Courtyard Gardens Health v. Quarles

• Decision Date: 30 May 2013
• Docket Number: No. CV–12–873.,CV–12–873.
• Citation: 2013 Ark. 228,428 S.W.3d 437
• Parties: COURTYARD GARDENS HEALTH AND REHABILITATION, LLC; Arkadelphia Holdings, LLC; SLC Operations Master Tenant, LLC; SLC Operations, LLC; SLC Professionals Ofarkansas, LLC; SLC Administrative Services of Arkansas, LLC; Capital SeniorCare Ventures, LLC; SLC Properties, LLC; 2701 Twin Rivers Drive, LLC; Angela Marlar, in her capacity as Administrator/Executive Director of Golden Living Center–Arkadelphia, n/k/a Courtyard Gardens Health and Rehabilitation, LLC; and Deborah Thornton, in her capacity as Administrator of Courtyard Gardenshealth and Rehabilitation, LLC, f/k/a Golden Living Center–Arkadelphia, Appellants/Cross–Appellees v. Kenny QUARLES, as Special Administrator of the Estate of Bennie Jean Quarles, Deceased, and on behalf of the Wrongfuldeath Beneficiaries of Bennie Jean Quarles, Deceased, Appellee/Cross–Appellant.
• Court: Arkansas Supreme Court

2013 Ark. 228

428 S.W.3d 437

COURTYARD GARDENS HEALTH AND REHABILITATION, LLC; Arkadelphia Holdings, LLC; SLC Operations Master Tenant, LLC; SLC Operations, LLC; SLC Professionals Ofarkansas, LLC; SLC Administrative Services of Arkansas, LLC; Capital SeniorCare Ventures, LLC; SLC Properties, LLC; 2701 Twin Rivers Drive, LLC; Angela Marlar, in her capacity as Administrator/Executive Director of Golden Living Center–Arkadelphia, n/k/a Courtyard Gardens Health and Rehabilitation, LLC; and Deborah Thornton, in her capacity as Administrator of Courtyard Gardenshealth and Rehabilitation, LLC, f/k/a Golden Living Center–Arkadelphia, Appellants/Cross–Appellees

v.Kenny QUARLES, as Special Administrator of the Estate of Bennie Jean Quarles, Deceased, and on behalf of the Wrongfuldeath Beneficiaries of Bennie Jean Quarles, Deceased, Appellee/Cross–Appellant.

No. CV–12–873.

Supreme Court of Arkansas.

May 30, 2013.

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

Wilkes & McHugh, P.A., Little Rock, by: Melody H. Piazza and Deborah Truby Riordan, for appellees.

JIM HANNAH, Chief Justice.

Appellants/Cross–Appellees Courtyard Gardens Health and Rehabilitation, LLC; Arkadelphia Holdings, LLC; SLC Operations Master Tenant, LLC; SLC Operations, LLC; SLC Professionals of Arkansas, LLC; SLC Administrative Services of Arkansas, LLC; Capital SeniorCare Ventures, LLC; SLC Properties, LLC; 2701 Twin Rivers Drive, LLC; Angela Marlar, in her capacity as Administrator/Executive Director of Golden Living Center—Arkadelphia, n/k/a Courtyard Gardens Health and Rehabilitation, LLC; and Deborah Thornton, in her capacity as Administrator of Courtyard Gardens Health and Rehabilitation, LLC, f/k/a Golden Living Center—Arkadelphia (collectively, “Courtyard Gardens”) appeal from an order entered by the Clark County Circuit Court denying their motion to dismiss and to compel arbitration. Appellee/Cross–Appellant Kenny Quarles, as Special Administrator of the Estate of Bennie Jean Quarles, deceased, and on behalf of the wrongful-death beneficiaries of Bennie Jean Quarles, deceased (“the Estate”), cross-appeals from the same order. We hold that there was no valid arbitration agreement as a matter of law; accordingly, we affirm the denial of the motion to compel arbitration. This disposition renders all other issues, including the cross-appeal, moot.

The facts are these. On February 2, 2009, Bennie Jean Quarles, the decedent, became a resident of Golden Living Center, a nursing home in Arkadelphia. At that time, her son, Ronald Quarles, signed admission documents on her behalf. Those documents included an arbitration agreement; however, that arbitration agreement is not the one at issue in this case. On July 1, 2009, Courtyard Gardens took over ownership and operation of the facility (and changed its name). Sometime shortly thereafter, Ronald Quarles signed a new admission agreement and a new optional arbitration agreement in his capacity as “responsible party” on behalf of his mother. The arbitration agreement stated in pertinent part as follows:

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 ForumCode of Procedure, (“NAF”) which is hereby incorporated into this Agreement, and not by a lawsuit or resort to court process.

(Footnote omitted.) The decedent was a resident of the facility until March 16, 2010.

On May 3, 2011, Kenny Quarles, another of the decedent's sons, filed in the circuit court an amended complaint against Courtyard Gardens and various other entities associated with it and with Golden Living Center.¹ Kenny Quarles filed the amended complaint as power of attorney for his mother, who was incapacitated at that time; after her death on May 17, 2011, he was substituted as party plaintiff in his role as special administrator of her estate. The amended complaint sought damages for negligence, medical malpractice, and violations of the Arkansas Long–Term Care Residents' Rights Act, Arkansas Code Annotated sections 20–10–1201 to –1209 (Repl.2005).

Courtyard Gardens answered and then filed its motion to dismiss the complaint and compel arbitration, arguing that the arbitration agreement was valid and enforceable and that the claims raised in the amended complaint fell within its scope. In response, Kenny Quarles (who was still acting as power of attorney at that time) contended that the arbitration agreement was invalid for two reasons: (1) there was no evidence that Courtyard Gardens assented to the agreement, as it was not signed by a corporate representative; and (2) there was no evidence that the decedent assented to the agreement, as Ronald Quarles did not have authority to bind her by signing as her “responsible party.” Kenny Quarles further asserted that Courtyard Gardens had waived its right to demand arbitration by failing to timely assert it; that the arbitration agreement was unconscionable; and that enforcement of the arbitration agreement was impossible because it contained an integral term designating an arbitrator, the National Arbitration Forum, which had since become unavailable.²

After a hearing, the circuit court entered an order denying Courtyard Gardens's motion to compel arbitration. The order included three findings: (1) Courtyard Gardens assented to the arbitration agreement; (2) questions of fact remained regarding Ronald Quarles's authority to bind the decedent to the arbitration agreement, leaving the issue of authority as a question for the jury; and (3) enforcement of the arbitration agreement according to its terms was rendered impossible due to the unavailability of the National Arbitration Forum, the designation of which was an integral term of the agreement. Courtyard Gardens filed a timely notice of appeal, and the Estate filed a timely notice of cross-appeal.

On appeal, Courtyard Gardens argues that there was a valid arbitration agreement between the parties as a matter of law. It advances three alternative theories in support of this argument: that Ronald Quarles had actual authority to sign the arbitration agreement on the decedent's behalf, that he had statutory authority to sign the arbitration agreement on the decedent's behalf, and that the decedent was bound as a third-party beneficiary to the arbitration agreement. In addition, Courtyard Gardens maintains that the arbitration agreement was enforceable, as it did not expressly select the National Arbitration Forum as arbitrator and, even if it had, both the Federal Arbitration Act and the agreement itself provide for substitution in case of unavailability. The Estate responds that the evidence is in dispute regarding Ronald Quarles's actual authority and that neither statutory authority nor the third-party-beneficiary doctrine applies. On the second point, the Estate contends that the arbitration agreement's provision referring to the National Arbitration Forum's Code of Procedure, and the incorporation of those procedures into the agreement, amounted to a designation in an integral term and that the substitution provisions are therefore inapplicable. Alternatively, the Estate argues that Courtyard Gardens waived its right to arbitrate by failing to timely assert it. On cross-appeal, the Estate asserts that the arbitration agreement was invalid because Courtyard Gardens did not assent to it. Courtyard Gardens responds that its actions indicated its assent.

Our jurisdiction is in accordance with Arkansas Rule of Appellate Procedure—Civil 2(a)(12) (2012) and Arkansas Code Annotated section 16–108–228(a)(1) (Supp.2011), which permit interlocutory appeals from orders denying motions to compel arbitration. We granted the Estate's motion to reassign this case to this court on the basis that it presents a first-impression issue of statutory interpretation, pursuant to Arkansas Supreme Court Rule 1–2(b)(1) and (6) (2012). We review a circuit court's order denying a motion to compel arbitration de novo on the record. S. Pioneer Life Ins. Co. v. Thomas, 2011 Ark. 490, 385 S.W.3d 770.

As we have noted, the parties raise several issues in support of their positions. However, the threshold issue—and the one that is dispositive in this case—is whether there was a valid arbitration agreement. See Gruma Corp. v. Morrison, 2010 Ark. 151, 362 S.W.3d 898. This court has held that arbitration is simply a matter of contract between parties. S. Pioneer Life Ins. Co., supra. The question of whether a dispute should be submitted to arbitration is a matter of contract construction, and we look to the language of the contract that contains the agreement to arbitrate and apply state-law principles. Id. We have further held that the same rules of construction and interpretation apply to arbitration agreements as apply to agreements generally; thus, we will seek to give effect to the intent of the parties as evidenced by the arbitration agreement itself. Tyson Foods, Inc. v. Archer, 356 Ark. 136, 147 S.W.3d 681 (2004) (quoting E–Z Cash Advance, Inc. v. Harris, 347 Ark. 132, 60 S.W.3d 436 (2001)). Finally, the construction and legal effect of an agreement to arbitrate are to be determined by this court as a matter of law. Id.

We must first determine whether Ronald Quarles had actual authority to bind the decedent to the arbitration agreement. Courtyard Gardens posits that Ronald Quarles signed the arbitration agreement in his capacity as the decedent's agent. Our law on agency is well settled:

We have adopted the definition...