Kohlman, D. v. Grane Healthcare Company ( 2020 )


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  • J-A23033-19
    
    2020 PA Super 29
    DEBRA KOHLMAN, ADMINISTRATRIX          :   IN THE SUPERIOR COURT OF
    OF THE ESTATE OF FAY A. VINCENT,       :         PENNSYLVANIA
    DECEASED                               :
    :
    :
    v.                        :
    :
    :
    GRANE HEALTHCARE COMPANY;              :
    HIGHLAND PARK CARE CENTER, LLC,        :
    D/B/A HIGHLAND PARK CARE               :
    CENTER; GRANE ASSOCIATES, LP;          :
    GRANE ASSOCIATES, INC.; GRANE          :
    PROPERTIES, INC.; TREBRO, INC.;        :
    HIGHLAND PARK PROPERTIES, LLC;         :
    UNIVERSITY OF PITTSBURGH               :
    MEDICAL CENTER A/K/A UPMC;             :
    UPMC PRESBYTERIAN SHADYSIDE;           :
    UPMC SHADYSIDE HOSPITAL                :
    :
    :
    APPEAL OF: GRANE HEALTHCARE            :
    COMPANY; HIGHLAND PARK CARE            :
    CENTER, LLC, D/B/A HIGHLAND            :
    PARK CARE CENTER; GRANE                :
    ASSOCIATES, LP; GRANE                  :
    ASSOCIATES, INC.; GRANE                :
    PROPERTIES, INC.; TREBRO, INC.;        :
    HIGHLAND PARK PROPERTIES, LLC          :       No. 144 WDA 2019
    Appeal from the Order Entered January 2, 2019
    in the Court of Common Pleas of Allegheny County
    Civil Division at No(s): GD 18-010949
    BEFORE: BENDER, P.J.E., KUNSELMAN, J., and MUSMANNO, J.
    OPINION BY MUSMANNO, J.:                      FILED FEBRUARY 10, 2020
    Grane Healthcare Company, Highland Park Care Center, LLC d/b/a
    Highland Park Care Center, Grane Associates, LP, Grane Associates, Inc.,
    Grane Properties, Inc., Trebro Inc., and Highland Park Properties, LLC
    J-A23033-19
    (collectively, “Defendants”), appeal from the Order denying their Preliminary
    Objections seeking to compel arbitration of the claims asserted against
    Defendants by Debra Kohlman (“Plaintiff”), Administratrix of the Estate of Fay
    A. Vincent (“decedent”). We affirm in part, reverse in part, and remand for
    further proceedings.
    On January 31, 2017, decedent, who was 67 years old and Plaintiff’s
    mother, was discharged from a Pittsburgh hospital (the “Hospital”)1 and
    admitted for care and rehabilitation at Highland Park Care Center (“Highland
    Park”),2 a skilled nursing home facility located in Pittsburgh. While she was
    being    admitted,     decedent     executed     a   two-page   document   entitled
    “AGREEMENT TO ARBITRATE DISPUTES” (hereinafter, the “Arbitration
    Agreement”).3
    The Arbitration Agreement provides, in relevant part, as follows:
    PLEASE READ CAREFULLY, YOU ARE GIVING UP YOUR
    RIGHT TO SUE [HIGHLAND PARK] IN COURT
    [Decedent] and [Highland Park] agree that all matters in
    dispute between [decedent] and [Highland Park], its agents,
    ____________________________________________
    1  Decedent was treated for various conditions at the Hospital, including
    congestive heart failure, diabetes, and pressure ulcers. Decedent remained
    in the Hospital for three months, two of which were in the intensive care unit.
    2   Defendants collectively owned and operated Highland Park.
    3The record does not contain the admission agreement concerning decedent’s
    admission into Highland Park. Notably, nor does it explain the circumstances
    surrounding decedent’s execution of the Arbitration Agreement and admission
    agreement. However, it does indicate that the Arbitration Agreement is a
    separate contract from the admission agreement.
    -2-
    J-A23033-19
    servants, employees, officers, contractors and affiliates
    (hereinafter “the parties”), including but not limited to claims for
    personal injuries or any controversy or claim between the parties
    arising out of or relating to the agreement for admission and for
    the provision of nursing facility services, whether by virtue of
    contract, tort or otherwise, including the scope of this [A]rbitration
    [A]greement and the arbitrability of any claim or dispute[,] shall
    be resolved exclusively by binding arbitration. …
    ***
    The parties agree that any administrative fees and costs,
    including the fees of the arbitrator, shall be split equally between
    the parties, and that each party shall be responsible for their own
    attorneys’ fees.[4]
    In the event that a court having jurisdiction finds any
    portion of this agreement unenforceable, then that portion shall
    not be effective and the remainder of the agreement shall remain
    effective.
    ***
    [Decedent] retains all rights under federal and state
    law to file grievances with or to complain to authorities or
    advocacy groups concerning care and treatment.
    ***
    [Decedent] understands that he/she has the right to consult
    legal counsel concerning this [A]rbitration [A]greement; that
    execution of this [A]rbitration [A]greement is not a condition of
    admission or to the furnishing of services to [decedent] by
    [Highland Park]; and that this [A]rbitration [A]greement may be
    rescinded by written notice delivered to [Highland Park] within ten
    (10) days of signature. …
    The undersigned certifies that he/she has read this
    [A]rbitration [A]greement and that it has been fully explained to
    him/her, that he/she understands its contents, and that he/she is
    the Resident or a person duly authorized by the Resident or
    otherwise to execute this agreement and accept its terms.
    ____________________________________________
    4   We will hereinafter refer to this provision as the “fee-splitting provision.”
    -3-
    J-A23033-19
    Arbitration Agreement, 1/31/17 (footnote added; bold, underline and heading
    capitalization in original). A representative of Highland Park also signed and
    dated the Arbitration Agreement. Decedent died approximately three months
    after her admission into Highland Park.
    On August 27, 2018, Plaintiff filed a Complaint against, inter alia,
    Defendants,5 alleging negligence, survival and wrongful death causes of
    action.   Plaintiff alleged that Defendants were negligent in their care and
    treatment of decedent while she was a resident at Highland Park, which
    caused her injuries and eventually led to her death.               Plaintiff sought
    compensatory and punitive damages.
    On October 22, 2018, and November 13, 2018, Defendants filed
    Preliminary Objections to the Complaint.6 Therein, Defendants asserted, in
    relevant part, that Plaintiff’s claims must be resolved via arbitration, pursuant
    to the Arbitration Agreement.          Plaintiff thereafter filed a Response to the
    Preliminary Objections, asserting, inter alia, that the Arbitration Agreement
    was unenforceable, void, unconscionable, against public policy, and the
    ____________________________________________
    5The Complaint also named as defendants University of Pittsburgh Medical
    Center, a/k/a UPMC, UPMC Presbyterian Shadyside, and UPMC Shadyside
    Hospital (collectively, “the UPMC defendants”). The UPMC defendants are not
    parties to the instant appeal, and did not file a brief.
    6 Defendants did not attach a Notice to Plead to their Preliminary Objections,
    as required by Allegheny County Local Rule 1028(c)(2) (providing that if an
    issue of fact is raised in preliminary objections, they “must be endorsed with
    notice to plead[.]”).
    -4-
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    product of duress.       The trial court heard oral argument on the matter on
    January 2, 2019, wherein the parties’ respective counsel disputed the
    enforceability of the Arbitration Agreement. Importantly to this appeal, the
    parties did not engage in any discovery prior to the trial court’s ruling on the
    Preliminary Objections.
    By an Order dated January 2, 2019, and entered on January 8, 2019,
    the trial court denied Defendants’ Preliminary Objection to compel arbitration.
    Defendants timely filed a Notice of Appeal. The trial court ordered Defendants
    to file a Pa.R.A.P. 1925(b) concise statement of errors complained of on
    appeal, and Defendants timely complied. The trial court then issued a Rule
    1925(a) Opinion.
    In its Opinion, the trial court ruled, in relevant part, as follows:
       Plaintiff is entitled to a trial on the wrongful death cause of
    action, notwithstanding the Arbitration Agreement.7 See Trial
    Court Opinion, 3/13/19, at 4.
       “[T]he standards for a valid and enforceable agreement to
    arbitrate cannot be met where an ill or damaged patient signs
    such an agreement as either an implicit or explicit condition of
    admission to a health care facility, such as [Highland Park]
    here.” 
    Id.
       The “[fee-splitting] provision in the [Arbitration] Agreement[,
    which states] that an injured patient has also agreed to pay for
    the Arbitrator’s services and to have given up his or her right
    to a trial in a court before a judge and jury, where there is no
    ____________________________________________
    7 As we discuss below, Defendants do not dispute that Plaintiff’s wrongful
    death action must proceed to court; thus, their claim under the Arbitration
    Agreement concerns only the survival action.
    -5-
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    charge to litigants for those services, defines overreach and
    chutzpah.” 
    Id.
       Defendants failed to meet “their burden to show that
    [d]ecedent knew what she was giving up and what expense
    she was accepting when she signed” the Arbitration
    Agreement. Id. at 4-5.
       Defendants’ attempt to enforce the Arbitration Agreement
    “with an allegedly elderly woman in frail health and in need of
    advanced wound care, is facially unconscionable and procured
    under duress[,]” and the Arbitration Agreement is thus void,
    and Plaintiff’s survival action must proceed to court. Id. at 4.
    On appeal, Defendants present the following issue for our review:
    “Whether the court below erred by overruling Preliminary Objections seeking
    to compel the matter to arbitration pursuant to a binding agreement to
    arbitrate disputes?” Brief for Defendants at 3.
    This Court previously set forth our standard of review and the relevant
    law as follows:
    Our review of a claim that the trial court improperly denied
    the appellant’s preliminary objections in the nature of a petition
    to compel arbitration is limited to determining whether the trial
    court’s findings are supported by substantial evidence and
    whether the trial court abused its discretion in denying the
    petition.
    ***
    [C]ourts must bear in mind:
    (1) arbitration agreements are to be strictly construed
    and not extended by implication; and (2) when parties
    have agreed to arbitrate in a clear and unmistakable
    manner, every reasonable effort should be made to
    favor the agreement unless it may be said with
    positive assurance that the arbitration clause involved
    -6-
    J-A23033-19
    is not susceptible to an interpretation that covers the
    asserted dispute.
    ***
    Pennsylvania law endorses the nationally accepted liberal
    policy favoring arbitration embodied in the Federal Arbitration
    Act at 
    9 U.S.C. §§ 1-16
     (“FAA”):
    The enactment of the FAA expresses a liberal federal policy
    favoring arbitration agreements. Congress[’s] purpose was to
    overcome state legislative and judicial efforts to undermine the
    enforceability of arbitration agreements, inter alia, by establishing
    a substantive rule of federal law placing such agreements upon
    the same footing as other contracts. The federal statute thus
    requires that a written provision to settle by arbitration a
    controversy thereafter arising out of such contract or transaction
    shall be valid, irrevocable, and enforceable, save upon any
    grounds at law or in equity for the revocation of any contract.
    Griest v. Griest, 
    183 A.3d 1015
    , 1022 (Pa. Super. 2018) (citations, brackets,
    ellipses, footnote and indents omitted).
    We are further guided by the reasoning of our Pennsylvania Supreme
    Court in Taylor v. Extendicare Health Facilities, Inc., 
    147 A.3d 490
     (Pa.
    2016):
    [W]hile state courts have attempted to reconcile their state law
    contract defenses and public policy protections with the
    preemptive effect of the FAA, see, e.g., [AT&T Mobility, LLC v.]
    Concepcion[,] 563 U.S. [333,] 342 [(2011)] (recognizing that
    “the judicial hostility toward[] arbitration that prompted the FAA
    had manifested itself in “a great variety” of “devices and formulas”
    declaring arbitration against public policy”), the United States
    Supreme Court has endeavored to compel judicial acceptance of
    private agreements to arbitrate. The FAA is now perceived as
    applying to almost every arbitration agreement, although the
    savings clause envisions a limited role for state law. In this
    respect, arbitration has come a long way from its origin as a
    mutually agreed-upon method of dispute resolution by two
    business entities of equal bargaining power, and now is employed
    -7-
    J-A23033-19
    in a variety of contracts, many of which are contracts of adhesion.
    As arbitration clauses proliferate, individuals will ever more
    broadly exchange their right to a jury trial for basic consumer
    products or nursing home care.
    One of the striking consequences of the shift away from the
    civil justice system and toward private adjudication is that
    corporations are routinely stripping individuals of their
    constitutional right to a jury trial. See U.S. Const. amend.
    VII (preserving the right to a trial by jury); Pa. Const. art. 1, § 6
    (same). While one’s right to a jury trial may be waived, it is not
    at all apparent that signatories to arbitration agreements are
    aware that they waive their right to a jury trial upon the execution
    of an arbitration agreement.
    The West Virginia Supreme Court of Appeals highlighted this
    constitutional concern in Brown et al[.] v. Marmet Health Care
    Ctr. et al[.], 
    228 W. Va. 646
    , 
    724 S.E.2d 250
     (W.Va. 2011).
    Relying in part upon the state constitution’s provision of the right
    to a jury trial, W. Va. Const. art. III, § 13, the West Virginia court
    criticized the [United States] Supreme Court’s decisions granting
    the FAA sweeping preemptive effect. Brown, 
    724 S.E.2d at 278
     (“With tendentious reasoning, the United States Supreme
    Court has stretched the application of the FAA from being a
    procedural statutory scheme effective only in the federal courts,
    to being a substantive law that preempts state law in both the
    federal and state courts.”). Based upon its belief that Congress
    did not intend for all arbitration agreements to be governed by the
    FAA, the state court held that the FAA did not apply to pre-dispute
    agreements to arbitrate negligence claims in nursing home
    contracts. 
    Id. at 291-92
     ([stating that] “[a]s a matter of public
    policy under West Virginia law, an arbitration clause in a nursing
    home admission agreement adopted prior to an occurrence of
    negligence that results in personal injury or death, shall not be
    enforced to compel arbitration of a dispute concerning the
    negligence.”).
    On appeal, the [United States] Supreme Court was
    unsympathetic to the [West Virginia] court’s concern for the right
    to a jury trial. In a cursory per curiam opinion, the Supreme Court
    reversed, and chastised the West Virginia court for “misreading
    and disregarding the precedents of this Court interpreting the
    FAA.” Marmet [Health Care Ctr., Inc. v. Brown, 
    565 U.S. 530
    ,
    531 (2012) (per curiam)]. The Court held that the state’s public
    -8-
    J-A23033-19
    policy rationale constituted “a categorical rule prohibiting
    arbitration of a particular type of claim,” which the Court held was
    “contrary to the terms and coverage of the FAA” and, therefore,
    preempted. 
    Id.
     at [533]; see [also] Nitro-Lift Techs., L.L.C.
    v. Howard, 
    568 U.S. 17
     … (2012) (per curiam) (invalidating a
    state law that required the validity of non-compete provisions in
    employment contracts to be resolved judicially).[FN]
    [FN]Interestingly, upon remand from the Supreme Court,
    the West Virginia Supreme Court of Appeals again
    declared that the arbitration agreements at issue could
    be invalid, this time based upon common-law grounds of
    unconscionability, and remanded for the development of
    a record to assess these common-law arguments.
    Brown et al v. Marmet Health Care Ctr. et al, 
    229 W. Va. 382
    , 
    729 S.E.2d 217
    , 223 (W.Va. 2012)
    [(hereinafter, Brown II)].
    With this Supreme Court jurisprudence in mind, and
    solicitous of our obligation to consider questions of arbitrability
    with a “healthy regard for the federal policy favoring arbitration,”
    Moses H. Cone [Mem’l Hosp. v. Mercury Constr. Corp.], 460
    U.S. [1,] 2[4] [(1983)], we observe that Section 2 of the FAA
    binds state courts to compel arbitration of claims subject to an
    arbitration agreement. 
    9 U.S.C. § 2
     (providing that arbitration
    agreements “shall be valid, irrevocable, and enforceable”). This
    directive is mandatory, requiring parties to proceed to arbitration
    on issues subject to a valid arbitration agreement, even if a state
    law would otherwise exclude it from arbitration. Mastrobuono
    v. Shearson Lehman Hutton, Inc., 
    514 U.S. 52
     … (1995).
    The only exception to a state’s obligation to enforce an
    arbitration agreement is provided by the savings clause, which
    permits the application of generally applicable state contract law
    defenses such as fraud, duress, or unconscionability,[8] to
    ____________________________________________
    8 Concerning the defense of unconscionability, we have explained that
    “[u]nconscionability has generally been recognized to include an absence of
    meaningful choice on the part of one of the parties[,] together with contract
    terms which are unreasonably favorable to the other party.” Cardinal v.
    Kindred Healthcare, Inc., 
    155 A.3d 46
    , 53 (Pa. Super. 2017) (citation
    omitted).
    -9-
    J-A23033-19
    determine whether a valid contract exists. [Doctor’s Assocs. v.]
    Casarotto, 517 U.S. [681,] 687 [(1996)]; Volt [Info. Scis. v.
    Bd. Of Trs.], 489 U.S. [468,] 476 [(1989)]; Perry [v. Thomas],
    482 U.S. [483,] 492 n.9 [(1987)].
    Taylor, 147 A.3d at 507-09 (Pa. 2016) (footnote added, some footnotes and
    brackets omitted).9 Additionally, this Court has explained that “the existence
    of an arbitration provision and a liberal policy favoring arbitration does not
    require the rubber stamping of all disputes as subject to arbitration.” Pisano
    v. Extendicare Homes, Inc., 
    77 A.3d 651
    , 661 (Pa. Super. 2013) (citation
    omitted).
    Initially, Defendants do not dispute that Plaintiff is entitled to a trial on
    the wrongful death cause of action, notwithstanding the Arbitration
    Agreement. See Brief for Defendants at 32 (citing Pisano, 
    77 A.3d at 663
    (stating that “Pennsylvania’s wrongful death statute creates an independent
    action distinct from a survival claim that, although derived from the same
    tortious conduct, is not derivative of the rights of the decedent. We conclude,
    therefore, that the trial court did not abuse its discretion in determining that
    ____________________________________________
    9  Though the Taylor Court held that the FAA binds state courts to compel
    arbitration of claims subject to an arbitration agreement, even if a state law
    would exclude it from arbitration, Taylor, 147 A.3d at 509, the court went on
    to remand the case to the trial court to afford the parties “the opportunity to
    litigate whether there is a valid and enforceable arbitration contract in accord
    with generally applicable contract defenses and the FAA’s savings
    clause.” Id. at 513.
    - 10 -
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    Decedent’s contractual agreement with [the nursing home] to arbitrate all
    claims was not binding on the non-signatory wrongful death claimants.”)).
    We next turn to Defendants’ claim that the trial court erred in denying
    their Preliminary Objection to compel arbitration of the survival action, and
    ruling that the Arbitration Agreement was unconscionable and, thus, void.
    See Brief for Defendants at 15-27.
    Because the record has not been sufficiently developed to address
    Plaintiff’s contract law unconscionability defense, it would be premature at this
    point to reach the merits of Defendants’ claim.         In this regard, we are
    persuaded by the following argument advanced by Plaintiff:
    Plaintiff was not afforded an opportunity to conduct discovery on
    the issue of whether a valid and enforceable contract to arbitrate
    exists.    Instead, Plaintiff set forth grounds upon which the
    proffered [A]rbitration [A]greement could be set aside as a matter
    of law. But[,] “where material facts are disputed … concerning
    the general commercial background underlying a challenged
    transaction …[,] fact finding may be necessary.” Salley v. Option
    One Mortg. Corp., 
    925 A.2d 115
    , 120 (Pa. 2007).[10] In light of
    allegations that a contract is unconscionable, “the parties are to
    be afforded an opportunity to present evidence as to commercial
    setting, purpose and effect to aid the court in its determination.”
    
    Id.
    Further, a preliminary objection in the nature of a motion to
    compel arbitration “cannot be determined from facts of record.”
    Pa.R.Civ.P. 1028(a)(6)[, (c)(2), note]. And “[i]f an issue of fact
    is raised, the court shall consider evidence by depositions or
    otherwise.” Pa.R.Civ.P. 1028(c)(2).
    ____________________________________________
    10  The Salley Court further stated that although the question of
    unconscionability is “ultimately a question of law for the court to decide[,]”
    the matter is also “often fact-sensitive[.]” Salley, 925 A.2d at 124.
    - 11 -
    J-A23033-19
    Brief for Plaintiff at 20-21 (footnote added; footnote in original omitted).
    Indeed, in Taylor, supra, this Court declined to address the plaintiff’s
    generally applicable contract defenses, including unconscionability, where
    plaintiffs did not have the opportunity to present these issues in the lower
    courts, and directed that “[u]pon remand to the trial court, the parties will
    have the opportunity to litigate whether there is a valid and enforceable
    arbitration contract in accord with generally applicable contract defenses and
    the FAA’s savings clause.” Taylor, 147 A.3d at 512-13; see also id., supra
    (pointing out that the West Virginia state court, in Brown II, remanded for
    the development of a record to assess the plaintiff’s claim of unconscionability
    of the nursing home arbitration agreement, where the parties did not have
    the opportunity to conduct discovery and develop the record on this matter).
    Here, the record was not developed to establish facts surrounding, inter
    alia, the following:
       decedent’s physical and mental state at the time that she
    executed the Arbitration Agreement;11
       whether decedent was accompanied by anyone at this time;
       the nature of the admission agreement that decedent executed
    (and whether the Arbitration Agreement was part of, or buried
    within, a potentially lengthy admissions packet that decedent
    was required to complete, while in ill health);
    ____________________________________________
    11 We are naturally cognizant that decedent’s death will limit the amount of
    facts that can be uncovered surrounding some of the circumstances of
    decedent’s execution of the Arbitration Agreement; nevertheless, the parties
    are entitled to develop the record on the unconscionability claim. See Taylor,
    147 A.3d at 512-13.
    - 12 -
    J-A23033-19
        whether the Hospital sent the ill decedent directly to Highland
    Park upon her discharge from the Hospital;
        whether decedent was aware that she could receive treatment
    from other skilled nursing care facilities, and whether she had
    the ability to research other options;
        whether decedent was economically constrained to enter into
    an agreement with Highland Park to provide her care (and
    relatedly, whether she had the means to pay for arbitration).
    Accordingly, we remand for the parties to conduct discovery, and
    develop the record on the defense of unconscionability related to the survival
    action, and for a proper consideration by the trial court as to whether the
    Arbitration Agreement is unconscionable, based on a complete record. See
    Taylor, 147 A.3d at 512-13. Thus, we affirm the trial court’s Order refusing
    to compel arbitration of the wrongful death action, and vacate that part of the
    Order       denying   Defendants’   Preliminary   Objection   seeking   to   compel
    arbitration of the survival action, and remand consistent with the foregoing.
    Order affirmed in part and reversed in part. Case remanded for further
    proceedings consistent with this Opinion. Jurisdiction relinquished.
    Judgment Entered.
    Joseph D. Seletyn, Esq.
    Prothonotary
    Date: 2/10/2020
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