Jane Doe 1, as Legal Guardian of the Person and Estate of Jane Doe 2, an Incapacitated Adult v. Carmel Operator, LLC d/b/a Carmel Senior Living

FILED
Mar 17 2020, 8:43 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEES
Ashley N. Hadler CARMEL OPERATOR, LLC &
Garau Germano, P.C. SPECTRUM RETIREMENT
Indianapolis, Indiana COMMUNITIES, LLC
ATTORNEY FOR AMICUS CURIAE Rafael P. McLaughlin
INDIANA TRIAL LAWYERS Katherine M. Haire
Reminger Co., LPA
ASSOCIATION
Fort Wayne, Indiana
James E. Stoltz
Gerling Law Offices, P.C. ATTORNEYS FOR APPELLEE
Evansville, Indiana CERTIPHI SCREENING, INC.
Chad J. Kaldor
Peter T. Tschanz
Littler Mendelson, P.C.
Columbus, Ohio
ATTORNEYS FOR APPELLEE
MICHAEL DAMON SULLIVAN
David G. Field
Jeffrey M. Kraft
Schultz & Pogue, LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 1 of 27
Jane Doe 1, as Legal Guardian March 17, 2020
of the Person and Estate of Jane Court of Appeals Case No.
Doe 2, an Incapacitated Adult, 19A-CT-2191
Appellant-Plaintiff, Appeal from the Hamilton Superior
Court
v. The Honorable Michael A. Casati,
Judge
Carmel Operator, LLC d/b/a Trial Court Cause No.
Carmel Senior Living, et al., 29D01-1811-CT-11534
Appellees-Defendants.
Bailey, Judge.
Case Summary
[1] Jane Doe I (“Guardian”), as legal guardian of the person and estate of Jane
Doe II (“Resident”), an incapacitated adult, appeals the trial court order
compelling arbitration of Resident’s claims against Carmel Operator, LLC,
d/b/a Carmel Senior Living (“CSL”), Spectrum Retirement Communities
(“Spectrum”), Michael D. Sullivan (“Sullivan”), and Certiphi Screening, Inc.
(“Certiphi”).
[2] We affirm.
Issues
[3] Guardian raises two issues on appeal which we restate as follows:
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 2 of 27
1. Whether the trial court erred by enforcing the arbitration
agreement and compelling arbitration of Resident’s claims
against CSL, Spectrum, and Sullivan1 despite Guardian’s
claim that the agreement is unconscionable.
2. Whether the trial court erred by enforcing the arbitration
agreement and compelling arbitration of Resident’s claims
against Certiphi based upon equitable estoppel.
Facts and Procedural History
[4] Prior to June 1, 2018, seventy-seven-year-old Resident was a resident of
Wellbrooke of Wabash, an assisted living facility located in Wabash, Indiana.
On approximately May 1, 2018, Wellbrooke of Wabash advised Guardian that
it could no longer care for Resident due to Resident’s tendency to elope from
the facility. Guardian was provided until the end of the month to find new
accommodations for Resident.
[5] On May 7, Guardian contacted CSL, and she visited the facility on May 8.
Guardian informed CSL that she had also toured other facilities in search of a
placement for Resident. Guardian authorized a nurse at CSL to assess Resident
on or about May 16, 2018. The assessment revealed serious cognitive issues
and memory impairment, and CSL was concerned that Resident would be at
risk for elopement from its unsecured unit. Because Guardian did not want to
1
Guardian does not challenge the applicability of the arbitration agreement to Spectrum and Sullivan as
non-signatories; rather, she treats CSL, Spectrum, and Sullivan as one.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 3 of 27
place Resident in a secured facility, CSL agreed to accept Resident into its
unsecured unit on the conditions that Resident, upon arrival, had to tour the
memory care unit and, if Resident attempted to elope, she would be transferred
to that memory care unit. Guardian agreed to those terms.
[6] On May 23, 2018, Guardian went to CSL’s facility, paid a deposit, and received
a move-in packet. Resident’s scheduled move-in date was June 4, 2018. On the
morning of May 31, CSL e-mailed an Assisted Living and Memory Care
Residency Agreement (“Residency Agreement”) to Guardian. CSL requested
that Guardian either come to CSL to execute the agreement or that she print,
sign, and return it.
[7] Guardian subsequently contacted CSL and scheduled a meeting for 1:00 p.m.
on June 1, 2018, in order to review and sign the Residency Agreement, among
other things. Guardian was unable to make that appointment; however, at
approximately 4:45 p.m. that day, she delivered a copy of the Residency
Agreement that she had already executed, along with two lease checks, to a
CSL move-in coordinator. At that time, CSL provided Guardian with a copy
of the Residency Agreement that had been signed by Rita Shew (“Shew”), the
Executive Director of CSL, and Guardian “was told to sign the Residency
Agreement.” App. Vol. III at 171.2 At that time, Guardian also received the
keys to Resident’s apartment. CSL did not explain the Residency Agreement to
2
All references to the appendices relate to Appellant’s appendices unless otherwise specified.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 4 of 27
Guardian, and Guardian did not ask CSL for any explanations of the
Residency Agreement. On June 4, 2018, Shew signed the Residency
Agreement that Guardian had signed and provided to CSL on June 1. Resident
moved into CSL on June 4.
[8] The Residency Agreement was twenty-two pages long, exclusive of the table of
contents and addenda. The agreement contained approximately sixty-one
pages of addenda. Section III of the agreement stated in relevant part: “You
may terminate this Residency Agreement at any time, with or without cause, by
giving thirty (30) days prior written notice to the Community’s Executive
Director, or such other person as the Executive Director may designate ….”
Section V(J) of the agreement stated in relevant part: “This Residency
Agreement shall be construed and enforced in accordance with the laws of the
State in which the Community is located and shall be binding upon and inure
to the benefit of the parties hereto ….” App. V. II at 58. Section V(L) of the
agreement stated, in relevant part:
If the person signing this Residency Agreement is not the
Resident, the Community both requires and relies upon the
representation by the person that signs this Residency
Agreement, as Legal Representative, that he or she has been
authorized by the Resident to enter into and bind the Resident to
each and every one of the terms and conditions of this Residency
Agreement, both financial and non-financial, without any
restriction whatsoever. This authorization expressly includes but
is not limited to the authority to bind the Resident to the Binding
Arbitration Agreement. …
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 5 of 27
Id. at 59.
[9] Section VII of the Residency Agreement was entitled, in bold capital letters,
“BINDING ARBITRATION AGREEMENT” (Arbitration Agreement). Id.
at 63. The Arbitration Agreement stated, in relevant part:
THIS AGREEMENT GOVERNS IMPORTANT LEGAL
RIGHTS. PLEASE READ IT CAREFULLY AND IN ITS
ENTIRETY BEFORE SIGNING IT.
The parties wish to work together to resolve any disputes in a
timely fashion and in a manner that they believe will minimize
both of their legal costs. Therefore, in consideration of the
mutual promises in this Agreement, the Community and the
Resident hereby agree as follows:
A. What is Arbitration?
… In arbitration, the disputes are heard and decided by a private
individual called an arbitrator. The disputes will not be heard or
decided by a judge or jury under any circumstance. However,
just as in a court case, each party can be represented by an
attorney.
B. Disputes to be Arbitrated
Any and all claims or controversies involving the Community,
Resident and/or Legal Representative arising out of or in any
way relating to this Arbitration Agreement or any of the
Resident’s stays at the Community, including all disputes raised
by the Community, Resident or Legal Representative regarding
enforcement or interpretation of this Agreement, and including
but not limited to all disputes involving questions of waiver,
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 6 of 27
unconscionability, voidability or arbitrability, whether arising out
of State or Federal law, whether existing now or in the future,
whether sounding in breach of contract, tort or breach of
statutory duties (including, without limitation, claims based on
personal injury or death or claim for unpaid Community
charges), regardless of the basis for any duty or of the legal
theories upon which the claim is asserted, shall be submitted to
and resolved by binding arbitration. This includes claims against
the Community, its employees, agents, officers, directors, any
parent, subsidiary or affiliate of the Community.
C. Binding Nature of Arbitration
The decision rendered by the arbitrator shall be final and binding,
… There shall be no appeal of the arbitrator’s decision by either
party. The decision of the arbitrator shall be binding on all
parties to the arbitration, and all persons whose claim is derived
through or on behalf of the Resident, including, but not limited
to, any claims on behalf of any … guardian, … [or] legal
representative … of the Resident. The parties agree and
acknowledge that any award issued pursuant to an arbitration
hearing shall not include any amount for exemplary or punitive
damages.
D. Who Will Conduct Arbitration
***
In the event that a dispute arises, a written demand for
arbitration shall be made by the person(s) (the “Claimant” or
“Claimants”) asserting that a dispute exists ….
***
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 7 of 27
… The Claimants and Respondents shall agree upon an
Arbitrator ….
***
The Arbitrator shall resolve all disputes between the Claimants
and Respondents, without any restriction whatsoever, as it is the
parties’ intent to completely avoid the court system in such
matters.
***
E. Laws Governing Arbitration
The parties agree that the Community is engaged in interstate
commerce and that this Agreement to arbitrate disputes and the
arbitration shall be governed by the Federal Arbitration Act. If
for any reason there is a finding that the Federal Arbitration Act
cannot be applied to this Agreement, then the parties hereby
make it clear their intent that their disputes/claims be resolved
pursuant to the arbitration section of the Revised Code or such
similar statutes of the state in which the Community is located.
F. Confidentiality
You and Your Legal Representative and the Community agree to
keep all arbitration proceedings strictly confidential, …
G. Survival and Durability Provision
This Agreement shall survive the termination of, and changes to,
the Assisted Living Residency Agreement and Addenda and shall
apply to any of the Resident’s admissions to the Community. If
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 8 of 27
any term, phrase, or portion thereof of this Arbitration
Agreement is deemed invalid or unenforceable, the remaining
portions shall nevertheless remain in force.
Id. at 63-65 (emphasis original).
[10] At the end of the Arbitration Agreement, there is a line for the initials of the
Resident, and Guardian initialed that line as follows: “AG (Guardian).” Id. at
65.
[11] The “SIGNATURE PAGE FOR ASSISTED LIVING RESIDENCY
AGREEMENT” immediately follows the Arbitration Agreement. Id. at 66
(emphasis original). It states, in relevant part:
The undersigned certifies that he/she has read this Assisted
Living Residency Agreement and its Addenda or that the
Residency Agreement and its Addenda have been fully explained
to him/her, that he/she understands their contents, and has
received a copy of the Residency Agreement and its Addenda
and that he/she is the Resident, or a person authorized by the
Resident or otherwise authorized to execute this Residency
Agreement and its Addenda and accept all of the terms therein.
…
Id. (emphasis added). Guardian signed that page and dated it June 1, 2018.
Shew also signed the signature page as the “Community Representative,” and
dated it June 1, 2018. Id. The addenda A through S3 follow the signature page,
3
Addendum B states only that it is “intentionally deleted.” Id. at 69.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 9 of 27
and each addendum is dated June 1, 2018. Guardian and Shew signed each
addendum.
[12] On November 30, 2018, Guardian filed a complaint for breach of contract and
negligence against CSL, Spectrum,4 and Sullivan, who was an employee of
CSL. She alleged that, on or before August 7, 2018, Sullivan, while an
employee of CSL, sexually abused Resident and that CSL/Spectrum should be
held vicariously liable. On March 19, 2019, Guardian amended the complaint
to add Certiphi as a defendant who contracted with CSL to do a criminal
background check of Sullivan. The amended complaint alleged that CSL,
Spectrum, and Certiphi are liable for negligently failing to uncover in a criminal
background check Sullivan’s prior Indiana convictions of a sex crime and
murder.
[13] On January 25, 2019, CSL and Spectrum served Guardian with a Demand for
Arbitration. On February 9, counsel for Guardian and Resident advised CSL
that “the Arbitration Agreement is not valid and we will not agree to
[CSL/Spectrum’s] request to proceed with arbitration on that basis.” App. Vol.
II at 125. All defendants to the lawsuit subsequently moved the trial court to
dismiss and/or stay the trial court proceedings and to compel arbitration.
Guardian argued that the Arbitration Agreement is unconscionable, that the
4
Spectrum is the management company of CSL.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 10 of 27
trial court should find the Arbitration Agreement to be invalid, and that the
dispute should remain before the trial court.
[14] Following a hearing on the motions, on August 20, 2019, the trial court issued
an Order denying defendants’ motions to dismiss but granting the defendants’
motions to compel arbitration and stay proceedings. The August 20 order
stated, in relevant part:
***
The Court, in granting the Motions to Compel Arbitration,
concludes that the Arbitration Agreement is a valid and
enforceable contract to arbitrate the disputes that are the subject
of the Plaintiffs’ Amended Complaint. The Court further finds
that the Arbitration Agreement clearly and unmistakably
delegates matters of arbitrability and unconscionability to an
arbitrator, including whether Plaintiffs’ claims against all parties
should be subject to arbitration. Accordingly, it is for the
arbitrator to decide the issues relating to Plaintiffs’
unconscionability defense and whether Plaintiffs’ claims against
Defendants are subject to Arbitration. However, even if the issue
of unconscionability of the Arbitration Agreement were before
the Court, the Court would find that such provision was not
unconscionable.
Additionally, Certiphi Screening, although not a party to the
Arbitration Agreement, wants the claims that Plaintiffs have
asserted against it decided at the binding arbitration required by
the Arbitration Agreement. The Court finds the plain language
of the Arbitration Agreement expressly covers claims against
“agents.” Considering Plaintiffs’ allegations in this case and
drawing all reasonable inferences in favor of arbitration, the
Court finds that Plaintiffs’ agency theory of liability falls within
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 11 of 27
the scope of the Arbitration Agreement. For this reason, the
Court finds Plaintiffs’ claims against Certiphi Screening are
subject to arbitration.
Lastly, the Court finds both types of equitable estoppel present
themselves in this case and therefore mandate arbitration of
Plaintiffs’ claims against Certiphi Screening.
App. Vol. II at 24-25. This appeal ensued.
Discussion and Decision
Existence and Validity of Arbitration Agreement
[15] This is an appeal from an order compelling arbitration, which we review de
novo. Brumley v. Commw. Bus. Coll. Educ. Corp., 945 N.E.2d 770, 774-75 (Ind.
Ct. App. 2011).
The party seeking to compel arbitration has the burden of
proving the existence of a contract calling for arbitration.... After
a motion to compel arbitration has been made and supported, the
burden is on the non-movant to present evidence that the
supposed arbitration agreement is not valid or does not apply to
the dispute in question.
Id. at 775 (quotation and citation omitted).
[16] The Arbitration Agreement contained in the Residency Agreement states that
the Federal Arbitration Act (“FAA”), 9 USC § 1, et seq., applies to it. App. V.
II at 64.
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Congress enacted the FAA to overcome judicial resistance to
arbitration and to declare a national policy favoring arbitration of
claims that parties contract to settle in that manner. Vaden v.
Discover Bank, 556 U.S. 49 … (2009). The FAA places arbitration
agreements on an equal footing with other contracts and requires
courts to enforce them according to their terms. Volt Info. Sci.,
Inc. v. Bd. of Tr. of Leland Stanford Junior Univ., 489 U.S. 468 …
(1989). Like other contracts, however, arbitration agreements
may be invalidated by generally applicable contract defenses,
such as fraud, duress, or unconscionability. Doctor’s Assocs., Inc.
v. Casarotto, 517 U.S. 681, 687 … (1996). State law contract
principles apply to determine whether parties have agreed to
arbitrate. MPACT Constr. Group, LLC v. Superior Concrete
Constructors, Inc., 802 N.E.2d 901, 906 (Ind. 2004).
Brumley, 945 N.E.2d at 776.
[17] When considering whether parties agreed to arbitrate a dispute, a reviewing
court must attempt to determine the intent of the parties at the time the contract
was made by examining the language used to express their rights and duties.
Progressive Se. Ins. Co., v. Empire Fire & Marine Ins. Co., 88 N.E.3d 188, 194 (Ind.
Ct. App. 2017); see also Maynard v. Golden Living, 56 N.E.3d 1232, 1238 (Ind. Ct.
App. 2016) (“If the [contract] language is unambiguous, we may not look to
extrinsic evidence to expand, vary, or explain the instrument but must
determine the parties’ intent from the four corners of the instrument.”). We
presume that contracts represent the freely bargained agreement of the parties,
“reflecting the principle that it is in the best interests of the public not to
unnecessarily restrict the freedom to contract.” City of New Albany v. Cotner, 919
N.E.2d 125, 134 (Ind. Ct. App. 2010), trans. denied; see also Sanford v. Castleton
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 13 of 27
Health Care Ctr., 813 N.E.2d 411, 416 (Ind. Ct. App. 2004) (“Under Indiana
law, a person is presumed to understand and assent to the terms of the contracts
he or she signs.”).
[18] Here, the language of the arbitration agreement clearly and plainly states that
the parties agree to “binding arbitration” of all disputes “arising out of the
Arbitration Agreement or the Resident’s stay at [CSL], … whether sounding in
breach of contract [or] tort ….” App. Vol. II at 63. The contract also clearly
states that the decision rendered by an arbitrator “shall be final and binding, …
[with] no appeal of the arbitrator’s decision by either party.” Id. Furthermore,
the arbitration agreement states in a stand-alone paragraph: “The Arbitrator
shall resolve all disputes between the [Resident and CSL], without any
restriction whatsoever, as it is the parties’ intent to completely avoid the court system
in such matters.” Id. at 64 (emphasis added).5 The language of the agreement is
unambiguous and clearly evinces the parties’ intent to submit disputes such as
the breach of contract and tort claims of Guardian to binding arbitration.
[19] Despite the plain language of the arbitration agreement, Guardian and Amicus
Curiae Indiana Trial Lawyers Association assert that the agreement is invalid
5
Guardian challenges only the validity of the arbitration agreement, not the entire residency agreement as a
whole. “If a party challenges the validity of the precise agreement to arbitrate, the court must address the
challenge before ordering compliance with that agreement, [Rent–A–Center, West, Inc. v. Jackson, -- U.S. --, 130
S.Ct. 2772, 2778, 177 L.Ed.2d 403 (2010),] whereas ‘a challenge to the validity of the contract as a whole,
and not specifically to the arbitration clause, must go to the arbitrator.’ Buckeye Check Cashing, Inc. v. Cardegna,
546 U.S. 440, 449, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006).” Brumley, 945 N.E.2d at 777. Therefore, to the
extent the arbitration agreement purports to make its own existence an arbitrable issue, that part of the
agreement is invalid. Id.Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 14 of 27
because it is unconscionable. Where—as here—a party challenges only the
validity of the arbitration agreement and not the entire contract as a whole, the
question of whether an agreement to arbitrate is invalid as unconscionable is a
question to be addressed by the courts, not an arbitrator. 6 Brumley, 945 N.E.2d
at 777 (“If a party challenges the validity of the precise agreement to arbitrate,
the court must address the challenge before ordering compliance with that
agreement, [Rent–A–Center, West, Inc. v. Jackson, -- U.S. --, 130 S.Ct. 2772, 2778,
177 L.Ed.2d 403 (2010),] whereas ‘a challenge to the validity of the contract as
a whole, and not specifically to the arbitration clause, must go to the arbitrator.’
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 449, 126 S.Ct. 1204, 163
L.Ed.2d 1038 (2006).”).7 If the court finds that the arbitration clause is valid
and enforceable and applicable to the disputes at issue, the court “shall order
the parties to proceed with arbitration.” Sanford, 813 N.E.2d at 416.
[20] Like other contracts, arbitration agreements may be invalidated by generally
applicable contract defenses, such as unconscionability. Brumley, 945 N.E.2d at
776. As a general rule, a contract may be unenforceable due to
unconscionability when there is “a great disparity in bargaining power which
leads the party with the lesser power to sign a contract unwillingly and unaware
of its terms.” McAdams v. Foxcliff Est. Cmty. Ass’n, Inc., 92 N.E.3d 1144, 1150
6
The trial court erred to the extent it held otherwise. However, any such error was harmless because the
trial court held that, to the extent the issue was before it, the arbitration contract was not unconscionable.
7
Therefore, to the extent the arbitration agreement purports to make its own existence an arbitrable issue,
that part of the agreement is invalid. Id.Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 15 of 27
(Ind. Ct. App. 2018) (quotation and citation omitted). An unconscionable
contract is one that “no sensible person not under delusion or duress or in
distress would make, and one that no honest and fair person would accept.” Id.In Indiana,
[o]ur unconscionability jurisprudence is sub-divided into two
branches: substantive and procedural. Substantive
unconscionability refers to oppressively one-sided and harsh
terms of a contract, while procedural unconscionability involves
the manner and process by which the terms become part of the
contract.
Missler v. State Farm Ins. Co., 41 N.E.3d 297, 303 (Ind. Ct. App. 2015) (citations
omitted).
[21] Guardian alleges the arbitration agreement is both substantively and
procedurally unconscionable. She contends that it is substantively
unconscionable because its terms requiring arbitration and prohibiting judicial
review, requiring confidentiality of arbitration proceedings, and limiting
damages are “oppressively one-sided and harsh.” Appellant’s Br. at 19.
Essentially, Guardian asserts that the arbitration agreement is an “adhesion
contract,” i.e., “a standardized contract, which, imposed and drafted by the
party of superior bargaining strength, relegates to the subscribing party only the
opportunity to adhere to the contract or reject it.” Sanford, 813 N.E.2d at 417.
However, a contact is not unenforceable merely because one party enjoys
advantages over another, and an adhesion contract is not per se
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 16 of 27
unconscionable.8 Id.; see also, e.g., Four Seasons Mfg., Inc. v. Coliseum, LLC, 870
N.E.2d 494, 502-03 (Ind. Ct. App. 2007) (holding parties may contract to limit
damages as long as the limitation is “so definite and positive in its terms as to
show the clear intention of the parties”); Horner v. Carter, 981 N.E.2d 1210,
1211 (Ind. 2013) (“Indiana policy strongly favors the confidentiality of all
matters that occur during mediation.”) Rather, a contract is substantively
unconscionable when “the weaker party, in need of goods or services, is not in
a position to shop around for better terms, either because the author of the
standard contract has a monopoly or the other competitors use the same
contract. …” DiMizio v. Romo, 756 N.E.2d 1018, 1024 (Ind. Ct. App. 2001)
(quotation and citation omitted), trans. denied.
[22] Guardian has pointed to no evidence indicating that she was the weaker party
or that she was not in a position to “shop around for better terms.” Id. In fact,
the evidence shows that Guardian did investigate other facilities as possible
placements for Resident. And, although Guardian now states that she did not
understand that she was agreeing to confidentiality of arbitration and waiving
Resident’s access to courts and claims for punitive and exemplary damages, she
provides no explanation as to why she did not understand the clear, plain terms
of the contract that did just that. She does not establish—or even claim—that
8
Furthermore, an arbitration contract is not per se unconscionable simply because it must be signed in order
to be admitted to a nursing facility, as Guardian contends, citing Maynard, 56 N.E.3d 1232. This court has
found such arbitration provisions not unconscionable in other cases involving nursing home facilities. See
Tender Loving Care Mgmt., Inc. v. Sherls,14 N.E.3d 67 (Ind. Ct. App. 2014); Sanford, 813 N.E.2d 411.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 17 of 27
she had difficulty understanding the terms of the agreement or that she initialed
and signed it unwillingly. See Tender Loving Care Mgmt., Inc. v. Sherls,14 N.E.3d
67, 75 (Ind. Ct. App. 2014) (holding an arbitration provision of nursing home
contract was not unconscionable in part because there was no allegation that
the signatory had difficulty understanding the terms of the Agreement or that he
unwillingly signed it). Nor does Guardian provide evidence that she was
precluded from asking CSL questions about the agreement; rather, the evidence
establishes that Guardian had an appointment with CSL for that exact purpose
but cancelled that appointment and did not seek any explanation of the contract
thereafter. Moreover, the terms of the agreement do not prohibit Resident from
seeking relief for her claims; they simply require that such claims be decided in
binding arbitration and not include claims for punitive or exemplary damages.
See id. The agreement is not substantively unconscionable.
[23] Guardian also contends that the Arbitration Agreement is procedurally
unconscionable because the arbitration clause was three pages of an “eighty-
three-page document,” Appellant’s Br. at 24, and CSL provided her with the
document “less than twenty-four hours before move-in,” Appellant’s Reply Br.
at 12. CSL emailed the residency and arbitration agreements to Guardian on
the morning of May 31, 2018, four calendar days before Resident’s move-in
date of June 4; that is not an insufficient period of time in which to read a
contract. And there is no evidence to suggest that Guardian sought and/or was
denied additional time in which to review the agreements.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 18 of 27
[24] Furthermore, the arbitration agreement was not “buried or hidden in the
Contract,” as Guardian seems to suggest. Sanford, 813 N.E.2d at 417. Rather,
as was the case with the nursing home arbitration agreement at issue in Sanford,
the arbitration agreement here had its own heading in bold capital letters; it is
immediately followed by a signature line requiring Guardian to provide her
initials, which she did; and there is no evidence that Guardian was precluded
from reading the agreement and asking questions about it. Id. at 418. In
addition, the very beginning of the arbitration agreement states in bold capital
letters and in a larger font than the rest of the contract, “THIS AGREEMENT
GOVERNS IMPORTANT LEGAL RIGHTS. PLEASE READ IT
CAREFULLY IN ITS ENTIRETY BEFORE SIGNING IT.” App. Vol. II at
63. That Guardian apparently chose to ignore that warning does not make the
contract unconscionable.
[25] Finally, Amicus Curiae Indiana Trial Lawyers Association contends that
predispute arbitration agreements for nursing home facilities such as the one in
this case are unconscionable as against public policy. However, the Residency
Agreement was a contract for Resident to live in CSL’s “assisted living and
memory care apartments,” not a nursing home facility. App. Vol. II at 45. 9
9
CSL disputes that it is a nursing home facility; rather, it states it is an assisted living facility and it
submitted an affidavit to that effect in its Appendix, although the affidavit was not submitted in the trial
court. It is well-settled that we may not consider matters outside the record in ruling on an appeal. Schaefer v.
Kumar, 804 N.E.2d 184, 187 n. 3 (Ind.Ct.App.2004), trans. denied. And “[f]actual material which was not
part of the record in the trial court cannot be made part of a case on appeal merely by including it in an
appendix to a party's brief.” Chesterfield Mgmt., Inc. v. Cook, 655 N.E.2d 98, 101 (Ind. Ct. App. 1996), trans.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 19 of 27
Regardless, Indiana case law makes it clear that predispute arbitration
agreements—whether for assisted living or nursing home facilities—are not
unconscionable, per se, as against public policy in this state.
[26] In determining whether an otherwise valid agreement is contrary to declared
public policy, we
keep in mind the principle that it is to the best interest of the
public that persons should not be unnecessarily restricted in their
freedom of contract and that their agreements are not to be held
void as against public policy, unless they are clearly contrary to
what the constitution, the legislature, or the judiciary have
declared to be the public policy or unless they clearly tend to the
injury of the public in some way.
Gabrill Cabinet Co., Inc. v. Sullivan, 919 N.E.2d 1162, 1168 (Ind. Ct. App. 2010)
(quoting Raymundo v. Hammond Clinic Ass’n, 449 N.E.2d 276, 279 (Ind. 1983)).
This court has repeatedly upheld nursing facilities’ predispute arbitration
agreements as not unconscionable or fraudulently induced. See Maynard, 56
N.E.3d at 1237, 1239-40 (noting Indiana’s “strong public policy favoring
enforcement of arbitration agreements”); Sherls, 14 N.E.3d at 75 (holding
arbitration clause in nursing home facility’s admission agreement was not an
unconscionable adhesion contract); Sanford, 813 N.E.2d at 417-18 (same). See
also Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (2012) (holding a state
denied. Moreover, Indiana Appellate Rule 34(F), cited by CSL, is only applicable to appellate motions
practice. Therefore, we do not consider the affidavit contained in CSL’s appendix.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 20 of 27
law categorically prohibiting predispute arbitration agreements regarding
personal injury claims against nursing homes was preempted by the FAA, 9
U.S.C. § 2, which allows such agreements). Thus, in Indiana, predispute
arbitration agreements in nursing home facility contracts are not, per se, against
public policy. We see no reason why that case law does not apply equally to
assisted living facility contracts.
[27] The cases from other states that Amicus cites did not declare nursing home
arbitration agreements unconscionable as a matter of public policy but found
the particular arbitration agreements at issue in those cases unconscionable
based on facts distinguishable from those at issue in this case. In Rankin v.
Brinton Woods of Frankford, LLC, unlike here, the arbitration provision was
simply two numbered paragraphs within the contract as a whole, in the same
format as every other provision, and lacking “any apparent emphasis by either
bolded, underlined, or italicized language.” 241 Md. App. 604, 624, 211 A.3d
645, 657 (2019). In Lopez v. Bartlett Care Ctr., LLC, the arbitration provision was
unenforceable in part because it lacked mutuality in that it required residents to
arbitrate claims but allowed the facility to pursue claims in court. 39 Cal. App.
5th 311, 321-22, 251 Cal. Rptr. 3d 813, 822 (2019). In Romano ex rel. Romano v.
Manor Care, Inc., the arbitration provision was unconscionable in part because it
deprived the resident of important statutory remedies the state legislature
deemed important to reduce elder abuse in nursing homes. 861 So.2d 59, 62-63
(Fla. Dist. Ct. App. 2003).
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 21 of 27
[28] Amicus also directs our attention to a federal Centers for Medicare and
Medicaid Services (“CMS”) regulation that prohibits long-term care facilities
such as nursing homes from requiring that a resident sign a binding arbitration
agreement as a condition of admission to the facility. 42 C.F.R. § 483.70(n).
Amicus also points to policy statements of the American Bar Association
(“ABA”),10 the National Association of Social Workers (“NASW”),11 and the
American Association of Retired Persons (“AARP”) 12 which oppose
mandatory, binding, predispute arbitration agreements between residents and
long-term care facilities. However, both the federal regulation and the policy
statements all relate solely and explicitly to long-term care facilities, and CSL
did not contract with Resident for placement in such a facility. Moreover, none
of those authorities are binding upon us in this case, whereas relevant Indiana
caselaw clearly allows for otherwise valid predispute binding arbitration
agreements in the nursing home setting. Maynard, 56 N.E.3d 1232; Sherls, 14
N.E.3d 67; Sanford, 813 N.E.2d 411.
10
https://www.americanbar.org/content/dam/aba/directories/policy/2009_my_111b.authcheckdam.pdf
[https://perma.cc/3AZX-TMBF].
11
https://www.socialworkers.org/LinkClick.aspx?fileticket=rVC5l9q6hSA%3D&portalid=0
[https://perma.cc/2TKF-4SVY].
12
https://www.aarp.org/content/dam/aarp/politics/advocacy/2017/08/comments-cms-ltc-facility-
arbitration-proposed-rule-final-august-2017-aarp.pdf [https://perma.cc/STG4-T7B6].
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 22 of 27
[29] The arbitration agreement is valid, enforceable, and applicable to Guardian’s
breach of contract and negligence claims against CSL, Spectrum, and/or
Sullivan.13 The trial court did not err in compelling arbitration of those claims.
Applicability of Arbitration Agreement to Certiphi
[30] Certiphi filed its own motion to compel arbitration of Guardian’s claims against
it, even though Certiphi is not a signatory to either the Residency Agreement or
the Arbitration Agreement. As a general rule, only parties to a contract or
those in privity with the parties have rights under the contract. E.g., M Jewell,
LLC v. Bainbridge, 113 N.E.3d 685, 689 (Ind. Ct. App. 2018). However, “a non-
signatory to an agreement may bind a signatory to an arbitration clause” under
certain circumstances,14 including under a theory of equitable estoppel. German
Am. Fin. Advisors & Tr. Co. v. Reed, 969 N.E.2d 621, 627 (Ind. Ct. App. 2012).
In Reed, this Court adopted the reasoning of MS Dealer Serv. Corp. v. Franklin,
which stated:
[E]quitable estoppel allows a nonsignatory to compel arbitration
in two different circumstances. First, equitable estoppel applies
when the signatory to a written agreement containing an
arbitration clause must rely on the terms of the written agreement
in asserting its claims against the nonsignatory. When each of a
signatory’s claims against a nonsignatory makes reference to or
presumes the existence of the written agreement, the signatory’s
13
Guardian does not challenge application of the arbitration agreement to Spectrum or Sullivan separately
from her claim that the arbitration agreement is not valid as to CSL.
14
One such circumstance is where the nonsignatory is a third-party beneficiary of the contact. Id. However,
Certiphi makes no such claim and the trial court did not base its decision on such a theory.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 23 of 27
claims arise out of and relate directly to the written agreement,
and arbitration is appropriate. Second, application of equitable
estoppel is warranted when the signatory to the contract
containing an arbitration clause raises allegations of substantially
interdependent and concerted misconduct by both the
nonsignatory and one or more of the signatories to the contract.
Otherwise the arbitration proceedings between the two
signatories would be rendered meaningless and the federal policy
in favor of arbitration effectively thwarted.
177 F.3d 942, 947 (11th Cir. 1999) (citations omitted); Reed, 969 N.E.2d at 627.
See also Williams v. Orentlicher, 939 N.E.2d 663, 670 (Ind. Ct. App. 2011) (noting
“when the nonsignatory concedes arbitrability on a contract issue, [federal]
courts have routinely held the signatory to be bound by its arbitration clause”),
trans. dismissed; cf. Daimler Chrysler Corp., v. Franklin, 814 N.E.2d 281, 285-86
(Ind. Ct. App. 2004) (holding, where no equitable estoppel claim was raised, that
nonsignatory could not bind signatory to arbitration agreement when there was
no showing nonsignatory was in privity with a signatory or was a third-party
beneficiary of the agreement). The trial court held that the claims against
Certiphi must be arbitrated based on the holding in Reed.
[31] It is clear that at least the second equitable estoppel circumstance is present in
this case.15 That is, Guardian’s Count II negligence claims against all of the
defendants are interdependent and raise allegations of concerted misconduct by
15
We do not address Certiphi’s contention and the trial court’s holding that the first equitable estoppel
circumstance is present here, as we find arbitration binding under the second equitable estoppel circumstance
identified in Reed.
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all of the defendants. Guardian alleges that CSL/Spectrum and Certiphi
negligently failed to conduct an appropriate criminal background check on
CSL’s employee, Sullivan.16 Those claims will require the presentation of the
same evidence; i.e., evidence that (1) CSL/Spectrum hired Certiphi to do the
background check of Sullivan; (2) Certiphi failed to properly do that
background check; and (3) the failure to do a proper background check resulted
in CSL’s employee, Sullivan, harming Resident. In other words, Guardian
cannot prove CSL/Spectrum was negligent in doing a background check of
Sullivan unless it proves Certiphi did not do an appropriate background check
of Sullivan, as CSL/Spectrum had requested. See Reed, 969 N.E.2d at 627(holding Reed was required to arbitrate claims against a nonsignatory where
those claims stemmed from conduct of the employee of the signatory and the
contractual relationship between the signatories to the contract).
[32] Furthermore, we note that we have held signatories to be bound to their broad-
reaching agreements to arbitrate when there is no contract language
contradicting that agreement. See Dulworth v. Bermudez, 97 N.E.3d 272, 281
(Ind. Ct. App. 2018) (release from liability was applicable to nonsignatory
where the unambiguous, broad language of the release clearly applied to “all
16
Guardian contends in her briefs that her negligence claims against CSL/Spectrum are not dependent upon
a showing that Certiphi negligently failed to do a proper background check on CLS’s employee. However,
that is simply not true. The second count of Guardian’s complaint alleges no basis for CSL/Spectrum’s
negligence other than the failure to do a proper background check of Sullivan. And if Certiphi was not
negligent in failing to uncover Sullivan’s criminal background, then CSL/Spectrum was not negligent as to
the background check either because they hired Certiphi to do it.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 25 of 27
other persons” and contained no contradictory terms); Medical Realty Assoc.,
LLC v. D.A. Dodd, Inc., 928 N.E.2d 871, 875 (Ind. Ct. App. 2010) (signatory
defendant was permitted to require signatory plaintiff to arbitrate claim against
nonsignatory where arbitration provision used “broad sweeping phrases such as
‘any claims’ and ‘all claims’” and did not specifically exclude the claim against
the nonsignatory). Here, the arbitration agreement contains broad, sweeping
language under which “any and all claims involving … any of the Resident’s
stays at [CSL] … shall be submitted to and resolved by binding arbitration[,] …
[including] claims against [CSL’s] employees, agents, officers, directors, any
parent, subsidiary or affiliate of [CSL].” App. Vol. II at 63. And there is no
language in the agreement contradicting the broad agreement to arbitrate “all
claims.” See Dulworth, 97 N.E.3d at 281 (“Language which releases ‘all
persons’ does just that and is clear as long as no other terms are contradictory.”)
(quoting Dobson v. Citizen Gas & Coke Util., 634 N.E.2d 1343, 1345 (Ind. Ct.
App. 1994)).
[33] The trial court did not err when it required Guardian to arbitrate her claims
against Certiphi.17
17
Because we hold that equitable estoppel principles require arbitration of Guardian’s claims against
Certiphi, we do not address Certiphi’s contention that it is entitled to arbitration because Guardian brought
an “agency theory” of liability against it.
Court of Appeals of Indiana | Opinion 19A-CT-2191 | March 17, 2020 Page 26 of 27
Conclusion
[34] It is clear from the plain language of the Arbitration Agreement that it applies
to Guardian’s claims against CSL (and, since not challenged by Guardian,
Spectrum and Sullivan), and there is no evidence establishing that the
Arbitration Agreement is invalid as unconscionable and against public policy.
In addition, because Count II of Guardian’s complaint raises allegations of
substantially interdependent and concerted misconduct by both Certiphi (a
nonsignatory) and CSL (a signatory), Guardian is equitably estopped from
asserting that her claims against Certiphi are not subject to the broad language
of her agreement to arbitrate “all claims.”
[35] Affirmed.
Kirsch, J., and Mathias, J., concur.
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