The United States Court of Appeals for the Eighth Circuit (“Federal Appellate Court”) overturned the district court’s order compelling arbitration of the plaintiff’s nursing home wrongful death claim, stating in its opinion filed on July 23, 2019, “based on this record, [the nursing home resident’s son] attempted to sign [the nursing home admission documents containing an arbitration agreement] in a representative capacity; he did not sign a contract with [the defendant nursing home] in his individual capacity … As [the son] was undisputedly not his father’s legal guardian or attorney-in-fact, he lacked the capacity to sign the contract as his father’s representative. Because the district court relied on the existence of a valid underlying agreement between [the defendant nursing home] and [the son] in his individual capacity, we reverse the order compelling arbitration and remand to the district court for proceedings consistent with this opinion.”
The Underlying Facts
On September 2, 2004, a father and one of his sons arrived at the defendant residential rehabilitation center (nursing home), seeking admission of the father. The father was experiencing disorientation, delusions, and hallucinations. As part of the admission process, the father and son received an admission agreement (the Agreement) that included an arbitration agreement and waiver of jury trial. Both the father and the son signed the Agreement, the father as the “Resident” and the son as the “Responsible Party.”
The Agreement defined Responsible Party as a legal guardian, attorney-in-fact, “or some other individual or family member who agrees to assist the Facility in providing for [the resident’s] health, care, and maintenance.” It also noted that “[t]he Responsible Party represents to the Facility that he or she manages, uses, directs or controls funds or assets which may be used to pay for Resident’s Facility charges and/or that he or she tends to make decisions for or otherwise act on behalf of Resident.” It is undisputed that the son was not his father’s legal guardian or attorney-in-fact.
Another son filed a wrongful death lawsuit in Arkansas state court against the defendant nursing home on behalf of his father’s estate after his father died in the nursing home in January 2016. The defendant nursing home filed a separate action in federal court, seeking to stay the state court action and compel arbitration of the wrongful death claim pursuant to the Agreement. The parties then filed competing motions for summary judgment; the district court denied the son’s motion and granted the nursing home’s motion to the extent that it sought to compel arbitration, assuming without finding that the father was incompetent at the time of his admission and finding that the son was not his father’s legal representative, determining that the son, in his individual capacity, entered into a binding arbitration agreement with the nursing home for which his father was the intended beneficiary. The estate subsequently appealed.
The Federal Appellate Court stated that Arkansas courts have repeatedly declined to find that individuals like the son—relatives without power-of-attorney or other legal authority who admit a family member to a nursing home—possess valid authority to bind their relatives to arbitration under a third-party beneficiary theory. The definition of Responsible Party in the Agreement equates a Responsible Party to a legal guardian, attorney-in-fact, or legal representative. The Agreement goes on to state that “[t]he Responsible Party represents to the Facility that he . . . tends to make decisions for or otherwise act on behalf of Resident.” The Federal Appellate Court held, “In the absence of other evidence, including testimony, we find as a matter of law that the term “Responsible Party” as used in the Agreement describes a representative similar to a legal guardian,” which the son was not.
Northport Health Services of Arkansas, LLC v. Posey, No. 18-2459.
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