In Crossman v. Life Care Centers of America, Inc., the North Carolina Court of Appeals recently upheld the invalidation of a healthcare arbitration agreement as impossible to perform due to a failure of material terms. In January 2011, while serving as the administrator of her husband’s estate, Lucille Crossman filed a wrongful death complaint against the Defendants, who own, operate, and manage the assisted living facility in Hendersonville in which Ms. Crossman’s husband resided before his death. When Mr. Crossman entered the facility in 2004, he signed an agreement in which he stipulated that the parties agreed to submit all cl
When Ms. Crossman filed the wrongful death complaint, the Defendants
filed a motion to dismiss and compel arbitration based on the terms of
the arbitration agreement. The
trial court denied the motion, holding that the agreement was
unenforceable because it was impossible to perform due to a failure in
its material terms and because arbitration agreements signed by
decedents do not bind wrongful death beneficiaries.
On appeal, the Court agreed that the arbitration agreement was unenforceable. The
Court explained that effective January 1, 2003, the AAA had issued a
Healthcare Policy Statement informing all potential parties to an
arbitration agreement in the field of healthcare that the AAA would no
longer accept the arbitration of cases involving individual patients
without a post-dispute agreement to arbitrate. Because
the agreement had been signed before a dispute arose, and because the
agreement stipulated that arbitration must occur under AAA rules and be
presided over by persons approved by the AAA, the Court held that the
agreement was unenforceable because it was impossible to perform due to a
failure in material terms.
The Court distinguished the case from its earlier holding in Westmoreland v. High Point Healthcare Inc.,
___ N.C. App. ___, 721 S.E.2d 712 (2012), in which the Court held that a
pre-dispute arbitration agreement signed on admittance to a nursing
facility was enforceable. In
that case, the agreement stipulated that any arbitration must follow
the rules of the AAA and be conducted before one neutral arbitrator
selected in accordance with the rules of the AAA. The
Court held that the agreement was not impossible to perform despite the
existence of the AAA Policy Statement, because it did not preclude
arbitration of the claims by a non-AAA arbitrator. Here, in contrast, the agreement stated that the arbitration would be conducted by arbitrators selected from the AAA. It specifically required the use of AAA arbitrators and was, therefore, unenforceable as impossible to perform.
