Dean v. Heritage Healthcare of Ridgeway, LLC

• Decision Date: 18 June 2014
• Docket Number: No. 27401.,27401.
• Citation: 408 S.C. 371,759 S.E.2d 727
• Court: South Carolina Supreme Court
• Parties: Darlene DEAN, as Personal Representative of the Estate of Louise Porter, Respondent, v. HERITAGE HEALTHCARE OF RIDGEWAY, LLC, Uni–Health Post Acute Care–Tanglewood, LLC and UHS Pruitt Corporation, Appellants. Appellate Case No. 2013–000509.

408 S.C. 371

759 S.E.2d 727

Darlene DEAN, as Personal Representative of the Estate of Louise Porter, Respondent,

v.HERITAGE HEALTHCARE OF RIDGEWAY, LLC, Uni–Health Post Acute Care–Tanglewood, LLC and UHS Pruitt Corporation, Appellants.

Appellate Case No. 2013–000509.

No. 27401.

Supreme Court of South Carolina.

Heard April 1, 2014.

Decided June 18, 2014.

Todd W. Smyth and Joshua Steven Whitley, both of Smyth Whitley, LLC, of Charleston, South Carolina, for Appellants.

John D. Kassel and Theile Branham McVey, of Kassel McVey, and Gerald Jowers, Jr., of Janet, Jenner & Suggs, all of Columbia, and Kenneth G. Goode, of Winnsboro, South Carolina, for Respondent.

Chief Justice TOAL.

Heritage Healthcare of Ridgeway, LLC, UniHealth Post–Acute Care–Tanglewood, LLC (Tanglewood), and UHS–Pruitt Corporation (collectively, Appellants) ask this Court to reverse the circuit court's denial of their motion to compel arbitration in this wrongful death and survival action involving Appellants' allegedly negligent nursing home care. We reverse and remand.

Facts/Procedural Background

Tanglewood is a skilled nursing facility located in Ridgeway, South Carolina, and is owned and controlled by Appellants. In January 2007, Tanglewood and Darlene Dean (Respondent) entered into a nursing home residency agreement in which Tanglewood assumed responsibility for the care of Respondent's mother, Louise Porter (the patient). The same day, Respondent signed a separate, voluntary arbitration agreement (the Agreement).¹

The Agreement states that:

any and all controversies, claims, disputes, disagreements or demands of any kind ... arising out of or relating to the [patient's residency agreement] with the Facility ... or any service or care provided to the [patient] by the Facility shall be settled exclusively by binding arbitration. This means that the parties are waiving their right to a trial before a jury or a judge.

Further, the Agreement provides that:

Any arbitration proceeding that takes place under this [ ] Agreement shall follow the rules of the American Arbitration Association (‘AAA’) and any resulting decision shall be enforceable by a court of competent jurisdiction. The arbitration proceeding shall be conducted where the Facility is located or as close to the Facility as practical. The arbitration proceeding shall be conducted before one neutral arbitrator selected in accordance with the rules of thE AAA. the parties agree to bear their own attorneys' fees and costs associated with the arbitration proceeding.

Id. (emphasis added). Finally, the Agreement contains a severability clause and states, in bold font directly above the signature lines, that the patient “is not required to sign this [ ] Agreement in order to be admitted to or to remain in the Facility.” (Emphasis in original).

In 2009, the patient fell three separate times within a ten day period, fracturing her hip in the third fall. Over the next two months, the patient underwent two hip surgeries; however, due to complications following the surgeries, the patient died on September 30, 2009.

On December 20, 2011, Respondent—acting in her capacity as personal representative of her mother's estate—filed a Notice of Intent (NOI) to file a medical malpractice suit against Appellants, as well as an expert affidavit in support of her NOI. SeeS.C.Code Ann. § 15–79–125 (Supp.2012). Respondent also alleged claims for survival and wrongful death.

Appellants requested discovery of all of the patient's medical records, which Respondent provided. The parties then engaged in the statutorily required pre-suit mediation; however, following an impasse, Respondent filed her complaint on March 23, 2012. In lieu of filing an answer to the complaint, Appellants filed a motion to dismiss pursuant to Rules 12(b)(1) and (6), SCRCP, or, in the alternative, a motion to compel arbitration and stay the litigation.

Respondent opposed the motion, arguing, inter alia, that the Agreement was unenforceable because the “forum selection” clause had failed. More specifically, Respondent claimed the portion of the Agreement stating that “[a]ny arbitration proceeding that takes place under this [ ] Agreement shall follow the rules of the [AAA]” meant that the parties had agreed to an arbitration proceeding administered exclusively by the AAA. However, since January 1, 2003, the AAA has refused to accept personal injury disputes without a post-injury agreement to arbitrate.² Thus, because Respondent viewed the “exclusive” arbitral forum as unavailable, she contended it would be improper to compel arbitration.

Relying on Grant v. Magnolia Manor–Greenwood, Inc., 383 S.C. 125, 678 S.E.2d 435 (2009), the circuit court agreed, invaliding the Agreement in its entirety and refusing to compel arbitration between the parties.³ Specifically, the court found that “the forum selection is an integral part of the [A]greement and cannot be remedied” because “the forum selected by [Appellants] will not hear this type of dispute.” Because the court held the Agreement completely invalid, it declined to address any of Respondent's remaining arguments as to why the court should compel arbitration between the parties.⁴

Appellants filed a motion to reconsider, which the circuit court denied. Appellants appealed, and this Court certified the appeal pursuant to Rule 204(b), SCACR.

Standard of Review

Arbitrability determinations are subject to de novo review. Bradley v. Brentwood Homes, Inc., 398 S.C. 447, 453, 730 S.E.2d 312, 315 (2012). However, a circuit court's factual findings will not be reversed on appeal if any evidence reasonably supports the findings. Id. at 453, 730 S.E.2d at 315. “[T]he party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000); accord Blue Cross Blue Shield of Ala. v. Rigas, 923 So.2d 1077, 1083 (Ala.2005).

Analysis

I. Interstate Commerce and the Federal Arbitration Act

As a threshold matter, we address whether federal or state arbitration law applies to the instant controversy. Respondent claims that the Federal Arbitration Act (FAA) does not apply to the Agreement because the residency agreement does not involve interstate commerce. (Citing Timms v. Greene, 310 S.C. 469, 427 S.E.2d 642 (1993), overruled in part by Cape Romain Contractors, Inc. v. Wando E., L.L.C., 405 S.C. 115, 123 n. 5, 747 S.E.2d 461, 465 n. 5 (2013)). We disagree.

“[T]he basic purpose of the [FAA] is to overcome courts' refusals to enforce agreements to arbitrate,” Allied–Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 270, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995), and “ensure that arbitration will proceed in the event a state law would have a preclusive effect on an otherwise valid arbitration agreement.” Bradley, 398 S.C. at 453, 730 S.E.2d at 315. To that end, the United States Supreme Court held in Allied–Bruce that, unless the parties specifically contracted otherwise, the FAA would apply whenever an arbitration agreement involves interstate commerce. 513 U.S. at 273–77, 115 S.Ct. 834;Bradley, 398 S.C. at 453–54, 730 S.E.2d at 315. Moreover, the Supreme Court clarified that the reach of interstate commerce—and thus the FAA—was coextensive with the broad reach of the Commerce Clause.⁵Allied–Bruce, 513 U.S. at 277, 115 S.Ct. 834; Zabinski v. Bright Acres Assocs., 346 S.C. 580, 590, 553 S.E.2d 110, 115 (2001). Thus, in practice, arbitration agreements enjoy a strong presumption of validity in federal and state courts. Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14, 24, 644 S.E.2d 663, 668 (2007); Zabinski, 346 S.C. at 596, 553 S.E.2d at 118.

To ascertain whether an arbitration agreement implicates interstate commerce and the FAA, “the court must examine the agreement, the complaint, and the surrounding facts,” focusing particularly on “ ‘what the terms of the contract specifically require for performance.’ ” Bradley, 398 S.C. at 455, 730 S.E.2d at 316 (quoting Thornton v. Trident Med. Ctr. L.L.C., 357 S.C. 91, 96, 592 S.E.2d 50, 52 (Ct.App.2003)); Zabinski, 346 S.C. at 594, 553 S.E.2d at 117. This is generally a very fact-specific inquiry. Cf. Thornton, 357 S.C. at 95–96, 592 S.E.2d at 52 (citing Zabinski, 346 S.C. at 594, 553 S.E.2d at 117).

In arguing that the residency agreement did not involve interstate commerce, Respondent relied heavily on Timms v. Greene, which predated Allied–Bruce 's pronouncement regarding the breadth of interstate commerce. In Timms, the parties entered into a nursing home residency contract that included an arbitration agreement. 310 S.C. 469, 470–71, 427 S.E.2d 642, 643 (1993). After the plaintiff-resident suffered an injury at the hands of a nursing home employee, she filed suit instead of initiating arbitration proceedings, arguing that arbitration could not be compelled under the FAA because the contract was for the provision of patient-resident services in South Carolina and therefore did not involve interstate commerce. Id. at 472, 427 S.E.2d at 644.⁶ In attempting to compel arbitration, the nursing home asserted, inter alia, that they purchased the majority of their goods, equipment, and supplies from out-of-state vendors. Id. at 473, 427 S.E.2d at 644.

This Court held that “the contract ... [was] obscure, if not devoid, of any basis for holding that [interstate] commerce was involved.” Id. at 472, 427 S.E.2d at 644. Specifically, the Court found the nursing home's assertion regarding the supplies and goods irrelevant because it was not the basis of the contract between the parties, which was to provide patient care services in a South Carolina facility. Id. at 473, 427 S.E.2d at 644. Therefore, the Court found the FAA inapplicable because the basis of the contract did not involve interstate commerce. Id.

Since the Supreme Court decided Allied–Bruce, many—if not all—federal and state courts have held that nursing home residency contracts...