Mary T. Kleine v. Emeritus at Emerson

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4453-14T3
MARY T. KLEINE,
Plaintiff-Appellant,
APPROVED FOR PUBLICATION
v.
June 9, 2016
EMERITUS AT EMERSON, BREA EMERSON,
LLC d/b/a EMERITUS AT EMERSON, APPELLATE DIVISION
and EMERITUS CORPORATION,
Defendants,
and
CARE ONE AT VALLEY, CARE ONE,
LLC, MILLENNIUM HEALTH CARE
CENTERS II, d/b/a CARE ONE
AT VALLEY, DES HOLDING CO.,
INC. and DES-C 2009 GRAT,
Defendants-Respondents.
________________________________________________________
Argued March 15, 2016 – Decided June 9, 2016
Before Judges Fisher, Rothstadt and Currier.
On appeal from the Superior Court of New
Jersey, Law Division, Bergen County, Docket
No. L-409-13.
Thomas S. Howard argued the cause for
appellant (Gartenberg Howard, LLP, attorneys;
Mr. Howard, on the brief).
Shane P. Simon argued the cause for
respondents (Buchanan Ingersoll & Rooney,
P.C., attorneys; David L. Gordon, Eric D.
Heicklen and Mr. Simon, of counsel and on
the brief).
The opinion of the court was delivered by
FISHER, P.J.A.D.
Plaintiff commenced this personal injury action against,
among others, defendant Care One at Valley,1 which operates a
nursing facility that moved to compel arbitration of plaintiff's
claims based on a clause contained in plaintiff's admission
agreement. Defendant apparently imposes on its patients an
obligation to arbitrate disputes because it can. The Federal
Arbitration Act (FAA), 9 U.S.C.A. §§ 1-16, which the Supreme
Court of the United States broadly construes in favor of
arbitration, overrides all state policies and concerns,
including the Nursing Home Act's2 express prohibition against the
enforcement of such agreements, N.J.S.A. 30:13-8.1.3 See Marmet
1
Plaintiff actually named a number of defendants as being
responsible for this aspect of her personal injury claims,
namely: defendants Care One, LLC, Millennium Health Care Centers
II, d/b/a Care One at Valley, DES Holding Co., Inc., and DES-C
2009 GRAT (collectively, defendant).
2
N.J.S.A. 30:13-1 to -17.
3
N.J.S.A. 30:13-8.1 declares that "[a]ny provision or clause
waiving or limiting the right to sue for negligence or
malpractice in any admission agreement or contract between a
patient and a nursing home or assisted living facility . . .
whether executed prior to, on or after [January 12, 2002,] the
effective date of this act, is hereby declared to be void as
against public policy and wholly unenforceable, and shall not
constitute a defense in any action, suit or proceeding."
2 A-4453-14T3
Health Care Ctr., Inc. v. Brown, 565 U.S. __, __, 132 S. Ct.
1201, 1203, 182 L. Ed. 2d 42, 45 (2012) (holding that West
Virginia's similar nursing home statute, which prohibits
arbitration of personal injury and wrongful death suits, takes a
backseat to the FAA and the federal policy in favor of
arbitration); see also Estate of Ruszala v. Brookdale Living
Communities, Inc., 415 N.J. Super. 272, 292-93 (App. Div. 2010).4
Despite its broad interpretation of the FAA and its
supremacy over specific state policies and practices,5 the
Supreme Court has recognized the "fundamental principle that
arbitration is a matter of contract," Rent-A-Center, West, Inc.
v. Jackson, 561 U.S. 63, 130 S. Ct. 2772, 2776, 177 L. Ed. 2d
4
We must comply with Marmet, but we are not required to agree.
See Reinauer Realty Corp. v. Borough of Paramus, 34 N.J. 406,
415 (1961); Crespo v. Crespo, 408 N.J. Super. 25, 37 (App. Div.
2009), aff’d o.b., 201 N.J. 207 (2010). Although we willingly
embrace the concept of federal supremacy, we find it distressing
that invocation of the "liberal federal policy favoring
arbitration," see Moses H. Cone Mem. Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765,
785 (1983), in many cases has caused the forfeiture of important
rights because consumers and employees lack the bargaining power
to object to an arbitration clause's inclusion; citation of the
"liberal federal policy favoring arbitration" merely evokes the
old saying, "a good catchphrase can obscure fifty years of
analysis."
5
In recognizing that the Nursing Home Act's sensible bar on
compelled arbitration must give way to the FAA's long reach, we
see no impediment to the indirect enforcement of the policies
embedded in N.J.S.A. 30:13-8.1 through the state's licensing
power over such facilities.
3 A-4453-14T3
403, 410 (2010), thereby permitting application of state
contract law to ascertain whether the parties had a meeting of
the minds when contracting, and whether a party, who has
ostensibly agreed to waive the right to trial by jury, has
clearly and unambiguously consented to arbitration, Atalese v.
U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 442, 444 (2014),
cert. denied, __ U.S. __, 135 S. Ct. 2804, 192 L. Ed. 2d 847
(2015). In light of these principles, we turn to the specific
facts of this case.
Because the trial judge summarily granted defendant's
motion to compel arbitration and because our review of that
determination is de novo, we assume as true the factual
opposition presented by plaintiff in response to defendant's
motion. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520,
540 (1995). In opposition to the motion, Frank J. McMahon
asserted his then eighty-five-year-old sister, plaintiff Mary T.
Kleine, was "still suffering from the consequences of the trauma
she had endured" at a nursing facility operated by the other
defendants,6 when, through a power of attorney, he sought her
admission at defendant's facility. An individual in the
admissions office presented him with "a stack of papers, of
6
Defendants Emeritus At Emerson, Brea Emerson, LLC d/b/a
Emeritus at Emerison, and Emeritus Corporation (collectively,
Emerson).
4 A-4453-14T3
which the admission agreement was one of several" documents, and
he was told "to sign and initial wherever indicated." McMahon
was then "left alone to do so, without any further explanations
or instructions."
McMahon further asserted:
No one told me, and I did not notice, that
the agreement contained a waiver of my
sister's civil rights, including her right
to a jury trial and her right to appeal any
adverse decision to an appellate court. I
also was not told that my sister would have
to pay for one-half the cost of the
arbitration. In fact, the admission person
said nothing to me about the contents of the
agreement, except that I had to sign it for
my sister, and that I had to sign it right
away because my sister was being admitted to
that nursing home.
No one told me that I had a right to consult
with counsel before signing or that my
sister's admission to the facility was not
contingent upon my signing the agreement. If
I had understood that such a provision was
contained in the admission agreement, I
would have asked for an explanation so I
could understand what this provision meant.
If I had been told that by signing I would
not only give up her right to a jury trial,
but also would waive her right to appeal
from any decision, and that she would have
to pay for one-half the cost of any
proceeding to determine whether Care One was
negligent or caused her injury, I would
certainly have asked whether I was required
to agree as a condition of her admission,
and I would probably have spoken with an
attorney to fully understand the effect of
this agreement.
. . . .
5 A-4453-14T3
My sister's finances are very limited. She
is currently paying the cost of the
Allendale Nursing Home (about $5,000 per
month) from the proceeds of the sale of her
house in 2010, which funds should last her
another two years or so, so long as she does
not have any large unanticipated expenses.
Her only income is the $1,191 she receives
from Social Security. When her savings are
expended, she will have to apply for
Medicaid coverage.
My understanding is that qualified arbitrators
charge $400-500 or more per hour for their
services. If our case required 4-5 seven
hour days to present all the testimony and
documentary evidence, plus another day for
the arguments of counsel and the
arbitrator's consideration of the evidence,
the arbitrator's fees would range from
$14,000 — 18,000 and maybe more if more
hearing days are needed or the arbitrator
was more expensive, which means my sister
would have to pay $7,000 — 9,000 or more,
plus the cost of a transcript if we want to
obtain one, all with her limited resources.
Consequently, my sister could only afford to
pay for an arbitrator to hear the case if
she sacrificed her ability to pay for her
continued life at the assisted living
facility. I do not believe that is a choice
she should have to make — and I would not
have signed the admission agreement as
worded if I had been told that she would
have to pay that amount of money in order to
have her claims heard.
The trial judge was required to assume the truth of these sworn
statements and assume there was no meeting of the minds about
the arbitration of disputes.
6 A-4453-14T3
Defendant's arbitration clause provided in upper case and
bold lettering:
Any controversy or claim arising out of or
relating to this agreement and brought by
the resident, his/her personal representa-
tives, heirs, attorneys or the responsible
party shall be submitted to binding
arbitration by a single arbitrator selected
and administered pursuant to the commercial
arbitration rules of the American Arbitra-
tion Association. . . .[7] Any claimant
contemplated by this paragraph hereby waives
any and all rights to bring any such claim
or controversy in any manner not expressly
set forth in this paragraph, including, but
not limited to, the right to a jury trial.[8]
It is well-established that the party from whom an
arbitration clause has been extracted must "clearly and
unambiguously" agree to a waiver of the right to sue. Atalese,
supra, 219 N.J. at 443; see also Morgan v. Raymours Furniture
Co., 443 N.J. Super. 338, 343 (App. Div. 2016), certif. denied,
7
We have omitted a sentence that describes the impact of
applicable statutes of limitations because of its lack of
relevance here.
8
The contract's next separate provision, also in upper case and
bold lettering, states: "This agreement is a binding legal
document. The resident has read and understands the agreement
and acknowledges that, if so desired, the resident and/or [sic]
responsible party has been given the opportunity to consult with
legal counsel." It is difficult to imagine an infirm individual,
or his or her family member, is likely to delay admission while
taking the time to seek a legal opinion about the contract. Our
Legislature likely appreciated these realities — to which the
"liberal federal policy favoring arbitration" is blind — when
enacting N.J.S.A. 30:13-8.1.
7 A-4453-14T3
__ N.J. __ (Apr. 25, 2016). We agree the arbitration clause
unambiguously declares the resident's waiver of the right to
pursue a claim in any fashion other than as set forth, but other
aspects of the clause suggest it may be unconscionable.
For example, it is only the resident or the resident's
representative who is asked to waive the right to seek redress
in the courts; the clause's insistence on the utilization of
arbitration applies to "any controversy or claim arising out of
or relating to this agreement and brought by the resident [or
the resident's representatives9]" (emphasis added). If the use of
the word "and" were not sufficient to demonstrate the promise to
arbitrate was made only by the resident or her representatives,
certainly the clause's last sentence, which describes the waiver
of the right to pursue the claim or controversy in some manner
other than arbitration, is expressed only by "any claimant
contemplated by this paragraph," i.e., the resident or her
representatives. In short, only the plaintiff was bound;
defendant made no such promise, retaining for itself not only
the right to sue the resident or her representatives in any
court of competent jurisdiction but also the right to have its
own claims resolved by trial by jury.
9
These representatives are identified as "his/her personal
representatives, heirs, attorneys or the responsible party."
8 A-4453-14T3
As observed earlier, arbitrability was decided summarily.
At that stage, the judge was required to assume the truth of
McMahon's sworn statements and consider the language of the
agreement in the light most favorable to plaintiff. Brill,
supra, 142 N.J. at 540. Had the judge done so, the one-sided
waiver extracted by defendant, as well as an assumption of the
truth of McMahon's assertions about the manner in which the
contract was formed, would have required an evidentiary hearing
related to unconscionability. See, Muhammad v. Cnty. Bank of
Rehoboth Beach, 189 N.J. 1, 15 (2006), cert. denied, 549 U.S.
1338, 127 S. Ct. 2032, 167 L. Ed. 2d 763 (2007). If that was
all that was before us, we would remand for such an evidentiary
hearing and the judge's consideration of both procedural and
substantive unconscionability factors related to the contract.
See Sitogum Holdings, Inc. v. Ropes, 352 N.J. Super. 555, 564-66
(Ch. Div. 2002) (recognizing that procedural unconscionability
includes consideration of "a variety of inadequacies, such as
age, literacy, lack of sophistication, hidden or unduly complex
contract terms, bargaining tactics, and the particular setting
existing during the contract formation process," and substantive
unconscionability involves consideration of harsh or unfair one-
sided terms embedded in the contract). The application of our
common law unconscionability principles in this fashion would
9 A-4453-14T3
not create an obstacle inconsistent with FAA principles. See
AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339-40, 131 S.
Ct. 1740, 1746, 179 L. Ed. 2d 742, 751 (2011).
But we reverse because the arbitration process contemplated
by the clause in question was not available when the parties
executed their contract. In opposing the motion to compel
arbitration, plaintiff provided a certification, which
authenticated an attached AAA statement that unequivocally
expressed that, as of January 1, 2003, AAA would "no longer
accept the administration of cases involving individual patients
without a post-dispute agreement to arbitrate." Consequently,
when the parties contracted, their exclusive forum for
arbitration was no longer available; there being no agreement to
arbitrate in any other forum, arbitration could not be
compelled. In short, even assuming the clause was otherwise
enforceable and consented to by plaintiff, there was no meeting
of the minds as to an arbitral forum if AAA was not available.10
10
We are mindful defendant has argued the clause does not
require AAA arbitration, only that the arbitration be
administered pursuant to AAA's commercial arbitration rules; in
other words, defendant contends that the provision does not
limit the appointment of a substitute administrator so long as
that administrator applies AAA's commercial arbitration rules.
It is difficult to conclude that a reasonable reader of this
language — particularly one simultaneously contemplating the
placement of an elderly sister in a nursing home — would make
that fine distinction even if defendant's interpretation was
(continued)
10 A-4453-14T3
As Atalese instructs, the party from whom such a provision has
been extracted must be able to understand — from clear and
unambiguous language — both the rights that have been waived and
the rights that have taken their place. See Atalese, supra, 219
N.J. at 444; see also Khan v. Dell, Inc., 669 F.3d 350, 357-59
(3rd Cir. 2012) (Sloviter, J., dissenting). Because AAA was not
available to administer the arbitration of this dispute at the
time the contract was formed, or even at the time the trial
court ruled on the application,11 the judge mistakenly compelled
arbitration of plaintiff's personal injury claims against this
defendant.12
(continued)
plausible. Moreover, the forfeiture of legal rights and the
compelling of arbitration over objection is not a three-card
monte game. Atalese requires greater clarity and less ambiguity
in determining whether and how to enforce such a clause. We
reject the notion that a court must adopt defendant's strained
interpretation of the clause it alone drafted.
11
In its appendix, defendant provided a document purporting to
represent AAA's current position, which, if true, would suggest
AAA has a new-found willingness to administer such disputes.
The document is undated and was not appended to a statement
swearing to its authenticity or identifying when this alleged
change in policy occurred. We, accordingly, give this item no
consideration in concluding that arbitration could not be
compelled because the parties' exclusive forum was unavailable.
12
Compelling arbitration provides further complications.
Plaintiff alleges two separate acts of negligence against two
groups of defendants. Because of personal injuries allegedly
suffered in Emeritus's facility, plaintiff moved to defendant's
facility; she claims she was later injured as a result of
(continued)
11 A-4453-14T3
The April 21, 2015 order compelling arbitration is
reversed.13
(continued)
defendant's negligence. Although both facilities extracted
arbitration clauses when admitting plaintiff — we can only
wonder whether this is the industry standard despite what
N.J.S.A. 30:13-8.1 prohibits — in earlier proceedings a
different judge denied arbitration of plaintiff's claims against
Emeritus because Emeritus's provision required arbitration
administered by the National Arbitration Forum, which also does
not offer its services for any claim arising out of "any aspect
of healthcare." If the arbitration clause in question in this
appeal were to be enforced, plaintiff would be relegated to two
different fora and face the possibility of inconsistent results;
both those circumstances are inconsistent with New Jersey
policies and any modern thought on litigation and, indeed, would
run counter to the reasons that originally triggered our state
policy in favor of arbitration — the providing of "a speedy,
inexpensive, expeditious and perhaps less formal manner"
disposition of claims. See Carpenter v. Bloomer, 54 N.J. Super.
157, 162 (App. Div. 1959).
13
The motion judge never appointed a replacement of the
unavailable arbitral forum and never described what the parties
were to do next. The order merely "directed" plaintiff "to
arbitrate" with defendant and "dismissed" the "matter" from
"th[e] [c]ourt's jurisdiction." Even if the judge correctly
ruled, the claims against defendant should only have been
stayed, not dismissed. See N.J.S.A. 2A:23B-7(g).
12 A-4453-14T3