Owens v. Nat’l Health Corp., 2007 Tenn. LEXIS 1003 (2007)

On appeal, the Supreme Court of Tennessee found that the primary issue was whether a durable power of attorney for health care authorized the attorney-in-fact to enter into an arbitration agreement as part of a contract admitting the principal to a nursing home and thereby to waive the principal’s right to trial by jury. The Court found that the power of attorney authorized the attorney-in-fact to enter into the arbitration agreement on behalf of the principal. The Court rejected the plaintiff’s arguments that: 1) the arbitration agreement was unenforceable because a material term of the agreement was incapable of performance; 2) the arbitration agreement violated federal law; and 3) pre-dispute arbitration agreements in nursing-home contracts violate public policy. The court remanded the case to the trial court for further proceedings on the question of whether the arbitration agreement was an unconscionable, and thus unenforceable, contract of adhesion.

Mary Francis King (“King”) had executed a Durable Power of Attorney for Health Care naming Gwyn C. Daniel (“Daniel”) and William T. Daniel as King’s attorneys-in-fact. The power of attorney provided:

At any time, my Attorney-in-Fact shall have the right to examine my medical records and to consent to their disclosure whether I am incapacitated or not. I grant to my Attorney-in-Fact the power and authority to execute on my behalf any waiver, release or other document which may be necessary in order to implement the health care decisions that this instrument authorizes my Attorney-in-Fact to assist me to make, or to make on my behalf.This instrument is to be construed and interpreted as a Durable Power of Attorney for Health Care and is intended to comply in all respects with the provisions of Tennessee Code Annotated, § 34-6-201 et seq.; and all terms used in this instrument shall have the meanings set forth for such terms in the statute, unless otherwise specifically defined herein

Three weeks after executing the power of attorney, Kind was admitted to a nursing home. Her agents signed an admission agreement that included an arbitration clause. Later, when King was injured, her conservator filed suit against the nursing home. It filed a motion to compel arbitration. The trial court denied the motion, finding that the power of attorney does not authorize the attorneys-in-fact to make “legal decisions for Ms. King” and found “that the Durable Power of Attorney for Healthcare should not be so broadly construed as to be considered a Power of Attorney for legal care.” The Court of Appeals reversed, concluding that the power of attorney authorized Daniel to make health care decisions on behalf of King and that the decision to admit King to a nursing home is a health care decision.

The Supreme Court found Tennessee Code Annotated section 34-6-201(2) (2001) defines “[h]ealth care” to mean “any care, treatment, service or procedure to maintain, diagnose or treat an individual’s physical or mental condition, and includes medical care as defined in § 32-11-103(5).” Section 34-6-201 then defines “[h]ealth care decision” to mean “consent, refusal of consent or withdrawal of consent to health care.” Tenn. Code Ann. § 34-6-201(3) (2001). Under these two statutory definitions, the decision to admit King to the nursing home clearly constitutes a “health care decision.” Section 34-6-204(b) (2001) provides: Subject to any limitations in the durable power of attorney for health care, the attorney in fact designated in such durable power of attorney may make health care decisions for the principal, before or after the death of the principal, to the same extent as the principal could make health care decisions for such principal if the principal had the capacity to do so . . . .

The court concluded this language includes the power to sign an admissions agreement which includes an arbitration clause. The court indicated its decision was based on the Tennessee Durable Power of Attorney for Health Care Act, but that its decision was consistent with cases from other jurisdictions considering the issue, citing Briarcliff Nursing Home, Inc. v. Turcotte, 894 So. 2d 661 (Ala. 2004); Hogan v. Country Villa Health Servs., 148 Cal. App. 4th 259, 55 Cal.Rptr. 3d 450, 453-55 (Cal. Ct. App. 2007) (citing Garrison v. Superior Court of Los Angeles County, 132 Cal. App. 4th 253, 33 Cal.Rptr. 3d 350 (Cal. Ct. App. 2005)); Sanford v. Castleton Health Care Ctr., L.L.C., 813 N.E.2d 411 (Ind. Ct. App. 2004).

The Court rejected plaintiff’s argument that the arbitration agreement was an additional consideration violating 42 U.S.C. § 1396r(c)(5)(A)(iii) (Supp. 2007) and 42 C.F.R. § 483.12(d)(3) (2006).

The Court noted that the trial court did not determine whether the arbitration agreement was offered on a “take it or leave it basis” which would make it a contract of adhesion. Thus, it was unable to resolve the question of whether the arbitration agreement is unconscionable due to the limited nature of the factual record. It condcluded that the case should be remanded to the trial court for further proceedings on that issue.

Decided November 8, 2007. Opinion at: http://www.tsc.state.tn.us/OPINIONS/TSC/PDF/074/OwensDOPN.pdf

Prior decision: Owens v. Nat’l Health Corp., 2006 Tenn. App. LEXIS 448 (Tenn. Ct. App. 2006). Similar case: Cabany v. Mayfield Rehabilitation and Special Care Center

For a defense oriented analysis of this decision, see Tennessee Supreme Court Unanimously Upholds Nursing Home Arbitration Contracts