Based on a U.S. Supreme Court ruling, the state’s Supreme Court recently overruled one of its prior decisions and held that nursing home residency agreements do, in fact, implicate interstate commerce and the Federal Arbitration Act.
The ruling, filed on June 18, came in Darlene Dean v. Heritage Healthcare of Ridgeway,LLC, appealed from Fairfield County Circuit Court. And while the court overruled the oft-cited 1993 case Timms v. Greene, it remanded Dean for further proceedings regarding the plaintiff’s authority to sign the agreement on her mother’s behalf and the question of whether there was a meeting of the minds between the parties, as required by law, prior to the signing.
Jeanne Born, a health law attorney with Nexsen Pruet in Columbia, was not involved in this case but regularly represents nursing homes and other healthcare facilities. She said that the ruling simply shores up her understanding, especially with regards to agreements.
For instance, previously drafted client contracts she recently reviewed already included a rescission period to ensure parties fully understand terms of the agreement before being bound by it.
“That takes care of the ‘meeting of the minds’ and whether there was recognition that it was an integral part of the contract,” Born said.
In 2009, Dean’s mother, a patient at Tanglewood Health Care Center, fell on three separate occasions within a 10-day period. In the third fall, she fractured her hip, and underwent two surgeries over the next two months. Due to complications from the surgeries, she died on Sept. 30, 2009.
In December 2011, Dean, acting as personal representative of her mother’s estate, filed a Notice of Intent to file a medical malpractice suit and alleged claims for survival and wrongful death. Heritage filed a motion to dismiss or, alternately, a motion to compel arbitration and stay the litigation.
Dean opposed that motion, claiming that the nursing home residency agreement was unenforceable because in her view, the “exclusive” arbitral forum was unavailable. Since 2003, the American Arbitration Association, has refused to accept personal injury disputes without a post-injury agreement to arbitrate.
The Supreme Court found, however, that: (1) the plain language of the arbitration agreement suggests no reason that AAA’s rules can’t be followed in a different forum and (2) the parties wish to follow AAA’s rules, not its policies. While AAA has a policy not to arbitrate individual patients’ claims, it has no such rule stating that they are not arbitrable, the Court said. That, according to the court, would be “in direct conflict with [the] strong public policy in favor of arbitration.”
Dean also argued that the agreement did not involve interstate commerce. In Greene, the court held that a residency contract was “obscure, if not devoid, of any basis for holding that [interstate] commerce was involved.”
It specifically found that a nursing home’s assertion that its supplies and goods were purchased from out of state was irrelevant because it was not the basis of the contract, which was to provide patient services in a South Carolina facility.
But since the Supreme Court decided in Allied-Bruce Terminix Cos. v. Dobson, 1995, many — if not all — federal and state courts have held that residency contracts implicate interstate commerce and the FAA because the contracts “usually entail providing residents with meals and medical supplies that are inevitably shipped across state lines…”
In its opinion, the state Supreme Court referred to Timms as a “relic” decided before Allied-Bruce more broadly defined interstate commerce. Though it concedes meals and medical supplies are irrelevant to the dispute, the court said they must be considered because the residency agreement requires nursing homes to provide them.
Born wasn’t surprised by the decision, despite the years passed and likely number of similar cases that have been decided to the contrary based on Timms.
“I think the court really had no choice here but to come down on the side of the nursing home … finding that the residency agreement is involved in interstate commerce,” she said. “I don’t know that it could’ve arrived at any other conclusion.”
After addressing the interstate commerce issue, the court expressed concern that Porter, despite being competent to do so, signed neither the residency nor arbitration agreements. Further, Dean did not possess a health care power of attorney to sign either contract on her mother’s behalf. The issue was not addressed on appeal, and the court notes that on remand, the circuit court “must engage in a full inquiry into this matter” before any attempt to enforce the agreement.
The 15-page decision is Dean v. Heritage Healthcare of Ridgeway, LLC (Lawyers Weekly No. 010-060-14). The full text of the opinion is available online at sclawyersweekly.com