The Estate of Mary Solesbee v. Fundamental Clinical ( 2023 )

THE STATE OF SOUTH CAROLINA
In The Court of Appeals
The Estate of Mary Solesbee, by her personal
representative, Connie Bayne, Respondent,
v.
Fundamental Clinical and Operational Services, LLC;
Fundamental Administrative Services, LLC; THI of
South Carolina at Magnolia Manor-Inman, LLC d/b/a
Magnolia Manor-Inman; Inpatient Consultants of North
Carolina, P.C.; and Angela Brown, ACNP, Defendants,
Of which Fundamental Clinical and Operational
Services, LLC; Fundamental Administrative Services,
LLC; and THI of South Carolina at Magnolia Manor-
Inman, LLC d/b/a Magnolia Manor-Inman are the
Appellants.
Appellate Case No. 2019-001731
Appeal From Spartanburg County
Grace Gilchrist Knie, Circuit Court Judge
Opinion No. 5963
Submitted October 3, 2022 – Filed January 25, 2023
AFFIRMED
Stephen Lynwood Brown, Russell Grainger Hines,
Donald Jay Davis, Jr., and Gaillard Townsend Dotterer,
III, all of Clement Rivers, LLP, of Charleston, for
Appellants.
Warren H. Christian, Jr., and Matthew W. Christian, both
of Christian & Christian, LLC, of Greenville, and Jordan
Christopher Calloway, of McGowan Hood Felder &
Phillips, of Rock Hill, all for Respondent.
THOMAS, J.: In this wrongful death and survival action alleging nursing home
negligence, Fundamental Clinical and Operational Services, LLC; Fundamental
Administrative Services, LLC; and THI of South Carolina at Magnolia Manor-
Inman, LLC d/b/a Magnolia Manor-Inman 1 (collectively, Appellants) appeal the
trial court's denial of Magnolia's motion to compel arbitration. Appellants argue
the trial court erred in (1) denying Magnolia's motion to compel arbitration and (2)
denying Fundamental's 2 motions to stay this lawsuit pending arbitration of the
claims against Magnolia. We affirm.
FACTS
Magnolia operates a nursing facility located in Spartanburg County. Mary
Solesbee became a resident at Magnolia on June 27, 2016. She was admitted to
Magnolia by her son, Allen Dover, who executed the paperwork for her
admission. 3 Among the contracts Dover entered into on behalf of Solesbee were
an admission agreement (Admission Agreement) and an arbitration agreement
(Arbitration Agreement). Solesbee was not present when Dover signed the
documents.
The Admission Agreement governs the type of care Solesbee was to receive at
Magnolia and Solesbee's financial obligation to pay for those services. On the
Admission Agreement's final page, there is an "Entire Agreement" section
indicating the twelve pages of the Agreement constitute "the entire agreement and
understanding between the parties" concerning Solesbee's admission to Magnolia.
1
Appellant THI of South Carolina at Magnolia Manor-Inman, LLC, d/b/a
Magnolia Manor-Inman (Magnolia) is a skilled nursing facility in Spartanburg
County.
2
Appellants Fundamental Clinical and Operational Services, LLC and
Fundamental Administrative Services, LLC (collectively, Fundamental) are
"affiliated and/or parent and/or subsidiary entities" to Magnolia.
3
Solesbee had given Dover a general power of attorney. However, Solesbee
revoked the power of attorney a few months later, which was more than two years
before her admission to Magnolia.
The Admission Agreement does not mention the Arbitration Agreement. Dover
signed the Admission Agreement on the "Signature of Representative" line.
Magnolia's representative did not ask Dover for proof of authority to act on
Solesbee's behalf.4
The separate one-page Arbitration Agreement states:
It is further understood that in the event of any
controversy or dispute between the parties arising out of
or relating to Facility's Admission Agreement, or breach
thereof, or relating in any way to Resident's stay at
Facility, or to the provisions of care or services to
Resident, including but not limited to any alleged tort,
personal injury, negligence or other claim; or any federal
or state statutory or regulatory claim of any kind; or
whether or not there has been a violation of any right or
rights granted under State law (collectively "Disputes"),
and the parties are unable to resolve such through
negotiation, then the parties agree that such Dispute(s)
shall be resolved by arbitration, as provided by the South
Carolina Alternate Dispute Resolution/Mediation Rules.
The Arbitration Agreement further states that "[b]y his/her signature below, the
executing party represents that he/she has the authority to sign on Resident's behalf
so as to bind the Resident as well as the Representative." Dover signed the
Arbitration Agreement on the line labeled "Resident/Representative Signature."
On July 14, 2016, two weeks after her admission, Solesbee was transported to a
hospital and died on August 1, 2016. Connie Bayne, as the personal representative
for Solesbee's estate, 5 filed a wrongful death and survival action against Appellants
alleging nursing home negligence. 6 The complaint alleged Solesbee's death was "a
direct and proximate result of . . . sepsis resulting from [an] improperly treated leg
wound and infection" that was not properly recognized and treated while she was a
4
In its brief, Magnolia acknowledges it was unable to establish agency, either
actual or apparent, on the part of Dover because there was no power of attorney or
any other documents.
5
Bayne is Solesbee's daughter.
6
Bayne filed an amended complaint on January 3, 2019, and a second amended
complaint on February 27, 2019.
resident of Magnolia. It sought judgment against Appellants for actual and
punitive damages.
Based on the Arbitration Agreement Dover signed for Solesbee, Magnolia filed a
motion to dismiss Bayne's complaint, compel arbitration, and stay proceedings
pending the outcome of arbitration. Fundamental filed motions to stay any
requirement to file further responsive pleadings, as well as any requirement to
respond to any motions or discovery filed or served by Bayne, until such time as
this court made a final decision on the validity of the arbitration agreement.
Magnolia filed a memorandum in support of its motion.
After a hearing, the court denied Magnolia's motion to compel arbitration. In its
order, the court found Dover did not have the actual or apparent authority to sign
the Arbitration Agreement on behalf of Solesbee. The court stated this case was
very similar to Coleman v. Mariner Health Care, Inc., 407 S.C. 346, 755 S.E.2d
450 (2014); Hodge v. UniHealth Post-Acute Care of Bamberg, LLC, 422 S.C. 544,
813 S.E.2d 292 (Ct. App. 2018); and Thompson v. Pruitt Corporation, 416 S.C. 43,
784 S.E.2d 679 (Ct. App. 2016). The court noted that in these cases, our appellate
courts found: (1) the arbitration agreements to be unenforceable when a family
member signed an arbitration agreement near the time of admission to a skilled
nursing facility for the decedent and did not have any actual authority; (2) that no
implied authority existed; and (3) no estoppel applied. As the Thompson and
Hodge courts noted, there was no evidence the resident being admitted to the
nursing home took any action to create an agency relationship with the person who
signed the arbitration agreement. See Thompson, 416 S.C. at 55, 784 S.E.2d at 686
("[T]he authority conveyed by a principal to an agent to handle finances or make
health care decisions does not encompass executing an agreement to resolve legal
claims by arbitration, thereby waiving the principal's right of access to the courts
and to a jury trial."); Hodge, 422 S.C. at 572, 813 S.E.2d at 307 (quoting
Thompson). The court stated this case was nearly identical to those cases.
Therefore, the court held there was no valid Arbitration Agreement in this case.
The court also held that even if the Arbitration Agreement was generally valid, it
could not be enforced for the wrongful death claim brought for the benefit of
Solesbee's statutory beneficiaries. Further, the court rejected Magnolia's request
for leave to conduct discovery before the court ruled on its motion, finding it had
the opportunity to use the South Carolina Rules of Civil Procedure to conduct
discovery related to arbitration. This appeal followed.
STANDARD OF REVIEW
"The question of the arbitrability of a claim is an issue for judicial determination,
unless the parties provide otherwise." Zabinski v. Bright Acres Assocs., 346 S.C.
580, 596, 553 S.E.2d 110, 118 (2001). An "[a]ppeal from the denial of a motion to
compel arbitration is subject to de novo review." New Hope Missionary Baptist
Church v. Paragon Builders, 379 S.C. 620, 625, 667 S.E.2d 1, 3 (Ct. App. 2008).
Also, "[w]hether an arbitration agreement may be enforced against a nonsignatory
to the agreement is a matter subject to de novo review by an appellate court."
Wilson v. Willis, 426 S.C. 326, 335, 827 S.E.2d 167, 172 (2019). Under this
standard of review, "a [trial] court's factual findings will not be reversed on appeal
if any evidence reasonably supports those findings." Id.LAW/ANALYSIS
I. Motion to Compel Arbitration
Appellants argue the trial court erred in denying Magnolia's motion to compel
arbitration. We disagree.
South Carolina's policy is to favor arbitration of disputes. Zabinski, 346 S.C. at
596, 553 S.E.2d at 118. "Arbitration agreements, like other contracts, are
enforceable in accordance with their terms." Munoz v. Green Tree Fin. Corp., 343
S.C. 531, 539, 542 S.E.2d 360, 364 (2001). "To decide whether an arbitration
agreement encompasses a dispute, a court must determine whether the factual
allegations underlying the claim are within the scope of the broad arbitration
clause, regardless of the label assigned to the claim." Zabinski, 346 S.C. at 597,
553 S.E.2d at 118. "Unless a court can say with positive assurance that an
arbitration clause is not susceptible to any interpretation that covers the dispute,
arbitration should generally be ordered." Gissel v. Hart, 382 S.C. 235, 240-41, 676
S.E.2d 320, 323 (2009). "A broadly-worded arbitration clause applies to disputes
that do not arise under the governing contract when a 'significant relationship'
exists between the asserted claims and the contract in which the arbitration clause
is contained." Zabinski, 346 S.C. at 598, 553 S.E.2d at 119 (quoting Long v.
Silver, 248 F.3d 309, 316 (4th Cir. 2001)).
"However, arbitration is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed to submit." Gissel, 382
S.C. at 241, 676 S.E.2d at 323. "[T]he presumption in favor of arbitration applies
to the scope of an arbitration agreement; it does not apply to the existence of such
an agreement or to the identity of the parties who may be bound to such an
agreement." Wilson, 426 S.C. at 337, 827 S.E.2d at 173 (emphasis omitted)
(quoting Carr v. Main Carr Dev., LLC, 337 S.W.3d 489, 496 (Tex. App. 2011)).
"[B]ecause arbitration, while favored, exists solely by agreement of the parties, a
presumption against arbitration arises where the party resisting arbitration is a
nonsignatory to the written agreement to arbitrate." Id. at 337-38, 827 S.E.2d at
173 (emphasis omitted). Nevertheless, "[w]ell-established common law principles
dictate that in an appropriate case a nonsignatory can enforce, or be bound by, an
arbitration provision within a contract executed by other parties." Pearson v.
Hilton Head Hosp., 400 S.C. 281, 288, 733 S.E.2d 597, 600 (Ct. App. 2012)
(quoting Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d
411, 416-17 (4th Cir. 2000)).
"Whether an arbitration agreement may be enforced against nonsignatories, and
under what circumstances, is an issue controlled by state law." Wilson, 426 S.C. at
338, 827 S.E.2d at 173-74. "South Carolina has recognized several theories that
could bind nonsignatories to arbitration agreements under general principles of
contract and agency law, including (1) incorporation by reference, (2) assumption,
(3) agency, (4) veil piercing/alter ego, and (5) estoppel." Id. at 338, 827 S.E.2d at
174. This court has held the theory of equitable estoppel precludes parties from
asserting their nonsignatory status, compelling them to submit their claims to
arbitration. Id. at 339, 827 S.E.2d at 174. Under this theory, "[a] nonsignatory is
estopped from refusing to comply with an arbitration clause 'when it receives a
direct benefit from a contract containing an arbitration clause.'" Pearson, 400 S.C.
at 290, 733 S.E.2d at 601 (quoting Int'l Paper, 206 F.3d at 418). "In the arbitration
context, the doctrine recognizes that a party may be estopped from asserting that
the lack of his signature on a written contract precludes enforcement of the
contract's arbitration clause when he has consistently maintained that other
provisions of the same contract should be enforced to benefit him." Id. (emphasis
omitted) (quoting Int'l Paper, 206 F.3d at 418).
Magnolia argues the trial court should have found the Arbitration Agreement
merged with the Admission Agreement because merger is presumed when the
instruments in question are executed at the same time, by the same parties, for the
same purpose, and in the course of the same transaction.
In Coleman v. Mariner Health Care, Inc., our supreme court held:
In South Carolina, "[t]he general rule is that, in the
absence of anything indicating a contrary intention,
where instruments are executed at the same time, by the
same parties, for the same purpose, and in the course of
the same transaction, the courts will consider and
construe the documents together. The theory is that the
instruments are effectively one instrument or contract."
407 S.C. at 355, 755 S.E.2d at 455 (quoting Klutts Resort Realty, Inc. v.
Down'Round Dev. Corp., 268 S.C. 80, 88, 232 S.E.2d 20, 24 (1977)). The
Coleman court found the documents in that case were executed at the same time,
by the same parties, for the same purpose, and in the course of the same
transaction; thus, unless there was a contrary intention, there was a merger. Id.However, the court determined that "[b]y their own terms, the contracts between
these parties indicated an intent that the common law doctrine of merger not
apply." Id. And, even if a clause in the contract created an ambiguity as to merger,
the law is clear that any ambiguity in such a clause is construed against the drafter.
Id. at 355-56, 755 S.E.2d at 455. Thus, there was no merger in that case, and the
appellants' equitable estoppel argument was properly denied. Id. at 356, 755
S.E.2d at 455.
Also, in Hodge v. UniHealth Post-Acute Care of Bamberg, LLC, this court held the
admission agreement and arbitration agreement did not merge because: (1) the
admission agreement indicated it was governed by South Carolina law, whereas
the arbitration agreement stated it was governed by federal law; (2) like in
Coleman, the arbitration agreement recognized the two documents were separate,
stating "[a]ny and all claims or controversies arising out of or in any way relating
to this Agreement or the Patient/Resident's Admission Agreement"; (3) the
arbitration agreement stated it could be revoked within thirty days, whereas the
admission agreement contained no such indication and instead provided the
admission agreement could only be amended; (4) each document was separately
paginated and had its own signature page; and (5) the arbitration agreement stated
signing it was not a precondition to admission. 422 S.C. at 562-63, 813 S.E.2d at
302.
Here, the Admission Agreement provides it is governed by South Carolina law,
and the Arbitration Agreement provides it is governed by federal law. The
Arbitration Agreement recognized the two documents were separate, stating the
Arbitration Agreement "shall survive any termination or breach of this Agreement
or the Admission Agreement." The Arbitration Agreement is silent as to whether it
could be revoked, but the Admission Agreement provides, "Resident and/or his/her
legal representative may terminate this Agreement at any time, upon written notice
to Facility." The Admission Agreement and Arbitration Agreement were
separately paginated and had their own signature pages. Magnolia's attorney
admitted at the hearing that "[i]t's perfectly true that [Dover] did not have to sign
the arbitration agreement to move forward with [Solesbee] being admitted. It was
voluntary . . . ." Thus, like the Coleman and Hodge courts, we find there was no
merger in this case and Magnolia's equitable estoppel argument was properly
denied.
The Coleman court also considered whether the Adult Health Care Consent Act
(Act)7 gave a family member authority to execute an arbitration agreement on
behalf of another. The court held:
The scope of Sister's authority [under the Act] to consent
to "decisions concerning Decedent's health care"
extended to the admission agreement, which was the
basis upon which Facility agreed to provide health care
and Sister agreed to pay for it. The separate arbitration
agreement concerned neither health care nor payment,
but instead provided an optional method for dispute
resolution between Facility and Decedent or Sister should
issues arise in the future. Under the Act, Sister did not
have the capacity to bind Decedent to this voluntary
arbitration agreement. We therefore affirm the circuit
court's holding that the Act did not confer authority on
Sister to execute a document which involved neither
health care nor financial terms for payment of such care.
407 S.C. at 353-54, 755 S.E.2d at 454. In Thompson v. Pruitt Corporation, this
court also held the admission agreement did not merge with the arbitration
agreement and the son's authority under the Act to execute the admission
agreement did not cover the terms of the arbitration agreement. 416 S.C. at 52-53,
784 S.E.2d at 684-85.
A limited general agreement power of attorney was executed on September 2,
2014, by Solesbee, giving Dover power of attorney for certain limited acts and
alternatively giving power of attorney to Bayne. However, Solesbee revoked the
7
S.C. Code Ann. § 44-66-30 (Supp. 2022) (providing that when a patient is unable
to consent, decisions concerning their health care may be made by other persons,
as specified in the statute).
power of attorney on September 12, 2014, which was almost two years before
Dover signed the Agreements in this case. Thus, according to Bayne, Dover had
no authority to sign the Arbitration Agreement on Solesbee's behalf. However,
Bayne asserted Dover did have the authority to sign the Admission Agreement
under the Act. Bayne argues the Act is limited to "health care" decisions and
provides no authority for separate contracts like the Arbitration Agreement. She
asserts the Act was never meant to affect anything other than health care decisions
and the Arbitration Agreement was not a health care decision because Solesbee
could get the health care services covered in the Admission Agreement without
agreeing to arbitrate. We agree and find Dover did not have any authority to sign
the Arbitration Agreement for Solesbee via the Act or a power of attorney.
Magnolia further asserts that because Solesbee was bound by the Arbitration
Agreement at the time of her death, her wrongful death beneficiaries are bound by
the Arbitration Agreement as well. However, we previously found the Arbitration
Agreement is not enforceable against Solesbee because she did not sign it or
authorize Dover to sign it for her; thus, Solesbee's cause of action was not barred at
the time of her death.
Finally, Magnolia asserts the trial court erred in denying its request to conduct
discovery on the issue of arbitrability. The trial court held "[Magnolia] had the
opportunity to use the South Carolina Rules of Civil Procedure to conduct
discovery related to arbitration." Magnolia cites no authority for how it claims the
court erred, and the record does not contain any discovery requests Bayne ignored
or any subpoenas to which she objected. Magnolia states the discovery it seeks is
whether an agency relationship exists (or whether the facts to support estoppel or
ratification exist) and whether Solesbee was competent at the time of her
admission. It also asserts there was ambiguity as to whether Solesbee gave consent
for Dover to act as her agent, given the inconsistency between Dover's
representation of authority in the Arbitration Agreement and his disavowal of such
authority in his affidavit.
In Hodge, this court addressed a similar argument and affirmed the trial court's
refusal to compel the husband's deposition that would add nothing probative to a
potential agency analysis, noting this court has held "the authority conveyed by a
principal to an agent to handle finances or make health care decisions does not
encompass executing an agreement to resolve legal claims by arbitration, thereby
waiving the principal's right of access to the courts and to a jury trial." 422 S.C. at
579, 813 S.E.2d at 311 (quoting Thompson, 416 S.C. at 55, 784 S.E.2d at 686).
Because we find the trial court correctly held there was no merger of the
Agreements and Magnolia's equitable estoppel argument was properly denied, we
also find the court did not err in denying its request for further discovery when it
would not have changed the result.
II. Motions to Stay
Appellants argue the trial court erred in denying Fundamental's motions to stay the
lawsuit pending arbitration of the claims against Magnolia. Because we find the
trial court did not err in denying Magnolia's motion to compel arbitration,
Fundamental's motions are moot and we need not address this issue. See Hagood
v. Sommerville, 362 S.C. 191, 199, 607 S.E.2d 707, 711 (2005) (declining to
address an issue when the resolution of a prior issue is dispositive).
CONCLUSION
Accordingly, the decision of the trial court is
AFFIRMED. 8
WILLIAMS, C.J., and LOCKEMY, A.J., concur.
8
We decide this case without oral argument pursuant to Rule 215, SCACR.