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In remanding a case with instructions to grant a nursing home's motion to compel arbitration, the Fifth Circuit Court of Appeals held that a nursing home resident was bound by an arbitration agreement signed by her mother because the resident was a third-party beneficiary of the agreement.
In JP Morgan Chase & Co. v. Conegie ex rel. Lee, No. 06-60603, 2007 WL 2028926 (5th Cir. Jun 16, 2007), Conegie suffered from dementia psychosis and was thus admitted to a nursing home by her mother, who signed a nursing home admission agreement containing an arbitration clause. When Conegie sued for injuries sustained during her residency, JP Morgan filed a motion to compel arbitration. The district court denied the motion.
On appeal, applying Mississippi law, the Court held that JP Morgan could enforce the arbitration agreement against Conegie. Conegie lacked capacity to sign the contract, since she suffered from dementia psychosis. Further, Conegie's mother had statutory authority to bind Conegie because Conegie's mother was "an appropriate member of the classes from which a [health care] surrogate could be drawn" under Miss. Code Ann. Sec 41-41-211(2)(c).
The Court reached the same conclusion under federal law. The agreement stated that it was "with, or on behalf, of Delores Conegie and/or her family." The language of the agreement thus established that the parties intended to make Conegie a beneficiary of the agreement. Accordingly, she was bound by the agreement as a third-party beneficiary.
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