Richmond Health Facilities v. Nichols

Decision Date15 January 2016
Docket NumberNo. 15–5062.,15–5062.
Citation811 F.3d 192
Parties RICHMOND HEALTH FACILITIES–Kenwood, LP; Preferred Care Partners Management Group, LP; Preferred Care, Inc.; Kentucky Partners Management Group, LLC, Plaintiffs–Appellants, v. Adrianne NICHOLS, Executor of the Estate of Charlie Nichols, Defendant–Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED:Marcia L. Pearson, Wilson Elser Moskowitz Edelman & Dicker LLP, Louisville, Kentucky, for Appellants. Robert E. Salyer, Wilkes & McHugh, P.A., Lexington, Kentucky, for Appellee.ON BRIEF:Marcia L. Pearson, Edward M. O'Brien, Wilson Elser Moskowitz Edelman & Dicker LLP, Louisville, Kentucky, for Appellants. Robert E. Salyer, Wilkes & McHugh, P.A., Lexington, Kentucky, for Appellee.

Before KEITH, ROGERS, and GRIFFIN, Circuit Judges.

OPINION

DAMON J. KEITH, Circuit Judge.

Charlie Nichols was admitted to a nursing and rehabilitation facility, now operated by Plaintiffs, and subsequently passed away. The executrix of his estate, Adrianne Nichols ("Defendant"), sued Plaintiffs in state court, asserting various Kentucky state-law claims, including wrongful death. Plaintiffs filed suit in federal court to compel arbitration of these claims under an Arbitration Agreement (or, "Agreement") Mr. Nichols had entered into with the facility. The facility and the decedent, Mr. Nichols, were the only signatories to the Agreement. The federal district court denied the motion to compel arbitration of the wrongful-death claim, granted the motion with respect to other claims, and stayed the case until arbitration of those claims was complete. Plaintiffs appeal the denial of the motion to compel arbitration of the wrongful-death claim. For the reasons set forth below, we AFFIRM the district court's decision.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiffs set forth the following allegations in the Complaint:

On October 14, 2011, Mr. Nichols was admitted to the Kenwood Nursing & Rehabilitation Center ("Center"), a nursing facility in Richmond, Kentucky. R. 1, ¶ 12. Upon admission, Mr. Nichols entered into the Agreement with the Center. Id. ¶ 13. In relevant part, the Agreement states the following:

• It applies to "any and all disputes arising out of or in any way relating to this Agreement" including "wrongful death." Id. ¶ 14.
• It is governed by "The Kentucky Uniform Arbitration Act.... If for any reason there is a finding that Kentucky law cannot support the enforcement of this Agreement, then the Parties agree to resolve their disputes by arbitration ... pursuant to the [FAA]." Id. ¶ 19.
• It binds Charlie Nichols and all persons with claims through or on behalf of him, including "any personal representative, responsible party, guardian, executor, administrator, legal representative, agent or heir." Id. ¶ 15.

On June 22, 2012, Mr. Nichols filed a lawsuit in Madison Circuit Court ("State Court Action") concerning the care provided by the Center. Id. ¶ 25. Plaintiffs were not named as parties to that State Court Action. Id. Plaintiffs took over the Center on July 1, 2012. Id. ¶ 24. Mr. Nichols passed away on October 28, 2012. Id. ¶ 25. Defendant was named as administratrix of his estate. Id. On February 6, 2014, Defendant filed an amended complaint in the state court, asserting several claims against Plaintiffs, including wrongful death. Id. But on April 11, 2014, four defendants in the lawsuit pending in Kentucky state courtPlaintiffs here1 —filed this action in federal court to compel arbitration under the FAA, and to enjoin the State Court Action. Id.

Plaintiffs moved to compel arbitration of all claims pursuant to the Agreement. R. 11. Defendant argued that, under Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky.2012), cert. denied, ––– U.S. ––––, 133 S.Ct. 1996, 185 L.Ed.2d 879 (2013), arbitration of the wrongful-death claim is not required. R. 12. In response, Plaintiffs argued, among other things, that the portion of Ping relevant to this case is preempted by the FAA. R.14. On December 19, 2014, the district court ruled that Ping was not preempted, and denied the motion to compel arbitration of the wrongful-death claim. The court otherwise granted the motion with respect to the other claims. R. 15. The district court further stayed the case until arbitration of those claims was complete. Id. Plaintiffs timely appealed the denial on January 15, 2015. R. 16.

II. STANDARD OF REVIEW

We review a district court's ruling on a motion to compel arbitration de novo.

Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir.2000) ; see also M & C Corp. v. Erwin Behr GmBH & Co., 143 F.3d 1033, 1037 (6th Cir.1998) ("A determination of the arbitrability of a dispute is subject to de novo review.").

III. ANALYSIS
A. The Federal Arbitration Act

The FAA "embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts." Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir.2007) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) ). Notwithstanding this "liberal federal policy favoring arbitration agreements," Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), arbitration is a "matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT & T Techs. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (citation omitted).

"Before compelling an unwilling party to arbitrate"—as Plaintiffs seek to do here—"the court must engage in a limited review to determine whether the dispute is arbitrable; meaning that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement." Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir.2003).

Under the FAA, "[a] written agreement to arbitrate disputes arising out of a transaction in interstate commerce ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ " Id. (quoting 9 U.S.C. § 2 ); see also 9 U.S.C. § 3 (providing for a stay of federal lawsuit involving issues subject to an arbitration agreement).

Neither section 2 nor section 3 of the FAA "purports to alter background principles of state contract law regarding the scope of agreements (including the question of who is bound by them)." Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009). So in determining the enforceability of an arbitration agreement, we apply state law of contract formation. Seawright, 507 F.3d at 972 ; see also Tillman v. Macy's, Inc., 735 F.3d 453, 462 (6th Cir.2013) (holding that arbitration agreement was enforceable under Michigan law on offer and acceptance); Hergenreder v. Bickford Senior Living Grp., LLC, 656 F.3d 411, 416–17 (6th Cir.2011) (applying Michigan law to determine enforceability of an arbitration agreement); Dantz v. Am. Apple Grp., LLC, 123 Fed.Appx. 702, 706 (6th Cir.2005) (determining enforceability of arbitration agreement under Ohio contract law). "When it comes to ‘state laws applicable only to arbitration provisions,’ however, the [FAA] preempts those state laws." Hergenreder, 656 F.3d at 416–17 (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) ).

B. Merits of this Appeal

This case boils down to whether Defendant is bound by the Agreement to arbitrate the wrongful-death claim. In arguing that she is not bound, Defendant relies on the Kentucky Supreme Court's reasoning in Ping. Under Ping, a wrongful-death claim is "independent" of any claims held by a decedent. Ping, 376 S.W.3d at 597. This means that a wrongful-death claim is a "distinct interest in a property right that belongs only to the statutorily-designated beneficiaries"; decedents have no "cognizable legal rights" in that claim. Extendicare Homes, Inc. v. Whisman, Nos. 2013–SC–000426–I, 2013–SC–000430–I, 2013–SC–000431–I, 478 S.W.3d 306, 314, 2015 WL 5634309, at *2 (Ky. Sept. 24, 2015).2 Accordingly, Defendant argues that she is not required to arbitrate the wrongful-death claim. Plaintiffs, however, argue that Ping is preempted by the FAA, and that we cannot apply its reasoning.

As explained above, the FAA does not alter basic principles of state contract law, and so we must apply Kentucky law to determine whether the Agreement is enforceable. We therefore turn to Ping to ascertain the enforceability of the Agreement.

1. Defendant is not a party to the Agreement under Ping and so is not required to arbitrate the wrongful-death claim.

The Kentucky Supreme Court's ruling in Ping is dispositive of the issue before us because it is factually analogous to the case here. There, the executrix of the decedent's estate sued the operators of a long-term care facility. Ping, 376 S.W.3d at 586. The executrix alleged that the facility staff breached statutes regulating nursing care services, resulting in the decedent's injuries and wrongful death. Id. Relying on an arbitration agreement executed between the executrix, in her capacity as the decedent's agent, and the facility, the operators moved to dismiss the complaint or to stay the litigation pending the arbitration. Id. at 587. The trial court denied the motion, holding that the executrix lacked the authority to agree to arbitration. Id. at 586. The Kentucky Supreme Court agreed. Id. In the alternative, the Kentucky Supreme Court also held that the facility could not compel arbitration under Kentucky's wrongful-death statute because the wrongful-death claim does not "derive from any claim on behalf of the decedent." Id. at 600 ; see KRS 411.130. Thus, the arbitration agreement could not provide a basis for compelling the wrongful-death beneficiaries to arbitrate...

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