Last month, the Alabama Supreme Court held that an enforceable arbitration agreement was never formed because the resident lacked capacity and the daughter who signed on his behalf lacked power of attorney. In Stephan v. Millennium Nursing & Rehab Ctr., 2018 WL 4846501 (Ala. Oct. 5, 2018), the decedent’s estate sued the nursing home for wrongful death. The nursing home moved to compel arbitration. The trial court granted the motion to compel, and the Supreme Court of Alabama reversed.
The decedent’s daughter had signed the admission paperwork but did not have power of attorney or any other legal authority to contract in his name at the time the contract was signed. In reviewing the record, the court found decedent was incapable of entering into a contract on the date of the admission documents due to his dementia. In addition, the decedent could not have understood the effect of allowing his daughter to agree to arbitrate, so she lacked apparent authority. Furthermore, the daughter was not personally bound to the arbitration clause, and thereby precluded from suing as personal representative, because she signed in her capacity as her father’s relative, not in her own capacity. Therefore, the arbitration agreement never existed and could not be enforced.