Thi of New Mexico at Hobbs Center, LLC v. Spradlin

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT September 20, 2013
Elisabeth A. Shumaker
Clerk of Court
THI OF NEW MEXICO AT HOBBS
CENTER, LLC; THI OF NEW MEXICO,
LLC,
Plaintiffs-Appellees,
v. No. 12-2182
(D.C. No. 2:11-CV-0792-MV-LAM)
JASON SPRADLIN, as personal (D. N.M.)
representative of the wrongful death
estate of Douglas A. Spradlin, Jr.,
deceased,
Defendant-Appellant.
ORDER AND JUDGMENT*
Before HOLMES, HOLLOWAY, and BACHARACH, Circuit Judges.
Mr. Douglas Spradlin died not long after being removed from the Plaintiffs-
Appellees’ nursing home. Mr. Spradlin’s son, Jason,1 brought a wrongful-death
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
action in state court. The Plaintiffs-Appellees then filed suit in federal court to
compel arbitration, with diversity jurisdiction being alleged and not disputed. Jason
now appeals from a federal district court order compelling arbitration of the wrongful
death action. We have appellate jurisdiction under 28 U.S.C. § 1291, and we affirm.
BACKGROUND
In August 2006, Mr. Douglas Spradlin was admitted to THI of New Mexico at
Hobbs Center, LLC, a nursing home, for long-term care and treatment of his
dementia. He was accompanied by his daughter, Melissa.
Upon admission, Mr. Douglas Spradlin signed a “Durable Power of Attorney
for Financial and Healthcare Decision Making,” appointing Jason and Melissa as his
attorneys in fact. Aplt. App. at 27. Melissa then signed a six-page “Admission
Contract.” In doing so, she checked a box indicating that she was “execut[ing] th[e]
Contract in the capacit(y)” of “Immediate Family Member,” rather than “Attorney-in-
Fact under validly executed power of attorney.” Id. at 25. Mr. Douglas Spradlin did
not sign the Admission Contract.
The contract contains a clause requiring that any dispute between the parties
regarding the Hobbs Center’s provision of healthcare services be resolved by binding
arbitration:
1
For the sake of clarity throughout this order and judgment, we follow
Defendant-Appellant’s convention and refer to Mr. Spradlin’s children by their first
names.
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VI. Arbitration
Pursuant to the Federal Arbitration Act, any action, dispute,
claim, or controversy of any kind (e.g., whether in contract or tort,
statutory or common law, legal or equitable, or otherwise) now existing
or hereafter arising between the parties in any way arising out of,
pertaining to or in connection with the provision of healthcare
services . . . causing injury to either party whereby the other party or
its agents, employees or representatives may be liable, in whole or in
part, . . . shall be resolved by binding arbitration administered by the
National Health Lawyers Association (the “NHLA”).
Id. at 24. Directly below this clause and immediately above the signature lines is a
provision stating that “THE UNDERSIGNED ACKNOWLEDGE THAT EACH OF
THEM HAS READ AND UNDERSTOOD THIS CONTRACT, AND THAT EACH
OF THEM VOLUNTARILY CONSENTS TO ALL OF ITS TERMS.” Id.Mr. Douglas Spradlin lived at Hobbs Center for roughly two-and-a-half years.
On March 6, 2009, he was removed from the home and he died five days later.
In June 2011, Jason, as the personal representative of his father’s estate, sued
THI and other defendants in New Mexico state court for wrongful death. In
response, THI filed a complaint in federal district court to compel arbitration. Jason
then moved to dismiss THI’s complaint, arguing that the arbitration agreement was
invalid and unenforceable. In support of her brother’s motion to dismiss, Melissa
submitted an affidavit, stating that when she signed the Admission Contract, she “did
not know what the term arbitration meant” and that she “felt rushed while signing the
documents.” Id. at 202. Additionally, Melissa stated she did not believe that her
father was capable of understanding the power of attorney that he signed.
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The district court concluded that it had diversity jurisdiction over the matter
and that the arbitration agreement was valid and enforceable. Having resolved the
only issue present, the court then dismissed the case.
DISCUSSION
I. Standards of Review
The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, embodies the national
policy favoring arbitration. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440,
443 (2006). “Although the [Supreme] Court has . . . long recognized and enforced a
liberal federal policy favoring arbitration agreements, . . . the question of
arbitrability[ ] is an issue for judicial determination unless the parties clearly and
unmistakably provide otherwise.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S.
79, 83 (2002) (citation, brackets, and internal quotation marks omitted).
“[A]rbitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.” Id. (internal quotation
marks omitted).
“Generally, courts should apply ordinary state-law principles that govern the
formation of contracts to determine whether a party has agreed to arbitrate a dispute.”
Hardin v. First Cash Fin. Servs., Inc., 465 F.3d 470, 475 (10th Cir. 2006) (internal
quotation marks omitted). We review de novo a district court’s decision compelling
arbitration. Hancock v. Am. Tel. & Tel. Co., Inc., 701 F.3d 1248, 1261 (10th Cir.
2012), cert. denied, 133 S. Ct. 2009 (2013).
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II. Binding Effect of the Admission Contract
A. On Mr. Douglas Spradlin
Jason argues that Melissa had no authority to sign the Admission Contract and
bind their father because the power of attorney, which appointed her as an attorney in
fact, was signed by their father while he was incompetent. But, as noted by the
district court in its order compelling arbitration, the power of attorney is irrelevant
because Melissa signed the Admission Contract, not pursuant to her authority as her
father’s attorney in fact, but simply as “Immediate Family Member.” Aplt. App. at
25.
But more importantly, in the district court, Jason did not dispute THI’s
assertion that Mr. Douglas Spradlin, despite not signing the Admission Contract, was
bound by it as a third-party beneficiary. And the district court deemed Jason’s
silence as a “concession of this point.” Id. at 394 n.1. Arguments not raised in the
district court “are waived for purposes of appeal.” Quigley v. Rosenthal, 327 F.3d
1044, 1069 (10th Cir. 2003). Additionally, Jason raises the third-party-beneficiary
issue only in his reply brief before this court. Generally, a party may not attempt to
dispute an issue for the first time in a reply brief. See Reedy v. Werholtz, 660 F.3d
1270, 1274 (10th Cir. 2011).
Moreover, in arguing before this court that the wrongful-death beneficiaries
are not bound by the Admission Contract under a third-party beneficiary theory,
which we address below in Part II.B., Jason asserts that Mr. Douglas Spradlin is
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indeed bound under a third-party-beneficiary theory: “The contract only was
intended to benefit [Mr. Douglas Spradlin], so only he (and perhaps his estate) are
bound by its terms.” Aplt. Opening Br. at 34.
Accordingly, we reject Jason’s arguments that the Admission Contract is not
binding on Mr. Douglas Spradlin.
B. On Wrongful-Death Beneficiaries
Jason contends that “[t]he arbitration [clause] cannot be applied against the
wrongful death beneficiaries” like himself who did not sign the Admission Contract.
Aplt. Opening Br. at 33-34. We disagree.2
“Generally, third parties who are not signatories to an arbitration agreement
are not bound by the agreement and are not subject to . . . arbitration.” Horanburg v.
Felter, 99 P.3d 685, 689 (N.M. Ct. App. 2004) (employment discrimination case).
But New Mexico’s Wrongful Death Act, N.M. Stat. Ann. § 41-2-1 - § 41-2-4,
“transmits to the personal representative the cause of action which the injured person
would have had if death had not ensued.” Stang v. Hertz Corp., 463 P.2d 45, 55
(N.M. Ct. App. 1969). Thus, the wrongful-death statute confers upon the
beneficiaries those rights that the decedent would have possessed had he lived. See
2
Additionally, Jason cursorily argues that the arbitration clause cannot bind the
beneficiaries because the (1) Admission Contract terminated when Mr. Douglas
Spradlin died; and (2) “[t]he wrongful death beneficiaries are not parties to the
agreement.” Aplt. Opening Br. at 34. But he did not make these arguments below,
and therefore, they are waived. See Quigley, 327 F.3d at 1069. Further, perfunctory
arguments that fail to frame and develop an issue are insufficient to invoke appellate
review. Murrell v. Shalala, 43 F.3d 1388, 1390 n.2 (10th Cir. 1994).
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N.M. Stat. Ann. § 41-2-1 (providing a cause of action for the statutory beneficiaries
insofar as the decedent, had he lived, could have “maintain[ed] an action and
recover[ed] damages”); Romero v. Byers, 872 P.2d 840, 846 (N.M. 1994)
(characterizing the wrongful death statute as a survival statute that “provides a cause
of action for the benefit of the statutory beneficiaries to sue a tortfeasor for the
damages . . . which the decedent himself would have been entitled to recover had
death not ensued” (internal quotation marks omitted)); Hogsett v. Hanna, 63 P.2d
540, 543 (N.M. 1936) (stating that the wrongful-death statute, instead of “creat[ing] a
new cause of action,” “transmits to the designated persons a cause of action when the
injured person would have had one had death not ensued”).
There is a split of authority among the states regarding the binding effect of
arbitration provisions on nonsignatory, wrongful-death heirs. “States that bind such
plaintiffs generally view wrongful death claims as derivative of the decedent’s claim,
or focus on the public policy favoring arbitration agreements. States that do not bind
claimants generally emphasize the independence of the wrongful death claim or the
need for consent in creating binding arbitration.” Ruiz v. Podolsky, 237 P.3d 584,
591 n.2 (Cal. 2010) (citations omitted).
We conclude that in New Mexico, a wrongful-death claim derives directly
from the claim possessed by the decedent, had he or she lived. Thus, in New Mexico,
as in Mississippi, Florida, Texas, and Michigan, a “wrongful-death suit is a derivative
action by the beneficiaries, and those beneficiaries, therefore, stand in the position of
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their decedent.” Trinity Mission of Clinton, LLC v. Barber, 988 So. 2d 910, 919
(Miss. Ct. App. 2007); see also Laizure v. Avante at Leesburg, Inc., 109 So. 3d 752,
761-62 (Fla. 2013) (“[T]he nature of a wrongful death cause of action in Florida is
derivative in the context of determining whether a decedent’s estate and heirs are
bound by the decedent’s agreement to arbitrate. The estate and heirs stand in the
shoes of the decedent for purposes of whether the defendant is liable and are bound
by the decedent’s actions and contracts with respect to defenses and releases.”);
In re Labatt Food Serv., LP, 279 S.W.3d 640, 646 (Tex. 2009) (“[R]egardless of the
fact that [decedent’s] beneficiaries are seeking compensation for their own personal
loss, they still stand in [decedent’s] legal shoes and are bound by his agreement.”);
Ballard v. Sw. Detroit Hosp., 327 N.W.2d 370, 371-72 (Mich. Ct. App. 1982)
(“[A]lthough the Michigan wrongful death act provides for additional damages
benefitting the decedent’s next of kin for loss of society and companionship, it does
not create a separate cause of action independent of the underlying rights of the
decedent. Rather, the cause of action is expressly made derivative of the decedent’s
rights.”). Consequently, because Mr. Douglas Spradlin was bound by the arbitration
clause as a third-party beneficiary, the non-signatory, wrongful-death beneficiaries
are likewise bound.
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III. Procedural Unconscionability
Jason argues that the arbitration clause in the Admission Contract is
procedurally unconscionable because the contract is an adhesion contract.
“[U]nconscionability is an equitable doctrine, rooted in public policy, which allows
courts to render unenforceable an agreement that is unreasonably favorable to one
party while precluding a meaningful choice of the other party.” Strausberg v. Laurel
Healthcare Providers, LLC, No. 33,331, __ P.3d __, 2013 WL 3226753, at *7
(N.M. June 27, 2013) (internal quotation marks omitted). An adhesion contract is a
“standardized contract offered by a transacting party with superior bargaining
strength to a weaker party on a take-it-or-leave-it basis, without opportunity for
bargaining.” Id. at *8 (internal quotation marks omitted). It “is procedurally
unconscionable and unenforceable when the terms are patently unfair to the weaker
party.” Id. (brackets and internal quotation marks omitted). The party claiming
unconscionability bears the burden to prove this affirmative contract defense.
Id. at *9.
In support of his argument that Melissa executed an unconscionable
adhesion contract, Jason cites Melissa’s affidavit statements that she has only an
eleventh-grade education, she did not know what “arbitration” meant, and she “felt
rushed” while signing the documents. Aplt. Opening Br. at 29. But these statements
do not indicate (1) whether THI was in a superior bargaining position, as might occur
if there were no other suitable and available nursing homes for Mr. Douglas Spradlin,
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see Fiser v. Dell Computer Corp., 188 P.3d 1215, 1221 (N.M. 2008) (noting “there
was no evidence that Plaintiff could not avoid doing business under the particular
terms mandated by Defendant”); or (2) whether the Admission Contract was
presented to Melissa on a take-it-or-leave-it basis. And despite Melissa’s limited
education and her feeling rushed to sign the documents, nothing indicates that she
was incapable of understanding the arbitration clause or that THI used “sharp
practices or high pressure tactics” to secure her signature, Guthmann v. LaVida
Llena, 709 P.2d 675, 679 (N.M. 1985), overruled in part on other grounds by
Cordova v. World Fin. Corp. of N.M., 208 P.3d 901 (N.M. 2009). Indeed, the
arbitration clause was followed prominently by clear language above the signature
lines indicating that she had read, understood, and consented to all the terms of the
Admission Contract. Therefore, we conclude that the Admission Contract was not
procedurally unconscionable.
IV. Breach of Fiduciary Duty
Jason argues “that THI breached fiduciary duties to [Mr. Douglas Spradlin] by
presenting a mandatory arbitration agreement without full disclosure and making sure
Melissa understood all its terms and ramifications,” and by “having [Mr. Douglas
Spradlin] sign the Power of Attorney knowing that he was mentally incompetent.”
Aplt. Opening Br. at 31. But Jason does not identify any New Mexico case declaring
that a nursing home has a fiduciary duty to a prospective patient who has not yet
entered into an admission contract. Indeed, in the analogous context of applying for
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insurance, the New Mexico Court of Appeals has expressly declined to impose such a
duty prior to the formation of a contract:
[W]e decline to acknowledge the existence of the insurer’s fiduciary
duty before the issuance of the policy. At the application stage, the
relationship between insurer and insured is similar to that of buyer and
seller, and the transaction is little more than an arms-length negotiation
involving the purchase of insurance. Ordinarily, a buyer-seller
relationship is not fiduciary in nature, even though the seller typically
has superior bargaining power and knowledge. An essential feature and
consequence of a fiduciary relationship is that the fiduciary becomes
bound to act in the interests of [its] beneficiary and not itself.
Obviously, this dynamic does not inhere in the ordinary buyer-seller
relationship.
Azar v. Prudential Ins. Co. of Am., 68 P.3d 909, 926 (N.M. Ct. App. 2003) (brackets,
citation, and internal quotation marks omitted).
Similarly, in the context of seeking nursing-home services, the prospective
patient and the nursing home are in a relationship resembling a buyer and seller, with
no services forthcoming until after contract formation. Until that time, the
prospective patient and the nursing home are engaged in no more than negotiations
for services, with the patient free to walk away if he or she deems the offered
services unsatisfactory.
We conclude then, that New Mexico would not recognize a fiduciary duty
between a nursing home and a prospective patient during negotiations over an
admission contract. Thus, Jason’s breach-of-fiduciary-duty argument fails.
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V. Discovery
Jason contends that the district court should not have decided this case without
providing an opportunity for discovery. We disagree.
In enacting the FAA, Congress intended that proceedings to compel arbitration
be “expeditious and summary,” “with only restricted inquiry into factual issues.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22 (1983).
To obtain discovery in opposition to a motion to compel arbitration, the arbitration
opponent must at least show how discovery would “assist[ ] them in opposing the
motion to compel arbitration.” Wolff v. Westwood Mgmt., LLC, 558 F.3d 517, 521
(D.C. Cir. 2009).
But in the district court, Jason provided little specificity as to why discovery
was necessary on the issues relevant to opposing arbitration. Indeed, he stated that if
the district court was “disinclined to” rule “that the arbitration agreement is
unenforceable,” “it should permit discovery and conduct an evidentiary hearing.”
Aplt. App. at 261.
On appeal, Jason indicates that discovery was necessary “on whether
[Mr. Douglas Spradlin] had mental capacity to sign the Power of Attorney.” Aplt.
Opening Br. at 13. As we indicated above, however, that issue is irrelevant and
subject to various procedural infirmities. See supra Part II.A. (concluding that the
power of attorney is irrelevant because Melissa signed the Admission Contract as a
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family member rather than as her father’s attorney in fact, that the issue was not
properly raised, and that Jason conceded the issue).
Jason next claims that discovery was needed to ascertain whether the
Admission Contract is procedurally unconscionable. He questions whether “Melissa
felt pressured, had no reasonable alternative, or did not fully comprehend what she
was signing.” Id. at 14. The answers to those questions, however, were available to
Jason through Melissa, who had already provided an affidavit to aid Jason.
Lastly, Jason asserts that discovery was needed to support his “defense that
THI breached fiduciary duties owed to [Mr. Douglas Spradlin].” Id. We determined
above that New Mexico would not recognize such a defense. Thus, discovery
regarding such a defense is irrelevant.
We conclude that the district court did not abuse its discretion in rejecting
Jason’s request for discovery.
CONCLUSION
The judgment of the district court is affirmed.3
Entered for the Court
William J. Holloway, Jr.
Circuit Judge
3
Jason argues that “[i]n determining a remand remedy, the Court is reminded
that THI has not produced most of the nursing home’s records for [Mr. Douglas
Spradlin’s] first several months of admission.” Aplt. Opening Br. at 20-21. Because
we affirm the district court’s judgment, we do not reach Jason’s remand argument.
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