NC Leasing, LLC v. Nilene Junker

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2014-CA-00338-SCT
NC LEASING, LLC d.b.a.
THE NICHOLS CENTER
v.
NILENE JUNKER
DATE OF JUDGMENT: 02/27/2014
TRIAL JUDGE: HON. JOHN HUEY EMFINGER
COURT FROM WHICH APPEALED: MADISON COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANT: JOSEPH SPENCER YOUNG, JR.
ATTORNEYS FOR APPELLEE: JOHN F. HAWKINS
RALPH TODD WILLIS, JR.
NATURE OF THE CASE: CIVIL - PERSONAL INJURY
DISPOSITION: REVERSED AND REMANDED - 08/13/2015
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE RANDOLPH, P.J., PIERCE AND COLEMAN, JJ.
COLEMAN, JUSTICE, FOR THE COURT:
¶1. Nilene Junker was admitted to the Nichols Center nursing facility for rehabilitation
after surgery. Junker’s daughter, acting with power of attorney, signed an admission
agreement on Junker’s behalf. The admission agreement contained an arbitration clause.
While she was being put in a room, Junker fell and sustained injuries. Junker sued the
Nichols Center, and the nursing home filed a motion to compel arbitration. The circuit court
denied the motion, finding that the arbitration agreement was unenforceable because the
forum was unavailable. The Nichols Center appealed.
Factual Background and Procedural History
¶2. Nilene Junker underwent a total knee replacement in November 2010. Following the
surgery, an ambulance transported her from St. Dominic Hospital to the Nichols Center
nursing facility for rehabilitation. When the nursing home admitted Junker, her daughter
signed an admission agreement on Junker’s behalf.1 When the facility placed her in a room,
the bed had to be moved to make room; an attendant failed to lock the bed in place after
moving it. Junker stood up and leaned on the bed, and it slid out from under her. Junker
suffered injuries as a result of the fall.2
¶3. The admission agreement contained an arbitration clause, which provided the
following, in pertinent part:
ARBITRATION – PLEASE READ CAREFULLY
1. It is understood and agreed by the Facility and Resident and/or Responsible
Party that any legal dispute, controversy, demand or claim (hereinafter
collectively referred to as “claim” or “claims”) that arises out of or relates to
the Admission Agreement, any service or health care provided by the Facility
to the Resident or any matter related to the Resident’s stay shall be resolved
exclusively by binding arbitration pursuant to the Federal Arbitration Act, to
be conducted at a place agreed upon by the parties, or in the absence of such
agreement, at the Facility, in accordance with the procedural rules of the
American Arbitration Association (“AAA”) under its Commercial Arbitration
Rules, and not by a lawsuit or resort to court process except to the extent
applicable state or federal law provides for judicial review of arbitration
proceedings or the judicial enforcement of arbitration awards. The Commercial
Arbitration Rules established by the AAA (“the Rules”) are referred to only to
1
Neither party raised the issue of whether Junker’s daughter had authority to execute
the admission agreement and consent to arbitration on Junker’s behalf.
2
At the time of the fall, Junker had been admitted to the Nichols Center, and her
daughter had executed the admission agreement. Junker does not dispute that the admission
agreement was in effect when the incident occurred.
2
provide a procedural guideline for arbitrations held under this Agreement. The
Parties do not agree to use the AAA to conduct or administer any arbitration
under this Agreement or to confer any jurisdiction to the AAA; nor do they
agree to use the AAA’s arbitrators. Accordingly, the availability or willingness
of the AAA to administer any arbitration is irrelevant to this Agreement. The
Parties agree that no AAA Rules, policies or procedures which are inconsistent
with the specific terms or intent of this Agreement, including any requirement
that the Parties enter into a post-dispute agreement to arbitrate, will be applied
to or followed in any arbitration held under this Agreement. The Parties may
mutually agree to further deviate from said rules of the American Arbitration
Association in whole or in part. Otherwise, said procedural Rules shall govern
the arbitration.
2. The parties agree that any dispute shall be arbitrated by one impartial,
unbiased arbitrator who shall be chosen by mutual agreement of the parties.
The arbitrator’s decision shall be final and binding. The parties agree that
judgment may be entered on any arbitration award in any court having
jurisdiction.
...
7. The parties understand and agree that by entering this arbitration
agreement, which binds both the Facility and the Resident/Responsible
Party, they are giving up and waiving their constitutional right to have any
claim decided in a court of law before a judge and a jury.
...
10. The parties agree the Resident and Responsible Party have other choices
with regard to the provision of long term care to the Resident and they enter
into this Agreement voluntarily. The parties acknowledge that this Agreement
involves interstate commerce and that this Arbitration Agreement shall be
governed by and interpreted under the Federal Arbitration Act, 9 U.S.C.
Sections 1-16.
(Emphasis in original.) A final notice was printed above the daughter’s signature, in bold
and all capital letters, which read: “THE UNDERSIGNED ACKNOWLEDGE THAT
EACH OF THEM HAS READ AND UNDERSTANDS THIS AGREEMENT,
INCLUDING THE ARBITRATION PROVISION, AND HAS RECEIVED A COPY
3
OF THIS AGREEMENT, AND THAT EACH OF THEM VOLUNTARILY
CONSENTS TO AND ACCEPTS ALL OF ITS TERMS.”
¶4. In December 2012, Junker sued the Nichols Center and the ambulance service that
transported her to the nursing home. The Nichols Center moved to compel arbitration.
Junker responded in opposition, arguing that the arbitration agreement was unconscionable
and unenforceable because it did not provide a forum for arbitration. Junker’s position was
based on the fact that the American Arbitration Association (“AAA”) no longer accepts
healthcare cases “involving individual patients without a post-dispute agreement to arbitrate.”
Junker argued that, because she did not agree to arbitrate, the parties would not be able to
agree on an arbitrator. Thus, according to the agreement, the AAA would need to administer
the arbitration and, because the AAA was no longer taking healthcare cases, Junker
maintained that the forum was unavailable. The Nichols Center responded that a forum was,
in fact, available because the agreement did not require the parties to use the AAA. The
agreement only required the parties to use the AAA procedural rules as a guideline; the
agreement specifically said that the AAA would not conduct the arbitration and that the
parties did not agree to use AAA arbitrators. The Nichols Center maintained that Junker’s
unavailable-forum argument was without merit.
¶5. The circuit court denied the motion to compel arbitration. The court announced a
ruling from the bench without hearing arguments from the parties. The court held that the
arbitration agreement was not valid and that the “arbitration agreement must fail because it
4
does not make provision for an arbitrator in the event the parties could not agree.” The
Nichols Center appealed the denial of its motion to compel arbitration.
Discussion
¶6. “Notwithstanding the lack of a final judgment or a grant of a petition for interlocutory
appeal, this Court has jurisdiction over an appeal from a denial of a motion to compel
arbitration.” United Credit Corp. v. Hubbard, 905 So. 2d 1176, 1177 (¶ 6) (Miss. 2004)
(citing Tupelo Auto Sales, Ltd. v. Scott, 844 So. 2d 1167, 1169-70 (¶¶ 6-10) (Miss. 2003)).
We review a trial court’s denial of a motion to compel arbitration de novo. Sawyers v.
Herrin-Gear Chevrolet Co., Inc., 26 So. 3d 1026, 1034 (¶ 20) (Miss. 2010) (citing East
Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (Miss. 2002)). The Court has adopted the federal
policy in favor of arbitration, and “any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration.” Sawyers, 26 So. 3d at 1034 (¶ 20) (quoting
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).
¶7. Junker maintains that the contract fails because there is no mutual agreement as to an
arbitrator and no legally valid method to enforce the arbitration agreement. The Nichols
Center argues that the trial court mistakenly believed that the dispute was over the selection
of an arbitrator when the dispute actually concerned Junker’s refusal to submit to arbitration.
Further, the Nichols Center maintains that Section 5 of the Federal Arbitration Act governs
and, in the event the parties could not agree on an arbitrator, the court could appoint one.
¶8. The circuit court judge denied the Nichols Center’s motion to compel arbitration,
holding that the arbitration agreement failed to provide a forum because it did “not make
5
provision for an arbitrator in the event the parties could not agree.” The judge stated that the
agreement could have provided for the court to appoint an arbitrator if the parties did not
agree, but it did not. The court held that it would not reform the agreement to select a forum
that was not anticipated by either party.3 Because Junker refused to consider arbitration,
much less agree to an arbitrator, the court concluded that it would be left to appoint an
arbitrator, which it should not do absent an express provision, and the court deemed the
agreement to be invalid. The trial court erred in two regards. First, the agreement did
provide a method for arbitrator selection if the parties could not agree. Second, the issue of
arbitrator selection was not properly before the court, as there is no evidence to suggest that
Junker made any good faith attempt to comply with the terms of the agreement and attempt
to mutually select an arbitrator.
A. Arbitrator Selection
¶9. Junker argues that the contract is “nothing more than an agreement to ‘mutually’ agree
on essential terms in the future” because the agreement did not provide a method for
selecting an arbitrator in the event the parties could not agree. Junker is incorrect. Section
10 of the agreement provided: “The parties acknowledge that this Agreement involves
interstate commerce and that this Arbitration Agreement shall be governed by and interpreted
under the Federal Arbitration Act, 9 U.S.C. Sections 1-16.” Section 5 of the Federal
3
The trial court relied exclusively on Covenant Health & Rehabilitation of
Picayune, LP v. Estate of Moulds, 14 So. 3d 695, 707 (¶ 38) (Miss. 2009) (The Court has
held that courts “should not become a party to redrafting or reforming agreements [and] . .
. should not be used to reform a contract to select a forum not anticipated by either of the
parties.”).
6
Arbitration Act provides a mechanism for appointing an arbitrator if the parties cannot agree:
If in the agreement provision be made for a method of naming or appointing
an arbitrator or arbitrators or an umpire, such method shall be followed; but if
no method be provided therein, or if a method be provided and any party
thereto shall fail to avail himself of such method . . . then upon the application
of either party to the controversy the court shall designate and appoint an
arbitrator or arbitrators or umpire, as the case may require, who shall act under
the said agreement with the same force and effect as if he or they had been
specifically named therein; and unless otherwise provided in the agreement the
arbitration shall be by a single arbitrator.
9 U.S.C.A. § 5. Under Section 5 of the FAA, the court is to appoint an arbitrator in the event
the parties cannot agree. The parties’ agreement specifically provided that it involved
interstate commerce and was governed by the FAA.
¶10. Although this Court has not previously adopted Section 5 of the FAA, we have
“endorsed the undisputed province of the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (FAA),
and recognized its clear authority to govern agreements formed in interstate commerce
wherein a contractual provision provides for alternative dispute resolution.” Adams Cmty.
Care Ctr., LLC v. Reed, 37 So. 3d 1155, 1158 (¶ 6) (Miss. 2010). See also Slater-Moore v.
Goeldner, 113 So. 3d 521, 525 (¶ 8) (Miss. 2013) (“The Federal Arbitration Act governs the
enforcement of arbitration contracts that evidence a transaction in interstate commerce.”);
IP Timberlands Operating Co. v. Denmiss Corp., 726 So. 2d 96, 107 (¶ 45) (Miss. 1998)
(“The Arbitration Act, resting on Congress’s authority under the Commerce Clause, creates
a body of federal substantive law that is applicable in both state and federal courts.”). We
have held that nursing home admissions agreements affect interstate commerce and are
governed by the FAA. Adams Cmty. Care Ctr., 37 So. 3d at 1158 (¶ 6); Grenada Living
7
Ctr., LLC v. Coleman, 961 So. 2d 33, 36 (¶ 7) (Miss. 2007).
¶11. While the court may be called upon to appoint an arbitrator if the parties cannot agree,
in the instant case, the circuit court was not yet at that juncture. From the record, there is no
evidence to suggest that Junker made any good faith attempt to comply with the terms of the
arbitration agreement or to “mutually agree” with the Nichols Center on the selection of an
arbitrator. Junker asserts only that she “does not agree to arbitrate under any circumstance.”
The parties were not seeking the appointment of an arbitrator in the wake of disagreement;
rather, the Nichols Center sought to compel Junker to arbitrate the dispute according to the
terms of the agreement as written, including the mutual selection of an arbitrator. Without
any attempt by the parties to select an arbitrator, it is mere speculation to conclude that no
arbitrator will ever be mutually agreeable. And, if the parties reached that point, the court
would be called upon to appoint an arbitrator pursuant to Section 5 of the FAA.
B. Motion to Compel
¶12. When ruling on a motion to compel arbitration, a court’s inquiry is two-pronged.
Rogers-Dabbs Chevrolet-Hummer, Inc. v. Blakeney, 950 So. 2d 170, 173 (¶ 12) (Miss.
2007) (citing East Ford, 826 So. 2d at 713 (¶ 9)). Under the first prong, the court must
determine whether the parties agreed to arbitrate. Id. In making that determination, two
considerations should be weighed: (1) whether a valid arbitration agreement exists and (2)
whether the parties’ dispute falls within the scope of the arbitration agreement. Id. Only
after satisfying the first prong and finding that the parties agreed to arbitrate does the Court
move to the second prong of the analysis. The second prong then considers “whether legal
8
constraints external to the parties’ agreement foreclosed arbitration of those claims.” Id.
¶13. In assessing the validity of arbitration agreements under the first prong of the analysis,
courts apply contract law to determine whether parties entered into a valid contract. Adams
Cmty. Care, 37 So. 3d at 1158 (¶ 7) (citing Grenada Living Ctr., 961 So. 2d at 36-37 (¶ 9)).
The essential elements of a contract include: “(1) two or more contracting parties, (2)
consideration, (3) an agreement that is sufficiently definite, (4) parties with legal capacity to
make a contract, (5) mutual assent, and (6) no legal prohibition precluding contract
formation.” Id. Rather than engaging in an inquiry into the validity of the contract, the
circuit court dismissed the arbitration agreement as invalid simply because it concluded that
no arbitrator was available. The court focused on provision E2 of the agreement, which
provides that “any dispute shall be arbitrated by one impartial, unbiased arbitrator who shall
be chosen by mutual agreement of the parties.” Because Junker refused to arbitrate and
insisted that the parties would not be able to agree on an arbitrator, the court found that the
agreement was invalid. The court focused its ruling on arbitrator selection alone and did not
address the above contractual elements under the first prong of the analysis.
¶14. In Covenant Health & Rehab. of Picayune, LP v. Estate of Moulds, 14 So. 3d 695
(Miss. 2009), the Court addressed whether an arbitration agreement between a nursing home
and a resident was unenforceable when the designated arbitration forum was unavailable.
The arbitration agreement in that case “require[d] that the arbitration be administered by the
AAA.” Moulds, 14 So. 3d at 709 (¶ 44). Because the AAA refused to arbitrate the claim,
the Court found that the designated forum was unavailable. Id. The Court declined to
9
rewrite the arbitration agreement to include a forum that neither party anticipated. Id. at 707
(¶ 38).
¶15. Junker relies on Moulds to assert that the agreement must be invalid because it fails
to provide an available forum. But the arbitration agreement between Junker and the Nichols
Center is distinguishable from the Moulds agreement. Unlike the agreement in Moulds, the
arbitration agreement here does not present an issue of forum unavailability. The terms of
the agreement require that the parties arbitrate “in accordance with the procedural rules of
the AAA.” (Emphasis added.) Further, the agreement emphasizes that “the [p]arties do not
agree to use the AAA to conduct or administer any arbitration agreement . . . nor do they
agree to use the AAA’s arbitrators.” (Emphasis added.) Where the Moulds agreement
designated the AAA as arbitrator, the agreement in the instant case designated “one impartial,
unbiased arbitrator who shall be chosen by mutual agreement.” And, as discussed above, if
the parties cannot agree, the court can appoint an arbitrator pursuant to Section 5 of the FAA.
¶16. The fact that the AAA will no longer administer healthcare-related arbitration in the
absence of a post-dispute agreement has no bearing on the agreement’s validity. The
arbitration agreement between Junker and the Nichols Center expressly states that “the
availability or willingness of the AAA to administer any arbitration is irrelevant in this
Agreement.” The agreement goes on to provide that “no AAA Rules, policies or procedures
[that] are inconsistent with the specific terms or intent of this Agreement . . . will be applied
to or followed in any arbitration held under this agreement.” The parties clearly
contemplated the AAA’s refusal to arbitrate potential claims when the agreement was
10
drafted. Upon that consideration, the parties agreed only to arbitrate according to the AAA’s
procedural rules not inconsistent with other terms of the agreement. It does not appear that
the Moulds agreement contained such express language limiting the AAA’s involvement.
¶17. Other courts in Mississippi and neighboring states have affirmed that the AAA’s
refusal to arbitrate a claim does not automatically preclude arbitration as a form of dispute
resolution. In Trinity Mission Health and Rehabilitation of Clinton v. Estate of Scott, 19
So. 3d 735, 742 (Miss. Ct. App. 2008), the wrongful death beneficiary of a prior patient
argued that her pre-dispute arbitration agreement with the nursing home was unenforceable
after the AAA announced that it would no longer arbitrate cases without a post-dispute
agreement. The Court of Appeals commented that “[w]hile it would appear that the AAA
would not administer the arbitration of this claim since there is only a pre-dispute agreement
to arbitrate, it does not mean that arbitration is precluded. Arbitration pursuant to the AAA’s
rules and procedures would still be possible.” Id. at 742 (¶ 32). Because the arbitration
provision contained a process for choosing an arbitrator aside from the AAA, the court
refused to find the agreement unenforceable on that ground. Id. The Alabama Supreme
Court has similarly resolved the issue of whether claims are arbitrable in the absence of AAA
administration. See Blue Cross Blue Shield Alabama v. Rigas, 923 So. 2d 1077, 1092 (Ala.
2005) (enforcing an arbitration agreement that required arbitration in accordance with AAA
rules, but not administration by the AAA). In the instant case, both parties signed the
agreement, thereby acknowledging that potential claims would be administered by a mutually
agreeable arbitrator with or without the AAA’s willingness to administer arbitration.
11
Because the agreement expressly limited the AAA’s involvement and provided a method for
choosing another capable arbitrator, Junker’s forum-unavailability argument fails.
¶18. The Nichols Center opines that Junker must adhere to the procedures set forth in the
agreement by submitting her claim to arbitration. The nursing home relies on the Court’s
language in Slater-Moore v. Goeldner, 113 So. 3d 521, 528 (Miss. 2013), which states that
“[t]here is no reason this Court should not compel a party to submit a post-contract dispute
to arbitration if a valid arbitration agreement so requires.” In Slater-Moore, the Court
affirmed the grant of a motion to compel arbitration of an attorney-client fee dispute. Upon
finding that the two-pronged motion to compel test was satisfied, the Court rejected the
client’s contention that she could revoke the arbitration provision by filing her suit and
response to the motion for arbitration. Id. at 531 (¶ 30). Instead, the Court reaffirmed its
decision to “respect the right of an individual or an entity to agree in advance of a dispute to
arbitration or other alternative dispute resolution” and rejected the line of cases that
previously allowed contracting parties to revoke an arbitration agreement prior to award. Id.
(quoting IP Timberlands, 726 So. 2d at 104).
¶19. Following the Court’s proclamation in Slater-Moore, if the arbitration agreement
between Junker and the Nichols Center is valid and enforceable under the two-pronged test,
neither party can escape that agreement by later changing positions and filing suit. Though
Junker does not allege revocation in her brief, her outright refusal to comply with arbitration
“under any circumstance” gives rise to the same effect. Relying on her refusal to arbitrate
as the primary justification for finding the agreement to be invalid, the circuit court
12
effectively allowed Junker to revoke her responsibilities under the contract by changing her
mind and taking the claim to court, a result that was explicitly rejected in Slater-Moore. If
the arbitration agreement is valid and enforceable under the two-pronged test, parties to the
agreement should be required to adhere to the arbitration procedures agreed upon. Here, the
parties agreed to an arbitrator chosen by mutual agreement. If the arbitration agreement is
valid, Junker should be required to nominate possible arbitrators, consider arbitrators
nominated by the Nichols Center, or make other attempts to comply with the prescribed
procedure.
Conclusion
¶20. The circuit court erred by denying the motion to compel arbitration on the basis of
forum unavailability. The motion to compel asked the court to determine whether the
arbitration agreement was valid and enforceable. The court was not asked to rewrite the
terms of the agreement to provide for an arbitrator, but rather to compel Junker to comply
with the procedures outlined in the agreement. There must be some attempt by the parties
to select an arbitrator; then, if the parties cannot agree, the court may be called on to appoint
an arbitrator. We reverse the decision of the circuit court, and the case is remanded for a
hearing on the motion to compel and a determination of the validity of the arbitration
agreement. If the arbitration agreement is valid, Junker cannot simply refuse to arbitrate.
¶21. REVERSED AND REMANDED.
WALLER, C.J., RANDOLPH, P.J., LAMAR, KITCHENS, CHANDLER,
PIERCE AND KING, JJ., CONCUR. DICKINSON, P.J., NOT PARTICIPATING.
13