Accordius Health LLC v. Del Marshall

ACCORDIUS HEALTH LLC, THE CITADEL SALISBURY LLC d/b/a The Citadel Salisbury,THE PORTOPICCOLO GROUP LLC, SIMCHA HYMAN, NAFTALI ZANZIPER, and KIMBERLY MORROW, Plaintiffs, v. THOMAS DEL MARSHALL, by and through Attorney-in-Fact MELISSA STIREWALT,and ROBERT LEROY WHITLATCH, by and through Attorney-in-Fact LORETTA HAIR, Defendants.

1:20cv464

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

December 30, 2020

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, Chief District Judge.

Plaintiffs filed this action to compel arbitration of Defendants' state court lawsuit against them for alleged violations of the North Carolina Patient's Bill of Rights in the wake of the COVID-19 pandemic. (Doc. 1 ¶ 18.) Before the court are the motion to compel arbitration and stay proceedings by Plaintiffs Accordius Health LLC, the Citadel Salisbury LLC, the Portopiccolo Group LLC, Simcha Hyman, Naftali Zanziper, and Kimberly Marrow ("arbitration motion") (Doc. 13); the motion for limited discovery by Defendants Thomas Del Marshall and Robert Leroy Whitlach, by and through their respective attorneys-in-fact, Melissa Stirewalt and Loretta Hair (Doc. 21); the motion to strike by Plaintiffs (Doc. 24); the motion to seal by Plaintiffs (Doc. 15); and the motion for leave to file surreply by Defendants (Doc. 36). For the reasons set forth below, Plaintiffs' arbitration motion will be denied, Defendants' motion for limited discovery will be granted, Plaintiffs' motion to strike will be denied, and Plaintiffs' motion to seal will be granted.

I. BACKGROUND

The basic facts alleged, as relevant to the motions before the court, are as follows:

Defendants Marshall and Whitlatch are residents of a nursing home facility located at 710 Julian Road. (Doc. 19 at 2.) When each Defendant entered the facility in 2019, it was known as Salisbury Center and was operated by 710 Julian Road Operations LLC, a provider affiliated with the Genesis Healthcare enterprise. (Id. at 2-3.)

On March 27, 2019, Marshall executed a notarized power of attorney designating his daughters, Stirewalt and Amanda Marshall Dykeman, as his agents. (Doc. 20-2 at 47-50.) On April 22, 2019, Marshall was admitted to Salisbury Center. (Doc. 19 at 4.) Upon entry, he was given and signed numerous admission-related documents, including a standalone arbitration agreement ("2019 arbitration agreement"). (Id.) The 2019 arbitration agreement, which was not a condition of admission, mandates that all claims or controversies relating to the patient's stay be submitted toarbitration pursuant to the Federal Arbitration Act. (Doc. 1-1 ¶¶ 2, 3, 19.) It further provides that the agreement "shall inure to the direct benefit of and bind [Salisbury] Center, its . . . successors, [and] assigns." (Id. ¶ 15.) It bears the signature of Marshall on his own behalf and Erica Dalton on behalf of Salisbury Center. (Id. at 4.) Marshall was later diagnosed with dementia. (Doc. 20-8 at 5.)

On August 23, 2019, Whitlatch was admitted to Salisbury Center. (Doc. 19 at 7.) Upon his admission, Hair, on behalf of Whitlatch as his power of attorney, signed the same admission-related documents as those allegedly signed by Marshall, including an identical 2019 arbitration agreement. (See Doc. 1-2.)

On February 1, 2020, Salisbury Center was sold and operational control was transferred from 710 Julian Road Operations to The Citadel Salisbury LLC ("Citadel"). (Doc. 19 at 3; see Docs. 14-6, 16.) The Transfer Agreement effecting the sale indicated that "[w]ith respect to the occupancy, residency, tenancy and similar written agreements entered into in the ordinary course of business with residents . . . (collectively, the 'Resident Agreements')," Citadel shall accept assignment, "subject to the representation . . . that none of such Resident Agreements (i) deviate[s] in any material respect from the standard form of resident agreement provided by [710 Julian Road Operations]." (Doc. 16 ¶ 2.14(a).) The parties also executed a separate Assumption and AssignmentAgreement, which provided that on January 31, 2020, 710 Julian Road Operations "assign[ed], convey[ed] and transfer[red] to [Citadel], all of [710 Julian Road Operations'] right, title and interest under the Resident Agreements in effect" on that date. (Doc. 14-6 at 1.) Following the transfer, the facility was renamed "The Citadel at Salisbury." (Doc. 19 at 3.)

On April 28, 2020, Defendants filed suit against Plaintiffs in the General Court of Justice, Superior Court Division, of Rowan County, North Carolina for violations of the North Carolina Patient's Bill of Rights. (Doc. 1 ¶ 18.)

On May 19, 2020, Dalton — now employed by Citadel — sent an email to the residents and families of residents of The Citadel at Salisbury asking them to complete and sign a new contract (the "2020 contract"), which included an arbitration clause. (Doc. 22 at 8.)

On May 26, 2020, Plaintiffs initiated this action to compel arbitration and stay the state court proceedings against them. (Doc. 1.)

On June 11, 2020, Hair, on behalf of Whitlatch, completed and signed the 2020 contract but declined the arbitration clause. (Doc. 20-1 at 16-17, 19.) The next day, Stirewalt, on behalf of Marshall, completed and signed the 2020 contract but also declined the arbitration clause. (Doc. 20-2 at 35-36, 38.)

On July 6, 2020, Plaintiffs filed the present motion to compelarbitration. (Doc. 13.) Defendants responded in opposition (Doc. 19), and Plaintiffs replied (Doc. 28). Defendants also filed a cross-motion to allow limited discovery on the issue of arbitrability, accompanied by over 30 exhibits. (Docs. 21, 20.) Plaintiffs subsequently moved to strike multiple exhibits included with Defendants' cross-motion. (Doc. 24.) Plaintiffs have also moved to seal a copy of the Transfer Agreement (Docs. 14-4, 16). (Doc. 15.) Though all motions were fully briefed (Docs. 30-33), it was unclear whether Plaintiffs maintained that the 2020 contracts were executed. So, the court directed Plaintiffs to indicate their position, including the date those agreements allegedly became effective, if ever. (Doc. 34.) In response, Plaintiffs stated their position that the 2020 contracts were not executed and have not entered into force. (Doc. 35.) In reaction to Plaintiffs' filing, Defendants moved for leave to file a response to contest positions newly expressed by Plaintiffs, along with prior correspondence between the parties. (Docs. 36, 37.) On this state of the record, the motions are ready for resolution.

II. ANALYSIS

A. Legal Standard

The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16, establishes "a liberal federal policy favoring arbitration agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Thus, "any doubts concerning the scope ofarbitrable issues should be resolved in favor of arbitration." Id. at 24-25. As "agreements to arbitrate must be enforced," Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985), "courts may compel arbitration where a party has failed to abide by a valid arbitration clause," Dillon v. BMO Harris Bank, N.A., No. 1:13-CV-897, 2014 WL 911950, at *1 (M.D.N.C. Mar. 10, 2014). However, "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Am. Bankers Ins. Grp. v. Long, 453 F.3d 623, 626-27 (4th Cir. 2006). As such, prior to submitting a dispute to arbitration, a court must make two threshold determinations. First, the court must determine whether parties have a valid and enforceable agreement to arbitrate. Berkeley Cnty. Sch. Dist. v. Hub Int'l Ltd., 944 F.3d 225, 234 (4th Cir. 2019). This inquiry is not confined to defects in contract formation, but also includes "such grounds as exist at law or in equity for the revocation of any contract." Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938 (4th Cir. 1999). In conducting this inquiry, courts apply the contract formation and interpretation principles of the forum state. Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 630-31 (2009); see also Cara's Notions v. Hallmark Cards, Inc., 140 F.3d 566, 569 (4th Cir. 1998). Second, if the court concludes that there is a valid agreement to arbitrate, the court must then determine whether "the specificdispute falls within the substantive scope of that agreement." Phillips, 173 F.3d at 938.

The standard for deciding a motion to compel arbitration is similar to that applied to a motion for summary judgment. Berkeley, 944 F.3d at 234; Adams v. Citicorp Credit Servs., Inc., 93 F. Supp. 3d 441, 445 (M.D.N.C. 2015). A party seeking to compel arbitration bears the initial burden of demonstrating the absence of any genuine issue of material fact as to the parties' agreement to arbitrate. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Noe v. City Nat'l Bank of W. Va., 828 F. App'x 163, 166 (4th Cir. 2020). Once the moving party has met its burden, the nonmoving party must affirmatively demonstrate with specific evidence that there is a genuine dispute of material fact requiring trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); see Drews Distrib., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 352 n.3 (4th Cir. 2001). In determining whether arbitration should be compelled, the court is entitled to consider materials beyond the complaint and its supporting documents. Berkeley, 944 F.3d at 234.

B. Agreement to Arbitrate

Plaintiffs move to compel arbitration based on the 2019 arbitration agreements between Defendants and 710 Julian Road Operations. Plaintiffs maintain that as assignees of these agreements, they are entitled to enforce the arbitrationagreements against Defendants. In response, Defendants argue multiple grounds, which can be distilled into three broad contentions, as to why Plaintiffs cannot enforce the 2019 arbitration agreements against them. First, Defendants contend that the 2019 arbitration agreements are not controlling for the present dispute because the...