Motion to Compel Arbitration Denied Where Party to Agreement Had No Authority to Sign Agreement

• Posted on: Dec 8 2022

By: Jeffrey M. Haber

We have noted previously that the “policy of [the State of New York is] to encourage arbitration.”¹ For this reason, “[a]ny doubts as to whether an issue is arbitrable will be resolved in favor of arbitration.”² 

When a party wishes to compel arbitration, that party must establish “the existence of a valid agreement to arbitrate”.³ This means that, among other things, all parties to the agreement have the power and authority to enter into the agreement. In Wolf v. Hollis Operating Co., LLC, (2d Dept. Dec. 7, 2022) (here), this issue – i.e., the authority to enter into an arbitration agreement – was examined by the Appellate Division, Second Department. 

Wolf was an action to recover damages for personal injuries.  In April 2017, following a heart attack and a hospital stay, plaintiff’s decedent was admitted to a skilled nursing facility (the “nursing home”) that was owned and operated by defendants. Upon admission, the nursing home’s staff noted that the decedent suffered from delirium superimposed on dementia, among other conditions. Plaintiff, who is the decedent’s son, went to the nursing home after the decedent had been admitted. 

Plaintiff was allegedly provided signature pages from the facility’s standard admission agreement by the nursing home’s administrator. According to plaintiff, the administrator did not provide the full agreement. Plaintiff signed the documents provided and later received a blank copy of the full admission agreement from the administrator, including unsigned versions of the pages he had signed. 

Notably, the admission agreement contained an arbitration provision with its own signature page. The signature page for the arbitration agreement was among the pages that plaintiff had executed. 

On February 9, 2019, the decedent allegedly was pushed by another resident, causing him to fall and sustain injuries. The decedent died on February 15, 2019.

After plaintiff was appointed administrator of the decedent’s estate, he commenced the action on behalf of the estate to recover damages for personal injuries. The complaint alleged that defendants’ negligence led to the decedent’s fall and resulting injuries.

After interposing an answer, defendants moved to compel arbitration. Plaintiff opposed the motion. By order dated June 8, 2021, the motion court granted defendants’ motion. Plaintiff appealed. 

The Court reversed the motion court’s order.

The Court held that defendants failed to demonstrate that there was a valid arbitration agreement between the parties. The Court found that defendants failed to submit “sufficient evidence demonstrating plaintiff’s authority to bind the decedent to arbitration at the time he signed the admission agreement on the decedent’s behalf.”⁴ 

“Most significantly,” said the Court, “defendants failed to submit the instrument through which the plaintiff allegedly derived his authority to bind the decedent to arbitration”.⁵ The Court explained that the evidence plaintiff showed to defendants, which purportedly demonstrated that “he held a power of attorney when signing the admission agreement[,] was insufficient to establish that he, in fact, held such authority as a matter of law”.⁶ 

The Court rejected plaintiff’s contention that his status as the decedent’s son⁷ and his willingness to be the decedent’s “responsible party” under the terms of the admission agreement⁸ had “any bearing on his authority to bind the decedent to arbitration.”⁹

The Court remanded the matter to the motion court for further proceedings to “determine whether the plaintiff possessed the requisite authority to bind the decedent to arbitration”.¹⁰

Footnotes

1. Smith Barney Shearson Inc. v. Sacharow, 91 N.Y.2d 39 (1997).
2. State of New York v. Philip Morris Inc., 30 A.D.3d 26, 31 (1st Dept. 2006), aff’d, 8 N.Y.3d 574 (2007).
3. Matter of Cusimano v. Berita Realty, LLC, 103 A.D.3d 720, 721 (2d Dept. 2013); Whitelock v. Morgan Stanley Smith Barney, LLC, 82 A.D.3d 1212, 1212 (2d Dept. 2011).
4. Slip Op. at *1.
5. Id. at *2 (citing, Sunshine Care Corp. v. Warrick, 100 A.D.3d 981, 981-982 (2d Dept. 2012)).
6. Id. (citing, Shefa Trading III, LLC v. E.N.Y. Plaza, LLC, 192 A.D.3d 937, 939 (2d Dept. Mar. 17, 2021)).
7. Id. (citing, Gayle v. Regeis Care Ctr., LLC, 191 A.D.3d 598, 599-600 (2d Dept. Feb. 25, 2021); and Maurillo v. Park Slope U-Haul, 194 A.D.2d 142, 146 (2d Dept.1993)
8. Id. (citing, Sunshine Care, 100 A.D.3d at 981-982).
9. Id.
10. Id. (citations omitted).