Oak Crest Manor Nursing Home, LLC Day Life Corporation Terry Rowan Norma Elemento And Grover Moore v. Peggy Barba, as Guardian of S.F., 03-16-00514-CV

Background

S.F. (aka Shawn Frank) is a long‑term schizophrenic/bipolar patient who was involuntarily transferred from Seton Shoal Creek Hospital to Oakcrest Manor on December 13, 2013. Appellee later obtained guardianship and the probate court twice found Frank incapacitated.
On admission Oakcrest required Frank to sign a 15‑page nursing‑home admission agreement that included an arbitration clause; signatures on the agreement were Frank and the facility administrator only.
Oakcrest’s contemporaneous admission records (multiple nurse/assessment entries) documented a long history of serious mental illness, suicidal behavior, prior psych admissions, and elopement risk.
A court‑appointed physician (Dr. McRoberts) evaluated Frank ~6 weeks after admission and certified him as totally incapacitated; Dr. David Mansfield (appellee expert) opined Frank was totally incapacitated on the admission date and could appear lucid while lacking contractual capacity.
Appellee sued (initially including alternative breach‑of‑contract theories but later withdrew contract claims) and the probate court denied appellants’ motion to compel arbitration. Appellee’s brief argues the admission agreement (and arbitration clause) is void for lack of capacity and, alternatively, unenforceable under Texas law and not preempted by the FAA.

Issues

Issue	Plaintiff's Argument (Barba)	Defendant's Argument (Oakcrest)	Held
1. Was Frank competent to execute the admission agreement?	Frank lacked contractual capacity on admission (long history, court physician and expert say totally incapacitated; facility records corroborate).	Frank had a "lucid interval" on admission (administrator and nursing notes say he "seemed fine", answered questions).	Probate court denied motion to compel arbitration; appellee argues evidence shows lack of capacity so agreement is void.
2. Does prior pleading of a breach‑of‑contract claim waive right to assert incapacity or estop guardian from voiding the contract?	No—Texas permits pleading inconsistent/alternative theories; appellee later dropped contract claims; incapacity defense is not waived or estopped.	Argued appellee’s earlier contractual theory precludes later voiding/ratification.	Appellee: pleading alternatives does not estop capacity defense; court found no waiver.
3. If capacity existed, is the arbitration clause enforceable under Texas law (Tex. Civ. Prac. & Rem. Code §74.451)?	Clause fails Chapter 74 requirements (not signed by patient’s attorney; missing statutory notice) so is invalid as to health‑care liability claims.	Clause should be enforced; defendants seek FAA preemption.	Appellee: clause noncompliant with §74.451 and therefore unenforceable unless FAA preempts. Probate court denied compulsion.
4. Does the Federal Arbitration Act preempt Texas law and allow enforcement (i.e., is interstate commerce implicated)?	FAA does not preempt because the transaction is intrastate (Texas resident, Texas facility) and the resident received only Texas Medicaid (state‑administered), not Medicare; accepting defendants’ theory would unduly expand federal preemption.	FAA preemption applies because Medicaid/Federal funds implicate interstate commerce.	Appellee argues FAA does not preempt Chapter 74 here; briefs note this is a question of first impression and contend lack of Medicare or clear interstate commerce defeats preemption.

Key Cases Cited

Buckeye Check Cashing v. Cardegna, 546 U.S. 440 (U.S. 2005) (arbitration clause enforceability may depend on whether the underlying contract is valid; challenges to the contract as a whole are for courts).
Prima Paint Corp. v. Flood & Conklin Mfg., 388 U.S. 395 (U.S. 1967) (distinguishes challenges to arbitration clause vs. entire contract).
Rent‑A‑Center West, Inc. v. Jackson, 130 S. Ct. 2772 (U.S. 2010) (parties cannot delegate threshold contract validity questions to arbitrator where delegation not clearly established; courts decide fraud‑in‑the‑inducement to whole contract).
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (party seeking to compel arbitration must first show a valid arbitration agreement exists; presumption favoring arbitration arises after validity shown).
In re Morgan Stanley & Co., 293 S.W.3d 182 (Tex. 2009) (defenses to contract validity, e.g., incapacity, are for courts and can render contracts unenforceable).
The Fredricksburg Care Co. v. Perez, 461 S.W.3d 513 (Tex. 2015) (Texas Supreme Court considered FAA preemption in nursing‑home arbitration context where Medicare was involved).
In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125 (Tex. 1999) (discusses FAA preemption principles in Texas law).
In re Estate of Gray, 279 S.W.2d 936 (Tex. Civ. App.—El Paso 1955) (lay witnesses lacking sufficient contact or expertise may be excluded on capacity questions; expert evidence carries greater weight).