Durable Power of Attorney Validates Arbitration Waivers in Nursing Home Admissions under Tennessee Uniform Arbitration Act

Introduction

The case of Dorothy Owens, as Conservator of Mary Francis King v. National Health Corporation et al., adjudicated by the Supreme Court of Tennessee on November 8, 2007, addresses pivotal issues surrounding the authority vested in a durable power of attorney for health care and the enforceability of arbitration agreements within nursing home contracts. The primary parties involved are Dorothy Owens, acting as conservator for Mary Francis King, an incapacitated individual, and National Health Corporation along with its affiliates.

Central to this case is the question of whether the durable power of attorney granted to Owens allows her to bind King to an arbitration agreement, thereby waiving King's right to a jury trial upon admission to a nursing home. Secondary issues involve the applicability of state versus federal arbitration laws and the public policy implications of enforcing such arbitration agreements in healthcare settings.

Summary of the Judgment

The Supreme Court of Tennessee affirmed parts of the Court of Appeals' decision while vacating others. The Court held that:

The arbitration agreement in King's nursing-home contract is governed by the Tennessee Uniform Arbitration Act, not the Federal Arbitration Act.
The durable power of attorney for health care duly authorized Owens to enter into the arbitration agreement on King's behalf, including waiving the right to a jury trial.
The arbitration agreement does not violate federal law or Tennessee public policy.
The argument that the arbitration agreement is unenforceable due to the impossibility of performance was rejected.
The case was remanded to the trial court to determine whether the arbitration agreement constitutes an unconscionable contract of adhesion.

Analysis

Precedents Cited

The Supreme Court referenced several key precedents to support its decision:

Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ. - Established that parties can choose the governing law for arbitration agreements, allowing state arbitration acts to prevail over federal ones when explicitly stated.
BRIARCLIFF NURSING HOME, INC. v. TURCOTTE, HOGAN v. COUNTRY Villa Health Services, and others - Supported the notion that durable powers of attorney can encompass legal decisions necessary for healthcare agreements.
Broughsville v. OHECC, L.L.C., SANFORD v. CASTLETON HEALTH CARE CENTER, LLC, Gainesville Health Care Center, Inc. v. Weston - Demonstrated that arbitration agreements in healthcare settings do not constitute additional consideration prohibited by federal statutes.
BURACZYNSKI v. EYRING - Clarified that arbitration agreements between patients and healthcare providers are not inherently against public policy.

Legal Reasoning

The Court meticulously dissected the language of the durable power of attorney, emphasizing that it explicitly empowered the attorney-in-fact to make health care decisions and execute necessary documents to implement those decisions. Interpreting the arbitration agreement as a component of consenting to healthcare services, the Court concluded that signing such an agreement falls within the scope of the attorney-in-fact's authority.

The application of the Tennessee Uniform Arbitration Act was affirmed based on the contract's stipulation that Tennessee law governs the arbitration provisions. This choice overrides the potential applicability of the Federal Arbitration Act, as per the Volt precedent.

Regarding the enforceability of the arbitration agreement, the Court found no merit in the plaintiffs' arguments that the specified arbitration organizations were unavailable or that the agreement provided additional consideration as prohibited by federal law. Additionally, the allegations that such agreements violate public policy were dismissed, noting that enforcing arbitration clauses in healthcare settings does not inherently contravene established public policy.

However, recognizing the limited factual record concerning the unconscionability of the arbitration agreement, the Court remanded the case for further proceedings to ascertain whether the contract of adhesion aspect renders the arbitration agreement unenforceable.

Impact

This judgment reinforces the authority of durable powers of attorney in healthcare settings to make binding legal decisions, including the execution of arbitration agreements. It clarifies that such agreements are enforceable under the Tennessee Uniform Arbitration Act, even when involving interstate commerce, provided the contract specifies state law applicability.

The decision also underscores the non-violation of federal statutes and public policy when arbitration agreements are included in nursing home contracts, setting a precedent that similar healthcare contracts can lawfully include such provisions.

Additionally, by remanding the case for the unconscionability review, the Court signals the necessity for thorough factual investigations in determining the fairness and voluntariness of arbitration agreements in vulnerable settings like nursing homes.

Complex Concepts Simplified

Durable Power of Attorney for Health Care: A legal document that allows an appointed individual (attorney-in-fact) to make healthcare decisions on behalf of someone who is incapacitated.

Arbitration Agreement: A contract clause where parties agree to resolve disputes outside of court, typically through an arbitrator.

Tennessee Uniform Arbitration Act: State legislation that governs the enforcement and interpretation of arbitration agreements within Tennessee.

Contract of Adhesion: A one-sided contract prepared by one party with stronger bargaining power, leaving the other party with little choice but to accept the terms.

Unconscionability: A legal doctrine allowing courts to invalidate contracts that are grossly unfair or oppressive to one party.

Conclusion

The Supreme Court of Tennessee's decision in Owens v. National Health Corporation establishes that a durable power of attorney for health care encompasses the authority to enter into arbitration agreements as part of healthcare contracts. By interpreting the arbitration clause under the Tennessee Uniform Arbitration Act, the Court ensures the enforceability of such agreements while balancing the need for protecting incapacitated individuals from potentially unfair contracts. This ruling provides clear guidance for healthcare providers and legal representatives, affirming the legitimacy of arbitration waivers in nursing home admissions and reinforcing the scope of authority granted through durable powers of attorney.

The remand for further proceedings on the unconscionability of the arbitration agreement emphasizes the Court's commitment to ensuring fairness in contracts involving vulnerable populations. Overall, this judgment solidifies the legal framework surrounding arbitration in healthcare settings, offering predictability and clarity for future cases.