Jack Nelson Jones Professional Association

March 12-18, 2018

Pine Hills Health & Rehabilitation, LLC, et al v. Talley, 2018 Ark. App. 131 (February 14, 2018)


This appeal comes from the Ouachita County Circuit Court, honorable Robin J. Carroll presiding. This case concerns the validity of an agreement to arbitrate.


In June 2010, Glenda Sue Talley (Mrs. Talley) granted priority power of attorney to her husband, Jessie. However, if Jesse could not serve, second priority power of attorney was granted to her son, Jesse Alan Talley (Jesse Alan); and if he could not serve, then she nominated, as third priority, her daughter, Peggy Sue Talley-McMillon.


Mrs. Talley was admitted to Pine Hills Health and Rehabilitation LLC (Pine Hills) on March 10, 2012. At the time of admission she was suffering from Alzheimer’s and dementia, resulting in her mental incapacity. Admission documents included an arbitration agreement, which explained that “execution of the Agreement [was] not a precondition to admission.” Mrs. Talley’s daughter, Tonja Belt (Belt), however, signed the optional arbitration agreement as the “Responsible Party.” On the next page, Belt identified herself as Mrs. Talley’s daughter. Belt did not check where the agreement stated, “A copy of my guardianship papers, durable power of attorney or other documentation, has been provided to the Facility and is attached.” Mrs. Talley did not sign the agreement.


Acting pursuant to the power of attorney, Jesse Alan filed a complaint against Pine Hills and certain administrators, on Mrs. Talley’s behalf as an incapacitated person, in April 2016, asserting claims of ordinary negligence and medical-malpractice negligence. Pine Hills denied all material allegations and asserted the complaint should be dismissed. In November 2016, Pine Hills sought to compel arbitration asserting that because Mrs. Talley was a third-party beneficiary of a valid, enforceable arbitration agreement between Pine Hills and Belt, Jesse Alan should be ordered to submit to arbitration in accordance with that agreement. Jesse Alan denied the agreement was valid or binding against Mrs. Talley as Belt was not authorized by Mrs. Talley to execute the agreement and accept its terms, a requirement of the arbitration agreement.


The circuit court found first that no valid arbitration agreement existed between Mrs. Talley and Pine Hills because Belt lacked the legal authority to act in a representative capacity to bind Mrs. Talley. The circuit court also found that no valid agreement existed between Belt in her individual capacity and Pine Hills. In addition, the circuit court found that Mrs. Talley did not receive any benefit from Belt signing the optional arbitration agreement, and was thus not an intended third-party beneficiary the agreement between Belt and Pine Hills. The circuit court denied the motion to compel arbitration. Pine Hills appealed.


On appeal, Pine Hills argued that the claims asserted on Mrs. Talley’s behalf were governed by the arbitration agreement because she was an intended third-party beneficiary of the agreement signed by Belt in her individual capacity. Although an arbitration agreement is subject to the Federal Arbitration Act, the Court explained that the question of whether a dispute should be submitted to arbitration is a matter of contract construction. In Arkansas, the same rules of contract construction apply to arbitration agreements as apply to agreements in general: competent parties; subject matter; legal consideration; mutual agreement; and mutual obligation.


Because a third party signed the arbitration agreement on behalf of Mrs. Talley, the Court had to determine whether the third party – Belt – was clothed with the authority to bind Mrs. Talley. In an agency relationship, the agent (Belt) must agree to act on the principal’s behalf and subject to her control and the principal (Mrs. Talley) must also indicate that the agent is to act for her.


Pine Hills had never argued that Belt had the authority to sign for Mrs. Talley in a representative capacity, and thus put forth no evidence on that issue. Even so, the Court noted that Mrs. Talley, who could not sign for herself due to multiple mental conditions, executed a valid power of attorney prior to her mental incapacity granting Jesse Alan her power of attorney. Belt listed Mrs. Talley as a party to the optional arbitration agreement and signed the same without the authority of Mrs. Talley, who could not give such authority due to her mental incapacity, or the authority of Jesse Alan, the person to whom Mrs. Talley had chosen to delegate such decision-making authority for her and who specifically asserted that Belt did not have any authority to sign for Mrs. Talley. Because Belt had no representative authority, she could not bind Mrs. Talley to an arbitration agreement with Pine Hills. Accordingly, the Court held that there was no error with the circuit court’s finding that no valid arbitration agreement existed between Mrs. Talley and Pine Hills.


Pine Hills did argue there was a binding contract between it and Belt in her individual capacity. Pine Hills argued that the identification of the “Responsible Party” in the introductory paragraph made clear that the Responsible Party was not an independent party to the agreement but someone whose interests aligned with that of Mrs. Talley, an asserted party to the agreement. The Court noted that the only evidence regarding such a claim was the arbitration agreement itself. The agreement stated that it was “entered into between [Pine Hills] … and Glenda Talley (the Resident or Responsible Party).” The Court pointed out that this made clear that Mrs. Talley, not Belt, was the asserted party to the arbitration agreement as it only allowed for the resident or the responsible party to be a party to the agreement and Mrs. Talley’s name was listed.


Accordingly, Belt was not a party to the agreement as she named Mrs. Talley as a party to the arbitration agreement, though Belt had no authority to do so. Therefore, the Court found no error in finding that Belt did not intend to sign in her individual capacity. Since she was not signing in her individual capacity, no valid arbitration agreement existed between Pine Hills and Belt.


Because there must first be a valid agreement to arbitrate between two parties when determining whether to apply the third-party-beneficiary doctrine and the Court found that no valid arbitration agreement existed, it was unnecessary for the Court to determine whether Mrs. Talley was a third-party beneficiary of an agreement between Pine Hills and Belt. Affirmed.