Broadway Heath & Rehab, LLC v. Roberts , 524 S.W.3d 407 ( 2017 )

Cite as 2017 Ark. App. 284
ARKANSAS COURT OF APPEALS
DIVISION IV
No. CV-16-978
BROADWAY HEALTH & REHAB, Opinion Delivered: May 10, 2017
LLC, d/b/a BROADWAY
HEALTHCARE CENTER; APPEAL FROM THE CRITTENDEN
BROADWAY HEALTH HOLDINGS, COUNTY CIRCUIT COURT
LLC; ARKANSAS SNF OPERATIONS [NO. 18CV-15-646]
ACQUISITION III, LLC; ARKANSAS
NURSING HOME ACQUISITION, HONORABLE TOMMY FOWLER,
LLC; CSCV HOLDINGS II, LLC; JUDGE
CAPITAL FUNDING GROUP, INC.;
ALAN ZUCCARI; BRIAN
REYNOLDS; JOHN W. DWYER; SLC
PROFESSIONALS, LLC; SLC
PROFESSIONALS AR7, LLC; ADDIT,
LLC; AND JACK H. SMITH, IN HIS
CAPACITY AS ADMINISTRATOR OF
BROADWAY HEALTHCARE
CENTER
APPELLANTS
V.
CATHERINE ROBERTS, AS
GUARDIAN OF THE PERSON AND
ESTATE OF EVELYN KING, AN
INCAPACITATED PERSON
APPELLEE AFFIRMED
RITA W. GRUBER, Chief Judge
Catherine Roberts sued Broadway Health & Rehab, LLC, and related entities
(collectively “Broadway”) for medical malpractice, negligence, and violations of the Arkansas
Long-Term Care Residents’ Rights Act1 for injuries her mother, Evelyn King, sustained
1
Ark. Code Ann. §§ 20-10-1201 et seq. (Repl. 2014).
Cite as 2017 Ark. App. 284
while a resident at Broadway Health & Rehab in West Memphis. Broadway appeals from an
order denying its motion to compel arbitration.2 Broadway argues on appeal that the circuit
court erred in finding that the Federal Arbitration Act did not apply, in denying Broadway
the opportunity to conduct discovery regarding Ms. Roberts’s authority to sign the agreement
for her mother, and in finding that the third-party-beneficiary doctrine was inapplicable.
Broadway also argues that nonsignatories to the arbitration agreement may enforce the
agreement. We hold that there was no valid arbitration agreement and that the circuit court
did not abuse its discretion in denying Broadway the opportunity to conduct further
discovery. Accordingly, we affirm the circuit court’s order denying the motion to compel
arbitration. This disposition renders all other issues moot.
When Ms. King was admitted to the facility on March 5, 2013, Ms. Roberts signed
the relevant paperwork, which included an arbitration agreement. The arbitration agreement
lists Evelyn N. King in the space immediately next to “Print Resident Name.” Directly
beneath that line is a signature space in which Ms. Roberts signed her name next to the date.
The following appears directly under her signature:
Signature of (1) Resident or (2) Resident Representative (circle one)
If Resident Representative, please check the basis of your authority:
G Power of Attorney (attach document)
G Court-Appointed Guardian (attach document)
G Other. Please explain. __________________
Neither “Resident” nor “Resident Representative” was circled. The box next to “Other”
2
An order denying a motion to compel arbitration is an appealable order. Ark. R.
App. P.–Civ. 2(a)(12) (2016).
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was checked, with the explanation “Daughter” written on the blank line next to it.
On November 24, 2015, Ms. Roberts, as guardian of the person and estate of Evelyn
King, filed a complaint against Broadway alleging negligence, medical malpractice, and
violations of the Arkansas Long-Term Care Residents’ Rights Act. Specifically, Ms. Roberts
alleged that Ms. King was admitted to the facility for incapacity due to a previous stroke and
that during her time there she sustained numerous injuries, including a severe injury to her
left hand; and she suffered from illnesses, including infection, poor hygiene, poor nutrition,
and unnecessary pain and suffering. Broadway answered and then filed a motion to dismiss
the complaint and compel arbitration pursuant to the Federal Arbitration Act, arguing that
Ms. Roberts, on behalf of her mother, executed a binding arbitration agreement that
encompassed the claims in her complaint. In the alternative, Broadway argued that, if the
court found Ms. Roberts lacked authority to bind her mother, the arbitration agreement was
valid under the third-party-beneficiary doctrine. Ms. Roberts resisted arbitration, claiming
that Broadway did not own the facility when the arbitration agreement was signed and thus
was not a party to the agreement and could not enforce it; Ms. Roberts lacked the authority
to bind Ms. King; and the third-party-beneficiary doctrine was inapplicable because there was
no valid underlying agreement between Ms. Roberts and Broadway.
Following a hearing, the circuit court denied Broadway’s motion to compel
arbitration, finding that the arbitration agreement was invalid as a matter of law, that Ms. King
did not execute the agreement, that Ms. Roberts lacked the legal capacity to bind Ms. King
to the terms of the arbitration agreement, that the third-party-beneficiary doctrine was
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inapplicable, and that the Federal Arbitration Act did not apply to Ms. Roberts’s claims.
Finally, the circuit court denied Broadway’s request for additional time to conduct discovery.
Broadway filed this appeal.
We review an order denying a motion to compel arbitration de novo on the record,
determining the issue as a matter of law. Bank of the Ozarks, Inc. v. Walker, 2014 Ark. 223, at
4, 434 S.W.3d 357, 360. We look to state contract law to decide whether the parties’
agreement is valid. Id. Thus, the essential elements for an enforceable arbitration agreement
are (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement,
and (5) mutual obligation. Id. The construction and legal effect of an agreement to arbitrate
are to be determined by the appellate court as a matter of law. Courtyard Gardens Health &
Rehab., LLC v. Quarles, 2013 Ark. 228, at 6, 428 S.W.3d 437, 442.
Our review of appellant’s points on appeal requires that we first consider the circuit
court’s finding that Ms. Roberts lacked the legal capacity to bind Ms. King to the terms of the
arbitration agreement, although we note that Broadway does not appear to specifically
challenge this finding. Before a court can compel arbitration, it must make a threshold
determination that a valid arbitration agreement exists between the parties. Id. Arbitration is
a matter of contract, and the elements of a contract, including mutual agreement, must be
met. GGNSC Holdings, LLC v. Lamb, 2016 Ark. 101, at 7, 487 S.W.3d 348, 353. When a
third party signs an arbitration agreement on behalf of another, as was done in this case, the
court must determine whether the third party was clothed with the authority to bind the
other person to arbitration. Courtyard Gardens Health & Rehab., LLC v. Williamson, 2016 Ark.
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App. 606, at 3, 509 S.W.3d 685, 688.
The burden of proving an agency relationship lies with the party asserting its
existence—in this case, Broadway. Quarles, 2013 Ark. 228, at 7, 428 S.W.3d at 443. And
while the statements and actions of an alleged agent may be admissible to corroborate other
evidence tending to establish agency, neither agency nor the scope of agency can be
established by declarations or actions of the purported agent. Id. Not only must the agent
“agree to act on the principal’s behalf and subject to [her] control,” but the principal must also
indicate that the agent is to act for her. Quarles, 2013 Ark. 228, at 6, 428 S.W.3d at 442–43
(quoting Evans v. White, 284 Ark. 376, 378, 682 S.W.2d 733, 734 (1985)).
In this case, the only evidence regarding Ms. Roberts’s authority to bind her mother
to the arbitration agreement is the agreement itself. The agreement demonstrates that Ms.
Roberts did not have a power of attorney to act on Ms. King’s behalf and that she had not
been appointed to serve as Ms. King’s guardian. Further, there was no evidence that Ms. King
authorized Ms. Roberts to serve as her agent. Ms. Roberts specified on the arbitration
agreement that she signed as Ms. King’s “Daughter.” Our supreme court made it clear in
Quarles that a familial relationship is not sufficient to establish agency. At the hearing,
Broadway’s counsel conceded that, other than signing the agreement, she was not aware of
any other steps having been taken by Broadway to ascertain actual or apparent agency
between Ms. Roberts and Ms. King:
COURT: But as you stand before me, you don’t have anything to present to the Court
of actual agency.
APPELLANT’S COUNSEL: No, Your Honor.
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COURT: Not even apparent agency other than the familial relationship.
APPELLANT’S COUNSEL: Correct, Your Honor, and the language of this agreement.
There is no evidence at all to support the contention that Ms. King authorized Ms. Roberts
to act as her agent in signing the arbitration agreement, even assuming she had the capacity
to do so. On the record before us, we hold that the evidence fails to demonstrate, as a matter
of law, that Ms. Roberts had the authority to act as Ms. King’s agent to bind her to the
arbitration agreement.
Broadway contends that the circuit court erred in denying its request for additional
time to conduct discovery on the legal authority of Ms. Roberts to bind her mother to the
arbitration agreement. A circuit court has broad discretion in matters pertaining to discovery,
and the exercise of that discretion will not be reversed by this court absent an abuse of
discretion that is prejudicial to the appealing party. Bennett v. Lonoke Bancshares, Inc., 356 Ark.
371, 155 S.W.3d 15 (2004). In order for this court to reverse the circuit court’s denial of a
continuance, an appellant must show that the circuit court abused its discretion and that the
additional discovery would have changed the outcome of the case. Alexander v. E. Tank Servs.,
Inc., 2016 Ark. App. 185, at 7, 486 S.W.3d 813, 817.
At the hearing, the circuit court questioned Broadway’s counsel about what additional
evidence it could discover to demonstrate that Ms. Roberts had authorization from her
mother to execute the arbitration agreement on her behalf. Counsel stated that “having a
conversation with Ms. Roberts to understand how she understood to have this authority”
might help Broadway progress on the issue. The court stated that it was not persuaded there
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was anything Broadway could discover from Ms. Roberts to ascertain that she had actual
authority to enter into the agreement, and it denied the stay to conduct additional discovery.
We note again that, while the statements of an alleged agent may be admissible to
corroborate other evidence tending to establish agency, agency cannot be established by
declarations or actions of the purported agent. Quarles, 2013 Ark. 228, at 7, 428 S.W.3d at
443. Thus, the circuit court did not abuse its discretion in denying Broadway an opportunity
to conduct additional discovery on the issue.
Broadway also argues that the circuit court erred in finding that the third-party-
beneficiary doctrine is inapplicable to this case. Specifically, as an alternative to the agency
theory to support a valid arbitration agreement, Broadway contends that Ms. Roberts entered
into the arbitration agreement in her individual capacity and that Ms. King was the third-party
beneficiary. Two elements are necessary to apply the third-party-beneficiary doctrine: there
must be an underlying valid agreement between two parties and there must be evidence of
a clear intention to benefit a third party. Progressive Eldercare Servs.-Chicot, Inc. v. Long, 2014
Ark. App. 661, at 4, 449 S.W.3d 324, 327. The first element, a valid agreement between Ms.
Roberts and Broadway, has not been shown to exist. The only evidence is the agreement
itself, in which Ms. Roberts clearly indicated that she did not sign in her individual capacity.
Ms. King was listed as the resident on the arbitration agreement above Ms. Roberts’s
signature. Under the request for the basis of Ms. Roberts’s authority to sign the document,
Mr. Roberts indicated “Daughter.” The doctrine does not apply.
Because we hold that the parties did not have a valid arbitration agreement under
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either the agency theory or the third-party-beneficiary doctrine, we need not consider
Broadway’s additional arguments, which have been rendered moot.
Affirmed.
GLADWIN and VAUGHT, JJ., agree.
Kutak Rock LLP, by: Mark W. Dossett, Scott Jackson, and Samantha B. Leflar, for
appellants.
Ford & Cook, PLC, by: Bryce D. Cook; and James, Carter & Priebe, LLP, by: Jeff Priebe,
for appellee.
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