Court Opinion

ID: 6325503
Source: CourtListenerOpinion
Date Created: 2022-03-22 16:00:27.611195+00
Date Added: 2024-06-11T09:22:03.584307
License: Public Domain

Appellate Case: 21-2037     Document: 010110660927       Date Filed: 03/22/2022     Page: 1
                                                                                   FILED
                                                                       United States Court of Appeals
                        UNITED STATES COURT OF APPEALS                         Tenth Circuit

                              FOR THE TENTH CIRCUIT                           March 22, 2022
                          _________________________________
                                                                          Christopher M. Wolpert
                                                                              Clerk of Court
  CASA ARENA BLANCA LLC,

        Plaintiff - Appellant,

  v.                                                          No. 21-2037
                                                  (D.C. No. 1:20-CV-00314-JCH-SCY)
  LADONNA KAY RAINWATER,                                       (D. N.M.)
  deceased, by the personal representative of
  the wrongful death estate of BARRY
  GREEN, ESQ.,

        Defendant - Appellee.
                       _________________________________

                              ORDER AND JUDGMENT*
                          _________________________________

 Before PHILLIPS, BALDOCK, and EID, Circuit Judges.
                    _________________________________

       Plaintiff Casa Arena Blanca LLC appeals from the district court’s denial of its

 motion to compel arbitration under the Federal Arbitration Act (“FAA”), 9 U.S.C.

 §§ 1-16. Exercising jurisdiction under 28 U.S.C. § 1291, we reverse and remand for

 further proceedings.

       *
         After examining the briefs and appellate record, this panel has determined
 unanimously to honor the parties’ request for a decision on the briefs without oral
 argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
 submitted without oral argument. This order and judgment is not binding precedent,
 except under the doctrines of law of the case, res judicata, and collateral estoppel. It
 may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
 and 10th Cir. R. 32.1.
Appellate Case: 21-2037     Document: 010110660927         Date Filed: 03/22/2022        Page: 2

        I. Background

        Plaintiff operates the Casa Arena Blanca Nursing Center (“Facility”).

 Ladonna Kay Rainwater was a patient at the Facility for post-surgery care. After

 spending seventeen days at the Facility, Ms. Rainwater was subsequently transferred

 to a medical center to be treated for infection, sepsis, and altered mental status. She

 died just over a year later. Ms. Rainwater’s estate, represented by Barry Green

 (“the Estate”), filed a wrongful-death lawsuit in state court, alleging that the Facility

 and other defendants failed to properly care for Ms. Rainwater when she was a

 patient at the Facility.

        While Ms. Rainwater was a patient at the Facility, her daughter,

 Melanie Burris, signed an Admission Agreement and a Dispute Resolution

 Agreement (“Arbitration Agreement”). The Arbitration Agreement stated it was

 “between Kay Rainwater (‘Resident’) and/or Melanie Burris (‘Representative’), and

 Casa Arena Blanca (‘Facility’).” Aplt. App. at 33. The Arbitration Agreement

 explained:

        When this Agreement says that the Representative signs in his or her
        individual capacity, this means that, in addition to entering the Agreement
        on behalf of the Resident, the Representative, himself or herself, also enters
        the agreement with us. The Representative does so because he or she
        wishes to obtain care and services for the Resident who is a third-party
        beneficiary of the agreement between the Facility and the Representative.
        Our agreement to admit the Resident . . . personally benefits the
        Representative as well as the Resident.
 Id. at 37.

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        The Arbitration Agreement also explained that both parties were agreeing to

 mutual arbitration and that any dispute that arises regarding Ms. Rainwater’s stay at

 the Facility would be resolved by an arbitrator instead of a judge or jury. It further

 provided that the FAA governs the agreement and that the arbitration will follow the

 FAA and the rules and procedures of the Judicial Arbitration and Mediation Service

 (“JAMS”).

        Plaintiff initially filed a motion to compel arbitration in the state-court action,

 but it later withdrew the motion without waiving its right to request arbitration later.

 Plaintiff then filed a complaint in federal court against the Estate to compel

 arbitration based on the FAA, 9 U.S.C. § 4. Plaintiff also filed a motion to compel

 arbitration.

        A. Motion to Compel Arbitration

        In its motion, Plaintiff argued that “the Arbitration Agreement contains a

 ‘Delegation Clause’ that clearly and unmistakably delegates to the arbitrators all

 ‘gateway’ disputes regarding arbitrability.” Aplt. App. at 97. The Delegation Clause

 states: “To the fullest extent permitted by law, any disagreements regarding the

 applicability, enforceability or interpretation of this Agreement will be decided by

 the arbitrator and not by a judge or jury.” Id. at 36.

        Plaintiff further argued that the arbitration is governed by the JAMS rules,

 which the Arbitration Agreement incorporates, and those rules “also clearly and

 unmistakably manifest the parties’ agreement to arbitrate gateway arbitrability

 questions.” Id. at 97. The pertinent JAMS rule states: “Jurisdictional and

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 arbitrability disputes, including disputes over the formation, existence, validity,

 interpretation or scope of the agreement under which Arbitration is sought, and who

 are proper Parties to the Arbitration, shall be submitted to and ruled on by the

 Arbitrator” who “has the authority to determine jurisdiction and arbitrability issues as

 a preliminary matter.” Id. at 46.

        Plaintiff therefore asserted that “any dispute regarding whether the Arbitration

 Agreement is valid and enforceable or whether a resident is bound by the Arbitration

 Agreement must be submitted to the arbitrators for resolution.” Id. at 97. In other

 words, Plaintiff contended that “the Delegation Clause and JAMS rules require that

 any arbitrability challenge raised by [the Estate] be decided by the arbitrators, rather

 than the [district court].” Id. at 104.

        Alternatively, Plaintiff argued that, even if there was no delegation provision,

 Defendant’s underlying claims against Plaintiff in state court must be arbitrated

 pursuant to the Arbitration Agreement because the: (1) the Arbitration Agreement

 between the Facility and Ms. Burris is valid and enforceable; (2) the Estate must

 arbitrate because Ms. Rainwater is a third-party beneficiary of the Arbitration

 Agreement; and (3) the Estate is also bound by the Arbitration Agreement under the

 equitable estoppel doctrine.

        The Estate opposed the motion. It first asserted that “no valid agreement to

 arbitrate exists or was ever formed by the parties.” Id. at 125 (capitalization and

 boldface omitted). In support, it argued (1) “the alleged Agreement cannot be

 enforced because neither Ms. Rainwater nor a legally authorized representative ever

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 assented to the alleged Agreement,” id. at 126; (2) the alleged Agreement is

 unenforceable as to Ms. Burris individually because she “is not a party to the

 underlying state court action and she is not the Personal Representative of the

 [Estate],” id. at 128; and (3) “[t]he alleged Agreement is unenforceable under the

 third-party beneficiary or equitable estoppel doctrines,” id. (capitalization and

 boldface omitted).

       The Estate next asserted that “[t]he alleged Agreement is a procedurally

 unconscionable contract of adhesion,” id. at 131 (capitalization and boldface

 omitted), and is “unenforceable under both applicable federal regulations and general

 principles of contract law,” id. at 136. Finally, the Estate argued that the court

 should decide the gateway issue of arbitrability because the Delegation Clause was

 ambiguous and therefore unenforceable. It also reiterated its earlier argument that

 “there is no agreement in the first place due to the lack of authority to bind

 Ms. Rainwater or her [Estate],” id. at 138, and “[t]he Court should first determine

 whether a contract exists before it can enforce a provision of the contract,” id. at 136.

       Plaintiff filed a reply in support of its motion. It argued that the Estate did not

 dispute that Ms. Burris signed the Arbitration Agreement to secure Ms. Rainwater’s

 admission to the Facility nor did the Estate specifically challenge the delegation

 language in the JAMS rules, which the Arbitration Agreement incorporates. It also

 asserted that because the Estate’s argument regarding Ms. Burris’s lack of authority

 was directed to the Arbitration Agreement as a whole and did not specifically target

 the Delegation Clause, it could not be considered. It further asserted that

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 Ms. Rainwater was bound by the Arbitration Agreement under third-party beneficiary

 and equitable estoppel doctrines and “[t]hus, [the Estate’s] contention that Ms. Burris

 lacked authority to agree to arbitration on Ms. Rainwater’s behalf is irrelevant to

 Plaintiff’s Motion.” Id. at 204. Because “[t]he arbitrators alone have the authority to

 decide [the Estate’s] defenses to the Arbitration Agreement,” Plaintiff contended “the

 Court should enforce the delegation provision in the Agreement and the JAMS Rules

 and compel arbitration.” Id. at 199.

       B. District Court Decision

       In its decision, the court first rejected the Estate’s argument that there was

 ambiguity in the Arbitration Agreement about the parties’ intent to delegate

 disagreements about arbitrability to an arbitrator. The court explained: “The

 Tenth Circuit made clear [in Belnap v. Iasis Healthcare, 844 F.3d 1272, 1281

 (10th Cir. 2017),] that incorporating JAMS rules in which arbitrability decisions are

 plainly decided by the arbitrator compels finding an intent to delegate” and “Belnap

 is controlling here.” Id. at 261. The court next determined that because the Estate’s

 arguments concerning procedural unconscionability targeted the agreement as a

 whole and were not particular to the delegation provision, the Estate’s

 “unconscionability challenge is for an arbitrator to decide based on the plain

 language of the delegation provision.” Id. at 263.

       But when it came to the Estate’s argument that Ms. Burris did not have

 authority to enter the agreement on behalf of the Estate, which also went to the

 Arbitration Agreement as a whole and was not specific to the delegation provision,

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 the court found “that the question of whether any contract exists at all to bind the

 Estate is one for this Court and not the arbitrator,” id. at 264 (citing Fedor v.

 United Healthcare, Inc., 976 F.3d 1100, 1104 (10th Cir. 2020)). In considering this

 “gateway question . . . of contract formation,” Aplt. App. at 264, the court looked to

 whether Ms. Burris had authority to enter the contract for Ms. Rainwater under

 agency law. The court ultimately concluded that Plaintiff had “not met its burden of

 showing an agency relationship existed between Ms. Rainwater and Ms. Burris.” Id.

 at 266.

       The court next considered whether the Arbitration Agreement between

 Ms. Burris individually and the Facility could bind Ms. Rainwater under the

 third-party beneficiary and equitable estoppel doctrines. The court recognized that

 the contractual terms “evince an intent to name Ms. Rainwater, the Resident, as a

 third-party beneficiary,” id. at 268. The court explained that the third-party

 beneficiary doctrine generally “applies when a non-signatory attempts to enforce the

 contract against a signatory.” Id. at 269. But the court observed that New Mexico

 courts had not resolved the question at issue here—“whether and under what

 circumstances a signatory may compel a non-signatory to arbitrate under the third-

 party beneficiary doctrine.” Id. Based on the circumstances in this case, the court

 determined that Plaintiff had not met its burden of showing its entitlement to compel

 arbitration under the third-party beneficiary doctrine. The court reached the same

 determination regarding the applicability of the equitable estoppel doctrine.

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        The court denied Plaintiff’s motion to compel arbitration, and this appeal

 followed.

        II. Discussion

        We review de novo a district court’s denial of a motion to compel arbitration.

 Ragab v. Howard, 841 F.3d 1134, 1136 (10th Cir. 2016).1

        Plaintiff contends that the district court erred in not enforcing the delegation

 provisions in the Arbitration Agreement, which delegated all gateway issues of

 arbitrability to the arbitrator. It explains that “[n]one of the parties disputed that a

 contract (the Arbitration Agreement) was formed between Ms. Burris and the

 Facility,” Aplt. Opening Br. at 12; “[t]he issue is thus not one of contract formation

 . . . , but instead one of enforcement—can the Arbitration Agreement be enforced

 against the Estate because Ms. Rainwater was a third-party beneficiary of the

 Agreement,” id. at 14. Plaintiff argues the gateway issue of arbitrability must be

 submitted to the arbitrator to decide in the first instance because the Arbitration

 Agreement contains clear and unmistakable delegation provisions. Plaintiff therefore

 asserts that the district court “erred in deciding [the third-party beneficiary] issue

        1
          The Estate asserts in its jurisdictional statement that Plaintiff “has not
 sufficiently demonstrated that federal subject matter jurisdiction exists pursuant to
 28 U.S.C. § 1332(a)(1).” Aplee. Resp. Br. at 1. But the Estate offers no explanation
 as to how Plaintiff failed to establish that the district court possessed diversity
 jurisdiction over the case. Plaintiff explains that it alleged in its complaint that the
 parties were citizens of different states (Delaware and Maryland for Plaintiff and
 New Mexico for the Estate) and that the amount in controversy exceeds $75,000.
 Because the Estate did not explain why these allegations were insufficient, we see no
 basis to conclude that the district court lacked jurisdiction under § 1332(a)(1).

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 rather than compelling arbitration.” Id. at 12. We agree.2

       Under § 4 of the FAA, a party “aggrieved” by another party’s failure “to

 arbitrate under a written agreement for arbitration” may petition a federal court “for

 an order directing that such arbitration proceed in the manner provided for in such

 agreement.” 9 U.S.C. § 4. In Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63,

 68-69 (2010), the Supreme Court explained that a “delegation provision is an

 agreement to arbitrate threshold issues concerning the arbitration agreement” and

 “parties can agree to arbitrate ‘gateway’ questions of ‘arbitrability,’ such as whether

 the parties have agreed to arbitrate or whether their agreement covers a particular

 controversy.” The Court further explained that “[a]n agreement to arbitrate a

 gateway issue is simply an additional, antecedent agreement the party seeking

 arbitration asks the federal court to enforce, and the FAA operates on this additional

 arbitration agreement just as it does on any other.” Id. at 70. Courts, however,

 “should not assume that the parties agreed to arbitrate arbitrability unless there is

 clear and unmistakable evidence that they did so.” Belnap, 844 F.3d at 1281

 (brackets and internal quotation marks omitted).

       Here, Plaintiff sought to enforce the delegation terms in the Delegation Clause

 and the JAMS rules, which the Arbitration Agreement expressly incorporated,

       2
          Because we agree with Plaintiff that the district court erred in reaching an
 issue that should have been submitted to the arbitrator, we need not address
 Plaintiff’s second argument—whether “the district court incorrectly determined that
 the New Mexico Supreme Court would not compel a non-signatory to arbitrate under
 the third-party beneficiary doctrine,” Aplt. Opening Br. at 12 (internal quotation
 marks omitted).
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  arguing that “the Delegation Clause and JAMS rules require that any arbitrability

  challenge raised by [the Estate] be decided by the arbitrators, rather than the [district

  court],” Aplt. App. at 104. If a party “seeks to enforce” a delegation clause, the

  opposing party must “challenge[] the delegation provision specifically”; otherwise,

  the court “must treat [the delegation clause] as valid” and “enforce it” under the

  FAA, “leaving any challenge to the validity of the Agreement as a whole for the

  arbitrator.” Rent-A-Ctr., 561 U.S. at 72; see also Fedor, 976 F.3d at 1105 (“[I]f a

  party . . . fails to specifically challenge a delegation clause . . . , then the delegation

  clause will typically require a court to compel arbitration and allow an arbitrator to

  determine whether the arbitration contract was indeed valid.”).

         Although the Estate argued in response to the motion to compel that a sentence

  after the Delegation Clause created ambiguity and therefore the delegation provision

  was not clear and unmistakable, it never challenged the delegation terms in the JAMS

  rules. In Belnap, we concluded that the parties “clearly and unmistakably agreed to

  arbitrate arbitrability when they incorporated the JAMS Rules into the Agreement.”

  844 F.3d at 1281. In its decision, the district court recognized that “[t]he JAMS rule

  regarding arbitrability in Belnap is identical to the JAMS rule here” and found an

  intent to delegate under the holding in Belnap. Aplt. App. at 261. “[B]ased on the

  plain language of the delegation provision,” and the Rent-A-Center decision, the

  district court concluded that the Estate’s argument that the Arbitration Agreement

  was unconscionable—which challenged the agreement as a whole and not the

  delegation provision—had to be submitted to an arbitrator. Id. at 263.

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        But after initially determining there was an enforceable delegation provision

  and concluding that the Estate’s unconscionability argument needed to be submitted

  to an arbitrator based on that provision, the district court next determined that there

  was an “initial question” of “whether the Estate ever entered an agreement at all with

  [the Facility] to which it can be bound.” Id. at 264. Because the court characterized

  this question as one of contract formation, it found that the question of whether any

  contract existed to bind the Estate was for the court to decide and not the arbitrator,

  citing our decision in Fedor.

        Fedor is distinguishable on its facts, though, and for that reason it does not

  support the district court’s decision to consider this question. In Fedor, a former

  employee filed a collective suit against her former employer. 976 F.3d at 1100. The

  employer sought to compel arbitration based on four arbitration policies, but the

  fourth policy from 2016 was the only one that contained a delegation provision. Id.

  at 1103-04. The plaintiffs argued the first three policies were void as illusory and

  that the 2016 policy was irrelevant because none of them saw or signed it. Id. at

  1104. The district court nevertheless compelled arbitration based on the 2016

  agreement because the plaintiffs did not challenge the delegation provision

  specifically. Id. The lead plaintiff argued on appeal that a court must first determine

  whether an agreement to arbitrate was formed before sending the case to an

  arbitrator. Id. We agreed, explaining that the lead plaintiff “raised an issue of

  formation which . . . cannot be delegated to an arbitrator.” Id. at 1106-07.

        Here, in contrast, the parties did not dispute that an agreement was formed

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  between Ms. Burris and the Facility, and neither is there a dispute that the agreement

  contains a delegation provision. Further, Plaintiff never argued that Ms. Burris had

  the authority to enter into the Arbitration Agreement on Ms. Rainwater’s behalf.

  Instead, Plaintiff asserted that based on the Arbitration Agreement formed between

  the Facility and Ms. Burris, the Arbitration Agreement should be enforced against

  Ms. Rainwater as a third-party beneficiary of that agreement.

        Moreover, by initially discussing the Arbitration Agreement’s delegation

  provision and rejecting the Estate’s challenge to that provision, the district court

  necessarily concluded that an arbitration agreement was formed between Ms. Burris

  and the Facility. Had the district court found that no agreement had been formed,

  there would have been no need to determine whether the Arbitration Agreement

  contained an enforceable delegation provision.3

        We conclude the district court’s rulings—on the one hand that there was an

  agreement to arbitrate and an enforceable delegation provision as to the Estate’s

  unconscionability argument, and on the other hand that there was a question as to

  whether an agreement to arbitrate had ever been formed and then proceeding to

  address the third-party beneficiary issue—are inconsistent. We agree with and affirm

  the district court’s first ruling—that there is an arbitration agreement between

  Ms. Burris and the Facility that contains an enforceable delegation clause. Once the

        3
          Likewise, if the district court had determined that no agreement to arbitrate
  had been formed between Ms. Burris and the Facility, then it would not have needed
  to go on to address whether the Arbitration Agreement could be enforced against
  Ms. Rainwater as a third-party beneficiary of that agreement.
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  district court made that determination, it should have sent the case to arbitration. The

  district court erred in going on to decide whether there was a second agreement to

  arbitrate formed between the Facility and Ms. Rainwater and then proceeding to

  address the third-party beneficiary issue.

        Based on the delegation provisions in the Arbitration Agreement between the

  Facility and Ms. Burris, the question of whether the Agreement should be enforced

  against Ms. Rainwater as a third-party beneficiary of that contract is one that should

  be decided by an arbitrator, not the court. Because there is no issue of contract

  formation, only contract enforcement, the gateway issue of arbitrability must be

  submitted to the arbitrator consistent with the delegation provisions in the

  Arbitration Agreement.

        III. Conclusion

        For the foregoing reasons, we reverse and remand for the district court to

  compel arbitration of the gateway issue of arbitrability.

                                                Entered for the Court

                                                Allison H. Eid
                                                Circuit Judge

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