Opinion
1 CA-CV 12-0456
04-30-2013
In the Matter of the Estate of: RICHARD HEINEY, An Adult, Deceased. THE ESTATE OF RICHARD HEINEY, by and through JESSICA O'QUINN, Personal Representative; JESSICA O'QUINN, on behalf of herself and other survivors of RICHARD HEINEY, Plaintiffs/Appellants, v. LIFE CARE CENTERS OF AMERICA, INC., a foreign corporation doing business in Arizona as DESERT COVE NURSING CENTER; CHANDLER UNITED MEDICAL INVESTORS LIMITED PARTNERSHIP, Defendants/Appellees.
Udall Shumway, PLC By H. Micheal Wright and Lincoln M. Wright Attorneys for Appellants Fann & Petruccelli, P.A. By Dustin A. Christner Attorneys for Appellees
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication - Rule 28, Arizona Rules of
Civil Appellate Procedure)
Appeal from the Superior Court in Maricopa County
Cause No. PB2008-090825
The Honorable Kirby Kongable, Judge Pro Tempore
The Honorable Rodrick J. Coffey, Judge Pro Tempore
AFFIRMED IN PART; REVERSED IN PART
Udall Shumway, PLC
By H. Micheal Wright
and Lincoln M. Wright
Attorneys for Appellants
Mesa Fann & Petruccelli, P.A.
By Dustin A. Christner
Attorneys for Appellees
Phoenix KESSLER, Judge ¶1 Jessica O'Quinn, as personal representative of the estate of Richard Heiney ("Richard") and on behalf of herself and his beneficiaries (collectively "Plaintiffs"), appeals the trial court's judgment dismissing her complaint against Life Care Centers of America, Inc. ("Life Care"), dba Desert Cove Nursing Center ("Desert Cove") (collectively "Defendants"), referring the matter for arbitration, and denying her motion for reconsideration. For the following reasons, we affirm in part and reverse in part.
Judy Luhan was Richard Heiney's daughter and the original personal representative of his Estate. She died after the commencement of the action and the court appointed Jessica O'Quinn in her place.
FACTUAL AND PROCEDURAL HISTORY
¶2 On May 6, 2008, Richard was admitted to Desert Cove following hospitalization for a broken hip. On May 8, 2008, Margaret Shermer ("Shermer"), a facility representative, provided Richard's wife, Florence Heiney ("Florence"), with the admissions paperwork. Included in the stack was a voluntary arbitration agreement. In her affidavit, Shermer stated that although she does not specifically recall Richard or his family, "[i]t is [her] habit and practice in completing admittance paperwork to review each document separately, one by one, with the signatory. [She does] not, under any circumstances, give the resident, or the resident's responsible party, the admission paperwork without personally reviewing with them each and every document contained in the admittance paperwork." Florence claims she signed all of the documents at the nurse's desk without reading them, and in her affidavit claimed the only discussion she had with the representative was in regard to the advance directive for Richard's care. Florence's daughter, Judy, was also present when Richard was admitted, and claimed that "[t]he representative did not explain the [a]rbitration [a]greement to [Florence], nor mention the word 'arbitration' at all." ¶3 Richard was hospitalized a second time and then readmitted to Desert Cove on June 1, 2008. Florence again received and signed the same admissions paperwork on June 17, 2008. Florence claims in her affidavit that "no one explained the [voluntary arbitration agreement] to [her], nor called any attention to the form, nor explain[ed] that [she] or [her] husband would be giving up legal rights by signing the agreement." Florence's friend, Sheila McDonald, was present at the second admission, and testified at her deposition that there was no conversation between Florence and the representative regarding the contents of the documents she signed. ¶4 Richard died on July 26, 2008 after developing an infection caused by a pressure ulcer. The Plaintiffs filed a complaint alleging negligence, violation of the Adult Protective Services Act ("APSA") under Arizona Revised Statutes ("A.R.S.") section 46-455 (Supp. 2012), and wrongful death. Defendants moved to dismiss the complaint, arguing the dispute should be resolved pursuant to the arbitration agreements Florence executed on behalf of her husband, herself, and her husband's heirs and beneficiaries. Following an evidentiary hearing, the trial court granted Defendant's motion finding that the arbitration agreement was not a contract of adhesion. The court held that: (1) the documents were signed well after Richard was admitted, and no one pressured Florence to sign; (2) Florence could not argue there was no knowing waiver of rights because "[s]he testified that she now knows the differences between trial and arbitration, and that she would have known the difference at the time of signing had she chosen to read the arbitration agreement in its entirety"; (3) Florence was not under duress at the time of signing; (4) there was no procedural unconscionability because Florence went through the paperwork one page at a time in a quiet place, she could have taken the paperwork home, she could have had the documents explained to her by an attorney, she was never prevented from fully reading the documents, and she was never told she had to sign; (5) there was no substantive unconscionability because the terms did not unfairly benefit the care center over patients and were binding on both parties; and (6) Florence failed to show that arbitration would be prohibitively costly or deny her access to justice because she had a contingent fee agreement with her attorney. The minute entry dismissed the case against Life Care without prejudice, and provided that the action could be used by the parties for motions of confirmation of an award if warranted. ¶5 An arbitration hearing was held and the panel unanimously found in favor of Life Care. Life Care filed a request for confirmation of the arbitration award with the trial court, and Plaintiffs filed a motion to reconsider the order to arbitrate. The court denied Plaintiffs' motion, and granted Life Care's request for confirmation of the award. ¶6 O'Quinn filed a timely appeal. We have jurisdiction pursuant to A.R.S. § 12-2101.01(A)(6) (Supp. 2012).
Plaintiffs' wrongful death claim is subsumed in the negligence claim: "As a proximate result of the acts and omissions by Defendants, Plaintiffs suffered a loss of love, affection, companionship, care and guidance since the death of their husband and father, [Richard], and will continue to suffer such losses in the future. . . . Plaintiffs have already suffered and will in the future continue to suffer pain, grief, sorrow, anguish, stress, shock and mental suffering."
Although recorded, a full transcript from this proceeding is not in the record on appeal.
The order, however, lacked Arizona Rule of Civil Procedure Rule 54(b) language. See S. Cal. Edison Co. v. Peabody W. Coal Co., 194 Ariz. 47, 52, ¶ 16, 977 P.2d 769, 774 (1999) ("[E]ven in an independent proceeding in which the question of arbitrability has been raised, an order compelling arbitration will always adjudicate 'fewer than all of the claims.'" (quoting Ariz. R. Civ. P. 54(b))). If the trial court does not certify an order pursuant to Rule 54(b), "the order compelling arbitration remains interlocutory and is not appealable." Id. at 53, ¶ 20, 977 P.2d at 775 (further stating that if proper, the court's refusal to enter an appealable order may be reviewed by special action proceedings). No one sought special action relief from the order compelling arbitration.
ISSUES AND STANDARD OF REVIEW
¶7 Plaintiffs argue the trial court erred in finding the arbitration agreement was enforceable under principles of contract law. Specifically, Plaintiffs argue that the agreement was a contract of adhesion which violated Florence's reasonable expectations and was procedurally and substantively unconscionable. In addition, Plaintiffs argue that Richard's wrongful death beneficiaries are not parties to the arbitration agreement and cannot be bound by it. ¶8 When parties dispute the enforceability of an arbitration agreement, the trial court treats the dispute as one for summary judgment and, if there are material facts in dispute, holds an expedited evidentiary hearing to resolve the dispute. Ruesga v. Kindred Nursing Ctrs., L.L.C., 215 Ariz. 589, 596, ¶¶ 23-24, 161 P.3d 1253, 1260 (App. 2007). In reviewing an order compelling arbitration from such a hearing, "[w]e must defer, absent clear error, to the factual findings upon which the trial court's conclusions are based. We review the trial court's conclusions of law, however, de novo." Harrington v. Pulte Home Corp., 211 Ariz. 241, 246-47, ¶ 16, 119 P.3d 1044, 1049-50 (App. 2005) (citations omitted).
DISCUSSION
¶9 "This [C]ourt recognizes the strong public policy favoring arbitration as the preferred means of dispute resolution. However, that same public policy presupposes the existence of a valid agreement to arbitrate. Only when the arbitration provision is enforceable will the court compel arbitration." Stevens/Leinweber/Sullens, Inc. v. Holm Dev. & Mgmt., Inc., 165 Ariz. 25, 29-30, 795 P.2d 1308, 1312-13 (App. 1990) (citations omitted); see A.R.S. § 12-1501 (2003) (providing that arbitration contracts are "valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract"); see also Peters v. Columbus Steel Castings Co., 873 N.E.2d 1258, 1260, ¶ 8 (Ohio 2007) ("While arbitration is encouraged as a form of dispute resolution, the policy favoring arbitration does not trump the constitutional right to seek redress in court."). Thus, the enforceability of an arbitration agreement is governed by general principles of contract law. Broemmer v. Abortion Servs. of Phoenix, Ltd., 173 Ariz. 148, 150, 840 P.2d 1013, 1015 (1992). ¶10 Plaintiffs contend the arbitration agreement is not enforceable because it is an unenforceable contract of adhesion. An adhesion contract is one offered on a take-it-or-leave-it basis to a consumer who has no realistic bargaining strength. Burkons v. Ticor Title Ins. Co. of Cal., 165 Ariz. 299, 311, 798 P.2d 1308, 1320 (1989), rev'd on other grounds, 168 Ariz. 345, 813 P.2d 710 (1991). "[U]nder such conditions . . . the consumer cannot obtain the desired product or services except by acquiescing in the form contract." Broemmer, 173 Ariz. at 150, 840 P.2d at 1015. A court will not enforce a contract of adhesion if it is beyond the reasonable expectations of the party challenging it or if the contract is procedurally or substantively unconscionable. Banner Health v. Med. Sav. Ins. Co., 216 Ariz. 146, 158-59, ¶¶ 50-54, 163 P.3d 1096, 1108-09 (App. 2007) (Kessler, J., dissenting) (citing Broemmer, 173 Ariz. at 151, 840 P.2d at 1016). Unconscionability is a question of law for a court to decide. Banner Health, 216 Ariz. at 159, ¶ 54, 163 P.3d at 1109. ¶11 In September 2010, the trial court held an evidentiary hearing to determine the enforceability of the arbitration agreement and concluded it was not a contract of adhesion and there was no procedural or substantive unconscionability. The court found that Florence signed the paperwork well after Richard's admission, was not pressured to sign, was not under duress, and testified that she would have known the difference between trial and arbitration at the time of signing had she chosen to read the agreement in its entirety. In addition, the court found that Florence was never told she had to sign the documents, she went through the paperwork one page at a time in a quiet location, and she could have taken the documents home, had them explained to her, or changed her mind within ten days of signing. ¶12 Although the proceedings were recorded, a full transcript of the hearing is not included in the record on appeal. Thus, we do not have most of Florence's testimony from that hearing or the testimony of two witnesses presented by the Defendants. "A party is responsible for making certain the record on appeal contains all transcripts or other documents necessary for us to consider the issues raised on appeal. When a party fails to include necessary items, we assume they would support the court's findings and conclusions." Baker v. Baker, 183 Ariz. 70, 73, 900 P.2d 764, 767 (App. 1995) (citations omitted); ARCAP 11(b). As Plaintiffs failed to provide us with the full transcripts of the evidentiary hearing, we assume the record supports the trial court's ruling. See Kohler v. Kohler, 211 Ariz. 106, 108 n.1, ¶ 8, 118 P.3d 621, 623 n.1 (App. 2005); Johnson v. Elson, 192 Ariz. 486, 489, ¶ 11, 967 P.2d 1022, 1025 (App. 1998). As a result, we find the trial court did not err in finding the arbitration agreement was not a contract of adhesion, beyond Florence's reasonable expectations, or procedurally or substantively unconscionable. ¶13 Separate mention must be made of Plaintiffs' substantive unconscionabilty argument. Plaintiffs argue that the arbitration agreement was substantively unconscionable because the high arbitration fees (in excess of $33,000) which were allocated to Florence were sufficient to preclude her from obtaining relief through arbitration and would not have been incurred in a civil trial. Plaintiffs point to a portion of Florence's testimony at the evidentiary hearing showing that she was on a fixed income and that the potential fees were prohibitory. As we explained in Harrington, 211 Ariz. at 252, ¶ 41, 119 P.3d at 1055, arbitration costs may make an arbitration agreement substantively unconscionable if they are so prohibitive as to force the party challenging the clause to forgo her claims. One of the premises to enforce arbitration agreements is that it is an inexpensive and speedy way to resolve disputes, which cannot happen if the costs would preclude the claims being arbitrated. Id. at ¶ 42. Such a determination is factually driven and the person challenging the agreement has the burden of proof on the prohibitive nature of the costs. Id. at ¶ 43. ¶14 We affirm the trial court's ruling that the agreement was not substantively unconscionable based on prohibitive costs for several reasons. First, as with the other claims, Plaintiffs have failed to provide us with the rest of Florence's testimony at the evidentiary hearing and we presume that missing testimony supports the court's conclusion. Second, Florence proceeded to arbitrate the claims to conclusion without seeking special action relief from the court's original order enforcing the arbitration agreement. This would imply that either Florence did not find the possible arbitration costs prohibitive or was willing to take the chance that the costs would not be allocated equally between the parties. Third, the court concluded that Florence's attorneys might be advancing those costs, thus allowing her to fully arbitrate her claims rather than preclude arbitration. See Harrington, 211 Ariz. at 253, ¶ 48, 119 P.3d at 1056. While we agree with Florence that such advancement might only delay the inevitable incurring of such fees, such an arrangement would still permit her to fully arbitrate her claims, which she did. ¶15 Plaintiffs next argue that the arbitration agreement does not preclude wrongful death claims by Richard's survivors. Although the trial court did not expressly rule on this argument, we may infer that the court rejected it. See Coronado Co. v. Jacome's Dep't Store, Inc., 129 Ariz. 137, 139, 629 P.2d 553, 555 (App. 1981) ("Implied in every judgment, in addition to express findings made by the court, is any additional finding that is necessary to sustain the judgment, if reasonably supported by the evidence, and not in conflict with the express findings."). Life Care's arbitration agreement purports to bind "the Resident, his/her successors, assigns, agents, insurers, heirs, trustees, and representatives, including the personal representative or executor of his or her estate." ¶16 There is currently a division among jurisdictions regarding the applicability of arbitration provisions to non-signatory heirs. "States that bind such plaintiffs generally view wrongful death claims as derivative of the decedent's claim, or focus on the public policy favoring arbitration agreements. States that do not bind claimants generally emphasize the independence of the wrongful death claim or the need for consent in creating binding arbitration." Ruiz v. Podolsky, 237 P.3d 584, 591 n.2 (Cal. 2010) (citations omitted). As explained below, because Ariz.ona views wrongful death actions as independent of any action the decedent may have had for his or her own harm and pain and suffering, we hold that arbitration clauses which have not been expressly agreed to by a decedent's wrongful death statutory beneficiaries do not bind those beneficiaries. ¶17 "Ariz.ona's wrongful death act, A.R.S. § 12-611, confers an original and distinct claim for the damages sustained by named statutory beneficiaries. It is not derived from nor is it a continuation of claims which formerly existed in a decedent." Huebner v. Duechle, 109 Ariz. 549, 549-50, 514 P.2d 470, 470-71 (1973) (emphasis added); accord Girouard v. Skyline Steel, Inc., 215 Ariz. 126, 131-32, ¶ 19, 158 P.3d 255, 260-61 (App. 2007). Washington shares a similar interpretation:
The wrongful death statutes create new causes of action for the benefit of specific surviving relatives to compensate for losses caused to them by the decedent's death. Our supreme court has explained that in this context, the personal representative of the estate is merely a statutory agent or trustee acting in favor of theWoodall v. Avalon Care Ctr.-Fed. Way, L.L.C., 231 P.3d 1252, 1258, ¶ 27 (Wash. Ct. App. 2010) (citations and internal punctuation omitted). Thus, although Washington acknowledges that a non-signator is bound by an arbitration agreement where claims are asserted solely on behalf of the signator to the arbitration agreement, Satomi Owners Ass'n v. Satomi, L.L.C., 225 P.3d 213, 229-30, ¶ 48 (Wash. 2009), those heirs are not required to arbitrate their own distinct claims for wrongful death, see Woodall, 231 P.3d at 1261, ¶ 43; cf. Allen v. Pacheco, 71 P.3d 375, 379-80 (Colo. 2003) (stating that although wrongful death claims are independent, non-parties can be bound if the original parties intended for them to fall within the scope). ¶18 Courts in Mississippi, Texas, and Michigan, on the other hand, have held that a "wrongful death suit is a derivative action by the beneficiaries, and those beneficiaries, therefore, stand in the position of their decedent." Trinity Mission of Clinton, L.L.C. v. Barber, 988 So.2d 910, 919, ¶ 27 (Miss. Ct. App. 2007) (emphasis added); see also Ballard v. Sw. Detroit Hosp., 327 N.W.2d 370, 372-73 (Mich. Ct. App. 1982) ("[A]lthough the Michigan wrongful death act provides for additional damages benefitting the decedent's next of kin for loss of society and companionship, it does not create a separate cause of action independent of the underlying rights of the decedent. Rather, the cause of action is expressly made derivative of the decedent's rights."). As a result, those states have found arbitration clauses to be binding on non-signatory beneficiaries of wrongful death claims. See In re Labatt Food Serv., L.P., 279 S.W.3d 640, 646 (Tex. 2009) ("[R]egardless of the fact that [decedent's] beneficiaries are seeking compensation for their own personal loss, they still stand in [decedent's] legal shoes and are bound by his agreement."); Wilkerson v. Nelson, 395 F.Supp.2d 281, 288-89 (M.D. N.C. 2005); Cleveland v. Mann, 942 So.2d 108, 118-19, ¶¶ 40-41 (Miss. 2006); In re Jindal Saw Ltd., 289 S.W.3d 827, 828 (Tex. 2009). In light of this difference in interpretation, we find those and similar cases to be unpersuasive. ¶19 Defendants rely on Schoenrock v. Cigna Health Plan of Ariz.ona, Inc., to argue that while Ariz.ona's wrongful death claim is a new cause of action, it can be asserted "only if the decedent would have been able to maintain an action had death not ensued." 148 Ariz. 548, 550, 715 P.2d 1236, 1238 (App. 1985) (citations and internal quotation marks omitted). We find this case to be distinguishable. In Schoenrock, the plaintiff brought a malpractice claim against the defendants, asserting that the failure to timely diagnose cancer jeopardized and shortened his life. Id. at 548, 715 P.2d at 1236. Within a year, the plaintiff settled his claim for $30,000 and stipulated to a dismissal with prejudice. Id. at 549, 715 P.2d at 1237. After his death, the decedent's wife filed a wrongful death action which was ultimately dismissed. Id. Ariz.ona's wrongful death statute states that:
class designated in the statute, with no benefits flowing to the estate of the injured deceased. In other words, under no circumstances does the estate of the decedent benefit by the wrongful death action. Anything realized therefrom goes to the beneficiaries. A cause of action for wrongful death is not one which ever belonged to the decedent.
When the death of a person is caused by wrongful act, neglect or default, and the act, neglect or default, is such as would, if death had not ensued, have entitled the party injured to maintain an action to recover damages in respect thereof, then, and in every such case, the person who or the corporation which would have been liable if death had not ensued shall be liable to an action for damages, nothwithstanding the death of the person injured . . . .A.R.S. § 12-611 (2003). As the decedent had settled his claim, he would not have been able to bring another suit to recover additional damages. Thus the Court affirmed the dismissal, finding that "even though the action is independent and not derivative, the plaintiff must still bring himself within the terms of A.R.S. § 12-611." Schoenrock, 148 Ariz. at 550, 715 P.2d at 1238. In this case, as Richard would have been entitled to maintain an action had he lived, the subsequent claim for wrongful death is not barred. See Frongillo v. Grimmett, 163 Ariz. 369, 370-71, 788 P.2d 102, 103-04 (App. 1989) (statutory requirement of decedent being able to maintain action if he did not die refers only to the circumstances under which the injury arose and the nature of the wrongful act, not whether such a tort claim would now be time-barred). ¶20 A non-signatory may be barred from avoiding arbitration if he has claimed or received some direct benefit from the agreement containing the arbitration clause. Schoneberger v. Oelze, 208 Ariz. 591, 594, ¶ 14, 96 P.3d 1078, 1081 (App. 2004), superseded by statute, 2008 Ariz. Sess. Laws, ch. 247, § 16 (2d Reg. Sess.). "Arbitration rests on an exchange of promises, " and "[p]arties to a contract may decide to exchange promises to substitute an arbitral for a judicial forum." Id. at 596, ¶ 20, 96 P.3d at 1083. ¶21 After reviewing the record, we find no evidence of any such benefit or exchange between Life Care and Richard's heirs who did not sign the agreement. Unlike Schoneberger, id., where the plaintiffs sought to benefit from a trust document while avoiding an arbitration clause it contained, Plaintiffs do not seek any benefits under the arbitration agreement. Moreover, Life Care's argument that Plaintiffs are not entitled to bring suit for alleged failure to provide contractually-defined care and services while denying Life Care the benefits of the arbitration agreement is unpersuasive. As we pointed out in Schoneberger, id. at 594, ¶ 14, 96 P.3d at 1081, a non-party to an arbitration agreement seeking to avoid arbitration must receive a direct benefit from the agreement if they are going to be required to abide by the arbitration. No such direct benefit is present here, especially where Life Care concedes that it would have been required to treat Richard even if Florence had not signed the arbitration agreement. Furthermore, even though arbitration might expedite the resolution of claims, this is not a case in which Plaintiffs sought the benefit of arbitration without incurring the costly detriment. The non-signatory Plaintiffs opposed the validity of the agreement from the beginning of the suit. ¶22 As a result, we find the arbitration agreement is not binding against Richard's non-signatory wrongful death beneficiaries.
Not only did Plaintiffs fail to provide us with most of the transcript of Florence's testimony or any of the testimony of Shermer or Thompson, but the briefs refer to depositions of Florence, Shermer, and Thompson and an affidavit of Florence. We will not consider those depositions because the trial court expressly held it would not consider the depositions of those who testified at the evidentiary hearing (Florence, Shermer and Thompson). While Florence's affidavit was not admitted as evidence at the hearing, it was attached to the response to the motion to dismiss and the court did not state on the record that it would not consider it.
CONCLUSION
¶23 For the foregoing reasons, we affirm the dismissal and order to compel arbitration, but hold that the arbitration agreement does not preclude wrongful death claims by Richard's statutory beneficiaries. We remand the matter to the trial court to vacate the confirmation of the arbitration award as to the non-signatory Plaintiffs and for further proceedings consistent with this decision.
________________
DONN KESSLER, Judge
CONCURRING: ________________
JOHN C. GEMMILL, Presiding Judge
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JON W. THOMPSON, Judge