COA Declines to Enforce Arbitration Clause in Nursing Home Admission Agreement

Today, in a very interesting opinion, the Court of Appeals held that the mother of a nursing home patient did not bind the patient or her estate to arbitration by signing an agreement to admit daughter to the nursing home that contained an arbitration clause. The case is Munn v. Haymount Rehabilitation and Nursing Center.

Plaintiff Munn, whose daughter Demetra Murphy died in a nursing home, filed a wrongful death action against the nursing home arising out of their medical treatment of Murphy. Munn filed the suit as administratrix of Murphy's estate. When Murphy was admitted to the nursing home Munn signed an "Admission Agreement." That agreement stated that it was “by and between Century Care of Fayetteville and Demetra Murphy (Resident) or Iris Munn (Responsible Party)." The term "Responsible Party" meant that Munn was responsible for payment of Murphy's nursing home care. The Admission Agreement contained provisions related to such payment, visiting hours, laundry options, and other "housekeeping" matters. The arbitration clause in the agreement required all disputes other than those related to debt collection to be arbitrated, and stated that it was binding on "all persons whose claims are derived through or on behalf of the Resident.”

The COA noted that Munn had to have some form of legal authority to enter into an arbitration agreement on behalf of Murphy or her estate, and found that Munn was not the actual or apparent agent of Murphy. In order for Munn to have actual authority, Murphy had to have actually consented to Munn acting on her behalf. The COA found that Murphy did not do so, even though at some point prior to her stay in the nursing home Murphy identified her mother as her next of kin and "primary contact." This was not enough to make Munn Murphy's general agent.

The COA also found that even though Munn was consulted about and made decisions regarding her daughter’s medical treatment, Munn was not authorized as or acted as if she were authorized to be "Murphy’s general agent in matters such as arbitration agreements." The COA pointed out that apparent authority rests on the principal's manifestations of authority - at the time that Munn signed the Admission Agreement containing the arbitration clause Murphy was “not responsive” and unable “to speak or communicate,” and thus did not give Munn authority to act as her agent for purposes of binding Murphy to arbitration. There was also no ratification of any apparent agency by Murphy. The COA further noted that the primary purpose of the Admission Agreement was to secure payment for the nursing home's services, not to bind Murphy to arbitration.