Briarcliff Nursing Home, Inc. v. Turcotte, No. 1012193 (Ala. 2/6/2004)

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Briarcliff Nursing Home, Inc., d/b/a Integrated Health Services at Briarcliff, and James Anthony Clements v. David Turcotte, executor of the estate of Noella Turcotte, deceased.

Briarcliff Nursing Home, Inc., d/b/a Integrated Health Services at Briarcliff, and James Anthony Clements v. Kyra L. Woodman, administratrix of the estate of Sarah Carter, deceased.

No. 1012193.

No. 1012195.

Supreme Court of Alabama.

Decided February 6, 2004.

Appeals from Shelby Circuit Court (CV-01-1246; CV-01-1304)

PER CURIAM.

Briarcliff Nursing Home, Inc., d/b/a Integrated Health Services at Briarcliff, and James Anthony Clements, the defendants in actions pending in the Shelby Circuit Court, appeal the denial of their motions to compel the plaintiffs David Turcotte, executor of the estate of Noella Turcotte, deceased, and Kyra L. Woodman, administratrix of the estate of Sarah Carter, deceased, to arbitrate their wrongful-death claims. The appeals have been consolidated because they raise identical issues. We reverse and remand.

I.

Turcotte and Woodman separately sued Briarcliff and Clements for the alleged wrongful deaths of Noella Turcotte and Sarah Carter while Noella and Sarah were residents at a nursing home owned and operated by Briarcliff. Clements was the administrator of the nursing home at the time of Noella's and Sarah's deaths. (Briarcliff and Clements are hereinafter collectively referred to as "Briarcliff.") Briarcliff moved to compel arbitration on the ground that agents for Noella and Sarah had signed admission contracts that contained an arbitration provision. Turcotte and Woodman opposed the motions to compel arbitration on the grounds that neither of them, in their capacities as executor and administratrix, respectively, of the deceased estates had signed or had otherwise entered into the admission contracts and that the "fiduciary parties" who signed the admission contracts for Noella and Sarah while they were alive could not contractually affect the then nonexistent wrongful-death claims. Turcotte and Woodman also argued that the arbitration provision was a part of a contract of adhesion and was unconscionable.

The arbitration provision in the admission contract¹ reads:

"Pursuant to the Federal Arbitration Act, any action, dispute, claim or controversy of any kind (e.g., whether in contract or in tort, statutory or common law, legal or equitable, or otherwise) now existing or hereafter arising between the parties in any way arising out of, pertaining to or in connection with the provision of health care services, any agreement between the parties, the provision of any other goods or services by the Health Care Center or other transactions, contracts or agreements of any kind whatsoever, any past, present or future incidents, omissions, acts, errors, practices, or occurrence causing injury to either party whereby the other party or its agents, employees or representatives may be liable, in whole or in part, or any other aspect of the past, present or future relationships between the parties shall be resolved by binding arbitration administered by the National Health Lawyers Association (the `NHLA').

"THE UNDERSIGNED ACKNOWLEDGE THAT EACH OF THEM HAS READ AND UNDERSTOOD THIS CONTRACT, AND THAT EACH OF THEM VOLUNTARILY CONSENTS TO ALL OF ITS TERMS."

(Boldface type and capitalization original.) The admission contract relating to Noella is signed by David Turcotte in his capacity as "Fiduciary Party," and the admission contract relating to Sarah is signed by Kyra Woodman in her capacities as "Fiduciary Party" and "Attorney-In-Fact under [a] validly executed power of attorney."

The trial court denied Briarcliff's motions to compel arbitration. Briarcliff appeals, arguing that Turcotte and Woodman must arbitrate their wrongful-death claims because Noella and Sarah, through their agents, signed the admission contracts containing the arbitration provision.

II.

The standard of review of a trial court's ruling on a motion to compel arbitration is de novo. W.D. Williams, Inc. v. Ivey, 777 So. 2d 94, 98 (Ala. 2000).

"'The party seeking to compel arbitration has the initial burden of proving the existence of a contract calling for arbitration and proving that the contract evidences a transaction substantially affecting interstate commerce. "[A]fter a motion to compel arbitration has been made and supported, the burden is on the nonmovant to present evidence that the supposed arbitration agreement is not valid or does not apply to the dispute in question."'"

SouthTrust Bank v. Ford, 835 So. 2d 990, 993 (Ala. 2002)(citations omitted) (quoting American Gen. Fin., Inc. v. Morton, 812 So. 2d 282, 284 (Ala. 2001)).

III.

Turcotte and Woodman brought these wrongful-death actions in the names of "the Estate of Noella Turcotte, by and through its Executor David Turcotte" and "the Estate of Sarah Carter by and through its Administratrix, Kyra L. Woodman," respectively. The wrongdoing alleged in both complaints is predicated upon an alleged breach of the duties owed by Briarcliff to Noella and Sarah as residents of the nursing home. Both Noella and Sarah were residents of the nursing home pursuant to the admission contracts, which contained the arbitration provisions. Therefore, Noella's and Sarah's personal representatives are seeking to impose duties that arise from the admission contracts, but they also seek to avoid the arbitration provisions of the same contracts under which they seek recovery.

In SouthTrust Bank, 835 So. 2d 990, the underlying dispute involved SouthTrust's negligent cashing of a check on Edwin Edwards's account. Edwards died before the dispute was resolved, and Melody Ford, his daughter, as the administratrix of Edwards's estate, sued SouthTrust alleging that it had negligently cashed the check. She also sued SouthTrust in her individual capacity, asserting related claims. The deposit agreement that governed Edwards's account at SouthTrust contained an arbitration provision. On the basis of that provision, SouthTrust moved to compel arbitration; the trial court denied the motion. SouthTrust appealed, and this Court found that "Melody's claim to recover the value of the improperly paid check is subject to arbitration because she is asserting that claim in her role as the administratrix of Edwards's estate." Id. at 994. We further stated:

"We recognize that an administratrix of a decedent's estate stands in the shoes of the decedent. We also recognize that the `[p]owers [of an executor], in collecting the debts constituting the assets of the estate, are just as broad as those of the deceased.' For the same reason the powers of an executor or an administrator encompasses all of those formerly held by the decedent, those powers must likewise be restricted in the same manner and to the same extent as the powers of the decedent would have been. Thus, where an executor or administrator asserts a claim on behalf of the estate, he or she must also abide by the terms of any valid agreement, including an arbitration agreement, entered into by the decedent."

Id. at 993-94 (citations omitted). Therefore, in this case, Turcotte, as executor of Noella's estate, and Woodman, as administratrix of Sarah's estate, are bound by the arbitration provisions contained in the admission contracts.

Alabama's wrongful-death statute, § 6-5-410(a), Ala. Code 1975, provides:

"(a) A personal representative may commence an action and recover such damages as the jury may assess ... for the wrongful act, omission, or negligence of any person, persons, or corporation, his or their servants or agents, whereby the death of his testator or intestate was caused, provided the testator or intestate could have commenced an action for such wrongful act, omission, or negligence if it had not caused death."

In the present case, Noella and Sarah could not have commenced an action against Briarcliff for its wrongful acts because they agreed to arbitrate those claims against Briarcliff; therefore, their executor and administratrix, respectively, may not commence such an action.

IV.

We now address Turcotte and Woodman's claims that the arbitration provision was unconscionable. "The burden of proving unconscionability of an arbitration agreement rests with the party challenging the agreement." Green Tree Fin. Corp. v. Vinson, 753 So. 2d 497, 504 (Ala. 1999), citing Ex parte NcNaughton, 728 So. 2d 592, 598 (Ala. 1998). In Vann v. First Community Credit Corp., 834 So. 2d 751, 753 (Ala. 2002), this Court stated:

"In determining whether a contract is unconscionable, courts look to four factors: `(1) whether there was an absence of meaningful choice on one party's part, (2) whether the contractual terms are unreasonably favorable to one party, (3) whether there was unequal bargaining power among the parties, and (4) whether there was oppressive, one-sided or patently unfair terms in the contract.' Layne v. Garner, 612 So. 2d 404, 408 (Ala. 1992)."

Summarizing the Layne v. Garner, 612 So. 2d 404 (Ala. 1992), test in American General Finance, Inc. v. Branch, 793 So. 2d 738, 748 (Ala. 2000), we stated: "For ease of discussion, we can reduce the Layne v. Garner test further to one comprised of two essential elements: (1) terms that are grossly favorable to a party that has (2) overwhelming bargaining power." See also Steele v. Walser, [Ms. 1020652, October 31, 2003] __ So. 2d __, __ (Ala. 2003)(stating that "[t]he `"applicable standards for determining unconscionability are set forth in American General Finance[, Inc. v. Branch], 793 So. 2d [738] at 748 [(Ala. 2000)] — whether there are (1) terms that are grossly favorable to a party that has (2) overwhelming bargaining power."'").

A. Terms that are grossly favorable to a party.

Turcotte and Woodman argue that, because the arbitration provision provides that disputes shall be resolved by arbitration administered by the National Health Lawyers Association ("NHLA"), this "dispute...