Paducah Center for Health and Recovery. v. Penix, No. 2022-CA-0993-MR (2023)



Paducah Health and Rehab Center, LLC D/B/A Stonecreek Health and Rehab; ClearView Health Care Administration Ky, LLC D/B/A Clearview Health Care Adminivity; Paducsu Consulting Co., Ltd.; Paducá Propco; and Sarah Stewart, V. TERRY LANCE PENIX IN HER CAPACITY AS ADMINISTRATOR OF STONECREEK HEALTH AND RECOVERY APPELLANTS, AS EXECUTOR OF THE ESTATE OF TERRY LYNN PENIX, THE LEGEND AND TERESA PENIX INDIVIDUAL APPELLANTS

LOS APELANTES: A. Pete Pullen Leah T. Scharff Louisville, KY LOS APPELADOS: Brian M. Jasper Louisville, KY



Notice to Appellants:

A. Pete Pullen

Leah Scharf

Louisville, Kentucky

Letter to Appellant:

Brian M. Jasper

Louisville, Kentucky




This is an appeal from the McCracken Circuit Court decision denying a request for mandatory arbitration by Paducah Center for Health and Rehabilitation, LLC d/b/a Stonecreek Health and Rehabilitation (“Stonecreek”); Paducah Consulting, LLC ; Clearview Healthcare Management KY, LLC d/b/a Clearview Healthcare Management; The Paducah Project; and Sarah Stewart, administrator at Stonecreek Health and Rehabilitation Center. The underlying action is for wrongful death, negligence, syndicate damages, and punitive damages against Nursing Home Stonecreek and its corporate entities and officers. Terry Lynn Penix (“Terry”) lived in Stone Creek for approximately a year before passing away in March 2021. The lawsuit was filed through her executor, Terry Lance Penix, and his wife Teresa Penix (“Teresa”). Stonecreek filed a motion to dismiss. The court did not dismiss the lawsuit or order arbitration, finding that Stonecreek failed in its obligation to enter into a valid arbitration agreement. For the reasons described below, we confirm.


In 2014, Terry executed a living will directive and an advance directive (“POA”) appointing Theresa as his health care power of attorney. In 2020, Terry was admitted as a Stonecreek resident. This record contains no information about her physical or mental condition at the time, but Teresa signed an admissions agreement ("Agreement") as part of the admissions process. To this end, he signed above the line "Resident - natural person or legal representative" at the end of the document. This is a response to the clause acknowledging that the agreement has been read and understood.

Another provision at the end of the agreement requires the name and signature of the "sponsor," acknowledging that the person "accepts the sponsor's personal obligations as set forth in the agreement[.]" Teresa writes her name below this acknowledgment instead of Signature line, but next to the line that says "Sponsor". Below that, he typed the word "wife" next to the line for "relationship." But on the first page of the document, he wrote "Terry L. Penix" as the initiator.In another part of the agreement, "sponsor" is defined as "a person who is legally responsible for [bo] or shallAcquiring this status includes guardian, person with enduring power of attorney and/or conservator. "

It's unclear whether Teresa intended "Terry L. Penix" to refer to "Terry Lance Penix," the executor named in the complaint filed a year later, or her husband, "Terry Lynn Penix."

Elsewhere in the 12-page agreement, there is a section titled "Disputes." The section says in part:

(i) To the fullest extent permitted by law, Tenant and/or Tenant’s legally authorized representative will agree on behalf of Tenant, Tenant’s heirs, assigns, and property and facilities representing or purporting to represent Tenant or residentsAll civil claims in any way arising out of this Agreement or the care provided to residents by the Facility, its employees or agents, which is not a requirement for a facility to collect unpaid bills for services rendered or to involuntarily terminate a resident,Resolved exclusively through mandatory mediation or, if such mediation fails to resolve the dispute, through binding arbitration using the JAMS/Endispute Commercial Mediation and Arbitration Rules and Procedures. . . . (ii) Residents and Facilities also agree toTo the fullest extent permitted by law, Lessee and Facility will seek only actual damages in such mediation or arbitration, nor will they seek any punitive damages, treble damages, or any other type of damages, which The purpose is to punish either party. Both parties seek damages greater than the actual damages the other party claims to have caused.[.]

In March 2021, more than a year later, Terry left the nursing home. He died a few weeks later. On January 23, 2022, Terry's estate filed a lawsuit alleging negligence, wrongful death and syndicate claimsStone Creek.Stonecreek then responded and filed a motion to dismiss and compel arbitration pursuant to the Dispute clause, the aforementioned signatures, and the Healthcare Power of Attorney. In response, the estate argued that Teresa, who signed the settlement as Terry's wife, had no authority to bind him or the estate to abide by the settlement's arbitration clause, and that enforcing the settlement would deprive the estate of constitutionally protected rights. Right to a jury trial. The motion to compel arbitration was denied by the trial court, leading to this appeal.

The parties agree that the wrongful-death claim asserted in the lawsuit is not subject to arbitration, although vested in a beneficiary under Kentucky wrongful-death law,Kentucky Revised Statute 411.130. The agreement to arbitrate operators of skilled nursing facilities does not oblige wrongful death beneficiaries to arbitrate their wrongful death claims against the operator.. Diversicare af Nicholasville, LLC 诉 Lowry,213 F.Supp.3d 859, 869-70(ED Ky. 2016).Se også Society of Kindred Nursing Centers Ltd. 诉 Cox,486 SW3d 892、893(Ky. App. 2015) (“Based on Kentucky precedent, wrongful death claims are not subject to arbitration.”)

legal analysis

An arbitration agreement is a contract; therefore, in order to determine whether an arbitration agreement is enforceable, a court must observe principles applicable to contract law.Ping kontra Beverly Enters., Inc.,376 SW3d 581、591(Kentucky 2012);See also General Steel Company. v Collins,196 SW3d 18、20(Ky App. 2006). The enforcement and effectiveness of the arbitration agreement is governed by the Kentucky Uniform Arbitration Act (“KUAA”), Kentucky Revised Statutes (“KRS”)417.045-417.240 and the Federal Arbitration Act ("FAA"),9 University of Southern CaliforniaSection 1-402. "Both laws demonstrate legislative policy to support arbitration agreements, or at least protect them from opposition."post,376 SW3d and 588.

US code.

Furthermore, the Kentucky Supreme Court explained that, under the two statutes, "the onus is first on the party seeking to compel arbitration to determine the existence of a valid arbitration agreement."ID。at 590 (citations omitted). Thereafter, "[unless the parties expressly and unambiguously state an intent to the contrary, the initial showing is brought before the [trial] court ... and the existence of the agreement is subject to the state law rules of contract formation".ID. (Citation omitted).This court reviews the application of the above provisions by the court of first instance.again.However, we review any factual findings for obvious errors.ID。(Citation omitted).

It is important to note that nothing in the FAA changes the fundamental principles of state contract law regarding the scope of an agreement and who is bound by it.Golden Gate National Senior Care, LLC Contra-Ride,588 SW3d 868、870(Ky App. 2019). (Citation omitted). Therefore, "the validity of the arbitration agreement shall be governed by the principles of ordinary contracts".GGNSC Stanford, LLC vs. Rowe,388 SW3d 117、121(Ky App. 2012). Furthermore, the arbitration agreement "constitutes a waiver of the right to a jury trial, which is a fundamental right."Jackson kontra Legacy Health Servs., Inc., 640 SW3d 728、735(Ky. 2022) (citas omitidas);see alsoKy. Constant. § 7.

As discussed, we must first determine whether Stonecreek, the party seeking to compel arbitration, has fulfilled its duty to establish a valid arbitration,376 SW3d and 590.In Kentucky, for an agreement to be valid and enforceable, "the full and voluntary consent of the parties having capacity to contract must be present."Cambridge Place Group, LLC Contramundi,617 SW3d 838、840(Ky. App. 2021) (citations omitted). The court found Stonecreek failed to meet its burden.

While the lawsuit notes that Terry appointed Teresa as his health care surrogate in 2014, it pins down the issue to determine whether she signed the that capacity.The trial court concluded, based primarily on unpublished opinions of this court, that it did not,Providence Healthcare Contra Rock of Pine Meadows, LLC,n.º 2020-CA-0117-MR,2020 WL 7086083(Ky App. Dec. 4, 2020). we agree with thisLockeIt's very similar, so it should be discussed further.

ILocke, a nursing home resident signed a power of attorney designating her son as her health surrogate.Locke, 2020 WL 7086083, *1. During Roark's admission to the hospital, his son signed a document similar to that agreement, which included an arbitration agreement.ID。 But here, the son just signed the document and did not identify himself as a lawyer.ID。This court affirms the trial court's finding that the nursing home did not bear the burden of proving the existence of a valid arbitration agreement.ID。3.

Here, Stonecreek argues, first, that the Court should not rely on unpublished opinions, and, second, thatLockeThe decision can be separated from the case. As Stonecreek points out, on this document, Teresa puts her name or signs in several other places next to the "Sponsor Name" line. Additionally, Stonecreek's contract defines the term "sponsor" at the front of the document as "a person who is legally responsible for [bo] or [sic] and is acquiring such status, including guardians, attorneys-at-law and/or trustees" .

However, as the trial court noted, Teresa never signed on as an attorney. On the first page of the document, he also wrote "Terry L. Penix" as the sponsor instead of his own name. She therefore argued that she signed the agreement not as a health advocate or sponsor, but as his wife. Like the High Court, we foundLockeThe opinion is no different from this case. Additionally, we have relied on various published opinions addressing such arbitration clauses in nursing home settings.

Ipost, our Supreme Court clarified that a legal representative may enter into an arbitration agreement on behalf of residents of a,376 SW3d and 593. However, the attorney has no authority to bind the attorney to a prior arbitration agreement.Unless such authority is expressly establishedin lasting power.Genesis Healthcare, LLC Contra Stevens,544 SW3d 645、651(Application of Ky. 2017).

IGenesis, the Court followed the direction of the Supreme Courtpost, noting:

A power of attorney must be construed in reference to the type of transaction expressly authorized in the document and always subject to the attorney's duty to act with the utmost,376 SW3d and 592, quoteWebner and sorting,7 SW3d 379、381(1999), yesProxy Restatement (Second), § 37 (1958). Therefore, the general statement of authorization must be interpreted in support of the specific powers conferred by the POA.ID。In 592-93.

Here, the POA designates Teresa as attorney and “delegates the powers of health care attorney311.629 rupeesThis, he explained, “applies only to those health care decisions for which [Terry] is unable to give informed consent.” The POA goes on to detail specific preferences regarding such “health care decisions,” which include mechanical ventilation, dialysis, antibiotics,and artificial nutrition and hydration. In addition, the POA provides the attorney with:this means., Teresa - has the right to "take all lawful actions necessary to carry out these resolutions, including but not limited to: (i) executing, executing, delivering and confirming any agreement, release, authorization or other necessary document, desirable, expedient or convenient To exercise and enforce any of these powers..." Here, therefore, we must determine whether the POA authorizes Teresa to enter into an arbitration agreement thereby waiving Terry's right to a jury trial.

311.629 rupeesThe powers of health care agents are described, specifically including powers to make decisions about health care, treatment, and nutrition.

ILuo, we believe that although the parents of the disabled have the right to make health care decisions afterCrown 311.621- Kentucky Living Wills Directive Law: Entering into an arbitration agreement is not a health care decision as defined by law.Luo,388 SW3d and 124. Specifically, the statute states that "'health care decision' means consent to or withdrawal of consent to any medical procedure, treatment, or intervention."ID。(quoteKRS 311.621(8)). There, we note that the arbitration agreement makes no reference to "any form of medical treatment, procedure, or intervention[,]" and, as here, it refers to "the sole means of resolving the dispute[.]"ID。Importantly, we explain that the arbitration agreement is not a necessary part of the resident's admission agreement, but is "separate and incidental".ID。

Here we find nothing in the agreement itself to suggest it is mandatory. Although Stonecreek's attorneys briefly raised this point during the motions hearing, the trial court did not address it in its opinion, nor did the parties discuss it in their briefs.

correspondingly inLide, the Court noted that a provision in the Power of Attorney allowing the agent to "bring, maintain, defend, resolve, and dismiss legal proceedings ... does not expressly authorize [the agent] to enter into an arbitration agreement that would have had the effect ofgive up[resident director's] right to a jury trial".Lide,588 SW3d and 871(emphasize). quote againpost, we believe that “there is no authority in [the power of attorney] to resolve claims and disputes or any such express authority with respect to dispute resolution, the authority to make such a waiver should not be inferred lightly.”ID。(quotepost,376 SW3d and 593). There, as here, the High Court recognizes that a power of attorney does not mean that the principal intentionally authorizes the agent to make such waivers on behalf of the principal; "not for that reasonactualoobviouslyThe right to sign an arbitration agreement.ID。

Dessouden Imundi,617 SW3d and 841, This court heard a strikingly similar case where the wife signed an admission agreement for her husband to enter a nursing home and designated their relationship as "wife" rather than a power of attorney. We found arbitration agreements signed by residentsWife is ineffective in part because he wrote in a paper titled "Capacity as Legal Representative (this means., guardians, spouses, children, agents, etc..)"express:

Although Cambridge is correct that Kentucky law does not require a party to expressly state that they are acting as an agent, the issue here is not [the agent's] silence but their affirmative statement that they areact in a different capacity.As wife, [Attorney] is authorized to make limited decisions on behalf of [Attorney]; however, the Pre-Dispute Arbitration Agreement is outside the scope of this.
ID。(quoteLuo,388 SW3d and 124)(emphasize). We therefore consider that the High Court was not erroneous in finding that there was no valid arbitration agreement.ID。

Also here, Teresa not only appoints herself as an attorney, but goes out of her way to declare herself Terry's wife. picturemundi, The trial court held that such indications indicated Teresa had signed the agreement as "wife" and not as a power of attorney. picturemundi, the court of first instance did not err in finding that the arbitration agreement did not exist and was valid.

In fact, our review of a large number of cases arising from nursing home arbitration agreements shows that the vast majority of cases find such agreements unenforceable for a variety of reasons. we know the latest decisionLP Louisville East, LLC Contra Barton,651 SW3d 759、770(KY 2020),as modified by negating reh'g(April 29, 2021), which enforced an arbitration agreement enforced by a son who sent his father to a nursing home. But the agreement, titled "Agreement on the Informal Resolution and Arbitration of All Disputes," said,necessary"All new residents and/or their legal representatives must read, accept and sign" the agreement as a condition of entry to the facility.ID。At 762. We do not find such a statement here.

In addition, Son's power of attorney submitted to the facility specifically authorizes him to "submit to arbitration, compromise, and offer or accept compromise with respect to any claim or proceeding[.]ID。At 763. Again, there is no such authorization in the POA.

Finally, afterBarton, our Supreme Court has ruled that a nursing home resident's fundamental right to a jury trial was denied by his son's signature as guardian on a voluntary arbitration agreement. existjackson, our Supreme Court dismissed a panel of that court on the issue of first impressions, specifying that the fundamental right to a trial by jury was limited beyond what was necessary to provide necessary care and services because the arbitration agreement in that case did not The circumstances under which the patient received care or was admitted to the facility.jackson,640 SW3d and 735.The Supreme Court held that since the waiver of this right was not necessary to the benefit, the guardian wasThere is no authority to enter into an arbitration agreement, so this agreement is not binding and void.ID。

Here, too, there is nothing in the agreement that states that an arbitration agreement is a condition of entry to Stonecreek. The POA did not specifically authorize Teresa to agree to arbitration. Teresa signed the agreement only as wife, according toCrown 311.621, not as a proxy. Finally, the agreement also explicitly lists "Terry L. Penix" as a sponsor on the front page, although Teresa signed or initialed it somewhere next to the "Sponsors" line. Under the general principles of contract and broad powers to uphold residents' fundamental right to a jury trial, unless a power of attorney expressly waives carte blanche to do so, the trial court correctly applied the law and found that Stonecreek failed to comply with its obligations. Establish effective and enforceable agreements. Accordingly, we affirm the motion to deny to compel arbitration.

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