Subject Matter: Recent Ohio Courts of Appeals Decisions Call Into Question the Enforceability of Arbitration Agreements Executed Without Actual Authority
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
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
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
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.
Document Date: October 2015
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