Judge: Mark H. Epstein, Case: 24SMCV03126, Date: 2024-11-18 Tentative Ruling
Case Number: 24SMCV03126 Hearing Date: November 18, 2024 Dept: I
This is a surprisingly difficult motion. Plaintiff sues for elder abuse; defendant
moves to compel arbitration. Plaintiff
was admitted to defendant’s facility. In
the course of that process, her attorney in fact, Michael Damerell, signed
various documents, one of which contained the arbitration provision. Plaintiff’s opposition is mainly that he
lacked the authority to bind plaintiff to arbitration, and therefore there is
no arbitration agreement between the parties.
While California favors arbitration provisions, the law is
clear that there is no preference for arbitration unless there is an
arbitration agreement. One who does not
agree to arbitration need not be bound to arbitration, and there is no
proverbial thumb on the scale that would say otherwise. So, the question is whether Michael (the
court uses first names to avoid confusion; no disrespect is intended) had the
authority to enter into the arbitration agreement on Janice’s behalf. If so, then the motion ought to be granted;
if not, then the motion ought to be denied.
Whether Michael had authority is a question for the court, not the
arbitrator, and the party seeking to compel arbitration bears the burden of
proof by a preponderance of the evidence.
(Guiliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th
1276; Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955.)
The arbitration clause here was part of the admission packet
for admission to the facility. The form
also provided that agreement to arbitrate was not a requirement for admission
to the facility, implying that Michael could have refused to sign that
provision.
Michael had two potential sources of authority. The major one is a Power of Attorney for
Property (POA), which Janice signed giving Michael certain powers to act in her
behalf and to bind her. The court must
interpret that POA to determine if it covers contracts such as the one in
question. The court starts with the
contract’s language itself. Where the
language is clear and not ambiguous, then the words will determine the
outcome. However, where there is an
ambiguity, then the court looks to parol evidence to resolve the
ambiguity. Unlike some other
jurisdictions, the court will consider parol evidence in the context of a
patent or a latent ambiguity.
That is, even if the contract appears unambiguous on its face, if there
is an ambiguity in light of the parol evidence, the court will consider that
evidence. However, the evidence must be
such as to support a reading to which the words are “reasonably
susceptible.” In other words, parol
evidence can be used to resolve or even create and resolve an ambiguity, but it
cannot be used to vary or add to the terms of an integrated written
contract. The court’s determination as
to whether an ambiguity exists is a question of law. The resolution of that ambiguity is also a
question of law unless the parol evidence is in conflict, in which case
resolution of that conflict is a question of fact. If there is no conflict in the parol
evidence, it is for the court to interpret the contract even if the contract is
susceptible to more than one reasonable interpretation. (Wolf v. Superior Court (2004) 114
Cal.App.4th 1343.) Here, neither party
offers parol evidence, so the court will interpret the contract based on its
language alone. In the context of POA
contracts, our Supreme Court has emphasized the importance of the document’s
plain meaning, and that the agent may not go beyond it nor beside it. (Harrod v. Country Oaks Partners, LLC
(2024) 15 Cal.5th 939.) That said,
though, where there is a power within the POA, the agent may engage in all such
subordinate acts that are incident or necessary to effectuate the powers that
are given. (Ibid.) Thus, the court looks to the specifically
enumerated powers, and then, to the extent that the act is allegedly impliedly
within the POA, the court looks to see if the act in question was necessary to
effectuate the enumerated authority.
The POA in question was signed in Illinois. The parties have not briefed the choice of
law question. The court presumes that a
POA signed by the parties in Illinois is governed by Illinois law, all other
things being equal. However, there is no
reason to believe that Illinois law is different than California law in this
context. The POA upon which defendant
principally relies is the POA “for Property,” as opposed to the POA involving
health care matters. In the POA for
Property, the court looks to a number of factors. First, the title suggests that the POA was
intended to deal with Janice’s property—things like her house or
possessions. Issues like health care and
whether she should be admitted to a facility and the conditions under which she
should be admitted do not fit neatly into the concept of a POA regarding
“Property.” Further, the POA
incorporates an attached document: Section 3-4 of the “Illinois Statutory Short
Form Power of Attorney for Property Law.”
That document lists a lot of powers, but all relate to property or
financial issues. That, too, supports
the notion that the contract at issue here is beyond the scope of the POA for
Property. (Obviously, that is not quite
100% true. Defendant undoubtedly would
have billed plaintiff for services rendered, and one might well conclude that
payment for those services is the disposition of property, to wit, money, and
thus within this POA. In fact, that is
one of the enumerated powers. But that
is not really the issue here.) Further,
none of the enumerated powers give Michael the right to enter into an
arbitration agreement. Such an
agreement, at least standing alone, does not deal with the disposition of
property or other financial matters; it deals with the forum to resolve
disputes. On the other side of the
balance are paragraphs 7 and 9, upon which defendants rely. But those paragraphs go to the ability to
bring or defend a lawsuit. Paragraph 7
provides that Michael may bring a suit “for the recovery of any of my land or
for any goods, chattels, debts, duties, demand, cause or thing whatsoever, due
or to become due or belonging to me, and to prosecute, meaning, and discontinue
the same, if he shall deem proper.” But
the suit in question is not for the recovery of any of those things. It is for a personal injury (and elder
abuse); not the recovery of property or a sum due and owing like a debt. The court tends to agree that the power to
bring an action includes with it the power to agree to arbitrate the action,
but that would seem to pertain to a post-commencement arbitration agreement,
not a pre-arbitration agreement. The
defense also argues that Michael signed the contract on Janice’s behalf and is
prosecuting this case in her name. But
the court does not believe that the instant suit is within paragraph 7 of the
POA for Property. Both the authority for
the suit, and the forum issue, must be found elsewhere.
The defense also relies on paragraph 9 of the POA for
Property. That clause allows Michael to
“appear, answer, and defend in all actions and suits whatsoever which shall be
commenced against me and also for me and in my name to compromise, settle, and
adjust . . . all actions, accounts, dues, and demands . . . between me and them
. . . in such manner as my attorneys-in-fact shall think proper; hereby giving
to my attorneys-in-fact power and authority to do, execute, and perform and
finish for me and in my name all those things which shall be expedient and
necessary, or which my attorneys-in-fact shall judge expedient and necessary in
and about or concerning the premises, or any of them, as fully as I . . . could
do if personally present, hereby ratifying and confirming whatever my
attorneys-in-fact shall do or cause to be done in, about, or concerning the
premises, and any part thereof.”
Phew. In the court’s view, this
is fairly read as a broad power to act in Janice’s stead in cases where she is
being sued—that is, to defend the suit and resolve it. But Janice is the plaintiff here, not the
defendant.
There is also the general powers statement, which might be
defendants’ strongest argument. It
states that the POA “is to be construed and interpreted as a general power of
attorney. The enumeration of specific
items, rights, acts, or powers herein is not intended to, nor does it limit or
restrict, and is not to be construed or interpreted as limiting or restricting,
the general powers herein granted to my attorneys-in-fact.” This is a general grant, but the court cannot
read it as universal. The general grant
must be read in light of the document’s purpose, which (again) deals with
property, not other things. In fact,
this is precisely Harrod’s teaching.
The general provision cannot be read outside the context of the
enumerated powers and the overall purpose of the POA. That does not make the clause one without meaning. For example, if Michael had signed a contract
to sell one of Janice’s paintings (something plainly within the POA’s scope),
presumably an arbitration clause in the sale contract would be enforceable due
to the general powers statement such that if Janice needed to sue under such a
contract, the clause would bind. But
that is because the entry into an arbitration clause is truly incidental to
the included power to sell the painting; that does not expand upon the POA’s
more general purpose, which was to deal with Janice’s property, not personal
injury tort suits. Read as a whole, the
POA just does not cover suits such as this one at all. And, of course, it is black letter law that a
contract must be read as a whole. (Zalkind
v. Ceradyne, Inc. (2011) 194 Cal.App.4th 1010.)
The other Power of Attorney is one for health care (POAHC),
and that is the document that authorized Michael to enter into the contract
admitting Janice to the facility.
Whether the arbitration agreement is within Michael’s powers under the
POAHC is an easier question, for that is the precise issue in Harrod. There, a party had a Durable Power of
Attorney (DPOA) to make health care decisions.
That person admitted the principal into a skilled nursing facility and
also signed an optional arbitration agreement.
When suit was filed, the defendant sought to enforce the arbitration
agreement. Our Supreme Court held that
the DPOA gave the agent the power to sign the first contract—admitting Mr.
Logan to the facility—but not the second.
Our Supreme Court concluded that the decision to admit Logan to the
facility was one Harrod (who held the DPOA) could make, something upon which
both parties agreed. But the Court also
concluded that the decision whether or not to arbitrate was not a “health care
decision” within the meaning of the DPOA.
But while Harrod had the power to choose health care facilities or
providers, that did not give Harrod the right to enter into an arbitration
contract, as that was not a health care decision. The court also noted that there was no
catch-all provision in the DPOA that gave Harrod the right to make ancillary
decisions that were not necessary to the health care decision. That case seems to be on all fours with this
one (with one exception). As such, the
POAHC does not mandate granting the motion.
The one caveat in the court’s reasoning is that Harrod was
influenced heavily by California law.
Illinois law might well be different and in a material way. However, inasmuch as no party has made such
an argument, the court must assume that there is no material difference.
Which leads to a difficult question. Arbitration agreements can work in favor of
either party. The vagaries of
litigation, with its attendant delay, uncertainty, and expense, can work to the
detriment of either side. It could well
be that in many cases, a plaintiff could prefer arbitration to litigation. But how is that to be accomplished, at least
pre-suit? Post suit, it is easy
enough. If the plaintiff is not capable
of making decisions, a Guardian ad Litem can be appointed, and the GAL can
agree to arbitrate. But what about
pre-litigation decisions? In other
words, plaintiff’s argument here is that Michael lacked the power to agree to
arbitration, but often (and potentially here), Janice did not have the legal
capacity to enter into a contract. (The
court is not so holding; the court is merely observing that such will often be
the case where decisions are being made by one holding a POA.) The import of today’s ruling is that it is
impossible to enter into a binding pre-litigation arbitration agreement, or so
it might seem. It is not actually so
dire. The POAHC could have included
language that would allow the holder to agree to pre-litigation arbitration
agreements. If the POA were more broadly
written, it could go that far also. If
there is a general Power of Attorney giving the holder the power to make all
litigation decisions about any topic, that would do. In other words, it is not impossible to give
an agent the power to enter into a binding pre-litigation arbitration
agreement; it is just that there needs to be some document that so
provides. There does not appear to be
one here.
Accordingly, because it does not appear that either the POA
for Property or the POAHC gave Michael the power to enter into a pre-litigation
arbitration agreement concerning a potential personal injury type of suit (or a
suit not involving property or one in which Janice is the defendant), the
motion to compel arbitration is DENIED.
That said, the court does believe that this might well be an area where
further appellate guidance could be helpful.
The court will not take it amiss were the moving party to seek appellate
review. The resulting decision—either
affirming or reversing—could well bring some clarity into this aspect of health
care facilities.