Hardaway v. Quince Nursing and Rehabilitation Center, LLC, et al, No. 2:2019cv02464 - Document 52 (W.D. Tenn. 2020)
Court Description: ORDER denying 16 Motion to Compel. Signed by Judge Samuel H. Mays, Jr on 4/20/2020. (Mays, Samuel)
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Hardaway v. Quince Nursing and Rehabilitation Center, LLC, et al Doc. 52 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 1 of 15 PageID 638 IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) KEVIN HARDAWAY, as next of kin of Doris Albright, deceased, and on behalf of the wrongful death beneficiaries of Doris Albright, Plaintiff, v. QUINCE NURSING AND REHABILITATION CENTER, LLC, d/b/a QUINCE NURSING AND REHABILITATION CENTER; AURORA CARES, LLC; DTD HC; D&N, LLC; DONALD T. DENZ; and NORBERT A. BENNETT, Defendants. No. 2:19-2464 ORDER Before the Rehabilitation Court Center, is Defendant LLC’s (“Quince”) Quince Nursing September 26, and 2019 Motion to Compel Arbitration and Stay Proceedings (“Motion to Compel”). (ECF No. 16.) Plaintiff Kevin Hardaway, as next of kin of Doris Albright, deceased, and on behalf of the wrongful death beneficiaries of Doris Albright (“Hardaway”), responded on October 9, 2019. 2019. (ECF No. 20.) Quince replied on October 25, (ECF No. 29.) Dockets.Justia.com Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 2 of 15 PageID 639 For the following reasons, Quince’s Motion to Compel is DENIED. I. Background This is a health care liability suit alleging a wrongful death. Doris Albright was a resident of Quince Nursing and Rehabilitation Center from death on August 29, 2019. about August 21, 2018, until her (Compl., ECF No. 1 ¶¶ 20, 42.) On admission to the nursing home, Doris Albright’s sister, Charitee Albright, signed an arbitration agreement (the “Agreement”), which stated that the parties, Doris Albright and Quince, agreed to submit “[a]ny and all disputes” “arising out of or in any way relating to . . . the Resident’s stay[] at the facility . . .” to arbitration. (ECF No. 16-2 at 1 ¶ 3; id. at 3.) The Agreement further stated that “[t]he term ‘Resident’ shall refer collectively to those signing with or for the Resident” and that “[a] person signing who routinely makes decisions for the Resident, if not the Power of Attorney or Guardian/Conservator, will be considered a health care surrogate/proxy and/or Legal Representative.” (Id. ¶ 2.) The Agreement stated that the arbitrator should apply the law of the state where the facility is located, except that the Federal Arbitration exclusively govern the enforcement of the Agreement. Doris Albright did not sign the Agreement. 2 Act should (Id. ¶ 3.) (See id. at 3.) Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 3 of 15 PageID 640 There is no evidence in the record that Charitee Albright had authorization to sign the Agreement on Doris Albright’s behalf. On July 19, 2019, Kevin Hardaway instituted the present action as son and next of kin of Doris Albright and on behalf of all wrongful death beneficiaries. (ECF No. 1.) Hardaway brings claims for statutory negligence under the Tennessee Health Care Liability Act, Tenn. Code Ann. §§ 29-26-101, et seq. (“THCLA”), negligence under Tennessee common law, and survival and wrongful death, all arising from Doris Albright’s stay at Quince Nursing and Rehabilitation Center. (Id. ¶¶ 47-70.) On September 26, 2019, Quince filed the Motion to Compel. (ECF No. 16.) Quince argues that the Agreement binds Doris Albright and that all claims brought by Hardaway are subject to arbitration. arbitration (ECF No. 16-1.) and arbitration. 1 stay all Quince asks the Court to compel proceedings pending resolution of (ECF No. 16.) On November 4, 2019, the Court held a scheduling conference in which the Motion to Compel was discussed. (ECF No. 34.) Court conduct granted the parties’ request 1 to The discovery In addition to the nursing home as a facility defendant, Hardaway names other defendants, including corporate defendants and individuals (the “Non-facility Defendants”). The Non-facility Defendants have filed a concurrent motion to dismiss for lack of jurisdiction. (ECF No. 17.) They argue that, if the Court finds them subject to personal jurisdiction, the Agreement also binds Hardaway to arbitration of the claims against them. (ECF No. 16-1 at 1 n.1.) 3 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 4 of 15 addressing authorization to sign the Agreement. PageID 641 (See id.) A subsequent Scheduling Order established January 31, 2020, as the deadline for discovery; the March parties 2, arbitration-related to complete as the 2020, memoranda; and arbitration-related deadline March 16, to file 2020, as any the deadline for the parties to respond to any arbitration-related memoranda. (ECF No. 36.) On March 2, 2020, both parties filed briefs addressing the applicability of a recent Tennessee Court of Appeals decision and reiterating arguments made in their October filings. parties produced no new evidence. (See ECF Nos. 46, 47.) The On March 16, 2020, Hardaway filed a response to Quince’s March 2, 2020 memorandum. (ECF No. 48.) II. Jurisdiction and Choice of Law The Court has diversity jurisdiction. The amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Hardaway is seeking compensatory and punitive damages for, inter alia, survival and wrongful death claims against multiple defendants. (ECF No. 1 ¶¶ 53, 64, 70, 73; id. at 22 ¶¶ 1, 4.) The parties are completely diverse. At the time of her death, Doris Albright was a citizen of Tennessee. ¶ 1.) (ECF No. 50 Kevin Hardaway is also a citizen of Tennessee. ¶¶ 2, 4-5.) (Id. None of the defendants is a citizen of Tennessee. 4 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 5 of 15 Quince is a Tennessee limited liability company. PageID 642 (Id. ¶ 6.) Aurora Cares, LLC is a New York limited liability company. ¶ 8.) (Id. For purposes of diversity jurisdiction, limited liability companies have the citizenship of each of their members. Americold Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. 1012, 1015 (2016) (citing Carden v. Arkoma Associates, 494 U.S. 185, 195-96 (1990)); accord Delay v. Rosenthal Collins Grp., LLC, 585 F.3d 1003, 1005 (6th Cir. 2009). The members of Quince and Aurora Cares, LLC are D&N, LLC and DTD HC, LLC, which are also named defendants. (ECF No. 50 ¶¶ 7, 9.) D&N, LLC and DTD HC, LLC are New York limited liability companies. D&N, LLC’s Bennett members Children’s Children’s Trust. York. are Norbert Trust, and (Id. ¶ 17.) LLC, omitted). Trust and 888 The the the (Id. ¶ 11.) Bennett, Norbert the A. Bennett A. Grand- Bennett is a citizen of New See GBForefront, L.P. v. Forefront Mgmt. F.3d 29, 38-40 trustee of the Norbert A. Bennett (3d Norbert Cir. A. 2018) (citations Bennett Children’s Grand-Children’s Ronald Bennett, who is also a citizen of New York. ¶ 12.) Norbert The citizenship of a traditional trust is that of its trustee. Grp., A. (Id. ¶¶ 10, 13.) Trust is (ECF No. 50 DTD HC, LLC’s members are Donald T. Denz and the Donald T. Denz Irrevocable Trust. New York. (Id. ¶ 17.) (Id. ¶ 14.) Denz is a citizen of The trustee of the Donald T. Denz 5 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 6 of 15 PageID 643 Irrevocable Trust is Martin Clifford, who is also a citizen of New York. (Id. ¶ 15.) The Court has diversity jurisdiction because the parties are completely diverse and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Federal courts sitting in diversity apply state law to issues of substantive law and federal law to procedural issues. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80 (1938); see also Gasperini (1996). v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 Under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1, et seq., arbitration agreements may be invalid on the grounds that “exist at law” for the revocation of contracts. U.S.C. § 2. enforceable See 9 “In other words, whether an arbitration clause is is governed by state law.” Stutler v. Constructors, Inc., 448 F.3d 343, 345 (6th Cir. 2006). T.K. State law determines the applicability of contract defenses such as fraud, duress, or unconscionability. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 686–87 (1996); see Floss v. Ryan’s Fam. Steak House, Inc., 211 F.3d 306, 314–15 (6th Cir. 2000). there is no dispute that a certain state’s substantive When law applies, the court need not conduct a choice-of-law analysis sua sponte. See GBJ Corp. v. E. Ohio Paving Co., 139 F.3d 1080, 1085 (6th Cir. 1998). The parties assume in their respective 6 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 7 of 15 briefing that claims. The Tennessee Court substantive applies law governs Tennessee PageID 644 Hardaway’s substantive law to Hardaway’s claims. III. Standard of Review “When a suit is brought in federal court on issues that by written agreement are subject to arbitration, the Federal Arbitration Act requires that the court in which the suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration[,] shall stay the trial of the action.” O.J. Distrib., Inc. v. Hornell Brewing Co., 340 F.3d 345, 355 (6th Cir. 2003) (alterations, quotation marks, and citations omitted). The FAA strongly favors arbitration. Albert M. Higley Co. v. N/S Corp., 445 F.3d 861, 863 (6th Cir. 2006); see also EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002). One of a court’s primary responsibilities under the FAA is to determine whether there is a valid agreement to arbitrate. See 9 U.S.C. § 3; Mazera v. Varsity Ford Mgmt. Servs., LLC, 565 F.3d 997, 1001 (6th Cir. 2009) (“The court ‘must determine whether the dispute arbitrate is arbitrable, exists between meaning the that parties a and valid that agreement the to specific dispute falls within the substantive scope of the agreement.’”) (quoting Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559, 561 7 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 8 of 15 (6th Cir. 2008). PageID 645 “Any doubts about whether an [arbitration] agreement is enforceable, including defenses to arbitrability, should be resolved in favor of arbitration.” Johnson v. Long John Silver’s Rests., Inc., 320 F. Supp. 2d 656, 663 (M.D. Tenn. 2004) (citation omitted). mistake, or voided, a arbitrate.” some other court must “[A]bsent a showing of fraud, duress, ground upon enforce a which a contract contractual may agreement be to Haskins v. Prudential Ins. Co. of Am., 230 F.3d 231, 239 (6th Cir. 2000), overruled on other grounds by Morrison v. Circuit City Stores, Inc., 317 F.3d 646 (6th Cir. 2003) (en banc). The showing necessary to compel arbitration absent trial is the same as the showing necessary for summary judgment in a civil suit. Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002) (citing Doctor’s Assocs., Inc. v. Distajo, 107 F.3d 126, 129–30 (2d Cir. 1997)). The moving party must “clearly and convincingly establish[] the nonexistence of any genuine issue of material fact, and the evidence . . . must be read in a light most favorable to the party opposing the motion.” Kochins v. Linden-Alimak, Inc., 799 F.2d 1128, 1133 (6th Cir. 1986). The moving party must show the existence of “a binding agreement to arbitrate.” In re First Thermal Sys., Inc., 182 B.R. 510, 513 (Bankr. E.D. Tenn. 1995). 8 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 9 of 15 PageID 646 If that showing is made, the burden shifts to the nonmoving party to demonstrate that the validity of the agreement is “in issue.” Great Earth Cos., 288 F.3d at 889. requires evidence beyond mere allegations and denials. That See id. (citation omitted) (“In order to show that the validity of the agreement is ‘in issue,’ the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate.”). IV. Analysis Hardaway argues that the Agreement does not bind Doris Albright or subject his claims to arbitration because Charitee Albright did not have legal authority to enter into and execute the Agreement on Doris Albright’s behalf. 9.) (See ECF No. 20 at 7- Quince does not contest the lack of authority, but argues that Doris Albright is bound to arbitration under a third-party beneficiary theory. (ECF No. 29 at 2-5; ECF No. 47 at 2-4.) Quince’s argument is not well taken. Any authority to compel arbitration would be derived from the existence of a contract binding Doris Albright. Hardaway argues that Charitee Albright did not have the authority to bind Doris Albright. If Charitee Albright’s signature does not bind Doris there Albright, is Albright to arbitration. no contract that would bind Doris See McKey v. Nat’l Healthcare Corp., 9 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 10 of 15 PageID 647 2008 WL 3833714, at *2 (Tenn. Ct. App. Aug. 15, 2008) (to bind resident of nursing home to an arbitration agreement, the mother or sister who signed the agreement had to have authority to act as resident’s agent or surrogate); cf. United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960) (“[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.”). There is no evidence in the record that Charitee Albright had authority to sign the Agreement on Doris Albright’s behalf. arbitration. No valid contract binds Doris Albright to Quince argues that, under a third-party beneficiary theory, the parties should be required to arbitrate their dispute regardless of whether Charitee authorization to enter into the Agreement. Albright had (ECF No. 29 at 2-5; ECF No. 47 at 2-4.) “Generally, contracts are presumed to be ‘executed for the benefit of the parties thereto and not third persons.’” Owner- Operator Indep. Drivers Ass’n, Inc. v. Concord EFS, Inc., 59 S.W.3d 63, 68 (Tenn. 2001) (quoting Oman Constr. Co. v. Tenn. Cent. Ry. Co., 370 S.W.2d 563, 572 (Tenn. 1963)). There is an exception to that rule when “the contracting parties express an intent that the benefits of the contract flow to a third party.” Id. These “third-party beneficiaries” “may enforce a contract 10 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 11 of 15 if they are (citations intended intended beneficiaries omitted). In third-party entitled to enforce parties to the (2) recognition Tennessee, beneficiary the terms contract of the of “a of of a have third-party’s the contract.” third a party contract, contract, not PageID 648 is and where to an thus (1) otherwise right Id. the agreed, performance is appropriate to effectuate the parties’ intent, and (3) terms or circumstances indicate that performance of the promise is intended or will satisfy an obligation owed by the promisee to the third party.” Benton v. Vanderbilt Univ., 137 S.W.3d 614, 618 (Tenn. 2004) (citing Owner–Operator, 59 S.W.3d at 70). Quince relies primarily on Benton, arguing that, as Quince construes its holding, “[u]nder Tennessee law, a non-signatory to an arbitration agreement may be compelled to arbitrate if that non-signatory is arbitration agreement.” a third-party beneficiary of that (ECF No. 29 at 2-5) (citing Benton, 137 S.W.3d at 618); (see also No. 47 at 2-3.) Quince cites language in the Agreement providing that it is intended to be a part of a broader “Admissions Agreement” and that “Resident [Doris Albright] will be considered a third party beneficiary of this Agreement and is intended to benefit directly from the execution of this Agreement admission(s) and in receipt conjunction of with services.” 11 the (ECF corresponding No. 29 at 4) Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 12 of 15 (citing No. 16-2 at 1 ¶ 2.) requires the Court to PageID 649 Quince argues that this language enforce the Agreement against Doris Albright. Quince’s Quince’s reliance broader on Benton is misplaced. characterization, Benton Contrary to that “an held arbitration provision in a contract is binding against a thirdparty beneficiary who brings an action seeking to enforce the terms of that contract.” 137 S.W.3d at 618 (emphasis added). Benton is distinguishable because Doris Albright, as the alleged third-party beneficiary, is not “bring[ing] an action seeking to enforce the terms of th[e] contract.” Id. by of the plaintiff in Benton – abuse The claims brought process, breach of contract, and a violation of the Tennessee Consumer Protection Act – derived provision. from See id. the contract at 616. containing Benton the declined arbitration to allow a plaintiff to “have his cake and eat it too” by allowing him to enforce certain favorable provisions of avoiding provisions he viewed as unfavorable. a contract while See id. at 619–20 (“Thus, where a third-party beneficiary seeks to enforce rights under a contract, an interpretation of the contract as a whole requires that the third party not be permitted to interpret the contract in a piecemeal fashion terms.”). 12 by avoiding unfavorable Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 13 of 15 Here, Hardaway, on behalf of Doris Albright, PageID 650 is not bringing contract claims or “seeking to enforce the terms of the contract.” He is bringing claims for statutory and common law negligence and for survival and wrongful death that do not arise under the terms of the Agreement. The Benton court specifically (See ECF No. 1 ¶¶ 47-70.) said that its analysis “is applicable only to actions brought by a third-party beneficiary seeking to enforce rights under that contract” and that “[a]n arbitration provision claims raised are may under not be other applicable legal in cases theories and are where not intertwined with rights being enforced under the terms of the contract.” 137 S.W.3d at 620 (emphasis added) (citations omitted). Quince’s argument also fails because the existence of a valid contract is a threshold requirement for any third-party beneficiary rejected ground. argument. similar Post-Benton, third-party Tennessee beneficiary courts arguments on have that See, e.g., Jones v. Allenbrooke Nursing & Rehab. Ctr., LLC, 2019 WL 6842372, at *6 (Tenn. Ct. App. Dec. 16, 2019); Ricketts v. Christian Care Ctr. of Cheatham Cty., Inc., 2008 WL 3833660, at *4 (Tenn. Ct. App. Aug. 15, 2008). In Ricketts, the Tennessee Court of Appeals decided that a nursing home contract signed by a family member who did not have authority to act on 13 Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 14 of 15 PageID 651 behalf of the resident did not create a contract and, therefore, that there could be no third-party beneficiary of a contract. 2008 WL 3833660, at *4. Ricketts reasoned: Third party beneficiary concepts should not be used to circumvent the threshold requirement that there be a valid arbitration agreement. [The family member] signed the admission agreement as [the resident’s] ‘representative.’ She was not entering into a contract on her own behalf, but as her mother’s representative. The issue in this case is whether [the family member] had authority to act as her mother’s agent and to enter into a contract on her behalf. If she did not have authority, there is no valid contract. Without a valid contract, there can be no third party beneficiary. Id. Other courts are in accord. See, e.g., Hattiesburg Health & Rehab Ctr., LLC v. Brown, 176 So. 3d 17, 22 (Miss. 2015) (holding that for a third-party beneficiary to exist, there must first be a valid contract executed by one who had authority); Licata v. GGNSC Malden Dexter LLC, 2 N.E.3d 840, 848 (Mass. 2014) (same). Quince relies on two orders in this District in which the court granted motions to compel arbitration. (ECF No. 47 at 4 n.1) (citing Foley v. Allenbrooke Nursing and Rehab. Ctr., LLC, 2:18-cv-02741-JPM-cgc, ECF No. 52 (W.D. Tenn. May 2, 2019); Farwell v. Quince Nursing and Rehab. Ctr., LLC, 2:18-cv-02795JPM-dkv, ECF No. 20 (W.D. Tenn. May 2, 2019)). In Foley and Farwell, the court found that the arbitration agreements were valid and did not reach the third-party beneficiary issue. 14 See Case 2:19-cv-02464-SHM-tmp Document 52 Filed 04/20/20 Page 15 of 15 PageID 652 2:18-cv-02741-JPM-cgc, ECF No. 52 at 2 (“The Court, therefore, may not decide the arbitrability issue which includes the extent of rights conferred beneficiary.”) (citation No. 20 at 2 (same). sign the to Donna Foley omitted); as the third-party 2:18-cv-02795-JPM-dkv, ECF Here, Charitee Albright lacked authority to Agreement. A valid contract does not exist. Therefore, Foley and Farwell are not apposite. Because there is no evidence that Charitee Albright had the authority to act on behalf of Doris Albright, Doris Albright was not bound by the Agreement. Doris Albright was not a third- party beneficiary of the Agreement who would be precluded from bringing this action. arbitration. V. The Agreement does not bind Hardaway to Quince’s Motion to Compel is DENIED. Conclusion Quince’s Motion to Compel Arbitration and Stay Proceedings is DENIED. So ordered this 20th day of April, 2020. /s/ Samuel H. Mays, Jr. SAMUEL H. MAYS, JR. UNITED STATES DISTRICT JUDGE 15
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