Bedford Health Properties, LLC v. Patricia Davis
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2007-CA-00945-COA
BEDFORD HEALTH PROPERTIES, LLC,
BEDFORD CARE CENTER OF HATTIESBURG,
LLC, HATTIESBURG MEDICAL PARK, INC.,
HATTIESBURG PARK MANAGEMENT CORP.,
MICHAEL MCELROY, JR. AND ROBERT
PERRY
APPELLANTS
v.
THE ESTATE OF THEODORE DAVIS, BY AND
THROUGH PATRICIA DAVIS, INDIVIDUALLY
AND AS PERSONAL REPRESENTATIVE OF
THE ESTATE OF THEODORE DAVIS, AND ON
BEHALF OF AND FOR THE USE AND
BENEFIT OF THE WRONGFUL DEATH
BENEFICIARIES OF THEODORE DAVIS
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEYS FOR APPELLANTS:
ATTORNEYS FOR APPELLEE:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
APPELLEE
04/26/2007
HON. ROBERT B. HELFRICH
FORREST COUNTY CIRCUIT COURT
STEVEN MARK WANN
HEATHER MARIE ABY
MARJORIE SELBY BUSCHING
ANNETTE ELISE BULGER MATHIS
DOUGLAS BRYANT CHAFFIN
CIVIL - PERSONAL INJURY
DENIED DEFENDANT’S MOTION TO
COMPEL ARBITRATION
REVERSED AND REMANDED: 12/16/2008
BEFORE MYERS, P.J., GRIFFIS AND ISHEE, JJ.
GRIFFIS, J., FOR THE COURT:
¶1.
Patricia Davis, on behalf of the Estate of Theodore Davis, filed suit against Bedford
Health Properties, LLC (“Bedford”) based on alleged personal injuries that Theodore
sustained while a resident at Bedford. In response, the defendants filed a motion to compel
arbitration that was denied by the circuit court. Bedford now appeals and argues that the
circuit court should have ordered arbitration. We find the denial of the motion to compel
arbitration to be in error. Accordingly, we reverse and remand for further proceedings
consistent with this opinion.
FACTS
¶2.
On September 20, 2000, Theodore executed a properly authenticated durable power
of attorney making his wife, Patricia, his agent for all healthcare decisions.
¶3.
On November 12, 2002, Patricia signed an admissions agreement with Bedford Care
Center on behalf of Theodore as his responsible party. The admissions agreement contained
an arbitration clause that stated, “[i]t is understood and agreed by the Facility and Resident
and/or Responsible Party that any legal dispute, controversy, demand or claim . . . that arises
out of or relates to . . . any service or health care provided by the Facility to the Resident,
shall be resolved exclusively by binding arbitration . . . .” This clause also stated, “[t]he
parties understand and agree that by entering this Arbitration Agreement they are giving up
and waiving their constitutional rights to have any claim decided in a court of law before a
judge and a jury.” This section was initialed by Patricia.
STANDARD OF REVIEW
¶4.
We apply a de novo standard of review to the denial of a motion to compel arbitration
because the motion presents a question of law as to whether the circuit court has jurisdiction
to hear the underlying matter. Vicksburg Partners, L.P. v. Stephens, 911 So. 2d 507, 513
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(¶9) (Miss. 2005). The Federal Arbitration Act (“FAA”) governs contracts “evidencing a
transaction involving commerce” which include nursing home admissions agreements. Id.
at 514-15 (¶¶13, 16-18) (quoting 9 U.S.C. § 2 (2000)). Therefore, we must apply the policy
of the FAA to “rigorously enforce agreements to arbitrate.” East Ford, Inc. v. Taylor, 826
So. 2d 709, 713 (¶11) (Miss. 2002) (quoting Shearson/Am. Express, Inc. v. McMahon, 482
U.S. 220, 226 (1987)).
ANALYSIS
I.
¶5.
Agency
“In determining the validity of a motion to compel arbitration under the Federal
Arbitration Act, courts generally conduct a two-pronged inquiry. The first prong has two
considerations: (1) whether there is a valid arbitration agreement and (2) whether the parties’
dispute is within the scope of the arbitration agreement.” Id. at 713 (¶9). The second prong
of the inquiry is “whether legal constraints external to the parties’ agreement foreclosed
arbitration of those claims.” Id. at 713 (¶10) (quoting Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)). Further, “only generally applicable
contract defenses, such as fraud, duress, or unconscionability, can be used to invalidate
arbitration provisions or agreements” governed by the FAA. Stephens, 911 So. 2d at 514
(¶11).
¶6.
Bedford argues that Patricia was authorized to bind Theodore to arbitration because
she was Theodore’s express agent under a durable power of attorney for healthcare. Patricia
counters by arguing that the power of attorney was limited to decisions involving healthcare
and did not include the ability to waive Theodore’s right to a jury trial.
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¶7.
“The burden of proving an agency relationship rests squarely upon the party asserting
it.” Highlands Ins. Co. v. McLaughlin, 387 So. 2d 118, 120 (Miss. 1980). “An express
agent is one who is ‘in fact authorized by the principal to act on their behalf.’” McFarland
v. Entergy Miss., Inc., 919 So. 2d 894, 902 (¶25) (Miss. 2005) (quoting Cooley v. Brawner,
881 So. 2d 300, 302 (¶10) (Miss. Ct. App. 2004)). After reviewing the durable power of
attorney, we find that Patricia was Theodore’s express agent. Now, we must determine if
the decision regarding arbitration is within the scope of the express agency that Theodore
granted Patricia.
¶8.
The durable power of attorney authorizes Patricia “to make all Health-Care Decisions
for [Theodore] . . . .” Paragraph eighteen of the power of attorney states:
ACTS CONNECTED WITH AUTHORIZATION: In connection with the
exercise of the powers herein described, my Agent is fully authorized and
empowered to perform any acts and things and to execute and deliver any
documents, instruments, and papers necessary, appropriate, incident, or
convenient to such exercise or exercises, including without limitation the
following . . . .
(Emphasis added). Paragraph eighteen then lists various actions in subsections (a) through
(g) that Patricia may undertake in order to fulfill Theodore’s healthcare wishes. Subsection
(g) of paragraph eighteen states that the agent’s power includes the ability, “to grant . . . .
waivers of or releases from liability required by any hospital or physician to implement my
wishes regarding medical treatment or non-treatment.”
¶9.
We find that, under the durable power of attorney, Theodore granted Patricia the
power to consent to the arbitration clause because he authorized her to execute documents
in order to fulfill his healthcare needs. The power of attorney clearly stated that the items
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listed in subsections (a) through (g) of paragraph eighteen were not exclusive. Instead, we
find that these items are merely illustrative of the types of acts Patricia may undertake in
order to fulfill Theodore’s healthcare needs. Theodore authorized Patricia to grant waivers
or releases in order to implement his wishes regarding medical treatment; consequently,
Theodore granted Patricia, in connection with his medical treatment, the ability to waive his
right to a jury trial. Therefore, we find that Patricia was authorized to sign the arbitration
provision, and we reverse and remand for further proceedings consistent with this opinion.
II.
¶10.
Unconscionability
Having found that Theodore’s estate is bound by the arbitration agreement, we now
turn to the second prong of East Ford to see if any general contract defenses exist to
invalidate the contract. East Ford, 826 So. 2d at 713 (¶10). The estate argues that it should
be allowed to conduct discovery related to the enforceability of the arbitration provision in
order to determine whether the clause is unconscionable. However, neither the supreme
court nor this Court has determined that such discovery is necessary before we may analyze
whether a provision is unconscionable. See Stephens, 911 So. 2d at 516-25 (¶¶20-48); Cmty.
Care Ctr. of Vicksburg, LLC. v. Mason, 966 So. 2d 220, 229-31 (¶¶23-33) (Miss. Ct. App.
2007). Likewise, we find that no further discovery on this issue is needed, and we will now
determine whether the arbitration clause is unconscionable.
¶11.
The Mississippi Supreme Court has defined unconscionability as "an absence of
meaningful choice on the part of one of the parties, together with contract terms which are
unreasonably favorable to the other party." East Ford, 826 So. 2d at 715 (¶17) (citation
omitted). There are two types of unconscionability: procedural and substantive.
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a.
¶12.
Procedural Unconscionability
Procedural unconscionability exists when there is "a lack of knowledge, lack of
voluntariness, inconspicuous print, the use of complex legalistic language, disparity in
sophistication or bargaining power of the parties and/or a lack of opportunity to study the
contract and inquire about the contract terms." Id. at 714 (¶13) (quoting Pridgen v. Green
Tree Fin. Servicing Corp., 88 F. Supp. 2d 655, 657 (S.D. Miss. 2000)). Under procedural
unconscionability, we examine the circumstances surrounding the overall formation of the
contract in which the subject clause is contained. Stephens, 911 So. 2d at 517 (¶¶23-24).
¶13.
In Stephens, the supreme court reviewed the circumstances surrounding the signing
of a nursing home admissions agreement that contained an arbitration clause. The court held
that a contract of adhesion is not unconscionable per se. It is essential that the evidence
shows a "lack of knowledge or voluntariness by the weaker party." Id. at 520 (¶32). In
concluding that the contract was not procedurally unconscionable, the supreme court in
Stephens noted the following facts: (1) there were no circumstances of exigency; (2) the
arbitration agreement appeared on the last page of a six-page agreement and was easily
identifiable as it followed a clearly marked heading printed in all caps and bold-faced type
clearly indicating that section "F" was about "Arbitration"; (3) the provision itself was
printed in bold-faced type of equal size or greater than the print contained in the rest of the
document; and (4) appearing between the arbitration clause and the signature lines was an
all caps, bold-faced consent paragraph drawing special attention to the parties' voluntary
consent to the arbitration provision contained in the admissions agreement. Id. at (¶33).
After analyzing the above facts, the supreme court held that there was no evidence of a lack
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of knowledge or voluntariness on the part of the weaker party. Instead, the parties were
"competent individuals signing a well-marked, highly visible agreement which indicated
very clearly that dispute resolution would be accomplished by way of arbitration." Id.
¶14.
In the present case, page five of Bedford’s admissions agreement is titled:
“ARBITRATION - PLEASE READ CAREFULLY.” The arbitration clause is located on
pages five and six of a seven[-]page document. At the bottom of page five, the arbitration
provision stated, “[t]he parties understand and agree that by entering this Arbitration
Agreement they are giving up and waiving their constitutional right to have any claim
decided in a court of law before a judge and a jury.” Furthermore, the last paragraph of the
arbitration provision stated:
The Resident and/or Responsible Party understands that (1) he/she has the
right to seek legal counsel concerning this agreement, (2) the execution of this
Arbitration Agreement is not a precondition to the furnishing of services to the
Resident by the Facility, and (3) this Arbitration Agreement may be rescinded
by written notice to the Facility from the Resident within 30 days of signature.
There is also no evidence in the record to show that Patricia signed this document under
exigent circumstances. Therefore, we find that the agreement in this case, like the agreement
in Stephens, is not procedurally unconscionable.
b.
¶15.
Substantive Unconscionability
Substantive unconscionability exists when the terms of the arbitration agreement are
shown to be oppressive. East Ford, 826 So. 2d at 714 (¶14). "When reviewing a contract
for substantive unconscionability, we look within the four corners of an agreement in order
to discover any abuses relating to the specific terms which violate the expectations of, or
cause gross disparity between, contracting parties." Stephens, 911 So. 2d at 521 (¶35).
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“While unconscionably oppressive terms can be facially invalid, a per se finding of
substantive unconscionability is strictly applicable only” where the language of the contract
greatly alters the legal rights of the parties or severely limits the damages available. Id. at
(¶38).
¶16.
We find that the arbitration clause in the admissions agreement neither significantly
alters Theodore’s legal rights nor severely limits the damages available to his estate. Instead,
it "merely provides for a mutually agreed-upon forum for the parties to litigate their claims
and is benign in its effect on the parties' ability to pursue potential actions." Id. at 522 (¶39).
It did not contain any of the language previously held unconscionable by Mississippi courts.
There is no required grievance resolution process, no limit on the amount of damages, no
waiver of punitive damages, and no requirement to compensate Bedford's staff for their
involvement in a dispute. See id. at 522-24 (¶¶39-43); Covenant Health Rehab of Picayune,
L.P. v. Brown, 949 So. 2d 732, 737-41 (¶¶14-25) (Miss. 2007). Accordingly, we find that
the arbitration agreement is not substantively unconscionable.
III.
¶17.
Validity
The estate’s final argument is that the arbitration provision is unenforceable because
American Health Lawyers Association (“AHLA”), which is mentioned in the provision, has
adopted the policy that they will no longer hear cases unless all parties involved agree to
arbitration after the dispute arises. In a case similar to this one, this Court held: “While it
would appear that the AAA would not administer the arbitration of this claim since there is
only a pre-dispute agreement to arbitrate, it does not mean that arbitration is precluded.
Arbitration pursuant to the AAA's rules and procedures would still be possible.” Trinity
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Mission Health & Rehab. of Clinton v. Estate of Scott, 2006-CA-01053-COA (¶32) (Miss.
Ct. App. Jan. 8, 2008).1 Likewise, arbitration pursuant to the AHLA’s rules and procedures
is still possible even though the AHLA would not preside over the arbitration in this case.
Accordingly, this issue is without merit.
¶18. THE JUDGMENT OF THE FORREST COUNTY CIRCUIT COURT IS
REVERSED, AND THIS CASE IS REMANDED FOR FURTHER PROCEEDINGS
CONSISTENT WITH THIS OPINION. ALL COSTS OF THIS APPEAL ARE
ASSESSED TO THE APPELLEE.
KING, C.J., LEE AND MYERS, P.JJ., CHANDLER, BARNES, ISHEE,
ROBERTS AND CARLTON, JJ., CONCUR. IRVING, J., CONCURS IN PART AND
IN RESULT.
1
The Mississippi Supreme Court dismissed the appeal in this matter on July 31, 2008.
Trinity Mission Health & Rehab. of Clinton v. Estate of Scott, 2006-CA-01053-SCT (Miss.
July 31, 2008).
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