Clanton v. Oakbrook Healthcare Ctr.

226 N.E.3d 1266

2023 IL 129067

Nancy CLANTON, as Independent Administrator of the Estate of Laurel J. Jansen, Deceased, Appellee

v.OAKBROOK HEALTHCARE CENTRE, LTD., et al., Appellants.

(Docket No. 129067)

Supreme Court of Illinois.

Filed September 21, 2023

Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Patricia O. Sheahan, Judge, presiding.

Carter A. Korey and Chaniece M. Hill, of Korey Richardson LLP, of Chicago, for appellants.

Michael W. Rathsack, Steven M. Levin, Michael F. Bonamarte IV, and Isabela Bacidore, all of Chicago, for appellee.

OPINION

JUSTICE O’BRIEN delivered the judgment of the court, with opinion.

¶ 1 Plaintiff, Nancy Clanton, as the independent administrator of the estate of the decedent, Laurel Jansen, brought an action against defendants, Oakbrook Healthcare Centre, Ltd., Lancaster, Ltd., and May Flor Andora, R.N. The complaint alleged that Jansen was negligently cared for in a nursing facility, suffered injuries as a result, and subsequently died from her injuries. Defendants filed a motion to compel arbitration pursuant to the contract for admission to the nursing facility. The Cook County circuit court denied the motion to compel, and the First District affirmed. 2022 IL App (1st) 210984, 462 Ill.Dec. 836, 207 N.E.3d 1139.

¶ 2 On appeal to this court, defendants contend that the denial by the trial court of their motion to compel arbitration under the nursing facility contract was erroneous. For the reasons that follow, we affirm the judgment of the appellate court affirming the denial of defendants’ motion to compel arbitration.

¶ 3 BACKGROUND

¶ 4 Plaintiff’s complaint alleges that Jansen was a resident at a skilled nursing facility operated by Oakbrook Healthcare, commonly known as Oak Brook Care, from July 19, 2019, through September 17, 2019. On August 9, 2019, Debbie Kotalik, as Jansen’s power of attorney (POA) for healthcare, signed a "Contract Between Resident and Facility" with Oakbrook Healthcare for Jansen’s admission and residency at the nursing facility.

¶ 5 Relevant to this action, the contract provides:

"E. Dispute Resolution/Punitive Damages

1. Civil Disputes Subject To This Paragraph. Resident and Facility agree that all civil claims arising in any way out of this Agreement, other than claims by Facility to collect unpaid bills for services rendered, or to involuntarily discharge Resident, shall be resolved exclusively through mandatory mediation, and, if such mediation does not resolve the dispute, through binding arbitration using the commercial mediation and arbitration rules and procedures of JAMS/Endispute in its Chicago, Illinois office.

2. Punitive/Treble Damages Waived. Resident and Facility also agree that both Resident and Facility shall seek only actual damages in any such mediation or arbitration, and that neither of them will pursue any claim for punitive damages, treble damages or any other type of damages the purpose of which are to punish one party in an amount greater than the actual damages allegedly caused by the other party.

F. Term and Termination

***

1. If the resident is compelled by a change in physical or mental health to leave the facility, this Contract shall terminate on 7 days’ notice or immediately upon the resident’s death. The resident may terminate the Contract on 30 days’ notice to the facility."

¶ 6 According to the complaint, Jansen suffered several falls while a resident at Oak Brook Care, resulting in injuries that contributed to or caused Jansen’s death. After Jansen’s death, plaintiff filed a complaint against defendants. The complaint pleads four counts against Oakbrook Healthcare. Count I alleges violations of the Nursing Home Care Act (210 ILCS 45/1-101 et seq. (West 2018)). Count II alleges a common-law negligence claim, and count III alleges wrongful death. Count VIII asserts a res ipsa loquitur negligence claim. The complaint also alleges negligence and wrongful death claims against Lancaster (counts IV and V) and Andora (counts VI and VII). Counts I, II, IV, VI, and VIII are brought pursuant to the Survival Act (755 ILCS 5/27-6 (West 2018)), while counts III, V, and VII are brought pursuant to the Wrongful Death Act (740 ILCS 180/0.01 et seq. (West 2018)).

¶ 7 Defendants filed a motion to compel mediation and/or arbitration of counts I, II, VI, and VIII pursuant to section E of the contract (hereinafter the arbitration clause), to dismiss those counts with prejudice, and to stay the remaining counts. In response, plaintiff contended that defendants had waived their right to mediate and/or arbitrate by participating in litigation for nearly a year, that the arbitration clause was procedurally and substantively unconscionable, and that Kotalik, as Jansen’s POA for healthcare, lacked the authority to execute an arbitration clause on Jansen’s behalf.

¶ 8 The trial court denied defendants’ motion. The trial court concluded that defendants did not waive their right to enforce the arbitration clause and the arbitration clause was not procedurally unconscionable. However, the trial court held that the provision in section E(2) of the nursing facility contract was substantively unconscionable because it waived plaintiff’s entitlement to punitive or tre- ble damages, effectively limiting plaintiff’s ability to recover attorney fees. The trial court declined to exercise its discretion to sever the limitation on damages from the rest of the dispute resolution provision of section E and found that the entire dispute resolution provision was unenforceable.

¶ 9 Defendants filed an interlocutory appeal pursuant to Illinois Supreme Court Rule 307(a)(1) (eff. Nov. 1, 2017). Defendants argued that the trial court erred in finding the contract substantively unconscionable and, if a portion of the contract was unconscionable, the trial court erred in not severing that portion. In response, plaintiff argued that defendants waived the ability to rely on the arbitration clause in the contract and the trial court correctly concluded that the arbitration clause was substantively unconscionable. Plaintiff also argued a number of other grounds upon which the appellate court could affirm the denial of defendants’ motion, including that the arbitration clause was procedurally unconscionable, Kotalik lacked authority to enter into the arbitration clause on Jansen’s behalf, and the arbitration clause terminated and was ineffective upon Jansen’s death pursuant to section F(1) of the contract. The last ground was not raised in the trial court.

¶ 10 The appellate court agreed with the trial court that defendants’ litigation conduct did not amount to a waiver of their right to invoke the arbitration clause. 2022 IL App (1st) 210984, ¶ 51, 462 Ill.Dec. 836, 207 N.E.3d 1139. It also concluded that it was not precluded from considering plaintiff’s argument that the arbitration clause terminated upon Jansen’s death since an appellee may raise an issue not presented to the trial court to sustain a judgment, as long as the factual basis for the issue was before the trial court. Id. ¶ 54. Interpreting the plain language of the contract, the court found that section F(1) of the contract, the termination-on-death provision, applied and that the contract, including the arbitration clause, was no longer enforceable at the time the action was commenced. Id. ¶ 58. It rejected defendants’ argument that the entire contract did not terminate upon the death of a resident, finding that conclusion would require the court to read limitations or exceptions into the contract. Id. ¶ 60.

¶ 11 The appellate court rejected defendants’ reliance on the Fourth District’s opinion in Mason v. St. Vincent’s Home, Inc., 2022 IL App (4th) 210458, 459 Ill.Dec. 893, 199 N.E.3d 346, and recognized the conflict. 2022 IL App (1st) 210984, ¶ 63, 462 Ill.Dec. 836, 207 N.E.3d 1139. In Mason, the Fourth District construed a nursing facility contract similar to the contract at issue in this case—containing both a broad arbitration clause and a termination-on-death clause. Relying on Carter v. SSC Odin Operating Co., 2012 IL 113204, 364 Ill.Dec. 66, 976 N.E.2d 344, the Fourth District concluded that the arbitration clause was valid, even in light of the termination-on-death clause, on the basis that Survival Act claims accrue prior to the decedent’s death, so the arbitration provision was valid when the cause of action accrued. 2022 IL App (1st) 210984, ¶¶ 66-67, 462 Ill.Dec. 836, 207 N.E.3d 1139. The appellate court below disagreed with the reasoning of Mason, distinguishing Carter on the facts because this court in Carter did not have reason to construe the effect of a termination-on-death clause. Id. ¶ 68. More importantly, the court found that the Mason court’s approach did not give effect to the termination clause’s plain and unequivocal language and essentially created an exception to the termination clause. Id. ¶ 69. The court concluded that the contract terminated upon Jansen’s death, at which time the arbitration clause was no longer enforceable, and affirmed the trial court’s denial of the motion to compel mediation and/or arbitration of counts I, II, VI, and VIII. Id. ¶¶ 74-75. The court also affirmed the denial of defendants’ request to stay the remaining counts. The matter was remanded for further proceedings in accordance with the appellate court’s decision. Id. ¶ 82.

¶ 12 This court granted defendants’ petition for leave to appeal. Ill. S. Ct. R. 315(a) (eff. Oct. 1, 2021).

¶ 13 ANALYSIS

[1] ¶ 14 Defendants argue that the negligence and Nursing Home Care Act claims are brought under the Survival Act and are assets of the decedent’s estate that accrued prior to death, so they should be arbitrated under the contract’s arbitration clause. Defendants contend that the termination-on-death clause in the contract does not change the result since the cause had already accrued prior to decedent’s death.

¶ 15 Pl...