Court Opinion

ID: 1046212
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:34:04.512757+00
Date Added: 2024-06-11T12:24:44.328030
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                            AT NASHVILLE
                                 March 6, 2012 Session

MARY ANN CAUDLE, NEXT OF KIN AND CO-EXECUTOR OF ESTATE
 OF LOUISE K. FITE, DECEASED, AND ON BEHALF OF WRONGFUL
          DEATH BENEFICIARIES OF LOUISE K. FITE
                             v.
  COLUMBIA OPERATIONS, LLC D/B/A LIFE CARE CENTERS OF
    COLUMBIA AND LIFE CARE CENTERS OF AMERICA, INC.

                     Appeal from the Maury County Circuit Court
                     No. 13505 Robert Lee Holloway, Jr., Judge

                No. M2011-02194-COA-R9-CV - Filed August 27, 2012

This is an interlocutory appeal from a trial court’s grant of a motion to compel arbitration.
The mother executed a power of attorney in favor of the plaintiff daughter. Subsequently,
the daughter signed documents on her mother’s behalf for admission into the defendant
nursing home. The documents included an agreement to arbitrate any disputes with the
nursing home. After the mother died, the daughter filed this wrongful death lawsuit against
the nursing home. The nursing home filed a motion to stay the lawsuit and compel
arbitration; this motion was granted. The daughter was then granted permission for this
interlocutory appeal, on the issue of whether the power of attorney gave the daughter
authority to sign the arbitration agreement and waive her mother’s right to a jury trial.
Interpreting the language in the power of attorney document, we find that the daughter had
authority to execute the nursing home admission documents, including the arbitration
agreement, only if, in the opinion of her physician, the mother was “incompetent or incapable
of action” for herself. Therefore, we reverse and remand for further proceedings.

 Tenn. R. App. P. 9 Interlocutory Appeal; Judgment of the Circuit Court Reversed
                                  and Remanded

H OLLY M. K IRBY, J., delivered the opinion of the Court, in which D AVID R. F ARMER, J., and
J. S TEVEN S TAFFORD, J., joined.
Cameron C. Jehl, Carey L. Acerra, and Deborah Truby Riordan, Memphis, Tennessee for
Plaintiff/Appellant Mary Ann Caudle, next of kin and co-executor of estate of Louise K. Fite,
deceased, and on behalf of the wrongful death beneficiaries of Louise K. Fite

John Barry Burgess and Marc A. Sorin, Memphis, Tennessee for Defendant/Appellees
Columbia Operations, LLC d/b/a Life Care Center of Columbia and Life Care Centers of
America, Inc.

                                        OPINION

                            F ACTS AND P ROCEEDINGS B ELOW

In November 2002, Louise K. Fite (“Fite”) executed a durable power of attorney (“POA”)
naming her daughter, Plaintiff/Appellant Mary Ann Caudle (“Caudle”), as her attorney in
fact. The form for the POA was apparently provided to Caudle and Fite by a local bank. The
POA stated that Caudle was appointed as Fite’s attorney-in-fact under the Uniform Durable
Power of Attorney Act, Tennessee Code Annotated § 34-6-101, et seq. Paragraph 1 of the
POA stated:

       This power of attorney shall not be affected by my subsequent disability or
       incapacity. I intend for the authority conferred on my attorney-in-fact herein
       to be exercisable by them [sic] notwithstanding any such disability or
       incapacity.

Paragraph 2 of the POA, delineating Caudle’s powers as Fite’s attorney-in-fact, included a
provision on Fite’s medical care. It stated that Caudle had the following authority:

       To contract for my entry into, maintenance at, or release from any hospital,
       convalescent center, nursing home, or other health care facility, including the
       authority to approve or disapprove any proposed medical treatment to the
       extent that I am, in the opinion of my treating physician, incompetent or
       incapable of acting for myself.

The POA was signed by Fite and duly notarized.

On August 4, 2005, Caudle sought to have her mother admitted to a residential nursing home
facility in Maury County, Tennessee, Defendant/Appellees Columbia Operations, LLC, doing
business under the name Life Care Center of Columbia and Life Care Centers of America,
Inc. (“Life Care”). The documents Caudle executed in connection with Fite’s admission into
Life Care included a “Voluntary Agreement for Arbitration” (“arbitration agreement”). The

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arbitration agreement waived Fite’s right to a jury trial in the event of a dispute with Life
Care and obligated Fite and her agents or representatives to arbitrate any such dispute. It
provided that the arbitrators for any arbitration would be selected from the American
Arbitration Association (“AAA”) and that the arbitrators would apply the rules of procedure
of the AAA.

Fite lived at the Life Care nursing home for over four years. She died at the facility in
October 2009.

In August 2010, Caudle, in her capacity as Fite’s next of kin and co-executor of Fite’s estate,
filed the instant lawsuit against Life Care in the Circuit Court at Columbia, Maury County,
Tennessee. The complaint alleged that Fite suffered numerous serious injuries, and
eventually death, due to the negligent and intentional conduct of Life Care. The complaint
sought monetary damages based on several tort theories, including wrongful death, as well
as breach of contract and violations of various statutes.

In response, Life Care filed a motion to compel arbitration and stay the lawsuit, citing the
arbitration agreement signed by Caudle as part of Fite’s admission documents. The trial
court permitted discovery only on the enforceability of the arbitration agreement.

Caudle filed a response to Life Care’s motion to compel arbitration. Caudle’s response
argued, inter alia, that the POA did not grant her the authority to execute the arbitration
agreement unless Fite’s treating physician had deemed Fite incompetent, and that this was
not done. Caudle also contended that the arbitration agreement was not enforceable because
the AAA had announced that it would no longer accept patient disputes absent a post-dispute
arbitration agreement. Caudle argued that this amounted to failure of an integral term of the
contract.

In August 2011, the trial court held a hearing on Life Care’s motion to compel arbitration.
Several arguments were made by both parties, but the discussion between the trial court and
the attorneys focused on interpretation of the POA. Specifically, the exchange centered on
whether the phrase in Paragraph 2, authorizing Caudle to act to the extent that Fite had been
deemed incompetent by her physician, conditioned Caudle’s authority as to medical care
only, or whether it also was a condition to Caudle’s authority to execute the nursing home
admission documents, including the arbitration agreement.

A few days after the hearing, the trial court entered an order granting Life Care’s motion to
stay the proceedings and compel arbitration. The order stated that the issue before the trial
court was whether Caudle “had the power under the [POA] to sign the Arbitration Agreement

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for Ms. Fite.” After reviewing applicable statutes, the trial court issued findings pertinent
to the stated issue:

               1. Ms. Caudle was designated as legal representative in the Arbitration
       Agreement.
               2. At the time she executed the Arbitration Agreement she was
       attorney-in-fact for Ms. Fite under the [POA] executed on November 19, 2002
       by Ms. Fite before a Notary Public.
               3. The [POA] contains the words “[T]his power of attorney shall not
       be affected by subsequent disability or incapacity” as required by § 34-6-102.
               4. Paragraph 2.d. of the [POA] authorized the attorney-in-fact to
       “contract for (Ms. Fite’s) entry into, maintenance at, or release from any
       hospital, convalescent center, nursing home, or other health care facility . . .”
               5. Paragraph 2.d. of the [POA] authorized the attorney-in-fact “to
       approve or disapprove any proposed medical treatment to the extent that (Ms.
       Fite is), in the opinion of my treating physician, incompetent or incapable of
       acting for (herself).”
               6. Health care is a broader term than medical care pursuant to § 34-6-
       201, the definition section of the chapter dealing with durable power of
       attorney for health care.
               7. Medical care as defined in § 32-11-103(5) is specifically included
       in the definition of health care in § 34-6-201(2).
               8. Ms. Fite conferred on Ms. Caudle the power upon the execution of
       the [POA], which power was not revoked by any subsequent disability of Ms.
       Fite, to make health care decisions concerning entry into, maintenance at, or
       release from Life Care of Columbia.
               9. Ms. Fite did not confer to Ms. Caudle the power to make decisions
       concerning her medical care as defined in § 32-11-103(5) until she was “in the
       opinion of (her) treating physician, incompetent or incapable of action for
       (herself).”

After reciting these findings, the order granted the motion to stay the proceedings and compel
arbitration.

Upon issuance of the order compelling arbitration, Caudle filed a motion to lift the stay and
for permission for an interlocutory appeal of the order. Caudle’s motion argued first that the
trial court had not correctly construed the POA, contending that Caudle’s authority to execute
documents to admit Fite into a nursing home was conditioned on a determination by Fite’s
physician that Fite was incompetent. Because no such determination was made, Caudle

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insisted, the POA did not authorize Caudle to execute the arbitration agreement. Caudle
sought permission for an interlocutory appeal on this issue.

Caudle’s motion for permission to appeal also noted that the trial court did not rule on
Caudle’s contention that there was a fatal failure of an integral term of the arbitration
agreement, in that the arbitration could not be conducted by AAA arbitrators or in accordance
with AAA procedures because the AAA no longer accepted such cases. Caudle sought
permission for an interlocutory appeal of this issue as well.

On October 4, 2011, the trial court issued an order lifting the stay and granting Caudle
permission for an interlocutory appeal pursuant to Rule 9 of the Tennessee Rules of
Appellate Procedure. The issue on which the trial court granted permission to appeal was
stated as follows:

       The issue on appeal should involve interpreting a one page durable power of
       attorney to determine if the attorney-in-fact for the deceased had the authority
       to waive a trial by jury by executing a “Voluntary Agreement for Arbitration”.
       Two paragraphs of the durable power of attorney are at the heart of the issue.

       Paragraph 1.b. states:

                     This power of attorney shall not be affected by
              subsequent disability or incapacity. I intend for the authority
              conferred on my attorney-in-fact herein to be exercisable by
              them notwithstanding any such disability or incapacity.

       Paragraph 2.a. states:

                     To contract for my entry into, maintenance at, or release
              from any hospital, convalescent center, nursing home, or other
              health care facility, including the authority to approve or
              disapprove any proposed medical treatment to the extent that I
              am, in the opinion of my treating physician, incompetent or
              incapable of acting for myself.

On this basis, the trial court granted Caudle permission to appeal. Subsequently, this Court
also granted Caudle’s application for permission to appeal.

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                      ISSUES ON A PPEAL AND S TANDARD OF R EVIEW

On appeal, Caudle lists two issues in the Statement of the Issues in her brief. First, she
argues that the trial court erred in construing the durable power of attorney as vesting
authority in the agent to optionally waive the principal’s right to trial by jury when the power
of attorney contained no provision contemplating such an exercise of authority. Second, she
contends that the designation of a sole arbitral forum in the arbitration agreement constitutes
an integral term, the failure of which renders enforcement of the agreement impossible.

Though stated differently, Life Care lists the same two issues on appeal. Life Care asserts
that the first issue on appeal is whether the POA vested Caudle with the authority to execute
the arbitration agreement. The second issue stated by Life Care is whether the arbitration
agreement’s designation of a single arbitration forum distinguishes it from the arbitration
agreement found enforceable in Owens v. National Health Corp., 263 S.W.3d 876 (Tenn.
2007).

“Issues raised by an interlocutory or extraordinary appeal, after permission to appeal has been
granted, are decided in the same manner as if the issues had been raised in an appeal as of
right.” State v. Strode, 232 S.W.3d 1, 8 (Tenn. 2007) (quoting State v. Moore, 775 S.W.2d
372, 374 (Tenn. Crim. App. 1989)). The issues argued by the parties concern questions of
law, for which our review is de novo, with no presumption of correctness. Campbell v. Fla.
Steel Corp., 919 S.W.2d 26, 28-29 (Tenn. 1996); Fontaine v. Weekley Homes, L.P., No.
M2002-01651-COA-R3-CV, 2003 WL 21946721, at *1; 2003 Tenn. App. LEXIS 571, at
*3 (Tenn. Ct. App. Aug. 13, 2003) (citing Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn.
2000)).

                                          A NALYSIS

Under Rule 9 of the Tennessee Rules of Appellate Procedure, we are limited on appeal to the
questions certified by the trial court in its order granting permission for an interlocutory
appeal and those certified in this Court’s order granting the appeal.                  In re
Bridgestone/Firestone, 286 S.W.3d 898, 902 (Tenn. Ct. App. 2008) (citing Heatherly v.
Merrimack Mut. Fire Ins. Co., 43 S.W.3d 911, 914 (Tenn. Ct. App. 2000)). In the case at
bar, we interpret the trial court’s order as granting permission to appeal only on the
interpretation of the POA, i.e., whether Caudle had authority under the POA to execute the
arbitration agreement. Both parties argue other issues in their appellate briefs and did so in
oral argument on appeal. However, the issues presented to us in this appeal are
circumscribed by the trial court’s order granting permission for the appeal.

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                                         Authority Under POA

On appeal, Caudle argues that the trial court erroneously interpreted Paragraph 2.d. of the
POA. Caudle contends that the trial court construed the phrase “to the extent that I am, in
the opinion of my treating physician, incompetent or incapable of acting for myself” as
limiting only Caudle’s authority to approve or disapprove proposed medical treatment for
Fite. Caudle contends that the phrase is intended to limit all of the powers listed in Paragraph
2.d., including the authority to “contract for [Fite’s] entry into . . . any . . . nursing home . .
. .” As such, Caudle asserts, the POA did not authorize her to execute the arbitration
agreement at issue.

In response, Life Care argues that the only reasonable interpretation of Paragraph 2.d. of the
POA is that the condition precedent applies only to decisions regarding proposed medical
treatment. Life Care notes that the POA references the Tennessee Uniform Durable Power
of Attorney Act, Tennessee Code Annotated § 34-6-109, which indicates that an attorney-in-
fact may be granted broad authority. Life Care also relies on the Supreme Court’s analysis
in Tenn. Farmers Life Reassurance Co. v. Rose, 239 S.W.3d 743, 746-47 (Tenn. 2007).

Our research indicates that the issue presented in this appeal was decided by this Court in a
previous case, Wilson v. Americare Systems, Inc., No. M2008-00419-COA-R3-CV, 2009
WL 890870; 2009 Tenn App. LEXIS 277 (Tenn. Ct. App. Mar. 31, 2009).1 In Wilson, a
mother executed a power of attorney in favor of her daughter. Wilson, 2009 WL 890870,
at *2. The daughter signed documents to have her mother admitted to the defendant nursing
home, including an arbitration agreement. Id. at *1. After the mother died, the daughter
filed suit against the nursing home. Id. The defendant nursing home filed a motion to
compel arbitration, which was denied. Id. at *3. The nursing home appealed.

On appeal, this Court was presented with the issue of whether the daughter had authority
under the power of attorney to execute the arbitration agreement. Id. at *4. As it so happens,
the power of attorney at issue in Wilson contained language virtually identical to the

1
This case is not among those listed by the parties in their appellate briefs and, from our review of the record,
was apparently not cited to the trial court.

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language in Paragraph 2.d. of the POA in the instant case.2 Id. at *2. Interpreting that
language, the appellate court stated:

           The power of attorney executed by [the decedent mother] authorized [the
           daughter] to make medical decisions for [the mother] but specifically
           conditioned that authority on the opinion of a licensed physician that she was
           incompetent or incapable of acting for herself. There simply is no evidence in
           this record that [the decedent mother] was either incompetent or incapable of
           acting for herself.

Id. at *4 (citing Hendrix v. Life Care Centers of Am., Inc., No. E2006-02288-COA-R3-CV,
2007 WL 5423876, at *14; 2007 Tenn. App. LEXIS 791 (Tenn. Ct. App. Dec. 21, 2007)).
On this basis, the appellate court in Wilson held that the defendant nursing home “failed to
establish [the daughter] had the authority to sign” the nursing home admission documents for
her mother. Id. at *5. It then held: “Thus, we hold the record fails to establish there was a
valid arbitration agreement for the trial court to enforce.” Id.

The first part of the Wilson Court’s discussion of the language at issue references the
condition precedent as applying to the daughter’s authority “to make medical decisions” for
her mother. However, it is apparent that the Wilson Court construed the condition as limiting
the daughter’s authority to execute the nursing home admission documents, including the
arbitration agreement, since the Wilson Court concluded that the daughter was not authorized
to sign the agreement. See also Wise v. Heritage Assisted Living Facility, No. E2008-
02710-COA-R3-CV, 2009 WL 2877427, at *7 (Tenn. Ct. App. Sept. 9, 2009) (holding that
the power of the attorney-in-fact to sign an arbitration agreement was ineffective “[w]ithout
a finding of incompetency by a physician,” based on the language of the power of attorney
at issue).

2
    The pertinent provision in the POA in Wilson stated:

           1. Medical Care. To contract for my entry into and maintenance in, or release from, any
           hospital, convalescent center, nursing home, or other type of heath care center, including
           the authority to approve and give consent to any type of surgery or other medical treatment,
           should I at any time in the opinion of a licensed physician be incompetent or incapable of
           acting for myself.

Wilson, 2009 WL 890870, at *2.

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We see no reason to disagree with the Wilson Court’s interpretation of the language at issue
in the POA.3 On this basis, we hold that Caudle’s authority to contract for Fite’s entry into
and maintenance at Life Care, including her authority to execute the arbitration agreement,
was subject to the condition precedent that Fite was “in the opinion of [her] treating
physician, incompetent or incapable of acting for [her]self.”

On appeal, Life Care argues that the record shows that Fite was in fact incompetent when the
arbitration agreement was signed. The trial court made no finding of fact on this question
and it is beyond the purview of the question certified for appeal by the trial court. Therefore,
we decline to address it.

Accordingly, the trial court’s order compelling arbitration on the basis of the arbitration
agreement must be vacated and the cause remanded for further proceedings.

As noted above, the trial court did not expressly address the enforceability of the arbitration
agreement in light of the AAA’s decision not to take such cases. On remand, if the trial court
determines that the condition precedent in Paragraph 2.d. was not met, this issue becomes
moot. If not, we note that some courts in our sister states have held that the AAA’s decision
to decline to take cases involving pre-dispute arbitration agreements amounts to a failure of
an integral term of the contract. See Covenant Health & Rehabilitation of Picayune, LP
v. Moulds, 14 So. 3d 695, 707 (Miss. 2009) (observing that no other state court had held that
an arbitration may go forward if the arbitration agreement requires AAA administration);
Grant v. Magnolia Manor-Greenwood, Inc., 678 S.E.2d 435, 439 (S.C. 2009) (holding that
if the designation of forum in an arbitration clause “has wide-ranging substantive
implications that may affect, inter alia, the arbitrator-selection process, the law, procedures,
and rules that govern the arbitration, the enforcement of the arbitral award, and the cost of
the arbitration,” then the designation of forum should be considered an essential term). These
cases should be examined, as well as the decision of Tennessee’s Supreme Court in Owens
v. National Health Corp., in light of the particular language in this arbitration agreement.
Owens v. National Health Corp., 263 S.W.3d 876, 886 (Tenn. 2007) (holding that there was

3
 After determining that the defendant nursing home failed to establish they were entitled to enforce the
arbitration agreement, we acknowledge that other issues in Wilson were vacated and remanded for an
evidentiary hearing. Subsequently, a jury trial was held and the nursing home appealed the jury verdict.
Wilson v. Americare Sys, Inc., No. M2011- 00240-COA-R3-CV, 2012 WL 32106, at *1; 2012 Tenn. App.
LEXIS 7, at *1 (Tenn. Ct. App. Jan. 5, 2012) (hereinafter “Wilson II”). This Court then reversed, finding
no material evidence to support trial court’s acceptance of the jury verdict. Wilson II, 2012 WL 32106, at
*9; 2012 Tenn. App. LEXIS 7, at *23-24. In response, the daughter applied for permission to appeal to the
Supreme Court which was granted on April 11, 2012. Wilson v. Americare Sys., No. M2011-00240-SC-R11-
CV, 2012 Tenn. LEXIS 249, at *1 (Tenn. Apr. 11, 2012). Our analysis in the current case is not affected by
the issues addressed in these subsequent appeals.

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no factual basis for concluding that the two forums designated in the contract were so
material as to render the agreement unenforceable, based on only one of the two designated
forums being unavailable).

                                       C ONCLUSION

The decision of the trial court is vacated and the cause is remanded for further proceedings
consistent with this Opinion. Costs on appeal are assessed against Appellees Columbia
Operations, LLC d/b/a Life Care Centers of Columbia and Life Care Centers of America,
Inc., for which execution may issue if necessary.

                                                         ___________________________
                                                           HOLLY M. KIRBY, JUDGE

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