Heineman v. Evangelical Luth. Good Sam. Soc. , 300 Neb. 187 ( 2018 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
08/24/2018 09:09 AM CDT
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HEINEMAN v. EVANGELICAL LUTH. GOOD SAM. SOC.
Cite as 300 Neb. 187M ark Heineman, appellee, v. The Evangelical Lutheran
Good Samaritan Society, doing business as Good
Samaritan Society-Scribner, et al., appellants.
___ N.W.2d ___
Filed June 8, 2018. No. S-17-983.
1. Arbitration and Award. Arbitrability presents a question of law.
2. Judgments: Appeal and Error. When reviewing questions of law,
an appellate court resolves the questions independently of the lower
court’s conclusions.
3. Trial: Evidence: Appeal and Error. Generally, it is not the function
of an appellate court to review evidence which was not presented to the
trial court.
4. Evidence: Records: Appeal and Error. A bill of exceptions is the only
vehicle for bringing evidence before an appellate court; evidence which
is not made a part of the bill of exceptions may not be considered.
5. Actions: Judicial Notice: Records: Appeal and Error. An appellate
court may take judicial notice of a document, including briefs filed in
an appeal, in a separate but related action concerning the same subject
matter in the same court.
6. Contracts: Consideration. Consideration is sufficient to support a
contract if there is any detriment to the promisee or any benefit to
the promisor.
7. Arbitration and Award: Federal Acts: Contracts. If a contract con-
taining an arbitration clause involves interstate commerce, the Federal
Arbitration Act, 9 U.S.C. § 1 et seq. (2012), governs the contract.
8. Contracts: States: Words and Phrases. Contracts involving interstate
commerce include contracts for services between parties of differ-
ent states.
9. Federal Acts: Contracts: Arbitration and Award: States. The Federal
Arbitration Act, at 9 U.S.C. § 2 (2012), preempts inconsistent state laws
that apply solely to the enforceability of arbitration provisions in con-
tracts evidencing a transaction involving commerce.
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HEINEMAN v. EVANGELICAL LUTH. GOOD SAM. SOC.
Cite as 300 Neb. 187Appeal from the District Court for Dodge County: Geoffrey
C. H all, Judge. Reversed and remanded with directions.
Nicholas A. Buda, Steven D. Davidson, and Lindsay K.
Lundholm, of Baird Holm, L.L.P., and, on brief, Thomas E.
Johnson for appellants.
Douglas R. Novotny, of Novotny Law, L.L.C., for appellee.
Heavican, C.J., Cassel, Stacy, Funke, and Papik, JJ., and
Schreiner, District Judge.
Cassel, J.
INTRODUCTION
A nursing home resident filed suit for personal injuries
against the facility and several of its employees. The defend­
ants moved to dismiss and compel arbitration pursuant to
an arbitration agreement signed by the resident at the time
of admission. The district court declared that the arbitration
agreement was void and unenforceable on state law grounds
and for being contrary to public policy. Because the court erred
in both respects, we reverse, and remand with directions.
BACKGROUND
Mark Heineman filed a personal injury action against The
Evangelical Lutheran Good Samaritan Society, doing busi-
ness as Good Samaritan Society-Scribner, and several of its
employees (collectively Evangelical Lutheran), for injuries he
sustained as a resident at the Good Samaritan Society-Scribner
nursing home. Heineman is a Nebraska resident and The
Evangelical Lutheran Good Samaritan Society is a nonprofit
North Dakota corporation with its principal place of business
in South Dakota.
Evangelical Lutheran filed motions to dismiss or stay the
proceedings and to compel arbitration pursuant to an arbitra-
tion clause within the admission agreement Heineman had
signed before he was admitted as a resident in the nursing
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HEINEMAN v. EVANGELICAL LUTH. GOOD SAM. SOC.
Cite as 300 Neb. 187home. The signature on the second page of the arbitration sec-
tion was dated February 11, 2015.
The agreement included a “Resolution of Legal Disputes”
section in which Heineman agreed to arbitrate “[a]ny legal
controversy, dispute, disagreement or claim arising between
the Parties” by checking a box next to, “YES I DO wish to
arbitrate disputes and I received a copy of this Resolution of
Legal Disputes.” In addition to permitting the signor to either
opt into or out of the arbitration clause, the contract stated
that the agreement to arbitrate disputes was not a condition
of admission or of continued stay. The arbitration agreement
further provided: “This arbitration provision binds all par-
ties whose claims may arise out of or relate to treatment or
service provided by the center including any spouse or heirs
of the Resident.” And by signing the agreement, Heineman
agreed that the “Resolution of Legal Disputes” provision shall
be governed by and interpreted under the Federal Arbitration
Act (FAA).1
The district court held two hearings on the motions to dis-
miss and compel arbitration. The hearings were conducted
on affidavits, one at each hearing, offered by Evangelical
Lutheran. They were substantially identical. Heineman did not
offer any evidence.
After reviewing the language of the agreement, the court
determined that the arbitration clause lacked “mutuality of
obligation” by the parties. In doing so, the court relied on De
Los Santos v. Great Western Sugar Co.2 It further found the
arbitration clause unenforceable for failure to strictly conform
to the requirements of Nebraska’s Uniform Arbitration Act
(UAA).3 Finally, it relied on 42 C.F.R. § 483.70(n)(1) (2017)
to find that the federal government “has taken action to elimi-
nate preemptory arbitration clauses in nursing care facility
1
9 U.S.C. § 1 et seq. (2012).
2
De Los Santos v. Great Western Sugar Co., 217 Neb. 282, 348 N.W.2d 842(1984).
3
Neb. Rev. Stat. § 25-2601 et seq. (Reissue 2016).
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HEINEMAN v. EVANGELICAL LUTH. GOOD SAM. SOC.
Cite as 300 Neb. 187contracts wherein the facility receives Medicaid funding.”
Consequently, it also found the arbitration clause to be void
and unenforceable as contrary to public policy and overruled
the motions.
Evangelical Lutheran appealed, and we moved the case to
our docket.4
ASSIGNMENTS OF ERROR
Evangelical Lutheran assigns that the district court erred in
(1) failing to find that the arbitration clause was governed by
the FAA, (2) finding that the arbitration clause was void and
unenforceable under the UAA, (3) finding that the arbitration
clause lacked mutuality of obligation between the parties, (4)
finding that the arbitration clause was void and unenforceable
on public policy grounds, and (5) failing to dismiss or stay the
action and compel arbitration.
STANDARD OF REVIEW
[1,2] Arbitrability presents a question of law.5 When review-
ing questions of law, an appellate court resolves the questions
independently of the lower court’s conclusions.6
ANALYSIS
“Mutuality of Obligation”
The district court found that the arbitration agreement lacked
“mutuality of obligation,” thereby making it unenforceable. We
understand “mutuality of obligation” to be the equivalent of
mutuality of consideration.7
4
See Neb. Rev. Stat. § 24-1106(3) (Supp. 2017).
5
Citizens of Humanity v. Applied Underwriters, 299 Neb. 545, 909 N.W.2d
614 (2018).
6
Frohberg Elec. Co. v. Grossenburg Implement, 297 Neb. 356, 900 N.W.2d
32 (2017).
7
See, Black’s Law Dictionary 1179 (10th ed. 2014) (defining “mutuality of
obligation”); Joseph M. Perillo, Calamari and Perillo on Contracts § 4-12
(6th ed. 2009).
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HEINEMAN v. EVANGELICAL LUTH. GOOD SAM. SOC.
Cite as 300 Neb. 187The district court relied on De Los Santos v. Great Western
Sugar Co.,8 but the situation there was significantly different.
There, the processing company promised to pay for trans-
portation of sugar beets but only to the extent loaded on the
contractor’s trucks. In the absence of a specified quantity, the
processing company had no obligation to use the contractor’s
services. Here, as we discuss below, the language of the agree-
ment imposed reciprocal obligations.
Evangelical Lutheran argues that there was sufficient con-
sideration and that both Evangelical Lutheran and Heineman
were mutually bound by the arbitration agreement. It argues
that the language of the agreement applies to “‘any legal con-
troversy, dispute, disagreement, or claim of any kind,’ not just
to claims brought by . . . Heineman.”9 Therefore, it contends
that Evangelical Lutheran would also be required to submit its
claims to arbitration pursuant to the agreement.
In response to this argument, Heineman argues that
Evangelical Lutheran is not actually bound by the arbitration
agreement. To support this response, he cites to county and dis-
trict court cases outside of our record. He asserts that in those
cases, Evangelical Lutheran filed suit against its residents
without first attempting arbitration. And he asks us to take
judicial notice of the complaints filed in those cases as proof
of this lack of mutuality of obligation.
[3,4] But to expand the record in this fashion would be
improper, because, generally, it is not the function of an
appellate court to review evidence which was not presented
to the trial court.10 A bill of exceptions is the only vehicle
for bringing evidence before an appellate court; evidence
which is not made a part of the bill of exceptions may not
be considered.11
8
De Los Santos v. Great Western Sugar Co., supra note 2.
9
Brief for appellants at 22.
10
See, e.g., U.S. v. Oatman, 702 Fed. Appx. 478 (8th Cir. 2017).
11
In re Estate of Radford, 297 Neb. 748, 901 N.W.2d 261 (2017).
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HEINEMAN v. EVANGELICAL LUTH. GOOD SAM. SOC.
Cite as 300 Neb. 187[5] It is true that we have held that an appellate court may
take judicial notice of a document, including briefs filed in an
appeal, in a separate but related action concerning the same
subject matter in the same court.12 But Heineman’s request
goes much further. Because we see no reason to expand
this precedent, we overrule Heineman’s motion to take judi-
cial notice.
[6] And without the extraneous material, his argument col-
lapses. Consideration is sufficient to support a contract if
there is any detriment to the promisee or any benefit to the
promisor.13 In this case, the language of the arbitration agree-
ment applies equally to claims brought by Heineman and by
Evangelical Lutheran. Because both parties are subject to the
same detriment and benefit as mutual promisees and promi-
sors, consideration was sufficient. The district court erred in
finding that the agreement was unenforceable for insufficient
consideration or “no mutuality of obligation.”
A pplicability of FAA
Having determined that an enforceable arbitration agree-
ment existed, we now turn to consider whether the arbitration
clause was subject to the requirements of the FAA or UAA.
[7,8] If a contract containing an arbitration clause involves
interstate commerce, the FAA governs the contract.14 And we
have held that contracts involving interstate commerce include
contracts for services between parties of different states.15
Here, there is no question that the admission agreement
involved interstate commerce. Heineman conceded as much
at oral argument, and the agreement itself stated that it was “a
12
See, Pennfield Oil Co. v. Winstrom, 276 Neb. 123, 752 N.W.2d 588(2008); Jessen v. Jessen, 259 Neb. 644, 611 N.W.2d 834 (2000).
13
City of Omaha v. City of Elkhorn, 276 Neb. 70, 752 N.W.2d 137 (2008).
14
See Wilczewski v. Charter West Nat. Bank, 295 Neb. 254, 889 N.W.2d 63(2016).
15
See Frohberg Elec. Co. v. Grossenburg Implement, supra note 6.
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HEINEMAN v. EVANGELICAL LUTH. GOOD SAM. SOC.
Cite as 300 Neb. 187transaction involving interstate commerce.” Consequently, the
FAA governs this contract.
[9] Because the FAA, at 9 U.S.C. § 2, preempts inconsistent
state laws that apply solely to the enforceability of arbitra-
tion provisions in contracts evidencing a transaction involving
commerce,16 the arbitration agreement did not need to strictly
comply with the language of the UAA. For this reason, the dis-
trict court erred in finding the arbitration agreement void and
unenforceable on UAA grounds.
Public Policy
Lastly, we consider the district court’s holding that the
arbitration agreement was void and unenforceable as contrary
to public policy. The only authority on which the court relied
was a federal regulation17 which provides that “[a] facil-
ity must not enter into a pre-dispute agreement for binding
arbitration with any resident or resident’s representative nor
require that a resident sign an arbitration agreement as a con-
dition of admission to the [long-term care] facility.”18
However, this provision of the regulation did not become
effective until November 28, 2016,19 long after the date of
the agreement in the case before us, which was signed on
February 11, 2015. And the U.S. Supreme Court has made
clear that retroactivity is not favored in the law and has
held “administrative rules will not be construed to have ret-
roactive effect unless their language requires this result.”20
Moreover, as Evangelical Lutheran points out, implementation
16
See Kremer v. Rural Community Ins. Co., 280 Neb. 591, 788 N.W.2d 538(2010).
17
42 C.F.R. § 483.70.
18
42 C.F.R. § 483.70(n)(1).
19
See Medicare and Medicaid Programs; Reform of Requirements for Long-
Term Care Facilities, 81 Fed. Reg. 68,688 (Oct. 4, 2016).
20
Bowen v. Georgetown University Hospital, 488 U.S. 204, 208, 109 S. Ct.
468, 102 L. Ed. 2d 493 (1988).
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HEINEMAN v. EVANGELICAL LUTH. GOOD SAM. SOC.
Cite as 300 Neb. 187of the regulation has been enjoined by a federal court.21 Thus,
Heineman’s public policy argument rests on retroactive appli-
cation of a federal regulation, which has no plain language
mandating retroactivity and which has been enjoined by a
federal court from being placed into effect. At oral argument,
Heineman conceded that neither the U.S. Congress nor the
Nebraska Legislature had enacted legislation encompassing
the public policy articulated in the enjoined regulation. We
decline his invitation to impose such a policy based upon
the “common law.” The district court erred in using the
regulation as a basis to conclude that the agreement was void
and unenforceable.
CONCLUSION
Because the arbitration agreement was valid and enforce-
able and governed by the FAA, the district court should have
sustained the motions to dismiss and compel arbitration. But,
in sustaining the motions, the district court could exercise its
discretion to stay rather than dismiss the case.22 Accordingly,
we reverse the district court’s order and remand the cause with
directions that the court enter an order compelling arbitra-
tion pursuant to the agreement and either dismissing or
staying the action.
R eversed and remanded with directions.
Miller-Lerman, J., not participating.
21
American Health Care Association v. Burwell, 217 F. Supp. 3d 921 (N.D.
Miss. 2016), appeal dismissed ___ F.3d ___ (5th Cir. June 2, 2017).
22
See Wilczewski v. Charter West Nat. Bank, supra note 14.