In its opinion filed on September 24, 2015 in three consolidated cases involving the alleged wrongful death of three nursing home residents due to nursing home negligence, the Supreme Court of Kentucky (“Kentucky Supreme Court”) held that in two of the cases, the authority to enter into a pre-dispute arbitration agreement was not among the powers granted to the respective attorney-in-fact and therefore the arbitration agreements were not formed with the assent of the party to be bound thereby (lacking the essential element of assent, the arbitration agreements in those cases were never validly formed).
In the third case, where there was the broadest grants of authority stated in the power-of-attorney instrument, the Kentucky Supreme Court stated that it would be absurd to infer from a non-specific, universal grant, the principal’s assent to surrender of fundamental, even sacred, liberties, including the right to trial by jury which the Kentucky Constitution states to be inviolate.
The Pre-Dispute Arbitration Agreements
In each of the three cases, at the time of the resident’s admission to the nursing home, an attorney-in-fact for the resident executed a written document providing that any claims or disputes arising out of the relationship between the resident and the nursing home would be submitted to arbitration, rather than adjudication in the courts.
The Kentucky Supreme Court cited one of its prior cases in which it stated that a party seeking to compel arbitration has the initial burden of establishing the existence of a valid agreement to arbitrate. That initial showing is addressed to the court, not the arbitrator, and the existence of the agreement depends on state law rules of contract formation. To create a valid, enforceable contract, there must be a voluntary, complete assent by the parties having capacity to contract. Whether the principal’s assent to the arbitration agreement was obtained is, in each of the cases under review, a question of law that depends entirely upon the scope of authority set forth in the written power-of-attorney instrument. An agent’s authority under a power of attorney is to be construed with reference to the types of transaction expressly authorized in the document and subject always to the agent’s duty to act with the utmost good faith.
Furthermore, the Kentucky Supreme Court stated that a collateral agreement to waive the principal’s right to seek redress of grievances in a court of law was an act with significant legal consequences, and absent authorization in the power of attorney to settle claims and disputes or some such express authorization addressing dispute resolution, authority to make such a waiver is not to be inferred lightly and a power-of-attorney must be strictly construed in conformity with the principal’s purpose.
The Kentucky Supreme Court held that without a clear and convincing manifestation of the principal’s intention to do so, it would not infer the delegation to an agent of the authority to waive a fundamental personal right so constitutionally revered as the “ancient mode of trial by jury” (“to cloak the agent with authority to waive the fundamental right to an adjudication by judge or jury, the power-of-attorney document must expressly so provide”). Because none of the power-of-attorney instruments involved in the three cases provide a manifestation of the principal’s intent to delegate that power to his agent, the Kentucky Supreme Court held that the agent was not so authorized, and that the principal’s assent to the waiver was never validly obtained.
The Kentucky Supreme Court stated, however, that nursing home residents may enter into pre-dispute arbitration agreements and those agreements will be enforced, like any contract, if the agreement of the persons to be bound thereby has been obtained, either directly in person or by a duly authorized agent; however, an agent’s authority to waive his principal’s constitutional right to access the courts and to trial by jury must be clearly expressed by the principal.
The Wrongful Death Claims
The Kentucky Supreme Court held that with regard to the wrongful death claims alleged by the plaintiffs in each of the three cases, the decedent whose death becomes the basis of a wrongful death claim had no authority during his lifetime, directly or through the actions of his attorney-in-fact, to prospectively bind the beneficiaries of the wrongful death claim to an arbitration agreement – a wrongful death claim does not derive from any claim on behalf of the decedent, and the wrongful death beneficiaries do not succeed to the decedent’s dispute resolution agreements.
The Kentucky Supreme Court explained that under Kentucky law, a wrongful death claim is a distinct interest in a property right that belongs only to the statutorily-designated beneficiaries: decedents, having no cognizable legal rights in the wrongful death claims arising upon their demise, have no authority to make contracts disposing of, encumbering, settling, or otherwise affecting claims that belong to others. The rightful owners of a wrongful death claim (the beneficiaries identified in KRS 411.130(2)) cannot be bound to the contractual arrangements purportedly made by the decedent with respect to those claims: a decedent has no more authority to bind the wrongful death beneficiaries to an arbitration agreement than he has to bind them to a settlement agreement fixing or limiting the damages to be recovered from the wrongful death action, limiting the persons against whom a claim could be pursued, or an agreement on how and to whom to allocate the damages recovered in a wrongful death claim.
There are two separate written dissenting opinions to the Kentucky Supreme Court’s majority opinion in the three cases.
If you or a loved one suffered injuries (or worse) during a nursing home stay in Kentucky or in another U.S. state due to nursing home neglect, nursing home negligence, or nursing home abuse, you should promptly contact a local nursing home claim lawyer in Kentucky or in your U.S. state who may investigate your possible nursing home claim for you and file a nursing home claim on your behalf, if appropriate.
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