Georgia Supreme Court Sides With Nursing Home on Arbitration Issue Briefed by AGG Attorneys

Since 1925, Congress and the United States Supreme Court have recognized arbitration as a favored means of dispute resolution, offering a faster, more private, and less expensive alternative to the court systems. Unfortunately, despite an almost century-old statute favoring arbitration, some courts remain hostile to the process. In a recent opinion, the Georgia Supreme Court yet again embraced arbitration by reversing a lower court decision that held that a guardian lacked authority to enter an arbitration agreement in connection with a nursing home admission.

The facts of the case were straightforward. A guardian contracted with a nursing home to care for her ward. A guardian is someone (usually a close relative or friend) appointed by a county probate court to act in the best interests of an incompetent person (the ward). When admitting her ward into the nursing home, the guardian signed an admission agreement that contained an arbitration clause, as well as a separate arbitration agreement, in which she agreed that any disputes with the nursing home would be resolved by an arbitrator (a neutral person, such as a lawyer or retired judge, the parties would mutually choose). Later, however, when a dispute arose, the guardian disregarded the arbitration agreements and sued the nursing home in court. When the nursing home sought to enforce the arbitration agreements, the county court said that the guardian was authorized to enter them. But it found that the provision in the admission agreement was unenforceable because it violated federal law by giving the nursing home consideration beyond the Medicaid payments provided for the ward’s care. And it found that the separate arbitration agreement was unenforceable because it was not commercially reasonable and was unconscionable.

The Georgia Court of Appeals affirmed the trial court’s ruling, but for a different reason. It concluded that neither the letters of guardianship issued by the probate court nor Georgia’s guardianship statute authorized the guardian to consent to arbitration. All agreed that a guardian was allowed to contract for admission into a healthcare facility. But the guardian argued—and the Court of Appeals held—that this power excludes the power to choose in advance how disputes related to that very same admission will be resolved. Despite the broad authority of a guardian to make decisions on behalf of the ward, the Court of Appeals allowed the guardian to disavow her own authority to enter the arbitration agreement that she signed. The nursing home then sought review by the Georgia Supreme Court.

Arnall Golden Gregory submitted a friend-of-the-court brief on behalf of the Georgia Health Care Association (GHCA) in the case. In a unanimous opinion of the qualified Justices, the Supreme Court agreed with our arguments and reversed the Court of Appeals. See CL SNF, LLC v. Fountain, No. S20G1292, 2021 WL 4268081 (Ga. Sept. 21, 2021).

Congress enacted the Federal Arbitration Act (FAA) in 1925 to “reverse the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991); EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002). “When Congress passed the Arbitration Act in 1925, it was ‘motivated, first and foremost, by a . . . desire’ to change this antiarbitration rule.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 220 (1985). Consistent with this legislative mandate, the United States Supreme Court has repeatedly affirmed arbitration as a favored method of dispute resolution and rejected any limitations upon parties’ rights to enter into arbitration agreements, including in nursing home admissions. See Marmet Health Care Center Inc. v. Brown, 565 U.S. 530, 531-532 (2012); Kindred Nursing Centers L.P. v. Clark, 581 U.S. –; 137 S. Ct. 1421, 1428 (2017).  The Georgia Supreme Court has been faithful to these principles as well.  See United Health Services of Georgia, Inc. v. Norton, 300 Ga. 736, 737 (2017) (enforcing arbitration agreement signed by nursing home resident’s general power of attorney).

Georgia’s guardianship laws, O.C.G.A. § 29-4-1, et seq., enable a probate court to appoint a guardian when an “adult lacks sufficient capacity to make or communicate significant responsible decisions concerning his or her health or safety.” O.C.G.A. § 29-4-1(a). “In every guardianship, the ward has the right to . . . [a] qualified guardian who acts in the best interest of the ward.” O.C.G.A. § 29-4-20(a)(1). The probate court is obligated to appoint a guardian that will “best serve the interest of the ward,” with preference given to a “friend, relative or other individual,” if a spouse, adult child, parent, or previously appointed guardian is unavailable.  O.C.G.A. § 29-4-3.

Georgia’s guardianship statutes state that unless the Court’s order specifies otherwise, the appointment of a guardian removes from the ward the power to “make, modify, or terminate other contracts;” “consent to medical treatment;” and “bring or defend any action at law or equity, except an action relating to the guardianship.” O.C.G.A. § 29-4-21(a). These removed powers are then reposed in a guardian, who must “make decisions regarding the ward’s support, care, education, health, and welfare.” O.C.G.A. § 29-4-22(a). “To the extent known, a guardian, in making decisions, shall consider the expressed desires and personal values of the ward.”  Id. A guardian must act as a fiduciary in the ward’s best interest and exercise reasonable care, diligence, and prudence. Id. Unless the Court’s order specifies otherwise, a guardian may “[b]ring, defend, or participate in legal, equitable, or administrative proceedings, including alternative dispute resolution, as are appropriate for the support, care, education, health, or welfare of the ward in the name of or on behalf of the ward.” O.C.G.A. § 29-4-23(a)(3). Before accepting the appointment, a guardian must “take an oath or affirmation before the court to perform well and truly the duties required of a guardian and to account faithfully for the estate.” O.C.G.A. § 29-4-25.

In its opinion enforcing arbitration, the Georgia Supreme Court found that the guardian signed all the nursing home admission documents, including the arbitration agreement, contemporaneously. The Court, therefore, recognized that the agreements were interrelated as part of the same transaction (i.e., the ward’s admission to the nursing home) and must be read and considered together. In other words, the guardian could not selectively choose those parts of the agreement that she sought to enforce (e.g., the admission) and disavow those parts that she later found inconvenient (e.g., arbitration).

The Court concluded that Georgia’s guardianship code grants a guardian authority to enter into a binding pre-dispute arbitration agreement where the exercise of such power is reasonably necessary to provide adequately for the ward’s support, care, health, and welfare. The Court held that such a power is one that is “reasonably necessary” to adequately provide for the ward, and the guardian had the power to execute a pre-dispute arbitration agreement on the ward’s behalf in connection with the provision of care. Otherwise, without possessing these related powers, guardians would either be unable to execute routine contracts such as telephone, banking, and utility contracts (most of which include arbitration agreements), or they would have to obtain approval from the probate court for each agreement—an unworkable process.

In the wake of the Supreme Court’s opinion, guardians will be able to continue to enter contracts for their wards that include arbitration provisions, and companies, such as nursing homes, will be able to enforce those agreements without fear of the guardian later changing their minds or selectively disavowing the arbitration provision. But the opinion may have larger implications as well. Eleven years ago, the Georgia Supreme Court agreed to review a case involving the authority of a family member—in that case, a health care power of attorney—to sign an arbitration agreement when admitting a loved one to a nursing home. See Life Care Centers v. Smith, 298 Ga. App. 739, 681 S.E.2d 182 (2009), certiorari granted (Feb. 1, 2010). Like the recent Fountain case, the Court of Appeals had said that the family member was authorized to contract for the resident’s nursing home admission, but not to agree to arbitrate disputes that might arise out of that admission.  Before the Supreme Court could issue a ruling in Life Care, the parties settled, thus depriving the Supreme Court of the opportunity to decide this issue. Since then, the Court of Appeals has issued at least six opinions on the authority of loved ones to enter nursing home arbitration agreements, with inconsistent and generally unfavorable results.

The Supreme Court’s recent opinion in Fountain did not mention Life Care or the other Court of Appeals decisions deciding the authority of a family member to enter an arbitration agreement in connection with a nursing home admission. But the reasoning of Fountain should apply with equal force and measure when analyzing a family member’s authority to agree to arbitrate as part of a nursing home admission—regardless of whether that authority comes from a guardianship, a health care power of attorney, or other agency law. If the family member has authority to admit the loved one to a nursing home, that family member typically should have authority to agree to resolve disputes arising out of that admission by arbitration. As with the guardianship code, Georgia law allows a family member to admit a loved one into a healthcare facility, such as a nursing home, under certain circumstances. Healthcare admission agreements cover a landscape of issues, from selecting a doctor, to choosing a laundry service, to consenting to surgery. All of which are “reasonably necessary” to adequately provide for the family member, as should be the power to decide how disputes arising out of that admission ought to be resolved. Indeed, as with its recent Fountain opinion, the Supreme Court, when presented with arbitration questions, has been consistent in enforcing the policy in favor of arbitration agreements and upholding agreements to arbitrate. See Norton, 300 Ga. 736 (holding that arbitration agreement between a nursing home and patient was enforceable against patient’s husband in wrongful death action). The reasoning of Fountain should therefore apply with equal force and measure to arbitration agreements signed by family members who are authorized to admit a patient into a health care facility.

Arbitration provides a fair, prompt, private, and efficient method of dispute resolution, which is beneficial for residents, their families, and the healthcare system as a whole. The Georgia Supreme Court’s decision allows representatives to choose this favored form of dispute resolution. For more information about the case or for assistance with arbitration agreements, please contact Jason E. Bring, W. Jerad Rissler, or Kara G. Silverman.