Arbitration & Mediation

5th Circuit Upholds Nursing Home Admission on 3rd Party Beneficiary Theory and "Concessions"

By Christopher B. Hopkins, Esq.

Up until 1981, the Fifth Circuit had been the federal circuit for Florida. Given that it governs our sister states and still has precedential value, we cast our gaze to their docket to find one of our favorite gems: a nursing home arbitration dispute. Not surprisingly, the decision turns on the hot issue of long term care arbitration: whether the person who signed the admission agreement had authority/capacity.

In J.P. Morgan Chase & Co.; J.P. Morgan Trust Company v. Delores Conegie by and through next friend Deola Lee, the Resident suffered dementia psychosis so her mother signed her into the facility. The court set forth that it must decide whether a valid agreement existed using state contact law but then, for reasons unexplained, examined the issue under both Mississippi statutory law AND federal third party beneficiary common law principles. Arguably, the federal common law also equates to most state laws.

The federal court primarily relied upon a 2007 Mississippi Supreme Court case, Covenant Health Rehab of Picayune v. Brown. In that case, the state supreme court held that the non-resident signor met the standard for a health care surrogate because the party avoiding arbitration made "concessions" regarding the resident's incapacity and physician's finding of incapacity which the court found to satisfy the requirements of the statute. In Conegie, the plaintiff likewise conceded that the resident was incapacitated and that she was diagnosed with dementia. This was "similar" enough to the Brown case that the federal court deemed that the health care surrogate statutory standard was met.

Of note, Mississippi courts seem to be on a pro-arbitration curve, as we noted in this prior post.

Back to our case: under federal law, the resident was clearly an intended third party beneficiary based upon the face of the admission agreement and that any dispute arising from or relating to the admission had to be arbitrated.

Full post as published by Florida Arbitration Law on March 05, 2008 (boomark / email).