Cv Louisville Opco I, LLC D/B/A or A/K/A Sycamore Heights Health and Rehabilitation v. Sheila Douglas as Adminstratrix of the Estate of Larry Douglas ( 2022 )

RENDERED: AUGUST 5, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0051-MR
CV LOUISVILLE OPCO I, LLC D/B/A
OR A/K/A SYCAMORE HEIGHTS
HEALTH AND REHABILITATION;
THE PORTOPICCOLO GROUP, LLC;
THOMAS RAWLINS IN HIS
CAPACITY AS ADMINISTRATOR
OF SYCAMORE HEIGHTS HEALTH
AND REHABILITATION; AND
ULTRACARE MANAGEMENT
GROUP, LLC APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE SUSAN SCHULTZ GIBSON, JUDGE
ACTION NO. 20-CI-004497
SHEILA DOUGLAS AS
ADMINISTRATRIX OF THE ESTATE
OF LARRY DOUGLAS APPELLEE
OPINION
AFFIRMING IN PART, REVERSING IN PART,
AND REMANDING
** ** ** ** **
BEFORE: ACREE, CETRULO, AND TAYLOR, JUDGES.
TAYLOR, JUDGE: CV Louisville Opco I, LLC d/b/a or a/k/a Sycamore Heights
Health and Rehabilitation; the Portopiccolo Group, LLC; Thomas Rawlins in his
capacity as Administrator of Sycamore Heights Health and Rehabilitation; and
Ultracare Management Group, LLC (collectively referred to as Sycamore) bring
this appeal from an Order entered December 14, 2020, by the Jefferson Circuit
Court denying their motion to compel arbitration of negligence and wrongful death
claims brought by Sheila Douglas as the Administratrix of the Estate of Larry
Douglas (herein referred to as the resident or decedent) on behalf of beneficiaries
of the decedent against Sycamore (a nursing home). As will be discussed, Douglas
entered into an arbitration agreement in her role as attorney-in-fact under a power
of attorney (POA) as part of a larger Admissions Agreement to ensure the
resident’s care at Sycamore. For the reasons stated herein, we affirm in part,
reverse in part, and remand for proceedings consistent with this Opinion.
BACKGROUND
In 2019, Larry Douglas appointed his sister, Sheila Douglas, as his
lawful attorney-in-fact pursuant to an executed power of attorney, which is not in
dispute in this appeal. In February of 2019, Sheila executed the Admissions
Agreement on Larry’s behalf for his admission to Sycamore’s facility. Larry was
treated at the facility between February 1, 2019, and May 29, 2019. Larry died on
June 4, 2019. Thereafter, Douglas filed an action in Jefferson Circuit Court on
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August 3, 2020, as administratrix of the Estate, asserting negligence and wrongful
death claims against Sycamore. The circuit court denied Sycamore’s motion to
compel arbitration by order entered December 14, 2020. This appeal followed.
STANDARD OF REVIEW
The standard of review for this Court of an order below denying a
motion to compel arbitration can be summarized as follows:
Ordinarily, such orders are interlocutory and are not
immediately appealable. However, an order denying a
motion to compel arbitration is immediately appealable.
[Kentucky Revised Statutes] KRS 417.220(1). See
also Conseco Finance Servicing Corp. v. Wilder, 47
S.W.3d 335, 340 (Ky. App. 2001). The enforcement and
effect of an arbitration agreement is governed by the
Kentucky Uniform Arbitration Act (KUAA), KRS
417.045 et seq., and the Federal Arbitration Act, (FAA) 9
U.S.C.4 §§ 1 et seq. “Both Acts evince a legislative
policy favoring arbitration agreements, or at least
shielding them from disfavor.” Ping v. Beverly
Enterprises, Inc., 376 S.W.3d 581, 588 (Ky. 2012).
But under both Acts, a party seeking to compel
arbitration has the initial burden of establishing the
existence of a valid agreement to arbitrate. Id. at 589.
That question is controlled by state law rules of contract
formation. Id. at 590. The FAA does not preempt state
law contract principles, including matters concerning the
authority of an agent to enter into a contract and which
parties may be bound by that contract. Arthur Andersen
LLP v. Carlisle, 556 U.S. 624, 630-31, 129 S. Ct. 1896,
1902, 173 L. Ed. 2d 832 (2009). Since this matter is
entirely an issue of law, our standard of review is de
novo. Conseco, 47 S.W.3d at 340.
Genesis Healthcare, LLC v. Stevens, 544 S.W.3d 645, 648-49 (Ky. App. 2017).
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The circuit court, in denying Sycamore’s motion to compel
arbitration, found that Douglas signed the Admissions Agreement, which contained
the arbitration agreement, only in her representative capacity. The court also found
that the arbitration agreement was unconscionable. Although the circuit court did
not cite any authority in support of its decision, we agree that Douglas signed only
in her representative capacity as attorney-in-fact and affirm in that regard.
However, as concerns the conscionability of the arbitration agreement, for the
reasons stated, we conclude the arbitration agreement was not unconscionable.
Further facts will be developed as necessary.
ANALYSIS
The Admissions Agreement presented to Douglas upon the decedent’s
admission to Sycamore is an eleven-page document, excluding the signature pages.
It is divided into ten sections and various subsections within. Several sections
and/or subsections within the Admissions Agreement contain lines for a signature
or initials of either the Resident or the Resident’s Sponsor. Douglas signed or
initialed each item as “Sponsor.” Section 4 of the Admissions Agreement defines
“Sponsor,” in relevant part, as:
[A] person legally responsible for the Resident or must
be in the process of obtaining such status, including a
guardian, a person holding a durable power of attorney
and/or a conservator. The Facility must receive written
documentation from the person who will act as the
Sponsor showing the legal right to act on behalf of the
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Resident and the date on which the person was appointed
by a court and/or the Resident.
The arbitration agreement is found in Section 10(G), of the
Admissions Agreement, entitled “Disputes,” and does not have an accompanying
line for signatures or initials as found in other sections and/or subsections. Section
10 contains the final substantive provisions of the Admissions Agreement.
Following Section 10 is a separate signature page for the Admissions Agreement.
Appearing at the top of the signature page is the following:
THE UNDERSIGNED ACKNOWLEDGE THAT
EACH OF THEM HAVE READ AND UNDERSTOOD
THIS AGREEMENT, INCLUDING THE
ARBITRATION PROVISION IN SECTION 10.G. AND
HAS RECEIVED A COPY OF THIS AGREEMENT,
AND THAT EACH OF THEM VOLUNTARILY
CONSENTS TO AND ACCEPTS ALL OF ITS
TERMS[.]
Douglas signed her name on the line below that says “(Resident
(individual or by legal representative)[)].” However, below that is a section for the
Sponsor to sign. It has a similar statement preceding the signature line that appears
in all caps and boldface type and reads:
SPONSOR MUST COMPLETE AND SIGN BELOW
AS ACKNOWLEDGMENT OF HIS/HER HAVING
READ AND FULLY UNDERSTOOD, AND
AGREED TO THE PERSONAL UNDERTAKINGS
OF THE SPONSOR, AS PROVIDED FOR IN THE
AGREEMENT[.]
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Douglas printed her name, provided her signature, and on the
“Relation” line wrote “Sister/POA.” Notably, there is no dispute over Douglas’s
role as attorney-in-fact, and whether, as such, she had the authority to sign the
Admissions Agreement which included the arbitration agreement. However,
“Sister” does not in any way comport with the nursing home’s definition of a
Sponsor in Section 4 of the Admissions Agreement. Douglas’s role as “Sister”
would not provide the necessary authority to sponsor the decedent for
admission. Only her role as attorney-in-fact under the POA does that.
Accordingly, this language in the agreement is not sufficient to bind Douglas
individually to the arbitration provisions including her personal wrongful death
claim. We can find no definitive statement that Douglas was signing in her
individual capacity.
The arbitration agreement in Section 10(G) reads as follows:
Disputes. (i) To the fullest extent allowed by law,
Resident and/or the Resident’s legally authorized
representative who signs this Agreement, on behalf of the
Resident, the Resident’s heirs, assigns, and all others
acting or purporting to act for the Resident or the
Resident’s estate, and Facility agree that all civil claims
arising in any way out of this Agreement or the
nursing care that Facility, its employees, or agents
provide to Resident, other than claims by the Facility to
collect unpaid bills for services rendered, or to
involuntarily discharge the Resident, shall be resolved
exclusively through mandatory mediation, and, if
such mediation does not resolve the dispute, through
binding arbitration using the commercial mediation
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and arbitration rules and procedures of
JAMS/Endispute. JAMS shall hold such mediation and,
if needed, such arbitration in its office located closest to
the Facility. If any mediator, arbitrator, or court of
competent jurisdiction finds any portion of this Section
unenforceable for any reason, then they shall delete those
unenforceable provisions and enforce the remaining
provisions. Except as stated in this paragraph,
JAMS/Endispute’s commercial mediation and arbitration
rules shall apply to any mediation or arbitration[;] (ii)
Resident and Facility also agree that, to the greatest
extent allowed by law, both Resident and Facility
shall seek only actual damages in any such mediation
or arbitration, and that neither of them will pursue
any claim for punitive damages, treble damages or
any other type of damages the purpose of which are to
punish one party in an amount greater than the actual
damages allegedly caused by the other party; (iii) If
circumstances justifying a temporary restraining order or
a preliminary injunction exist, then either party may seek
such a temporary restraining order and/or such a
preliminary injunction from any court with jurisdiction
over the dispute. After the court rules on such motion for
temporary restraining order or preliminary injunction,
however, the parties will then engage in the mediation
and, if necessary, arbitration, detailed in paragraphs A
and B of this Section above; [and] (iv) Resident,
Resident’s authorized representative, and Facility all
agree that they have read this section, that they
understand all of its provisions, and that they agree to all
of the provisions detailed in this Section[.]
Despite the language purporting to bind the decedent’s “heirs, assigns,
and others acting or purporting to act for the Resident or the Resident’s estate,” it
is well-settled law in Kentucky that a decedent cannot bind wrongful death
claimants to an arbitration agreement. “[T]he decedent whose death becomes the
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basis of a wrongful death claim had no authority during his lifetime, directly or
through the actions of his attorney-in-fact, to prospectively bind the beneficiaries
of the wrongful death claim to an arbitration agreement.” Extendicare Homes, Inc.
v. Whisman, 478 S.W.3d 306, 313 (Ky. 2015), judgment rev’d in part, vacated in
part sub nom. Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421,
(2017) (emphasis added).1 Similarly, had Douglas signed the Admissions
Agreement in her individual capacity, which did not occur, other than herself, she
could not have bound the Estate or any other wrongful death beneficiaries to
arbitrate any claims under the agreement. See LP Louisville East, LLC v. Patton,
621 S.W.3d 386, 399 (Ky. 2020). In short, Douglas, as attorney-in-fact, only
possessed the authority to bind the decedent to the arbitration agreement. See id. at
394. Although she indicated in the agreement that her relation was “Sister/POA,”
the relationship of “Sister” would not create any personal liability for Douglas
under the Admissions Agreement, including Section 4 regarding sponsors. We
therefore affirm the circuit court in that regard.
The circuit court also found that the arbitration agreement is
unconscionable, concluding that it “is a mutual agreement in name only” because
1
As this Court has noted in Preferred Care Partners Management Group, L.P. v. Alexander, 530
S.W.3d 919, 924 (Ky. App. 2017), KRS 411.130, Kentucky’s wrongful death statute, including
its predecessor statute preceded the enactment of the Federal Arbitration Act and is not
antiarbitration legislation.
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only the decedent gave up the right to proceed in a court of law for any disputes.
The circuit court pointed to the fact that the part of the agreement binding the
decedent to arbitration appears in boldface type while the language that reserves
Sycamore’s right to bring its actions in court does not. The court found that this
“borders on fraud and certainly appears to be in bad faith.” We disagree.
A fundamental rule of contract law holds that,
absent fraud in the inducement, a written agreement duly
executed by the party to be held, who had an opportunity
to read it, will be enforced according to its terms. The
doctrine of unconscionability has developed as a narrow
exception to this fundamental rule. The doctrine is used
by the courts to police the excesses of certain parties who
abuse their right to contract freely. It is directed against
one-sided, oppressive and unfairly surprising contracts,
and not against the consequences per se of uneven
bargaining power or even a simple old-fashioned bad
bargain.
An unconscionable contract has been characterized
as “one which no man in his senses, not under delusion,
would make, on the one hand, and which no fair and
honest man would accept, on the other.”
Unconscionability determinations being inherently fact-
sensitive, courts must address such claims on a case-by-
case basis.
Conseco Fin. Serv. Corp. v. Wilder, 47 S.W.3d 335, 334-42 (Ky. App. 2001)
(footnotes omitted).
This Court, in Conseco, also defined the different types of
unconscionability applicable to a contract dispute:
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Procedural, or unfair surprise, unconscionability pertains
to the process by which an agreement is reached and the
form of an agreement, including the use therein of fine
print and convoluted or unclear language . . . . [It]
involves, for example, material, risk-shifting contractual
terms which are not typically expected by the party who
is being asked to assent to them and often appear [ ] in
the boilerplate of a printed form. The notion of
procedural unconscionability thus includes many of the
concerns raised by contracts of adhesion. Substantive
unconscionability refers to contractual terms that are
unreasonably or grossly favorable to one side and to
which the disfavored party does not assent.
Id. at 343 n.22 (internal quotation marks and citations omitted).
In the case sub judice, Douglas does not claim she was misled by
Sycamore. Nor does she claim that she did not read or did not have an opportunity
to read the arbitration agreement. The provision itself is not hidden or obscured in
fine print. Indeed, it is the only subsection within the entirety of the Admissions
Agreement containing portions that are in both boldface type and underlined. It is
the only section of the Admissions Agreement that mentions arbitration. We are
unpersuaded by Douglas’s argument using Flesch-Kincaid scores to convince this
Court that the language in the arbitration agreement is incomprehensible to a
person of ordinary experience and education. Douglas points to no examples in
Kentucky law where Flesch-Kincaid scores have been used in contract
interpretation. The language in the Arbitration Agreement is such that its general
import is understandable to a person of ordinary experience and education.
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Although the arbitration agreement does provide that Sycamore may
use the courts for “unpaid bills for services rendered, or to involuntarily discharge
the Resident,” we are not persuaded that this renders the agreement
unconscionable. These potential claims of Sycamore are such that they could be
decided expeditiously in the courts. “The potential for uneven remedies does not
render the arbitration clause unconscionable.” Hathaway v. Eckerle, 336 S.W.3d
83, 89 (Ky. 2011). Accordingly, we reverse and remand the circuit court’s finding
that the arbitration agreement was unconscionable for lack of mutuality.
In summation, we conclude that the arbitration agreement is
enforceable against the Estate except as concerns any wrongful death claims. And,
Douglas is not personally liable under the Admissions Agreement. Accordingly,
we affirm in part, reverse in part, and remand for proceedings consistent with this
Opinion.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE:
James P. Grohmann Matthew D. Swindle
A. Pete Pullen Robert W. Francis
Louisville, Kentucky Little Rock, Arkansas
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