An assisted living facility for the elderly was recently denied its petition to compel arbitration following a grievance brought by one of its residents. In<em> <a href="http://blog.wcmlaw.com/wp-content/uploads/2018/04/Clemenston-v-Evangelical-Manor.pdf">Clemenston v Evangelical Manor</a>, </em>No. 299 EDA 2017 (Pa. Super.), the Superior Court of Pennsylvania denied Evangelical Manor’s appeal of the Philadelphia Court of Common Pleas’ ruling denying its petition to compel a dispute to arbitration. The appeal was lodged after Clementson brought a negligence action in the Philadelphia Court of Common pleas seeking damages for a fractured tibia she suffered during a fall while she was a resident at the Manor.
In February 2012, Clementson began her residency at the Manor. At that time, Clementson’s daughter signed the Manor’s Responsible Person Agreement (“RPA”), in which her daughter agreed to be held responsible for the financial obligations associated with Clementson’s residency. Clementson’s daughter also signed the Manor’s Admission Agreement which included, <em>inter alia</em>, a compulsory arbitration clause stipulating that any grievance for personal injury due to inadequate care must be resolved exclusively by arbitration through a pre-selected arbitration service. Clementson’s daughter executed both agreements, however she did not possess power-of-attorney status at the time. Later, in 2014, Clementson’s daughter was granted durable power-of-attorney status by Clementson, however the power-of-attorney agreement did not contain explicit language to apply the power-of-attorney designation retroactively.
In December 2016, the Philadelphia Court of Common Pleas denied the Manor’s petition to compel arbitration, concluding that no agency relationship existed between Clementson and her daughter because Clementson’s daughter had no express or implied agency based on the RPA, and that Clementson’s daughter furthermore had no apparent authority or agency by estoppel because there was no evidence that Clementson was present when the paperwork was signed or that she even knew what the agreements contained. The Manor appealed, arguing that a principal/agent relationship could be inferred from Clementson’s apparent consent to her daughter executing the paperwork as well as the 2014 durable power-of-attorney designation.
The Pennsylvania Superior Court articulated a two-part test regarding enforceability of the arbitration agreement: 1) whether a valid agreement to arbitrate exists; and 2) whether the dispute is within the scope of the agreement. The Court also explained that the party alleging the existence of a valid arbitration agreement has the burden of proof. Ultimately, the Court concluded that no principal/agent relationship existed between Clementson and her daughter because Clementson’s daughter was not Clementson’s attorney-in-fact at the time the agreements were executed in 2012 (and the 2014 durable power-of-attorney did not contain retroactive language), the Manor did not produce any evidence to show that Clementson was present when the agreements were signed or that Clementson was ever presented with the agreements, and that Clementson did not sign any document conferring authority upon her daughter to act on her behalf. Furthermore, the Court found that the RPA bound only Clementson’s daughter and the Manor (not Clementson herself), and that the Admission Agreement was an agreement between Clementson’s daughter as the Responsible Person, and the Manor. Thus, no valid agreement to arbitrate existed between Clementson and the Manor because Clementson did not authorize her daughter to agree to arbitrate on her behalf. The Court did not need to examine the 2nd prong of the enforceability test.
Because the Court concluded that Clementson was not bound by the Agreement to Arbitrate, it differed ruling on the enforceability of the arbitration agreement itself. This case and the Superior Court’s opinion offers helpful insight into the contractual analysis that accompanies contracts of adhesion and compulsory arbitration clauses. Thank you to Greg Herrold for his contribution to this post. Please email <a href="mailto:BGibbons@wcmlaw.com">Brian Gibbons</a> with any questions.