The Eighth Circuit made quick work of a nursing home’s argument in favor of compelling arbitration this week. In a suit alleging negligent care of a resident, the court ruled that the arbitration agreement was not enforceable because the resident never signed it. GGNSC Omaha Oak Grove, LLC v. Payich, __ F.3d __, 2013 WL 776811 (8th Cir. March 4, 2013).
The fact pattern in this case is probably a common one. When the mother entered the nursing home’s care, she did not sign either the Admission Agreement or the separate Arbitration Agreement. Instead, her son signed his own name on both of those documents. However, her son did not have power of attorney.
After the mother died, the son, as Special Executor for the Estate, sued the nursing home for negligent care. The nursing home moved to compel arbitration. The district court denied the motion after finding the son did not have authority to sign on his mother’s behalf and there was no valid third-party beneficiary argument.
The Eighth Circuit affirmed the district court’s refusal to compel arbitration. On appeal, the nursing home only pursued its third-party beneficiary argument. The argument went like this: while the son signed the agreements, the mother accepted the benefits by receiving the care, so she was a third party beneficiary and therefore her estate should be bound. The court disagreed with the whole foundation of the argument, finding that there was no valid contract between the son and the nursing home (and therefore, no contract from which a third party could conceivably benefit). It noted that the agreements identified the contracting parties as the mother and the nursing home, not the son and the nursing home. There was no indication that the nursing home and the son, on his own behalf, intended to enter into an agreement.
Nursing home employees may have some training in their future about who has authority to sign contracts…