An “Alternate” Power of Attorney May Still Bind Principal to Arbitration

A recent decision by the Supreme Court of Appeals of West Virginia confirms the binding nature of arbitration agreements for nursing home admissions, even when an “alternate” power of attorney signs the agreement, as long as the nursing home does not know that the power of attorney no longer has the authority to act or is exceeding their authority. Specifically, in AMFM LLC et al. v. Shanklin, No. 17-0096, the Court reversed the trial court’s denial of various nursing home Defendants’ motion to dismiss and compel arbitration, finding that an “alternate” power of attorney had the authority to bind her mother to an arbitration agreement as part of her mother’s admission to a nursing home.

In Shanklin, Plaintiff’s mother signed a durable power of attorney, which named her son as her attorney-in-fact and provided that Plaintiff was her “alternate” attorney-in-fact.  As part of her mother’s admission to Defendants’ nursing home facility, Plaintiff signed several admission documents, including an arbitration agreement. The primary attorney-in-fact was not present for the admission. During her mother’s three year stay in Defendants’ facility, Plaintiff made numerous medical care and treatment decisions for her mother. After her mother’s death, Plaintiff filed suit against Defendants, alleging a variety of theories, including medical malpractice and violations of the West Virginia Consumer Credit Protection Act. Defendants moved to dismiss and compel arbitration. Plaintiff argued that Defendants’ arbitration agreement was unenforceable because, as the “alternate” attorney-in-fact, she did not have the actual authority to enter into the agreement on her mother’s behalf. The circuit court agreed and denied Defendants’ motion.

On appeal, the Court reversed the circuit court’s ruling, holding that Plaintiff had the authority to enter into the arbitration agreement because her authority was not “void, invalid, or terminated,” nor was she “exceeding or improperly exercising her authority.” Further, under the plain language of W. Va. Code § 39B-1-119(c), Defendants were permitted to rely on Plaintiff’s authority as her mother’s attorney-in-fact when she signed the arbitration agreement.

This decision illustrates the factual inquiry courts should take to examine whether an individual had the authority to sign an arbitration agreement. A health care facility may rely on a durable power of attorney as long as it is without actual knowledge that the durable power of attorney was void, invalid, or terminated; that the power of attorney was divested of authority; or that the power of attorney was exceeding or improperly exercising their authority.

Chief Justice Workman wrote a dissenting opinion which focused on Plaintiff’s lack of actual or apparent authority to enforce a contract. Justice Workman pointed to the fact that Plaintiff’s brother was her mother’s primary attorney-in-fact and that his absence from his mother’s admission to the nursing home did not make him “unable” to serve as the power of attorney.

Click here for a copy of Justice Workman’s dissent.

Please feel free to contact the authors of this alert with any questions regarding this decision and arbitration agreements.