Northport Health Servs. of Ark., LLC v. Chancey

2022 Ark. App. 103

642 S.W.3d 253

NORTHPORT HEALTH SERVICES OF ARKANSAS, LLC, d/b/a Paris Health and Rehab Center; and Northport Health Services, Inc., Appellants

v.Thomas CHANCEY, Guardian of the Estate and Person of Lucy Chancey, an Incapacitated Person, Appellee

No. CV-21-129

Court of Appeals of Arkansas, DIVISION IV.

Opinion Delivered March 2, 2022

Hardin, Jesson & Terry, PLC, by: Jeffrey W. Hatfield, Kynda Almefty, Carol Ricketts, Little Rock, and Kirkman T. Dougherty, Fort Smith, for appellants.

Grayson & Grayson, P.A., by: Keith L. Grayson and Melanie L. Grayson, North Little Rock; and Law Office of Craig L. Cook, Ozark, by: Craig L. Cook, for appellee.

RITA W. GRUBER, Judge

This is an interlocutory appeal from a denial of a motion to compel arbitration. Northport Health Services of Arkansas, LLC, d/b/a Paris Health and Rehab Center; and Northport Health Services, Inc. (collectively Northport), appeal an order of the Logan County Circuit Court denying a motion to compel arbitration based on its finding that the arbitration agreement lacked mutuality of obligations. Northport argues that the circuit court erred in refusing to enforce the valid arbitration agreement. We affirm.

On or about September 24, 2018, Lucy Chancey was admitted to Paris Health and Rehab Center, a nursing-home facility. She resided there until May 12, 2019. Thomas Chancey, who is Lucy's son, signed the admission agreement as the "Responsible Party."¹ Under the section identifying the relationship of the resident to the responsible party, Thomas is identified as "Relative" and "Son." The admission agreement contained an arbitration provision, which provides as follows:

8. Dispute Resolution Program, Arbitration Agreement, and WAIVER OF JURY TRIAL.

(Read Carefully)

A. The Program

This Agreement creates a dispute resolution program (the "Program") which shall govern the resolution of any and all claims or disputes that would constitute a cause of action in a court of law that Facility may have now or in the future against you or any of your representatives, or that you or any of your representatives may have now or in the future against Facility, any parent or subsidiary of Facility, any company affiliated with Facility, or any of Facility's officers, directors, managers, employees, or agents acting in such capacity (hereinafter referred to as "Disputes") or that any other person may have arising out of the residency. The Disputes whose resolution is governed by the Program shall include, but not be limited to, claims for breach of contract or promise (express or implied); tort claims; and claims for violation of any federal, state, local, or other governmental law, statute, regulation, common law, or ordinance. Notwithstanding the foregoing, the Program shall not govern (i) any grievance brought either formally or informally under the Facility's grievance policy or with an appropriate state or federal agency (ii) an appeal to the appropriate state or federal entity regarding an involuntary transfer or discharge (iii) any complaint with an appropriate state or federal agency concerning the Facility's compliance with applicable regulations governing care, facility services, or residents’ rights (iv) any complaint with an appropriate state or federal agency concerning resident abuse, neglect, misappropriation of resident property or non-compliance with advance directive requirements or (v) any claim or dispute involving solely a monetary claim in an amount less than $25,000, and any such claim or dispute shall not be deemed a Dispute hereunder.

B. Arbitration

All Disputes covered under the Program between you and the Facility shall be resolved by binding arbitration. Arbitration is a procedure in which the parties submit a Dispute to one or more mutually selected, impartial persons for a final and binding decision. The parties expressly agree to settle all Disputes by binding arbitration rather than by a judge, jury, or administrative agency.

Arbitration is a complete substitute for a trial by a judge or a jury. The parties hereby specifically waive their rights to a jury trial. Only Disputes that would constitute a legally cognizable cause of action in a court of law may be arbitrated.

THE PARTIES ACKNOWLEDGE THAT BY ENTERING INTO THIS ARBITRATION AGREEMENT, THEY ARE GIVING UP THEIR RIGHT TO HAVE ANY SUCH DISPUTE DECIDED IN A COURT OF LAW BEFORE A JUDGE OR JURY, AND INSTEAD ARE ACCEPTING THE USE OF ARBITRATION.

On October 28, 2019, Thomas, as Lucy's guardian, filed a complaint against Northport alleging claims of negligence, medical negligence, and a violation of long-term care residents’ rights.² The complaint alleged that Northport had failed to discharge its obligations of care to Lucy and that as a result, she suffered serious injuries, extreme pain, suffering, and mental anguish. Northport filed an answer and affirmatively pleaded that Lucy's claims are barred from being litigated in court by virtue of the arbitration agreement.

Northport filed a motion to compel arbitration on June 26, 2020, arguing that (1) the Federal Arbitration Act governs arbitration in this case and preempts any Arkansas law to the contrary; and (2) the arbitration clause is valid and enforceable. Thomas responded, in part, that the arbitration agreement was invalid and unenforceable due to a lack of mutuality of obligations as required for a valid contract in Arkansas. Thomas alleged, in part, that the provision in the arbitration agreement provides that "any claim or dispute involving solely a monetary claim in an amount less than $25,000, and any such claim or dispute shall not be deemed a Dispute hereunder." He contended that this provision impermissibly shields Northport from litigation and lacks mutuality of obligations because it specifically designated all of Northport's likely claims against Lucy, such as collection of money due to nonpayment, as not subject to binding arbitration but subjected all of Lucy's likely claims arising in tort to binding arbitration.

On November 24, 2020, the circuit court entered an order finding that the arbitration agreement is invalid and unenforceable because it lacks mutuality of obligations based on Country Club Gardens, LLC v. Alexander , 2020 Ark. App. 239, 599 S.W.3d 363. Northport filed a notice of appeal on December 23, 2020.³

We review a circuit court's denial of a motion to compel arbitration de novo on the record. Progressive Eldercare Servs. - Morrilton, Inc. v. Taylor , 2021 Ark. App. 379. While we are not bound by the circuit court's decision, in the absence of a showing that the circuit court erred in its interpretation of the law, we will accept its decision as correct on appeal. Id.

Arbitration agreements are governed by the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 – 16 ; however, we look to state contract law to decide whether an agreement to arbitrate is valid. Robinson Nursing & Rehab. Ctr., LLC v. Phillips , 2019 Ark. 305, at 5, 586 S.W.3d 624, at 629. In deciding whether to grant a motion to compel arbitration, two threshold questions must be answered: (1) whether a valid agreement to arbitrate between the parties exists and, (2) if such an agreement exists, whether the dispute falls within its scope. Id. The same rules of construction and interpretation apply to arbitration agreements as apply to agreements in general. Id. We have held that, as with other types of contracts, the essential elements for an enforceable arbitration agreement are (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5) mutual obligations. Id. at 6, 444 S.W.3d at 629–30. Northport, as the proponent of the arbitration agreement, has the burden of proving these essential elements. Id.

Mutuality of contract means that "an obligation must rest on each party to do or permit to be done something in consideration of the act or promise of the other; that is, neither party is bound unless both are bound." Id. at 14, 586 S.W.3d at 633–34. There is no mutuality of obligation when one party uses an arbitration agreement to shield itself from litigation, while reserving to itself the ability to pursue relief through the court system. Id. Thus, under Arkansas law, mutuality requires that the terms of the agreement impose real liability upon both parties. Id.

In this case, Northport argues that the circuit court erred "in applying a bright line rule that arbitration agreements containing monetary thresholds are per se invalid instead of determining whether mutuality of obligations is satisfied" in the arbitration agreement in this case. Northport contends that had the circuit court properly applied the standard set forth in Jorja Trading, Inc. v. Willis , 2020 Ark. 133, 598 S.W.3d 1, the arbitration agreement in this case would establish mutuality of obligations based on ordinary contract principles. Northpoint suggests that all parties are clearly and unequivocally required to submit any disputes to arbitration where the amount in controversy is more than $25,000, and all parties are able to pursue disputes involving an amount in controversy less than $25,000 by any legal means, including by lawsuit or other legal process. Northport states that pursuant to Jorja Trading , it would be a violation of the FAA to speculate as to whether one party to the agreement would receive a greater benefit than another so as to invalidate the agreement.

Jorja Trading involved an installment-sales contract for the purchase of a vehicle that contained an arbitration provision. When the purchasers failed to pay, they also surrendered the vehicle. The car was sold and the purchasers were credited, but a balance remained on their account. Jorja Trading filed a complaint in the small-claims division of district court seeking to recover the remaining balance, and the district court entered a judgment in its favor. The purchasers appealed the district court decision to the circuit court and counterclaimed, alleging...