37479 (D. Miss. 2006). On November 7, 2002, when resident was admitted to a nursing home, her daughter signed an agreement for arbitration. On August 23, 2004, a nursing home negligence case was filed in State court. Mariner then filed a federal action to compel arbitration. Fifth circuit precedent indicates the court should determine (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement. The burden of proving whether the arbitration agreement exists rests on the party seeking to invoke the agreement. Relying on Mariner Health Care, Inc. v. Estate of Rhodes, 2005 U.S. Dist. LEXIS 42650 (D. Miss. 2005), the court first examined whether there was express or implied authority, demonstrated by documentation or evidence, that the resident gave her daughter authority to sign the agreement. Next, the court examined whether there was any apparent authority, which would be determined by acts of the principal and good faith reliance by the third party. Finally, the court looked for statutory authority that might allow a surrogate to make decisions for an incompetent or incapacitated patient. Mariner produced no evidence to satisfy any of these tests and, thus, failed to show that the resident’s daughter had authority to sign away the resident’s right to trial by jury.

Hogan v. Country Villa Health Services, 2007 Cal. App. LEXIS 289 (Cal. Ct. App. 2007). Children of deceased nursing home resident sued nursing home. The trial court denied the nursing home’s motion to compel arbitration and the nursing home appealed. The resident had executed a California Probate Code § 4701 health care power of attorney that impliedly included the power to execute contracts for nursing home admission. The power of attorney did not restrict the powers of the agent. Relying on Garrison v. Superior Court, 132 Cal. App. 4th 253 (Cal. Ct. App. 2005), the court held that the holder of a health care power of attorney has authority to enter into an arbitration agreement. The case was remanded for determination as to whether California Code of Civil Procedure § 1281.2 applied (providing that arbitration can be delayed until issues that are not subject to arbitration are resolved). The court rejected contrary holdings in Goliger v. AMS Properties, Inc., 123 Cal.App.4th 374 (2004) and Pagarigan v. Libby Care Center, Inc., 99 Cal.App.4th 298, (2002), distinguishing them because in each case the putative agent did not hold a health care power of attorney. Decided: March 1, 2007.

Note: This is a poorly reasoned opinion. A health care power of attorney is for the purpose of making health care decisions, not financial and legal decisions. Unfortunately, it creates and additional moving target for victims of nursing home abuse who wish to hold wrong-doer’s accountable. Now, not only must they limit their durable powers or attorney but, at least in California, they must also limit their agent’s authority under a health care power of attorney.

Flores v. Evergreen at San Diego, LLC, 2007 Cal. App. LEXIS 348 (Cal. Ct. App. 2007). Resident suffering from dementia was admitted to nursing facility. Husband signed admissions documents including two arbitration agreements. California law prohibits including the arbitration agreement in the admissions agreement so it was a separate document. Husband signed the arbitration agreement on a line labled “Legal Rep/Responsible Party/Agent.” Husband did not hold a power of attorney and had not been appointed guardian or conservator. In February, 2005, nine months after the documents were signed, husband became resident’s attorney-in-fact. In August 2005, husband brought a negligence action on behalf of resident. In December 2005, the nursing home filed a motion to compel arbitration. The trial court denied the motion, finding “no evidence that the purported principal (Josephina Flores) did anything which caused [Evergreen] to believe that her husband was her agent.” On appeal, the nursing facility argued that husband’s status as spouse gave him authority to bind the resident. The court of appeals found that the spousal relationship alone is insufficient to confer authority to to agree to an arbitration provision in a nursing home admission contract. The court distinguished prior case law allowing a health care agent to bind the resident since the husband did not hold a health care power of attorney. Thus, there was no express or implied agency. Further, there was no apparent agency since the conduct of the principal must evidence some consent or ratification for that theory to apply. Execution of a power of attorney after the arbitration agreement was signed does not prove agency at the time it was signed and does not prove that the resident intended to ratify the arbitration agreement. The nursing facility’s evidence that husband “acted as if he were Josephine’s agent” was insufficient to confer agency status since it also requires conduct on the resident’s part to confer that status. The nursing facility’s argument that husband had statutory authority, a s a health care surrogate, to bind resident was rejected. Although the statute confers authority to make medical decisions, it does not convey authority over arbitration decisions. The court reviewed various statutes relating to health care decision making and nursing home admissions and found that the legislative scheme recognizes that it may be necessary to admit a relative to a nursing home even when there is no person with a recognized legal authority to act on behalf of the patient; however, the court found it could not conclude from those statutes that the legislature intended to confer on relatives the authority to make a decision concerning arbitration. Unlike admission decisions, the decision to agree to an arbitration provision in a nursing home contract is not a necessary decision that must be made to preserve a person’s well-being. “Given the Legislature’s extensive regulation of arbitration agreements, combined with the facts that an arbitration agreement waives legal rights and is not necessary to preserve health, we cannot conclude that the Legislature intended by implication to extend authority over the arbitration decision to next of kin.”

Note: This is one of the few cases expressly recognizing that the decision to agree to arbitration is distinct from necessary health care decisions.

Alterra Healthcare Corp. v. Estate of Linton, 2007 Fla. App. LEXIS 2727 (Fla. 1st DCA 2007). Plaintiff filed suit for negligence and violations of the Florida Nursing Home Residents Act (Plaintiff was beaten and raped). Defendants moved for arbitration. Plaintiff argued that the resident never signed the arbitration agreement and her son, who signed it, had no authority to do so. Plaintiff also argued that the arbitration agreement was substantively and procedurally unconscionable because it included a $250,000 cap on non-economic damages and a total waiver of punitive damages. Plaintiff also argued that the agreement did not apply to an employee defendant since she was not a party to the agreement. The trial court compelled arbitration, but ruled that the provisions limiting compensatory and punitive damages were void and unenforceable as against public policy and that claims against the employee defendant were not subject to arbitration except to the extent Plaintiff sought to hold the nursing home vicariously liable for her conduct; the court found that a severability clause allowed reformation of the agreement. On appeal, Defendants argued that the trial court had no authority to determine the validity of the arbitration agreement as part of a motion to compel. The court of appeals ruled otherwise, holding that doing so step one under the court’s analysis in Seifert v. U.S. Home Corp, 750 So.2d 633, 636 (Fla. 1999). The also rejected Defendants’ argument that Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) prevents the court from reforming the agreement. “In Buckeye, the Supreme Court reaffirmed the general rule that “a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.” See Buckeye, 126 S. Ct. at 1210. The defendants here unconvincingly argue that the plaintiff challenged the entire residency agreement, rather than the arbitration agreement alone, based on its mischaracterization of the limitation of liability clause as “outside” the arbitration provision. However, the limitation of liability clause is plainly part of the arbitration provision, as it is expressly incorporated by reference therein.” The court then rejected Defendants’ arguments that the limitations on liability did not violate public policy; the Resident Rights Act is a remedial statute designed to protect residents and the agreement would defeat that purpose by eliminating punitive damages and capping non-economic damages. The court reversed the trial court’s finding that the arbitration agreement did not apply to the employee defendant. Where the arbitration agreement would include persons within the respondeat superior doctrine, claims against the company’s employees may be subject to arbitration even though the employee did not sign the agreement. In Plaintiff’s cross appeal, the court found that the wrongful death beneficiary was bound by the arbitration agreement, finding that she was an intended beneficiary of the agreement; there was no discussion in the appeal of Plaintiff’s argument that the son did not have authority to sign the agreement. Plaintiff also argued that the arbitration agreement could not be reformed, but the court found that severability clause allowed the trial court to reform the agreement.

Note: Following this case, you should expect limitations on damages to appear in admissions agreements or in free-standing agreements, outside the arbitration agreement itself. You should also expect severability clauses to appear in arbitration agreements.

Alterra Healthcare Corp. v. Bryant, 937 So. 2d 263 (Fla. 4th DCA 2006). Both parties appealed after the court severed limitations on damages but compelled arbitration. In 2004, Plaintiff filed suit for negligence and violations of the Assisted Living Facilities Act. Alterra moved to compel arbitration because the resident’s agent, who held a power of attorney, signed the Residency Agreement containing an arbitration provision. The court compelled arbitration but found that the arbitration provision’s exclusion of punitive damages, limit on non-economic damages, and prohibition against attorney’s fees were void as contrary to public policy, since Fla. Stat. Chapter 400 is a remedial statute, and because the discovery limitations and limitations on appeal were “egregiously unconscionable.” On appeal the court upheld the trial court in striking limitations on damages; the Assisted Living Facility Act is remedial and an arbitration agreement that would defeat its purpose is unenforceable. Alterra argued that the resident waived statutory rights and, therefore, the agreement was enforceable. However, the agreement provided that it was governed by the Florida Arbitration Code and, since the code provides for a limited right of appeal, a complete waiver of the right to appeal violates public policy. Alterra argued that the Court had no authority to determine the validity of the limits on damages and that they were issues for the arbitrator, citing Buckeye, supra, as well as Beaver Coaches, Inc. v. Revels Nationwide R.V. Sales, Inc., 543 So.2d 359 (Fla. 1st DCA 1989), and Rollins, Inc. v. Lighthouse Bay Holdings, Ltd., 898 So.2d 86 (Fla. 2d DCS 2005). The Court found the cases were distinguishable because Plaintiff challenged the specific arbitration provisions, including the limitation on liability. In Plaintiff’s cross appeal, the Court reviewed the power of attorney, finding that it gave the resident’s agent power to “transact all business, make, execute and acknowledge all contracts.” Fla. Stat. § 709.08(6) provides that unless otherwise stated in the durable power of attorney, the power of attorney applies to any interest in property. The court noted that the power of attorney did not prohibit the agent from consenting to arbitrate claims on behalf of the principal. Plaintiff then argued that the limitations on damages rendered the entire contract void; the court held otherwise since the contract included a severance clause. Plaintiff’s final argument, that the contract was not signed as to one of the Defendants and therefore unenforceable, was rejected because the parties had performed under the contract.

Note: This case seems to suggest the result would be different if the power of attorney expressly excluded the right to arbitrate.

SA-PG-Ocala, LLC v. Stokes, 935 So. 2d 1242 (Fla. 5th DCA 2006). Defendant nursing home moved to compel arbitration. The trial court denied the motion and the nursing home appealed. The agreement provided that controversies would be arbitrated pursuant to Alternative Dispute Resolution Service Rules of Procedure for Arbitration of the American Health Lawyers Association. Rule 6.06 provided that the “arbitrator may not award consequential, exemplary, incidental, punitive or special damages against a party unless the arbitrator determines, based on the record, that there is clear and convincing evidence that the party against whom such damages are awarded is guilty of conduct evincing an intentional or reckless disregard for the rights of another party or fraud, actual or presumed.” In affirming the trial court, the court found that requiring clear and convincing evidence would dismantle the protections afforded nursing home residents by the legislature and would be contrary to the Nursing Home Residents Act. The nursing home cited Rollins, supra, arguing that the arbitrator should determine whether the remedial limitations render the contract unenforceable; the court disagreed, finding that in Rollins the court initially determined whether the arbitration agreement was unconscionable and this agreement did not survive that threshold inquiry. Defendant then argued that the AHLA rules could be severed. The Court held otherwise since there was no severability clause and the rules were incorporated into the arbitration agreement.

Bland v. Health Care & Ret. Corp. of Am., 927 So. 2d 252 (Fla. 2nd DCA 2006). Order compelling arbitration was affirmed. Four days after admitting her mother to a nursing home, Ms. Coker, the resident’s daughter, signed documents which included an arbitration and limitation of liability agreement. The agreement was clearly worded, conspicuous and separate from other documents. “The Agreement was intended to be signed by “Resident, Guardian or Other Legal Representative.” The nature of Ms. Coker’s authority to execute the Agreement for her mother was not addressed in this appeal.” The agreement offset medical expenses paid by collateral sources, limited non-economic damages to $250,000, provided that interest and punitive damages could not be awarded, limited discovery and waived attorney’s fees. The court noted that the agreement limited the resident’s remedies, should she prevail, to less than she would be entitled to under the Nursing Home Residents Act. To prevail on a theory of unconscionability, Plaintiff must show both procedural and substantive unconscionability. “Procedural unconscionability relates to the manner in which a contract is made and involves consideration of issues such as the bargaining power of the parties and their ability to know and understand the disputed contract terms…. Substantive unconscionability, on the other hand, requires an assessment of whether the contract terms are “so ‘outrageously unfair’ as to ‘shock the judicial conscience.’” In finding an absence of procedural unconscionability, the court examined the deposition of the admission direction. “[S]he spent approximately two hours with Ms. Coker on the day Ms. Coker signed the Agreement and other documents. Ms. Coker had ample opportunity that day to review and ask questions about any of the documents. Ms. Coker was not rushed or forced to sign the Agreement. Furthermore, Mrs. Bland’s continued stay at Heartland was not conditioned on Ms. Coker signing the Agreement. … Refusal to sign would not have led to Mrs. Bland’s expulsion from Heartland.” There was also a three-day revocation period. Having determined that the agreement was not procedurally unconscionable, the court declined to reach substantive unconscionability. The court was mindful that other courts have refused to uphold agreements limiting remedies but found nothing in the Nursing Home Residents Rights Act prohibiting contracts that limit liability. Citing Buckeye and other cases, the court found that the arbitrator could not decide whether to enforce them.

Estate of Williams v. Manor Care of Dunedin, Inc., 923 So. 2d 615 (Fla. 2nd DCA 2006). The Estate appealed after the trial court granted Manor Care’s motion to compel arbitration. Resident’s wife had signed admissions agreement and an arbitration and limitation of liability agreement. After the resident filed suit, Manor Care answered, making a demand for trial by jury. Later it moved to compel arbitration. On appeal, Plaintiff argued that Manor Care waived its right to trial by jury. The Court found that Manor Care had a duty to safeguard its right to arbitration if it wished to preserve it. By answering and demanding jury trial without mentioning arbitration, Manor Care waived its right to arbitration and could not reclaim it without the other party’s consent. The trial court erred by requiring the Estate to show prejudice; no prejudice is required for there to be an effective waiver. The trial court also erred by requiring the Estate to show that Manor Care had knowledge of the right to arbitrate; each party and their counsel are charged with knowledge of the agreement.

Fletcher v. Huntington Place, 2007 Fla. App. LEXIS 4681 (Fla. App. 2007). Nursing home moved to compel arbitration, which was denied because it designated the American Health Lawyer’s Association as the arbitrator (which no longer accepts arbitration of health care disputes where binding arbitration agreements are signed pre-injury). The court found it could not re-write the agreement for the nursing home. “Given the nature of the relationship between a nursing home and its patient, the courts ought to expect nursing homes to proffer form contracts that fully comply with Chapter 400, not to revise them when they are challenged to make them compliant. Otherwise, nursing homes have no incentive to proffer a fair form agreement.” The court also found that the agreement was not executed by the resident’s agent. Decided: March 30, 2007.

Kindred Hosps. Ltd. P’ship v. Lutrell, 190 S.W.3d 916 (Ky. 2006). Plaintiff filed a negligence and wrongful death suit against the nursing home. Kindred filed a motion to dismiss or, in the alternative, stay litigation pending arbitration. The trial court denied the motion, finding that the resident’s daughter had no express or implied authority to bind the resident when the arbitration agreement was signed at admission. Kindred then sought relief in the court of appeals alleging the court erred in denying its motion. The court of appeals denied Kindred’s request for interlocutory relief, finding that Kindred’s motion was improperly taken. The Kentucky Uniform Arbitration Act provides for a direct appeal following denial of arbitration rather than a request for interlocutory relief. The Supreme Court found that either method of appeal is acceptable, but that a party one has “one bite at the apple.” However, if interlocutory relief is sought, the statute requires a showing of extraordinary cause, which Kindred failed to do.

Kindred Healthcare, Inc. v. Peckler, 2006 WL 1360282 (Ky. 2006) (not reported in S.W.3d or on Lexis). Kindred filed a motion for an emergency protective order after the trial allowed limited discovery on the sole issue of whether the arbitration agreement executed on behalf of the resident was void. Among the matters over which Kind sought protection was the relationship between Kindred and the service that administers the ADR program, as well as Kindred’s ADR training program. Kindred then petitioned the Court of Appeals for a writ of prohibition to prevent the trial judge from presiding over the challenge to the ADR agreement or from enforcing his discovery order. The court of appeals denied the application. The Supreme Court affirmed. Online at: http://floridaarbitrationlaw.com/cases/kindred_v_peckler.pdf.

Miller v. Cotter, 2007 Mass. LEXIS 189 (Mass. 2007). Resident’s son (Miller) brought suit against physician (Cotter) as well as nursing home and three employees after his father’s death. Miller had signed admission papers including an arbitration agreement. The arbitration agreement, within the admission agreement, was separated from other language, was not a condition of admission and fact that it was an arbitration agreement was noted in capital letters at the top of the page. The arbitration agreement itself was a two page single spaced document with one-half of the second page being devoted to signatures. The agreement included the following language: “[T]he Admission Agreement evidences a transaction involving interstate commerce governed by the Federal Arbitration Act. It is understood and agreed by Facility and Resident that any and all claims, disputes, and controversies . . . arising out of, or in connection with, or relating in any way to the Admission Agreement or any service or health care provided by the Facility to the Resident shall be resolved exclusively by binding arbitration . . . in accordance with the National Arbitration Forum Code of Procedure . . . and not by a lawsuit or resort to court process.” When deposed, Miller admitted that the admissions employee summarized the document and stated it was not a condition of admission; Miller’s position was that he was under stress at the time, but admitted the stress was not caused by the nursing home’s action. Miller had a degree in English, worked as an intelligence office with the air force and spent twenty-seven years in the insurance industry working, among other roles, as a claims adjuster. After suit was filed, the nursing home answered, including the arbitration agreement as a defense. The trial court denied the motion to compel arbitration because requiring arbitration against one party, but not all parties was inefficient. On appeal, Miller’s primary argument was that the agreement was unconscionable. The court rejected those arguments and declined to find a public policy reason for refusing to enforce nursing home arbitration agreements. The court of appeals found no rule or precedent supporting the trial court’s denial of the motion to compel based on judicial economy. “It is true that, if arbitration is ordered, Miller will be forced to proceed against Cotter in one forum (court) and the Birchwood defendants in another (arbitration). Whether this is inconvenient, duplicative, or inefficient is not determinative. It is the necessary result of the choice that Miller made when he signed the arbitration agreement.” The decision below was reversed and arbitration was compelled. Decided: March 30, 2007.

Note: This decision was reported in Massachusetts Lawyers Weekly at http://www.masslaw.com:80/news0409.cfm

Covenant Health Rehab of Picayune, L.P. v. Brown, 2007 Miss. LEXIS 43 (Miss. 2007). After Plaintiffs filed a wrongful death suit, Defendants filed a motion to compel arbitration. Plaintiff argued the resident was incompetent and incapable of understanding the agreement and that the agent had no authority to enter into an arbitration agreement. The court found that resident’s health care agent had authority to bind the agent “in matters of health care.” The trial court struck several clauses in the admissions agreement including the arbitration provision. The court of appeals affirmed the trial court’s finding that the agreement was not procedurally unconscionable. It also affirmed striking the limits on liability, waiver of punitive damages, providing different judicial remedies, requiring all resolution costs from one party and limiting the statute of limitations. The court reversed the trial court’s denial of the motion to compel arbitration, reversed the trial court for striking provisions binding the estate and heirs to arbitration and remanded with instructions to require arbitration.

Bedford Care Center-Monroe Hall, LLC v. Lewis, 923 So. 2d 998 (Miss. 2006). Conservator initialed pages indicating she read arbitration agreement, but did not sign the agreement. Facility made two attempts to have her sign the arbitration agreement and each time she declined. Resident continued to receive care in the facility. Plaintiff submitted an affidavit stating: “To the best of her memory and knowledge she had a reservation about agreeing to the arbitration provision in the admissions agreement. Therefore, she did not initial the top of page five, nor did she sign at the bottom of page five or the top of page seven. …Approximately one week after returning the packet to Bedford, she received another telephone call stating she had not signed the agreement in certain places. … Bedford returned the admission agreement to Lewis for more signatures. …Lewis initialed the top of page five to signify she had carefully read the arbitration provision. However, she did not agree to the provision and did not sign at the bottom of page five where indicated and highlighted.” Based on these facts, the court found there was no agreement to arbitrate and affirmed the trial court’s denial of the motion to compel.

Cleveland v. Mann, 942 So. 2d 108 (Miss. 2006). The decision of the trial court was reversed and arbitration was compelled. On September 17, 2002, Mann underwent a total gastrectomy for stomach cancer. On June 18, 2003, after the surgery byt prior to surgery to repair a hernia, he signed an arbitration agreement. During the hernia surgery, his bowel was punctured. Following a third surgery, it was discovered that Mann had liver cancer; he died on August 27, 2003. A wrongful death action was filed on April 15, 2004. A motion to compel was filed on May 19, 2004 based on the agreement signed prior to the second surgery. Plaintiffs argued that Mann did not enter into the agreement knowingly, voluntarily and intelligently and that, even if he did, the agreement would not bind them as wrongful death beneficiaries. The trial court entered an order on February 24, 2005, finding that the agreement was one of adhesion and was unconscionable. Plaintiff argued that the procedure for which the agreement was signed was the hernia operation; the court in reviewing the agreement found that it covered “any dispute, claim or controversy arising out of or relating to the performance of medical services.” Regarding whether it was unconscionable, the court found that the patient’s inability to read did not render it invalid. Without reaching whether the inability to read made the explanation suspect, the court noted there was an explanation of the arbitration provision in the agreement and that it was headed by a notice in all bold, all capital text. “The claim of a lack of voluntariness fails for several reasons. First, Mann initialed on the second page of the agreement next to the term stating, “[p]atient is not in need of emergency care or under immediate stress.” Second, the agreement provides for rescission within fifteen days of signing the agreement, and Mann had nineteen days before his surgery. Additionally, the agreement states, “[b]efore signing the Agreement the Patient may make written changes in the Arbitration Agreement if they so desire and present these to the Clinic for approval.”” The agreement was no substantively unconscionable because it presented Mann with a fair forum to raise disputes, did not limit his legal rights or the Defendants’ liability. Other arguments made at the appellate level were rejected because they were not raised with the trial court. The court found that the agreement was not procedurally or substantively unconscionable. Because a wrongful death action is only allowed to bring the claims that the decedent could have brought if he had survived, the heirs were bound by the agreement. Decided: August 31, 2006.

Finney v. Nat’l Healthcare Corp, 193 S.W.3d 393 (Mo. Ct. App. 2006). On admission to the nursing home, resident’s granddaughter executed an admission contract that included an arbitration agreement. Later, after resident died, the resident’s daughter filed a wrongful death action. The trial court denied the motion to arbitrate finding that Missouri law applied, that it was not pre-empted by the Federal Arbitration Act, that there was no basis to conclude interstate commerce was present and that the mandatory warning required by Missouri law was not present. On appeal, the case was reviewed do novo. The appeals court found it unnecessary to reach the trial court’s conclusions regarding pre-emption because there was no agreement to arbitrate the wrongful death claim. A wrongful death claimant does not stand in the resident’s shoes. “The wrongful death claim does not belong to the deceased or even to a decedent’s estate. Campbell v. Callow, 876 S.W.2d 25, 26 (Mo. App. S.D. 1994). “‘The wrongful death act creates a new cause of action where none existed at common law and did not revive a cause of action belonging to the deceased.'” O’Grady v. Brown, 654 S.W.2d 904, 910 (Mo. banc 1983) (quoting State ex rel. Jewish Hospital v. Buder, 540 S.W.2d 100, 104 (Mo. App. St.L.D. 1976)). A wrongful death action is not a transmitted right nor a survival right but is created and vested in the statutorily designated survivors at the moment of death.” The court expressly rejected the notion that the wrongful death claim is covered by the agreement because it arises out of the same set of circumstances. Since the wrongful death claimant was a non-party to the initial agreement, she was not bound by it.

Manley v. Personacare of Ohio, 2007 Ohio 343 (Ohio Ct. App. 2007). After admission to the nursing home, resident met with the admissions director and signed a “resident admission agreement” and an “alternative dispute resolution agreement between resident and facility.” Later, resident suffered from recurring falls, was permitted to get sick and died as a result of treatment. Daughter filed a wrongful death action against nursing home. Nursing home moved to stay and to have matter referred to arbitration. In addition to filing the agreements, nursing home filed (1) competency evaluation; and (2) and copy of a pamphlet regarding alternative dispute resolution. The trial court granted Defendants’ motion and Plaintiff appealed alleging the agreement was unconscionable. “Under Ohio law, a contract clause is unconscionable where one party has been misled as to its meaning, where a severe imbalance of bargaining power exists, or where the specific contractual clause is outrageous. n9 Unconscionability is generally recognized to include an absence of meaningful choice on the part of one of the parties to a contract, combined with contract terms that are unreasonably favorable to the other party.” To prevail, Plaintiff must show contract is substantively unconscionable (not commercially reasonable) and procedurally unconscionable (factors bearing on the relative bargaining position of the contracting parties, including their age, education, intelligence, business acumen and experience, relative bargaining power, who drafted the contract, whether the terms were explained to the weaker party, and whether alterations in the printed terms were possible). The court examined the resident’s age, education, the fact that she had been an assault victim the week prior to admission, her stress on admission and the relative bargaining power of the parties and found the agreement procedurally unconscionable. However, the agreement, while troubling, contained a warning that rights were being waived, a statement that admission was not contingent on it being executed and a 30 day right to rescind; therefore the court found it was not substantively unconscionable despite a troubling provision providing for attorney’s fees to the prevailing party. The court rejected plaintiff’s argument that there was on consideration for the agreement. The consideration resident received was the right to have disputes with the nursing home resolved through arbitration. The court rejected plaintiff’s argument that the arbitration agreement was an illegal additional consideration in addition to the Medicaid rate.

Hanson v. Valley View Nursing & Rehab. Ctr., 2006 Ohio 3815 (Ohio Ct. App. 2006). Trial court granted motion to stay pending arbitration. Affirmed on appeal. On appeal Plaintiff argued that the agreement was procedurally and substantively unconscionable. Reviewing the facts, the court observed that “[a]n unconscionable contract clause is one in which there is an absence of meaningful choice for the contracting parties, coupled with draconian contract terms unreasonably favorable to the other party.” Procedural unconscionability concerns the formation of the agreement and occurs when there is no voluntary meeting of the minds. Substantive unconscionability goes to the contract terms themselves. Regarding procedural unconscionability, plaintiff argued it was a form contract, the resident had no authority to change its terms, he was not represented by counsel, and he did not realize he was waiving his right to a jury. The court rejected these arguments finding that the agreement was not a condition of admission so he could have rejected the entire agreement. There is no requirement in Ohio that an attorney be present when a contract is signed. Regarding notice, the agreement includes a warning that jury rights are waived in bold, capital letters. Finding that the agreement was not procedurally unconscionable, the trial court was affirmed.

Bruner v. Timberlane Manor L.P., 2006 OK 90 (Okla. 2006). Decided 12/12/2006. Plaintiffs filed suit for negligence and wrongful death. The nursing home appeared specially and moved to dismiss or in the alternative to compel arbitration. The trial court denied the motion to compel arbitration. The nursing home argued that the Federal Arbitration Act applied because it received Medicare payments originating out of state, complied with Medicare and Medicare rules and regulations, purchased supplies from out of state and used instruments of interstate commerce such as telephones and the postal service. On appeal, the court found that the Federal Arbitration Act did not apply to the contract at issue and affirmed the trial court. The court declined to find that Congress intended funding under the Medicare and Medicaid programs to be indicative of interstate commerce. Instead, the transaction was found to be a “profoundly local transaction – in state nursing home care provided to an Oklahoma individual by an Oklahoma entity licensed under Oklahoma law.” Further, the agreement itself stated that it would be governed by Oklahoma law. The court then held that Oklahoma’s Nursing Home Care Act (a specific statute) governed over Oklahoma’s Uniform Arbitration Act (a general statute) in this case and upheld the decision below.

Ostroff v. Alterra Healthcare Corp., 433 F. Supp. 2d 538 (D. Pa. 2006). At admission to assisted living facility, daughter who was completing documents indicated she wanted to have residency agreement reviewed by an attorney. The facility employee said that would be “pointless” because the facility would not accept any changes and resident would not be allowed to move in without a signed agreement. The agreement provided for arbitration and limited discovery, disallowing all depositions except expert witnesses. It provided for a division of costs between the parties and capped all non-economic damages at $350,000. Resident sued for injuries. Facility filed a motion to compel. The court had no difficulty determining that the agreement was procedurally unconscionable due to the facility’s superior bargaining position and the lack of choice. In finding that the agreement was substantively unconscionable, the court found that the limitations on discovery would put plaintiff at a distinct disadvantage proceeding to arbitration and would impair her ability to present her claims. The court also found it noteworthy that the facility reserved its right to proceed in court for the purpose of evicting resident while requiring resident to waive her right to access to the courts. Decided: June 7, 2006.

Sloan v. Nat’l Healthcorp, L.P., 2006 Tenn. App. LEXIS 580 (Tenn. Ct. App. 2006). When defendant answered the complaint it alleged the dispute was subject to arbitration and asked for a jury trial. After four months of discovery, Defendant moved to compel arbitration. The trial court denied the motion ruling that Defendant could not withdraw its jury demand without Plaintiffs’ consent. On appeal, the court found that Defendant could make alternative demands in its complaint without running afoul of Tenn. R. Civ. Pro. 38.05 because when the answer was filed it did not know whether the arbitration provision would be enforceable. Decided: August 30, 2006.

Owens v. Nat’l Health Corp., 2006 Tenn. App. LEXIS 448 (Tenn. Ct. App. 2006). The trial court denied a motion to compel arbitration because the agent had no authority to execute the arbitration agreement. On appeal, the court found that the health care agent “had the authority to execute on King’s behalf any waiver, release, or other document which may be necessary to implement health care decisions that Daniel was authorized to assist or to make on King’s behalf.” The court found no Tennessee case deciding whether a health care proxy’s authority included the power to waive a jury trial. Citing cases from other jurisdictions, the court held a health care proxy’s authority to execute any necessary waiver, release, or other document for implementing health care decisions includes executing an admission contract which includes an agreement to arbitrate. The court reasoned that power to agree to care necessarily includes power to negotiate payment and that it is common for the same parties to enter into alternative dispute resolution agreements. The court then rejected other arguments, determining that requiring arbitration is not an additional consideration prohibited by Medicaid, that it was not unconscionable, and that it did not breach a fiduciary obligation because arguendo, if there was a fiduciary relationship, the arbitration provision was neutral and gave neither party an advantage. The court rejected Plaintiff’s argument that the agreement terminated upon Plaintiff’s discharge from the nursing home because claims arising out of the stay at the nursing home remain subject to arbitration. The court rejected Plaintiff’s contention that only the facility could compel arbitration and held that all of the related entities were entitled to arbitration. Finally, the court rejected Plaintiff’s contention that it was without a remedy unless the motion to compel was denied because the parties had stipulated that the arbitrator designated in the agreement would not accept the case; Tennessee has a “savings” statute that allows appointment of another arbitrator where the initial method of arbitration fails. Decided: June 20, 2006. An appeal was granted on November 20, 2006, in Owens v. Nat’l Health Corp., 2006 Tenn. LEXIS 1089 (Tenn. 2006).

Note: Reported in Healthcare ADR Reporter (National Arbitration Forum, Fall, 2006), at http://www.arb-forum.com/users/naf/documents/Newsletters/HealthcareADRReporter-Vol02No01.pdf.

Owens v. Nexion Health at Gilmer, Inc., 2007 U.S. Dist. LEXIS 22522 (D. Tex. 2007). Plaintiffs sued for negligence and nursing home moved to compel arbitration. Plaintiffs argued that the agreement could not be enforced because it was a pre-injury agreement subject to AHLA rules and is invalid in light of the AHLA’s revised ruled. The court found otherwise. “[T]he AHLA rules provide that “[i]n limiting the circumstances under which the Service will administer the arbitration of a consumer health care liability claim, the Service does not intend to affect the enforceability of an agreement to apply the rules — only that the Service will not administer the arbitration.” Dkt. No. 4, Ex. B at § 1.01 (emphasis added). Further, the AHLA rules specifically provide that the AHLA Dispute Resolution Service will administer a consumer health care liability claim if “a judge orders that the Service administer an arbitration under the terms of a pre-injury arbitration agreement.” Therefore, this Court may enforce the Arbitration Agreement as written.” Arbitration was compelled. Decided: March 19, 2007.

Giordano v. Atria Assisted Living, Va. Beach, LLC, 429 F. Supp. 2d 732 (D. Va. 2006). Plaintiff brought wrongful death action against assisted living facility. During the admission process, resident’s daughter signed admission papers without a power of attorney and without discussing it with the resident. After suit was filed, the facility filed a motion to compel arbitration. The matter was referred to the magistrate. The court found no evidence that there was mutual assent to the agreement. Nonetheless, citing Int’l Paper Co. v. Schmabedissan Maschinen & Anlagen GMBH, 206 F.3d 411 (4th. Cir. 2000), there are five instance where a non-signatory to a contract may be bound: incorporation by reference, estoppel, agency, assumption and veil piecing/alter ego. The facility argued that agency and apparent authority applied. Because the daughter had not discussed the matter with the resident, the resident was not present and there was no power of attorney, the court found there was no agency. In determining there was no apparent agency, the court found there must be reasonable reliance and: “Atria is a sophisticated, corporate client. They should be familiar with the usual devices utilized to ensure valid contract formation when a principal does not sign in person – namely powers of attorney. In this case Atria did nothing to ensure that Ms. Giordano was a lawful agent of Ms. Brennan. They did not require that she possess a power of attorney before she signed the contract, and there is no evidence that they ever inquired whether she had authority to sign for Ms. Brennan. Because of these facts, this Court finds that Atria did not reasonably rely upon the signature of Ms. Giordano to their detriment.” The court went on to find that even if there was an agency relationship, it was limited in scope and did not encompass the right to waive trial by jury. The court also noted, in dicta, that estoppel would not apply since the suit was not based on the contract. Decided March 29, 2006.

See also D. McGuffey, Nursing Home Arbitration Agreements