COMMUNITY CARE OF AMERICA OF ALA. v. Davis

• Citation: 850 So.2d 283
• Parties: COMMUNITY CARE OF AMERICA OF ALABAMA, INC., d/b/a IHS of Southgate f/k/a Southgate Village; et al. v. Leatha DAVIS.
• Decision Date: 13 September 2002
• Court: Alabama Supreme Court

850 So.2d 283

COMMUNITY CARE OF AMERICA OF ALABAMA, INC., d/b/a IHS of Southgate f/k/a Southgate Village; et al. v. Leatha DAVIS.

1010454.

Supreme Court of Alabama.

September 13, 2002.

Rehearing Denied November 27, 2002.

J. Mitchell Frost, Jr., and Champ Lyons III of Ferguson, Frost & Dodson, L.L.P., Birmingham, for appellants.

Thomas O. Plouff of Plouff Law Offices, P.C., Birmingham, for appellee.

Richard J. Brockman, William G. Somerville III, and S. Shelton Foss of Johnston, Barton, Proctor & Powell, L.L.P., Birmingham, amicus curiae Alabama Nursing Home Association, in support of the appellant.

Russell Jackson Drake of Whatley Drake L.L.C., Birmingham; Deborah M. Zuckerman and Dorothy Siemon, AARP Foundation, Washington, D.C.; and Michael Schuster, AARP, Washington, D.C., amicus curiae AARP (American Association of Retired Persons), in support of the appellee.

WOODALL, Justice.

Community Care of America of Alabama, Inc., d/b/a IHS of Southgate f/k/a Southgate Village, a Delaware corporation, and two of its employees, Brenda White and Joan Tidwell (Community Care and its employees are hereinafter referred to collectively as "Community Care"), appeal from an order denying their motion to compel arbitration of this dispute. We affirm.

This dispute arises out of an action commenced by Leatha Davis, an Alabama resident, against Community Care. Davis alleged that Community Care of America of Alabama, Inc., owned and operated a "nursing home and long-term care facility" in Bessemer, to which she was admitted on January 24, 2000. Her complaint alleged that, while she resided in the nursing home, she developed "pressure ulcer sores on her feet," as the result of what she described as the "negligent and wanton conduct" of the defendants. She averred that, as a consequence of this condition and of Community Care's failure to provide "the proper medical services, care, and treatment that a long-term care facility within the same medical community, and same general line of practice, possessing and exercising such ordinary, reasonable and necessary medical care, skill and diligence would have provided" in discovering and treating the condition, she suffered the amputation of both legs. She sought compensatory and punitive damages.

Community Care moved to compel arbitration of the dispute, based on a clause in the "Admission Contract" Davis's son, Willie Harris, executed when Davis was admitted to the facility. It supported the motion with the affidavit of Tidwell, the administrator of the nursing-home facility.

The trial court refused to consider the affidavit, concluding that it was not based on Tidwell's personal knowledge. The trial court also denied the motion to compel arbitration. From that order, Community Care appealed.

On appeal, Community Care contends that the trial court erred in refusing to consider Tidwell's affidavit, which, it argues, demonstrates that the Admission Contract bears a nexus with interstate commerce sufficient to render the arbitration provision enforceable through the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the "FAA"). In particular, § 2 of the FAA provides:

"A written provision in ... 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."

(Emphasis added.)

Tidwell's affidavit stated, in pertinent part:

"My name is Joan Tidwell. I am the Administrator for the IHS of Southgate facility in Bessemer. I have personal knowledge of the facts contained in this affidavit and I am authorized to give this affidavit. I understand that this affidavit will be used in support of a motion to compel arbitration.

"Leatha Davis was admitted to Southgate on January 24, 2000. At the time of her admission, she was accompanied by her son, Willie Harris. Willie Harris acted as her agent for purposes of signing the necessary admissions contracts. Leatha Davis was not physically capable of signing the documents herself and, therefore, her son signed on her behalf. Leatha Davis never expressed any objection to her son serving as her fiduciary representative. This is common practice for admissions to our facility because the majority of our residents are not capable of signing the necessary contracts. Southgate regularly allows an immediate family member to serve as a fiduciary agent for the resident who is being admitted to the facility.

"Southgate answers to a regional office in Florida and a corporate office in Maryland. Our monthly quality assurance reports are submitted for review in Florida and then are forwarded to Maryland for further review. These reports were prepared at the time Leatha Davis was a resident at Southgate.

"Southgate has patients who are residents from other states. In addition, we receive regular shipments of supplies from other states, including Georgia, Wisconsin and Mississippi. The supplies that came from those states were ultimately used in the treatment and care of Leatha Davis. The treatment and care given to Leatha Davis would not have been possible without the shipments of supplies from Georgia, Wisconsin and Mississippi. Our medications were purchased from Pharmerica which is based in Florida and is a subsidiary of a California corporation. The medications purchased from Pharmerica are manufactured in and shipped from all parts of the country.... Her treatment and care would not have been possible but for the medications that are shipped in from out of state.

"Leatha Davis was a Medicare Complete patient. To the best of my knowledge, Medicare Complete is an insurance program that receives funding from the federal Medicare program. Medicare Complete allows a 100-day benefit for care in a skilled nursing facility. If a patient is Medicaid eligible, then Medicaid pays for the services rendered after the expiration of the 100-day period. Southgate has received $24,555 from Medicare Complete for the treatment provided to Leatha Davis. In addition, Medicaid has paid $9,050.13 for the services provided to Leatha Davis. The treatment and care given to Leatha Davis would not have been possible without the funding provided by Medicare Complete and Medicaid."

The affidavit demonstrates a nexus with interstate commerce. However, we need not determine whether the trial court erred in striking the affidavit, because, even assuming that it was admissible, it fails to compel the conclusion that the FAA requires enforcement of the arbitration provision.

"The purpose of the FAA was to reverse judicial hostility to arbitration agreements and to place arbitration agreements on equal footing with other contracts." Keymer v. Management Recruiters Int'l, Inc., 169 F.3d 501, 504 (8th Cir. 1999) (emphasis added); see Equal Employment Opportunity Comm'n v. Waffle House, Inc., 534 U.S. 279, 294, 122 S.Ct. 754, 764, 151 L.Ed.2d 755 (2002). Under the "savings clause" of § 2, "state law, whether of legislative or judicial origin, is applicable if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally." Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), quoted in Doctor's Assoc., Inc. v. Casarotto, 517 U.S. 681, 685, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)

. Under some circumstances, therefore, Alabama law may prohibit the enforcement of an arbitration clause—even one in a contract evidencing a transaction that substantially affects interstate commerce.

It is undisputed that on November 6, 1999, the office of the Secretary of State revoked the certificate of authority of Community Care of America of Alabama, Inc., to transact business in Alabama. Thus, when the Admission Contract was signed, Community Care was not qualified to do business in Alabama, as required by Ala.Code 1975, § 10-2B-15.01(a).¹ Section 10-2B-15.01(a) provides: "A foreign corporation may not transact business in this state until it obtains a certificate of authority from the Secretary of State." The consequences of noncompliance with this section are set forth in Ala.Code 1975, § 10-2B-15.02(a), which provides, in pertinent part:

"All contracts or agreements made or entered into in this state by foreign corporations prior to obtaining a certificate of authority to transact business in this state shall be held void at the action of the foreign corporation or by any person claiming through or under the foreign corporation by virtue of the contract or agreement...."

(Emphasis added.) This "door-closing" statute "bars a foreign corporation not qualified to do business in Alabama from enforcing in an Alabama court a contract it made in Alabama." Hays Corp. v. Bunge Corp., 777 So.2d 62, 64 (Ala.2000); see S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1510 (11th Cir.1990). "The law of this state is that a foreign corporation which has not qualified to do business in Alabama at the time of the contract cannot use Alabama courts to enforce that contract." Sanjay, Inc. v. Duncan Constr. Co., 445 So.2d 876, 880 (Ala.1983).

Significantly, the penalty of § 10-2B-15.02(a) extends to the enforcement of arbitration provisions in contracts made by nonqualifying corporations. See Camaro Trading Co. v. Nissei Sangyo America, Ltd., 577 So.2d 1274 (Ala.1991)("Camaro I"), and Camaro Trading Co. v. Nissei Sangyo America, Ltd., 628 So.2d 463 (Ala. 1993) ("Camaro II"). Together, these two cases stand for the unremarkable proposition that a "foreign corporation [may] not compel arbitration pursuant to an arbitration clause in a contract [if] the entire contract [is] unenforceable and invalid as a result of the foreign...