Opinion
NO. 2019-CA-000407-MR
03-20-2020
LP PIKEVILLE, LLC d/b/a SIGNATURE HEALTHCARE OF PIKEVILLE; LPMM, INC.; LP MANAGER, LLC; SIGNATURE HEALTHCARE, LLC; SIGNATURE HEALTHCARE CONSULTING SERVICES, LLC; SIGNATURE HEALTHCARE CLINICAL CONSULTING SERVICES, LLC; LP O HOLDINGS, LLC; LPSNF II, LLC; JJLA, LLC; SHC KY HOLDINGS, LLC; SHC LP HOLDINGS, LLC; LAS PALMAS SNF, LLC; LPSNF, LLC; SIGNATURE HOLDINGS, II LLC; THE ARBA GROUP, INC.; JACOB WINTNER; and IRA SMEDRA APPELLANTS v. MARY LOZIER, AS ADMINISTRATRIX OF THE ESTATE OF LORINE DAMRON APPELLEE
BRIEFS FOR APPELLANTS: John David Dyche Leigh V. Graves Laura M. Brymer Louisville, Kentucky BRIEF FOR APPELLEE: Miller Kent Carter Pikeville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM PIKE CIRCUIT COURT
HONORABLE EDDY COLEMAN, JUDGE
ACTION NO. 18-CI-00783 OPINION
AFFIRMING
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BEFORE: COMBS, DIXON, AND TAYLOR, JUDGES. COMBS, JUDGE: LP Pikeville, LLC d/b/a Signature Healthcare of Pikeville; LPMM, Inc.; LP Manager, LLC; Signature Healthcare, LLC; Signature Healthcare Consulting Services, LLC; Signature Healthcare Clinical Consulting Services, LLC; LP O Holdings, LLC; LPSNF II, LLC; JJLA, LLC; SHC KY Holdings, LLC; SHC LP Holdings, LLC; Las Palmas SNF, LLC; LPSNF, LLC; Signature Holdings, II LLC; The ARBA Group, Inc.; Jacob Wintner; and Ira Smedra appeal from the denial of their motion to compel arbitration. After our review, we affirm.
According to appellant LP Pikeville, LLC d/b/a Signature Healthcare of Pikeville (the "Facility"), Lorine Damron was admitted as its long-term care resident on December 28, 2016. The Facility contends that at that time, Mary Lozier, Damron's daughter and the appellee, electronically signed the "Agreement to Informally Resolve and Arbitrate All Disputes" (the "Arbitration Agreement") on Damron's behalf. According to the Facility, execution of its arbitration agreement is included as a mandatory part of the admissions process.
The Facility contends that by signing the Arbitration Agreement (and electronically initialing certain of its provisions), Lozier represented that she was acting as Damron's authorized representative and that Damron had signed a written document permitting her (Lozier) to make decisions for her. A Power of Attorney ("POA") was executed by Damron on November 2, 2016, which broadly granted Lozier the authority to make "any and all medical decisions that may arise now or in the future and any decision of anything that [Damron] may have arise [sic]."
The Facility argues that pursuant to the terms of the Arbitration Agreement, the parties agreed that "if a dispute or legal claim of any kind . . . arises between the parties signing this agreement," they would attempt to resolve the dispute informally. If the parties were unable to resolve the dispute, they agreed to mediate, and if "mediation is not successful, we will arbitrate the dispute."
The Arbitration Agreement clearly provides that the parties are waiving the right to file a legal action in which a judge or jury would decide any dispute or any issues related to the agreement. Its provisions extend to the Facility's "affiliates, parents, officers, agent, owners, and assigns."
The Arbitration Agreement further provides that the arbitrator, not a court, "[w]ill decide all questions about this agreement, including but not limited [to] whether the person(s) signing it has proper authority and whether it is enforceable." The Arbitration Agreement provides that it can be revoked or cancelled within thirty days of its execution.
On June 30, 2018, the Estate of Lorine Damron, through Lozier, its administratrix, filed an action against the Facility in Pike Circuit Court. On July 27, 2018, the Facility filed a motion to stay the action and compel arbitration. It argued that its Arbitration Agreement is a valid and enforceable agreement that required arbitration of all claims.
In response, Lozier asserted that she had never signed any such agreement - electronically or otherwise. The trial court gave the parties an opportunity to conduct limited discovery on the issue.
During her deposition, Lozier attested that Damron arrived at the Facility in the early morning hours of December 28, 2016. She acknowledged the existence of the POA and her authority to execute documents on Damron's behalf. But she steadfastly denied signing (or initialing) any documents related to Damron's admission to the Facility. Lozier explained that she spoke with the Facility's admissions director, Shane Bentley, over the telephone on "probably 26th, 27th, right before she [Damron] came [to the Facility]." She insisted that she did not meet Bentley in person, did not discuss admissions paperwork with him, and did not authorize anyone to sign documents on her behalf. She denied having seen the Arbitration Agreement until the Facility's motion to dismiss was filed.
Bentley provided an affidavit that indicated that he worked as admissions director for the Facility from June 2016 to March 2017. He stated that during his tenure, he "without exception, reviewed and explained each document, including the [Arbitration Agreement] to be signed by the resident and/or the Resident's Authorized Representative." Bentley explained that the Facility used "an electronic signature system called DocuSign for execution of admissions documents including the Arbitration Agreement." The system allowed the signatory to sign the admissions documents by selecting a signature generated by the system. Bentley indicated that he "never executed a document on behalf of a resident nor on behalf of any resident's authorized representative." Bentley admitted that he had no independent recollection of Lozier. Nevertheless, he explained that he would have reviewed the terms of the Arbitration Agreement with her "in person, and would have explained to her its nature and meaning."
As the "Facility Representative," Shane Bentley's electronic signature appears on the Arbitration Agreement alongside Lozier's. The signatures are date-and time-stamped: 12/27/2016 | 3:47:45 PM EST. Bentley testified that he "would not have signed as witness to Ms. Lozier's signature on a document that I did not witness her execute or review and explain to her."
Through its order entered February 26, 2019, the trial court denied the Facility's motion to compel arbitration. Upon its review of the testimony, the court concluded that the Facility (and its affiliates) had failed to meet the burden of showing the existence and validity of an arbitration agreement. Based on the provisions of KRS 417.220, this appeal followed.
Kentucky Revised Statutes. --------
Pursuant to the provisions of KRS 417.220(2), an appeal taken from an order denying a motion to compel arbitration "shall be taken in the manner and to the same extent as from orders or judgments in a civil action." In the course of our review, we must defer to the trial court's findings of fact, but we review "without deference the trial court's identification and application of legal principles." Conseco Fin. Servicing Corp. v. Wilder, 47 S.W.3d 335, 340 (Ky. App. 2001).
On appeal, the Facility argues that the trial court erred by failing to stay the legal proceedings and to order the parties to arbitrate. We disagree.
Kentucky's version of the Uniform Arbitration Act, KRS Chapter 417, provides that the court shall order parties to proceed with arbitration upon the application of a party showing an agreement described in KRS 417.050. KRS 417.060(1). However, if the opposing party denies the existence of an agreement to arbitrate, the court "shall proceed summarily to the determination of the issue. . . ." Id. If the court finds that an agreement to arbitrate exists, the application shall be granted; otherwise, it will be denied. Id.
The Pike Circuit Court applied this standard and concluded that there was a disputed question of material fact concerning the existence of a valid arbitration agreement. It properly determined that the court was required to resolve the disputed fact.
The party who raises an arbitration agreement as a bar to court proceedings bears the burden of showing that a valid arbitration agreement exists. KRS 417.060; GGNSC Stanford, LLC v. Rowe, 388 S.W.3d 117, 121 (Ky. App. 2012) (citing Mt. Holly Nursing Center v. Crowdus, 281 S.W.3d 809, 813 (Ky. App. 2008)). While it is true that any doubts regarding the scope of arbitration should be resolved in favor of arbitration, the existence of a valid arbitration agreement is a threshold matter to be resolved by the court. General Steel Corp. v. Collins, 196 S.W.3d 18, 20 (Ky. App. 2006). This threshold issue is a matter of contract. First Options of Chicago., Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 1924, 131 L.Ed.2d 985 (1995).
Rudimentary principles of contract law govern the court's determination of whether the parties have agreed to arbitrate their disputes. General Steel Corp., supra. Every contract requires mutual assent. Cuppy v. General Acc. Fire & Life Assur. Corp., 378 S.W.2d 629, 632 (Ky. 1964). In its effort to show the parties' mutual assent to the terms of the arbitration agreement at issue in this case, the Facility produced a copy of the Arbitration Agreement bearing an electronic signature that it attributed to Lozier and the affidavit of its admissions director. However, in light of her deposition testimony, the trial court found the Facility's evidence to be insufficient to prove Lozier's assent to its terms.
The Facility emphasizes that the arbitration agreement is not rendered invalid merely by the fact that Lozier's purported signature appears in electronic form. We agree.
Kentucky has enacted the Uniform Electronic Transactions Act, KRS 369.101-369.120, which provides that a "signature may not be denied legal effect or enforceability solely because it is in electronic form." KRS 369.107(1). An electronic signature "is attributable to a person if it was the act of the person." KRS 369.109(1). "The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable." Id. While it is true that an electronic signature can evince a party's assent as a matter of law, the authenticity of an electronic signature is a question of fact to be determined by weighing the evidence.
The trial court found that the existence of an electronic signature attributed by the Facility to Lozier does not, under these circumstances, indicate her assent to the agreement. That finding is amply supported by the evidence. Lozier vehemently and consistently denied signing the agreement. In fact, she denied having ever seen the Arbitration Agreement before these proceedings were commenced.
Bentley, the Facility's admissions director, admitted that he had no recollection of his interactions with Lozier, and he offered no explanation of any security protocol embedded in DocuSign that might be useful in establishing the authenticity of the signature attributed to her. In fact, the Facility never attempted to present evidence showing the efficacy of any security procedure applied to determine the individual to whom the electronic signature was attributable. The Facility utterly failed to show that the electronic signature attributable to Lozier was created by any action that she undertook.
The trial court found that the existence of an arbitration agreement had not been shown because sufficient evidence of Lozier's consent to its terms had not been presented. The court was persuaded that the Facility was simply unable to show mutual assent of the parties. There is substantial evidence to support the court's findings.
Therefore, we AFFIRM the order of the Pike Circuit Court.
ALL CONCUR. BRIEFS FOR APPELLANTS: John David Dyche
Leigh V. Graves
Laura M. Brymer
Louisville, Kentucky BRIEF FOR APPELLEE: Miller Kent Carter
Pikeville, Kentucky