Court Opinion

ID: 2726401
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:02:30.865871+00
Date Added: 2024-06-11T13:26:57.931538
License: Public Domain

Sep 18 2013, 5:34 am

FOR PUBLICATION

ATTORNEYS FOR APPELLANT:                  ATTORNEYS FOR APPELLEE:

DARREN A. CRAIG                           RHONDA L. WOOD
EDWARD L. HOLLORAN, III                   HARVEY L. LANCASTER
JULIA BLACKWELL GELINAS                   DAVID W. STEWART
Frost Brown Todd, LLC                     KIRK R. JOCHAM
Indianapolis, Indiana                     Stewart & Stewart Attorneys
                                          Indianapolis, Indiana

                          IN THE
                COURT OF APPEALS OF INDIANA

ANONYMOUS, M.D. and LIFE CARE CENTERS)
OF AMERICA, INC., d/b/a LANE HOUSE,   )
                                      )
     Appellant-Defendant,             )
                                      )
            vs.                       )        No. 79A04-1304-CT-185
                                      )
EVELYN HENDRICKS,                     )
                                      )
     Appellee-Plaintiff.              )

                APPEAL FROM THE TIPPECANOE SUPERIOR COURT
                      The Honorable Randy J. Williams, Judge
                          Cause No. 79D01-1210-CT-80

                              September 18, 2013

                        OPINION - FOR PUBLICATION

BARNES, Judge
                                    Case Summary

      Anonymous, M.D., and Life Care Centers of America, Inc., d/b/a Lane House

(collectively “Lane House”) appeal the trial court’s denial of their motion to compel

arbitration in a lawsuit filed by Evelyn Hendricks. We reverse and remand.

                                         Issues

      The reordered and restated issues before us are:

             I.     whether an arbitration agreement signed by
                    Hendricks’s health care representative, Marjorie
                    Benge, binds Hendricks; and

             II.    whether the arbitration agreement is still effective
                    despite the unavailability of the arbitrator named in the
                    agreement.

                                          Facts

      Hendricks was a resident of Lane House, a health care institution, from December

21, 2010 through December 29, 2010. Prior to her admission to Lane House, Hendricks

appointed Benge as one of her three health care representatives.           The document

appointing Benge as a health care representative stated, in part, that Benge had the

authority to “[c]hoose, employ, consult with and discharge my attending physicians and

other health care providers” and to “[i]nstitutionalize and pay for all costs for my care

which my representative, based on medical advice, determines to be necessary or

advisable for my well-being.” App. p. 59. The document also stated that Hendricks

executed it “under the powers given me by the Indiana Health Care Consent Law, (I.C.

                                            2
16-36-1-1 et seq) and the Indiana Durable Power of Attorney Act (I.C. 30-5-5) . . . .” Id.

at 60.

         At the time of Hendricks’s admission to Lane House, her right arm and wrist were

in a cast and she could not sign documents. Benge accompanied Hendricks to a meeting

with Lane House’s social services director, Paulette Hornback. Among other documents,

Hornback presented Hendricks and Benge with a “Voluntary Agreement for Arbitration.”

Id. at 23. The agreement specifically stated that execution of the agreement was “not a

precondition to receiving medical treatment at or for admission to the Facility.” Id. at 24.

The agreement also provided:

                       By signing this agreement, the resident agrees with the
               Facility that any dispute regarding (1) any services rendered
               prior to the date of this agreement; (2) any dispute arising out
               of the diagnosis, treatment, or care of the resident, including
               the scope of this arbitration clause; or (3) the arbitrability of
               any claim or dispute, against whomever made . . . shall be
               resolved by binding arbitration by the National Arbitration
               Forum, under the Code of Procedure then in effect. Any
               award of the arbitrator(s) may be entered as a judgment in any
               court having jurisdiction. Information may be obtained and
               claims may be filed at any office of the National Arbitration
               Forum, at www.adrforum.com, or at P.O. Box 50191,
               Minneapolis, MN 55405. If the National Arbitration Forum
               is unwilling or unable to serve or the parties mutually agree
               not to utilize the National Arbitration Forum for whatever
               reason, then the parties shall mutually agree on some other
               Alternative Dispute Resolution Service or method to
               administer the binding arbitration proceeding.

                                              3
Id. Hendricks expressly instructed Benge to sign all of the admission documents to Lane

House on her behalf, including the arbitration agreement. Hendricks did not personally

sign it.

           On October 26, 2012, Hendricks filed suit against Lane House, alleging she had

suffered injuries as the result of negligent medical treatment. Lane House moved to stay

the proceedings and compel arbitration.           Hendricks responded that the arbitration

agreement was ineffective and impossible to perform because in 2009, the National

Arbitration Forum (“NAF”) had entered into a consent decree with the Minnesota

Attorney General barring it from conducting any future arbitrations involving disputes

between consumers and businesses. See Minnesota v. National Arbitration Found., No.

27-CV-09-18550 (Minn. Dist. Ct. July 17, 2009); Rivera v. American Gen. Fin. Servs.,

Inc., 259 P.3d 803, 808-09 (N.M. 2011). On March 22, 2013, the trial court denied Lane

House’s motion to stay the proceedings and compel arbitration.           Lane House now

appeals.

                                          Analysis

                         I. Signature of Health Care Representative

           The first issue we address is whether Benge had the authority to execute the

arbitration agreement on behalf of Hendricks. Lane House contends that Hendricks

waived any argument that Benge lacked such authority by not adequately raising it before

the trial court. Generally, a party cannot raise an argument for the first time on appeal.

                                              4
Welty Bldg. Co. Ltd. v. Indy Fedreau Co., LLC, 985 N.E.2d 792, 799 (Ind. Ct. App.

2013).

         Even if Hendricks had not waived this argument, it would fail on the merits. The

document granting Benge status as Hendricks’s health care representative explicitly

invoked Indiana’s Health Care Consent Act, Indiana Code Chapter 16-36-1, and the

Power of Attorney Act, Indiana Code Chapter 30-5-5, as its bases.1 The Health Care

Consent Act permits the appointment of a representative to act in all health care matters

for the appointor. See Ind. Code § 16-36-1-7. Additionally, Indiana Code Section 30-5-

5-16(b)(1) provides that language in a document “conferring general authority with

respect to health care powers means the principal authorizes the attorney in fact to . . .

[e]mploy or contract with servants, companions, or health care providers to care for the

principal.” The health care representative agreement in this case did grant such general

authority to Benge to act on Hendricks’s behalf in all health care matters. The arbitration

1
  The document in the record before us appointing Benge a health care representative is dated August 31,
2012, or well after Hendricks’s admission to Lane House. After briefing was completed in this case by
Lane House’s filing of a reply brief, Hendricks filed a “Petition for Leave to Respond to Appellant’s
Reply,” seeking to file an additional brief arguing that this document was not in effect at the time of
Hendricks’s admission. We have denied this petition by separate order. This is because Hendricks
expressly admitted to the trial court that she had appointed Benge as her health care representative prior to
her admission to Lane House and she made no argument to the trial court regarding the date of this
document. Also, Lane House relied upon and cited this document in its opening brief, (not only its reply
brief, contrary to Hendricks’s claim), and Hendricks thus had the opportunity to make an argument in her
appellee’s brief regarding the date of the document, but she did not. In fact, Hendricks also cited and
quoted from the document in her brief in support of her arguments. Clearly, Hendricks has waived any
argument regarding the effective date of Benge’s appointment as a health care representative, having
previously failed to make any such argument despite two opportunities to do so. See, e.g., Newland
Resources, LLC v. Branham Corp., 918 N.E.2d 763, 770 (Ind. Ct. App. 2009) (“a party cannot argue on
appeal an issue that was not properly presented to the trial court”); Town of Chandler v. Indiana-
American Water Co., 892 N.E.2d 1264, 1267 (Ind. Ct. App. 2008) (noting rule that no new issues may be
raised in a reply brief) (citing Ind. Appellate Rule 46(C)).
                                                     5
agreement here was part and parcel of the contract for the provision of health care

services by Lane House to Hendricks, though not a necessary part of the contract.

Arguably, Benge had the authority to execute that agreement on Hendricks’s behalf.

       Not all courts would agree with that conclusion, however. For example, in Life

Care Centers of America v. Smith, 681 S.E.2d 182, 186 (Ga. Ct. App. 2009), cert. denied,

the court held that an arbitration agreement signed by a limited health care attorney-in-

fact, and not a general attorney-in-fact, upon an incapacitated patient’s entry into a health

care facility was not binding upon the patient. The arbitration agreement in Smith, as

here, was not a necessary precondition to admission to the facility. The Smith court said

it would not rely upon Sanford v. Castleton Health Care Center, LLC, 813 N.E.2d 411

(Ind. Ct. App. 2004), trans. dismissed, in which this court held that a patient’s legal

representative had waived the patient’s right to a jury trial when executing an arbitration

agreement. The Smith court correctly noted that this court was not specifically asked in

Sanford to decide whether the representative’s authority extended to executing arbitration

agreements on the patient’s behalf. Smith, 681 S.E.2d at 185 n.2; see also Mississippi

Care Ctr. of Greenville, LLC v. Hinyub, 975 So. 2d 211, 218 (Miss. 2008) (where

agreement to arbitrate was not necessary part of consideration for patient to receive

health care, patient’s health care representative lacked authority to bind patient to

arbitration agreement); Dickerson v. Longoria, 995 A.2d 721, 739 (Md. 2010) (agreeing

with Hinyub).

                                             6
       The undisputed facts here, however, are that Hendricks expressly directed Benge

to sign the arbitration agreement on her behalf. There is no argument or contention that

Hendricks lacked the competency to make such a direction; the reason Hendricks herself

did not sign it only appears to be that she was physically unable to do so because of her

arm and wrist being injured. Even if we were to conclude that the appointment of Benge

as Hendricks’s health care representative did not grant Benge the authority to execute the

optional arbitration agreement with Lane House, a principal will be bound by a contract

signed by an agent if a principal expressly authorized the agent to enter into a contract on

behalf of the principal. See Heritage Dev. of Indiana, Inc. v. Opportunity Options, Inc.,

773 N.E.2d 881, 888 (Ind. Ct. App. 2002), trans. dismissed.           Hendricks expressly

authorized Benge to sign the arbitration agreement on her behalf. Under general agency

principles, Hendricks is now bound by that signing. Cf. Dickerson, 995 A.2d at 735

(applying general agency principles in deciding appointed health care representative did

not possess authority to bind patient to arbitration agreement).

                         II. Unavailability of NAF as Arbitrator

       Next, we address whether NAF’s unavailability to arbitrate any consumer

disputes, including the one between Lane House and Hendricks, invalidates the

arbitration agreement. We review de novo a trial court’s ruling on a motion to compel

arbitration.   Welty, 985 N.E.2d 798.      Indiana public policy favors enforcement of

arbitration provisions. Id. Additionally, because this case involves interstate commerce

                                             7
between parties from multiple states,2 the Federal Arbitration Act and cases decided

thereunder applies here. Id. at 798-99. “Federal policy, like Indiana’s, favors arbitration

when possible.” Id. at 799. “The United States Supreme Court has stated, in light of this

policy, that ‘any doubts concerning the scope of arbitrable issues should be resolved in

favor of arbitration, whether the problem at hand is the construction of the contract

language itself or an allegation of waiver, delay, or a like defense to arbitrability.’” Id.

(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103

S. Ct. 927, 941 (1983)).

          When determining whether parties have agreed to arbitrate a dispute, we apply

state law interpretation principles governing contracts. Blimpie Intern., Inc. v. Choi, 822

N.E.2d 1091, 1094 (Ind. Ct. App. 2005). We must attempt to determine the intent of the

parties at the time the contract was made by examining the language used to express their

rights and duties. Id. Parties are bound to arbitrate all matters not explicitly excluded

that reasonably fit within the language used, although we will not extend arbitration

agreements by construction or implication.                  Id.   Furthermore, when interpreting a

contract, we must read it as a whole and construe the language so as not to render any

words, phrases, or terms ineffective or meaningless. Brownsburg Mun. Bldg. Corp. v.

R.L. Turner Corp., 933 N.E.2d 905, 907 (Ind. Ct. App. 2010). Like any other contract,

arbitration agreements may be invalidated by generally applicable contract defenses such

2
    Life Care Centers of America, Inc., is a Tennessee corporation.
                                                      8
as fraud, duress, impossibility, or unconscionability.        Brumley v. Commonwealth

Business College Educ. Corp., 945 N.E.2d 770, 776 (Ind. Ct. App. 2011).

       Hendricks argues that the outcome of this case is controlled by Geneva-Roth,

Capital, Inc. v. Edwards, 956 N.E.2d 1195 (Ind. Ct. App. 2011), trans. denied, cert.

denied. Geneva-Roth involved a “payday loan” agreement that contained the following

arbitration provision:

              Arbitration: Both parties agree that any claim, dispute, or
              controversy between us, any claim by either party against the
              other or the agents, services, or assigns of the other, including
              the validity of this agreement to arbitrate disputes as well as
              claims alleging fraud or misrepresentation shall be resolved
              by binding arbitration by and under the Code of Procedures of
              the National Arbitration Forum (NAF) at the time the claim is
              filed. Rules and form of the NAF may be obtained and all
              claims shall be filed at any NAF office on the World Wide
              Web at www. arbforum. com or at P.O. Box 50131,
              Minneapolis, MN 55405. Any arbitration hearing, if one is
              held, will take place at a location near Customer’s residence.
              Customer’s arbitration fees will be waived by the NAF in the
              event you cannot afford to pay them. This arbitration
              agreement is made pursuant to a transaction involving
              interstate commerce and shall be governed by the Federal
              Arbitration Act 9 USC Section 1–18. Judgment upon the
              award may be entered by any party in court having
              jurisdiction. Notice: Without this arbitration agreement, both
              parties have the right to litigate disputes through the law
              courts but we have agreed instead to resolve disputes through
              binding arbitration.

Geneva-Roth, 956 N.E.2d at 1197. After the borrower instituted suit against the lender,

the lender moved to compel arbitration based on the above provision. The borrower

                                             9
responded that the arbitration provision was impossible to perform because of NAF’s

unavailability following the Minnesota consent decree.

           The trial court denied the motion to compel arbitration, and we affirmed.

Reviewing cases from other jurisdictions, we held that if an arbitration agreement’s

naming of a specific arbitrator is “integral” to the parties’ agreement to arbitrate, then the

arbitration agreement becomes null and void due to impossibility of performance if the

named arbitrator is unavailable. Id. at 1203. Additionally, Section 5 of the Federal

Arbitration Act, 9 U.S.C. § 5, which provides trial courts a mechanism for the

appointment of a substitute arbitrator under certain circumstances,3 cannot be invoked

when the naming of a specific arbitrator is “integral” to an arbitration agreement. Id. By

contrast, if the naming of a specific arbitrator in an arbitration agreement is merely a

matter of “ancillary logistical concern,” then the named arbitrator’s unavailability to

arbitrate does not invalidate the agreement and a substitute arbitrator may be appointed.

Id. at 1202.

3
    This statute provides in full:

                   If in the agreement provision be made for a method of naming or
                   appointing an arbitrator or arbitrators or an umpire, such method shall be
                   followed; but if no method be provided therein, or if a method be
                   provided and any party thereto shall fail to avail himself of such method,
                   or if for any other reason there shall be a lapse in the naming of an
                   arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the
                   application of either party to the controversy the court shall designate
                   and appoint an arbitrator or arbitrators or umpire, as the case may
                   require, who shall act under the said agreement with the same force and
                   effect as if he or they had been specifically named therein; and unless
                   otherwise provided in the agreement the arbitration shall be by a single
                   arbitrator.
                                                      10
       Reviewing the particular arbitration agreement at issue in Geneva-Roth, we noted,

“[a]n express designation of a single arbitration provider weighs in favor of a finding that

the designated provider is integral to the agreement to arbitrate.” Id. Also, the arbitration

agreement stated in mandatory terms that any arbitration “shall” be conducted by NAF

and its rules, and that all claims “shall” be submitted to NAF. Id. at 1203. Ultimately,

we held that the naming of NAF as arbitrator was “integral” to the arbitration agreement

at issue and, therefore, NAF’s unavailability to arbitrate rendered the agreement null and

void. Id.; see also Apex 1 Processing, Inc. v. Edwards, 962 N.E.2d 663 (Ind. Ct. App.

2012) (reaching same conclusion regarding nearly identical arbitration agreement naming

NAF as arbitrator), trans. denied, cert. denied.

       The arbitration agreement in the present case, however, contains language that is

conspicuously absent from the agreements in Geneva-Roth and Apex 1. Namely, after

reciting that NAF was the preferred entity to conduct any arbitration, the agreement goes

on to state: “If the National Arbitration Forum is unwilling or unable to serve or the

parties mutually agree not to utilize the National Arbitration Forum for whatever reason,

then the parties shall mutually agree on some other Alternative Dispute Resolution

Service or method to administer the binding arbitration proceeding.”                   App. p. 24.4

Hendricks attempts to dismiss this sentence as a “passing phrase . . . tacked on the end of

the Agreement . . . .” Appellee’s Br. p. 10. However, we cannot so easily dismiss the

sentence; to do so would effectively render it meaningless, contrary to standard contract
4
  Also, unlike the agreements in Geneva-Roth and Apex 1, the agreement here stated in permissive terms
that any dispute “may” be filed with NAF, not that any dispute “shall” be so filed. App. p. 24.
                                                 11
interpretation principles. We believe the phrase clearly was put into the agreement for a

reason. That reason was to embody the parties’ intent that it was not “integral” to the

arbitration agreement for NAF to conduct the arbitration and that, if NAF could not or

would not conduct the arbitration, it was acceptable to find another entity who would

conduct it. In other words, the naming of NAF in the arbitration agreement was only an

“ancillary logistical concern” and NAF’s current unavailability as an arbitrator does not

make it impossible to perform the agreement.

       In Crewe v. Rich Dad Education, LLC, 884 F. Supp. 2d 60 (S.D. N.Y. 2012), the

court was faced with an arbitration agreement stating in part that, any dispute “shall be

resolved exclusively and finally by binding arbitration under the Federal Arbitration Act

administered by the National Arbitration Forum (NAF) under the Code of Procedure in

effect when the claim is filed,” but which also stated, “[w]e will agree on another binding

arbitration forum if NAF ceases operations.” Crewe, 884 F. Supp. 2d at 67. The court

held that the latter sentence “emphatically indicates that the NAF is not integral to the

agreement to arbitrate.” Id. at 77. It observed, “[w]here the parties’ agreement reflects a

broader intention to arbitrate even if the designated forum or fora prove unavailable, there

is no . . . barrier to the appointment of an alternative forum.” Id. at 76; see also In re

Checking Account Overdraft Litig., 734 F. Supp. 2d 1294, 1301 (S.D. Fla. 2010)

(holding arbitration agreement naming either NAF or American Arbitration Association

(“AAA”) as arbitrators was not rendered invalid by both NAF’s and AAA’s

                                            12
unavailability to arbitrate where agreement provided method for selecting alternate

arbitrator).

       Despite Hendricks’s arguments to the contrary, we find Crewe to be legally

indistinguishable from the present case. She makes a corollary argument that because the

arbitration agreement specified the use of NAF rules of procedure during arbitration, and

supposedly only the NAF can utilize those procedures, the agreement is impossible to

perform. However, the agreement not only provides for choosing an alternate entity or

forum to conduct arbitration, but also an alternate method. This clearly contemplates the

use of non-NAF rules of procedure during arbitration if, indeed, only NAF can utilize

NAF rules but NAF is unavailable. In sum, we see no reason not to give effect to the

plain language of the parties’ arbitration agreement, providing for an alternate forum

and/or method of arbitration in the event of NAF’s unavailability. We reverse the denial

of Lane House’s motion to stay proceedings and compel arbitration and remand either for

the parties to select an alternate forum and/or method of arbitration or for the trial court to

select an alternate arbitrator in accordance with Section 5 of the Federal Arbitration Act if

the parties cannot reach agreement.

                                         Conclusion

       Benge’s signature on the arbitration agreement is binding upon Hendricks under

the undisputed facts of this case, and that agreement is not rendered impossible to

perform and invalid because of NAF’s unavailability to conduct the arbitration. We

reverse and remand for further proceedings consistent with this opinion.

                                              13
      Reversed and remanded.

CRONE, J., and PYLE, J., concur.

                                   14