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Recent Ohio Courts of Appeals’ Decisions Call Into Question the Enforceability of Arbitration Agreements Executed Without Actual Authority

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By Danny Merril Newman, Jr., Taylor Knight, and Allison Thomas

October 27, 2015

Arbitration agreements are significant documents that are executed upon the admission of almost all individuals to long term care facilities. These agreements are often executed by a third party representative of the resident on the resident’s behalf. Recently, the Court of Appeals for the Fourth and Second Districts rendered decisions that address the ability of third parties to bind a resident to arbitration. Primmer v. Healthcare Industries Corp., 2015-Ohio-4104 (4th Dist.); Brown v. Extendicare, Inc., 2015-Ohio-3059 (2nd Dist.). As explained below, both the Primmer and Brown decisions turned on specific facts and circumstances surrounding execution of the respective arbitration agreements.

In Primmer v. Healthcare Industries Corp., several months before being admitted to a long term care facility, John Primmer executed a durable power of attorney for healthcare (“DPOAH”), appointing his daughter, Pamela McCathern, to “make decisions about [his] healthcare” if he could not. In November 2012, McCathern signed admission paperwork, including an arbitration agreement, admitting Primmer to the facility. Like most arbitration agreements, it waived Primmer’s right to litigate any/all claims against the facility in favor of final and binding arbitration. It also emphasized that execution of the agreement was not a condition of admission.

After leaving the facility, Primmer filed a lawsuit against the facility asserting claims sounding in negligence, medical malpractice, and premises liability for injuries he allegedly sustained while at the facility. The facility moved to stay the litigation in favor of arbitration pursuant to the agreement arguing McCathern had: (1) the actual authority to execute the arbitration agreement on Primmer’s behalf pursuant to the DPOAH, and (2) the apparent authority to execute the arbitration agreement based on her execution of admission paperwork for Primmer. The trial court rejected both arguments and denied the Motion to Stay.

The Fourth District Court of Appeals upheld the trial court’s decision. With respect to McCathern’s actual authority, the court noted that a DPOAH is effective for “healthcare decisions,” which are defined as “informed consent, refusal to give informed consent, or withdrawal of informed consent to health care.” R.C. 1337.11(H). The court held the terms of the particular DPOAH did not encompass the decision to waive a resident’s right to litigate disputes in favor of arbitration; therefore, McCarthern did not have the actual authority (under the DPOAH) to make such decisions on Primmer’s behalf.

While the actual authority analysis in the Primmer decision will likely have a significant impact on the enforceability of arbitration agreements executed by a resident’s representative under the authority of a DPOAH, it is important to note that the Primmer court relied heavily on the language and terms of the specific DPOAH at issue and the specific facts surrounding the execution of the arbitration agreement. As such, the Primmer decision does not entirely foreclose the enforcement of an arbitration agreement executed under a durable power of attorney. Rather, the decision focuses the analysis on the actual authority granted by the specific document at issue.

In addition to its actual authority analysis, the Fourth District addressed whether McCathern had the apparent authority to act on behalf of Primmer. To that end, the Fourth District rejected the facility’s claim that McCathern had the apparent authority to act on behalf of Primmer based on her execution of other admission documents. In reaching this conclusion, the court noted that under the apparent authority analysis, an agent’s authority is determined by the acts of the principal not the acts of the agent. Thus, McCathern’s actions were irrelevant. There was no evidence Primmer held McCathern out to be authorized to enter in the arbitration agreement on his behalf since the DPOAH was insufficient to establish such authority and Primmer was not present during the execution of the arbitration agreement. Further, the court noted that Primmer could not have knowingly permitted McCathern to act on his behalf because he was incompetent at the time of his admission.

Similarly, in Brown v. Extendicare, Inc., the Second District addressed the issue of apparent authority of a resident’s representative in the execution of an arbitration agreement. In Brown, Patricia Brown sought admission to a long term care facility. At the time of her admission, Patricia’s daughter, Courtney, signed admission documents, including an arbitration agreement, on her mother’s behalf. After her mother’s death, Courtney filed a Complaint for wrongful death and survivorship against the facility, which then moved to compel arbitration and stay proceedings based on the arbitration agreement. Courtney challenged the motion, claiming she did not have actual authority to sign the document at the time of admission. The trial court granted the facility’s motion as to the survival claim, and Courtney appealed.

The Second District upheld the trial court’s decision, ordering the survival claims to arbitration and staying the wrongful death claims pending the arbitration. Unlike in Primmer, there was no evidence Courtney had actual authority (through a power of attorney or otherwise); thus, the Second District analyzed whether Courtney had the apparent authority to execute the arbitration agreement on her mother’s behalf.

In contrast to the Primmer court, the Brown court analyzed the contract, the arbitration agreement, and the admission agreement, as well as Courtney’s own actions, i.e. her representation that she was the legal representative for the healthcare and financial decisions of her mother in those documents (even though she had not indicated a specific relationship) in its apparent authority analysis. Additionally, the Brown Court noted that neither Courtney nor Patricia acted on the contract’s 30-day revocation period or objected to the facility’s care and treatment of Patricia for over a year. Based on these facts, the Brown court determined there was sufficient evidence to establish Courtney had apparent authority to bind her mother’s survival claims to arbitration. The significant take away from the Brown decision is that when a third party signs an agreement on behalf of a resident, the document should indicate above the signature line that the third party represents she/he has full authority to sign the document on behalf of the resident.

While the Primmer and Brown decisions are seemingly contradictory, the difference in the outcomes is a product of the evidence presented in both cases. In Primmer, the court held there was insufficient evidence to establish apparent authority, while the court determined there was sufficient evidence in Brown.

If you have any questions regarding the Primmer v. Healthcare Industries Corp. or Brown v. Extendicare, Inc. decisions, would like a complete copy of the opinions, or have questions regarding Ohio law governing long term care facilities, please contact a member of our Long Term Care Practice Group.

This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.

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