Affirming a trial court's denial of a motion to compel arbitration of a nursing home care dispute, an Arkansas appellate court nullified an arbitration agreement signed by a party with a questionably procured power of attorney.

In Waverly-Arkansas, Inc. v. Keener, No. CA 07-524, 2008 WL 316149 (Ark. Ct. App. Feb. 6, 2008), Davis suffered a stroke in 1996 that paralyzed her and rendered her unable to speak. After Davis declined her daughter's request for a power of attorney, her granddaughter placed a pen in Davis' hand and held it so that Davis would sign the power of attorney for her daughter Keener. Later, Davis' son had the power of attorney notarized by someone not present at the "signing."

In 1997, Keener used the power of attorney to admit her mother to the Mena Manor nursing home owned by Waverly-Arkansas. The initial admission contract did not contain an arbitration agreement. However, in 2002, a nursing home representative had Keener sign a new admissions agreement, which did contain an arbitration agreement. The parties disputed whether the nursing home representative explained the arbitration agreement.

Davis died in 2003. In 2005, Keener, as representative for her mother's estate, sued the nursing home, alleging that its negligence had caused her mother's wrongful death and for various Arkansas Residents' Rights Act violations. The nursing home moved to compel arbitration pursuant to the arbitration agreement contained in the admission contract. Keener opposed the motion, arguing that the nursing home lacked authority to bind her to the agreement and that the agreement was unenforceable.

The trial court denied the motion on the ground that Davis was incompetent and unlikely to have signed the agreement. Additionally, according to the trial court, even if Keener had acted under a valid power of attorney, the nursing home did not adequately explain that she was signing away important rights. The nursing home appealed, arguing that the strong federal policy favoring arbitration mandated enforcement and that Keener's "unclean hands" should preclude her from disavowing the arbitration agreement.

The Court held that a valid arbitration agreement did not exist. The Court declined to apply the "unclean hands" doctrine to compel Keener to arbitrate her dispute. Although equitable estoppel requires a party to arbitrate when it invokes rights under a contract containing an arbitration agreement, the Court found that Keener signed the admission contract in her individual capacity, not as the personal representative of Davis' estate. Therefore, her estate and wrongful-death beneficiaries were only bound to the extent the agreement bound Davis.

Because the Court found no evidence showing Davis intended to give her daughter power of attorney or sign the arbitration agreement, the trial court did not abuse its discretion in refusing to apply the doctrine. Further, the Court concluded that no agency relationship existed, as any kind of apparent authority authorizing Keener to act on her mother's behalf did not exist.