John T. Brooks and Jena L. Levin at Wealth Management wrote an article on the recent South Carolina case Thompson v. Pruitt Corp. (S.C. App., 2016). ” While the enforceability of arbitration agreements in general isn’t a particularly novel topic, there’s often an added twist in this context when admissions paperwork is signed by the patient’s spouse, child, other relative or personal representative bringing the patient to the facility. In these scenarios, there’s little uniformity regarding whether courts will enforce an arbitration agreement.”
The authors explain the facts behind the Thompson case. In January 2011, a brother and sister had their mother, who suffered from dementia, admitted to a Pruitt Corp. nursing home facility. Under South Carolina’s Adult Health Care Consent Act (the Act), her children were authorized to make decisions concerning her health care because she was unable to consent. Upon arriving at the nursing home, the son was presented with an Admission Agreement, an Arbitration Agreement and several other documents to sign on his mother’s behalf. The Arbitration Agreement was separate from the Admission Agreement and wasn’t a precondition for admission to the nursing home. Additionally, the Arbitration Agreement contained a provision allowing the patient to disclaim the agreement within 30 days.
Within five hours of admission, their mother fell out of a bed because of a broken side rail. The mother died as a result of the fall, and her daughter filed a wrongful death and survival action against the nursing home. The nursing home moved to compel arbitration, but the trial court denied the motion. The trial court found that there was no valid agreement to arbitrate because the son didn’t have authority to execute the arbitration agreement on his mother’s behalf. The Court of Appeals of South Carolina affirmed that decision on appeal, for several reasons.
First, the court held that that son didn’t have statutory authority to execute the Arbitration Agreement for his mother. Because the Arbitration Agreement was a separate document that didn’t deal with health care decisions, the court reasoned that the Act didn’t apply to establish the necessary principal-agent relationship. Importantly, because the Arbitration Agreement wasn’t a precondition to admission, the court didn’t consider it related in any way to decisions concerning the mother’s health care. This follows the South Carolina Supreme Court’s decisions in Dean and Coleman Decision.
Second, the court considered whether common law principles of agency could bind the mother’s estate to the Arbitration Agreement. The court held that the fact that the mother had dementia prior to being admitted to the nursing home meant that she could neither consciously nor impliedly agree to allow her son to enter into the agreement as her agent.
Finally, the court noted in dicta that, even if the mother did have capacity to consent to her son handling her affairs, a standard power of attorney (POA) for property or health care doesn’t convey authority to the agent to bind the principal to an arbitration agreement, thereby waiving the principal’s right to access the courts and to a jury trial.
Finally, whether the arbitration agreement is a precondition to admission is also a critical factor. Where an arbitration agreement is purely voluntary, courts typically hold that the agent doesn’t have authority to bind the patient. In practice, this factor may leave nursing facilities desiring to arbitrate all disputes stuck between a rock and a hard place, in that these agreements may be seen as unconscionable if entered into solely because they’ve been made a prerequisite to the patient receiving critical health care services.