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Authority to Bind (in Arbitration) comes Unbound (PA)

February 7, 2017

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The Superior Court recently issued a decision that tells a cautionary tale regarding authority to bind, through arbitration.  In the matter of <em><a href="http://blog.wcmlaw.com/wp-content/uploads/2017/02/Peterson-v.-Kindred.pdf">Mary P. Petersen, by and through her attorney-in-fact, Kathleen F. Morrison v. Kindred Healthcare, Inc., and Personcare of Reading, Inc., d/b/a Kindred Transitional Care and Rehabilitation-Wyomissing, and Kindred Nursing Centers East, LLC, and Kindred Healthcare Operating, Inc., and Monique Cole</a></em>, 2017 Pa Super 26 (Feb. 1, 2017), the Court found that a successor agent does not possess the requisite authority to render an arbitration agreement binding.
In this matter, Petersen sued Kindred for negligent care it rendered to Peterson during her stay as a patient a Kindred Facility.  In response to Petersen’s complaint, Kindred filed preliminary objections, seeking to enforce an arbitration agreement signed by Petersen’s daughter, Darlene Uriate, pursuant to a power of attorney (“POA”).  The POA appointed Uriarte as successor agent in the event her sister, Kathleen Morrison, was “unwilling or unable” to act.  However, there is no indication that Kindred confirmed whether Morrison was "unwilling or unable" to act, as required by the arbitration agreement.
Petersen argued that the agreement was “unenforceable, void, unconscionable, and/or a contract of adhesion,” and sought to litigate the matter in state court, rather than through arbitration. Following oral argument, the trial court directed Kindred to answer Petersen’s complaint, thereby denying the arbitration demand.  Kindred appealed.
On appeal, the Superior Court was asked to determine whether Uriarte possessed the authority to act on Petersen’s behalf under the POA.  The Court reasoned that the POA appointed Uriarte as agent only upon the occurrence of a specific contingency, i.e., if Kathleen Morrison was unwilling or unable to act.  Thus Uriarte’s authority to bind her mother did not arise until her sister, Kathleen Morrison, became “unwilling or unable” to act.  Having received a copy of Petersen’s POA, Kindred had actual notice that Uriarte had authority to act only based on the occurrence of certain conditions.  The Court further observed that Kindred demonstrated no attempt to ascertain whether Morrison was “unwilling or unable” to act..  Rather, Kindred simply accepted Uriarte’s representation that she possessed the requisite authority to act on behalf of her mother, even though she was named in the document only as successor agent.
In the endt, the Court concluded that Kindred failed in its obligation to take notice of the nature and extent of the authority conferred upon Uriarte by Petersen’s POA.  To view this issue another way, Morrison's being "unwilling or unable" to act was, essentially, a condition prcedent to arbitration.  And Kindred never satisfied this condition.  Hence, no arbitration.  Thanks to Hillary Ladov for her contribution to this post.  Please email <a href="mailto:BGibbons@wcmlaw.com">Brian Gibbons</a> with any questions.
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