Trinity Health & Reh. v. Estate of Scott

• Decision Date: 08 January 2008
• Docket Number: No. 2006-CA-01053-COA.,2006-CA-01053-COA.
• Citation: 19 So.3d 735
• Court: Mississippi Court of Appeals
• Parties: TRINITY MISSION HEALTH & REHABILITATION OF CLINTON and LPNH Holdings Limited, LLC, Appellants v. The ESTATE OF Mary SCOTT, by and Through Elzenia JOHNSON, Individually and as the Personal Representative of the Estate of Mary Scott, and on Behalf of and for the use and Benefit of the Wrongful-Death Beneficiaries of Mary Scott, Appellees.

19 So.3d 735

TRINITY MISSION HEALTH & REHABILITATION OF CLINTON and LPNH Holdings Limited, LLC, Appellants v. The ESTATE OF Mary SCOTT, by and Through Elzenia JOHNSON, Individually and as the Personal Representative of the Estate of Mary Scott, and on Behalf of and for the use and Benefit of the Wrongful-Death Beneficiaries of Mary Scott, Appellees.

No. 2006-CA-01053-COA.

Court of Appeals of Mississippi.

January 8, 2008.

Rehearing Denied April 15, 2008.

John L. Maxey, Jackson, Heather Marie Aby, attorneys for appellants.

Anthony Lance Reins, D. Bryant Chaffin, Hattiesburg, Susan Nichols Estes, attorneys for appellees.

Before KING, C.J., BARNES and ISHEE, JJ.

KING, C.J., for the Court.

¶ 1. Elzenia Johnson filed a wrongful death suit against Trinity Mission Health and Rehabilitation of Clinton (Trinity) alleging that her mother, Mary Scott, suffered injuries during her stay which caused her death. Trinity filed a motion to stay the proceedings and compel arbitration pursuant to the admission agreement, which was denied. Aggrieved, Trinity appeals. We find error and reverse and remand.

FACTS

¶ 2. On January 4, 2001, Johnson admitted her mother to Trinity and thereby signed an admission agreement. On that same day, Johnson executed a document authorizing Trinity to perform CPR on her mother if necessary, as well as a Medicare Secondary Payer Questionnaire. Several months later, Johnson executed a patient fund authorization, which allowed Trinity to manage Scott's account according to its established policies.

¶ 3. On September 13, 2002, Johnson signed the amended admission agreement which contained an arbitration agreement. Then, on July 25, 2003, Johnson signed a Resident Pharmacy Choice Opinion. Scott departed this life on January 26, 2004.

¶ 4. On August 25, 2004, Johnson filed suit in Hinds County Circuit Court alleging that Scott suffered injuries while residing at Trinity. Trinity answered, preserving several affirmative defenses including arbitration.

¶ 5. On October 28, 2005, Trinity filed a motion to compel arbitration, pursuant to the arbitration clause found in the admission agreement Johnson signed on September 13, 2002. Johnson responded contending that the arbitration agreement was unenforceable because she never had the authority to waive Scott's right to a jury trial.

¶ 6. The trial court conducted a hearing on the matter and denied Trinity's motion to compel arbitration. Aggrieved, Trinity now appeals.

STANDARD OF REVIEW

¶ 7. We review the grant or denial of a motion to compel arbitration de novo. East Ford, Inc. v. Taylor, 826 So.2d 709, 713(¶ 9) (Miss.2002). Since the supreme court has held that arbitration agreements contained in nursing home admission agreements affect interstate commerce, we view this arbitration agreement within the framework of the Federal Arbitration Act (FAA). Vicksburg Partners, L.P. v. Stephens, 911 So.2d 507, 515(¶ 16) (Miss.2005).

¶ 8. The FAA creates a two-pronged inquiry to determine the validity of a motion to compel arbitration. East Ford, Inc., 826 So.2d at 713(¶ 9). First, we must determine whether the parties intended to arbitrate the suit. See id. at (¶ 10). This involves two considerations: (1) whether there is a valid arbitration agreement and (2) whether the dispute is within the scope of that agreement. Id.

¶ 9. The second prong is whether "legal constraints external to the parties' agreement foreclose[s] the arbitration of those claims." Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). This involves such contract defenses as "fraud, duress, and unconscionability." Id. (citing Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)).

ANALYSIS

¶ 10. In accordance with the framework laid out by the FAA, our analysis begins with the issue of whether the parties intended to arbitrate this claim.

I. Whether the parties intended to arbitrate this issue.

¶ 11. To determine this issue, we must first look at whether there was a valid arbitration agreement. Without such an agreement, the motion to compel arbitration must be denied.

A. Whether a valid arbitration agreement existed.

¶ 12. Trinity argues that the admission agreement containing the arbitration agreement is valid and enforceable. Johnson counters by stating that Scott never signed the admission agreement. Further, Johnson argues that while she signed the agreement as Scott's "responsible party," she lacked the authority to waive Scott's right to a jury trial.

¶ 13. Trinity contends that Johnson did have authority to waive Scott's right to a jury trial through three alternatives: (1) that Johnson could bind her mother as a health care surrogate through Mississippi Code Annotated Section 41-41-201 (Rev. 2005); (2) that Johnson had the authority based on principles of agency; and (3) that Scott received the benefits from the contract, even though she was a non-signatory to the contract.

¶ 14. To determine whether Johnson had the required authority, we must still apply ordinary principles of contract law. Terminix Int'l, Inc. v. Rice, 904 So.2d 1051, 1055(¶ 9) (Miss.2004).

¶ 15. We first address whether Scott was bound to arbitrate as a third-party beneficiary. Trinity argues that Scott received services based upon the terms and conditions of the contract. Since Scott received services from a contract that was executed for her benefit, her wrongful death beneficiaries are bound to the contract including arbitration. Miss. Fleet Card, L.L.C. v. Bilstat, Inc., 175 F.Supp.2d 894, 902 (S.D.Miss.2001). Johnson counters by relying on a Fifth Circuit Case that applied Texas law to determine that two minor children were not third-party beneficiaries. Fleetwood Enters. v. Gaskamp, 280 F.3d 1069, 1075 (5th Cir.2002). Unlike Gaskamp, we apply Mississippi law in addressing this case.

¶ 16. Johnson acknowledges that "arbitration agreements are enforceable to non-signatories to the contract when the non-signatory party is a third-party beneficiary." Adams v. Greenpoint Credit, LLC, 943 So.2d 703, 708(¶ 15) (Miss.2006). However, Johnson alleges that Scott was not a third-party beneficiary. To address this point, we take a much closer look at Adams.

¶ 17. In Adams, the supreme court addressed a situation involving a motion to compel arbitration against a non-signatory to a contract. Id. at 704(¶ 1). There, the suit arose from a contract where Eddie Adams (Eddie) and his wife, Linda Adams purchased a mobile home. Id. at (¶ 2). In order to purchase the mobile home, the Adams secured a loan against the mobile home and signed a contract that included an arbitration provision. Id. Several years later, Greenpoint Credit, LLC, the company to which the contract had been assigned, presented a draft against Eddie and Beth Brown's joint checking account. Id. at (¶ 3). The draft was "`Signed: Linda G. Adams' by `Authorized Representative Greenpoint Credit.'" Id. at 704-05(¶ 3). However, Linda was deceased at the time that the draft was presented for payment. Id. at 705(¶ 3). Brown, Adams's daughter, was not mentioned in the contract. Id. at 704(¶ 1).

¶ 18. Eddie and Brown sued Greenpoint for an unauthorized draft of their joint checking account. Id. at 705(¶ 3). Greenpoint then sought to compel arbitration against both parties in accordance with the arbitration provision in the original contract. Id. at (¶ 4). The supreme court enforced arbitration against Adams, but found that Brown was not subject to the arbitration provision. Id. at 709(¶ 18). In its reasoning, the supreme court stated that Brown was never a party to the original contract, and she was not a third-party beneficiary. Id. at 710(¶ 18).

¶ 19. In its determination that Brown was not a third-party beneficiary, the supreme court stated Nothing in the plain language of the arbitration provision indicates a clear intent of the parties to make Brown a third-party beneficiary. She did not sign the contract, was in no way alluded to in the contract, and, based on the record before us, received no benefits from the contract.... [T]here is no evidence that the contract was "entered for [her] benefit[;]" id., there is no evidence that any benefit flowed to her as a "direct result of the performance within the contemplation of the parties as shown by its terms[;]" id., or that her suit "spring[s] from the terms of the contract itself." Id. As Brown is not a third-party beneficiary to whom the benefits of the contract attach, she is not bound by the arbitration provision.

Adams, 943 So.2d at 709(¶ 15) (Miss.2006) (citing Burns v. Washington Savs., 251 Miss. 789, 796, 171 So.2d 322, 325 (1965)).

¶ 20. The facts of this case clearly establish that Scott was a third-party beneficiary of the contract, unlike Brown. While Scott did not sign the contract, the plain language of the contract makes it very clear that its sole purpose is to bind Trinity to provide services for Scott. The benefit that she received was the healthcare services that were laid out in the admissions agreement. Finally, these rights and benefits bestowed upon Scott sprang forth from the terms of the contract.

¶ 21. We find that Scott was a third-party beneficiary of the contract; therefore, she was bound to arbitrate any claims within the scope of the arbitration provision. Since this suit is a derivative action, Johnson must stand in the position of the decedent. Carter v. Miss. Dep't of Corr., 860 So.2d 1187, 1192(¶ 17) (Miss. 2003). Since Scott's claims would have been subject to arbitration, Johnson is likewise subject to the arbitration provision.

¶ 22. Pursuant to Mississippi Rule of Appellate Procedure 28(j), Johnson sought to inform this Court of the recently decided supreme court case Grenada Living Ctr., LLC v. Coleman, 961 So.2d 33 (Miss. 2007). There, the supreme court held that Cephus Coleman, a non-signatory to a contract, was not a third-party ...