On September 9, 2009, the Tennessee Court of Appeals affirmed the Knox County Circuit Court’s decision to deny an assisted living facility’s Motion to Compel Arbitration. At issue was the enforceability of an arbitration clause contained within the residency agreement, which was signed by the resident’s daughter at the time of admission.

On appeal, the Court examined whether the resident’s daughter had authority to execute the residency agreement, including the arbitration clause, on behalf of the resident. Two years prior to the resident’s admission, the resident had executed a "Durable Power of Attorney for Health Care and Other Purposes" ("POA"). The POA explicitly endowed the resident’s daughter with the power to enter contracts for admission to an assisted living facility upon the declaration by a physician that the resident was incompetent.

The resident’s estate argued that the POA was not in effect at the time of the resident’s admission rendering the arbitration clause unenforceable. In response, the assisted living facility argued that the POA did not restrict the daughter’s ability to contract on the resident’s behalf to only periods of incompetency. In the alternative, the assisted living facility argued that the daughter contracted with the facility based on express actual authority.  

The Court found the language of the POA unambiguous. There was no evidence the resident was declared incompetent. Further, the Court found no evidence of an express agency relationship between the resident and her daughter for the purposes of admission. Accordingly, the Tennessee Court of Appeals held that the daughter lacked authority to admit her mother to the assisted living facility and affirmed the trial court’s decision that the arbitration clause is not enforceable.



Author: F. Laurens Larry Brock/Stephanie W. Deupree from Chambliss Bahner & Stophel P.C.