The Impact of Death on the Enforceability of Arbitration Agreements

In Baker v. Italian Maple Holdings, No. D069797, the Court of Appeal, Fourth Appellate District, Division One, recently held that an arbitration agreement was enforceable upon its execution and the fact that one signatory died before the 30-day rescission period does not render the terms of the parties’ agreements unenforceable.

Marlene Baker LaBerge (73) was a resident and patient of a 24-hour skilled nursing facility owned by Italian Maple Holdings, LLC dba La Paloma Healthcare Center (La Paloma). LaBerge signed two arbitration agreements with La Paloma that included language required by Code of Civil Procedure section 1295, subdivision (c) which requires such agreements to include a 30-day “cooling off” period, during which the parties to the agreement may rescind it. Ten days later, LaBerge died as a result of injuries she sustained in a fall at the facility.

LaBerge’s heirs filed a Complaint alleging elder abuse, a violation of Health and Safety Code section 1430, negligence, and wrongful death. Defendants filed a petition to compel arbitration and Plaintiffs opposed the motion on grounds that per the holding in Rodriguez v. Superior Court (2009) 176 Cal.App.4th 1461 (Rodriguez), the agreements were not effective until after the 30-day rescission period. In Rodriguez, the court held that an arbitration agreement signed by the decedent four days before surgery rendered it impossible to make an evidentiary finding regarding whether the decedent waived her rights to a jury trial. The Baker trial court agreed with Plaintiffs and denied the petition to compel arbitration on grounds that Defendants could not establish the validity of the arbitration agreements because LaBerge died prior to the expiration of the 30-day rescission period set forth in section 1295(c). Of note, the Rodriguez case facts were more complicated and the opinion cast a wider net than the Baker case addresses.

However, the appellate court in Baker disagreed with the Rodriguez court’s specific analysis and interpretation of section 1295(c). The arbitration agreements signed by LaBerge and La Paloma included the language “by signing this arbitration agreement below, the Resident agrees to be bound by the foregoing provision…” The Baker court held that by submitting these agreements to the court, Defendants made a prima facie showing of the existence of agreements to arbitrate between LaBerge and Defendants. The court rejected Rodriguez’ narrow interpretation of section 1295(c) which created a condition precedent to the enforcement of the terms of a medical services arbitration agreement – that the 30-day rescission period must lapse without either party rescinding in order to be enforceable. However, the Baker court noted that section 1295(c) also provides: “once signed, such a contract governs all subsequent open-book account transactions for medical services for which the contract was signed until or unless rescinded by written notice within 30 days of signature.” The court held that the plain meaning of this provision is that such an agreement is effective upon execution by the parties and remains in effect until or unless a party rescinds within the 30-day period.

The Baker holding clarifies prior ambiguity in case law for those seeking to enforce a medical services arbitration provision. The timing of the signatures is no longer an issue and, provided there are no other issues regarding validity (i.e.: lack of capacity to assent or coercion), such an agreement is enforceable upon its execution unless or until it is rescinded within the 30-day period. Regardless of intervening death of the signatory.

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August 9, 2017