Arbitration Not Compelled—Agreement Signed By Daughter, Not By Resident

A recent opinion from a federal district court rejects all of a facility’s arguments for compelling enforcement of an arbitration agreement signed by a resident’s family member without the knowledge or affirmative approval of the resident.

Giordano v. Atria Assisted Living, Virginia Beach, L.L.C., __ F. Supp. 2d __, 2006 WL 1120768, 2006 U.S. Dist. LEXIS 24451 (E.D. Va. 2006).

The issue is one being put to courts with increasing frequency.

The agreement in question had been signed by a resident’s adult daughter upon the resident’s admission to an assisted living facility.  The daughter had no formal authority to act on behalf of her mother, and stated in an affidavit that she had not discussed the admission agreement with her mother.  The facility had not inquired into the daughter’s authority to act on her mother’s behalf.

After the resident’s injury in the facility and subsequent death, her estate filed an action against the facility.  The facility responded by removing the action to federal court, based on diversity of citizenship, and then moved to compel arbitration.

The facility had the burden to show an agency relationship between the resident and her daughter, but failed to meet that burden.  The mere fact that the daughter signed the agreement did not indicate that the resident had consented or that the mother had control over her daughter.

Apparent agency also was not a viable theory; the facility could not show any history of the daughter acting as a de facto agent.  The court noted that the facility – “a sophisticated, corporate client” – had done nothing to investigate whether the daughter was a lawful agent.

Arbitration would not have been compelled even if the court had found agency or apparent agency, since the daughter’s authority would not have extended to the selection of binding arbitration:

To a layperson the existence of an arbitration provision could be unexpected, as it is not a customary element of a contract dealing with living arrangements.  If [the daughter] was serving as an agent for [the resident], she only possessed the apparent authority to bind [the resident] to financial, medical, and other logical obligations arising from residence in the [assisted living] facility. She did not possess the apparent authority to waive her mother’s right to a trial by jury and bind her to mandatory arbitration.

The court saw equitable estoppel as inapplicable because the estate’s claims were not based on breach of contract.