Arbitration Agreement with a Care Facility is not Enforceable when not Authorized by the Patient Herself

A California court of appeal recently ruled that an agreement to arbitrate disputes between an elderly patient and a nursing facility was not enforceable.  The arbitration agreement was signed by the daughter of the patient at the time the patient was admitted.  Because the patient herself had neither actually nor ostensibly provided authority for her daughter to make such legal decisions on her behalf, the court held that the agreement was not enforceable.  (Young v. Horizon West (--- Cal.Rptr.3d ----, Cal.App. 6 Dist., October 28, 2013).

After suffering a stroke, Marilyn Young ("Marilyn"), age 88, was hospitalized and then transferred to Monterey Pines Skilled Nursing Facility ("Monterey Pines") for 10 days.  Upon Marilyn's admittance, her daughter Bobbi signed an agreement that all disputes between Marilyn and Monterey Pines were to be resolved by arbitration.  Marilyn alleged that during her stay at Monterey Pines she had been physically abused and sexually molested by other patients and staff alike.

Marilyn brought a lawsuit against Monterey Pines and owners of the facility, alleging elder abuse, neglect, and negligence.  Monterey Pines and the other defendants moved to stay the action and compel arbitration based on the agreement Bobbi had signed.  The trial court denied the defendants' motion and the defendants appealed.

The question before the court was whether Bobbi had authority to represent Marilyn in agreeing to the arbitration requirement and whether a valid agreement existed to compel arbitration of the claims.  The court noted that Marilyn had authorized a power of attorney ("POA") for health care, which provided that if Marilyn's physician determined she lacked capacity, that Bobbi could make health care decisions on Marilyn's behalf only during the time of her incapacity.  The court noted that Marilyn elected not to check a box allowing Bobbi to make health care decisions without the determination of incapacity by the physician.  Further, the court noted, the POA contained no terms authorizing the patient's agent to make any decisions other than "health care decisions" for the patient.

The court concluded that the granting of power to make health care decisions during a period of incapacity "is a far cry from expressly authorizing her daughter to sign an agreement forgoing her right to a jury trial."  Therefore, the appellate court held that the POA did not empower Bobbi to enter into an agreement to compel Marilyn to arbitrate.

The next question was whether in the absence of actual authority, Bobbi had ostensible authority to bind Marilyn to arbitration.  Ostensible authority, the court said, "cannot be created merely by a purported agent's representation," but rather occurs only when "the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent."  The principal in this case is Marilyn, and no evidence suggested that Marilyn acted in any way to cause anyone at the facility to believe that Bobbi was authorized to sign an arbitration agreement on her behalf.

The defendants failed to demonstrate Bobbi's actual or ostensible authority to bind Marilyn to arbitration.  The trial court's order denying the motion to stay the lawsuit and compel arbitration was affirmed and Marilyn was not barred from pursuing her legal action.

Topics:  Arbitration, Arbitration Agreements, Consent, Patients, Power of Attorney

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Health Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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