Maide, LLC v. Dileo
| Decision Date | 24 February 2022 |
| Docket Number | 81804 |
| Citation | 504 P.3d 1126 |
| Parties | MAIDE, LLC, a Nevada Limited Liability Company, d/b/a Gentle Spring Care Home ; Sokhena K. Huch, an Individual; and Miki N. Ton, an Individual, Appellants, v. Corrine R. DILEO, as Special Administrator FOR the Estate of Thomas DILEO; Thomas DiLeo, Jr., as Statutory Heir to Thomas DiLeo; and Cindy DiLeo, as Statutory Heir to Thomas DiLeo, Respondents. |
| Court | Nevada Supreme Court |
Lewis Brisbois Bisgaard & Smith LLP and S. Brent Vogel and John M. Orr, Las Vegas, for Appellants.
Cogburn Law and Hunter S. Davidson and Jamie S. Cogburn, Henderson, for Respondents.
Claggett & Sykes Law Firm and Micah S. Echols, Las Vegas; Sharp Law Center and A.J. Sharp, Las Vegas, for Amicus Curiae Nevada Justice Association.
BEFORE THE SUPREME COURT, PARRAGUIRRE, C. J., STIGLICH and SILVER, JJ.
NRS 597.995 requires any agreement that includes an arbitration provision to also include a specific authorization for that provision—or the provision is void. But because NRS 597.995 singles out and disfavors arbitration provisions by imposing stricter requirements on them than on other contract provisions, the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. (2012), preempts NRS 597.995 in cases involving interstate commerce. Below, the district court concluded that an arbitration provision was void under NRS 597.995 for failure to include a specific authorization. Because we conclude the FAA applies here and preempts NRS 597.995, the district court's decision was erroneous, and we reverse.
Maide, LLC, owns and operates Gentle Spring Care Home and Bella Estate Care Home, residential group homes in Las Vegas. Thomas DiLeo moved to Gentle Spring after he developed dementia so that he could receive 24-hour care and supervision. His ex-wife and personal representative, Corinne DiLeo, signed the paperwork to admit Thomas to Gentle Spring. The admission paperwork included a separate one-page addendum that contained one paragraph addressing "Grievances" and a second paragraph addressing "Arbitration" (the addendum).1 The paragraphs were set in a large font, and the addendum contained its own signature block.
After his admission to Gentle Spring, Thomas injured his leg. The DiLeo family alleged that Gentle Spring staff improperly bandaged Thomas's leg, which developed gangrene
. Thomas's leg was later amputated, and he passed away shortly thereafter.
Corinne, as special administrator for the estate, and Cindy DiLeo and Thomas DiLeo, Jr., as statutory heirs, filed a complaint asserting causes of action for abuse/neglect of an older person, negligence, and wrongful death, and a survival action under NRS 41.100 against Maide and individuals connected to Gentle Spring (collectively Maide). Maide moved to compel arbitration based on the addendum, but the DiLeos countered that the arbitration paragraph in the addendum was void and unenforceable under NRS 597.995 for failure to include a separate signature or initial line pertaining solely to that paragraph.
The district court initially agreed with Maide, determining the arbitration provision was binding under NRS 597.995. The district court concluded, however, that the statutory heirs were not bound by the arbitration provision and stayed their claims pending arbitration. The DiLeos moved for rehearing, and the district court granted the motion after finding the arbitration addendum lacked specific authorization, such as a separate signature block or initial section, as required by NRS 597.995. The district court vacated the earlier order and denied Maide's motion to compel arbitration.2 This appeal followed.3
Where an agreement contains an arbitration provision, NRS 597.995(1) requires that agreement to "include specific authorization for the provision which indicates that the person has affirmatively agreed to the provision." Failure to include some form of specific authorization for the arbitration provision voids the arbitration provision. NRS 597.995(2).
Below and on appeal, the parties focused on whether the arbitration provision in the addendum complies with NRS 597.995. While this case proceeded in district court, however, we determined that the FAA, 9 U.S.C. § 1 et seq. (2012), where it applies, preempts NRS 597.995. MMAWC, LLC v. Zion Wood Obi Wan Tr., 135 Nev. 275, 277, 448 P.3d 568, 570 (2019). Specifically, if a state law "single[s] out and disfavor[s] arbitration," such as NRS 597.995 does by imposing stricter requirements on arbitration provisions than on other contract provisions, the FAA will preempt that law. Id. (internal quotation marks omitted).
A threshold issue in this appeal is whether the FAA applies because, if it does, it will preempt NRS 597.995 ’s specific authorization requirement, invalidate the district court's grounds for denying Maide's motion to compel arbitration, and moot the parties’ arguments as to whether the arbitration provision complies with NRS 597.995. Maide failed to address the FAA until its reply brief on appeal, thereby waiving the issue. See Old Aztec Mine, Inc. v. Brown , 97 Nev. 49, 52, 623 P.2d 981, 983 (1981). However, because failing to consider FAA preemption would require us to deliberately ignore obvious and controlling Nevada law, we nevertheless elect to address this point.4 Cf. Powell v. Liberty Mut. Fire Ins. Co. , 127 Nev. 156, 161 n.3, 252 P.3d 668, 672 n.3 (2011) ().
In U.S. Home Corp. v. Michael Ballesteros Trust , we explained the FAA applies where the contract evidences a transaction that involves interstate commerce. 134 Nev. 180, 186, 415 P.3d 32, 38 (2018) ; see also 9 U.S.C. § 2 (2012). In the context of the FAA, the word "involves" "is broad and functionally equivalent to the word ‘affecting,’ " and a contract "affects or involves interstate commerce if Congress could regulate the transaction through the Commerce Clause." Ballesteros, 134 Nev. at 186, 415 P.3d at 38. In considering whether a contract comes within the purview of the FAA, we recognize that the FAA was intended to "signal the broadest permissible exercise of Congress’ Commerce Clause power." Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003) ; Ballesteros, 134 Nev. at 186, 415 P.3d at 38. Thus, we have determined that "[s]o long as ‘commerce’ is involved, the FAA applies." Tallman v. Eighth Judicial Dist. Court, 131 Nev. 713, 724, 359 P.3d 113, 121 (2015). As to arbitration provisions specifically, the FAA will apply so long as there is evidence that interstate commerce was involved in the transaction underlying the arbitration agreement. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 277, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) (); see also Ballesteros , 134 Nev. at 186-87, 415 P.3d at 38. Moreover, we have explained that "it is perfectly clear that the FAA encompasses a wider range of transactions than those actually ‘in commerce’ " and the FAA will even govern contracts evidencing intrastate economic activities so long as those contracts, "when viewed in the aggregate, substantially affect interstate commerce." Ballesteros , 134 Nev. at 186-87, 415 P.3d at 38-39 (internal quotation marks omitted).
For example, in Ballesteros , we considered whether the FAA governed an arbitration agreement contained in Covenants, Conditions, and Restrictions (CC&Rs). Id. at 180, 415 P.3d at 34. There, homeowners sued for construction defects in homes in a common interest community. Id. at 181, 415 P.3d at 34-35. A central issue was whether the FAA applied, as the homeowners argued that the CC&Rs addressed real estate and land that was a local concern. Id. at 181, 187, 415 P.3d at 34, 39. We rejected that argument, noting that the CC&Rs allowed the property to be developed, constructed, and sold and that "out-of-state businesses provided supplies and services in constructing the homes." Id. at 187, 415 P.3d at 39. We accordingly concluded that the transaction underlying the CC&Rs’ arbitration agreement affected interstate commerce and the FAA controlled. Id. Ballesteros is not alone in concluding the definition of "interstate commerce" casts a wide net. Other cases instructive here include Katzenbach v. McClung , where the United States Supreme Court concluded a Birmingham restaurant engaged in interstate commerce by serving interstate travelers and by using food that moves through interstate commerce. 379 U.S. 294, 302-05, 85 S.Ct. 377, 13 L.Ed.2d 290 (1964). In Allied-Bruce , a contract to treat and repair termite damage involved interstate commerce where the material used to treat and repair termite damage came from outside the state. 513 U.S. at 282, 115 S.Ct. 834. And in MMAWC , the FAA applied where a licensing agreement provided a party the right to use appellant's licensed marks internationally. 135 Nev. at 276, 448 P.3d at 569.
We have never addressed the FAA's application in the context of care- or nursing-home contracts. But the South Carolina Supreme Court noted that following Allied-Bruce , most, if not all, courts have concluded that nursing home residency contracts implicate interstate commerce, as such "contracts usually entail providing residents with meals and medical supplies that are inevitably shipped across state lines from out-of-state vendors." Dean v. Heritage Healthcare of Ridgeway, LLC, 408 S.C. 371, 759 S.E.2d 727, 732 (2014). Similarly, the Kentucky Supreme Court noted that many courts have applied the FAA to arbitration provisions in nursing-home contracts and that health care is an activity that, in the aggregate, represents a general practice subject to federal control. Ping v. Beverly Enters., Inc., 376 S.W.3d 581, 589-90 (Ky. 2012).
These and other cases across the country show that residency home contracts implicate the FAA where they...
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