On March 22, 2013, the Supreme Court of Alabama (“Alabama Supreme Court”) issued its decision in a case contesting whether a nursing home resident’s representative (one of the daughters of the nursing home resident) bound her father’s nursing home malpractice claim to be arbitrated instead of a jury determining the case. The Alabama Supreme Court stated in its opinion, “while we have held that competent residents of nursing homes may be bound by arbitration agreements executed by their representatives … our cases also indicate that incompetent residents are not so bound.”
In the case that it was deciding, the Alabama Supreme Court found that it was undisputed that the resident’s daughter who signed the arbitration agreement never held a power of attorney for the resident; she stated in an affidavit submitted to the trial court that she was granted “no legal authority by him or anyone else to enter into the [DRA] on his behalf.” Furthermore, “the only evidence in the record in this case indicates that [the resident] is incompetent and thus unable to empower an agent, whether passively or through affirmative acts.”
The Underlying Facts
On January 8, 2012, the nursing home resident, Mr. Means (“Means”), was hospitalized after experiencing stroke and/or heart attack symptoms. On approximately January 25, 2012, he was admitted to Cedar Crest, a nursing home facility operated by SSC Montgomery, to receive rehabilitation and nursing services while he recovered. At the time Means was admitted to Cedar Crest, he was accompanied by his daughter, Michelle Pleasant, who completed the necessary paperwork on his behalf.
Among the paperwork completed and signed by Pleasant was a dispute resolution agreement (“the DRA”) providing that the “parties” waived their right to a judge or jury trial in the event a dispute arose between them and instead agreed to resolve any such dispute by way of a dispute resolution program consisting of mediation and binding arbitration. Pleasant signed her name on the final page of the DRA on a line indicated for the “Signature of Legal Representative or Family Member.”
On March 2, 2012, Means was hospitalized again. On March 6, 2012, another of his daughters, Linda Bolding, whom Means had previously granted a durable power of attorney, sued SSC Montgomery, alleging that Cedar Crest staff had negligently cared for Means, causing him to suffer dehydration, malnourishment, and an untreated infection that combined to result in his hospitalization on March 2.
On April 5, 2012, SSC Montgomery filed both its answer denying Bolding’s allegations and a motion to compel arbitration pursuant to the terms of the DRA. Bolding subsequently filed a response, arguing that it would be improper to enforce the DRA because, she argued, Pleasant had no legal authority to act on Means’ behalf at the time Pleasant executed the DRA. Following a September 12, 2012, hearing, the trial court entered an order denying SSC Montgomery’s motion to compel arbitration. On October 2, 2012, SSC Montgomery filed its timely notice of appeal to the Alabama Supreme Court.
The Alabama Supreme Court’s Decision
The Alabama Supreme Court stated, “The general rule in Alabama is that a nonsignatory to an arbitration agreement cannot be forced to arbitrate her claims … at best Pleasant may have purported to be Means’s legal representative, but that is an insufficient basis upon which to apply the doctrine of apparent authority … [I]n order for a principal to be held liable under the doctrine of apparent authority and estoppel, the principal must have engaged in some conduct which led a third party to believe that the agent had authority to act for the principal.”
The Alabama Supreme Court held, “In conclusion, we hold that Means was not bound by the DRA executed by Pleasant; therefore, Bolding was not bound. However, we emphasize that this conclusion is not reached because Means did not personally execute the DRA. Rather, it is because all the evidence in the record indicates that Means is incompetent. Thus, while Bolding, as the holder of a durable power of attorney granted by Means, may have been able to bind him to an arbitration agreement, Pleasant, as merely a family member or next friend, could not.”
Source SSC Montgomery Cedar Crest Operating Company, LLC v. Linda Bolding, as attorney in fact and next friend of Norton Means, Supreme Court of Alabama, October Term, 2012-2013, No. 1120122.
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