Business Law

Garcia v. KND Development 52, LLC (Dec. 15, 2020, B301929) __Cal.App.5th__ [2020 WL 7351173]

Inferences based on hospital staff’s custom and practice are insufficient to prove that a patient authorized relatives to execute arbitration agreements on his behalf.

Ramiro Garcia was admitted to Kindred Hospitals for treatment. Following his death, Garcia’s widow, Maria, sued the hospitals for negligence, elder abuse, and wrongful death. The hospitals moved to compel arbitration based on two agreements, one signed by Ramiro’s son, Mike, another signed by Maria. The hospitals argued that Mike and Maria were Garcia’s ostensible agents with authority to execute the arbitration agreements, along with other admitting documents. The hospitals’ motion was supported by declarations of hospital staff regarding their inference that Garcia had authorized his relatives to execute the arbitration agreements based on their custom and practice during the admission process. No hospital declarant described the actual circumstances of Garcia’s admissions, or averred that Garcia had authorized Mike or Maria to execute an arbitration agreement on his behalf. The trial court denied the motion to compel arbitration, ruling that the hospitals failed to meet their burden of establishing that Garcia authorized Mike and Maria to execute the arbitration agreements on his behalf. The hospitals appealed.

The Court of Appeal affirmed, holding that substantial evidence supported the trial court’s finding that the hospitals failed to prove Garcia has authorized Mike and Maria to execute arbitration agreements on his behalf. The court explained that the only evidence of authorization was inferences made by declarants, and the trial court was not compelled to accept them. Additionally, in their declarations, Mike and Maria controverted the accounts of the hospitals’ declarants, and the trial court could reasonably accept the truth of their declarations. Finally, the Court rejected the hospitals’ argument that the trial court was compelled to accept evidence upholding the arbitration agreements under Kinder Nursing Centers Ltd. Partnership v. Clark (2017) __ U.S. __, 137 S.Ct. 1421.  The Court of Appeal explained that Kinder construed the Federal Arbitration Act as preempting state laws that discriminate against arbitration agreements, but Kinder nonetheless allows courts to invalidate arbitration agreements based on generally applicable contract defenses that do not discriminate against arbitration. Because the scope of the authority possessed by an agent executing an agreement presents a contractual question that is neutral as to arbitration, the trial court’s ruling was consistent with the FAA.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or htwatson@horvitzlevy.com.

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