Reg'l Care of Jacksonville LLC v. Henry , 444 S.W.3d 356 ( 2014 )

Cite as 2014 Ark. 361
SUPREME COURT OF ARKANSAS
No. CV-14-37
REGIONAL CARE OF Opinion Delivered September 11, 2014
JACKSONVILLE, LLC, D/B/A
WOODLAND HILLS HEALTHCARE APPEAL FROM THE PULASKI
AND REHABILITATION OF COUNTY CIRCUIT COURT
JACKSONVILLE; WOODLAND HILLS [NO. 60CV-13-3149]
HEALTHCARE AND
REHABILITATION OF
JACKSONVILLE, LLC; HONORABLE TIMOTHY DAVIS
CORNERSTONE HEALTH CARE, FOX, JUDGE
INC.; CHRISTIAN HEALTH CARE
HOSPICE, INC.; AND ANGELA
HERD, IN HER CAPACITY AS
ADMINISTRATOR OF WOODLAND
HILLS HEALTHCARE AND
REHABILITATION OF
JACKSONVILLE
APPELLANTS
V.
SHIRLEY HENRY, AS SPECIAL
ADMINISTRATOR OF THE ESTATE
OF LUCILLE BETNCOURT, AFFIRMED.
DECEASED
APPELLEE
COURTNEY HUDSON GOODSON, Associate Justice
Appellants Regional Care of Jacksonville, LLC, d/b/a Woodland Hills Healthcare and
Rehabilitation of Jacksonville; Woodland Hills Healthcare and Rehabilitation of Jacksonville,
LLC; Cornerstone Health Care, Inc.; Christian Health Care Hospice, Inc.; and Angela Herd,
in her capacity as administrator of Woodland Hills Healthcare and Rehabilitation of
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Jacksonville (collectively “Woodland Hills”), appeal the order entered by the Pulaski County
Circuit Court denying their motion to dismiss and to compel arbitration of the claims
asserted against them by appellee Shirley Henry, as special administrator of the Estate of
Lucille Betncourt, deceased (Henry). For reversal, Woodland Hills contends that the circuit
court erred by not requiring arbitration of Henry’s claims. We affirm the circuit court’s
decision.
The record reflects that Lucille Betncourt was a resident of Woodland Hills, a
nursing-home facility, on eight separate occasions between January 2008 and her death in
December 2012. Woodland Hills provided an admission agreement to its residents for
execution upon entering the facility. Betncourt signed admission agreements on January 4,
2008, March 10, 2008, and May 20, 2010. She signed the latter two agreements with an
“X.” Dewey Brockwell, Betncourt’s husband, executed an admission agreement as the
“Responsible Party” on September 8, 2010. Henry, Betncourt’s daughter, signed the last
four admission agreements as the “Responsible Party” on November 15, 2011, June 4, 2012,
June 28, 2012, and September 26, 2012. All of the admission agreements contained an
arbitration clause.
On August 12, 2013, Henry filed a complaint against Woodland Hills asserting causes
of action for negligence, medical malpractice, breach of the admission agreement, violations
of the Arkansas Long-Term Care Residents’ Right Act, breach of the Medicare/Medicaid
provider agreement, and for violating the Arkansas Deceptive Trade Practices Act.
Woodland Hills subsequently filed a motion to dismiss and to compel arbitration of these
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claims. In its supporting brief, Woodland Hills relied on the arbitration clauses, which are
identical, found in each of the admission agreements executed after 2008. This clause states
as follows:
Arbitration. By signing this Admission Agreement, Resident, Responsible
Party, and Guarantor agree with the Facility that any dispute between the
Parties, other than a dispute over billing or collecting for services, but
including any services rendered prior to the date this Admission Agreement
was signed, and any dispute arising out of the diagnosis, treatment, or care of
the Resident, including the scope of this arbitration clause and the arbitrability
of any claim or dispute, against whomever made (including, to the fullest
extent permitted by applicable law, third parties who are not signatories to this
Admission Agreement) shall be resolved by binding arbitration. The Parties
hereby agree and intend that this Admission Agreement and the Resident’s stay
at the Facility substantially involve interstate commerce, and stipulate that the
Federal Arbitration Act (“FAA”) in effect as of November 1, 2008 and federal
case law interpreting such version of the FAA shall apply to this Admission
Agreement, shall preempt any inconsistent state law and shall not be reverse
preempted by the McCarran-Ferguson Act: United States Code Title 15,
Chapter 20, or other law. Any amendment to such version of the FAA is
hereby expressly waived. This Admission Agreement binds all parties whose
claims may arise out of or relate to treatment or service provided by the
Facility, including any spouse or heirs of the resident. This provision for
arbitration may be revoked by written notice delivered to the Facility
within twenty-one (21) days of signature. Resident, Responsible Party
and Guarantor understand that the result of this arbitration agreement is that
claims, other than those dealing with billing or collection matters, but
including malpractice claims Resident, Responsible Party, and Guarantor may
have against the Facility and its employees and agents, cannot be brought as a
lawsuit in court before a judge or jury, and agree that all such claims will be
resolved as described in this section. The arbitrator(s) shall apply the Federal
Rules of Evidence and Federal Rules of Civil Procedure except where
otherwise stated in this Admission Agreement. Also, the arbitrator(s) shall
apply, and the arbitration award shall be consistent with, the state substantive
law (including any and all statutory damage caps) for the state in which the
Facility is located, except as otherwise stated in this Admission Agreement or
where preempted by the FAA. Any award of the arbitrator(s) may be entered
as a judgment in any court having jurisdiction over the Parties. In the event
an arbitrator(s) or a court having jurisdiction finds any portion of this
Admission Agreement unenforceable, that portion shall not be effective and
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the remainder of the Admission Agreement shall remain in full force and
effect. This Arbitration provision shall remain in full force and effect
notwithstanding the termination, cancellation, or natural expiration of this
Admission Agreement and/or the death of Resident.
(Bold typeface in original.) Woodland Hills argued that the arbitration clause in question was
enforceable because it contained mutual obligations to arbitrate. It also asserted that the
admission agreements signed by Henry were binding on Betncourt’s estate because Henry
was clothed with apparent authority to act on Betncourt’s behalf. Alternatively, Woodland
Hills argued that the estate was bound by the admission agreements executed by Henry
because Betncourt was a third-party beneficiary of the agreements. In response, Henry
contended that, in executing the agreements, she did not possess the authority necessary
under the law of agency to bind Betncourt; that the arbitration clause failed for lack of
mutuality of obligation; and that the arbitration clause at issue was unconscionable. She also
contended that Betncourt lacked the mental capacity to enter into the admission agreement
executed in May 2010 and that Betncourt did not make a knowing and voluntary waiver of
the right to a jury trial when she signed that agreement. Woodland Hills filed a brief in reply
to the arguments made by Henry.
On December 12, 2013, the circuit court entered an order succinctly finding “that
Defendants’ Motion to Dismiss and to Compel Arbitration should be and hereby is denied.”
Woodland Hills filed a motion asking the circuit court to amend its order to include specific
findings on the issues raised by the parties. The circuit court denied the motion by written
order, and this timely appeal followed.
Before addressing the merits of the appeal, we note that an order denying a motion to
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compel arbitration is an immediately appealable order under Arkansas Rule of Appellate
Procedure–Civil 2(a)(12) (2013). When a circuit court denies a motion to compel arbitration
without expressly stating the basis for its ruling, that ruling encompasses the issues presented
to the circuit court by the briefs and arguments of the parties. Asset Acceptance, LLC v.
Newby, 2014 Ark. 280, ___ S.W.3d ___. On appeal, we review a circuit court’s order
denying a motion to compel arbitration de novo on the record. HPD, LLC v. Tetra Techs.,
Inc., 2012 Ark. 408, 424 S.W.3d 304.
For reversal, Woodland Hills first contends that the documentation submitted by
Henry does not support a finding that Betncourt was mentally incompetent to execute the
agreements. It next argues that the admission agreements executed by Henry are valid and
enforceable because it reasonably relied on Henry’s apparent authority to enter into the
agreements. As an alternative to that argument, Woodland Hills asserts that the agreements
signed by Henry are binding on the estate because Betncourt was a third-party beneficiary of
the agreements. In another issue, it contends that the circuit court erred in concluding that
mutuality of obligation did not exist. Last, it maintains that the arbitration clause is not
unconscionable. We confine our decision to the issue of mutuality, as it is dispositive of the
outcome of the appeal.
As stated, there were eight admission agreements executed in connection with
Betncourt’s residencies at Woodland Hills. Each of them excluded from the requirement of
arbitration “a dispute over billing or collecting for services.” Henry argued below, and the
circuit court agreed, that mutuality of obligation was lacking because, by carving out billing
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or collection for services, Woodland Hills reserved the right to hail its residents into court to
pursue the most likely claim it would have against them, while exclusively binding its
residents to arbitrate any claims that residents might have against it. In contesting the circuit
court’s ruling, Woodland Hills argues that mutuality of obligation exists because a resident,
particularly one who pays for services privately, could possibly dispute a charge for services
and thus might have a claim for billing.
The parties in this matter do not dispute that the Federal Arbitration Act (FAA) applies
in this case. Congress enacted the FAA, 9 U.S.C. §§ 1–16, to overcome judicial resistance
to arbitration. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). The Act
establishes a national policy favoring arbitration when the parties contract for that mode of
dispute resolution. Preston v. Ferrer, 552 U.S. 346 (2008) (citing Southland Corp. v. Keating,
465 U.S. 1 (1984)). So, too, in Arkansas, arbitration is strongly favored as a matter of public
policy and is looked upon with approval by courts as a less expensive and more expeditious
means of settling litigation and relieving docket congestion. Newby, supra. Although an
arbitration provision is subject to the FAA, courts look to state contract law to decide whether
the parties’ agreement to arbitrate is valid. DIRECTV, Inc. v. Murray, 2012 Ark. 366, 423
S.W.3d 555.
This court has observed that a threshold inquiry is whether a valid agreement to
arbitrate exists; that is, whether there has been mutual agreement, with notice as to the terms
and subsequent assent. See Alltel Corp. v. Sumner, 360 Ark. 573, 203 S.W.3d 77 (2005). We
also have said that the essential elements for an enforceable arbitration agreement are (1)
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competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5)
mutual obligation. Bank of the Ozarks, Inc. v. Walker, 2014 Ark. 223, 434 S.W.3d 357.
In Arkansas, the element of mutuality of contract means that an obligation must rest
on each party to do or permit to be done something in consideration of the act or promise
of the other; that is, neither party is bound unless both are bound. The Money Place, LLC v.
Barnes, 349 Ark. 411, 78 S.W.3d 714 (2002). A contract, therefore, that leaves it entirely
optional with one of the parties as to whether he will perform his promise would not be
binding on the other. Showmethemoney Check Cashers, Inc. v. Williams, 342 Ark. 112, 27
S.W.3d 361 (2000). There is no mutuality of obligation where one party uses an arbitration
agreement to shield itself from litigation, while reserving to itself the ability to pursue relief
through the court system. Cash in a Flash Check Advance of Ark., LLC v. Spencer, 348 Ark.
459, 74 S.W.3d 600 (2002). Thus, under Arkansas law, mutuality requires that the terms of
the agreement impose real liability upon both parties. E-Z Cash Advance, Inc. v. Harris, 347
Ark. 132, 60 S.W.3d 436 (2001).
These basic principles of mutuality are illustrated in our decision of Tyson Foods, Inc.
v. Archer, 356 Ark. 136, 147 S.W.3d 681 (2004). There, this court held that an arbitration
agreement lacked the necessary mutuality of obligation because swine producers were limited
to pursuing any grievance in an arbitral forum, while the owner of the swine retained the sole
right to pursue legal or equitable remedies in a court of law. Perhaps more instructive here
is our opinion in E-Z Cash, supra. In that case, we found that an arbitration clause was not
enforceable where the clause allowed the check casher the right to all civil remedies, including
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a return-check fee, court costs, and attorney’s fees, when a check was returned, but limited
the customer to arbitration. Although the clause allowed both parties access to small-claims
court, we held that any argument that this provision supplied the necessary mutuality was
“disingenuous” in light of the other provision allowing the check casher to go to court for
returned checks because “taking into account their line of business, it is difficult to imagine
what other causes of action against a borrower remain that E-Z Cash would be required to
submit to arbitration.” E-Z Cash, 347 Ark. at 141, 60 S.W.3d at 442. In other words,
mutuality was deemed lacking because the check casher could litigate the only kind of claim
that it might have against a borrower.
In the case at bar, we also conclude that the arbitration clause lacks mutuality. By
reserving the right to litigate billing or collection disputes, Woodland Hills excluded from
arbitration the only likely claim it might have against a resident. Its argument that a private-
pay resident might have a billing claim rings hollow in light of this reservation, and
particularly so in this case where the resident was a recipient of Medicaid and Medicare. The
fact remains that Woodland Hills retained the right to litigate its billing and collection claims,
while strictly limiting the residents to arbitration. Thus, the clause imposes no real liability
on Woodland Hills to arbitrate its own claims. For these reasons, the arbitration clause
offends our law requiring mutuality of obligation and cannot be enforced.1 Because no valid
1
There is some question in this appeal as to which admission agreement is controlling
in this case, and the parties have directed their arguments to all of them. We need not decide
which one is the operative agreement because each arbitration clause excepts billing and
collection disputes from arbitration and thus fails for want of mutuality.
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arbitration agreement exists due to lack of mutuality, we need not address any of the
remaining issues. Pine Hills Health & Rehab., LLC v. Matthews, 2014 Ark. 109, 431 S.W.3d
910.
Affirmed.
Davis, Clark, Butt, Carithers & Taylor, PLC, by: Constance G. Clark and Kelly Carithers,
for appellants.
Reddick Moss, PLLC, by: Brian D. Reddick, Robert W. Francis, and Matthew D. Swindle;
and Appellate Solutions, PLLC, by: Deborah Truby Riordan, for appellees.
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