Gross v. GGNSC Southaven, L.L.C.

Citation817 F.3d 169
Decision Date14 March 2016
Docket Number15–60248.,Nos. 15–60124,s. 15–60124
Parties Sammy GROSS, as the Administrator of the Estate of Pauline Tillman Wagner, Deceased and on Behalf of her Wrongful Death Beneficiaries, Plaintiff–Appellee v. GGNSC SOUTHAVEN, L.L.C., doing business as Golden Living Southaven; Golden Gate National Senior Care, L.L.C. ; GGNSC Equity Holdings, L.L.C.; GGNSC Clinical Services, L.L.C.; GPH Southaven, L.L.C.; GGNSC Holdings, L.L.C.; GGNSC Administrative Services, L.L.C. ; Beverly Enterprises, Incorporated, Defendants–Appellants. Shirley Cotton, As the Administratrix of the Estate of Ida Roberson, deceased and on Behalf of her Heirs and Wrongful Death Beneficiaries, Plaintiff–Appellee v. GGNSC Batesville, L.L.C., doing business as Golden Living Center Batesville; GGNSC Administrative Services, L.L.C., Defendants–Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Peter Byron Gee, Jr., Esq., Morgan & Morgan, L.L.C., Memphis, TN, Brian Gene Brooks (argued), Greenbrier, AR, David A. Couch, Little Rock, AR, for PlaintiffAppellee.

Lamar Bradley Dillard, Esq., Mitchell, McNutt & Sams, Tupelo, MS, H. Joseph Escher, III (argued), Dechert, L.L.P., San Francisco, CA, for DefendantsAppellants.

Before STEWART, Chief Judge, and KING and HIGGINSON, Circuit Judges.

STEPHEN A. HIGGINSON

, Circuit Judge:

Pauline Tillman Wagner and Ida Roberson died in Mississippi nursing homes run by Golden Living Southaven and Golding Living Center Batesville, respectively. Thereafter, Wagner's son, Sammy Gross, and Roberson's daughter, Shirley Cotton, sued the nursing homes in Mississippi state court. Southaven and Batesville removed the cases to federal court and moved to compel arbitration on the basis of arbitration agreements that the adult children had signed for their mothers when their mothers were admitted to the homes. Both district courts denied the motions to compel. The two cases present similar issues, so we have consolidated them for consideration on appeal.

I.
A. Gross

When Gross helped move Wagner into Southaven in 2009, he was presented with a sheaf of admission-related papers to sign on her behalf. Among them was an arbitration agreement. Gross signed it and everything else he was handed that day. Wagner had orally authorized Gross to manage certain of her affairs and accounts, but she never signed a written durable power of attorney or a medical-care surrogacy formally authorizing Gross to make decisions on her behalf. Wagner died in 2012. Gross, in his capacity as "Administrator of the Estate of Pauline Tillman Wagner," sued Southaven in Mississippi state court, asserting claims for negligence, medical malpractice, and wrongful death on behalf of Wagner's heirs and wrongful death beneficiaries.

Southaven removed the case to federal court and moved to compel arbitration on the basis of the arbitration agreement. In an opinion reasoned under Mississippi law, Judge Mills denied the motion, holding that Gross did not have actual agency authority to sign the agreement on Wagner's behalf. Judge Mills held that "informal proof" of orally conveyed authority is insufficient to bind a nursing-home resident to an arbitration agreement and that "a formal legal device," such as a "formal power of attorney" or a statutory health-care surrogacy, "is required in order to confer actual authority to sign a nursing home arbitration agreement on behalf of another." Judge Mills concluded that "Mississippi case law ... very strongly suggests" that a formal legal device is required. Judge Mills also rejected Southaven's arguments that the agreement should be enforced on the basis of equitable estoppel or third-party beneficiary doctrine. Gross timely appealed, challenging only the actual authority and estoppel holdings.

B. Cotton

Cotton arranged for Roberson to move into Batesville in April 2011, after Roberson suffered a stroke. A Batesville employee, Jessica Butler, came to meet with Cotton at the hospital where Roberson was recovering. Butler brought a stack of admissions-related documents, including an arbitration agreement. Although Roberson was in the room during the meeting, Butler gave all of the documents to Cotton. Cotton signed them all.

Two months earlier, in February 2011, Roberson had sought to execute a power of attorney in favor of Cotton and her sister, Annie Reed. Although the document was notarized, Roberson never signed it.1 Cotton presented the notarized but unsigned power of attorney to Butler at the hospital.

Roberson died in October 2011, five months after she entered Batesville. Thereafter, Cotton, in her capacity as "Administratrix of the Estate of Ida Roberson," sued Batesville in Mississippi state court, asserting claims for negligence, medical malpractice, and wrongful death on behalf of Roberson's heirs and wrongful death beneficiaries.

Batesville removed the case to federal court and moved to compel arbitration on the basis of the arbitration agreement. The district court, adopting the reasoning of Judge Mills's decision in Gross v. GGNSC Southaven, LLC, 83 F.Supp.3d 691 (N.D.Miss.2015)

, described above, denied the motion. Following Gross, it held that, in the absence of an executed durable power of attorney or other formal legal device, Cotton necessarily lacked actual authority under Mississippi law to execute an arbitration agreement. The district court also rejected Golden Living's arguments that the agreement should be enforced on the basis of apparent authority, equitable estoppel, or ratification. Cotton timely appealed, challenging all four holdings.

II.

We review de novo a district court's denial of a motion to compel arbitration. See Am. Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 536 (5th Cir.2003)

. We also review de novo a district court's interpretation of state law. Marino v. Dillard's, Inc., 413 F.3d 530, 532 (5th Cir.2005). We review its findings of fact for clear error. Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 256 (5th Cir.2014). We review for abuse of discretion a district court's determination of whether equitable estoppel may be invoked to compel arbitration. Auto Parts Mfg. Miss., Inc. v. King Constr. of Houston, L.L.C., 782 F.3d 186, 196 (5th Cir.), cert. denied sub nom. Noatex Corp. v. Auto Parts Mfg. Miss., Inc., ––– U.S. ––––, 136 S.Ct. 330, 193 L.Ed.2d 230 (2015). A district court abuses its discretion if it premises its decision on an erroneous application of the law or a clearly erroneous assessment of the evidence. See id.

III.

Southaven and Batesville both challenge the district courts' holdings as to actual authority and estoppel.

A. Actual Authority

Southaven and Batesville both argue that the district courts erred in adopting a formal legal-device requirement for a party to prove actual authority to sign a nursing-home arbitration agreement.

i. Gross

The district court in Cotton adopted the reasoning of Judge Mills's opinion in Gross on this issue, so we begin by examining the Gross decision. Southaven argues that the district court erred when it held that, under Mississippi law, Gross lacked actual agency authority to sign the arbitration agreement for Wagner. It asserts that, at the time Gross signed the agreement, he had been "authorized by Ms. Wagner to act as her express agent in all regards, and to execute any and all [Southaven] documents, including the arbitration agreement, on her behalf." As proof of Gross's agency authority, Southaven submitted to the district court portions of Gross's deposition, in which Gross testified about his understanding of his authority to act for his mother.

When evaluating a district court's decision on a motion to compel arbitration under the Federal Arbitration Act, 9 U.S.C. §§ 1

–16, we first must determine "whether the parties agreed to arbitrate the dispute in question." Tittle v. Enron Corp., 463 F.3d 410, 418 (5th Cir.2006). That determination involves two questions: "(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement." Id. at 418–19. Here, the parties dispute only the first question: the validity of the agreement. Although there is a strong federal policy favoring arbitration, the "federal policy favoring arbitration does not apply to the determination of whether there is a valid agreement to arbitrate between the parties." Am. Heritage, 321 F.3d at 537–38. Instead, we "apply ordinary state-law principles that govern the formation of contracts." Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir.1996).

Under Mississippi law—which the parties agree applies here—for a contract to be valid, there must be, among other things, "mutual assent" between "parties with legal capacity to make a contract." Grenada Living Ctr., LLC v. Coleman, 961 So.2d 33, 37 (Miss.2007)

. Here, Southaven contends that Gross had capacity to enter into the agreement on his mother's behalf by virtue of actual agency authority. "The burden of proof as to the existence of an agency relationship rests with the party asserting it." Aladdin Constr. Co., Inc. v. John Hancock Life Ins. Co., 914 So.2d 169, 177 (Miss.2005). Here, therefore, the burden rests on Southaven. After examining Mississippi case law, Judge Mills held that "a formal legal device," such as a "formal power of attorney" or a statutory health-care surrogacy, "is required in order to confer actual authority to sign a nursing home arbitration agreement on behalf of another." Consequently, Judge Mills held that the evidence that Southaven submitted—Gross's deposition testimony—was insufficient as a matter of law to establish the existence of an agency relationship.

No decision of the Mississippi Supreme Court precisely answers the question whether Mississippi law requires a formal legal document to confer actual agency authority to sign an arbitration agreement for another. Hence the district court made an "Erie guess" as to how that court would resolve the issue. We do the same, de novo,...

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