After suffering a stroke, a woman was admitted to a skilled nursing facility. During the admissions process, the woman’s daughter signed a number of documents including an arbitration agreement. While at the facility, the woman was sexually assaulted and contracted a sexually transmitted disease. The woman sued the facility for elder abuse and neglect, negligence, and violating her rights under California’s Patients’ Bill of Rights. The facility moved to compel arbitration. The Santa Clara County Superior Court denied the facility’s motion to compel arbitration.
The California Court of Appeal for the Sixth District affirmed holding that no valid agreement existed entitling the facility to nonjudicial arbitration of the woman's claims. Specifically, the court held that the woman’s power of attorney for health care (POA) did not confer authority on her daughter to sign the arbitration agreement for her, evidence did not establish that did the woman specifically authorized her daughter to sign the arbitration agreement for her, the woman was not equitably estopped from refusing to arbitrate, and the woman's daughter did not have ostensible authority to bind her to arbitration.
First, the POA did not make the woman's daughter her agent with authority to sign the arbitration agreement for her. The POA provided that when plaintiff's primary physician determined that the plaintiff was unable to make her own health care decisions her agent was authorized to make specified health care decisions for her. The facility conceded that no physician made such a determination. On the POA form, the woman elected not to check the box allowing her agent to make health care decisions for her without a prior determination of incapacity by her physician. The woman’s husband was her primary health care agent under the POA, not her daughter. Moreover, the POA contained no terms authorizing the woman's agent to make any decisions other than health care decisions. In the context of the POA, health care decisions did not include the execution of arbitration agreements for the woman.
Second, the evidence did not establish that the woman had expressly authorized her daughter to act as her agent and sign the arbitration agreement for her. The woman’s deposition testimony that her daughter knew from conversations that her wish was to receive the care that was possible at the time was in connection with her wishes for medical treatment when she was hospitalized immediately after the stroke. The woman testified during her deposition that her daughter had the authority to complete paperwork on her behalf and to take care of details like that upon admission to the facility. The court found that this testimony did not establish that the woman had expressly authorized her daughter to sign an agreement forgoing her right to a jury trial. The woman’s husband’s statement that the daughter was their legal guardian was nothing more than a legal conclusion unsupported by any facts.
Third, the woman was not equitably estopped from refusing to arbitrate. A valid claim for equitable estoppel requires: (a) a representation or concealment of material facts; (b) made with knowledge, actual or virtual, of the facts; (c) to a party ignorant, actually and permissibly, of the truth; (d) with the intention, actual or virtual, that the ignorant party act on it; and (e) that party was induced to act on it. The woman did not misrepresent or conceal any material fact.
Fourth, the woman's daughter did not have ostensible authority to bind her to arbitration. Agency can be established either by agreement between the agent and the principal, that is, a true agency, or it can be founded on ostensible authority, that is, some intentional conduct or neglect on the part of the alleged principal creating a belief in the minds of third persons that an agency exists, and a reasonable reliance thereon by the third persons. Under California Civ. Code § 2300, an agency is ostensible when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his or her agent who is not really employed by the principal. For an agency relationship to exist, the principal must in some manner indicate that the agent is to act for the principal, and the agent must act or agree to act on the principal’s behalf and subject to his or her control. The formation of an agency relationship is a bilateral matter; words or conduct by both principal and agent are necessary to create the relationship.
The woman did not act in any way to cause the facility's admissions coordinator to believe that her daughter was authorized to sign an arbitration agreement on her behalf. While the daughter, by signing the admission paperwork, may have represented that she was the woman’s agent and that she intended for resident to be bound by the agreements, ostensible authority cannot be created merely by a purported agent's representation. Conduct by the principal is essential to create the agency. A third person is not compelled to deal with an agent, but if that third person does so, he or she must take the risk not only of ascertaining whether the person with whom that person is dealing is the agent, but also of ascertaining the scope of the agent’s powers.
See: Young v. Horizon West, Inc., 2013 WL 5782524 (Cal.App. 6 Dist., October 28, 2013) (not designated for publication).