Jack Nelson Jones Professional Association

May 22-28, 2017

Broadway Health & Rehab, LLC v. Roberts, 2017 Ark. App. 284 (May 10, 2017)

 

This appeal comes from the Crittenden County Circuit Court, honorable Tommy Fowler presiding. This case concerns the formation of an agency relationship and the enforcement of an arbitration agreement.

 

Evelyn King was admitted to Broadway Health & Rehab (Broadway) in West Memphis on March 3, 2017. Catherine Roberts signed the relevant paperwork, which included an arbitration agreement. The arbitration agreement listed Ms. King in the space immediately next to “Print Resident Name.” Directly beneath that line was a signature space in which Ms. Roberts signed her name next to the date. Under her signature was text that directed the applicant to circle whether the signature was of the “Resident” or a “Resident Representative.” Neither was circled. Below that, the agreement stated: “If Resident Representative, please check the basis of your authority.” The options to check were: Power of Attorney; Court-Appoint Guardian; and “Other. Please explain.” Ms. Roberts checked “Other” and wrote down: “Daughter.”

 

On November 24, 2015, Ms. Roberts, as guardian of the person and estate of Evelyn King, filed a complaint against Broadway alleging negligence, medical malpractice, and violations of the Arkansas Long-Term Care Residents’ Rights Act. Ms. Roberts alleged that Ms. King sustained numerous injuries, including a severe injury to her left hand; and she suffered from illnesses, including infection, poor hygiene, poor nutrition, and unnecessary pain and suffering. Broadway answered, filed a motion to dismiss, and a motion to compel arbitration pursuant to the Federal Arbitration Act, arguing that Ms. Roberts, on behalf of her mother, executed a binding arbitration agreement that encompassed the claims in her complaint. In the alternative, Broadway argued that, if the court found Ms. Roberts lacked authority to bind her mother, the arbitration agreement was valid under the third-party-beneficiary doctrine.

 

Ms. Roberts resisted arbitration, claiming Broadway did not own the facility when the agreement was signed and thus was not a party to the agreement and could not enforce it; she lacked the authority to bind Ms. King; and the third-party-beneficiary doctrine was inapplicable because there was no valid underlying agreement between Ms. Roberts and Broadway. The circuit court denied Broadway’s motion to compel arbitration, finding that the arbitration agreement was invalid as a matter of law, that Ms. King did not execute the agreement, that Ms. Roberts lacked the legal capacity to bind Ms. King to the terms of the arbitration agreement, that the third-party-beneficiary doctrine was inapplicable, and that the Federal Arbitration Act did not apply to Ms. Roberts’s claims. Broadway appealed.

 

On appeal, the Court explained that the essential elements for an enforceable arbitration agreement are (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5) mutual obligation. However, the Court noted, before arbitration can be compelled, a threshold determination must be made that a valid arbitration agreement exists between the parties. Arbitration is a matter of contract, and the elements of a contract, including mutual agreement, must be met.

 

When a third party signs an arbitration agreement on behalf of another, a court must determine whether the third party had the authority to bind the other person to arbitration. The Court explained that an agency relationship requires both that the agent “agree to act on the principal’s behalf and subject to [her] control,” and the principal indicate that the agent is to act for her. While the statements and actions of an alleged agent may be admissible to corroborate other evidence tending to establish agency, neither agency nor the scope of agency can be established by declarations or actions of the purported agent.

 

In this case, the only evidence the Court could point to regarding Ms. Roberts’s authority to bind her mother to the arbitration agreement was the agreement itself. The agreement demonstrated that Ms. Roberts did not have a power of attorney to act on Ms. King’s behalf and that she had not been appointed to serve as Ms. King’s guardian. Further, there was no evidence that Ms. King authorized Ms. Roberts to serve as her agent. Ms. Roberts specified on the arbitration agreement that she signed as Ms. King’s “Daughter.” However, the Court pointed out that a familial relationship was not sufficient to establish an agency relationship between Ms. Roberts and Ms. King. Broadway’s counsel conceded that, other than signing the agreement, she was unaware of any other steps taken by Broadway to ascertain actual or apparent agency between Ms. Roberts and Ms. King. There was no evidence at all to support the contention that Ms. King authorized Ms. Roberts to act as her agent in signing the arbitration agreement, even assuming she had the capacity to do so. Accordingly, the Court held that the evidence failed to demonstrate, as a matter of law, that Ms. Roberts had the authority to act as Ms. King’s agent to bind her to the arbitration agreement.

 

Broadway also argued that the circuit court erred in finding that the third-party beneficiary doctrine was inapplicable to enforce the arbitration agreement. Specifically, Broadway contended that Ms. Roberts entered into the arbitration agreement in her individual capacity and that Ms. King was the third-party beneficiary. The Court explained that the two elements necessary to apply the doctrine are: that there must be an underlying valid agreement between the two parties and there must be evidence of a clear intention to benefit a third party. According to the Court, the first element, a valid underlying agreement, was not shown to exist. The only evidence was the agreement itself, in which Ms. Roberts clearly indicated that she did not sign in her individual capacity. Ms. King was listed as the resident on the arbitration agreement above Ms. Roberts’s signature. Under the request for the basis of Ms. Roberts’s authority to sign the document, Ms. Roberts indicated “Daughter.” Thus, the Court found that the doctrine did not apply. Affirmed.