MAIDE, LLC v. DILEO

138 Nev., Advance Opinion 41
IN THE SUPREME COURT OF THE STATE OF NEVADA
MAIDE, LLC, A NEVADA LIMITED No. 81804
LIABILITY COMPANY, D/B/A GENTLE
SPRING CARE HOME; SOKHENA K.
HUCH, AN INDIVIDUAL; AND MIKI N.
TON, AN INDIVIDUAL,
Appellants, NI=
vs.
CORRINE R. DILEO, AS SPECIAL
ADMINISTRATOR FOR THE ESTATE
OF THOMAS DILEO; THOMAS DILEO,
JR., AS STATUTORY HEIR TO
THOMAS DILEO; AND CINDY DILEO,
AS STATUTORY HEIR TO THOMAS
DILEO,
Respondents.
Appeal from a district court order denying a motion to compel
arbitration in a wrongful death action. Eighth Judicial District Court,
Clark County; Adriana Escobar, Judge.
Reversed and remanded.
Lewis Brisbois Bisgaard & Smith LLP and S. Brent Vogel and John M. Orr,
Las Vegas,
for Appellants.
Cogburn Law and Hunter S. Davidson and Jamie S. Cogburn, Henderson,
for Respondents.
Claggett & Sykes Law Firm and Micah S. Echols, Las Vegas; Sharp Law
Center and A.J. Sharp, Las Vegas,
for Amicus Curiae Nevada Justice Association.
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BEFORE THE SUPREME COURT, PARRAGUIRRE, C.J., STIGLICH and
SILVER, JJ.
OPINION
By the Court, SILVER, J.:
NRS 597.995 requires any agreement that includes an
arbitration provision to also include a specific authorization for that
provision—or the provision is void. But because NRS 597.995 singles out
and disfavors arbitration provisions by imposing stricter requirements on
them than on other contract provisions, the Federal Arbitration Act (FAA),
9 U.S.C. § 1 et seq. (2012), preempts NRS 597.995 in cases involving
interstate commerce. Below, the district court concluded that an arbitration
provision was void under NRS 597.995 for failure to include a specific
authorization. Because we conclude the FAA applies here and preempts
NRS 597.995, the district court's decision was erroneous, and we reverse.
FACTS AND PROCEDURAL HISTORY
Maide, LLC, owns and operates Gentle Spring Care Home and
Bella Estate Care Home, residential group homes in Las Vegas. Thomas
DiLeo moved to Gentle Spring after he developed dementia so that he could
receive 24-hour care and supervision. His ex-wife and personal
representative, Corinne DiLeo, signed the paperwork to admit Thomas to
Gentle Spring. The admission paperwork included a separate one-page
addendum that contained one paragraph addressing "Grievances" and a
second paragraph addressing "Arbitration" (the addendum).1 The
'Gentle Spring used a form addendum with a heading for another care
home Maide owned, but that fact does not affect this appeal.
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paragraphs were set in a large font, and the addendum contained its own
signature block.
After his admission to Gentle Spring, Thomas injured his leg.
The DiLeo family alleged that Gentle Spring staff improperly bandaged
Thomas's leg, which developed gangrene. Thomas's leg was later
amputated, and he passed away shortly thereafter.
Corinne, as special administrator for the estate, and Cindy
DiLeo and Thomas DiLeo, Jr., as statutory heirs, filed a complaint asserting
causes of action for abuse/neglect of an older person, negligence, and
wrongful death, and a survival action under NRS 41.100 against Maide and
individuals connected to Gentle Spring (collectively Maide). Maide moved
to compel arbitration based on the addendum, but the DiLeos countered
that the arbitration paragraph in the addendum was void and
unenforceable under NRS 597.995 for failure to include a separate
signature or initial line pertaining solely to that paragraph.
The district court initially agreed with Maide, determining the
arbitration provision was binding under NRS 597.995. The district court
concluded, however, that the statutory heirs were not bound by the
arbitration provision and stayed their claims pending arbitration. The
DiLeos moved for rehearing, and the district court granted the motion after
finding the arbitration addendum lacked specific authorization, such as a
separate signature block or initial section, as required by NRS 597.995. The
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district court vacated the earlier order and denied Maide's motion to compel
arbitration.2 This appeal followed.3
DISCUSSION
Where an agreement contains an arbitration provision, NRS
597.995(1) requires that agreement to "include specific authorization for the
provision which indicates that the person has affirmatively agreed to the
provision." Failure to include some form of specific authorization for the
arbitration provision voids the arbitration provision. NRS 597.995(2).
Below and on appeal, the parties focused on whether the
arbitration provision in the addendum complies with NRS 597.995. While
this case proceeded in district court, however, we determined that the FAA,
9 U.S.C. § 1 et seq. (2012), where it applies, preempts NRS 597.995.
MMAWC, LLC v. Zion Wood Obi Wan Tr., 135 Nev. 275, 277, 448 P.3d 568,
570 (2019). Specifically, if a state law "single [s] out and disfavor[s]
arbitration," such as NRS 597.995 does by imposing stricter requirements
on arbitration provisions than on other contract provisions, the FAA will
preempt that law. Id. (internal quotation marks omitted).
A threshold issue in this appeal is whether the FAA applies
because, if it does, it will preempt NRS 597.995s specific authorization
requirement, invalidate the district court's grounds for denying Maide's
motion to compel arbitration, and moot the parties arguments as to
whether the arbitration provision complies with NRS 597.995. Maide failed
2Senior Judge J. Charles Thompson granted Maide's motion to compel
arbitration. Judge Adriana Escobar granted the DiLeos' motion for
rehearing.
3See NRS 38.247(1)(a) (providing that an order denying a motion to
compel arbitration may be appealed).
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:
to address the FAA until its reply brief on appeal, thereby waiving the issue.
See Old Aztec Mine, Inc. v. Brown, 97 Nev. 49, 52, 623 P.2d 981, 983 (1981).
However, because failing to consider FAA preemption would require us to
deliberately ignore obvious and controlling Nevada law, we nevertheless
elect to address this point.4 Cf. Powell v. Liberty Mut. Fire Ins. Co., 127
Nev. 156, 161 11.3, 252 P.3d 668, 672 n.3 (2011) (explaining we may consider
an issue raised for the first time in the reply brief where doing so "is in the
interests of justice).
In U.S. Home Corp. v. Michael Ballesteros Trust, we explained
the FAA applies where the contract evidences a transaction that involves
interstate commerce. 134 Nev. 180, 186, 415 P.3d 32, 38 (2018); see also 9
U.S.C. § 2 (2012). In the context of the FAA, the word "involves" "is broad
and functionally equivalent to the word 'affecting,'" and a contract "affects
or involves interstate commerce if Congress could regulate the transaction
through the Commerce Clause." Ballesteros, 134 Nev. at 186; 415 P.3d at
38. In considering whether a contract comes within the purview of the FAA,
we recognize that the FAA was intended to "signal the broadest permissible
exercise of Congress Commerce Clause power." Citizens Bank v. Alafabco,
Inc., 539 U.S. 52, 56 (2003); Ballesteros, 134 Nev. at 186, 415 P.3d at 38.
Thus, we have determined that "[slo long as 'commerce' is involved, the FAA
applies." Tallman v. Eighth Judicial Dist. Court, 131 Nev. 713, 724, 359
P.3d 113, 121 (2015). As to arbitration provisions specifically, the FAA will
apply so long as there is evidence that interstate commerce was involved in
the transaction underlying the arbitration agreement. Allied-Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 277, 281 (1995) (adopting the
4We do not address the other arguments raised for the first time on
appeal.
5
"commerce in fact" test); see also Ballesteros, 134 Nev. at 186-87, 415 P.3d
at 38. Moreover, we have explained that "it is perfectly clear that the FAA
encompasses a wider range of transactions than those actually 'in
commerce'" and the FAA will even govern contracts evidencing intrastate
economic activities so long as those contracts, "when viewed in the
aggregate, substantially affect interstate commerce." Ballesteros, 134 Nev.
at 186-87, 415 P.3d at 38-39 (internal quotation marks omitted).
For example, in Ballesteros, we considered whether the FAA
governed an arbitration agreement contained in Covenants, Conditions,
and Restrictions (CC&Rs). Id. at 180, 415 P.3d at 34. There, homeowners
sued for construction defects in homes in a common interest community. Id.
at 181, 415 P.3d at 34-35. A central issue was whether the FAA applied, as
the homeowners argued that the CC&Rs addressed real estate and land
that was a local concern. Id. at 181, 187, 415 P.3d at 34, 39. We rejected
that argument, noting that the CC&Rs allowed the property to be
developed, constructed, and sold and that "out-of-state businesses provided
supplies and services in constructing the homes." Id. at 187, 415 P.3d at 39.
We accordingly concluded that the transaction underlying the CC&Rs'
arbitration agreement affected interstate commerce and the FAA
controlled. Id. Ballesteros is not alone in concluding the definition of
"interstate commerce" casts a wide net. Other cases instructive here
include Katzenbach v. McClung, where the United States Supreme Court
concluded a Birmingham restaurant engaged in interstate commerce by
serving interstate travelers and by using food that moves through interstate
commerce. 379 U.S. 294, 302-05 (1964). In Allied-Bruce, a contract to treat
and repair termite damage involved interstate commerce where the
material used to treat and repair termite damage came from outside the
6
state. 513 U.S. at 282. And in MMAWC, the FAA applied where a licensing
agreement provided a party the right to use appellant's licensed marks
internationally. 135 Nev. at 276, 448 P.3d at 569.
We have never addressed the FAA's application in the context
of care- or nursing-home contracts. But the South Carolina Supreme Court
noted that following Allied-Bruce, most, if not all, courts have concluded
that nursing home residency contracts implicate interstate commerce, as
such "contracts usually entail providing residents with meals and medical
supplies that are inevitably shipped across state lines from out-of-state
vendors." Dean v. Heritage Healthcare of Ridgeway, LLC, 759 S.E.2d 727,
732 (S.C. 2014). Similarly, the Kentucky Supreme Court noted that many
courts have applied the FAA to arbitration provisions in nursing-home
contracts and that health care is an activity that, in the aggregate,
represents a general practice subject to federal control. Ping v. Beverly
Enters., Inc., 376 S.W.3d 581, 589-90 (Ky. 2012).
These and other cases across the country show that residency
home contracts implicate the FAA where they regard supplies that are
shipped across state lines or involve the use of federal funding. In McGuffey
Health & Rehabilitation Center v. Gibson, for example, the Alabama
Supreme Court concluded a nursing home engaged in interstate commerce
by accepting Medicare for the patient's care and treatment and by
purchasing goods used for the patient's care from other states. 864 So. 2d
1061, 1062-63 (Ala. 2003). The Georgia Court of Appeals concluded a
nursing home engaged in. interstate commerce by purchasing supplies from
vendors in other states, treating patients from other states, and having
patients insured through Medicare and private insurances located in other
states. Triad Health Mgmt. of Ga., HI, LLC v. Johnson, 679 S.E.2d 785,
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787-88 (Ga. Ct. App. 2009). An Illinois court determined a contract involved
interstate commerce where Medicare paid for the patient's care and the
facility received food, oxygen tanks, beds, and other supplies from vendors
in other states, as well as provided services from companies situated in
other states and used an out-of-state company to process its payroll. Carter
v. SSC Odin Operating Co., 955 N.E.2d 1233, 1239 (III. App. Ct. 2011),
reversed in part on other grounds by Carter v. SSC Odin Operating Co., 976
N.E.2d 344 (111. 2012). Similarly, a New Jersey court concluded that several
nursing facilities that purchased supplies from out-of-state suppliers
engaged in interstate commerce. Estate of Ruszala v. Brookdale Living
Cmtys., Inc., 1 A.3c1 806, 817 (N.J. Super. Ct. App. Div. 2010); see also THI
of N.M. at Hobbs Ctr., LLC v. Spradlin, 893 F. Supp. 2d 1172, 1184 (D.N.M.
2012) (concluding a care facility engaged in interstate commerce by
accepting Medicare patients and purchasing medical and office supplies and
furniture across state lines), affd 532 F. App'x 813 (10th Cir. 2013);
Pickering v. Urbantus, LLC, 827 F. Supp. 2d 1010, 1014 (S.D. Iowa 2011)
(concluding the FAA applied where the facility purchased medical
equipment, laundry supplies, food, and medical supplies from other states
and where the parties were located in different states). Furthermore, even
where the funding comes through Medicaid or another state medical
assistance program, if the program is federally funded, a contract that
utilizes those funds implicates interstate commerce and falls under the
FAA.5 In re Dec. Nine Co., 225 S.W.3d 693, 697-98 (Tex. App. 2006)
5The DiLeos urge us to adopt Oklahoma's approach in Bruner v.
Timberlane Manor Ltd. Partnership, 155 P.3d 16, 28-31 (Okla. 2006), and
conclude contracts that "involve [ ] a profoundly local transactioe and have
a de minimis impact on commerce do not fall within the FAA. Given our
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(concluding a contract involved interstate commerce and fell within the FAA
where one party received federal funds through the state-run Medicaid
program).
The record here supports that the contract falls under the FAA's
purview. The admission agreement promised to provide Thomas with meals
and snacks, laundry service, a bed and other basic furnishings, and care for
temporary illnesses. It also gave Thomas's family the option of purchasing
additional services, such as cable TV and long-distance phone calls.
Supplies for these services are inevitably shipped across state lines. Cf
Ruszala, 1 A.3d at 817 ("Clearly these nursing home facilities cannot
function without the materials procured from these out-of-state suppliers.").
Further, the record shows that Thomas's care was paid for in part by
Medicaid,6 further implicating the FAA.7 Cf Spradlin, 893 F. Supp. 2d at
1184 (explaining the FAA applied in part because the care center received
funding from a state Medicaid program that in turn was funded in
decision in Ballesteros, wherein we recognized the broad reach of the FAA,
we decline to adopt Oklahoma's approach.
6At oral argument before this court, both parties acknowledged this
funding came, at least in part, from the federal government. Thus, even if
the government program utilized here is state-run, the contract still
implicates interstate commerce because it ultimately makes use of federal
funds.
7We note that Ballesteros clarified there must be evidence to
demonstrate interstate commerce was involved before the FAA will apply.
134 Nev. at 187, 415 P.3d at 38. We are not persuaded by the DiLeas'
argument that this record is devoid of evidence of interstate commerce, for
the reasons stated in this opinion. Moreover, when asked at oral argument
if a remand for further findings on this point would be appropriate, the
DiLeos counsel answered in the negative and urged us to settle this issue
based upon the existing record.
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RN 1947A .401g.
substantial part by the federal government); Owens v. Coosa Valley Health
Care, Inc., 890 So. 2d 983, 987-88 (Ala. 2004) (explaining that a contract
involved interstate commerce where a substantial portion of the funding for
the nursing home came from federally funded Medicaid or Medicare); In re
Dec., 225 S..3d at 697-98 (rejecting the argument that a contract did not
involve interstate commerce because a party received payments through
Medicaid instead of Medicare, where the state's Medicaid program was "a
conduit for the federal funds"); see also Visiting Nurse Ass'n of Fla., Inc. v.
Jupiter Med. Ctr., Inc., 154 So. 3d 1115, 1124-25 (Fla. 2014) (explaining a
contract involved interstate commerce where it contemplated the referral of
Medicare patients, even though the record showed no other evidence of
interstate commerce).
Accordingly, we conclude the FAA governs and preempts NRS
597.995.8 The district court therefore erroneously applied NRS 597.995
here and abused its discretion by denying the motion to compel arbitration.
See Land Baron Invs., Inc. v. Bonnie Springs Family Ltd. Pship, 131 Nev.
8Even if the FAA had not preempted NRS 597.995 here, the district
coures decision was erroneous. Nevada has a "fundamental policy favoring
the enforceability of arbitration agreements," and we "liberally construe
arbitration clauses in favor of granting arbitration." Tallman, 131 Nev. at
720, 359 P.3d at 118-19 (internal quotation marks omitted). NRS
597.995(1) requires specific authorization for an arbitration provision, and
we conclude that requirement was met here, where the arbitration
provision was included in a separate, one-page, two-paragraph addendum
with a signature line for that particular page.
We need not address the DiLeos arguments regarding the statutory
heirs, as the district court determined the heirs were not bound by the
arbitration clause and Maide does not contest this finding.
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686, 699 n.10, 356 P.3d 511, 520 n.10 (2015) (reviewing a district court's
decision to deny a motion for reconsideration for an abuse of discretion).
CONCLUSION
The FAA preempts NRS 597.995 in contracts involving
interstate commerce. Under the FAA, state law may not impose rules that
single out and disfavor arbitration. Because this contract involves
interstate commerce, the FAA governs and preempts• NRS 597.995.
Accordingly, the district court erred by concluding NRS 597.995 voided the
parties arbitration agreement, by granting rehearing and vacating an order
referring the Estates claims to arbitration, and by denying the motion to
compel arbitration. We therefore reverse that decision and rernand with
instructions to grant the motion to compel arbitration of the special
administrator's claims.
J.
Silver
We concur:
-946X4112...*Trumm.°1e J
Parraguirre
Al4Gi-f) J.
Stiglich
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