An Interesting Case About Effectiveness of Arbitration Agreements in LTC Settings
In my 1L Contracts course, I often discuss binding arbitration agreements, including those used as part of a package of admission documents in long-term care settings. I find that students tend to approach the subject from strong personal viewpoints. Some express their assumptions that arbitration is faster and less expensive than court-based litigation. Others, upon hearing the possible costs of arbitration and the rights that may be waived as a result of signing these agreements without careful thought or legal advice, ask whether they are “void” as unconscionable. We discuss the history of litigation in the nursing home realm, which has made the latter “contract law” challenge to be mostly unavailing.
On Tuesday, I sat in on an interesting “arbitration” discussion in an upper division Business Entities course that began with a unit on the law of agency. The springboard was the Pennsylvania Superior Court case of Wisler v. Manor Care of Lancaster, decided in September 2015. In the case history, the son had helped his father be admitted to a care facility for rehabilitation following a health crisis. The son signed the paperwork for his father, including an Arbitration Agreement. The son advised the facility he had a POA for his father, but the facility “did not obtain a copy of the power of attorney, nor could [the son] produce a copy at the time of his deposition.” These facts became important after the family brought a personal injury suit against the facility; the defendant sought to compel arbitration.
The appellate court addressed this fact pattern as one of validity of an agency relationship between the son and father. The court concluded that without a written document or other evidence to establish the scope of authority granted to the agent, the alleged arbitration document signed only by the son was invalid to compel arbitration. The court found there was inadequate evidence of express, implied, or apparent authority for the son to waive his father’s rights to a court-based trial, including any jury. Further, based on the facts, the court found no grounds to conclude the son had “authority by estoppel.”
The court concludes that it is up to nursing homes to seek appropriate confirmation of the agent’s authority. Reliance on oral representations was at their peril. “If a third party relies on an agent’s authority, it must ascertain the scope of that authority at the time of reliance. . . . In other words, our decision should encourage parties seeking an agreement to arbitrate to ascertain the source of an agent’s authority before allowing the agent to sign an arbitration agreement on the principal’s behalf.”
Perhaps the most interesting part of the class was the fact that the author of the appellate opinion, Pennsylvania Superior Court Judge Victor Stabile, was the guest lecturer for the discussion. He brought to bear not just his judicial experience but his commercial litigation experience to enliven the discussion. My thanks to Dickinson Law Professor Samantha Prince for inviting me to sit in on the interesting class.