Court Opinion

ID: 2732286
Source: CourtListenerOpinion
Date Created: 2014-09-11 16:05:56.254262+00
Date Added: 2024-06-11T12:24:27.209950
License: Public Domain

Cite as 2014 Ark. 361

                SUPREME COURT OF ARKANSAS
                                       No.   CV-14-37

REGIONAL CARE OF                                 Opinion Delivered September 11, 2014
JACKSONVILLE, LLC, D/B/A
WOODLAND HILLS HEALTHCARE                        APPEAL FROM THE PULASKI
AND REHABILITATION OF                            COUNTY CIRCUIT COURT
JACKSONVILLE; WOODLAND HILLS                     [NO. 60CV-13-3149]
HEALTHCARE AND
REHABILITATION OF
JACKSONVILLE, LLC;                               HONORABLE TIMOTHY DAVIS
CORNERSTONE HEALTH CARE,                         FOX, JUDGE
INC.; CHRISTIAN HEALTH CARE
HOSPICE, INC.; AND ANGELA
HERD, IN HER CAPACITY AS
ADMINISTRATOR OF WOODLAND
HILLS HEALTHCARE AND
REHABILITATION OF
JACKSONVILLE
                     APPELLANTS

V.

SHIRLEY HENRY, AS SPECIAL
ADMINISTRATOR OF THE ESTATE
OF LUCILLE BETNCOURT,                            AFFIRMED.
DECEASED
                       APPELLEE

                   COURTNEY HUDSON GOODSON, Associate Justice

       Appellants Regional Care of Jacksonville, LLC, d/b/a Woodland Hills Healthcare and

Rehabilitation of Jacksonville; Woodland Hills Healthcare and Rehabilitation of Jacksonville,

LLC; Cornerstone Health Care, Inc.; Christian Health Care Hospice, Inc.; and Angela Herd,

in her capacity as administrator of Woodland Hills Healthcare and Rehabilitation of
                                  Cite as 2014 Ark. 361

Jacksonville (collectively “Woodland Hills”), appeal the order entered by the Pulaski County

Circuit Court denying their motion to dismiss and to compel arbitration of the claims

asserted against them by appellee Shirley Henry, as special administrator of the Estate of

Lucille Betncourt, deceased (Henry). For reversal, Woodland Hills contends that the circuit

court erred by not requiring arbitration of Henry’s claims. We affirm the circuit court’s

decision.

       The record reflects that Lucille Betncourt was a resident of Woodland Hills, a

nursing-home facility, on eight separate occasions between January 2008 and her death in

December 2012. Woodland Hills provided an admission agreement to its residents for

execution upon entering the facility. Betncourt signed admission agreements on January 4,

2008, March 10, 2008, and May 20, 2010. She signed the latter two agreements with an

“X.” Dewey Brockwell, Betncourt’s husband, executed an admission agreement as the

“Responsible Party” on September 8, 2010. Henry, Betncourt’s daughter, signed the last

four admission agreements as the “Responsible Party” on November 15, 2011, June 4, 2012,

June 28, 2012, and September 26, 2012. All of the admission agreements contained an

arbitration clause.

       On August 12, 2013, Henry filed a complaint against Woodland Hills asserting causes

of action for negligence, medical malpractice, breach of the admission agreement, violations

of the Arkansas Long-Term Care Residents’ Right Act, breach of the Medicare/Medicaid

provider agreement, and for violating the Arkansas Deceptive Trade Practices Act.

Woodland Hills subsequently filed a motion to dismiss and to compel arbitration of these

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claims. In its supporting brief, Woodland Hills relied on the arbitration clauses, which are

identical, found in each of the admission agreements executed after 2008. This clause states

as follows:

       Arbitration. By signing this Admission Agreement, Resident, Responsible
       Party, and Guarantor agree with the Facility that any dispute between the
       Parties, other than a dispute over billing or collecting for services, but
       including any services rendered prior to the date this Admission Agreement
       was signed, and any dispute arising out of the diagnosis, treatment, or care of
       the Resident, including the scope of this arbitration clause and the arbitrability
       of any claim or dispute, against whomever made (including, to the fullest
       extent permitted by applicable law, third parties who are not signatories to this
       Admission Agreement) shall be resolved by binding arbitration. The Parties
       hereby agree and intend that this Admission Agreement and the Resident’s stay
       at the Facility substantially involve interstate commerce, and stipulate that the
       Federal Arbitration Act (“FAA”) in effect as of November 1, 2008 and federal
       case law interpreting such version of the FAA shall apply to this Admission
       Agreement, shall preempt any inconsistent state law and shall not be reverse
       preempted by the McCarran-Ferguson Act: United States Code Title 15,
       Chapter 20, or other law. Any amendment to such version of the FAA is
       hereby expressly waived. This Admission Agreement binds all parties whose
       claims may arise out of or relate to treatment or service provided by the
       Facility, including any spouse or heirs of the resident. This provision for
       arbitration may be revoked by written notice delivered to the Facility
       within twenty-one (21) days of signature. Resident, Responsible Party
       and Guarantor understand that the result of this arbitration agreement is that
       claims, other than those dealing with billing or collection matters, but
       including malpractice claims Resident, Responsible Party, and Guarantor may
       have against the Facility and its employees and agents, cannot be brought as a
       lawsuit in court before a judge or jury, and agree that all such claims will be
       resolved as described in this section. The arbitrator(s) shall apply the Federal
       Rules of Evidence and Federal Rules of Civil Procedure except where
       otherwise stated in this Admission Agreement. Also, the arbitrator(s) shall
       apply, and the arbitration award shall be consistent with, the state substantive
       law (including any and all statutory damage caps) for the state in which the
       Facility is located, except as otherwise stated in this Admission Agreement or
       where preempted by the FAA. Any award of the arbitrator(s) may be entered
       as a judgment in any court having jurisdiction over the Parties. In the event
       an arbitrator(s) or a court having jurisdiction finds any portion of this
       Admission Agreement unenforceable, that portion shall not be effective and

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       the remainder of the Admission Agreement shall remain in full force and
       effect. This Arbitration provision shall remain in full force and effect
       notwithstanding the termination, cancellation, or natural expiration of this
       Admission Agreement and/or the death of Resident.

(Bold typeface in original.) Woodland Hills argued that the arbitration clause in question was

enforceable because it contained mutual obligations to arbitrate. It also asserted that the

admission agreements signed by Henry were binding on Betncourt’s estate because Henry

was clothed with apparent authority to act on Betncourt’s behalf. Alternatively, Woodland

Hills argued that the estate was bound by the admission agreements executed by Henry

because Betncourt was a third-party beneficiary of the agreements. In response, Henry

contended that, in executing the agreements, she did not possess the authority necessary

under the law of agency to bind Betncourt; that the arbitration clause failed for lack of

mutuality of obligation; and that the arbitration clause at issue was unconscionable. She also

contended that Betncourt lacked the mental capacity to enter into the admission agreement

executed in May 2010 and that Betncourt did not make a knowing and voluntary waiver of

the right to a jury trial when she signed that agreement. Woodland Hills filed a brief in reply

to the arguments made by Henry.

       On December 12, 2013, the circuit court entered an order succinctly finding “that

Defendants’ Motion to Dismiss and to Compel Arbitration should be and hereby is denied.”

Woodland Hills filed a motion asking the circuit court to amend its order to include specific

findings on the issues raised by the parties. The circuit court denied the motion by written

order, and this timely appeal followed.

       Before addressing the merits of the appeal, we note that an order denying a motion to

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compel arbitration is an immediately appealable order under Arkansas Rule of Appellate

Procedure–Civil 2(a)(12) (2013). When a circuit court denies a motion to compel arbitration

without expressly stating the basis for its ruling, that ruling encompasses the issues presented

to the circuit court by the briefs and arguments of the parties. Asset Acceptance, LLC v.

Newby, 2014 Ark. 280, ___ S.W.3d ___. On appeal, we review a circuit court’s order

denying a motion to compel arbitration de novo on the record. HPD, LLC v. Tetra Techs.,

Inc., 2012 Ark. 408, 424 S.W.3d 304.

       For reversal, Woodland Hills first contends that the documentation submitted by

Henry does not support a finding that Betncourt was mentally incompetent to execute the

agreements. It next argues that the admission agreements executed by Henry are valid and

enforceable because it reasonably relied on Henry’s apparent authority to enter into the

agreements. As an alternative to that argument, Woodland Hills asserts that the agreements

signed by Henry are binding on the estate because Betncourt was a third-party beneficiary of

the agreements. In another issue, it contends that the circuit court erred in concluding that

mutuality of obligation did not exist. Last, it maintains that the arbitration clause is not

unconscionable. We confine our decision to the issue of mutuality, as it is dispositive of the

outcome of the appeal.

       As stated, there were eight admission agreements executed in connection with

Betncourt’s residencies at Woodland Hills. Each of them excluded from the requirement of

arbitration “a dispute over billing or collecting for services.” Henry argued below, and the

circuit court agreed, that mutuality of obligation was lacking because, by carving out billing

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or collection for services, Woodland Hills reserved the right to hail its residents into court to

pursue the most likely claim it would have against them, while exclusively binding its

residents to arbitrate any claims that residents might have against it. In contesting the circuit

court’s ruling, Woodland Hills argues that mutuality of obligation exists because a resident,

particularly one who pays for services privately, could possibly dispute a charge for services

and thus might have a claim for billing.

       The parties in this matter do not dispute that the Federal Arbitration Act (FAA) applies

in this case. Congress enacted the FAA, 9 U.S.C. §§ 1–16, to overcome judicial resistance

to arbitration. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). The Act

establishes a national policy favoring arbitration when the parties contract for that mode of

dispute resolution. Preston v. Ferrer, 552 U.S. 346 (2008) (citing Southland Corp. v. Keating,

465 U.S. 1 (1984)). So, too, in Arkansas, arbitration is strongly favored as a matter of public

policy and is looked upon with approval by courts as a less expensive and more expeditious

means of settling litigation and relieving docket congestion. Newby, supra. Although an

arbitration provision is subject to the FAA, courts look to state contract law to decide whether

the parties’ agreement to arbitrate is valid. DIRECTV, Inc. v. Murray, 2012 Ark. 366, 423
S.W.3d 555.

       This court has observed that a threshold inquiry is whether a valid agreement to

arbitrate exists; that is, whether there has been mutual agreement, with notice as to the terms

and subsequent assent. See Alltel Corp. v. Sumner, 360 Ark. 573, 203 S.W.3d 77 (2005). We

also have said that the essential elements for an enforceable arbitration agreement are (1)

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competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5)

mutual obligation. Bank of the Ozarks, Inc. v. Walker, 2014 Ark. 223, 434 S.W.3d 357.

       In Arkansas, the element of mutuality of contract means that an obligation must rest

on each party to do or permit to be done something in consideration of the act or promise

of the other; that is, neither party is bound unless both are bound. The Money Place, LLC v.

Barnes, 349 Ark. 411, 78 S.W.3d 714 (2002). A contract, therefore, that leaves it entirely

optional with one of the parties as to whether he will perform his promise would not be

binding on the other. Showmethemoney Check Cashers, Inc. v. Williams, 342 Ark. 112, 27
S.W.3d 361 (2000). There is no mutuality of obligation where one party uses an arbitration

agreement to shield itself from litigation, while reserving to itself the ability to pursue relief

through the court system. Cash in a Flash Check Advance of Ark., LLC v. Spencer, 348 Ark.
459, 74 S.W.3d 600 (2002). Thus, under Arkansas law, mutuality requires that the terms of

the agreement impose real liability upon both parties. E-Z Cash Advance, Inc. v. Harris, 347
Ark. 132, 60 S.W.3d 436 (2001).

       These basic principles of mutuality are illustrated in our decision of Tyson Foods, Inc.

v. Archer, 356 Ark. 136, 147 S.W.3d 681 (2004). There, this court held that an arbitration

agreement lacked the necessary mutuality of obligation because swine producers were limited

to pursuing any grievance in an arbitral forum, while the owner of the swine retained the sole

right to pursue legal or equitable remedies in a court of law. Perhaps more instructive here

is our opinion in E-Z Cash, supra. In that case, we found that an arbitration clause was not

enforceable where the clause allowed the check casher the right to all civil remedies, including

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a return-check fee, court costs, and attorney’s fees, when a check was returned, but limited

the customer to arbitration. Although the clause allowed both parties access to small-claims

court, we held that any argument that this provision supplied the necessary mutuality was

“disingenuous” in light of the other provision allowing the check casher to go to court for

returned checks because “taking into account their line of business, it is difficult to imagine

what other causes of action against a borrower remain that E-Z Cash would be required to

submit to arbitration.” E-Z Cash, 347 Ark. at 141, 60 S.W.3d at 442. In other words,

mutuality was deemed lacking because the check casher could litigate the only kind of claim

that it might have against a borrower.

       In the case at bar, we also conclude that the arbitration clause lacks mutuality. By

reserving the right to litigate billing or collection disputes, Woodland Hills excluded from

arbitration the only likely claim it might have against a resident. Its argument that a private-

pay resident might have a billing claim rings hollow in light of this reservation, and

particularly so in this case where the resident was a recipient of Medicaid and Medicare. The

fact remains that Woodland Hills retained the right to litigate its billing and collection claims,

while strictly limiting the residents to arbitration. Thus, the clause imposes no real liability

on Woodland Hills to arbitrate its own claims. For these reasons, the arbitration clause

offends our law requiring mutuality of obligation and cannot be enforced.1 Because no valid

       1
         There is some question in this appeal as to which admission agreement is controlling
in this case, and the parties have directed their arguments to all of them. We need not decide
which one is the operative agreement because each arbitration clause excepts billing and
collection disputes from arbitration and thus fails for want of mutuality.

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arbitration agreement exists due to lack of mutuality, we need not address any of the

remaining issues. Pine Hills Health & Rehab., LLC v. Matthews, 2014 Ark. 109, 431 S.W.3d
910.

       Affirmed.

       Davis, Clark, Butt, Carithers & Taylor, PLC, by: Constance G. Clark and Kelly Carithers,

for appellants.

       Reddick Moss, PLLC, by: Brian D. Reddick, Robert W. Francis, and Matthew D. Swindle;

and Appellate Solutions, PLLC, by: Deborah Truby Riordan, for appellees.

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