Opinion by Judge Clayton Green, Jr.
Held: Under general agency principles, agent did not have the requisite authority to bind principal to arbitration agreement. Trial court reversed.
Facts: Estate filed medical malpractice claim against nursing home. The nursing home sought to compel the estate to arbitrate the medical malpractice claim based on an arbitration agreement that was signed by the decedent’s agent when the decedent was admitted to the facility. The estate argued that it was not bound by the arbitration agreement. The circuit court found that the decedent not only knew that his agent acted on his behalf, but more importantly, he expected the agent to act for him and acquiesced to the agent’s decisions. Accordingly, the circuit court held that the agent signed the arbitration agreement while acting as decedent’s agent and the estate was therefore bound by the arbitration agreement.
Analysis: The Court held that Decedent’s agent did not have actual or apparent authority to bind the estate to the arbitration agreement. The agent was given authority to make healthcare and financial decisions on the decedent’s behalf. The decision to sign the arbitration agreement was not such a decision; instead, it was primarily a decision to waive the decedent’s right of access to the courts and his right to a trial by jury. The decision to sign a free-standing arbitration agreement is not a health care decision if the patient may receive health care without signing the arbitration agreement. In such a case, as here, the decision primarily concerns the legal rights of the patient with respect to resolving legal claims. The arbitration agreement explicitly stated that “the execution of this arbitration agreement is not a precondition to the furnishing of services to the Resident of the facility.” Accordingly, the agent’s decision to sign the arbitration agreement was not a health care decision and was therefore outside the scope of her actual authority. Further, there was no evidence of apparent authority conferred upon the agent as the decedent was not aware of the arbitration agreement when he was admitted to the facility.
In addition to general agency principles, the estate was not bound by the arbitration agreement as a third-party beneficiary, nor under the theories of equitable estoppel and unclean hands.
The estate could not be a third-party beneficiary to the arbitration agreement because, for the reasons cited above, the agreement was never actually formed. And, even if there was an enforceable arbitration agreement, a third-party beneficiary is bound only to the extent that it seeks to enforce the agreement. Here, the estate was suing for medical malpractice, which was separate and apart from any rights that would have been granted by the arbitration agreement.
The theories of equitable estoppel and unclean hands are equally inapplicable. The nursing home could not articulate any way in which it changed its position for the worse based upon the agent’s assertion that she was acting on the decedent’s behalf when she signed the arbitration agreement. Further, the nursing home did not assert any improper conduct by the agent.
The full opinion is available in PDF.