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Crowe v. GGNSC Ripley, LLC

United States District Court, N.D. Mississippi, Oxford Division

July 17, 2018




         This cause comes before the court on the motion of defendant GGNSC Ripley LLC (“GGNSC”) to compel arbitration, pursuant to Section 4 of the Federal Arbitration Act (“FAA”). See 9 U.S.C. § 4. Plaintiff Gail Growe, as the Administratrix of the Estate of Cletus Rowland, has responded in opposition to the motion, and the court, having considered the memoranda and submissions of the parties, concludes that the motion is well taken and should be granted.

         This is a nursing home neglect case, but, at this juncture, the sole issues which are being litigated involve the question of whether it should be referred to binding arbitration. The instant motion to compel arises out of arbitration provisions signed by Plaintiff Crowe on behalf of her mother Rowland, when she was admitted to GGNSC's nursing home in Ripley on two occasions in 2008 and 2011. This motion requires this court to interpret and apply the standards set forth by the Fifth Circuit regarding informal agencies authorizing an individual to sign an arbitration contract on behalf of a relative being admitted to a nursing home.

         This subject matter is a familiar one to this court, and it has previously written about it at length, with considerable clarifications from the Fifth Circuit. Most recently, in an order denying a nursing home's motion to compel arbitration in Gross v. GGNSC Southaven, LLC, this court made an Erie-guess that the Mississippi Supreme Court would require a formal legal device, such as a power of attorney or conservatorship, in order for a nursing home resident to authorize a relative to sign an arbitration contract on her behalf. Gross, 83 F.Supp.3d 691 (N.D. Miss. 2015).[1] The Fifth Circuit disagreed, making its own Erie-guess that the Mississippi Supreme Court would recognize informal, verbal agencies in this context. See Gross v. GGNSC Southaven, L.L.C., 817 F.3d 169, 175 (5th Cir. 2016).

         This is this court's first motion to compel arbitration since the Fifth Circuit's opinion in Gross, and it will accordingly take this opportunity to make some observations regarding the current state of the law in this field. Importantly, the Fifth Circuit in Gross appeared to find that, even if this court's reading of the Mississippi Supreme Court's intentions vis a vis nursing home arbitration were correct, that state court would likely lack the authority under AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) to require powers of attorney in the specific context of nursing home arbitration. Specifically, the Fifth Circuit wrote that “[t]o require a ‘formal legal device[ ] such as a power of attorney' specifically for arbitration agreements and other ‘important contracts' is in tension, at the very least, with Concepcion, which disapproved of nominally neutral rules that, in practice, ‘would have a disproportionate impact on arbitration agreements.'” Gross, 817 F.3d at 178, citing Concepcion, 563 U.S. at 342, 131 S.Ct. 1740.

         This court regards the Fifth Circuit's reliance upon Concepcion in Gross as quite significant, since it casts doubt upon the Mississippi Supreme Court's basic authority to interpret state law in a manner which, in the Fifth Circuit's judgment, unduly burdens the pro-arbitration policy considerations undergirding the Federal Arbitration Act. This is quite significant in the nursing home arbitration context, since it is difficult to overlook the fact that while the Fifth Circuit has broadly supported arbitration in nursing home cases, the Mississippi Supreme Court has repeatedly rejected, in unanimous decisions, informal agency arguments made by nursing homes in arbitration cases. See, e.g. Mississippi Care Center of Greenville, LLC v. Hinyub, 975 So.2d 211 (Miss. 2008); Adams Community Care Center, LLC v. Reed, 37 So.3d 1155 (Miss. 2010), GGNSC Batesville, LLC v. Johnson, 109 So.3d 562 (Miss. 2013).

         In light of these and other decisions, it seems clear that the Mississippi Supreme Court regards nursing home arbitration with far more skepticism than the Fifth Circuit does, and this places Mississippi district courts in the difficult position of attempting to reconcile the views of two appellate courts which seem to have significant differences of opinion on this issue. It is for this reason that this court regards the Fifth Circuit's reliance upon Concepcion as so important, since Concepcion essentially represents the federal law “trump card” over what would otherwise simply be a matter of state contract law. Thus, the fact that the Fifth Circuit has invoked Concepcion in this context suggests that, even if the Mississippi Supreme Court were to make its view unmistakably clear that informal agencies to sign nursing home arbitration contracts were invalid under state law, there would be considerable doubt, in the Fifth Circuit's view, regarding its authority to so interpret state law. As a federal district court, this court is, of course, answerable to the Fifth Circuit, and it will therefore put aside its own reading of the Mississippi Supreme Court's intent in this context and simply apply the Fifth Circuit's holding in Gross.

         Having said that, this court considers it important to note that it has already recognized one very important limitation on the Fifth Circuit's decision in Gross, namely that it did not address the crucial question of mental competency in nursing home arbitration cases. In an order issued shortly after the Fifth Circuit's decision in Gross, this court requested briefing from the parties in another nursing home arbitration case on its docket, in order to solicit their views regarding Gross's impact in that case. In its briefing order in Jackson v. GGNSC, 2016 WL 1104492 (N.D. Miss 2016), this court wrote as follows:

This court requests that, in submitting their revised briefing, the parties address an issue which was not raised by the plaintiff and accordingly was not addressed by the Fifth Circuit in Gross, namely that of mental competency. The Mississippi Supreme Court has not, to date, endorsed verbal agencies allowing an individual to sign a nursing home arbitration agreement on behalf of a relative, but, now that the Fifth Circuit has issued an Erie-guess that it would do so, this court considers it important to consider the competency requirement that would apply in this context. The execution of contracts requires that both parties have the mental capacity to contract, and it strikes this court that there will frequently be concerns surrounding mental competency when an elderly resident asks a relative to sign an arbitration agreement on his behalf, since this seems to suggest at least some level of diminished capacity. The Mississippi Supreme Court has written that the test for competency to contract is “whether a person could know or understand his legal rights sufficiently well to manage his personal affairs.” Estate of St. Martin v. Hixson, 145 So.3d 1124, 1131 (Miss. 2014), citing Rockwell v. Preferred Risk Mut. Ins. Co., 710 So.2d 388, 391 (Miss. 1998).

Jackson, 2016 WL 1104492 at *2.

         While this court thus expressed its view in Jackson that nursing home residents would frequently lack the mental competency to authorize a relative to sign an arbitration contract on their behalf, it also expressed concerns that the mental competency issue might serve to limit the applicability of the Fifth Circuit's ruling in Gross more than it intended. Specifically, this court wrote that:

Having said that, this court has some doubts regarding whether it was the Fifth Circuit's intent to have its opinion in Gross apply as seldom as it likely would if the Hixson standard is applicable. In the court's view, if an elderly resident has sufficient mental capacity to “know or understand his legal rights sufficiently well to manage his personal affairs” then why would he need to authorize a family member to sign an arbitration contract for him in the first place? He could seemingly just sign it himself. Indeed, the competency standard which this court applied in Howorth is essentially the same as the Hixson standard, and requiring an elderly resident to meet the same standard to either sign an arbitration contract himself or to authorize a relative to sign it would, at least arguably, render the Fifth Circuit's decision in Gross somewhat irrelevant. This court certainly does not wish to do that; yet, at the same time, it is required to apply Mississippi law. Mississippi law appears to have a rigorous competency standard for contracts, and is the informal agency authorized by the Fifth Circuit in Gross not a contract?

Id. at 5-6.

         Significantly, in responding to this court's briefing order in Jackson, GGNSC appeared to concede that Mississippi's traditional mental competency standards would, in fact, apply to informal agencies. Indeed, in its brief on remand in Gross, GGNSC wrote that:

While it is true that the recognized test for determining mental capacity in Mississippi is “whether or not a person is able to manage the ordinary affairs of life," Shippers Express v. Chapman, 364 So.2d 1097, 1100 (Miss. 1978), the burden is on the Plaintiff in this instance to first prove that Ms. Wagner was insane or not capable of providing consent to contract when she granted him actual authority to act on her behalf. As adults age, it is not uncommon for them to ask their adult children to handle financial, medical, or similar matters for them. The mere fact that an elderly individual could have, but chose not to, take certain actions on their own behalf is not indicative, in and of itself, that they were unable to do so because of some mental incapacity. It is the Plaintiff's burden, not Defendants, to prove that Ms. Wagner was incompetent when she granted Plaintiff authority to act as her agent. Unless the Plaintiff meets this burden, Ms.Wagner's competency is presumed.

[Gross, 3:14cv37, docket entry 108 at *9]. GGNSC thus appeared to agree that Mississippi's traditional mental competency standards apply in this context, although it argued that a plaintiff has the burden of proving lack of mental competency to enter into an informal agency. This court tends to agree, since it is the general rule that the “law presumes the fact of sanity and mental capacity to contract, and the burden is upon the party seeking to avoid an instrument on the ground of insanity or mental incapacity of the maker thereof to establish it by a preponderance of proof.” Hamilton Bros. Co. v. Narciese, 158 So. 467, 470 (1935). This court will likely apply that general rule in the nursing home arbitration context, barring some indication from the Mississippi Supreme Court or the Fifth Circuit that it should do otherwise.

         Having made some observations regarding the current state of nursing home arbitration law in this circuit, this court will now proceed to a discussion of the instant case. This court has arguably discussed the issue of mental competency more than it needed to here, since the plaintiff Crowe concedes that her mother, Ms. Rowland, had the requisite degree of mental competency to create an informal agency on her behalf. Specifically, plaintiff writes in her brief that:

Citing Estate of Jackson v. GGNSC Batesville, LLC, 2016 U.S. Dist. LEXIS 38313 (N.D. Miss. 2016), Defendants anticipate and rebut a competency argument. Plaintiff does not contend that Ms. Rowland lacked competence to bestow her daughter with authority to act. To the contrary, Ms. Rowland was quite competent and specifically delegated the level of authority she wished Ms. Crowe to possess, and it did not include the authority to bind Ms. Rowland to arbitrate her claim.

[Plaintiff's brief at 1].

         In the court's view, the fact that plaintiff concedes at the outset that her mother had the mental competency to execute an informal agency distinguishes this case from some of the more troubling nursing home arbitration cases it has encountered. For example, this court has tried cases in which defendants have argued that residents who lack a basic awareness of reality have waived their right to a trial by jury or to have authorized a relative to do so. In Liberty Health & Rehab of Indianola, LLC v. Howarth, 11 F.Supp.3d 684, 687 (N.D. Miss. 2014), for example, this court found, following a bench trial on the mental competency issue, that a nursing home resident who signed a nursing home arbitration contract lacked the competency to do so, based upon proof demonstrating, among other things, that, at the time he signed the arbitration agreement, he was unaware of what year it was. In this case, by contrast, plaintiff's concession on the mental competency issue leaves this case squarely within the scope of the Fifth Circuit's decision in Gross, and this court's task is simply to determine whether Rowland created an informal agency authorizing her daughter to sign an arbitration contract on her behalf. This court will presently turn to this issue, and, in so doing, it makes sense to begin with the Fifth Circuit's opinion in Gross.

         Following Gross, informal verbal agencies essentially take their place (at least in federal court) alongside powers of attorney and conservatorships as vehicles through which legal authority to sign an arbitration contract on behalf of another may be transferred under Mississippi law. One important difference is that, while powers of attorney and conservatorships each have a well-established body of law delineating their scope, there remains considerable uncertainty regarding exactly how broadly or narrowly the Fifth Circuit will choose to interpret the scope of informal agencies for the purpose of signing arbitration contracts. This court has a considerable number of nursing home arbitration cases on its docket, and it will therefore attempt to provide its best guess regarding the scope of such agencies, both for the purposes of this case and others as well. This court regards it as important to do so, since, in light of the Fifth Circuit's ruling, informal agencies will likely be asserted by nursing homes in a large number of arbitration cases. Indeed, informal agency now appears to be one of the few potentially winning arguments which nursing homes have in arbitration cases where they rely upon a signature of a relative. That is, the Fifth Circuit in Gross rejected the other arbitration theories raised by defendant in that case, and (as noted by this court in its opinion in Gross) nursing homes have had very little success with any of the theories which they have raised at the Mississippi Supreme Court.

         In considering the unsettled issues in this context, this court will begin with the language of the Fifth Circuit's opinion in Gross. In its opinion, the Fifth Circuit made it clear that verbal instructions may be sufficient to create an agency to sign an arbitration contract on behalf of a nursing home resident and that no formal written document is required in this regard.

         Specifically, the Fifth Circuit wrote in Gross that:

Under Mississippi law, an agent's ‘[a]ctual authority may be express or implied.'” Northrop Grumman Ship Sys., Inc. v. Ministry of Def. of Republic of Venezuela, 575 F.3d 491, 500 (5th Cir. 2009) (quoting Migerobe, Inc. v. Certina USA, Inc., 924 F.2d 1330, 1336 (5th Cir. 1991)). “It is deemed express if granted in either written or oral specific terms.” Id. According to the Restatement (Third) of Agency, which Mississippi courts consult, see id., “[a]ctual authority . . . is created by a principal's manifestation to an agent that, as reasonably understood by the agent, expresses the principal's assent that the agent take action on the principal's behalf.” Restatement (Third) of Agency § 3.01 (2006). From the foregoing, this court has previously concluded that “[i]t is clear . . . that the authority to enter a contract may be conveyed orally and that no formal writing is required as a general rule of Mississippi law.” Northrop Grumman, 575 F.3d at 500.

Gross, 817 F.3d at 177.

In addition to authorizing verbal agencies in this context, the Fifth Circuit in Gross also endorsed utilizing the deposition testimony of an alleged agent to establish the existence and scope of his agency. Specifically, the Fifth Circuit wrote that:

         [U]nder Mississippi law, actual authority exists when “at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal's manifestations to the agent, that the principal wishes the agent so to act.” Restatement (Third) Of Agency § 2.01. It follows that the agent's testimony is competent evidence of actual authority because the agent will usually be the best positioned to testify about his belief at the time he acted. Moreover, the Mississippi Supreme Court has stated in dicta that “[i]n Mississippi, agency and the scope thereof may be proved through the testimony of the agent alone.” Eaton v. Porter, 645 So.2d 1323, 1326 (Miss. 1994). Thus, Gross's sworn testimony is competent evidence on the question of Gross's agency and its scope.

Id. at 179.

         Based upon the foregoing, the Fifth Circuit in Gross framed the issues for this court's resolution on remand as whether the nursing home “has in fact established (1) that Gross had express authority to act on his mother's behalf and (2) that the power to execute an arbitration agreement-that is, the power to relinquish legal rights, in addition to the power to handle medical or financial circumstances-was within the scope of that authority. Id. at 180. The Fifth Circuit provided important clarification of this standard in footnote 4 of its opinion, where it wrote that:

Actions are within the scope of an agent's authority if they are “designated or implied in the principal's manifestations to the agent” or are “acts necessary or incidental to achieving the principal's objectives, as the agent reasonably understands the principal's manifestations and objectives when the agent determines how to act.” Restatement (Third) Of Agency § 2.02(1). The Restatement explains that “the consequences that a particular act will impose on the principal may call into question whether the principal has authorized the agent to do such acts, ” such as when acts “create legal consequences for a principal that are significant and separate from the transaction specifically directed by the principal.” Id. § 2.02 cmt. h.

Id. at 180, n. 4. The Gross parties settled before this court had an opportunity to apply these standards on remand, but they appear to be very much relevant in this case, and both sides have addressed them in their briefing.

         This court now turns to the parties' specific arguments regarding whether plaintiff had actual authority to sign an arbitration agreement on behalf of her mother in this case. As to this issue, the parties' positions essentially come down to what may be regarded as a crucial point of semantics, as it relates to the meaning of the word “necessary” in this context. In her deposition, defendant's employee Alisha James, who dealt with plaintiff's mother during her mother's 2008 admission, appeared to agree with the characterization of plaintiff's counsel that Rowland had indicated that she only granted her daughter the authority to make health care decisions and to sign the documents “necessary” to gain admission to the nursing home. For her part, plaintiff also testified that she thought “you had to sign all them papers to get her admitted, ” [plaintiff's depo. at 27] and she argues in her brief that her agency was, in fact, limited to signing documents “necessary” to gain admission.

         In the court's view, the problem with the use of the term “necessary” in this context is that it is susceptible to two different meanings, which this court will call the “loose” and “legalistic” constructions of the word. Under the loose meaning of the word “necessary, ” plaintiff allegedly had the authority to sign documents which were, in a general sense, associated with admission to the nursing home. Under the legalistic meaning of the term, plaintiff was only authorized to sign documents which were strict legal prerequisites for admission. This is a crucial distinction in this case, ...

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