In a recent case, a healthcare and rehabilitation center appealed a trial court’s order denying its motion to dismiss and compel arbitration. The case arose out of a case in which a wife admitted her husband to the rehabilitation center’s nursing facility in accord with a durable power of attorney he had signed. He lived there for two years. Days after he was discharged, the husband died.
The wife sued as personal representative of his state for violating his nursing home residents’ rights, negligence and wrongful death. The nursing facility moved to compel arbitration. The wife had signed an arbitration agreement when her husband was admitted. Signing the arbitration agreement was a condition of being admitted into the nursing home.
The trial court, however, denied the nursing facility’s motion to compel arbitration. It found that the durable power of attorney did not give the wife authority to sign the arbitration agreement on behalf of her husband. It also found the agreement was substantively unconscionable because the estate didn’t have the ability to pay arbitration costs, and that is was procedurally unconscionable in the way the agreement was presented to the wife.
The nursing facility appealed. It argued that the wife did have authority to enter into the nursing home admission agreement based on the durable power of attorney. The power of attorney stated it gave the wife the authority to act as a health care proxy. The Estate acknowledged that the wife was authorized to sign the admission agreement, but not the arbitration agreement. An earlier case found that agreeing to arbitration is not a strict health care decision.
The appellate court explained the wife was not acting only as health car proxy. She was also acting in accord with the durable power of attorney. The power of attorney stated that she could act on her husband’s behalf with respect to claims and litigation and everything else. The court explained it had previously held that this authority included the power to bind someone to an arbitration agreement.
In this case, the power of attorney was signed in New York. Under New York law, a power of attorney giving someone authority as to claims or litigation also empowers her to submit to alternative dispute resolution or settle a claim to which the principal became party.
The nursing home also challenged the trial court’s ruling that the arbitration agreement was unconscionable both procedurally and substantively. The appellate court explained that the Estate had not carried its burden of showing that the likely costs of arbitration would exceed litigation expenses. Therefore the agreement was not shown to be substantively unconscionable.
The appellate court further explained that because the Estate had not shown the agreement was substantively unconscionable, the court didn’t need to reach the issue of whether it was procedurally unconscionable. A court must find both procedurally and substantively unconscionable aspects to an agreement in order to permit a party to avoid arbitration.
The appellate court ruled that the trial court had erred in ruling the wife could not enter into the admissions and arbitration agreement and that it had erred in its determination that the agreement was unconscionable. It reversed and sent the case back to the trial court.
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