Riley, G. v. Premier Healthcare Mgmt. ( 2021 )

J-A01023-21
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GERALD J. RILEY, AS : IN THE SUPERIOR COURT OF
ADMINISTRATOR OF THE ESTATE OF : PENNSYLVANIA
ROSEANNE P. RILEY, DECEASED :
:
:
v. :
:
:
PREMIER HEALTHCARE : No. 3538 EDA 2019
MANAGEMENT, LLC., JONATHAN :
BLEIER, YAAKOV SOD, DEER :
MEADOWS PROPERTY LP, YF :
PROPERTY HOLDINGS, LLC, DEER :
MEADOWS OPERATING, LLC, D/B/A :
DEER MEADOWS REHABILITATION :
CENTER, HCR MANORCARE INC, :
MANCARE OF YARDLEY, PA, LLC :
D/B/A MANORCARE HEALTH :
SERVICES - OXFORD VALLEY, HCR :
MANORCARE OPERATIONS II, LLC., :
HCR III HEALTHCARE, LLC., :
HEARTLAND EMPLOYMENT :
SERVICES, LLC., AILEEN RAFTER :
MULVEY, NHA., AND HCR :
MANORCARE SERVICES, LLC. :
:
:
APPEAL OF: PREMIER HEALTHCARE :
MANAGEMENT, LLC., JONATHAN :
BLEIER, YAAKOV SOD, DEER :
MEADOWS PROPERTY LP, YF :
PROPERTY HOLDINGS, LLC., AND :
DEER MEADOWS OPERATING, LLC, :
D/B/A DEER MEADOWS :
REHABILITATION CENTER :
Appeal from the Order Entered November 21, 2019
In the Court of Common Pleas of Philadelphia County Civil Division at
No(s): No. 190303352
J-A01023-21
BEFORE: BENDER, P.J.E., OLSON, J., and STRASSBURGER, J.*
MEMORANDUM BY OLSON, J.: FILED: MAY 28, 2021
Appellants, Premier Healthcare Management, LLC, Jonathan Bleier,
Yaakov Sod, Deer Meadows Property LP, YF Property Holdings, LLC, and Deer
Meadows Operating, LLC d/b/a Deer Meadows Rehabilitation Center, appeal
from the order entered on November 21, 2019, which overruled their
preliminary objections to compel arbitration. We vacate and remand.
On March 26, 2019, Gerald J. Riley, as Administrator for the Estate of
Roseanne P. Riley, deceased (“Plaintiff”), commenced this wrongful death and
survival action against Appellants by filing a praecipe for a writ of summons.
Within Plaintiff’s later-filed complaint, Plaintiff alleged and averred the
following.
Deer Meadows Rehabilitation Center (“Deer Meadows”) is a skilled
nursing facility and each appellant is “the employer, supervisor and/or partner
of” Deer Meadows. Plaintiff’s Complaint, 7/30/19, at ¶¶ 1 and 5-23. In April
2017, Roseanne P. Riley (“Mrs. Riley”) was admitted to Deer Meadows and
Deer Meadows “assumed responsibility for [Mrs. Riley’s] total healthcare,
including the provision of nutrition, hydration, activities of daily living,
medical, skilled nursing, rehabilitation, and therapy.”1 Id. at ¶ 41. According
to Plaintiff’s complaint, however, Deer Meadows provided Mrs. Riley with
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
1 At the time of her admission to Deer Meadows, Mrs. Riley was 53 years old.
See Progress Notes, dated 4/4/17, at 18.
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negligent treatment, which caused Mrs. Riley “to suffer pressure sores, sepsis
and septic shock, poor hygiene, severe pain, and ultimately death.” Id. at
¶ 82. As a result, Plaintiff filed a wrongful death and survival action against
Appellants, wherein Plaintiff sought damages for harms and losses allegedly
sustained as a result of Appellants’ negligent care.
Appellants filed preliminary objections to Plaintiff’s complaint and
claimed, among other things, that Mrs. Riley had contractually agreed to
resolve her claims against Appellants through arbitration. Appellants’
Preliminary Objections, 8/19/19, at ¶ 7. Specifically, Appellants claimed, on
April 5, 2017, Mrs. Riley “voluntarily signed the Deer Meadows Admission
Agreement[], which contains an arbitration clause.” Id. at 11. Appellants
thus requested that the trial court “order all Plaintiff’s claims against
[Appellants] to proceed to arbitration in accordance with the arbitration
agreement.” Id. at Wherefore Clause (some capitalization omitted).
Appellants attached the Deer Meadows Admission Agreement
(“Admission Agreement”) to their preliminary objections. Of note, the
Admission Agreement is 19 pages long and Mrs. Riley’s signature appears on
the final page of the agreement. The arbitration clause appears on pages 12
through 16 of the agreement. The arbitration clause does not contain a
separate signature line and there is no express option to decline the clause
prior to signing the Admission Agreement. Further, each paragraph of the
arbitration clause is single-spaced and contains all capital letters. The clause
reads, in full:
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22.3 MANDATORY, BINDING ARBITRATION. ARBITRATION IS A
SPECIFIC PROCESS OF DISPUTE RESOLUTION UTILIZED INSTEAD
OF THE TRADITIONAL STATE OR FEDERAL COURT SYSTEM.
INSTEAD OF A JUDGE AND/OR JURY DETERMINING THE
OUTCOME OF A DISPUTE, A NEUTRAL THIRD PARTY
(“ARBITRATOR(S)”) CHOSEN BY THE PARTIES TO THIS
AGREEMENT RENDERS THE DECISION, WHICH IS BINDING ON
BOTH PARTIES. GENERALLY AN ARBITRATOR’S DECISION IS
FINAL AND NOT OPEN TO APPEAL. THE ARBITRATOR WILL HEAR
BOTH SIDES OF THE DISPUTE AND RENDER A DECISION BASED
ON FAIRNESS, LAW, COMMON SENSE AND THE RULES
ESTABLISHED BY THE ARBITRATION ASSOCIATION SELECTED BY
THE PARTIES. WHEN ARBITRATION IS MANDATORY, IT IS THE
ONLY LEGAL PROCESS AVAILABLE TO THE PARTIES. MANDATORY
ARBITRATION HAS BEEN SELECTED WITH THE GOAL OF
REDUCING THE TIME, FORMALITIES AND COST OF UTILIZING
THE COURT SYSTEM.
(a) CONTRACTUAL AND/OR PROPERTY DAMAGE DISPUTES.
UNLESS RESOLVED OR SETTLED BY MEDIATION, ANY
CONTROVERSY, DISPUTE, DISAGREEMENT OR CLAIM OF ANY
KIND OR NATURE, ARISING FROM, OR RELATING TO THIS
AGREEMENT, OR CONCERNING ANY RIGHTS ARISING FROM
OR RELATING TO AN ALLEGED BREACH OF THIS AGREEMENT,
WITH THE EXCEPTION OF (1) GUARDIANSHIP PROCEEDINGS
RESULTING FROM THE ALLEGED INCAPACITY OF THE
RESIDENT; (2) COLLECTION ACTIONS INITIATED BY THE
FACILITY FOR NONPAYMENT OF STAY OR FAILURE OF LEGAL
REPRESENTATIVE TO FULFILL HIS/HER OBLIGATIONS UNDER
THIS AGREEMENT OR THE LEGAL REPRESENTATIVE
AGREEMENT WHICH RESULTS IN A FINANCIAL LOSS TO THE
FACILITY; AND (3) DISPUTES INVOLVING AMOUNTS IN
CONTROVERSY OF LESS THAN TWELVE THOUSAND DOLLARS
($12,000), SHALL BE SETTLED EXCLUSIVELY BY
ARBITRATION. THIS MEANS THAT THE RESIDENT WILL NOT
BE ABLE TO FILE A LAWSUIT IN ANY COURT TO RESOLVE ANY
DISPUTES OR CLAIMS THAT THE RESIDENT MAY HAVE
AGAINST THE FACILITY. IT ALSO MEANS THAT THE RESIDENT
IS RELINQUISHING OR GIVING UP ALL RIGHTS THAT THE
RESIDENT MAY HAVE TO A JURY TRIAL TO RESOLVE ANY
DISPUTES OR CLAIMS AGAINST THE FACILITY. IT ALSO
MEANS THAT THE FACILITY IS GIVING UP ANY RIGHTS IT MAY
HAVE TO A JURY TRIAL OR TO BRING CLAIMS IN A COURT
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AGAINST THE RESIDENT. THE ARBITRATION SHALL BE
ADMINISTERED BY A NEUTRAL ARBITRATOR SELECTED IN
ACCORDANCE WITH SECTION 23.3(G), AND JUDGMENT ON
ANY AWARD RENDERED BY THE ARBITRATOR(S) MAY BE
ENTERED IN ANY COURT HAVING APPROPRIATE
JURISDICTION. RESIDENT AND/OR RESPONSIBLE PERSON
ACKNOWLEDGE(S) AND UNDERSTAND(S) THAT THERE WILL
BE NO JURY TRIAL ON ANY CLAIM OR DISPUTE SUBMITTED
TO ARBITRATION, AND RESIDENT AND/OR RESPONSIBLE
PERSON RELINQUISH AND GIVE UP THEIR RIGHTS TO A JURY
TRIAL ON ANY MATTER SUBMITTED TO ARBITRATION UNDER
THIS AGREEMENT.
(b) PERSONAL INJURY OR MEDICAL MALPRACTICE.
UNLESS RESOLVED OR SETTLED BY MEDIATION, ANY CLAIM
THAT THE RESIDENT MAY HAVE AGAINST THE FACILITY FOR
ANY PERSONAL INJURIES SUSTAINED BY THE RESIDENT
ARISING FROM OR RELATING TO ANY ALLEGED MEDICAL
MALPRACTICE, INADEQUATE CARE, OR ANY OTHER CAUSE OR
REASON WHILE RESIDING IN THE FACILITY, SHALL BE
SETTLED EXCLUSIVELY BY ARBITRATION. THIS MEANS THAT
THE RESIDENT WILL NOT BE ABLE TO FILE A LAWSUIT IN ANY
COURT TO BRING ANY CLAIMS THAT THE RESIDENT MAY
HAVE AGAINST THE FACILITY FOR PERSONAL INJURIES
INCURRED WHILE RESIDING IN THE FACILITY. IT ALSO
MEANS THAT THE RESIDENT IS RELINQUISHING OR GIVING
UP ALL RIGHTS THAT THE RESIDENT MAY HAVE TO A JURY
TRIAL TO LITIGATE ANY CLAIMS FOR DAMAGES OR LOSSES
ALLEGEDLY INCURRED AS A RESULT OF PERSONAL INJURIES
SUSTAINED WHILE RESIDING IN THE FACILITY. THE
ARBITRATION SHALL BE ADMINISTERED BY A NEUTRAL
ARBITRATOR SELECTED IN ACCORDANCE WITH SECTION
23.3(G), AND JUDGMENT ON ANY AWARD RENDERED BY THE
ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING
APPROPRIATE JURISDICTION. RESIDENT AND/OR
RESPONSIBLE PERSON ACKNOWLEDGE(S) AND
UNDERSTAND(S) THAT THERE WILL BE NO JURY TRIAL ON
ANY CLAIM OR DISPUTE SUBMITTED TO ARBITRATION, AND
RESIDENT AND/OR RESPONSIBLE PERSON RELINQUISH AND
GIVE UP THE RESIDENT’S RIGHT TO A JURY TRIAL ON ANY
CLAIMS FOR DAMAGES ARISING FROM PERSONAL INJURIES
TO THE RESIDENT WHICH ARE SUBMITTED TO ARBITRATION
UNDER THIS AGREEMENT.
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(c) EXCLUSION FROM ARBITRATION. THOSE DISPUTES
WHICH HAVE BEEN EXCLUDED FROM MANDATORY
ARBITRATION (I.E., GUARDIANSHIP PROCEEDINGS AND
DISPUTES INVOLVING AMOUNTS IN CONTROVERSY OF LESS
THAN $12,000) MAY BE RESOLVED THROUGH THE USE OF
THE JUDICIAL SYSTEM. IN SITUATIONS INVOLVING ANY OF
THE MATTERS EXCLUDED FROM MANDATORY ARBITRATION,
NEITHER RESIDENT NOR THE FACILITY IS REQUIRED TO USE
THE ARBITRATION PROCESS. ANY LEGAL ACTIONS RELATED
TO THOSE MATTERS MAY BE FILED AND LITIGATED IN ANY
COURT WHICH MAY HAVE JURISDICTION OVER THE DISPUTE.
THIS ARBITRATION PROVISION SHALL NOT IMPAIR THE
RIGHTS OF RESIDENT TO APPEAL ANY TRANSFER AND/OR
DISCHARGE ACTION INITIATED BY THE FACILITY TO THE
APPROPRIATE ADMINISTRATIVE AGENCY, AND AFTER THE
EXHAUSTION OF SUCH ADMINISTRATIVE APPEALS, TO
APPEAL TO THE COURT EXERCISING APPELLATE
JURISDICTION OVER THE ADMINISTRATIVE AGENCY. THIS
ARBITRATION PROVISION SHALL NOT PRECLUDE THE
PARTIES FROM FILING, WHERE APPROPRIATE, GOOD FAITH
CRIMINAL COMPLAINTS AGAINST EACH OTHER, AND SHALL
NOT PREVENT PROPER AUTHORITIES FROM REMOVING
RESIDENT FROM THE FACILITY FOR UNLAWFUL TRESPASS OR
ANY OTHER CRIMINAL ACTS.
(d) RIGHT TO LEGAL COUNSEL. RESIDENT HAS THE RIGHT
TO BE REPRESENTED BY LEGAL COUNSEL IN ANY
PROCEEDINGS INITIATED UNDER THIS ARBITRATION
PROVISION. BECAUSE THIS ARBITRATION PROVISION
ADDRESSES IMPORTANT LEGAL RIGHTS, THE FACILITY
ENCOURAGES AND RECOMMENDS THAT RESIDENT OBTAIN
THE ADVICE AND ASSISTANCE OF LEGAL COUNSEL TO
REVIEW THE LEGAL SIGNIFICANCE OF THIS MANDATORY
ARBITRATION PROVISION PRIOR TO SIGNING THIS
AGREEMENT.
(e) LOCATION OF ARBITRATION. THE ARBITRATION WILL
BE CONDUCTED AT A SITE SELECTED BY THE PARTIES,
WHICH SHALL BE AT THE FACILITY OR AT A SITE WITHIN A
REASONABLE DISTANCE OF THE FACILITY.
(f) TIME LIMITATION FOR ARBITRATION. ANY REQUEST
FOR ARBITRATION OF A DISPUTE MUST BE REQUESTED AND
SUBMITTED TO THE ARBITRATOR WITHIN TWO (2) YEARS OF
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THE DATE ON WHICH THE EVENT GIVING RISE TO THE
DISPUTE OCCURRED. THE FAILURE TO SUBMIT A REQUEST
FOR ARBITRATION WITHIN SUCH TWO (2) YEAR PERIOD
SHALL OPERATE AS A BAR TO ANY SUBSEQUENT REQUEST
FOR ARBITRATION, OR FOR ANY CLAIM FOR RELIEF OR A
REMEDY, OR TO ANY ACTION OR LEGAL PROCEEDING OF ANY
KIND OR NATURE, AND THE PARTIES WILL BE FOREVER
BARRED FROM ARBITRATING OR LITIGATING A RESOLUTION
TO ANY SUCH DISPUTE.
(g) SELECTION OF ARBITRATOR. EITHER PARTY MAY
COMMENCE AN ARBITRATION ACTION BY GIVING WRITTEN
NOTICE TO THE OTHER PARTY. UPON RECEIPT OF SUCH
NOTICE, THE PARTIES SHALL ENDEAVOR IN GOOD FAITH TO
TIMELY SELECT A NEUTRAL ARBITRATOR BY MUTUAL
AGREEMENT. IF THE NEUTRAL ARBITRATOR IS AN
INDIVIDUAL ARBITRATOR, THEN THE PENNSYLVANIA RULES
OF CIVIL PROCEDURE SHALL APPLY TO THE ARBITRATION
PROCEEDING. IF THE NEUTRAL ARBITRATOR IS AN
ARBITRATION AGENCY OR ASSOCIATION, THEN SUCH
AGENCY’S OR ASSOCIATION’S PROCEDURAL RULES SHALL
APPLY. IF THE PARTIES ARE UNABLE TO AGREE ON A
NEUTRAL ARBITRATOR WITHIN NINETY (90) DAYS OF
WRITTEN NOTICE OF ARBITRATION, THEN ADR OPTIONS,
INC., SHALL SERVE AS THE ARBITRATOR AND SHALL
ADMINISTER THE ARBITRATION IN ACCORDANCE WITH ITS
PROCEDURAL RULES. IN THE EVENT ADR OPTIONS, INC., IS
UNABLE OR UNWILLING TO SERVE, THEN THE PARTIES AGREE
THAT A COURT OF COMPETENT JURISDICTION SHALL SELECT
AND APPOINT AN ALTERNATIVE NEUTRAL ARBITRATOR OR
ARBITRATION SERVICE. CONTACT INFORMATION FOR ADR
OPTIONS, INC. IS AS FOLLOWS:
TWO COMMERCE SQUARE, SUITE 1100
2001 MARKET STREET
PHILADELPHIA, PA 19103-7044
PHONE: (215) 564-1775 / (800) 364-6098
FAX: (215) 564-1822
WEBSITE: WWW.ADROPTIONS.COM
(h) ALLOCATION OF COSTS FOR ARBITRATION. THE COSTS
OF THE ARBITRATION SHALL BE BORNE EQUALLY BY EACH
PARTY, AND EACH PARTY SHALL BE RESPONSIBLE FOR THEIR
OWN LEGAL FEES, EXCEPT IN A COLLECTION ACTION IN
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WHICH CASE THE PREVAILING PARTY SHOULD BE ENTITLED
TO RECOVER ATTORNEY’S FEES AND COSTS. IF THE
RESIDENT IS THE PREVAILING PARTY, THEN RESIDENT SHALL
BE ENTITLED TO RECOVERY OF ATTORNEY’S FEES AND COSTS
INCURRED IN DEFENDING THE COLLECTION ACTION. IF THE
FACILITY IS THE PREVAILING PARTY, THEN IT SHOULD BE
ENTITLED TO RECOVERY OF ATTORNEY’S FEES AND COSTS
INCURRED IN PURSUING THE ENFORCEMENT OF RESIDENT’S
FINANCIAL OBLIGATIONS.
(i) LIMITED RESIDENT RIGHT TO RESCIND THIS
MANDATORY ARBITRATION CLAUSE (SECTIONS 23.3(A-L) OF
THIS AGREEMENT). RESIDENT OR, IN THE EVENT OF
RESIDENT’S INCAPACITY, RESIDENT’S AUTHORIZED
REPRESENTATIVE HAVE THE RIGHT TO RESCIND THIS
ARBITRATION CLAUSE BY NOTIFYING THE FACILITY IN
WRITING WITHIN THIRTY (30) DAYS OF THE ADMISSION
DATE. SUCH NOTICE MUST BE SENT VIA CERTIFIED MAIL TO
THE ATTENTION OF THE ADMINISTRATOR OF THE FACILITY,
AND THE NOTICE MUST BE POST-MARKED WITHIN THIRTY
(30) DAYS OF THE ADMISSION DATE. THE NOTICE MAY ALSO
BE HAND-DELIVERED TO THE ADMINISTRATOR WITHIN THE
SAME THIRTY (30) DAY PERIOD. THE FILING OF A CLAIM IN
A COURT OF LAW WITHIN THE THIRTY (30) DAYS PROVIDED
FOR ABOVE WILL AUTOMATICALLY RESCIND THE
ARBITRATION CLAUSE WITHOUT ANY FURTHER ACTION BY
RESIDENT OR RESIDENT’S AUTHORIZE REPRESENTATIVE.
(j) SEVERABILITY, REFORMATION. IN THE EVENT ANY ONE
OR MORE TERMS OR PROVISIONS OF THIS ARBITRATION
CLAUSE ARE FOUND OR DECLARED IN ANY RESPECT TO BE
VOID, VOIDABLE, INVALID, ILLEGAL, OR UNENFORCEABLE,
THE VALIDITY AND ENFORCEABILITY OF THE REMAINING
PROVISIONS OF THIS CLAUSE SHALL NOT BE IN ANY WAY
AFFECTED, PREJUDICED OR DISTURBED, IT BEING INTENDED
THAT SUCH REMAINING PROVISIONS SHALL BE BINDING
WITH THE SAME EFFECT AND CONSTRUED AS IF THE INVALID
PROVISIONS HAD NEVER EXISTED AT THE TIME OF THE
EXECUTION OF THIS AGREEMENT, AND THE TERMS AND
PROVISIONS OF THIS ARBITRATION CLAUSE SHALL BE
DEEMED AND ARE DECLARED TO BE SEVERABLE.
(k) RELATED PERSONS AND AFFILIATED ENTITIES SUBJECT
TO THIS ARBITRATION CLAUSE. IT IS AGREED THAT ANY
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CLAIM THE RESIDENT MAY HAVE AGAINST ANY AFFILIATE OF
THE FACILITY IS INCLUDED WITHIN THE SCOPE OF THIS
ARBITRATION SECTION. THEREFORE, THE PROVISIONS OF
THIS ARBITRATION SECTION SHALL EXTEND TO AND
INCLUDE, WITHOUT LIMITATION, THE FACILITY, THE
ARCHDIOCESE OF PHILADELPHIA, CATHOLIC HEALTH CARE
SERVICES, THE FACILITY ADMINISTRATOR, THE FACILITY
DIRECTOR OF NURSING, AND THE FACILITY MEDICAL
DIRECTOR. ANY CONTRACTUAL CLAIM, PROPERTY DAMAGE
CLAIM, PERSONAL INJURY CLAIM OR MEDICAL MALPRACTICE
CLAIM ARISING OUT OF OR INVOLVING THE RESIDENCY OF
THE RESIDENT AT THE FACILITY IS SUBJECT TO THE
PROVISIONS OF THIS SECTION 23 INCLUDING CLAIMS
INVOLVING INDIVIDUALS OR ENTITIES AFFILIATED WITH
THE FACILITY WHO ARE NAMED OR IDENTIFIED AS PARTIES
TO THE DISPUTE.
(l) CONFIDENTIALITY. RESIDENT AGREES THAT, AT ALL
TIMES, RESIDENT WILL KEEP ANY INFORMATION REGARDING
THE ARBITRATION PROCEEDING, INCLUDING RULINGS,
DECISIONS AND AWARDS BY THE ARBITRATOR,
CONFIDENTIAL AND WILL NOT DISCLOSE VOLUNTARILY TO
ANY THIRD PARTY, EXCEPT TO THE EXTENT REQUIRED BY
LAW. RESIDENT IS PERMITTED TO DISCLOSE THAT THE
MATTER HAS BEEN RESOLVED, WITHOUT DISCLOSING THE
RESULTS OF THE ARBITRATION PROCEEDING.
Admission Agreement, dated 4/5/17, at 12-16.
Plaintiff responded to the preliminary objections and claimed that the
arbitration clause was unenforceable, as it violated “federal law.” Specifically,
Plaintiff cited 42 C.F.R. § 483.70(n)(1), which, at the time, declared:
(n) Binding arbitration agreements.
(1) A facility must not enter into a pre-dispute agreement
for binding arbitration with any resident or resident’s
representative nor require that a resident sign an
arbitration agreement as a condition of admission to the
[long-term care (“LTC”)] facility.
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42 C.F.R. § 483.70(n)(1) (effective November 28, 2016 to September 15,
2019); Plaintiff’s Response, 9/9/19, at ¶ 7.
Plaintiff noted that Appellants titled the arbitration clause “MANDATORY,
BINDING ARBITRATION.” Plaintiff’s Response, 9/9/19, at ¶ 7. As Plaintiff
argued, since the Admission Agreement mandated arbitration, the arbitration
clause “violat[ed] [Section 483.70(n)(1)] and is thus a nullity.” Id. at ¶ 15.
Further, Plaintiff filed new matter and a memorandum of law in
opposition to Appellants’ preliminary objections. Within these filings, Plaintiff
claimed that the arbitration clause was unenforceable, as it was procedurally
and substantively unconscionable. Plaintiff’s New Matter, 9/9/19, at ¶ 2;
Plaintiff’s Memorandum of Law, 9/9/19, at 6-9.
Appellants filed a supplemental brief in support of their preliminary
objections and attached certain medical records and deposition testimony to
support their demand to compel arbitration. Of note, Appellants attached
nursing “progress notes” from April 4 and 5, 2017 – which were, respectively,
the day that Mrs. Riley was admitted to Deer Meadows and the day that Mrs.
Riley signed the Admission Agreement. The progress notes declare that Mrs.
Riley was “AAOX3” on both days – meaning that the nurses found Mrs. Riley
alert to time, place, and person on those two days. See Progress Notes, dated
4/4/17-4/5/17, at 17-18; see also N.T. Leigha Himes Deposition, 11/14/19,
at 25.
Appellants also attached a sworn affidavit from Mrs. Riley’s son, Mark
Riley. Mark Riley averred that, “[a]t the time of her admission to Deer
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Meadows, I know [Mrs. Riley] was taking at least Oxycodone, Xanax,
Amoxicillin and Dilaudid.” Mark Riley’s Affidavit, 10/28/19, at ¶ 6. Although
Mark Riley was not present for his mother’s admission to Deer Meadows, he
averred that “[a]t the time of her admission to Deer Meadows on April 4, 2017,
[Mrs. Riley] was drowsy, confused, and inattentive as a result of the
medication she was taking” and that Mrs. Riley “was often ‘out of it,’ and prone
to nodding off unexpectedly.” Id. at ¶¶ 7-9.
Third, and perhaps most importantly, Appellants attached deposition
testimony from Leigha Himes, the admissions coordinator for Deer Meadows.
Ms. Himes testified that she neither remembered Mrs. Riley nor recalled
“anything about presenting the admission agreement to” Mrs. Riley. N.T.
Leigha Himes Deposition, 11/14/19, at 24. However, Ms. Himes testified that,
during the time in question, the admissions procedure occurred as follows.
First, Ms. Himes testified that she would have handed the applicant the
19-page Admission Agreement, along with “45 pages of attachments.” Id. at
33. She testified that she would have explained the Admission Agreement to
the applicant in the following manner:
I would explain that the admission agreement goes over
everything the facility is obligated to provide for the resident;
nursing care, therapy, housing, meals, things like that. I
would explain that it allows us to bill their insurance. It allows
us to share information between people involved in their
medical care and essentially is permission to treat. Other
things I would include were by signing the agreement you
would also acknowledge that if you no longer needed the
services on a particular unit you may be asked to change
rooms and move off that unit. And then I would also touch
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on the bed hold policy, which means when a person goes out
to the hospital, what happens to the bed and the belongings
when a person goes out to the hospital.
Id. at 41.
Ms. Himes testified that she would have offered the applicant the
opportunity to read the Admission Agreement “on [his or her] own” and would
have then “ask[ed him or her] to sign” the signature line on the final page of
the agreement. Id. at 42.
Ms. Himes testified that she remembered instances where applicants
specifically declined the arbitration clause prior to signing the Admission
Agreement. She testified that, in such instances: “I would have them X it out
and initial it or sign it and I would also . . . sign it acknowledging that.” Id.
at 22. However, nothing in the agreement declares that an applicant has the
option to “X [the arbitration clause] out” and Ms. Himes never testified that
she proactively informed applicants that they had this option. Further, Ms.
Himes testified that, during the relevant time, she was not aware of the
rescission provision in the arbitration clause and, thus, she did not explain
that provision of the contract before asking the applicant to sign the Admission
Agreement. Id. at 22 and 44-48.
On November 20, 2019, the trial court heard oral argument on
Appellants’ preliminary objection and, on November 21, 2019, the trial court
overruled Appellants’ preliminary objection to compel arbitration. Trial Court
Order, 11/21/19, at 2. As the trial court later explained, it overruled
Appellants’ preliminary objection to compel arbitration because it concluded
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that the arbitration agreement was both procedurally and substantively
unconscionable. Trial Court Opinion, 2/6/20, at 13.
Appellants filed a timely notice of appeal.2 They raise two claims on
appeal:
1. Whether the trial court erred in determining that the
agreement to arbitrate disputes was void as unconscionable,
as the evidence did not support a finding of either substantive
or procedural unconscionability?
2. Whether Mrs. Riley’s estate was able to prove, by clear and
convincing evidence, that she lacked the requisite capacity to
agree to the arbitration of disputes?
Appellants’ Brief at 3 (some capitalization omitted).3
We have explained:
Our review of a claim that the trial court improperly
[overruled] the appellant's preliminary objections in the
nature of a petition to compel arbitration is limited to
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2 “An order overruling preliminary objections seeking to compel arbitration is
immediately appealable as an interlocutory appeal as of right pursuant to 42
Pa.C.S.A. § 7320(a) and Pa.R.A.P. 311(a)(8).” Cardinal v. Kindred
Healthcare, Inc., 155 A.3d 46, 49 n.1 (Pa. Super. 2017).
3 Appellants’ issues on appeal concern the arbitrability of Plaintiff’s survival
claim. Appellants acknowledge that Plaintiff’s wrongful death claim is not
arbitrable. See Appellants’ Reply Brief at 4 n.1 (stating: “[c]ontrary to
[Plaintiff’s] assertions, [Appellants] acknowledge [the Superior Court’s]
precedential decision in Pisano v. Extendicare Homes, Inc., 77 A.3d 651(Pa. Super. 2013), which does not bind non-signatory wrongful death
beneficiaries to arbitration agreements”); see also Pisano, 77 A.3d at 663(holding: “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. [Therefore,
a decedent’s] contractual agreement with [a nursing facility] to arbitrate all
claims [is] not binding on the non-signatory wrongful death claimants”).
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determining whether the trial court's findings are supported
by substantial evidence and whether the trial court abused
its discretion in [overruling the preliminary objections]. In
doing so, we employ a two-part test to determine whether
the trial court should have compelled arbitration. First, we
examine whether a valid agreement to arbitrate exists.
Second, we must determine whether the dispute is within the
scope of the agreement. . . . If the two-part test results in
affirmative answers, then the controversy must be submitted
to arbitration. . . .
Whether a claim is within the scope of an arbitration provision
is a matter of contract, and as with all questions of law, our
[standard of review is de novo and our scope of review is
plenary]. In making these determinations, courts 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 is not susceptible to an
interpretation that covers the asserted dispute. To resolve
this tension, courts should apply the rules of contractual
construction, adopting an interpretation that gives
paramount importance to the intent of the parties and
ascribes the most reasonable, probable, and natural conduct
to the parties. In interpreting a contract, the ultimate goal is
to ascertain and give effect to the intent of the parties as
reasonably manifested by the language of their written
agreement.
TTSP Corp. v. Rose Corp., 217 A.3d 1269, 1280 (Pa. Super. 2019)
(quotations and citations omitted).
“Pennsylvania has a well-established public policy that favors
arbitration, and this policy aligns with the federal approach expressed in the
Federal Arbitration Act, 9 U.S.C. §§ 1–16 (FAA).” Pisano v. Extendicare
Homes, Inc., 77 A.3d 651, 660 (Pa. Super. 2013). “This policy applies
equally to all arbitration agreements, including those involving nursing
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homes.” MacPherson v. Magee Mem’l Hosp. for Convalescence, 128
A.3d 1209, 1219 (Pa. Super. 2015) (en banc).
Nevertheless, the policy favoring arbitration “was not intended to render
arbitration agreements more enforceable than other contracts, and the FAA
[was not] designed to preempt all state law related to arbitration.” Pisano,
77 A.3d at 661 (quotations and citations omitted). “Thus, when addressing
the specific issue of whether there is a valid agreement to arbitrate, courts
generally should apply ordinary state-law principles that govern the formation
of contracts, but in doing so, must give due regard to the federal policy
favoring arbitration.” Id. (quotations and citations omitted). This means that
“generally applicable contract defenses, such as fraud, duress, or
unconscionability, may be applied to invalidate arbitration agreements without
contravening” the FAA. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681,
687 (1996). However, “[c]ourts may not . . . invalidate arbitration
agreements under state laws applicable only to arbitration provisions.” Id.Here, the trial court refused to enforce the arbitration clause because,
it concluded, the clause was unconscionable. “Unconscionability 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.” MacPherson, 128 A.3d at 1221 (quotations and citations
omitted). “The aspects entailing lack of meaningful choice and
unreasonableness have been termed procedural and substantive
unconscionability, respectively.” Salley v. Option One Mortgage Corp.,
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925 A.2d 115, 119 (Pa. 2007). An unconscionability determination requires
that both procedural and substantive unconscionability be present and “[t]he
burden of proof generally concerning both elements has been allocated to the
party challenging the agreement.” Cardinal, 155 A.3d at 53; Salley, 925
A.3d at 119-120. “[T]he ultimate determination of unconscionability is for the
courts.” Salley, 925 A.2d at 119-120.
The learned trial court determined that the arbitration clause was
procedurally unconscionable because: under the terms of the clause, the
applicant was required to agree to arbitration as a condition of entering the
facility – and could only later “rescind” his or her agreement to arbitrate; the
arbitration clause was found buried in the Admission Agreement, and was not
“its own, independent document;” the title of the arbitration clause specifically
declares that arbitration is “mandatory;” and, the admissions coordinator did
not notify the applicant that an arbitration clause was contained in the
Admission Agreement. See Trial Court Opinion, 2/6/20, 4-11.
We agree that the above conditions are present in this case and that
they favor a finding of procedural unconscionability. Nevertheless, we observe
that several additional factors are also present in this case, which militate
against a finding of procedural unconscionability. Of note: the arbitration
clause specifically provides the resident with the unconditional right to rescind
the arbitration clause within 30 days of admission; the admissions coordinator
testified that applicants were, in fact, permitted to “X [the arbitration clause]
out” prior to signing the Admission Agreement (although the admissions
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coordinator did not proactively inform applicants of this option); in contrast to
the remainder of the Admission Agreement, the arbitration clause is written
in all capital letters, thus signifying its importance; the arbitration clause is
written in a fairly readable style; and, the arbitration clause explains the basic
procedure, costs, and benefits of arbitration. See Admission Agreement,
dated 4/5/17, at 12-16.
Thus, various aspects of the arbitration clause favor and disfavor a
finding of procedural unconscionability. However, as explained above, an
unconscionability determination requires that both procedural and substantive
unconscionability be present – and, in this case, the arbitration clause is not
so “unreasonably favorable” to Appellants that it may be labeled substantively
unconscionable.
The trial court concluded that the arbitration clause was substantively
unconscionable because Appellants reserved their right to bring a collection
action against the resident in the court system. See Trial Court Opinion,
2/6/20, at 11; see also Admission Agreement, dated 4/5/17, at 12. As the
Pennsylvania Supreme Court has explained, however, “parties who agree to
arbitrate some claims may exclude others from the scope of the arbitration
agreement.” Salley, 925 A.2d at 128. Further, this reservation of a single
category of claims is not so unfairly one-sided as to render the arbitration
clause substantively unconscionable.
Moreover, within Plaintiff’s brief, Plaintiff cites only two additional
provisions in the arbitration clause that, he contends, support the trial court’s
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substantive unconscionability determination. First, Plaintiff observes that
subsection (h) permits fee-shifting, but “only for those collections claims
brought by” Appellants; second, Plaintiff notes that the clause places a duty
of confidentiality on the resident, but not Appellants. Plaintiff’s Brief at 9
(emphasis omitted). These claims do not support a finding of substantive
unconscionability and thus fail.
First, subsection (h) of the arbitration clause provides:
(h) ALLOCATION OF COSTS FOR ARBITRATION. The costs of
the arbitration shall be borne equally by each party, and each
party shall be responsible for their own legal fees, except in
a collection action in which case the prevailing party should
be entitled to recover attorney’s fees and costs. If the
resident is the prevailing party, then resident shall be entitled
to recovery of attorney’s fees and costs incurred in defending
the collection action. If the facility is the prevailing party,
then it should be entitled to recovery of attorney’s fees and
costs incurred in pursuing the enforcement of resident’s
financial obligations.
Admission Agreement, dated 4/5/17, at 15 (some capitalization omitted).
According to Plaintiff, the above provision is unreasonably one-sided
because it permits “fee-shifting . . . only for those collections claims brought
by” Appellants. Plaintiff’s Brief at 9 (emphasis omitted). Plaintiff’s claim fails
because the fee shifting is reciprocal: if the resident prevails in the collection
action, the resident is entitled to attorney’s fees and costs; if Appellants
prevail in the collection action, they are entitled to the same. Further, the
mere fact that the fee shifting provision is limited to a collection action does
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not render the arbitration clause unreasonably one-sided, given that the fee
shifting provision applies equally to this one category of dispute.
Second, Plaintiff claims that the arbitration clause is substantively
unconscionable because subsection (l) declares that the resident has a duty
to “keep any information regarding the arbitration proceeding . . .
confidential.”4 According to Plaintiff, since this duty of confidentiality “applies
only to the resident, not the facility,” the entire arbitration clause is
substantively unconscionable. See Plaintiff’s Brief at 9.
It is true that the duty of confidentiality does not apply reciprocally.
However, this provision merely concerns the disclosure of information
regarding certain aspects of an arbitration proceeding. It does not affect
Appellants’ potential liability or Plaintiff’s potential remedies – and it does not
make the arbitration clause so unfair and unreasonably one-sided as to be
substantively unconscionable.
____________________________________________
4 Subsection (l) of the arbitration clause provides, in full:
(l) CONFIDENTIALITY. Resident agrees that, at all times,
resident will keep any information regarding the arbitration
proceeding, including rulings, decisions and awards by the
arbitrator, confidential and will not disclose voluntarily to any
third party, except to the extent required by law. Resident is
permitted to disclose that the matter has been resolved,
without disclosing the results of the arbitration proceeding.
Admission Agreement, dated 4/5/17, at 16 (some capitalization omitted).
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Thus, we conclude that the arbitration clause is not substantively
unconscionable and that the trial court erred when it refused to enforce the
clause on grounds of unconscionability.
Notwithstanding our holding, Plaintiff claims that remand is unwarranted
in this case because: the arbitration clause “represents a flagrant violation of
federal law[, specifically 42 C.F.R. § 483.70(n)(1),] and is thus a nullity;” Mrs.
Riley’s promise to arbitrate is void because it constitutes “additional
consideration” for her admission into the facility; and, since Plaintiff’s wrongful
death claims must remain in court, “severing [Plaintiff’s wrongful death and
survival] claims into two separate forums would result in unreasonable
expense and delay to all involved, thus rendering the [arbitration clause]
impracticable.” Plaintiff’s Brief at 11-18. These claims fail.
We first examine Plaintiff’s claim that the arbitration clause “represents
a flagrant violation of federal law and is thus a nullity.” Id. at 11. According
to Plaintiff, the arbitration clause violates 42 C.F.R. § 483.70(n)(1), which, at
the time of Mrs. Riley’s admission, provided:
(n) Binding arbitration agreements.
(1) A facility must not enter into a pre-dispute agreement
for binding arbitration with any resident or resident’s
representative nor require that a resident sign an
arbitration agreement as a condition of admission to the
[long-term care (“LTC”)] facility.
42 C.F.R. § 483.70(n)(1) (effective November 28, 2016 to September 15,
2019). According to Plaintiff, since Mrs. Riley was required to agree to the
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arbitration clause as a condition of her admission into the Deer Meadows, the
arbitration clause violates 42 C.F.R. § 483.70(n)(1) and “is thus a nullity.”
Plaintiff’s Brief at 11.
Plaintiff’s reliance upon 42 C.F.R. § 483.70(n)(1) is not persuasive for
several reasons. First, the rule is expressly concerned with the eligibility of
long-term care facilities to receive federal Medicare and Medicaid funding –
and not with the enforceability of a private agreement in a court of law. See
Northport Health Servs. of Ark., LLC v. U.S. Dep’t of Health & Human
Servs., 438 F.Supp.3d 956, 966-967 (W.D. Ark. 2020). Second, on
November 7, 2016, the United States District Court for the Northern District
of Mississippi, Oxford Division, issued a nationwide preliminary injunction,
which stopped the rule from going into effect. See American Health Care
Ass’n v. Burwell, 217 F.Supp.3d 921 (N.D. Miss. 2016); see also Northport
Health Servs., 438 F.Supp.3d at 961-963. Further, on December 9, 2016,
the agency that promulgated 42 C.F.R. § 483.70(n)(1) – the Center for
Medicare and Medicaid Services (“SMS”) – “issued a nation-wide instruction
to State Survey Agency Directors, directing them not to enforce” Section
483.70(n)(1). See 84 FR 34718-01.
We note that Section 483.70(n) was later amended. The amended
version of Section 483.70(n), however, did not take effect until September
16, 2019, which is well after the parties signed the Admission Agreement in
this case. Further, nothing in the amended rule demands that it be applied
retroactively. See Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208
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(1988) (“[r]etroactivity is not favored in the law. Thus, . . . administrative
rules will not be construed to have retroactive effect unless their language
requires this result”).
Thus, even if a Medicare/Medicaid eligibility regulation could potentially
be viewed as relevant to a private contractual dispute, Section 483.70(n)(1)
is not relevant here: at the time Mrs. Riley entered Deer Meadows and agreed
to arbitrate her disputes, Section 483.70(n)(1) was subject to a nationwide
injunction and the injunction was never lifted. As such, Section 483.70(n)(1)
has no relevance to the instant dispute and Plaintiff’s reliance upon this
regulation fails.
Plaintiff also claims that remand is unnecessary because 42 U.S.C.
§ 1396r(c)(5)(A)(iii) declares that nursing homes participating in the Medicare
and Medicaid programs may not accept additional consideration “as a
precondition of admitting” a resident to their facility.5 Plaintiff’s Brief at 12.
____________________________________________
5 42 U.S.C. § 1396r(c)(5)(A)(iii) provides:
With respect to admissions practices, a nursing facility
must—
(iii) in the case of an individual who is entitled to medical
assistance for nursing facility services, not charge, solicit,
accept, or receive, in addition to any amount otherwise
required to be paid under the State plan under this
subchapter, any gift, money, donation, or other consideration
as a precondition of admitting (or expediting the admission
of) the individual to the facility or as a requirement for the
individual's continued stay in the facility.
(Footnote Continued Next Page)
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According to Plaintiff, “[s]o even if [Mrs.] Riley’s promise to arbitrate was
supported by [Appellants’] promise to admit and care for her, the mandatory
nature of the arbitration provision violates federal law and is void.” Id.
Plaintiff’s claim fails. As the Supreme Court of Alabama cogently
explained:
requiring a nursing-home admittee to sign an arbitration
agreement is not charging an additional fee or other
consideration as a requirement to admittance. Rather, an
arbitration agreement sets a forum for future disputes; both
parties are bound to it and both receive whatever benefits
and detriments accompany the arbitral forum. If we were to
agree with [the party seeking to avoid the arbitration clause],
virtually any contract term [they] decided [they] did not like
could be construed as requiring “other consideration” in order
to gain admittance to the nursing home and thus be
disallowed by the statute. [The] argument based on 42
U.S.C. § 1396r(c)(5)(A)(iii) is without merit.
Owens v. Coosa Valley Health Care, Inc., 890 So.2d 983, 989 (Ala. 2004)
(emphasis omitted). We agree with the Owens Court and conclude that Mrs.
Riley’s agreement to arbitrate her disputes does not constitute “other
consideration” under 42 U.S.C. § 1396r(c)(5)(A)(iii). Plaintiff’s claim to the
contrary thus fails.
Finally, Plaintiff claims that remand is unnecessary because Plaintiff’s
wrongful death claims must remain in court. Plaintiff claims that “severing
[Plaintiff’s wrongful death and survival] claims into two separate forums would
result in unreasonable expense and delay to all involved, thus rendering the
____________________________________________
42 U.S.C. § 1396r(c)(5)(A)(iii).
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[arbitration clause] impracticable.” Plaintiff’s Brief at 15-18. The
Pennsylvania Supreme Court has already rejected Plaintiff’s claim. Certainly,
in Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490 (Pa. 2016),
the Supreme Court held:
the prospect of inefficient, piecemeal litigation proceeding in
separate forums is no impediment to the arbitration of
arbitrable claims. Indeed, where a plaintiff has multiple
disputes with separate defendants arising from the same
incident, and only one of those claims is subject to an
arbitration agreement, the [United States Supreme] Court
requires, as a matter of law, adjudication in separate forums.
Taylor, 147 A.3d at 507. Plaintiff’s claim, which rests on the expediency of
unitary judicial resolution, thus fails.
For Appellants’ second numbered claim on appeal, Appellants contend
that Plaintiff did not prove, by clear and convincing evidence, that Mrs. Riley
lacked capacity to enter into the Admission Agreement. Appellants’ Brief at
22.
At the outset, we do not see where Plaintiff ever claimed, before the
trial court, that Mrs. Riley lacked capacity to enter into the Admission
Agreement. See Plaintiff’s Response to Preliminary Objections, 9/9/19, at
1-9; Plaintiff’s Memorandum of Law in Opposition to Preliminary Objections,
9/9/19, at 1-18. Nevertheless, we observe that, in its opinion, the trial court
declared: “[a]s [the trial court] overruled the petition to enforce arbitration
on the grounds the agreement is unconscionable, [the trial court would not]
address whether or not [Mrs.] Riley lacked capacity to enter into the
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arbitration agreement.” Trial Court Opinion, 2/6/20, at 11 n.8. Appellants
cite this language and argue Plaintiff failed to prove, by clear and convincing
evidence, that Mrs. Riley lacked capacity to enter into the Admission
Agreement. Therefore, Appellants claim that we do not need to remand this
case to the trial court, so that the trial court may make a further factual finding
on Mrs. Riley’s capacity. Appellants’ Brief at 22-26.
Simply stated, any claim that Mrs. Riley lacked capacity to enter the
Admission Agreement is beyond the trial court’s scope of review, as it
constitutes a “challenge to the validity of [the] contract as a whole.” Salley,
925 A.2d at 120. As our Supreme Court has explained:
Although an arbitration agreement may be challenged on
grounds of unconscionability, . . . the United States Supreme
Court has expressed the concern that allowing a party to
invoke judicial review to challenge the parties’ overall
agreement (and therefore also an arbitration component)
would contravene Congress’ purpose to facilitate a just and
speedy resolution of controversies that is not subject to delay
and/or obstruction in the courts. Accordingly, the Supreme
Court has determined that a challenge to the validity of a
contract as a whole, and not specifically to an arbitration
clause, must be presented to the arbitrator and not the
courts. The courts may consider, in the first instance, only
those challenges that are directed solely to the arbitration
component itself.
Id. (citations omitted).
Any claim that Mrs. Riley lacked capacity to enter into the Admission
Agreement is “a challenge to the validity of [the] contract as a whole;” as
such, the claim “must be presented to the arbitrator and not the courts.” Id.
Order vacated. Case remanded. Jurisdiction relinquished.
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Judge Strassburger did not participate in the consideration or decision
of this case.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/28/21
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