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Testa v. Emeritus Corporation

United States District Court, N.D. Illinois, Eastern Division

March 7, 2016

JOSEPH TESTA, on behalf of SAMUEL J. TESTA, Plaintiff,


          EDMOND E. CHANG, District Judge.

         Joseph Testa brings this personal-injury action on behalf of his father, Samuel Testa, to recover for injuries that Samuel allegedly suffered when he lived at an assisted living facility run by Emeritus Corporation.[1] Emeritus believes that a valid arbitration agreement binds the parties, so the company moved to compel arbitration. In response, the Testas argue that the arbitration agreement is invalid. In an earlier opinion, the Court explained why the validity determination boiled down to one issue: whether either an Illinois power of attorney or an Arizona power of attorney signed by Samuel gave Joseph the actual, express authority to bind Samuel to the arbitration agreement. On consideration of the parties' supplemental briefs, the answer is no, so the Court denies Emeritus's motion to compel arbitration.

         I. Background

         Many of the background facts, which are not in dispute, are taken from the prior Opinion. R. 18, 9/4/15 Opinion at 2-5, Testa v. Emeritus Corp., 2015 WL 5183900 (N.D. Ill. Sept. 4, 2015).[2] Samuel Testa was admitted to Emeritus at Orland Park, an assisted living facility, on October 25, 2012. R. 1, Exh. A, Compl. ¶ 5. (For convenience's sake, this Opinion refers to both the facility itself and the company as "Emeritus."). On November 1, 2012, exercising a power of attorney for his father, Joseph Testa signed an "Assisted Living Establishment Contract, " which set the terms of Samuel's residence at Emeritus. R. 8, Exh. 2, Establishment Contract. Three weeks later on November 22, Joseph signed, as Samuel's "Authorized Representative, " a separate Arbitration Agreement with Emeritus. R. 20-4, Exh. 4, Arbitration Agreement. That second contract is entitled "Agreement to Resolve Disputes by Binding Arbitration, " and it states in relevant part that "any action, dispute, claim or controversy of any kind... arising out of the provision of assisted living services, healthcare services, or any other goods or services provided under the terms of any agreement between the Parties... shall be resolved exclusively by binding arbitration ...." Id. ¶ 2 (emphasis in original). The Arbitration Agreement further provides that "[a]dmission to the Community is not contingent upon signing this Agreement." Id. at 2.

         Before Joseph signed either the Establishment Contract or the Arbitration Agreement on his father's behalf, Samuel had given Joseph two powers of attorney:

         (1) in June 2010, an Illinois Statutory Short Form Power of Attorney for Health Care ("Illinois POA"), R. 20-2, Exh. 2; and (2) in March 2001, an Arizona durable power of attorney ("Arizona POA"), R. 20-1, Exh. 1. The purpose of the Illinois POA, according to its prefatory notice, is to give Joseph "broad powers to make health care decisions, including... to require, consent to or withdraw any type of personal care or medical treatment for any physical or mental condition and to admit [Samuel] to or discharge [him] from any hospital, home or other institution." Illinois POA at 1. Consistent with this purpose, Paragraph 1 of the Illinois POA gives Joseph the authority "to make any and all... personal care, medical treatment, hospitalization, and health care" decisions. Id. ¶ 1. The Illinois POA also specifies that it "is intended to be as broad as possible so that [Joseph] will have authority to make any decision [Samuel] could make to obtain or terminate any type of health care." Id. The Illinois POA then sets forth Joseph's powers, some of which are quoted from the Illinois Power of Attorney Act's section on health-care power of attorneys, 755 ILCS 45/4-10. One provision is an enabling-type authority, meaning it gives Joseph the authority to execute the other powers: "The agent may sign and deliver all instruments, negotiate and enter into all agreements and do all other acts reasonably necessary to implement the exercise of the powers granted to the agent." Id. at 5 (quoting 755 ILCS 45/4-10(c)).

         The Arizona POA is premised on Arizona law. ARS § 14-5501 (governing durable power of attorney). Articles I, II, and III of the Arizona POA govern "asset control, " "health care decisions, " and "administrative provisions, " in that order. Article I states broadly that Joseph "shall have full power and authority to do any and all acts for [Samuel's] benefit which [Samuel] might do if [he] were present." Arizona POA, art. I. Several examples are then listed "by way of illustration but not by way of limitation, " including "to ask, demand, sue for... sums of money, " "to sell, assign, and transfer stocks" and other securities, "to borrow money, " "to manage real property, " and "to make and verify income tax returns." Id. art. I ¶¶ 1-11. Another power is "to retain counsel on [Samuel's] behalf, to appear for [him] in all actions and proceedings to which [he] may be party in the courts of Arizona or elsewhere, to commence actions and proceedings in [his] name and to sign and verify [his] name on all complaints, petitions, answers and other pleadings of every description." Id. art. I ¶ 9.

         In January 2015, Joseph filed suit on Samuel's behalf in Cook County Circuit Court, alleging that Samuel-who left Emeritus in March 2014-had suffered physical injuries, including fractured bones, as a result of Emeritus's negligence during his stay. Compl. ¶¶ 8-19, 23-27. Emeritus removed the action to federal court, R. 1, and then moved to compel arbitration under the Arbitration Agreement that Joseph signed on November 22, 2012. R. 8, Def.'s Mot. Compel.

         In an earlier Opinion, the Court rejected Joseph's arguments that the Arbitration Agreement lacked consideration and mutual assent. 9/4/15 Opinion at 6-11. But at the same time, the Court also rejected Emeritus's agency arguments that Joseph had implied or apparent authority to enter into the Arbitration Agreement, id. at 20-21, as well as the argument that Samuel had ratified the Arbitration Agreement, id. at 22-23. What remained, the Court explained, was more briefing on whether Joseph had actual, express authority to bind Samuel to arbitration on the basis of the Illinois or Arizona powers of attorney. Id. at 11-19. As explained next, neither power of attorney granted Joseph the authority to enter into the Arbitration Agreement, so Emeritus's motion to compel arbitration is denied.

         II. Legal Standard

         The Federal Arbitration Act, which applies to "[a] written provision... evidencing a transaction involving commerce, " 9 U.S.C. § 2, governs this dispute. Under the FAA, an arbitration agreement "arising out of such contract or transaction... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Id. "Although it is often said that there is a federal policy in favor of arbitration, federal law places arbitration clauses on equal footing with other contracts, not above them." Janiga v. Questar Capital Corp., 615 F.3d 735, 740 (7th Cir. 2010) (citing Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68 (2010)). That is, the FAA was intended to respect parties' agreements to arbitrate and "put arbitration on a par with other contracts and eliminate any vestige of old rules disfavoring arbitration." Stone v. Doerge, 328 F.3d 343, 345 (7th Cir. 2003).

         If the parties have a valid arbitration agreement and the asserted claims in a lawsuit are within its scope, then the arbitration requirement must be enforced.

         9 U.S.C. §§ 3-4; Sharif v. Wellness Int'l Network, Ltd., 376 F.3d 720, 726 (7th Cir. 2004) (citing Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 909 (7th Cir. 1999)). Whether a binding arbitration agreement exists is determined under principles of state contract law. Janiga, 615 F.3d at 742 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 934 (1995)). And "the party seeking to invalidate or oppose the arbitration agreement bears the burden of demonstrating that the arbitration agreement is unenforceable and that the claims are unsuitable for arbitration." Paragon Micro, Inc. v. Bundy, 22 F.Supp. 3d 880, 887 (N.D. Ill. 2014) (citing Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91-92 (2000)). The FAA also "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).

         III. Analysis

         Joseph argues that the Arbitration Agreement is invalid because he never had the authority to bind Samuel to arbitration under the Illinois and Arizona POAs. Emeritus responds that both POAs established an agency relationship and expressly gave Joseph the power to enter into the Arbitration Agreement.

         Some basic agency principles are the same in Illinois and Arizona. An agent's authority to act for the principal can be either actual or apparent. See Patrick Eng'g, Inc. v. Naperville, 976 N.E.2d 318, 329 (Ill. 2012); Ruesga v. Kindred Nursing Ctrs., LLC, 161 P.3d 1253, 1261 (Az. Ct. App. 2007). In turn, actual authority-meaning the principal actually gave authority to the agent-can be either express or implied. Id. "Express authority is directly granted to the agent in express terms by the principal and extends only to the powers the principal confers upon the agent." Curto v. Illini Manors, Inc., 940 N.E.2d 229, 233 (Ill.App.Ct. 2010). One way to confer express authority is through a power of attorney. See id. ("[Express] authority may be granted through a written contract, a power of attorney or a court-ordered guardianship." (citations omitted)); Amcore Bank, N.A. v. Hahnaman-Albrecht, Inc., 759 N.E.2d 174, 181 (Ill.App.Ct. 2001) ("The power of attorney lists specific powers given to the attorneys-in-fact."). The other form of actual authority is implied authority, which "arises when the conduct of the principal, reasonably interpreted, causes the agent to believe that the principal desires him to act on the principal's behalf." Curto, 940 N.E.2d at 233. Separate from actual authority is apparent authority, which applies even when the principal has not actually given the agent any authority; put another way, apparent authority exists "where a principal has created the appearance of authority in an agent, and another party has reasonably and detrimentally relied upon the agent's authority." Patrick, 976 N.E.2d at 329-30 (citations omitted). The party alleging an agency relationship must prove it by a preponderance of the evidence. See Granite Properties Ltd. P'ship v. Granite Inv. Co., 581 N.E.2d 90, 92 (Ill.App.Ct. 1991); Curran v. Indus. Comm'n of Ariz., 752 P.2d 523, 526 (Az. Ct. App. 1988).

         In the earlier opinion, the Court rejected the arguments that Joseph had actual implied authority or apparent authority to sign the Arbitration Agreement for his father. 9/4/15 Opinion at 20-22. What's left is whether the Illinois and Arizona POAs gave ...

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