chevron-down Created with Sketch Beta.
March 07, 2016 Articles

Another Nursing Home and Arbitration Clause in Alabama

By Gary C. Norman

In thinking of Alabama, a film starring Reese Witherspoon may appear from the depths of the brain. A Supreme Court chief justice railing against the LGBT community (based on his interpretation of biblical dictates) may even come to mind. Little would, however, one think Alabama would have the complex issue of the intersectionality among health care and supports and services and enforceability of arbitration clauses.

In 2015, the Supreme Court of Alabama decided on just this issue in Diversicare Leasing Corp. v. Hubbard, No. 1131027 (Ala. Sept. 30, 2015). In simple terms, the court decided whether an arbitration clause was enforceable in a wrongful death claim where, because of incapacity, an individual did not sign the arbitration agreement. Federal substantive law provides that state contract legal principles govern whether the parties to a case agreed to arbitrate their conflict. Ex part Roberson, 749 So. 2d 441, 445 (Ala. 1999). In Diversicare, the court decided in favor of a next of kin to a person with severe disabilities, affirming the trial court's decision to deny the motion to compel arbitration where a contract for admission to a long-term care facility provided for any conflicts among the resident and the facility to be submitted to arbitration.

The mother of a severely disabled individual signed a mountain of admissions paperwork, including a document with an arbitration clause, to admit that individual to a long-term care facility. She comprised the individual's sole custodian parent rendering all health-care decisions. Of interesting note, she also comprised the federal payee on behalf of the individual for federal benefits. As such, she executed the contractual relationship without having official legal authority or without having otherwise legal capacity, such as being the official legal guardian of the individual. The individual died from care delivered at the facility. The mother filed a wrongful death action to which the long-term care facility claimed the case in controversy needed to be submitted to arbitration per the admissions paperwork. The court found that the mother signed and executed the arbitration clause without the legal authority or capacity to bind the resident, or disabled individual who was mentally incompetent, to the arbitration agreement. After extensive review of Alabama case decisions, the court concluded that the resident could not be bound to the arbitration agreement because he was mentally incompetent and incapable of authorizing his mother, who did not otherwise hold or possess the proper legal authority, to act on his behalf in executing the arbitration agreement.

As the court examined, the arbitration agreement provided: "If [the] Resident is unable to consent or sign this Agreement, this Agreement shall be executed by [the] Resident's Representative." The court also examined that the arbitration agreement defined the "Resident's Representative" as "the resident's Legal Guardian, Attorney-in-Fact, Power of Attorney, or Health Care Sponsor." The arbitration clause also stated: "In the event a representative with such legal authority does not exist, the Resident may authorize a duly appointed person such as the Responsible Party to serve as his/her Representative and to sign this agreement on his/her behalf."

The court extensively reviewed the case decisions, distinguishing the facts of the Hubbard family from where a person, who would be mentally competent but severely ill, authorized a family member—even if not in the context of a power of attorney, an example of an official legal capacity—to sign paperwork. In the analysis of the court, that would, at worst, be apparent authority. Here, while the mother may have signed the arbitration clause, doing so on a blithe basis, this does not per se mean she bound the individual, or in other words, the resident.

Do, however, compare a decision of the court also in 2015 in Troy Health & Rehabilitation Center v. McFarland, No. 1140090 (Ala. Aug. 28, 2015), where a daughter, who held a durable power of attorney, signed paperwork to admit her mother to a nursing home. Here, the court ruled in favor of the nursing home, finding that there was no sign the mother was incompetent in authorizing the daughter to hold a durable power of attorney. Therefore, she held the authority to act on behalf of the mother.

Given the power arguably held by the nursing home lobby, the Supreme Court of Alabama decided (some might state surprisingly decided) in a pro-consumer fashion. Rather, from the analysis apparent by the court, each appeal of an arbitration clause will be notably fact-based in Alabama.

Keywords: litigation, ADR, alternative dispute resolution, Alabama, arbitration clause, nursing home or long-term care contract

Copyright © 2018, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).