Beverly Enterprises-Mississippi Inc. v. Powell ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS August 3, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 06-60468
BEVERLY ENTERPRISES-MISSISSIPPI INC., doing business as Beverly
Healthcare-Eason,
Plaintiff-Appellant,
versus
BERTHA POWELL, Wrongful Death Beneficiary of Charles McAlister,
Deceased; JENNIFER PRUITT, Wrongful Death Beneficiary of Charles
McAlister, Deceased; KATHY BRUNSON; BRIDGET JONES; DARRYL KIRK;
CHARLES LAMONT MCALISTER; JUDY MCALISTER; LARRY MCALISTER; RUBY
MCALISTER; STEVE MCALISTER; ANTHONY GORDON; STEVAN (or Stephen)
MCALISTER,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Mississippi
(1:04-CV-276)
Before KING, DAVIS, and BARKSDALE, Circuit Judges.
PER CURIAM:*
Beverly Enterprises-Mississippi, Inc. challenges an adverse
summary judgment against its action to compel arbitration.
Material fact issues, however, preclude that judgment. VACATED AND
REMANDED.
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
I.
In January 2003, Charles McAlister (decedent) was admitted to
Beverly Healthcare-Eason, a nursing-home facility, owned and
operated by Beverly Enterprises-Mississippi, Inc. On the date of
admission, decedent, who was illiterate, purportedly executed an
arbitration agreement, which contained, inter alia, a provision
requiring all claims or disputes raised in connection with his
nursing-home care to be submitted to binding arbitration.
Decedent died at the Beverly facility in May 2003. In August
2004, Bertha Powell, decedent’s sister and a wrongful death
beneficiary, filed a state-court action, charging Beverly with,
inter alia, negligence, medical malpractice, fraud, breach of
fiduciary duty, and wrongful death.
In September 2004, Beverly filed this action against Powell
and others (defendants) to compel arbitration and enjoin the state-
court action. In response, defendants denied that the arbitration
agreement was valid and enforceable. Following discovery, Beverly
moved in August 2005 to compel arbitration. In February 2006, the
district court denied Beverly’s motion and closed its action,
holding: testimony from Beverly’s own witnesses suggest decedent
was not read the arbitration document and did not sign it; and, due
to decedent’s illiteracy, Beverly engaged in fraud-in-the-
inducement by having him sign the agreement without properly
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explaining it to him. Beverly’s motion to alter or amend the
judgment and for reconsideration was denied that April.
II.
In essence, summary judgment was awarded defendants. Beverly
challenges that judgment, contending: the arbitration agreement
was valid and enforceable; and, accordingly, decedent’s claims
should be submitted to arbitration. In the alternative, Beverly
contends: if questions of material fact exist as to the
arbitration agreement’s enforceability, this action should be
remanded for trial.
A summary judgment is reviewed de novo, e.g., Celotex Corp. v.
Catrett, 477 U.S. 317, 330 (1986), and is appropriate “if ... there
is no genuine issue as to any material fact and ... the mov[ant]
... is entitled to a judgment as a matter of law”, FED. R. CIV. P.
56(c). “An issue is ‘genuine’ if the evidence is sufficient for a
reasonable jury to return a verdict for the nonmoving party.”
Hamilton v. Segue Software Inc., 232 F.3d 473, 477 (5th Cir. 2000)
(citation omitted). “A fact issue is material if its resolution
could affect the outcome of the action.” Cooper Tire & Rubber Co.
v. Farese, 423 F.3d 446, 454 (5th Cir. 2005) (quoting Thompson v.
Goetzmann, 337 F.3d 489, 502 (5th Cir. 2003)). Finally, all
reasonable inferences are made in the light most favorable to the
non-movant. Calbillo v. Cavender Oldsmobile, Inc., 288 F.3d 721,
725 (5th Cir. 2002).
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In determining whether parties should be compelled to
arbitrate, courts perform a bifurcated inquiry. “First, the court
must determine whether the parties agreed to arbitrate the dispute.
Once the court finds that the parties agreed to arbitrate, it must
consider whether any federal statute or policy renders the claims
nonarbitrable.” Wash. Mut. Fin. Group, LLC v. Bailey, 364 F.3d
260, 263 (5th Cir. 2004). In this regard, a party seeking to avoid
arbitration must prove the arbitration provision was a product of
fraud or coercion or other “such grounds [that] ... exist at law or
in equity for the revocation of any contract”. Sam Reisfeld & Son
Imp. Co. v. S.A. Eteco, 530 F.2d 679, 681 (5th Cir. 1976) (quoting
the Federal Arbitration Act, 9 U.S.C. § 2); see also Nat’l Iranian
Oil Co. v. Ashland Oil, Inc., 817 F.2d 326, 332 (5th Cir. 1987).
In contending that no valid arbitration agreement exists, and,
therefore, in support of the summary judgment, defendants make two
contentions.
First, they assert decedent did not agree to arbitrate any
disputes because he did not sign the arbitration agreement.
Decedent’s family, although not present at his admission to the
Beverly facility, testified the signature on the agreement
(characterized by an “X” mark) is not his; the family produced
other documentation which they claimed was signed by decedent and
which purported to show a wholly different signature. In response,
Beverly offers deposition testimony from two employees: one, who
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witnessed decedent sign the agreement; and a second, who signed the
agreement as a witness. (Although the latter did not remember
decedent’s signing the agreement, she testified she would not have
signed as witness had decedent not signed the agreement.)
In the alternative, defendants contend: even if the agreement
was signed, it is unconscionable, both procedurally and
substantively. Under Mississippi law, unconscionability can either
be substantive or procedural. West v. West, 891 So.2d 203, 213
(Miss. 2004). For procedural unconscionability, parties invoking
it point to the “formation of the contract”, id.; unconscionability
generally requires showing lack of either knowledge or
voluntariness. Vicksburg Partners, L.P. v. Stephens, 911 So.2d
507, 517 (Miss. 2005) (citation omitted).
Defendants assert the circumstances surrounding the
agreement’s formation rendered it procedurally unconscionable:
decedent was illiterate and totally dependent on Beverly employees;
and the employees did not read or explain the agreement to him, but
simply paraphrased it. As a related claim, defendants contend, and
the district court found, that these actions amounted to fraud-in-
the-inducement, by which Beverly took advantage of both its
relationship with decedent and his illiteracy by failing to inform
him that he was signing an arbitration agreement. Beverly
employees, however, present at decedent’s admission, testified by
deposition that the agreement was explained to him; and that he
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understood the contents of the agreement when he executed it.
Further, Beverly notes: under Mississippi law, “illiteracy alone
is not a sufficient basis for the invalidation of an arbitration
agreement”. Am. Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 537
(5th Cir. 2003).
Needless to say, the contentions by both sides demonstrate
this matter is not easily resolved. Indeed, the district court
noted as much, stating: “there is conflicting testimony, from
[each party’s witnesses], as to whether [decedent] was read the
Agreement and whether he placed an X on it”. The resolution of
these fact issues will undoubtably affect the disposition of this
action. (Because material fact issues exist, we need not address
defendant’s claims for substantive unconscionability and breach of
fiduciary duty.) Therefore, summary judgment was improper.
III.
For the foregoing reasons, the denial of arbitration is
VACATED and the matter is REMANDED for trial.
VACATED AND REMANDED
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