While California Law strongly favors contractual arbitration of disputes, it has long been held that the party seeking to compel arbitration must prove that the parties agreed to arbitrate in the first place. One question which has arisen over time deals with whether a party which has not signed an arbitration agreement can be bound based upon a contract executed by an alleged predecessor of the party. This issue was brought to a head in the case of Monschke v. Timber Ridge Assisted Living, LLC (2016) 244 Cal.App.4th 583 ("Monschke case"), a wrongful death case where a plaintiff, acting as a personal representative for the estate of her mother, filed suit for wrongful death and elder abuse against an assisted living care facility for injuries sustained by her mother.
The fact pattern of the Monschke case is not uncommon. In that regard, plaintiff Valerie Monschke, acting pursuant to a power of attorney for her elderly mother, Marjorie Fitzpatrick, executed a residency agreement in June 2013 allowing defendant Timber Ridge Assisted Living, LLC ("Timber Ridge") to provide core living services for her mother. The residency agreement included a broad arbitration clause which provided in part:
“[Y]ou agree that any and all claims and disputes arising from or related to this Agreement or to your residency, care or services at Timber Ridge shall be resolved by submission to neutral, binding arbitration.... This arbitration clause binds all parties to this Agreement and their spouse, heirs, representatives, executors, administrators, successors, and assigns, as applicable."
In 2013, the plaintiff's mother passed away as a result of alleged neglect.
Plaintiff Monschke, one of three daughters of the plaintiff, filed suit for wrongful death and elder abuse. Timber Ridge then petitioned the trial court to compel binding arbitration as to all of the plaintiff's claims. The trial court denied the petition ruling that there was a possibility of conflicting rulings and because the Complaint involved an action by a party other than the signatory to the agreement to arbitrate.
Timber Ridge appealed contending that the plaintiff had agreed to submit the wrongful death claim to arbitration when she executed the residency agreement by a power of attorney. The Court of Appeal affirmed the ruling of the trial court. In its opinion, the California Court of Appeal noted that the strong public policy in favor of arbitration does not extend to those who are not parties to the arbitration agreement citing Buckner v. Tamarin (2002) 98 Cal.App.4th 140, 142. The Court of Appeal went on to hold that, while there are three exceptions to the signatory rule (i.e., that an agent can bind a principal; that spouses can bind each other; and that a parent can bind a minor), none of the exceptions applied. In that regard, the Court of Appeal acknowledged that the plaintiff had signed the residency agreement, but ruled that the plaintiff did so as the decedent's Power of Attorney, and not in her personal capacity. The Court of Appeal also rejected Timber Ridge's argument that the plaintiff, acting as personal representative for the estate of her mother, stepped into the shoes of the decedent and was therefore bound by the decedent's obligations under the residency agreement to arbitrate. In that vein, the Court noted that while some jurisdictions hold that wrongful death cases are derivative, California's wrongful death statute, Code of Civil Procedure §377.60, instead creates a new cause of action in favor of the heirs as beneficiaries, based upon their own independent injuries suffered by loss of a relative, and which is distinct from any action the deceased might have maintained had the deceased survived. The Court of Appeal also rejected Timber Ridge's contention that a personal representative in a wrongful death case is the alter ego of the decedent. The Court noted that a personal representative of the estate in a wrongful death case acts as the heirs' fiduciary for the heirs' interest (i.e. the personal representative's duty is to stand for the position of the heirs, not the decedent).
The Monschke case is important in that it certainly delineates and defines the parameters of who can be bound to arbitrate - at least in situations involving wrongful death actions. However, the implications of Monschke may be greater as it tends to narrowly define who may be bound to arbitrate.
About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at www.morrisonlawgroup.com.
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