RENDERED: MAY 19, 2023; 10:00 A.M. TO BE PUBLISHED 

# Commonwealth of Kentucky Court of Appeals

NO. 2022

- CA

- 0993

- MR

PADUCAH CENTER FOR HEALTH AND REHABILITATION, LLC D/B/A STONECREEK HEALTH AND REHABILITATION; CLEARVIEW HEALTHCARE MANAGEMENT KY, LLC D/B/A CLEARVIEW HEALTHCARE MANAGEMENT; PADUCAH CONSULTING, LLC; PADUCAH PROPCO; AND SARAH STEWART, IN HER CAPACITY AS ADMI NISTRATOR OF STONECREEK HEALTH AND REHABILITATION APPELLANTS

v. APPEAL FROM MCCRACKEN CIRCUIT COURT

HONORABLE TIMOTHY KALTENBACH, JUDGE

ACTION NO. 22

- CI

- 00042

TERRY LANCE PENIX, AS EXECUTOR OF THE ESTATE OF TERRY LYNN PENIX, DECEASED AND TERESA PENIX, INDIVIDUALLY APPELLEES- 2

- OPINION AFFIRMING
**   **  **
BEFORE: CETRULO, JONES, AND TAYLOR, JUDGES. CETRULO, JUDGE: This is an appeal from a ruling of the McCracken Circuit
Court , which denied a motion to compel arbitration filed by the Paducah Center for Health and Rehabilitation, LLC d/b/a Stonecreek Health and Rehabilitation (“Stonecreek”); Paducah Consulting, LLC; Clearview Healthcare Manag ement
K Y , LLC d/b/a Clearview Healthcare Management; Paducah Propco; and Sarah Stewart, in her c apacity as Administrator of Stonecreek Health and Rehabilitation

. The underlying action was one for wrongful death , negligence, loss of consortium , and punitive damages filed against Stonecreek, a nursing home, and its corporate
entities and administrator. Terry Lynn Penix (“Terry”) had been a resident of Stonecreek for approximately one year prior to his death in March 2021. The suit
was filed thr ough his executor, Terry Lance Penix, and his wife , Teresa Penix (“Teresa”)

. Stonecreek filed a motion to dismiss. The trial court did not dismiss the complaint nor compel arbitration , finding that Stonecreek did not meet its burden of establishing a val id agreement to arbitrate. For the reasons set forth below, we affirm.- 3

- FACTS In 2014, Terry executed a Living Will Directive and Advance Directive (“POA”) naming Teresa as his health care power of attorney. In 2020, Terry was admitted as a resident to Stonecreek

. The record does not contain any
information as to his physical or mental status at that point, but as part of the admission process, Teresa execute d an A dmission s A greement (“the Agreement”)

. She did so by signing her name at the end of the document, above a line which
read “Resident

– I ndividual or by L egal R epresentative .” This was in response to a provision acknowledging that the A greement ha d been read an d understood.

A second provision at the end of the Agreement require d a

“ sponsor’s ” name and signature acknowledging that the person “agreed to the personal undertakings of the sponsor, as provided for in the A greement [

. ] ” Teresa

wrote her name below th at acknowledgem ent , not on a signature line , but next to a
line that read “ S ponsor
. ” Below that , she entered the word “wife” next to a line
that read “Relation

. ” However, on the first page of the document, she had written “Terry L. Penix,” as sponsor. 1 In a nother section of the A greement, “sponsor” was defined as “a person legally responsible for the [ r ] esident or must be in the process

1 It is not clear whether Teresa intended “Terry L. Penix” to refer to “ Terry Lance Penix ,” the e xecutor listed in the c omplaint filed a year later, or to her husband “Terry Lynn Penix.”- 4

-

of obtaining such status, including a guardian , a person holding a durable power of attorney and/or a conservator.”

Elsewh ere in the 12

- page agreement, there was a section entitled “Disputes .” Th at section read, in part, that:

( i) To the fullest extent allowed by law, Resident and/or the Resident’s legally authorized representative who signs this Agreement, on behalf of the Resi dent, the Resident’s heirs, assigns, and all others acting or purporting to act for the Resident or the Resident’s estate, and Facility agree that all civil claims arising in any way out of this Agreement or the nursing care that Facility, its employees, o r agents provide to Resident , other than claims by the Facility to collect unpaid bills for services rendered, or to involuntarily discharge the Resident, shall be resolved exclusively through mandatory mediation, and, if such mediation does not resolve th e dispute, through binding arbitration using the commercial mediation and arbitration rules and procedures of JAMS/Endispute . . . . (ii) Resident and Facility also agree that, to the greatest extent allowed by law, both Resident and Facility shall seek onl y actual damages in any such mediation or arbitration, and that neither of them will pursue any claim for punitive damages, treble damages or any other type of damages the purpose of which are to punish one party in an amount greater than the actual damage s allegedly caused by the other party [.] A little over a year later in March 2021, Terry left the nursing home

. He died a few weeks later. On January 23, 2022, Terry’s estate filed a complaint alleging negligence, wrongful death , and spousal consortium claims against- 5

-

Stonecreek

. 2 Stonecreek answered and then filed the motion to dismiss and compel arbitration , based upon the “Disputes” provision, the signatures referenced
above , and the power of attorney for health care. In response, the estate argued
that Teresa had sign e d the Agreement in her capacity as wife to Terry , that she lacked the authority to bind him or the estate to the arbitration provision of the
A greement , and th at enforcement of the same would deprive the e state of its constitutionally protected right to a trial by jury. The trial court denied the motion to compel arbitration , resulting in this appeal.
LEGAL ANALYSIS Arbitration agreements are contracts ; there fore, to determine if an arbitration agreement is enforceable, a court must look to principles governing
contract law. Ping v

. Beverly Enter s. , Inc

. , 376 S.W.3d 581 , 591 (Ky. 2012); see also General Steel Corp. v. Collins , 196 S.W.3d 18 , 20 (Ky. App. 2006). The enforcement and effect of an arbitration agreement is governed by the Kentucky Uniform Arbitration Act ( “ KUAA ” ), Kentucky Revised Statute s (“ KRS ”)

2 The parties agree that the wrongful death claim asserted in th e complaint was not subject to arbitration , regardless , because it belongs to the beneficiaries under Kentucky’s wrongful death statute, Kentucky Revised Statute 411.130. An agreement to arbitrate claims against a skilled nursing facility operator did not bind wrongful death beneficiaries to arbitrate her wro ngful death claim against operators

. Diversicare of Nicholasville, LLC v. Lowry , 213 F. Supp. 3d 859 , 869

- 70 (E.D. Ky. 2016). See also Kindred Nursing Centers Ltd. Partnership v. Cox , 486 S.W.3d 892, 893 (Ky. App. 2015) ( “ U nder Kentucky precedent, wrongful death claims are not subject to arbitration.” ).- 6

-

417.045

- 417.240 , and the Federal Arbitration Act ( “ FAA ” ) , 9 U.S.C. 3 §§ 1

- 402

. “Both Acts evince a legislative policy favoring arbitration agreements, or at least shielding them from disfavor.” Ping , 376 S.W.3d at 588.

Further, the Kentucky Supreme Court explained that u nder both Acts,
the party “ seeking to compel arbitration has t he initial burden of establishing the existence of a valid agreement to arbitrate. ” Id. at 590 (citations omitted). Then, “[u] nless the parties clearly and unmistakably manifest a contrary intent, that initial showing is addressed to the [ trial ] court

. . . and the existence of the agreement depends on state law rules of contract formation. ” Id. (citation s omitted)

. This
Court reviews the trial court ’ s application of those rules de novo . However, we review any factual findings for clear erro r
. Id. (citation omitted).

Importantly , nothing in the FAA modifies the basic principles of state
contract law regarding the scope of agreements and who is bound by them. Golden Gate Nat’l Senior Care, LLC v. Rucker , 588 S.W.3d 868, 870 (Ky. App. 2019)

. (citation omitted). Therefore, “ [o] rdinary contract principles govern the validity of an arbitration agreement. ” GGNSC Stanford, LLC v. Rowe , 388 S.W.3d 117, 121 (Ky. App. 2012)

. Moreover, arbitration agreements “ constitute a waiver of the right to a trial by jury, which is a fundamental right. ” Jackson v. Legacy Health

3 United States Code.- 7

-

Servs

. , Inc

. , 640 S.W.3d 728 , 735 (Ky. 2022) (citations omitted); see also K Y

. C ONST

. § 7

. As discussed, we must first determine whether the party seeking to compel arbitration

– here, Stonecreek

– met its burden of establishing the existence of a valid agreement to arbitrate. Ping , 376 S.W.3d at 590. In Kentucky, to form a
valid and enforceable agreement , “ there must be voluntary and complete assent by parties having the capacity to contract. ” Cambridge Place Group, LLC v. Mundy , 617 S.W.3d 838 , 840 (Ky. App. 2021) (citation omitted)

. The trial court found that
Stonecreek failed to meet its burden.

While the trial court noted t hat Terry had named Teresa as his health care surrogate in 2014, it framed the issue as determining whether she signed the
A greement in that capacity

. The trial court found that she had not done so, relying in large part on an unpublished opinion of this Court , Providence Healthcare of Pine Meadows, LLC v. Roark , No. 2020

- CA

- 0117

- MR, 2020 WL
7086083 (Ky. App. Dec. 4, 2020). We agree that Roark is quite analogous and
thus bears further discussion.

In Roark , a nursing home resident had executed a power of attorney naming his son as his health care attorney

- in

- fact

. Roark , 2020 WL 7 086083 , at
*1. D uring Roark’s admission to the facility , his son had executed a document
similar to the A greement herein, which included an arbitration agreement. Id.- 8

-

However, a s here, the son had signed the documents with his name only and did
not indicate his status as attorney

- in

- f act

. Id. This Court upheld the trial court’s ruling that the nursing facility had failed to mee t its burden of establishing the existence of a valid arbitration agreement. Id. at *3

.

Here , Stonecreek initially asserts that this Court should not rely upon an unpublished opinion , and secondly, that the Roark decision is distinguishable
from th is case. As Stonecreek points out, Teresa did fill in her name or initial this
document in a few other places next to the line, “ Sponsor Name. ” Additionally,
Stonecreek’s contract did define the term “ s ponsor ” earlier in the document as “a person legally responsible for the [ r ] esident or [sic] must be in the process of obtaining such status, including a guardian , a person holding a durable power of attorney and/or a conser vator .”

However, as the trial court noted, Teresa did not sign at any time as attorney

- in

- fact or power of attorney

. Moreover, on the first page of th e document,
she wrote “ Terry L. Penix ” as sponsor, rather than her own name. Therefore, s he argues she did not sign th e Agreement in her capacity as a health care attorney

- in

fact or as sponsor, but as his wife. Like the trial court, we find the Roark opinion
to be in distinguishable from this case. Moreover, we also rely upon several published opinions th at address such arbitration clauses in nursing home scenarios.- 9

- In Ping , our Supreme Court clarified that legal representatives may execute arbitration agreements on behalf of a facility’s resident. Ping , 376 S.W.3d
at 593. However, an attorney

- in

- fact does not have the authority to bind principals to pre

- dispute arbitration agreements unless such authority is clearly stated in the durable power of attorney

. Genesis Healthcare, LLC v. Stevens , 544 S.W.3d 645, 651 (Ky. App. 2017).

In Genesis , this Court followed our Supreme Court’s directive in Ping , noting that:

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. Ping , 376 S.W.3d at 592, citing Wabner v. Black , 7 S.W.3d 379, 381 (1999), and Restatement (Second) of Agency , § 37 (1958). Consequently, general expressions of authority must be construed in furtherance of the specific powers granted by the POA. Id. at 592

- 93. Id. Here, the POA designated Teresa as the Agent and provided the “powers conferred upon a health care Agent by KRS 311.629,” 4 which it explained applied “only as to those health care decisions for which [Terry is] unable to give
informed consent.” The POA went on to detail specific preferences concerning such “health care decisions,” including mechanical ventilation, dialysis, antibiotics,

4 KRS 311.629 details the powers of health care surrogates, which specifically notes powers including making health care, treatment, and nutrition decisions

.- 10

-

and artificial nutrition and hydration. Additionally, the POA provided the Agent

– i.e. , Teresa

– with authority to “[t]ake any lawful actions that may be necessary to carry out these decisions, including, but not limited to: (i) signing, executing, delivering, and acknowledging any agreement, release, authorization, or other document that may be necessary, desirable, convenient, or proper in order to
exercise and carr y out any of these powers

. . . .” Th us , here, we must determine whether the POA provided authority for Teresa to enter an arbitration agreement, thereby waiving Terry’s right to a jury trial.

In Rowe , we held that even though parents of an incompetent p erson had the right to make health care decisions under KRS 311.621

– Kentucky’s Living Will Directive Act

– entering into an arbitration agreement was not a health
care decisio n as defined by the statute. Rowe , 388 S.W.3d at 124. Specifically, the

statu te provides that “ ‘ Health care decision’ means consenting to, or withdrawing consent for, any medical procedure, treatment, or intervention.” Id. (citing
KRS 311.621(8)). There, we noted, the arbitration agreement did not concern “ any type of medical tre atment, procedure, or intervention [ , ] ” and like here, address ed “only means of dispute resolution[.]” Id. Importantly, we explained that the arbitration agreement was not a necessary part of the agreement to admit the
residen t , but instead was “separate and ancillary.” Id.- 11

- Here , we ha ve found nothing within the body of the A greement that states it was mandatory for admission. While that wa s briefly suggested by Stonecreek’s counsel at the hearing on the motion, it was not ad dressed by the trial

court in its opinion , nor did the parties discuss this in their briefs

.

Similarly , in Rucker , th is C ourt noted that a provision in the power of attorney enabl ing the agent to “institute, maintain, defend, settle and dismiss legal proceedings

. . . did not expressly authorize [the agent] to enter into an arbitration agreement, which would have the effect of waiving [the resident

- principal’s] right to a jury trial. ” Rucker , 588 S.W.3d at 871 (emphasis added). Again, citing to Ping , we held that “[a] bsent 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.” Id. ( quoting Ping , 376 S.W.3d at 593 )

. There, the trial court had acknowledged, like here, the power of attorney did not suggest that the principal’s intent was to authorize the agent to make such waivers o n the principal’s behalf; “therefore, no
actual or apparent authorit y existed to sign the arbitration agreement.” Id.

Furthermore, in Mundy , 617 S.W.3d at 841 , this Court addressed a strikingly similar case involving a wife who signed an admissions agreement for her husband to enter a nursing home and listed her relation as “wife” rather than power of attorney

. W e held that the arbitration agreement signed by the resident ’ s- 12

-

spouse was invalid , in part, because she specifically wrote “wife” above a line
entitled “Legal Representative Capacity ( i.e. , guardian, spouse, child, Attorney

- in Fact, etc

. ) ” stating:

While Cambridge is correct that Kentucky law does not require a party to explicitly state they are acting as an attorney

- in

- fact, the issue herein is not [ the agent’s ] silence but rather her affi rmative avowal that she was acting in a separate capacity

. In her capacity as wife, [the agent] was authorized to make limited decisions on behalf of [the principal] ; however, the pre

- dispute arbitration agreement was outside that scope.
Id. (citing Rowe , 388 S.W.3d at 124 ) (emphasis added). Accordingly,
we found the trial court had not erred when it found there was not a valid
arbitration agreement. Id.

Similarly, here, Teresa not only failed to designate herself as the
power of attorney, but she also specifically indicated that she was acting as Terry’s
wife. As in Mundy , the trial court here found such indication suggested Teresa was signing the agreem ent in her “wife” capacity, not as power of attorney. As in Mundy , the trial court did not err in finding there was not a valid arbitration agreement. Indeed, our review of the plethora of cases arising out of nursing home arbitration agreements reveals that the vast majority have ruled that such agreements are not enforceable for a host of reasons. We are mindful of the recent
decision in LP Louisville East, LLC v

. Patton , 651 S.W.3d 759 , 770 (Ky. 2020) , as- 13

-

modified on denial of reh’g (Apr. 29, 2021) , which did enforce an arbitration agreement executed by a son admitting his father into a nursing facility

. However, that agreement , entitled “Agreement to I nformally R esolve and A rbitrate A ll
D isputes , ” stated that it required “all new re sidents and/or their legal representatives to read, agree, and sign” the agreement as a condition of admission to the facility. Id. at 762. We find no such requirement here

.

Further, there, the power of attorney that the son provided to the facility specifically authorized him to “ submit to arbitration, settle, and propose or accept a compromise with respect to a claim or litigation [

. ] ” Id. at 763

. Again, here, there is no such authorization in the POA.

Finally, subsequent to Patton , our Supreme Court held that a nursing home resident’s fundamental right to trial by jury was denied by her son’s signature as guardian on a voluntary arbitration agreement. In Jackson , our Supreme Court reversed a panel of this Court in a matter of first impression, specifically stating that the f undamental right to a jury trial was limited beyond the extent necessary to provide needed care and services, because the arbitration agreement in that ca se was not a condition of the patient receiving care or being
admitted to the facility

. Jackson , 640 S.W.3d at 735. The Supreme Court found that because release of that right was not necessary for services, the guardian- 14

-

lacked the authority to enter into the arbitration agreement, so it was not binding , and void. Id

.

Here , similarly, th e A greement does not state that the arbitration agreement was required as a condition for admission to Stonecreek

. T he POA did not specifically authorize Teresa to agree to arbitration. Teresa had only signed the Agreement in her capacity as wife , under KRS 311.621, not as power of attorney. Finally, th e Agreement , while signed or initialed by Teresa in a few locations next
to the line “ S ponsor , ” also specifically list ed “ Terry L. Penix ” as s ponsor on the first page. Based upon general contract principles and upon ample authorities upholding a resident’s fundamental right to a jury trial, unless clearly released by a power of attorney granting full aut hority to do so , the trial court properly appl ie d
the law in finding that Stonecreek did not meet its burden of establishing a valid , enforceable agreement. Accordingly, we affirm the denial of the motion to compel
arbitration.

ALL CONCUR

.- 15

-

BRIEF S FOR APPELLANT S : A. Pete Pullen Leah T. Scharff Louisville, Kentucky BRIEF FOR APPELLEE S : Brian M. Jasper Louisville, Kentucky