Opinion
NO. 2012-CA-002000-MR
05-20-2016
LANCASTER MEDICAL INVESTORS, LLC d/b/a CHRISTIAN CARE CENTER OF LANCASTER; CARE CENTERS MANAGEMENT CONSULTING, INC.; AND SAMUEL FRAZIER, in his capacity as Administrator APPELLANTS v. SHEILDA BATES, AS EXECUTRIX OF THE ESTATE OF RUTH GARLAND, DECEASED, AND ON BEHALF OF THE WRONGFUL DEATH BENEFICIARIES OF RUTH GARLAND APPELLEE
BRIEFS FOR APPELLANT: Loren T. Prizant William K. Oldham Louisville, Kentucky BRIEF FOR APPELLEE: Robert E. Salyer Ross F. Mann Lexington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM GARRARD CIRCUIT COURT
HONORABLE C. HUNTER DAUGHERTY, JUDGE
ACTION NO. 11-CI-00186 OPINION
AFFIRMING
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BEFORE: ACREE, CHIEF JUDGE; TAYLOR AND VANMETER, JUDGES. VANMETER, JUDGE: Lancaster Medical Investors, LLC d/b/a Christian Care Center of Lancaster; Care Centers Management Consulting, Inc.; Samuel Frazier, in his capacity as Administrator; and John Does 1 through 5, unknown defendants (hereinafter collectively referred to as "the Facility") appeal from the October 18, 2012, order of the Garrard Circuit Court denying the Facility's motion to compel arbitration of this case initiated by Sheilda Bates, as Executrix of the Estate of Ruth Garland, deceased (hereinafter referred to as "the Estate"), and on behalf of the wrongful death beneficiaries. The Facility argues the trial court erred by finding Ricky Bates, Ruth's son-in-law, lacked authority under a power-of-attorney ("POA") to execute the Arbitration Agreement at issue on his mother-in-law's behalf. For the following reasons, we affirm.
Since this case involved nearly identical issues, this case was held in abeyance pending resolution by the Kentucky Supreme Court of the composite case of Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2015).
The underlying facts of this action are not in dispute. On July 10, 2000, Ruth executed a document styled "General Power of Attorney," which outlines a number of authorities given to Ricky, including the power:
to draw, make and sign checks, contracts, agreements, deeds, notes, mortgages, instruments of conveyance and all other documents of every nature and description;
. . . .
to institute and defend suits concerning my property and personal rights; to make any and all health care decisions for me should I, at any time, not have decisional capacity to do so; and generally, to perform for me and in my name, all that I might do if present and acting in my own behalf, and I hereby expressly adopt and ratify all acts of
my said attorney-in-fact done pursuant to the powers hereby granted.
Thereafter, Ruth was admitted to the Facility, where she resided on two separate occasions; the first from October 21, 2009 until January 3, 2010, and the second from April 6, 2010 until May 7, 2010. On the date of her second admission, April 6, 2010, Ricky, as Ruth's attorney-in-fact, executed an optional Arbitration Agreement on Ruth's behalf during the course of the admission process. Ruth and Ricky had both signed a virtually identical Arbitration Agreement on October 21, 2009 when Ruth was first admitted to the Facility, but that agreement is not at issue in this appeal.
The April 6, 2010 Arbitration Agreement provided, in pertinent part:
Any legal controversy, dispute, disagreement, or claim of any kind now existing or occurring in the future between the parties arising out of or in any way relating to this Arbitration Agreement or the Resident's stay at the Facility, including, but not limited to, all claims based on breach of contract, negligence, medical malpractice, tort, breach of statutory duty, resident's rights, any departures from accepted standards of care, and all disputes regarding the interpretation or scope of this Arbitration Agreement, the arbitrability of any claim or dispute, and allegations of fraud in the inducement or requests for recission of this Arbitration Agreement, shall be settled by binding arbitration.
In addition, the Arbitration Agreement stated "By signing this Arbitration Agreement, the Resident acknowledges that he or she has been informed that: . . . (2) THIS ARBITRATION AGREEMENT WAIVES RESIDENT'S RIGHT TO A TRIAL IN COURT AND A TRIAL BY A JURY FOR ANY FUTURE LEGAL CLAIMS RESIDENT MAY HAVE AGAINST FACILTY[.]" A one-page information sheet provided with the Arbitration Agreement entitled "What is Binding Arbitration" reiterates that the Arbitration Agreement waives the resident's right to a jury trial and states that the agreement may be revoked within thirty days of execution.
Following Ruth's death in May 2010, Sheilda brought the underlying civil action asserting claims for negligence, medical negligence, corporate negligence, violations of the long-term care resident's rights statute, KRS 216.510 et seq., and wrongful death. The Facility moved to compel arbitration based on the terms of the Arbitration Agreement. By order entered April 9, 2012, the trial court ordered the parties to participate in arbitration, as outlined in the April 6, 2010 Arbitration Agreement. The Estate then moved to alter, amend or vacate the court's order, based upon the decision in Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012). The trial court granted the Estate's motion, finding that under Ping, Ricky lacked authority pursuant to the POA to execute the April 6, 2010 Arbitration Agreement on Ruth's behalf. The court then entered an order denying the Facility's motion to compel arbitration, which the Facility now appeals.
Kentucky Revised Statutes.
An order denying a motion to compel arbitration is immediately appealable. KRS 417.220(1). See also Conseco Fin. Serv. Corp. v. Wilder, 47 S.W.3d 335, 340 (Ky. App. 2001). The enforcement and effect of an arbitration agreement is governed by the Kentucky Uniform Arbitration Act ("KUAA"), KRS 417.045 et seq., and the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. "Both Acts evince a legislative policy favoring arbitration agreements, or at least shielding them from disfavor." Ping, 376 S.W.3d at 588.
United States Code. --------
Under both Acts, a party seeking to compel arbitration has the initial burden of establishing the existence of a valid agreement to arbitrate. Unless the parties clearly and unmistakably manifest a contrary intent, that initial showing is addressed to the court, not the arbitrator, and the existence of the agreement depends on state law rules of contract formation. An appellate court reviews the trial court's application of those rules de novo, although the trial court's factual findings, if any, will be disturbed only if clearly erroneous.Id. at 590 (internal citations omitted).
Neither party disputes that the April 6, 2010, Arbitration Agreement, if valid and enforceable, covers the Estate's negligence and personal injury claims. The issue is whether Ricky possessed authority under the POA to execute the Arbitration Agreement on Ruth's behalf. Whisman did not deny that a principal may expressly grant to his attorney-in-fact the authority to bargain away his right to trial by jury by entering into a pre-dispute arbitration agreement. 478 S.W.3d at 329. However, the Supreme Court cautioned that "without a clear and convincing manifestation of the principal's intention to do so, we will not infer the delegation to an agent of the authority to waive a fundamental personal right so constitutionally revered as the 'ancient mode of trial by jury.'" Id. at 313.
[T]he power to waive generally such fundamental constitutional rights must be unambiguously expressed in the text of the power-of-attorney document in order for
that authority to be vested in the attorney-in-fact. The need for specificity is all the more important when the affected fundamental rights include the right of access to the courts (Ky. Const. § 14), the right of appeal to a higher court (Ky. Const. § 115), and the right of trial by jury, which incidentally, is the only thing that our Constitution commands us to "hold sacred." See Ky. Const. § 7.Id. at 328 (internal footnotes omitted).
In Whisman, the Supreme Court expressly held that a POA granting the power to "institute or defend suits concerning my property rights" did not confer authority to enter into a pre-dispute arbitration agreement because arbitration is not a "suit" as the term is commonly understood, but rather a process designed to avoid suits. Id. at 323. Thus, we do not believe that the language conferring upon Ricky the power to "institute or defend suits concerning my property and personal rights" gave him the authority to enter into an arbitration agreement on Ruth's behalf.
Whisman further held that neither of the following provisions in a POA granted the agent the authority to enter into a pre-dispute arbitration agreement: a grant of the power "to draw, make and sign any and all checks, contracts, notes, mortgages, agreements, or any other document including state and Federal tax returns"; and a grant of the power "to make . . . contracts of every nature in relation to both real and personal property, including stocks, bonds, and insurance[.]" Id. at 324-26. The Court explained,
[i]nfusing the authority to enter into 'any contract or agreement' with the authority to waive fundamental constitutional rights eviscerates our long line of carefully crafted jurisprudence dictating that the principal's
explicit grant of authority delineated in the power-of-attorney document is the controlling factor in assessing the scope of the powers of the attorney-in-fact.Id. at 329. Both of the provisions in Whisman are nearly identical to the language in the POA at issue. We therefore must conclude that the language here does not constitute a clear manifestation of intent to confer the right to enter into an arbitration agreement. The trial court did not err by holding that Ricky was not authorized to execute the April 6, 2010 arbitration agreement on Ruth's behalf or by denying the Facility's motion to compel arbitration with respect to the negligence and personal injury claims.
Furthermore, Ricky did not possess authority to bind the wrongful death claims to arbitration. Wrongful death claims are not derivative of personal injury claims - they do not accrue through or on behalf of the decedent. Ping, 376 S.W.3d at 599. Rather, wrongful death claims accrue separately to the wrongful death beneficiaries and a decedent or her agent cannot bind wrongful death beneficiaries to arbitrate their claims. Id. "Arbitration is a matter of contract . . . it is something the contracting parties, or their proxies, must agree to. It is not something that one party may simply impose upon another." Id. at 600. Thus, the trial court also properly denied the Facility's motion to compel arbitration of the wrongful death claims.
In sum, the April 6, 2010 Arbitration Agreement is unenforceable. The Garrard Circuit Court's order denying the Facility's motion to compel arbitration is affirmed.
ALL CONCUR. BRIEFS FOR APPELLANT: Loren T. Prizant
William K. Oldham
Louisville, Kentucky BRIEF FOR APPELLEE: Robert E. Salyer
Ross F. Mann
Lexington, Kentucky