Court Opinion

ID: 3211652
Source: CourtListenerOpinion
Date Created: 2016-06-09 19:06:11.720978+00
Date Added: 2024-06-11T14:45:55.360774
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                  APPROVAL OF THE APPELLATE DIVISION

                                     SUPERIOR COURT OF NEW JERSEY
                                     APPELLATE DIVISION
                                     DOCKET NO. A-4453-14T3
MARY T. KLEINE,

          Plaintiff-Appellant,
                                        APPROVED FOR PUBLICATION
    v.
                                              June 9, 2016
EMERITUS AT EMERSON, BREA EMERSON,
LLC d/b/a EMERITUS AT EMERSON,            APPELLATE DIVISION
and EMERITUS CORPORATION,

          Defendants,

    and

CARE ONE AT VALLEY, CARE ONE,
LLC, MILLENNIUM HEALTH CARE
CENTERS II, d/b/a CARE ONE
AT VALLEY, DES HOLDING CO.,
INC. and DES-C 2009 GRAT,

          Defendants-Respondents.
________________________________________________________

          Argued March 15, 2016 – Decided June 9, 2016

          Before Judges Fisher, Rothstadt and Currier.

          On appeal from the Superior Court of New
          Jersey, Law Division, Bergen County, Docket
          No. L-409-13.

          Thomas S. Howard argued the cause for
          appellant (Gartenberg Howard, LLP, attorneys;
          Mr. Howard and Peter A. Tabisz, on the
          briefs).

          Shane   P.  Simon  argued  the  cause for
          respondents (Buchanan Ingersoll & Rooney,
          P.C., attorneys; David L. Gordon, Eric D.
              Heicklen and Mr. Simon, of counsel and on
              the brief).

       The opinion of the court was delivered by

FISHER, P.J.A.D.

       Plaintiff commenced this personal injury action against,

among others, defendant Care One at Valley,1 which operates a

nursing facility that moved to compel arbitration of plaintiff's

claims    based     on   a   clause   contained    in   plaintiff's      admission

agreement.     Defendant       apparently    imposes    on    its   patients     an

obligation to arbitrate disputes because it can. The Federal

Arbitration Act (FAA), 9 U.S.C.A. §§ 1-16, which the Supreme

Court    of   the    United     States   broadly    construes       in   favor   of

arbitration,        overrides     all    state     policies     and      concerns,

including the Nursing Home Act's2 express prohibition against the

enforcement of such agreements, N.J.S.A. 30:13-8.1.3 See Marmet

1
  Plaintiff actually named a number of defendants as being
responsible for this aspect of her personal injury claims,
namely: defendants Care One, LLC, Millennium Health Care Centers
II, d/b/a Care One at Valley, DES Holding Co., Inc., and DES-C
2009 GRAT (collectively, defendant).
2
    N.J.S.A. 30:13-1 to -17.
3
  N.J.S.A. 30:13-8.1 declares that "[a]ny provision or clause
waiving or limiting the right to sue for negligence or
malpractice in any admission agreement or contract between a
patient and a nursing home or assisted living facility . . .
whether executed prior to, on or after [January 12, 2002,] the
effective date of this act, is hereby declared to be void as
                                                   (continued)

                                         2                                A-4453-14T3
Health Care Ctr., Inc. v. Brown, 565 U.S. __, __, 132 S. Ct.
1201, 1203, 182 L. Ed. 2d 42, 45 (2012) (holding that West

Virginia's        similar    nursing     home    statute,       which      prohibits

arbitration of personal injury and wrongful death suits, takes a

backseat     to    the    FAA     and   the   federal     policy     in    favor     of

arbitration); see also Estate of Ruszala v. Brookdale Living

Communities, Inc., 415 N.J. Super. 272, 292-93 (App. Div. 2010).4

     Despite       its    broad    interpretation        of   the    FAA   and     its

supremacy    over     specific      state     policies    and   practices,5         the

Supreme    Court    has     recognized    the   "fundamental        principle      that

(continued)
against public policy and wholly unenforceable, and shall not
constitute a defense in any action, suit or proceeding."
4
  We must comply with Marmet, but we are not required to agree.
See Reinauer Realty Corp. v. Borough of Paramus, 34 N.J. 406,
415 (1961); Crespo v. Crespo, 408 N.J. Super. 25, 37 (App. Div.
2009), aff’d o.b., 201 N.J. 207 (2010).    Although we willingly
embrace the concept of federal supremacy, we find it distressing
that invocation of the "liberal federal policy favoring
arbitration," see Moses H. Cone Mem. Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765,
785 (1983), in many cases has caused the forfeiture of important
rights because consumers and employees lack the bargaining power
to object to an arbitration clause's inclusion; citation of the
"liberal federal policy favoring arbitration" merely evokes the
old saying, "a good catchphrase can obscure fifty years of
analysis."
5
  In recognizing that the Nursing Home Act's sensible bar on
compelled arbitration must give way to the FAA's long reach, we
see no impediment to the indirect enforcement of the policies
embedded in N.J.S.A. 30:13-8.1 through the state's licensing
power over such facilities.

                                          3                                 A-4453-14T3
arbitration is a matter of contract," Rent-A-Center, West, Inc.

v. Jackson, 561 U.S. 63, 130 S. Ct. 2772, 2776, 177 L. Ed. 2d
403,    410    (2010),      thereby     permitting          application          of     state

contract law to ascertain whether the parties had a meeting of

the    minds     when    contracting,       and       whether      a    party,       who   has

ostensibly     agreed     to   waive   the       right     to     trial    by    jury,     has

clearly and unambiguously consented to arbitration, Atalese v.

U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 442, 444 (2014),

cert. denied, __ U.S. __, 135 S. Ct. 2804, 192 L. Ed. 2d 847

(2015). In light of these principles, we turn to the specific

facts of this case.

       Because     the    trial     judge       summarily         granted       defendant's

motion to compel arbitration and because our review of that

determination       is    de   novo,    we       assume      as    true        the    factual

opposition     presented       by   plaintiff         in   response       to    defendant's

motion. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520,

540    (1995).    In     opposition    to       the    motion,         Frank    J.    McMahon

asserted his then eighty-five-year-old sister, plaintiff Mary T.

Kleine, was "still suffering from the consequences of the trauma

she had endured" at a nursing facility operated by the other

                                            4                                        A-4453-14T3
defendants,6 when, through a power of attorney, he sought her

admission    at   defendant's   facility.   An   individual   in    the

admissions office presented him with "a stack         of papers, of

which the admission agreement was one of several" documents, and

he was told "to sign and initial wherever indicated."         McMahon

was then "left alone to do so, without any further explanations

or instructions."

    McMahon further asserted:

            No one told me, and I did not notice, that
            the agreement contained a waiver of my
            sister's civil rights, including her right
            to a jury trial and her right to appeal any
            adverse decision to an appellate court. I
            also was not told that my sister would have
            to pay for one-half the cost of the
            arbitration. In fact, the admission person
            said nothing to me about the contents of the
            agreement, except that I had to sign it for
            my sister, and that I had to sign it right
            away because my sister was being admitted to
            that nursing home.

            No one told me that I had a right to consult
            with counsel before signing or that my
            sister's admission to the facility was not
            contingent upon my signing the agreement. If
            I had understood that such a provision was
            contained in the admission agreement, I
            would have asked for an explanation so I
            could understand what this provision meant.
            If I had been told that by signing I would
            not only give up her right to a jury trial,
            but also would waive her right to appeal

6
   Defendants Emeritus At Emerson, Brea Emerson, LLC d/b/a
Emeritus at Emerison, and Emeritus Corporation (collectively,
Emerson).

                                  5                           A-4453-14T3
from any decision, and that she would have
to pay for one-half the cost of any
proceeding to determine whether Care One was
negligent or caused her injury, I would
certainly have asked whether I was required
to agree as a condition of her admission,
and I would probably have spoken with an
attorney to fully understand the effect of
this agreement.

     . . . .

My sister's finances are very limited. She
is   currently  paying  the   cost  of   the
Allendale Nursing Home (about $5,000 per
month) from the proceeds of the sale of her
house in 2010, which funds should last her
another two years or so, so long as she does
not have any large unanticipated expenses.
Her only income is the $1,191 she receives
from Social Security. When her savings are
expended, she will have to apply for
Medicaid coverage.

My understanding is that qualified arbitrators
charge $400-500 or more per hour for their
services. If our case required 4-5 seven
hour days to present all the testimony and
documentary evidence, plus another day for
the    arguments    of    counsel    and    the
arbitrator's consideration of the evidence,
the arbitrator's fees would range from
$14,000 — 18,000 and maybe more if more
hearing days are needed or the arbitrator
was more expensive, which means my sister
would have to pay $7,000 — 9,000 or more,
plus the cost of a transcript if we want to
obtain one, all with her limited resources.
Consequently, my sister could only afford to
pay for an arbitrator to hear the case if
she sacrificed her ability to pay for her
continued   life   at  the    assisted   living
facility. I do not believe that is a choice
she should have to make — and I would not
have signed the admission agreement as
worded if I had been told that she would

                      6                           A-4453-14T3
         have to pay that amount of money in order to
         have her claims heard.

The trial judge was required to assume the truth of these sworn

statements and assume there was no meeting of the minds about

the arbitration of disputes.

    Defendant's arbitration clause provided in upper case and

bold lettering:

         Any controversy or claim arising out of or
         relating to this agreement and brought by
         the resident, his/her personal representa-
         tives, heirs, attorneys or the responsible
         party   shall   be   submitted   to   binding
         arbitration by a single arbitrator selected
         and administered pursuant to the commercial
         arbitration rules of the American Arbitra-
         tion Association. . . .[7] Any claimant
         contemplated by this paragraph hereby waives
         any and all rights to bring any such claim
         or controversy in any manner not expressly
         set forth in this paragraph, including, but
         not limited to, the right to a jury trial.[8]

7
  We have omitted a sentence that describes the impact          of
applicable statutes of limitations because of its lack          of
relevance here.
8
  The contract's next separate provision, also in upper case and
bold lettering, states: "This agreement is a binding legal
document. The resident has read and understands the agreement
and acknowledges that, if so desired, the resident and/or [sic]
responsible party has been given the opportunity to consult with
legal counsel." It is difficult to imagine an infirm individual,
or his or her family member, is likely to delay admission while
taking the time to seek a legal opinion about the contract. Our
Legislature likely appreciated these realities — to which the
"liberal federal policy favoring arbitration" is blind — when
enacting N.J.S.A. 30:13-8.1.

                               7                         A-4453-14T3
     It   is   well-established          that    the     party      from   whom   an

arbitration    clause       has   been       extracted    must       "clearly     and

unambiguously" agree to a waiver of the right to sue. Atalese,

supra, 219 N.J. at 443; see also Morgan v. Raymours Furniture

Co., 443 N.J. Super. 338, 343 (App. Div. 2016), certif. denied,

__ N.J. __ (Apr. 25, 2016). We agree the arbitration clause

unambiguously declares the resident's waiver of the right to

pursue a claim in any fashion other than as set forth, but other

aspects of the clause suggest it may be unconscionable.

     For example, it is only the resident or the resident's

representative who is asked to waive the right to seek redress

in the courts; the clause's insistence on the utilization of

arbitration applies to "any controversy or claim arising out of

or relating to this agreement and brought by the resident [or

the resident's representatives9]" (emphasis added). If the use of

the word "and" were not sufficient to demonstrate the promise to

arbitrate was made only by the resident or her representatives,

certainly the clause's last sentence, which describes the waiver

of the right to pursue the claim or controversy in some manner

other   than   arbitration,       is   expressed       only    by   "any   claimant

contemplated    by   this    paragraph,"        i.e.,    the   resident     or    her

9
  These representatives are identified as "his/her personal
representatives, heirs, attorneys or the responsible party."

                                         8                                 A-4453-14T3
representatives.    In   short,    only    the     plaintiff   was    bound;

defendant made no such promise, retaining for itself not only

the right to sue the resident or her representatives in any

court of competent jurisdiction but also the right to have its

own claims resolved by trial by jury.

    As observed earlier, arbitrability was decided summarily.

At that stage, the judge was required to assume the truth of

McMahon's   sworn   statements    and   consider    the   language   of    the

agreement in the light most favorable to plaintiff.                   Brill,

supra, 142 N.J. at 540.      Had the judge done so, the one-sided

waiver extracted by defendant, as well as an assumption of the

truth of McMahon's assertions about the manner in which the

contract was formed, would have required an evidentiary hearing

related to unconscionability. See, Muhammad v. Cnty. Bank of

Rehoboth Beach, 189 N.J. 1, 15 (2006), cert. denied, 549 U.S.
1338, 127 S. Ct. 2032, 167 L. Ed. 2d 763 (2007).               If that was

all that was before us, we would remand for such an evidentiary

hearing and the judge's consideration of both procedural and

substantive unconscionability factors related to the contract.

See Sitogum Holdings, Inc. v. Ropes, 352 N.J. Super. 555, 564-66

(Ch. Div. 2002) (recognizing that procedural unconscionability

includes consideration of "a variety of inadequacies, such as

age, literacy, lack of sophistication, hidden or unduly complex

                                    9                                A-4453-14T3
contract terms, bargaining tactics, and the particular setting

existing during the contract formation process," and substantive

unconscionability involves consideration of harsh or unfair one-

sided terms embedded in the contract). The application of our

common law unconscionability principles in this fashion would

not create an obstacle inconsistent with FAA principles.                                 See

AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339-40, 131 S.

Ct. 1740, 1746, 179 L. Ed. 2d 742, 751 (2011).

       But we reverse because the arbitration process contemplated

by the clause in question was not available when the parties

executed      their    contract.       In   opposing       the    motion      to    compel

arbitration,          plaintiff        provided     a      certification,             which

authenticated         an    attached     AAA     statement       that    unequivocally

expressed that, as of January 1, 2003, AAA would "no longer

accept the administration of cases involving individual patients

without a post-dispute agreement to arbitrate." Consequently,

when    the     parties        contracted,       their     exclusive          forum      for

arbitration was no longer available; there being no agreement to

arbitrate      in     any    other      forum,     arbitration          could      not    be

compelled.     In     short,    even    assuming     the    clause      was     otherwise

enforceable and consented to by plaintiff, there was no meeting

                                            10                                     A-4453-14T3
of the minds as to an arbitral forum if AAA was not available.10

As Atalese instructs, the party from whom such a provision has

been   extracted   must   be   able   to   understand   —   from   clear   and

unambiguous language — both the rights that have been waived and

the rights that have taken their place. See Atalese, supra, 219

N.J. at 444; see also Khan v. Dell, Inc., 669 F.3d 350, 357-59

(3rd Cir. 2012) (Sloviter, J., dissenting). Because AAA was not

available to administer the arbitration of this dispute at the

time the contract was formed, or even at the time the trial

court ruled on the application,11 the judge mistakenly compelled

10
   We are mindful defendant has argued the clause does not
require   AAA   arbitration,  only   that  the  arbitration  be
administered pursuant to AAA's commercial arbitration rules; in
other words, defendant contends that the provision does not
limit the appointment of a substitute administrator so long as
that administrator applies AAA's commercial arbitration rules.
It is difficult to conclude that a reasonable reader of this
language — particularly one simultaneously contemplating the
placement of an elderly sister in a nursing home — would make
that fine distinction even if defendant's interpretation was
plausible.    Moreover, the forfeiture of legal rights and the
compelling of arbitration over objection is not a three-card
monte game. Atalese requires greater clarity and less ambiguity
in determining whether and how to enforce such a clause. We
reject the notion that a court must adopt defendant's strained
interpretation of the clause it alone drafted.
11
  In its appendix, defendant provided a document purporting to
represent AAA's current position, which, if true, would suggest
AAA has a new-found willingness to administer such disputes.
The document is undated and was not appended to a statement
swearing to its authenticity or identifying when this alleged
change in policy occurred.   We, accordingly, give this item no
                                                     (continued)

                                      11                             A-4453-14T3
arbitration of plaintiff's personal injury claims against this

defendant.12

     The      April   21,   2015   order   compelling   arbitration    is

reversed.13

(continued)
consideration in concluding that arbitration could not be
compelled because the parties' exclusive forum was unavailable.
12
    Compelling   arbitration  provides   further  complications.
Plaintiff alleges two separate acts of negligence against two
groups of defendants. Because of personal injuries allegedly
suffered in Emeritus's facility, plaintiff moved to defendant's
facility; she claims she was later injured as a result of
defendant's negligence. Although both facilities extracted
arbitration clauses when admitting plaintiff — we can only
wonder whether this is the industry standard despite what
N.J.S.A. 30:13-8.1 prohibits — in earlier proceedings a
different judge denied arbitration of plaintiff's claims against
Emeritus because Emeritus's provision required arbitration
administered by the National Arbitration Forum, which also does
not offer its services for any claim arising out of "any aspect
of healthcare." If the arbitration clause in question in this
appeal were to be enforced, plaintiff would be relegated to two
different fora and face the possibility of inconsistent results;
both those circumstances are inconsistent with New Jersey
policies and any modern thought on litigation and, indeed, would
run counter to the reasons that originally triggered our state
policy in favor of arbitration — the providing of "a speedy,
inexpensive, expeditious and perhaps less formal manner"
disposition of claims. See Carpenter v. Bloomer, 54 N.J. Super.
157, 162 (App. Div. 1959).
13
   The motion judge never appointed a replacement of the
unavailable arbitral forum and never described what the parties
were to do next. The order merely "directed" plaintiff "to
arbitrate" with defendant and "dismissed" the "matter" from
"th[e] [c]ourt's jurisdiction." Even if the judge correctly
ruled, the claims against defendant should only have been
stayed, not dismissed. See N.J.S.A. 2A:23B-7(g).

                                    12                          A-4453-14T3
13   A-4453-14T3