Relying on the Federal Arbitration Act and recognizing that “this case presents one of the rare instances in which a defendant opposing arbitration survives the initial stage of an FAA proceeding,” the U.S. District Court for the Eastern District of Kentucky denied the defendant’s motion to dismiss the plaintiff’s action to compel arbitration and ordered the matter to proceed to trial on the limited issues concerning the validity and enforceability of the arbitration agreement.

In August 2010, Opal Wells executed an unlimited power of attorney providing her son Leonard Wells as her attorney-in-fact and agent. Opal was admitted to the Boyd Nursing and Rehabilitation Center in 2013. In 2019, when new owners took over Boyd, they took steps to obtain signatures on paperwork regarding Opal, which included an arbitration agreement. The arbitration agreement was part of a larger document but had its own signature block, which Leonard signed as his mother’s “responsible party.” Opal passed away in September 2020 and Leonard filed a state court action on behalf of her estate and wrongful death beneficiaries. Boyd then filed an action in the district court to compel arbitration of the state court claims, asserting that the power of attorney “provided Leonard with the authority to sign the Arbitration Agreement on Opal’s behalf.” Leonard filed a motion to dismiss Boyd’s action on several grounds, including lack of subject matter jurisdiction, failure to join an indispensable party, and the Colorado River abstention doctrine. The district court rejected each of those arguments. Leonard also raised arguments regarding the validity and enforceability of the arbitration agreement, asserting that the arbitration agreement was unconscionable because it was “part of a mass-produced, boiler-plate, pre-printed document” and that “an obviously gross disparity of bargaining power” supports a finding of unconscionability. The court rejected those arguments as well, noting that the court has “previously found that nursing home arbitration agreements with similar characteristics fall short of the high bar for procedural unconscionability despite their ‘boilerplate’ language” and that the claim of unequal bargaining power was unsupported.

Finally, Leonard argued that the authority he maintained as Opal’s power of attorney expired when she became incapacitated, rendering him incapable of signing the arbitration agreement on her behalf. With regard to this issue, the court concluded that “the making of the agreement is in issue” such that “this matter must proceed to trial” on limited issues regarding whether “Opal was incapacitated prior to the signing of the Arbitration Agreement” and, if necessary, “whether Leonard lacked actual knowledge of Opal’s incapacitation such that he could in good faith validly bind her and her successors in interest.” The court noted that the “Sixth Circuit has stated that ‘parties may seek targeted discovery on … disputed contract-formation questions’ under the FAA, provided that ‘any discovery must comport with § 4, which calls for a summary trial — not death by discovery.’” The court ordered the matter to proceed to trial on the limited issues addressed in the opinion and permitted limited discovery on the triable issues.

Boyd Nursing & Rehabilitation, LLC v. Wells, No. 0:22-cv-00011 (E.D. Ky. Aug. 30, 2022).