Scales v. SSC Winston-Salem Operating, Co., 1:17cv539

• Decision Date: 05 October 2017
• Docket Number: 1:17cv539
• Court: U.S. District Court — Middle District of North Carolina
• Parties: GERALDINE I. SCALES, as Administratrix of the Estate of Lee Norman Scales, Plaintiff, v. SSC WINSTON-SALEM OPERATING, COMPANY, LLC, Defendant.

GERALDINE I. SCALES,as Administratrix of the Estate of Lee Norman Scales, Plaintiff, v. SSC WINSTON-SALEM OPERATING, COMPANY, LLC, Defendant.

1:17cv539

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

October 5, 2017

MEMORANDUM OPINION AND ORDER

This case comes before the Court on "SSC Winston-Salem Operating Company LLC d/b/a Brian Center Health and Retirement/Winston-Salem's Motion to Compel Arbitration and Stay Proceedings" (Docket Entry 2) (the "Arbitration Motion"). For the reasons that follow, the Court will grant in part and deny in part the Arbitration Motion.¹

PROCEDURAL HISTORY

Alleging various state-law torts related to the death of Lee Norman Scales ("Mr. Scales"), Geraldine I. Scales, as Administratrix of the Estate of Lee Norman Scales (the "Plaintiff"), initiated this lawsuit against SSC Winston-Salem Operating Company LLC d/b/a "Brian Center Health and Retirement/Winston-Salem" (the "Defendant") in the Superior Court of North Carolina for Forsyth County. (See Docket Entry 6.) Defendant removed the lawsuit to this Court on the grounds of diversity jurisdiction (see Docket Entry 1 at 1-3)² and immediately moved to compel arbitration (see Docket Entry 2). More specifically, through the Arbitration Motion, Defendant seeks an order either (1) compelling arbitration in accordance with "the Agreement for Dispute Resolution Program made between the parties" or (2) authorizing discovery regarding the authority of Geraldine Scales ("Mrs. Scales") "to enter into the arbitration agreement for her husband," Mr. Scales. (Id. at 2; see also Docket Entry 3 at 4-5.) In response, Plaintiff asserts that Mrs. Scales lacked authority to execute the "Agreement for Dispute Resolution Program" (Docket Entry 2-1) (the "Agreement") on Mr. Scales's behalf, and asks the Court to deny the Arbitration Motion. (See Docket Entries 11, 11-1.)

DISCUSSION

I. Applicable Legal Standards

The Federal Arbitration Act (the "FAA") renders enforceable written arbitration contracts, "save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2.³ Pursuant to Section 4 of the FAA, "upon being satisfied that the making of the agreement for arbitration . . . is not in issue, the [C]ourt shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. . . . [However, i]f the making of the arbitration agreement . . . be in issue, the [C]ourt shall proceed summarily to the trial thereof." 9 U.S.C. § 4. Accordingly, the Court can compel arbitration "under the FAA only when there is 'a judicial conclusion' that there is a validly formed, express agreement to arbitrate." Dillon v. BMO Harris Bank, N.A., 173 F. Supp. 3d 258, 263 (M.D.N.C. 2016) (quoting Granite Rock Co. v. International Bhd. of Teamsters, 561 U.S. 287, 303 (2010)), appeal dismissed sub nom. Dillon v. Bay Cities Bank, No. 16-1373 (4th Cir. Apr. 5, 2016). In making this assessment, the Court looks to state-law contract principles. Id.; see also Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009) ("State law, therefore, is applicable to determine which contracts are binding . . . and enforceable under [the FAA] if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally." (brackets, internal quotation marks, and emphasis omitted)); First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995) ("When deciding whether the parties agreed to arbitrate a certain matter . . ., courts generally . . . should apply ordinary state-law principles that govern the formation of contracts.").

The party seeking to compel arbitration bears the burden of establishing the existence of "an arbitration provision that purports to cover the dispute." Dillon, 173 F. Supp. 3d at 263. If the party makes this evidentiary showing, the party opposing arbitration must come forward with sufficient facts to place the entitlement to arbitration in dispute. See Chorley Enters., Inc. v. Dickey's Barbecue Rests., Inc., 807 F.3d 553, 564 (4th Cir. 2015) ("[T]he party seeking a jury trial [under Section 4] must make an unequivocal denial that an arbitration agreement exists — and must also show sufficient facts in support." (citing Oppenheimer & Co. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995)), cert. denied, ___ U.S. ___, 136 S. Ct. 1656 (2016); see also Oppenheimer, 56 F.3d at 358 ("If the party seeking arbitration has substantiated the entitlement by a showing of evidentiary facts, the party opposing may not rest on a denial but must submit evidentiary facts showing that there is a dispute of fact to be tried."). "This standard is akin to the burden on summary judgment." Chorley, 807 F.3d at 564; accord Erichsen v. RBC Capital Mkts., LLC, 883 F. Supp. 2d 562, 566 (E.D.N.C. 2012) (explaining "that the standard for deciding a motion to compel arbitration brought under the . . . FAA[], 9 U.S.C. § 4, is a standard similar to a motion for summary judgment").

In light of these respective burdens, courts typically grant leave to conduct discovery if the parties dispute the enforceability of an arbitration agreement. See, e.g., Dillon v. BMO Harris Bank, N.A., No. 1:13cv897, 2015 WL 6619972, at *3 (M.D.N.C. Oct. 30, 2015) ("Accordingly, if a party challenges the enforceability of an arbitration agreement, courts generally permit discovery regarding the formation and performance of the arbitration provision." (collecting cases)); see also Livingston v. Assocs. Fin., Inc., No. 01 C 1659, 2001 WL 709465, at *2 (N.D. Ill. June 25, 2001) (observing, in analyzing request to conduct discovery in response to motion to compel arbitration, that a "party must be given an opportunity to pursue discovery related to the issue that it has the burden to prove"), report and recommendation adopted, No. 01 C 1659, 2002 WL 424352 (N.D. Ill. Mar. 6, 2002). Such discovery must remain "tailored to matters pertinent to the disposition of the petition to compel arbitration and/or stay litigation," namely "issues relating to the making and performance of the agreement to arbitrate." Dillon, 2015 WL 6619972, at *3. These issues include "generally applicable contract defenses," id. at *3 & n.5 (internal quotation marks omitted), such as lack of authority to execute the agreement, see, e.g., Smith Wilson Co. v. Trading & Dev. Establishment, 744 F. Supp. 14, 16 (D.D.C. 1990) (explaining that, "while a signed arbitration agreement leaves a court with no choice but to compel arbitration, this proposition applies only if the individuals who signed the agreement are legally authorized to bind the respective parties" (citation omitted)).

II. Factual Background

This lawsuit arises from allegedly negligent care Mr. Scales received at a nursing home Defendant operates in North Carolina. (See Docket Entry 6.) Defendant contends that the Agreement governs Plaintiff's claims (see Docket Entry 2 at 1-2) and asks the Court to compel arbitration and stay this action, "including any potential merits-based discovery," pending arbitration (id. at 2). In support of this request, Defendant submitted the Agreement as well as various notices and forms signed by Mrs. Scales. (See id. at 1-2; see also Docket Entries 2-1, 2-2.)

Entitled "Agreement for Dispute Resolution Program," the Agreement describes Defendant's three-step "Dispute Resolution Program" (the "DPR") (Docket Entry 2-1 at 2, 4), which culminates in binding arbitration (see id. at 4-5). The Agreement states that acceptance of the DPR "is voluntary" (id. at 2 (all-cap font omitted)) and does not impact an individual's admission to Defendant's facilities (id.). The Agreement provides two options for execution, depending on the resident's competence. In relevant part, the first option states:

If resident is competent, complete this section:

__________ Date:___

Signature of Resident

(Sign where resident is mentally competent to consent to this Agreement under State law)

(Id. at 8 (emphasis in original).) The second option states:

If resident is adjudged incompetent, complete this section:

I am the spouse, responsible party, legal guardian or power of attorney of the resident and have the authority to sign the agreement on his/her behalf. In signing this Agreement, the Legal Representative or Family Member binds both the Resident and themselves individually.

__________ Date:___

Signature of Legal Representative or Family Member

(Id. at 9 (emphasis in original).) Each section also provides signature lines for two Facility Witnesses and one Facility Representative. (See id. at 8-9.) The latter section of the Agreement contains the dated signatures of Mrs. Scales and a Facility Representative, Samantha Sutphin, but no witness signatures. (See id. at 9; see also Docket Entry 2-2 at 14.)

In response to the Arbitration Motion, Plaintiff submitted the "Affidavit of Geraldine I. Scales (RE: Defendant's Motion to Compel Arbitration)." (See Docket Entry 11 at 4-5 (the "Affidavit").) The Affidavit states that Mrs. Scales "filed this lawsuit in [her] representative capacity" as "the duly appointed administratrix of the estate of [her] husband, [Mr.] Scales." (Id. at 4.) It further states that, on March 31, 2015, Mr. Scales "was admitted to Brian Center Health and Retirement/Winston-Salem ('Brian Center Winston-Salem') for short term rehabilitation," and Mrs. Scales "went to Brian Center Winston-Salem and was told by a member of the staff of Brian Center Winston-Salem that [she] needed to sign [her] husband's admission paperwork." (Id.) Mrs. Scales avers that she "signed the nursing home admission documents presented to [her] by the staff at Brian Center Winston-Salem," but that Mr. Scales "had not executed a Power of Attorney appointing [her] as his attorney-in-fact, and he had not authorized [her] to sign an arbitration agreement on his behalf." (Id. at 5.) She further states both that she "did not tell any staff member at Brian Center Winston-Salem that [s...