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A federal magistrate in the Southern District of Georgia has recommended that, since the Supreme Court’s Buckeye Check Cashing, Inc. v. Cardegna decision declined to decide whether a party’s mental capacity to arbitrate should be decided by a court or an arbitrator, Eleventh Circuit precedent requires the issue to be decided by a court once the party makes a “colorable” showing of the lack of capacity to consent to arbitration.
In Washburn v. Beverly Enterprises-Georgia, Inc., No. CV 106-51, 2006 WL 2728627 (S.D. Ga. Aug 03, 2006), Sandra Washburn signed a “Resident and Facility Arbitration Agreement” prior to entering a Beverly nursing home.
Washburn died shortly after entering the nursing home and her estate brought suit against Beverly. Beverly filed a motion to compel arbitration. Washburn’s estate argued that the arbitration agreement was invalid because Washburn lacked capacity to consent to the agreement. The estate presented evidence that, at the time of signing, Washburn was severely ill, delusional, forgot basic facts about her life, and suffered from poor short term memory.
The first issue was determining which body of law governed the arbitration agreement. The magistrate did not apply the Georgia Arbitration Code, which prohibits pre-dispute agreements to arbitrate medical malpractice claims, but instead applied the Federal Arbitration Act (FAA), which preempts the Georgia Code.
The magistrate next turned to the estate’s argument that Washburn lacked the capacity to enter into an arbitration agreement. He found that the Supreme Court’s recent Buckeye Check Cashing, Inc. v. Cardegna decision declined to decide whether a court or arbitrator should decide “whether the signor lacked the mental capacity to assent.” 126 S.Ct. 1204, 1208 n.1 (2006). But because the Eleventh Circuit has held that courts determine the validity of arbitration agreements if a party makes a “colorable” denial to the existence of the agreement, the magistrate proceeded to examine whether the estate had made a colorable showing. Chastain v. Robinson-Humphrey Co., 957 F.2d 851, 855 (11th Cir. 1992).
The magistrate found that the estate’s evidence of Washburn’s mental and physical ills was a sufficient showing to establish the “colorable” claim required under the law. He therefore ordered limited discovery onto just Washburn’s mental capacity contract. If the court finds Washburn was mentally competent, “then an arbitrator may hear and decide Plaintiff’s many defenses to the arbitration agreement.”
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