Scroggins v. Andalusia Reg'l Hosp.
| Decision Date | 05 March 2021 |
| Docket Number | CASE NO.: 2:16-cv-00338-ECM (WO) |
| Parties | MARILYN R. SCROGGINS, Plaintiff, v. ANDALUSIA REGIONAL HOSPITAL, Defendant. |
| Court | U.S. District Court — Middle District of Alabama |
This case is about a third-party beneficiary who wishes to enforce a contract but not be held to its arbitration clause. The Plaintiff, Marilyn R. Scroggins ("Scroggins"), was in an automobile accident in 2015. Immediately after the accident, she was brought to the emergency room of Andalusia Regional Hospital ("ARH" or "the Defendant"), and she claims that she was then incorrectly charged for her treatment, in breach of the hospital's contract with her insurance company. She filed her original and amended class action complaints against numerous Defendants—but, importantly, not the hospital—beginning in May 2016.1 Since then, the Court joined ARH as the sole Defendant and dismissed herclaims against all other Defendants on March 6, 2020. (Doc. 164). The only remaining claim is Scroggins' breach of contract claim against ARH, filed on April 27, 2020. (Doc. 167).
Pending before the Court is ARH's motion to compel arbitration and to dismiss Scroggins' claim. (Doc. 172). At issue is whether the arbitration clause within the contract in this case, or the Hospital Participation Agreement ("HPA"), binds Scroggins. Scroggins argues that, even though she is a third-party beneficiary of the HPA, she is not bound by the arbitration agreement.
Scroggins has filed a response in opposition to the motion, (doc. 184), and the motion is ripe for review. After careful review of the motion, the briefs filed in support of and in opposition to the motion, the supporting and opposing evidentiary submissions, and the applicable law, the Court concludes that ARH's Motion to Compel Arbitration, (doc. 172), is due to be GRANTED, ARH's Motion to Dismiss, (doc. 172), is due to be DENIED, and this proceeding is stayed pending arbitration. 9 U.S.C. § 3.2
The Court exercises federal subject matter jurisdiction over this dispute pursuant to 28 U.S.C. § 1332(d)(2)(A).
Personal jurisdiction and venue are uncontested.
The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 et seq., is "a congressional declaration of a liberal federal policy favoring arbitration agreements." Davis v. S. Energy Homes, Inc., 305 F.3d 1268, 1273 (11th Cir. 2002) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). The FAA provides:
[a] written provision in . . . a contract . . . to settle by arbitration a controversy thereafter arising out of such contract . . . or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C. § 2. Thus, Congress put arbitration agreements "on equal footing with all other contracts . . . ." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006). The FAA "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a likedefense to arbitrability." Moses H. Cone, 460 U.S. at 24-25. Throughout, the FAA "creates a body of federal substantive law," which is "applicable in state and federal court." Southland Corp. v. Keating, 465 U.S. 1, 12 (1984).
There are two types of challenges to the validity of arbitration agreements: the first challenges the validity of the arbitration agreement itself, and the second challenges the validity of the contract as a whole. Buckeye Check Cashing, 546 U.S. at 444-45. When, as in this case, a party challenges the validity of the arbitration clause itself, the challenge may be addressed by the court. Id. at 445-46 (). Moreover, federal common law follows the severability doctrine; "an arbitration provision is severable from the remainder of the contract." Id. at 445.
The Court applies "ordinary state-law principles that govern the formation of contracts" when it decides whether the parties agreed to arbitrate. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Although "the FAA preempts state law to the extent it treats arbitration agreements differently than other contracts," "state law generally governs whether an enforceable contract or agreement to arbitrate exists." Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367-68 (11th Cir. 2005). "Under the FAA, parties are generally free to structure their arbitration agreements as they see fit," and courts may "'decline to enforce an arbitration agreement under the FAA only if the plaintiffs can point to a generally applicable principle of contract law under which the agreement could be revoked,' such as fraud, duress, or some other misconduct or wrongful act recognizedby law for revocation of a contract." Scurtu v. Int'l Student Exch., 523 F.Supp.2d 1313, 1318 (S.D. Ala. 2007) (quoting Caley, 428 F.3d at 1367). Thus, the Court applies the contract law of the relevant state to determine whether the parties formed an agreement. Id.
Here, the HPA identifies Alabama law as the governing law of the contract to the extent it is not preempted by federal law. (Doc. 176-1 at 10). In Alabama, "a motion seeking to compel arbitration is 'analogous to a motion for summary judgment.'" Scurtu, 523 F.Supp.2d at 1319 (quoting Dunes of GP, L.L.C. v. Bradford, 966 So. 2d 924, 925-26 (Ala. 2007)). "[A] party seeking to compel arbitration must prove '(1) the existence of a contract containing an arbitration agreement and (2) that the underlying contract evidences a transaction affecting interstate commerce.'" Id. at 1318 (quoting Allied Williams Cos., Inc. v. Davis, 901 So. 2d 696, 698 (Ala. 2004)). There is no dispute that ARH made the requisite showing. Therefore, "the burden shifts to the opposing party to present evidence that the arbitration agreement is not valid or that it does not apply to the dispute in question." Id. (quoting Allied Williams Cos., 901 So. 2d at 698).
ARH maintains a contract with United HealthCare of Alabama, Inc. ("United HealthCare") setting forth the terms ARH follows when it delivers medical services to individuals insured by United HealthCare. It is undisputed that Scroggins is a third-party beneficiary of this contract, or "HPA," because she is insured under the contract. (Doc. 167 at 3).
On May 19, 2015, Scroggins was in an automobile accident in Covington County, Alabama. An ambulance took Scroggins to ARH, where she received emergency-roomtreatment for her injuries. Scroggins had health insurance at that time with United HealthCare. According to Scroggins, the terms of the HPA between United HealthCare and ARH require the hospital to (1) submit Scroggins' emergency room bill to United HealthCare, (2) accept United HealthCare's discounted payment as full payment to the extent Scroggins did not owe a co-pay or deductible, and (3) hold Scroggins harmless for charges exceeding her responsibilities under ARH's plan with United HealthCare. (Doc. 167 at 6). She alleges that, instead of following its own policy, the hospital obtained $5,000 in undiscounted medical payment from Scroggins' automobile insurer and then one of its agents filed a hospital lien for $6,740.75 on all claims or demands accruing to Scroggins in Covington County, Alabama. When Scroggins received settlement proceeds from the accident, she was required to deduct money from the settlement to pay the hospital lien.
Scroggins alleges that ARH breached the HPA between itself and United HealthCare when it failed to submit her bills to United HealthCare or to follow the rest of the steps outlined in their managed-care contract. As a third-party beneficiary, she seeks to enforce the contract. Scroggins brings her class action allegations on her own behalf and on behalf of all other similarly situated.
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