Courtyard Gardens Health & Rehab., LLC v. Arnold

• Decision Date: 18 February 2016
• Docket Number: No. CV–14–1105,CV–14–1105
• Citation: 485 S.W.3d 669
• Parties: Courtyard Gardens Health and Rehabilitation, LLC ; Senior Living Communities of Arkansas, LLC; Arkansas SNF Operations Acquisition, LLC; Arkadelphia Holdings, LLC; SLC Professionals, LLC ; Arkansas Nursing Home Acquisition, LLC; Senior Vantage Point, LLC; 2701 Twin Rivers Drive, LLC ; SLC Operations Master Tenant, LLC; SLC Professionals Holdings, LLC; Addit, LLC; CSCV Holdings, LLC; SLC Operations Holdings, LLC; EOR–ARK, LLC; SLC Operations, LLC ; VAJ, LLC; Jerry V. Kemper; and Angela Marlar, in her capacity as administrator of Courtyard Gardens Health and Rehabilitation, Appellants v. Malinda Arnold, as Personal Representative of the Estate of Jessie James Bullock, Deceased, and as Attorney-in-Fact of Annie Bullock, Appellee
• Court: Arkansas Supreme Court

485 S.W.3d 669

Courtyard Gardens Health and Rehabilitation, LLC ; Senior Living Communities of Arkansas, LLC; Arkansas SNF Operations Acquisition, LLC; Arkadelphia Holdings, LLC; SLC Professionals, LLC ; Arkansas Nursing Home Acquisition, LLC; Senior Vantage Point, LLC; 2701 Twin Rivers Drive, LLC ; SLC Operations Master Tenant, LLC; SLC Professionals Holdings, LLC; Addit, LLC; CSCV Holdings, LLC; SLC Operations Holdings, LLC; EOR–ARK, LLC; SLC Operations, LLC ; VAJ, LLC; Jerry V. Kemper; and Angela Marlar, in her capacity as administrator of Courtyard Gardens Health and Rehabilitation, Appellants

v.Malinda Arnold, as Personal Representative of the Estate of Jessie James Bullock, Deceased, and as Attorney-in-Fact of Annie Bullock, Appellee

No. CV–14–1105

Supreme Court of Arkansas.

Opinion Delivered February 18, 2016

Rehearing Denied March 31, 2016

Kutak Rock, LLP, Fayetteville, by: Mark W. Dossett and Samantha B. Leflar, for appellants.

Campbell Law Firm, P.A., by: H. Gregory Campbell ; and Reddick Moss, PLLC, by: Brian D. Reddick and Robert W. Francis, for appellee.

KAREN R. BAKER

, Associate Justice

Appellants Courtyard Gardens Health and Rehabilitation, LLC and others¹ (collectively "Courtyard Gardens") appeal from a Clark County Circuit Court order denying its motion to dismiss and compel arbitration of claims brought against it by appellee Malinda Arnold, as personal representative of the Estate of Jessie James Bullock, deceased, and as attorney-in-fact of Annie Bullock.²

The complaint alleges that on approximately January 1, 2010, Jessie James Bullock was admitted to Courtyard Gardens, a nursing-home facility located in Arkadelphia, Arkansas. Mr. Bullock remained a resident of the facility until approximately April 10, 2012; he died on April 15, 2012. Mr. Bullock's wife, Annie Bullock, was admitted to Courtyard Gardens on approximately May 6, 2009, and remained a resident of the facility until approximately December 7, 2012. On June 18, 2009, Linda Gulley, the Bullocks' daughter, entered separate admission agreements and optional arbitration agreements on behalf of each parent. The arbitration agreement contained the following provision:

It is understood and agreed by Facility and Resident that any and all claims, disputes, and controversies (hereafter collectively referred to as a "claim" or collectively as "claims") arising out of, or in connection with, or relating in any way to the Admission Agreement or any service or health care provided by the Facility to the Resident shall be resolved exclusively by binding arbitration to be conducted at a place agreed upon by the Parties, or in the absence of such an agreement, at the Facility, in accordance with the National Arbitration Forum Code of Procedure, ("NAF") which is hereby incorporated into this Agreement, and not by a lawsuit or resort to court process. This agreement shall be governed by and interpreted under the Federal Arbitration Act, 9 U.S.C. Sections 1

–16.

On July 25, 2013, Arnold filed a complaint against Courtyard Gardens in the Clark County Circuit Court. The complaint alleged negligence, medical malpractice, violations of the Long–Term Care Facility Residents' Rights Act, breach of the provider agreement, violations of the Deceptive Trade Practices Act, and negligence against appellant Angela Marlar, in her capacity as administrator of Courtyard Gardens. On August 27, 2013, Courtyard Gardens filed an answer to Arnold's complaint and reserved the right to enforce any applicable arbitration agreement after conducting an initial investigation to determine whether a valid arbitration agreement exists.

On December 23, 2013, Courtyard Gardens filed a motion to dismiss the complaint and compel arbitration. Courtyard Gardens argued that the arbitration agreement was valid and encompassed all of the claims in Arnold's complaint. On January 9, 2014, Arnold filed her response to the motion to dismiss and motion to compel arbitration. In her response, Arnold argued that the arbitration agreement was unenforceable based on impossibility of performance and unconscionability. Specifically, Arnold argued that the arbitration agreement was impossible to perform because the agreement selected the National Arbitration Forum ("NAF") to serve has arbitrator and the NAF is now unavailable because it had settled with the Minnesota Attorney General and agreed to no longer conduct any arbitration pursuant to pre-dispute consumer agreements. On July 16, 2014, Courtyard Gardens filed a supplement to its motion to dismiss complaint and compel arbitration. Courtyard Gardens argued that the arbitration agreements only required arbitration in accordance with the NAF Code and did not select the NAF as the actual arbitrator. Further, Courtyard Gardens argued that the circuit court must compel arbitration based on the attached affidavit of Angela Marlar, who explained "Courtyard Gardens' overriding intent in entering these arbitration agreements is simply to have any and all disputes with a resident resolved through arbitration rather than litigation, regardless of the logistics." On July 25, 2014, Arnold filed her response to Courtyard Gardens' supplement. Arnold argued that Ms. Marlar's affidavit violated the parol-evidence rule because it contradicted the terms of the arbitration agreement.

On July 28, 2014, a hearing was held, and the circuit court denied the motion to compel arbitration. On August 29, 2014, the circuit court memorialized its findings in a written order. In denying Courtyard Gardens' motion to dismiss and motion to compel arbitration, the circuit court found that the parties had entered into a valid arbitration agreement and found that the arbitration agreement was not unconscionable. As to Arnold's defense of impossibility of performance, the circuit court found, as follows:

The Arbitration Agreement is impossible to perform because it incorporates the National Arbitration Forum ("NAF") Code of Procedure. Rule 1 of the NAF Code of Procedure requires the NAF to serve as arbitrator of any disputes between the Plaintiff and Defendants. As such, the NAF Code of Procedure is an integral term of the Arbitration Agreement. Because the NAF is no longer in business and is unavailable to serve as arbitrator over this dispute, the Agreement is impossible to perform.

On September 26, 2014, Courtyard Gardens filed its notice of appeal.

On appeal, Courtyard Gardens argues that the circuit court erred in finding that the arbitration agreement was unenforceable, thereby denying Courtyard Gardens' motion to compel arbitration. An order denying a motion to compel arbitration is an immediately appealable order under Arkansas Rule of Appellate Procedure–Civil 2(a)(12) (2015). We review a circuit court's order denying a motion to compel arbitration de novo on the record. Searcy Healthcare Ctr., LLC v. Murphy, 2013 Ark. 463, at 3, 2013 WL 6047164

(citing HPD, LLC v. T ETRA Techs., Inc., 2012 Ark. 408, 424 S.W.3d 304 ).

The parties agree that the Federal Arbitration Act ("FAA") governs the arbitration agreement at issue. In Regional Care of Jacksonville, LLC v. Henry,

we explained that Congress enacted the FAA, 9 U.S.C. §§ 1

–16, to overcome judicial resistance to arbitration. 2014 Ark. 361, at 6, 444 S.W.3d 356, 360 (citing Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) ). Section 2 of the FAA provides as follows:

A written provision ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2

. The Act, which rests on Congress' authority under the Commerce Clause, supplies not simply a procedural framework applicable in federal courts; it also calls for the application, in state as well as federal courts, of federal substantive law regarding arbitration. Preston v. Ferrer, 552 U.S. 346, 349, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) (citing Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) ). The primary purpose of the FAA is to ensure that private agreements to arbitrate are enforced according to their terms. Volt Info. Sci., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ., 489 U.S. 468, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). To this end, the Supreme Court recognizes that parties are generally free to structure their arbitration agreements as they see fit. Id. With the enactment of the FAA, Congress declared a national policy favoring arbitration when the parties contract for that mode of dispute resolution. Preston, 552 U.S. at 349, 128 S.Ct. 978 (citing Southland Corp. 465 U.S. at 16, 104 S.Ct. 852 ). In DIRECTV, Inc. v. Imburgia, –––U.S. ––––, 136 S.Ct. 463, 468, 193 L.Ed.2d 365 (2015), the Court disapproved of the California Court of Appeal's interpretation of an arbitration clause because it resulted in the failure to place arbitration agreements "on equal footing with all other contracts." Id. (citing Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. at 443, 126 S.Ct. 1204 ). The DIRECTV, Inc. Court reasoned that the California court's decision failed to give "due regard ... to the federal policy favoring arbitration." Id. at 471 (citing Volt Info. Sci., Inc., 489 U.S. at 476, 109 S.Ct. 1248 ). Likewise, as a matter of public policy, arbitration is strongly favored in Arkansas. Hart v. McChristian, 344 Ark. 656, 42 S.W.3d 552 (2001). Arbitration is looked upon with approval as a less expensive and more expeditious means of settling litigation and relieving docket congestion. Id. Any doubts and ambiguities of coverage will be resolved in favor of arbitration. Id. In light of the...