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Recent decisions by the California Court of Appeal have heaped stress on the owners/operators of residential care facilities for the elderly (“RCFEs”).

RCFEs, like other businesses, would prefer to avoid the court system and jury trials by obtaining residents’ consent to the arbitration of any disputes that might arise. But as California appellate courts are making ever more clear, it’s one thing to obtain a signature on an arbitration agreement, and quite another to enforce it.

In Hutcheson v. Eskaton FountainWood Lodge, the court held that a person holding a power of attorney authorizing her to make financial decisions (but not health care decisions) for her sister did not have authority to admit her sister to an RCFE, and consequently the arbitration agreement she signed on her sister’s behalf at admission was not enforceable.

Two years later, in Holley v. Silverado Senior Living Management, Inc., the court held that adult children operating as temporary conservators for their elderly mother did not have authority to enter into an arbitration agreement on her behalf. The court further held that even a general conservator would not have such authority absent power explicitly granted by a court.

Now, in Theresa D. v. MBK Senior Living LLC (2021) 73 Cal.App.5th 18, the court issued a brand new limitation that should concern RCFEs, holding that family members, even those with authority to place their relative in an RCFE, still lack the authority to bind that relative to an arbitration agreement.

Court of Appeal Holds That Daughter Cannot Waive Mother’s Right to a Jury Trial

The case arose after Theresa, an elderly woman with dementia, brought claims against the operators of Muirwoods Memory Care, alleging that their negligence and unsanitary conditions had caused her to suffer multiple falls and deteriorating health while a resident at the facility. Defendants moved to compel arbitration based on an arbitration agreement signed by Theresa’s daughter Kellie upon her placement in the facility. The trial court denied the motion and Defendants appealed.

Defendants contended that the arbitration agreement was enforceable because it had been signed by Kellie, who represented herself as Theresa’s “authorized representative” with authority to make health care decisions for her mother. Theresa responded that Kellie had neither actual nor ostensible authority to sign the agreement. In actuality it was Theresa’s son, through whom she had brought the claims, who had been granted a general power of attorney to act on her behalf.

After answering a threshold question by determining that it is for the court, and not for an arbitrator, to determine whether an arbitration agreement actually exists, the Court of Appeal moved on to whether Kellie had authority to bind her mother to arbitration.

In tackling the question, the Court of Appeal cited a state regulation (22 Cal. Code Regs. § 87101(r)(3)) for the proposition that a family member may place a person in an RCFE in “appropriate circumstances.” Defendants argued that this authority gave Kellie power to sign an arbitration agreement on her mother’s behalf. Even assuming that such “appropriate circumstances” existed here, the court disagreed.

The court noted that Health and Safety Code section 1569.269 (part of the “Resident’s Bill of Rights”) prohibits RCFEs from requiring their residents to waive any benefit or right, including the right to a trial by jury, as a condition of admission. An RCFE’s arbitration agreement signed at admission is thus, by law, a separate agreement, distinct from its admission contract.

Indeed, Muirwoods had been very clear with Kellie that the arbitration agreement was not a condition of admission. Accordingly, the question of whether Kellie had power to sign one contract (the admissions contract) on her mother’s behalf was completely separate from the question of whether she had power to sign another (the arbitration agreement).

Ultimately, the Court held that Kellie did not have power to sign the arbitration agreement on her mother’s behalf in the absence of any action on her mother’s part granting to Kellie, or implying she had granted to Kellie, authority to waive her right of access to the courts.

Kellie had signed the agreement simply in her capacity as a family member, and not under a power of attorney, an advanced health care directive, or any other capacity as her mother’s authorized agent. Accordingly, the court held that no arbitration agreement ever existed between Theresa and Muirwoods, and Defendants’ motion to compel arbitration was appropriately denied.

Defendants also argued that Theresa should nevertheless be compelled to arbitrate through the doctrine of equitable estoppel. The Court rejected that argument, noting that her claims did not rely on the terms of any agreement with Muirwoods, but rather on Defendants’ alleged violations of duties imposed by the law.

RCFEs Must Pay Close Attention to Who Signs Admissions Paperwork

Theresa D. should be alarming to all RCFEs who believe that arbitration agreements will shield them from trial before a jury. While it may be too late to bind existing residents to arbitration, the Court of Appeal’s decision should teach RCFEs to pay extremely close attention to who signs agreements for new admissions.

Courts have made clear that they will not honor an arbitration agreement signed on a resident’s behalf by someone acting merely as a family member, as a financial attorney-in-fact, or even as a conservator. The right to a jury trial is of paramount importance and may be waived on behalf of an elder only by someone with specific, explicit authority to do so.