Court Opinion

ID: 9893491
Source: CourtListenerOpinion
Date Created: 2023-10-27 14:07:25.722365+00
Date Added: 2024-06-11T09:04:17.024459
License: Public Domain

RENDERED: OCTOBER 20, 2023; 10:00 A.M.
                   NOT TO BE PUBLISHED

            Commonwealth of Kentucky
                   Court of Appeals
                     NO. 2022-CA-1539-MR

A&M HEALTHCARE INVESTMENTS
LLC; 900 GAGEL AVENUE LLC
(SUBSTITUTED DEFENDANT FOR
945 WEST RUSSELL STREET LLC);
BENCHMARK HEALTHCARE
CONSULTANTS LLC; INFINITY
HEALTHCARE MANAGEMENT
CONSULTING OF KENTUCKY LLC;
JOSEPH MEISELS; STRAWBERRY
FIELDS MANAGEMENT SERVICE
LLC; AND STRAWBERRY FIELDS
REIT LLC                                             APPELLANTS

            APPEAL FROM JEFFERSON CIRCUIT COURT
v.           HONORABLE MITCHELL PERRY, JUDGE
                    ACTION NO. 20-CI-000237

JOSEPH P. GILL JR., AS
ADMINISTRATOR OF THE ESTATE
OF BARBARA S. GILL, DECEASED;
945 WEST RUSSELL STREET LLC;
CATHY ALLEN, IN HER CAPACITY
AS ADMINISTRATOR OF
LANDMARK OF IROQUOIS PARK
REHABILITATION AND NURSING
CENTER; JOHN DOE 1; JOHN DOE 2;
JOHN DOE 3; LANDMARK OF
IROQUOIS PARK REHABILITATION
AND NURSING CENTER LLC; AND
RAYMOND BELL, IN HIS
CAPACITY AS ADMINISTRATOR
OF LANDMARK OF IROQUOIS
PARK REHABILITATION AND
NURSING CENTER                                                          APPELLEES

                                     OPINION
                                    AFFIRMING

                                   ** ** ** ** **

BEFORE: THOMPSON, CHIEF JUDGE; CETRULO AND COMBS, JUDGES.

CETRULO, JUDGE: The Appellants1 – “Corporate Entities” related to a

rehabilitation and nursing center – appeal an order denying, in relevant part, their

motion to compel arbitration. Upon review, we agree with the Jefferson Circuit

Court that the Corporate Entities did not establish their right to enforce an

arbitration agreement, and therefore we affirm.

                              I.     BACKGROUND

             In January 2016, Barbara Gill moved into AHF Kentucky-Iowa, d/b/a

Georgetown Manor (“AHF”), a skilled nursing facility. Upon admission, Barbara

Gill’s son, Appellee Joseph Gill, signed a “Voluntary Arbitration and Limitation of

1
 A&M Healthcare Investments LLC; 900 Gagel Avenue LLC (Substituted Defendant For 945
West Russell Street LLC); Benchmark Healthcare Consultants LLC; Infinity Healthcare
Management Consulting of Kentucky LLC; Joseph Meisels; Strawberry Fields Management
Service LLC; and Strawberry Fields REIT LLC.

                                          -2-
Liability Agreement” (“Arbitration Agreement”) on her behalf.2 The Arbitration

Agreement defined “Facility” as “Georgetown Manor including its officers,

employees, agents, administrators, and directors.” The Arbitration Agreement

bound the Facility and Barbara Gill to arbitrate, in relevant part, any “medical

claim[s] or negligence claim[s] or both that seek to recover monetary damages in

civil court for injury, death, or loss to person or property.”

              In July 2018, AHF sold operations to Landmark of Iroquois Park

Rehabilitation and Nursing Center, LLC (“Landmark”). The Operations Transfer

Agreement between AHF and Landmark stated, in relevant part, “[t]o the extent

assignable, AHF shall transfer, convey and assign to [Landmark], at Closing, all

Assumed Operating Contracts and any existing agreements with residents and any

guarantors thereof[.]” Following the ownership change, Barbara Gill continued to

reside at Landmark until three days before her death on March 21, 2019.

              In January 2020, Joseph Gill, as Administrator of the Estate of

Barbara Gill (“the Estate”), brought suit against Landmark and its related

Corporate Entities alleging negligence and wrongful death of Barbara Gill. In

August 2020, Landmark and its related Corporate Entities filed a motion to compel

arbitration. The Jefferson Circuit Court denied the motion, and on appeal this

2
 Joseph Gill’s authority to execute the Arbitration Agreement on his mother’s behalf – with a
valid power of attorney – is not at issue.

                                              -3-
Court affirmed in part and reversed in part. See Landmark of Iroquois Park Rehab.

& Nursing Ctr., LLC v. Gill, No. 2020-CA-1362-MR, 2022 WL 2182676 (Ky.

App. Jun. 17, 2022).

                Ultimately, this Court determined that (1) the Arbitration Agreement

was enforceable between the Estate and AHF and, (2) Landmark, as assignee of

AHF, could enforce the Arbitration Agreement, provided they had not waived the

right. Further, this Court found that “only Landmark constitutes an ‘assign’ under

the [Arbitration] Agreement” but noted that the circuit court “did not reach the

issue of whether any [of the related Corporate Entities are] entitled to enforce the

[Arbitration] Agreement, as a matter of contract.” Therefore, this Court did not

address that issue in the prior appeal, and the case was remanded.

                On remand, the Jefferson Circuit Court found that Landmark3 did not

waive its right to arbitrate and thus could enforce the Arbitration Agreement.

Secondly, the circuit court found the contract language clear and unambiguous that

only “the Facility, its officers, employees, agents, administrators, and directors” are

permitted to compel arbitration. The related corporate entities were not included.

Thus, the circuit court denied their motion to compel arbitration. The Corporate

Entities appealed, bringing the matter to this Court for a second time.

3
    And its named administrators: Appellee Cathy Allen and Appellee Raymond Bell.

                                              -4-
                        II.   STANDARD OF REVIEW

            Though interlocutory orders are generally not appealable, “an order

denying a motion to compel arbitration is immediately appealable.” New

Meadowview Health & Rehab. Ctr., LLC v. Booker, 550 S.W.3d 56, 58 (Ky. App.

2018) (citing Kentucky Revised Statute 417.220(1)). This matter is entirely an

issue of law; therefore, our standard of review is de novo. Conseco Fin. Servicing

Corp. v. Wilder, 47 S.W.3d 335, 340 (Ky. App. 2001).

                                III.   ANALYSIS

            “Five theories for binding non-signatories to arbitration
            agreements have been recognized: (1) incorporation by
            reference, (2) assumption, (3) agency, (4) veil-
            piercing/alter ego, and (5) estoppel.” Olshan Foundation
            Repair and Waterproofing v. Otto, 276 S.W.3d 827, 831
            (Ky. App. 2009) (citation omitted). As the parties seeking
            to compel arbitration, [Landmark and the Corporate
            Entities] bore the burden of showing they constitute non-
            signatories who may enforce the Agreement. [Ping v.
            Beverly Enters., Inc., 376 S.W.3d 581, 590 (Ky. 2012)].

Landmark, 2022 WL 2182676, at *8.

            Here, again, the Corporate Entities bear the burden of showing they

constitute non-signatories who may enforce the Arbitration Agreement. See id.

See also Wright v. Sullivan Payne Co., 839 S.W.2d 250, 253 (Ky. 1992) (citing

Cincinnati Ins. Co. v. Clary, 435 S.W.2d 88, 89 (Ky. 1968)) (“The burden of

proving agency is on the party alleging its existence.”). The Corporate Entities

argue that the definition of “Facility” in the Arbitration Agreement encompasses

                                        -5-
them as “agents” of Landmark. They admit in their appellate brief that “[i]t is an

established rule that where there is an issue on the question[,] the burden of

establishing agency is upon the party alleging it,” citing to Crump v. Sabath, 88

S.W.2d 665, 666-67 (Ky. 1935) (citations omitted). And yet, the Corporate

Entities do not meet the burden they so clearly stated.

               Instead, the Corporate Entities argue – without precedential support4 –

that the circuit court “was incorrect in its assertion that [they] must prove agency”

because (1) proving such an agency relationship could effectively waive future

defenses, and (2) such a determination is unnecessary because the Arbitration

Agreement as a whole was intended “to encompass all claims derivative of

[Barbara] Gill’s residency[.]”5 While those arguments look pretty sitting on the

table, there are no legs holding them up. Choosing not to establish an agency

relationship – in order to preserve possible defenses down the line – is a valid legal

4
 The Corporate Entities cite to precedent in their appellate brief but none that grants an
exception to the burden of establishing agency, i.e., an exception to the clearly stated rule in
Wright, 839 S.W.2d at 253, “the burden of proving agency is on the party alleging its existence.”
As an intermediate appellate court, we are bound by published decisions of the Kentucky
Supreme Court. Rule of the Supreme Court of Kentucky 1.030(8)(a).
5
 The Corporate Entities seem to argue that the “Arbitration Agreement’s assigns clause”
somehow encapsulated them, but the Corporate Entities did not present evidence that they were
assignees of Landmark, and this Court previously limited the assignment verbiage in the
Arbitration Agreement to only Landmark. Landmark, 2022 WL 2182676, at *7. (“[O]nly
Landmark constitutes an ‘assign’ under the [Arbitration] Agreement owing to the [Operations
Transfer Agreement] under which it assumed the operation of the nursing home, including the
performance of contracts with its residents.”). As such, we are bound by those findings. See
Union Light, Heat & Power Co. v. Blackwell’s Adm’r, 291 S.W.2d 539, 542 (Ky. 1956)).

                                               -6-
strategy, but it does not negate their burden. Moreover, a party cannot argue about

the enforceability of an arbitration agreement without first proving they are bound

to that contract. Phoenix Am. Adm’rs, LLC v. Lee, 670 S.W.3d 832, 838-39 (Ky.

2023)) (quoting Presnell Constr. Managers, Inc. v. EH Constr., LLC, 134 S.W.3d

575, 579 (Ky. 2004)). Stated another way, the Corporate Entities needed to show

privity to the Arbitration Agreement before arguing as to the substance of that

Arbitration Agreement. See id. The rule the Corporate Entities admitted remains

their burden: if they wish to enforce the Arbitration Agreement as agents of

Landmark, they first bear the burden of establishing an agency relationship with

Landmark, a burden they chose not to meet.

             Although we owe no deference to the legal findings of the circuit

court within a de novo review – Conseco, 47 S.W.3d at 340 – we see no need to

further expound upon the circuit court’s clear, concise, correct conclusions.

             The language of the Arbitration Agreement plainly states
             that it applies to the “Facility” and its “officers,
             employees, agents, administrators, and directors.” This
             express language does not include related corporate
             entities. Especially not corporate entities that stressed
             their disconnectedness from the facility earlier in
             litigation. Defendants allege that they fall under the
             “agents” category, but have failed to adequately meet their
             burden of proving that. See Lacy v. Hodgkin, 122 S.W.2d
             768 (Ky. 1938); Cincinnati Ins. Co. v. Clary, 435 S.W.2d
             88 (Ky. 1968) (“One pleading and relying on agency has
             the burden of proving both the agency and its extent.”).

                                         -7-
                    As arbitration agreements are matters of contract,
             the rules of contract interpretation are appropriate here.
             Where the contract’s language is clear and unambiguous,
             the agreement is to be given effect according to its terms,
             and “a court will interpret the contract’s terms by
             assigning language its ordinary meaning and without
             resort to extrinsic evidence.” Voherr v. Coldiron, 525
             S.W.3d 532, 543 (Ky. App. 2017) (quoting Frear v. P.T.A.
             Industries, Inc., 103 S.W.3d 99, 106 (Ky. 2003)). The
             language of the Arbitration Agreement is plain. Only the
             Facility, its officers, employees, agents, administrators,
             and directors are permitted to compel arbitration. Related
             corporate entities are not included. The corporate entities
             here have not met their burden that they are agents of the
             facility, so they are not entitled to seek arbitration under
             this agreement.

             Lastly, the Corporate Entities argue the Estate should be estopped

from challenging their agency status because the Estate – in prior pleadings –

inferred such a relationship existed. However, this argument is unpersuasive

because (1) again, the burden is not on the Estate to prove an agency relationship,

and (2) the record does not support a contention that the Estate conceded to the

Corporate Entities being considered agents of Landmark. Pleadings are not

evidence. Educ. Training Sys., Inc. v. Monroe Guar. Ins. Co., 129 S.W.3d 850,

853 (Ky. App. 2003). Allegations in a complaint do not negate the burden of proof

on the opposing party claiming agency.

                              IV.    CONCLUSION

             Therefore, we AFFIRM the November 2022 order of the Jefferson

Circuit Court.

                                         -8-
           ALL CONCUR.

BRIEFS FOR APPELLANTS:    BRIEF FOR APPELLEE JOSEPH P.
                          GILL JR., AS ADMINISTRATOR OF
Brandon C. R. Sword       THE ESTATE OF BARBARA S.
Jesse A. Farler           GILL, DECEASED:
Louisville, Kentucky
                          Lisa E. Circeo
                          Megan L. Adkins
                          Lexington, Kentucky

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