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The Arizona Court of Appeals recently ruled that an agency relationship sufficient to uphold an arbitration agreement may be inferred from a history of medical decision-making by the spouse of a skilled nursing resident, even without the express consent of the patient.1 In a significant boost to healthcare providers relying on the enforceability of arbitration agreements, the court found in Ruesga v. Kindred Nursing Centers West , that although the marital relationship alone does not create an agency relationship, an agency may be established from circumstantial evidence.2
On November 10, 2003, Robert Ruesga was admitted to Desert Life Rehabilitation and Care Center in a severely compromised and virtually non-responsive state. He had had a massive stroke and heart attack, and required both a feeding tube, and tracheostomy tube. At the time of admission, his wife, Florentine Ruesga, completed a series of admission documents, including an arbitration agreement entitled “Alternative Dispute Resolution Agreement Between Resident and Facility” (ADR agreement). That six-page agreement provided in part that:
Any and all claims or controversies arising out of or in any way relating to this Agreement or the Resident[']s stay at the Facility including disputes regarding the interpretation of this Agreement, whether arising out of State or Federal law, whether existing or arising in the future, whether for statutory, compensatory or punitive damages and whether sounding in breach of contract, tort or breach of statutory duties (including, without limitation, any claim based on violation of rights, negligence, medical malpractice, any other departure from the accepted standards of health care or safety or unpaid nursing home charges), irrespective of the basis for the duty or of the legal theories upon which the Claim is asserted, shall be submitted to alternative dispute resolution as described in the ADR Rules.
On its fifth page, the ADR agreement further provided:
By signing this Agreement, the Resident is acknowledging that he/she understands the following: (1) he/she has the right to seek legal counsel concerning this Agreement; (2) the execution of this Agreement is not a precondition of admission or to the furnishing of services to the Resident by facility, and the decision of whether to sign the Agreement is solely a matter for the Resident's determination without any influence; (3) nothing in this Agreement shall prevent Resident or any other person from reporting alleged violations of law to the facility, or the appropriate administrative, regulatory or law enforcement agency(s); (4) the ADR process adopted by this Agreement contains provisions for both mediation and binding arbitration, and if the parties are unable to reach settlement informally, or through mediation, the dispute shall proceed to binding arbitration; and (5) agreeing to the ADR process in this Agreement means that the parties are waiving their right to a trial in court, including their right to a jury trial, their right to a trial by judge, and their right to appeal the decision of the arbitrator(s) in a court of law. (Emphasis in original.)
After being assured that the ADR agreement was voluntary and optional, Mrs. Ruesga took the document home. She returned the next day and signed it in the presence of a facility social worker on a line labeled “ Legal Representative.” Immediately above her signature the agreement stated: “By virtue of the Resident's consent, instruction, durable power of attorney, or appointment as guardian, I hereby certify that I am authorized to act as Resident's agent in executing and delivering this Agreement.” On a line below her signature, labeled “ Authority and Title,” the word “wife” was hand written. However, it was undisputed by the parties during the course of litigation that Mrs. Ruesga was not acting under any power of attorney or as legal guardian for her husband, and her husband had not expressly or specifically authorized her to do so.
Mrs. Ruesga brought a civil action against the facility in January, 2005, alleging claims of negligence, negligence per se, violations of Arizona's Adult Protective Services Act, breach of contract and fraud. The facility immediately moved to compel arbitration based on the ADR agreement. Despite an initial ruling to the contrary, the trial court ultimately dismissed the case and ordered the parties to binding arbitration based on the existence of newly discovered medical records indicating an agency relationship.
In general, agency is a fiduciary or special relationship that arises when one person (a ‘principal') consents to another person (an ‘agent') acting on the principal's behalf subject to the principal's wishes. An agency cannot be created without the agent's consent. Authority may be actual or apparent. The actual authority of an agent to act on behalf of the principal may be “express,” such as that created by a contract, or “implied” by facts suggesting the existence of such a contract or ratification of it. An agency may also be “apparent” where the principal acts in such a way as to induce a third party to reasonably believe that a person is acting as the principal's agent even though an actual agency never existed.
Because Mr. Ruesga arrived at the facility already non-responsive, and the facility could not have been relying at the time on subsequently discovered medical records, an “apparent agency” did not exist in this case. Furthermore, it was undisputed that there was never an actual agency contract, power of attorney or guardianship, giving Mrs. Ruesga the right to make medical decisions for her husband. Thus, “express agency” did not apply either.
In reviewing Arizona case law, the Arizona Court of Appeals noted that the creation of an agency relationship in Arizona is frequently implied from the words and conduct of the parties and the circumstances of the particular case. If the facts and circumstances of a particular case imply the intention to create an agency relationship, then the relation may be held to exist, despite its denial by the alleged principal, and regardless of whether the parties understood their relationship to be one of agency.3
It is important to note that the court affirmed that the existence of a marital relationship alone is not sufficient to create an agency relationship, and an agreement to arbitrate claims is not necessarily valid when signed by a patient's spouse. Healthcare providers should not rely on the existence of a spousal relationship alone to create an enforceable arbitration agreement. However, circumstantial evidence may establish the existence of an agency relationship between spouses sufficient for one spouse to bind the claims of the other. Factors that swayed the court in Ruesga to recognize one spouse as the implied agent of the other included a history of past medical decisions made by the non-patient spouse on the patient's behalf, past reliance by the patient on the spouse to make such decisions, past expressions of permission including tacit permission that occurred when the patient did not object while observing his spouse sign documents on his behalf, and documents showing consent by the patient to the spouse's control of his care and insurance matters. Thus, the court in Ruesga ruled that “the trial court properly determined that there were sufficient facts to show that both [Mr. Ruesga's] actions and his wife's long history of making decisions on his behalf gave rise to an agency relationship such that [Mrs. Ruesga] could bind her husband to the ADR Agreement.4
In an important footnote following the court's holding in the case, the court suggested it was more impressed by medical records showing past decisions by the patient's spouse while the patient was competent, than it was by current medical records showing such decisions while the patient was not competent. It noted that under the latter situation, Mrs. Ruesga had statutory authority “to make health care decisions” for her spouse who “[wa]s unable to make or communicate” such decisions, even absent any agency authority. See A.R.S. § 36-3231(A)(1). While such medical records lent some support to an implied agency, the court would not rely on them for its decision.
1Ruesga v. Kindred Nursing Centers, L.L.C ., 215 Ariz. 589, 161 P.3d 1253 (Ariz. Ct. App. 2007.)
2 In contrast, recent California court decisions have held that the power to make medical decisions on behalf of a patient does not confer authority to bind the patient's claims to arbitration., even where the patient later signs a Durable Power of Attorney for Healthcare. Flores v. Evergreen At San Diego, LLC , 148 Cal.App.4th 581, 588-589 (Cal. Ct. App. 2007). The court held that the mere fact the patient's husband signed the admission documents, including the arbitration agreements, was insufficient. Likewise, the fact that his wife, a dementia patient, later signed a general power of attorney form giving her husband agency authority did not provide the necessary evidentiary support since it was signed after he signed the admission documents, and no facts were presented suggesting that by signing the power of attorney form she intended to ratify her husband's earlier agreement to the arbitration. The decision suggests that California requires more from the patient than authority to make medical decisions, in order to recognize the authority of a spouse to bind legal claims.
3Canyon State Canners, Inc. v. Hooks , 74 Ariz. 70, 73, 243 P.2d 1023, 1024 (1952)
4Ruesga , supra , at p. 1263, ¶36.
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