Alterra Healthcare v. Estate of Linton

• Decision Date: 28 February 2007
• Docket Number: No. 1D06-0986.,1D06-0986.
• Citation: 953 So.2d 574
• Parties: ALTERRA HEALTHCARE CORPORATION and Deanne M. Smith as to Alterra Sterling House of Tallahassee, Appellants, v. The ESTATE OF Jeanette Kelley LINTON by and through Lorrie Linton GRAHAM f/k/a Lorrie Ann Graham, Personal Representative, Appellee.
• Court: Florida District Court of Appeals

953 So.2d 574

ALTERRA HEALTHCARE CORPORATION and Deanne M. Smith as to Alterra Sterling House of Tallahassee, Appellants, v. The ESTATE OF Jeanette Kelley LINTON by and through Lorrie Linton GRAHAM f/k/a Lorrie Ann Graham, Personal Representative, Appellee.

No. 1D06-0986.

District Court of Appeal of Florida, First District.

February 28, 2007.

Rehearing Denied April 17, 2007.

Donna J. Fudge, Dennis J. Brennan and Connolly C. McArthur of Buckley &

Fudge, P.A., St. Petersburg, for Appellants.

Susan B. Morrison of the Law Offices of Susan B. Morrison, P.A., Tampa; Blair N. Mendes and Bennie Lazarra, Jr., of Wilkes & McHugh, P.A., Tampa, for Appellee.

PER CURIAM.

This appeal arises from an order of the circuit court compelling arbitration in an action against Alterra Healthcare Corporation ("Alterra") and its employee, Deanne Smith, by the Estate of Jeanette Linton for alleged negligence and statutory violations of the Florida Nursing Home Residents Act (Chapter 400, Laws of Florida). The complaint alleged that Linton, an elderly woman who suffered from advanced Alzheimer's disease, died after being beaten and raped while residing at Sterling House of Tallahassee, an assisted living facility owned by Alterra.

The defendants moved to compel arbitration, pursuant to the terms of the residency agreement. The plaintiff argued that the motion should be denied, because Mrs. Linton never signed the residency agreement, and her son, who did sign the agreement, had no authority to do so. Even if the son had authority to sign, the plaintiff maintained that the agreement was unenforceable because it was substantively and procedurally unconscionable. In addition, the plaintiff maintained that the arbitration provision in the residency agreement was void as contrary to public policy, because it included a $250,000 cap on non-economic damages and a total waiver of punitive damages. Finally, the plaintiff asserted that the arbitration provision did not apply to the claim against defendant Deanne Smith, because Smith was not a party to the residency agreement.

Following an evidentiary hearing, the trial court entered an order granting the motion to compel arbitration but specifically ruling that the provisions that limited punitive and compensatory damages were void and unenforceable as against the public policy reflected in the Nursing Home Residents Act. Because the agreement had a severability clause, however, the court ruled that the remainder of the agreement could proceed to arbitration, except as to defendant Smith, because she was not a party to the agreement. It held that any claims against Smith were not subject to arbitration, except to the extent that the plaintiff sought to hold Alterra vicariously liable for Smith's conduct. The court rejected the plaintiff's arguments as to the son's authority to sign the residency agreement on Linton's behalf. It found instead that Linton was an intended third-party beneficiary of the agreement and thus bound by its terms relative to arbitration, and there were no circumstances that would make enforcement of the contract unconscionable. The court stayed the action pending arbitration, and the case is now before us on appeal and cross-appeal.

We reject the defendants's contention that the trial court lacked authority on a motion to compel arbitration to determine the validity of the arbitration clause. The trial court ruled that the exclusion of punitive damages and limit on non-economic damages were void as contrary to public policy, on the basis that chapter 400 is a remedial statute. In so doing, the court did not go beyond the three elements it had authority to consider in ruling on a motion to compel arbitration.¹ See Seifert v. U.S. Home Corp., 750 So.2d 633, 636 (Fla.1999). Rather, its conclusion that the damages limitations were void as against public policy was a determination of the validity of the arbitration agreement under step one of the Seifert analysis.

The defendants' argument to the contrary notwithstanding, Bland v. Health Care & Retirement Corporation of America, 927 So.2d 252 (Fla. 2d DCA 2006) does not support their position. The language from Bland on which the defendants rely is mere dicta—a fact the Fourth District pointed out in rejecting this same argument by Alterra recently in a similar case. See Alterra Healthcare Corp. v. Bryant, 937 So.2d 263, 268 (Fla. 4th DCA 2006).

Nor is the U.S. Supreme Court's recent decision in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) of any aid to the defendants. In Buckeye, the Supreme Court reaffirmed the general rule that "a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator." See Buckeye, 126 S.Ct. at 1210. The defendants here unconvincingly argue that the plaintiff challenged the entire residency agreement, rather than the arbitration agreement alone, based on its mischaracterization of the limitation of liability clause as "outside" the arbitration provision. However, the limitation of liability clause is plainly part of the arbitration provision, as it is expressly incorporated by reference therein. For this reason, Buckeye does not require that the arbitrator rule on the challenge to the arbitration provision.

The trial court had not only the authority, but a duty to determine the validity of the arbitration clause in light of its express limitations of liability. "It is the court's obligation, in deciding a motion to compel arbitration, to determine whether a valid written agreement to arbitrate exists." SA-PG-Ocala, LLC v. Stokes, 935 So.2d 1242, 1243 (Fla. 5th DCA 2006). Florida courts have expressly held that arbitration agreements eliminating punitive damages and capping noneconomic damages defeat the remedial purpose of the Nursing Home Residents Act and are therefore void as against public policy. See, e.g., Lacey v. Healthcare & Retirement Corp. of America, 918 So.2d 333, 334 (Fla. 4th DCA 2005); Romano v. Manor Care, Inc., 861 So.2d 59, 61-63 (Fla. 4th DCA 2003), rev. denied, 874 So.2d 1192 (Fla.2004); Blankfeld v. Richmond Health Care, Inc., 902 So.2d 296, 298-99 (Fla. 4th DCA 2005); SA-PG-Ocala, 935 So.2d at 1242.

The defendants maintain that it is for the arbitrator, not the trial court, to decide whether limitations on statutory remedies make an arbitration clause unenforceable. However, the cases on which the defendants rely are distinguishable from the present case. See Beaver Coaches, Inc. v. Revels Nationwide RV Sales, Inc., 543 So.2d 359 (Fla. 1st DCA 1989) (limiting arbitrator's review to limitations of liability that do not pertain to the arbitration clause itself and stating that arbitrator should be bound by parties' specific agreement barring consequential damages, unless arbitrator finds such provision unconscionable); Rollins, Inc. v. Lighthouse Bay Holdings, Ltd., 898 So.2d 86 (Fla. 2d DCA 2005) (holding that trial court, rather than arbitrator, may review a limitation of liability where unconscionability is at issue). Unconscionability is clearly at issue in the present case, and the provision limiting liability, being part of the arbitration provision, pertains to the arbitration provision itself. Therefore, the trial court had authority to determine the enforceability of the remedial limitations.

We likewise reject the defendants' argument that the trial court lacked authority to interpret Chapter 400 in ruling that the remedial limitations of the arbitration provision were invalid. The issue of whether the provision violated public policy goes to the first Seifert inquiry: whether there was a valid agreement to arbitrate. This is a question for the trial court. See, e.g., Lacey, 918 So.2d at 334; Blankfeld, 902 So.2d at 298-99.

Nor did the trial court err in its substantive determination that the remedial limitations in the arbitration agreement were void as against the public policy of the statute. The arbitrability of statutory claims rests on the assumption that the arbitration clause permits relief equivalent to that available via the courts. An arbitration clause is thus unenforceable if its provisions deprive the plaintiff of the ability to obtain meaningful relief for alleged statutory violations. See Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054, 1062 (11th Cir.1998); see also Romano, 861 So.2d at 61-63.

Like the Nursing Home Residents Act, the Assisted Living Facilities Act is a remedial statute, designed to protect the residents of such facilities. See Bryant, 937 So.2d at 266. The arbitration agreement in the present case defeats the remedial purpose of the Act by eliminating punitive damages and capping noneconomic damages, so the trial court correctly ruled that it was void as against public policy. See Bryant at 266; Lacey, 918 So.2d at 334; Romano, 861 So.2d at 61-63; see also Blankfeld, 902 So.2d at 298-99; SA-PG-Ocala, 935 So.2d at 1242.

The defendants would have us depart from Blankfeld and Lacey, in light of Unicare Health Facilities, Inc. v. Mort, 553 So.2d 159 (Fla.1989). In Mort, the supreme court held that a party may waive her right to attorney fees under chapter 400 by accepting an offer of judgment that is silent as to attorney fees. See Mort, 553 So.2d at 161. However, Mort differed significantly from the case before us, both substantively and procedurally. Moreover, to depart from Blankfeld on this point would require us to ignore post-Mort decisions such as Lacey, Romano and Bryant, which held that similar remedial limitations were void as against public policy.

Although we affirm the trial court on the foregoing points, we reverse its ruling that the arbitration provision did not bind defendant Deanne Smith. Smith was the Residence Director at Sterling House and was not a signatory to the residency agreement. However, the arbitration clause in the agreement nonetheless applied to her.

Where the...