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Robinson Nursing and Rehabilitation Center, LLC v. Phillips

Supreme Court of Arkansas

October 31, 2019



          Hardin, Jesson & Terry, PLC (Little Rock), by: Jeffrey W. Hatfield, Kynda Almefty, and Carol Ricketts; and Hardin, Jesson & Terry, PLC (Fort Smith), by: Kirkman T. Dougherty and Stephanie I. Randall, for appellants.

          Campbell Law Firm, P.A., by: H. Gregory Campbell; and Reddick Moss, PLLC, by: Brian D. Reddick, for appellees.


         In this interlocutory appeal, appellants Robinson Nursing and Rehabilitation Center, LLC, d/b/a Robinson Nursing and Rehabilitation Center; Central Arkansas Nursing Centers, Inc.; Nursing Consultants, Inc.; and Michael Morton (collectively "Robinson") appeal from the Pulaski County Circuit Court's order denying motions to compel arbitration of a class-action complaint filed by appellees Andrew Phillips, as personal representative of the estate of Dorothy Phillips, and others (collectively "Phillips"). For reversal, Robinson argues that the circuit court erred in refusing to enforce valid arbitration agreements. We affirm in part and reverse and remand in part.

         On September 4, 2015, Phillips filed a first amended class-action complaint against Robinson alleging claims that Robinson had breached its admissions and provider agreements, violated the Arkansas Deceptive Trade Practices Act ("ADTPA"), committed negligence and civil conspiracy, and been unjustly enriched. He sought compensatory, economic, and punitive damages, as well as attorney's fees, interest, and costs. Phillips filed an amended motion for class certification on September 10, 2015, requesting that a class be certified of all residents and estates of residents who resided at Robinson from June 11, 2010, to the present.

         On September 24, 2015, Robinson filed an answer to the complaint in which it denied the allegations and asserted, among other defenses, that the claims of putative class members were barred from being litigated in a court of law by virtue of arbitration agreements. Robinson also filed a response to the motion for class certification.

         The circuit court entered an order granting class certification on March 4, 2016, and Robinson appealed to this court. We affirmed the grant of class certification with respect to Phillips's breach-of-contract, ADTPA, and unjust-enrichment claims, but reversed with respect to the negligence claim. Robinson Nursing & Rehab. Ctr., LLC v. Phillips, 2017 Ark. 162, 519 S.W.3d 291.

         On September 1, 2017, Robinson filed a motion to compel arbitration with regard to nine class members/residents with arbitration agreements that had been signed by the residents' legal guardians. This motion was later supplemented to add one additional class member. Robinson also filed separate motions to compel arbitration as to 105 residents who had signed the agreements on their own behalf and as to 158 residents whose agreements had been signed by a person with power of attorney over that resident. On September 5, 2017, Robinson filed a fourth motion to compel arbitration as to 271 residents who had "responsible parties" execute arbitration agreements on their behalf. The individual arbitration agreements, admission agreements, and any other accompanying documents were attached to the motions to compel.[1]

         On September 7, 2017, Phillips filed an unopposed motion for extension of time to respond to Robinson's motions to compel arbitration. The motion was granted, and the circuit court extended the time for response until October 17, 2017. However, before Phillips filed a response, the circuit court summarily ruled at a September 22, 2017 hearing that all four of Robinson's motions to compel arbitration were denied. Neither party presented argument in support of, or in opposition to, the motions or objected to the timing of the circuit court's ruling at the hearing. The court also denied Robinson's request for findings of fact and conclusions of law. A written order generally denying the motions to compel was entered on October 19, 2017, and Robinson filed a timely notice of appeal from the order.

         On appeal, Robinson argues that the circuit court erred in denying its motions to compel arbitration. Robinson contends that the 544 arbitration agreements at issue were valid and enforceable, that the claims asserted by Phillips were within the scope of the agreements, and that the circuit court's ruling was contrary to this court's strong policy in favor of arbitration.

         An order denying a motion to compel arbitration is immediately appealable pursuant to Arkansas Rule of Appellate Procedure-Civil 2(a)(12) (2018). We review a circuit court's denial of a motion to compel arbitration de novo on the record. Courtyard Gardens Health & Rehab., LLC v. Arnold, 2016 Ark. 62, 485 S.W.3d 669. When a circuit court denies a motion to compel arbitration without expressly stating the basis for its ruling, as it did here, that ruling encompasses the issues presented to the circuit court by the briefs and arguments of the parties. Reg'l Care of Jacksonville, LLC v. Henry, 2014 Ark. 361, 444 S.W.3d 356; Asset Acceptance, LLC v. Newby, 2014 Ark. 280, 437 S.W.3d 119.

         The parties do not dispute that the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16, governs the agreements at issue. The FAA establishes a national policy favoring arbitration when the parties contract for that mode of dispute resolution. Henry, supra. Likewise, in Arkansas, arbitration is strongly favored as a matter of public policy and is looked upon with approval as a less expensive and more expeditious means of settling litigation and relieving docket congestion. Arnold, supra; Henry, supra.

         Despite an arbitration provision being subject to the FAA, we look to state contract law to decide whether the parties' agreement to arbitrate is valid. Henry, supra. The same rules of construction and interpretation apply to arbitration agreements as apply to agreements in general. Newby, supra. In deciding whether to grant a motion to compel arbitration, two threshold questions must be answered: (1) Is there a valid agreement to arbitrate between the parties? and (2) If such an agreement exists, does the dispute fall within its scope? Id.

         Phillips preliminarily argues in his response brief that the motions to compel arbitration were barred by the law-of-the-case doctrine and that Robinson also waived its right to arbitrate. Phillips claims that Robinson's failure to attempt to exclude residents who were subject to arbitration agreements from the proposed class in its prior appeal from class certification now bars it from seeking to compel those class members to participate in arbitration. He further contends that Robinson waived its right to arbitrate by waiting for more than two years to request it. As Robinson asserts, however, these arguments are not properly preserved for our review. Phillips did not file a response to the motions to compel, nor did he raise these issues to the circuit court at the hearing. Further, because the circuit court's general denial constituted a ruling only on the arguments that were raised by the parties, Phillips has failed to secure a ruling on either the law-of-the-case doctrine or waiver.[2] Newby, supra. We therefore decline to address them and instead discuss only the issues raised by Robinson in its motions to compel-namely, whether there was a valid agreement to arbitrate between the parties and whether the claims fell within the scope of the agreements.

         I. Whether There Is a Valid Agreement to Arbitrate Between the Parties

         We must first determine the threshold inquiry of "whether a valid agreement to arbitrate exists; that is, whether there has been mutual agreement, with notice as to the terms and subsequent assent." Henry, 2014 Ark. 361, at 6, 444 S.W.3d at 360. We have held that, as with other types of contracts, the essential elements for an enforceable arbitration agreement are (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5) mutual obligations. Id. at 6-7, 444 S.W.3d at 360. As the proponent of the arbitration agreements, Robinson has the burden of proving these essential elements. DaimlerChrysler Corp. v. Smelser, 375 Ark. 216, 289 S.W.3d 466 (2008).

         A. Validity of the 271 Arbitration Agreements Executed by "Responsible Parties"

         Phillips first challenges the validity of Robinson's motion to compel with respect to the 271 arbitration agreements that were not signed by the resident, a legal guardian of the resident, or a person with a power of attorney over the resident. These agreements were instead signed by the resident's "responsible party" or "legal representative." Phillips contends that these agreements are invalid because the signors did not have legal authority to act on the residents' behalf or to bind the residents to arbitration.

         When a third party signs an arbitration agreement on behalf of another, we must determine whether the third party was clothed with the authority to bind the other person to arbitration. Courtyard Gardens Health & Rehab., LLC v. Sheffield, 2016 Ark. 235, 495 S.W.3d 69. The burden of proving an agency relationship lies with the party asserting its existence. Id. Not only must the agent agree to act on the principal's behalf and subject to his control, but the principal must also indicate that the agent is to act for him. Courtyard Gardens Health & Rehab., LLC v. Quarles, 2013 Ark. 228, 428 S.W.3d 437.

         Robinson admits that the "responsible parties" at issue here did not have legal authority to act as agents on the residents' behalf, as there were no documents presented by these persons demonstrating such authority. Instead, Robinson argues that the residents were bound by the arbitration agreements by virtue of being third-party beneficiaries. Two elements are necessary in order for the third-party-beneficiary doctrine to apply under Arkansas law: (1) there must be an underlying valid agreement between two parties, and (2) there must be evidence of a clear intention to benefit a third party. Perry v. Baptist Health, 358 Ark. 238, 189 S.W.3d 54 (2004); Hickory Heights Health & Rehab, LLC v. Cook, 2018 Ark.App. 409, 557 S.W.3d 286; Broadway Health & Rehab, LLC v. Roberts, 2017 Ark.App. 284, 524 S.W.3d 407.

         The critical question in determining whether the third-party-beneficiary doctrine applies to the 271 arbitration agreements at issue is whether the "responsible parties" were signing in their individual capacity or in a representative capacity. Cook, supra. Robinson asserts that these persons were acting in their individual capacity such that it created a valid and enforceable contract between those persons and Robinson, with a clear intention to benefit the nursing-home residents. Phillips, however, argues that these persons signed the agreements only on behalf of, and as representatives of, the residents.

         There are three different versions of the arbitration agreements presented by Robinson, with each version using slightly different terms to identify the parties to the agreement. Two of the versions indicate that the arbitration agreement is entered into between "the Facility" and the "Resident and/or Legal Representative," with the resident and legal representative collectively referred to as the "Resident." The signature lines similarly provide for a signature by the "Resident and/or Legal Representative" and the facility's representative. These arbitration agreements also contain a box that may be checked if a copy of guardianship papers, a durable power of attorney, or other documentation has been provided to the facility, although as noted earlier, no such documentation was provided for these 271 residents. The associated admissions agreements refer either to the "resident or resident responsible party" or to the "resident or resident representative/agent," with "agent" defined as "a person who manages, uses, controls, or otherwise has legal access to Resident's income or resources that legally may be used to pay Resident's share of cost or other charges not paid by the Arkansas Medicaid Program." The signature lines have a space for the resident and for either the "Resident Responsible Party" or the "Resident Representative/Agent" to sign, depending on the version of the admissions agreement, along with the facility representative.

         The third version of the arbitration agreement states that it is between "the Facility," "the Resident," and "the Resident's Responsible Party." "Responsible Party" is defined as "your legal guardian, if one has been appointed, your attorney-in-fact, if you have executed a power of attorney, or some other individual or family member who agrees to assist the Facility in providing for your health, care and maintenance." The agreement has signature lines for the facility representative, the "Resident," and the "Responsible Party," and it also has a line to indicate the "Responsible Party's Relationship to Resident." These agreements also have the box to be checked if documentation has been provided to Robinson demonstrating a guardianship or power of attorney over the resident. The admissions agreement associated with this version of the arbitration agreement indicates that the "Resident," the "Facility," and the resident's "Responsible Party" agree to the terms and conditions contained therein. The definition of "Responsible Party" is consistent with that in the arbitration agreement, with additional language stating this "includes a person who manages, uses, controls, or otherwise has legal access to Resident's income or resources that legally may be used to pay Resident's share of cost or other charges not ...

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