GGNSC Holdings, LLC v. Lamb

2016 Ark. 101

487 S.W.3d 348

GGNSC Holdings, LLC, et al., Appellants

v.Nellie R. Lamb, By and Through Richard Williams, as Guardian of the Estate and Person of Nellie R. Lamb, et al., Appellees

No. CV–15–629

Supreme Court of Arkansas.

Opinion Delivered March 10, 2016

Hardin, Jesson & Terry, PLC, by: Kirkman T. Dougherty, Fort Smith, Jeffrey W. Hatfield, and Kynda Almefty, Little Rock; Dechert, LLP; by: H. Joseph Escher III ; Eugene D. Bramblett, Camden; and Shook, Hardy & Bacon, LLP, by: A. Bradley Bodamer, for appellants.

Campbell Law Firm, P.A., Little Rock, by: H. Gregory Campbell ; Ludwig Law Firm, PLC, Little Rock, by: Gene A. Ludwig ; Reddick Moss, PLLC; by: Brian D. Reddick and Matthew D. Swindle ; and Marks, Balette & Giessel, P.C., by: David Marks, for appellees.

KAREN R. BAKER, Associate Justice

This appeal returns from our remand in GGNSC Holdings, LLC v. Chappel, 2014 Ark. 545, 453 S.W.3d 645. The appeal arose from the January 30, 2014 Ouachita County Circuit Court's denial of GGNSC's motion to compel arbitration of five former residents. At the time of their admission, arbitration agreements were entered by or on behalf of the following five residents: Nellie Lamb, Louise Brown, Wilma Richey, Leon Robinson, Jr., and Thomas Roche. The arbitration agreements contained the following provisions:

It is understood and agreed by Facility and Resident that any and all claims, disputes, and controversies (hereafter collectively referred to as a “claim” or collectively as “claims”) arising out of, or in connection with, or relating in any way to the Admission Agreement or any service or health care provided by the Facility to the Resident shall be resolved exclusively by binding arbitration to be conducted at a place agreed upon by the Parties, or in the absence of such an agreement, at the Facility, in accordance with the National Arbitration Forum Code of Procedure, (“NAF”) which is hereby incorporated into this Agreement, and not by a lawsuit or resort to court process. This agreement shall be governed by and interpreted under the Federal Arbitration Act, 9 U.S.C. Sections 1 –16.

....

In the event a court having jurisdiction finds any portion of this agreement unenforceable, that portion shall not be effective and the remainder of the agreement shall remain effective.

....

THE PARTIES UNDERSTAND AND AGREE THAT THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES, AND THAT BY ENTERING INTO THIS ARBITRATION AGREEMENT, THE PARTIES ARE GIVING UP AND WAIVING THEIR CONSTITUTIONAL RIGHT TO HAVE ANY CLAIM DECIDED IN A COURT OF LAW BEFORE A JUDGE AND A JURY, AS WELL AS ANY APPEAL FROM A DECISION OR AWARD OF DAMAGES.

On December 19, 2011, the appellees, who are former residents of the nursing homes, special administrators, guardians, or attorneys-in-fact of former residents (for purposes of this appeal, the appellees will be collectively referred to as “Lamb”) filed a class-action complaint against appellants GGNSC Holdings, LLC, and other related entities and employees of GGNSC Holdings, LLC (collectively “GGNSC”). In February 2012, GGNSC moved to compel arbitration of claims asserted by Lamb, Brown, Richey, Robinson, and Roche. On January 30, 2014, the circuit court denied the motions to compel arbitration.

In Chappel, we reversed and remanded the Ouachita County Circuit Court's January 30, 2014 order denying GGNSC's motion to compel arbitration because the circuit court addressed the impossibility-of-performance defense without first making the threshold finding of whether the arbitration agreements were valid. Id. at 8, 453 S.W.3d at 649. Specifically, we explained:

Considering the instant case in light of our most recent precedent, it is clearly more akin to the situation presented in Bank of the Ozarks than that presented in Asset Acceptance. Here, we simply do not have a blanket denial of the motion to compel. The order that is the subject of this appeal specifically addresses an issue involving impossibility of performance, a defense to a contract. After an in-depth discussion on that issue, the circuit court included a catch-all sentence that read, “The other arguments of Plaintiffs' counsel against the motion to compel arbitration are persuasive and contribute to this decision.” Those other arguments raised by appellees were that there was no mutual assent because of a lack of authority on the part of those who signed the arbitration agreement and that the agreement was unconscionable. [FN4]

[FN4] Appellees do not assert that there was a lack of authority with regard to Mr. Robinson.

Clearly, appellees challenged the validity of the arbitration agreement itself and, thus, it was incumbent on the circuit court to address this threshold issue. We cannot construe the court's catch-all sentence to be a ruling on the issue of whether there was a valid agreement to arbitrate. The circuit court stated that appellees' other arguments contributed to its decision to deny the motions to compel. But, it would be illogical for this court to conclude that appellees' argument that there was no valid agreement to arbitrate contributed to the denial of the motions because there would have been no need for the court to consider the impossibility defenses. In other words, if we were to assume anything about the circuit court's ruling, we would have to assume that the court impliedly found that there was a valid agreement to arbitrate and then considered the contract defense. But, we are not allowed to presume any such ruling pursuant to our precedent in Bank of the Ozarks. Accordingly, we reverse and remand this matter to the circuit court.

2014 Ark. 545, at 7–8 & n.4, 453 S.W.3d at 649 & n. 4.

On March 3, 2015, Lamb filed a motion to enter a proposed order and brief in support to enter proposed order. Lamb argued that four of the five arbitration agreements are invalid because the agreements lack the required element of mutual assent. Specifically, Lamb contended that the agreements of Lamb, Brown, Richey, and Roche were signed by persons who were not authorized to sign on behalf of the resident. Lamb argued that Robinson's agreement appears to be valid because he signed the agreement himself; however, Robinson's agreement is unenforceable because it is impossible to perform and unconscionable. Further, Lamb argued that even if the arbitration agreement is valid, the motion to compel must be denied because in the event that the National Arbitration Forum (“NAF”) cannot conduct the arbitration, or the NAF Code of Procedure cannot be utilized, Lamb is entitled to pursue her claims in court pursuant to NAF Rules 48(D) and (E).

On March 19, 2015, GGNSC filed its response to Lamb's motion to enter proposed order and argued that Lamb's arbitration agreement is valid because it was signed by her legal guardian. Brown, Richey, and Roche's arbitration agreements are also valid because the agreements were signed by agents acting with apparent authority. Robinson's arbitration agreement is valid because he signed the agreement himself. Further, the agreements are not unconscionable, and performance of the agreements is not impossible. Finally, NAF Rule 48 does not grant Lamb the right to litigate the dispute in court.

On June 9, 2015, the circuit court entered an amended order denying arbitration. The circuit court found that three of the five arbitration agreements were invalid because the agreements were signed by individuals who lacked authority to agree to arbitrate.¹ The circuit court concluded that Lamb's arbitration agreement is valid because Richard Williams, as guardian of the person and estate of Lamb, had the authority to bind Lamb to the arbitration agreement. The circuit court also found that Robinson's arbitration agreement was valid because he signed the agreement on his own behalf. However, the circuit court ruled that Lamb and Robinson's agreements were not enforceable to compel arbitration based on the defenses of impossibility of performance and unconscionability.

On June 30, 2015, GGNSC filed its notice of appeal. On July 6, Lamb filed a notice of cross-appeal. On appeal, GGNSC argues that the circuit court committed reversible error by refusing to enforce the valid arbitration agreements based on the defenses of impossibility of performance and unconscionability. On cross-appeal, Lamb argues that the circuit court erred in determining that Richard Williams, the court appointed guardian of the person and the estate of Lamb, was authorized to waive Lamb's fundamental right to a jury trial by executing an optional arbitration agreement on Lamb's behalf. Because Lamb's cross-appeal involves the threshold issue of the validity of the arbitration agreement, we must first consider Lamb's cross-appeal.²

Because this is a subsequent appeal to this court, this court's jurisdiction is proper pursuant to Arkansas Supreme Court Rule 1–2(a)(7) (2015). Our jurisdiction is also in accordance with Rule 2(a)(12) of the Arkansas Rules of Appellate Procedure—Civil, which permits interlocutory appeals from orders denying motions to compel arbitration. We review a circuit court's order denying a motion to compel arbitration de novo on the record. Searcy Healthcare Ctr., LLC v. Murphy, 2013 Ark. 463, at 3, 2013 WL 6047164 (citing HPD, LLC v. T ETRA Techs., Inc., 2012 Ark. 408, 424 S.W.3d 304 ).

I. Authority of Williams

On cross-appeal, Lamb argues that the circuit court erred in its determination that Richard Williams, Lamb's son, had the authority to bind Lamb to the arbitration agreement. Specifically, Lamb argues that Arkansas law limits a guardian's authority to acts necessary to promote and protect the well-being of the person and his or her property; a guardian of the person does not have the authority to bind a ward to an arbitration agreement; and the authority of a guardian of the estate is limited to actions necessary to protect, preserve, and administer the ward's property.

In reviewing an...