Arbitration – Power of Attorney – Nursing Facility – Negligence

Westmoreland v. High Point Healthcare, Inc. (Lawyers Weekly No. 12-07-0071, 29 pp.) (Sanford L. Steelman Jr., J.) Appealed from Guilford County Superior Court. (John O. Craig III, J.) N.C. App.  Click here for the full-text opinion.

Holding: The trial court improperly denied a nursing home’s motion to compel arbitration since the arbitration agreement was not procedurally or substantively unconscionable.

Background

On July 17, 2006, plaintiff, as attorney-in-fact for her father, James Chapman, placed him in a nursing facility owned by defendant. On July 18, 2006, plaintiff, as her father’s attorney-in-fact, was presented with several documents for her signature, one of which was an arbitration agreement. The arbitration agreement was a separate agreement, labeled as such in bold lettering. It provided that any claims between the parties would be resolved by binding arbitration and that the parties waived their right to trial before a jury or judge. The agreement explicitly stated that execution of the arbitration agreement was not a condition to Chapman being admitted to or remaining in the facility.

Plaintiff, as attorney-in-fact, executed this document, and Chapman remained at the facility until his death on Sept. 12, 2007. On Sept. 15, 2009, plaintiff, acting as executor of her father’s estate, sued defendant seeking monetary damages based upon allegations that Chapman’s death was proximately caused by the negligence of defendant.

On Oct. 16, 2009, defendant moved to dismiss the complaint or stay the proceedings and compel arbitration. The trial court denied defendant’s motion to dismiss or to compel arbitration, ruling that the arbitration agreement was both procedurally and substantively unconscionable. Defendant appeals.

Discussion

Plaintiff failed to meet her burden of proving that the arbitration agreement was procedurally unconscionable. The trial court erred in concluding as a matter of law that the arbitration agreement was procedurally unconscionable.

The factors cited in Tillman v. Commercial Credit Loans, 362 N.C. 93, 655 S.E.2d 362 (2008), as supporting procedural unconscionability are not present in this case. The arbitration agreement specifically provided that the admission of the patient was not dependent upon execution of the agreement by plaintiff as attorney-in-fact for Chapman. The circumstances surrounding the execution of the arbitration agreement do not excuse plaintiff’s apparent failure to read it.

This case is further distinguishable from Tillman on a number of grounds. Here, the trial court did not find that plaintiff was rushed through the signing process. Defendants did not admit that they would have refused to admit plaintiff’s father had she refused to sign the arbitration agreement. In fact, the plain language of the agreement supports a contrary finding. Moreover, Chapman had already been admitted to the facility at the time of execution of the arbitration agreement.

In light of the differences between this case and Tillman, particularly the provisions clearly advising plaintiff of three distinct rights, including that admission to or remaining in the facility was not contingent upon execution of the arbitration agreement, we discern no procedural unconscionability in the execution of the arbitration agreement. The trial court erred in holding that the agreement was procedurally unconscionable due to bargaining naughtiness.

Additionally, we hold that the trial court erred in concluding that performance of the arbitration agreement was impossible due to the policies of American Arbitration Association. We also hold that the trial court erred in concluding that the AAA policy statement – which conflicts with this state’s public policy in favor of arbitration – weighed in favor of ruling that the arbitration agreement was substantively unconscionable. The arbitration agreement was not one-sided. The trial court erred in concluding to the contrary.

We also find the trial court focused upon the cost-shifting provisions in isolation, rather than as part of a broader analysis focusing on whether the cumulative effects of various provisions in the agreement create a substantial barrier to a plaintiff pursuing his or her claims.

The trial court’s order is devoid of any findings of fact as to the potential cost of arbitration as compared to litigation. Plaintiff failed to establish the difference in the cost of arbitration and the cost of litigating her claims in court. Thus, she has also failed to establish that there is a differential that is so great that it deterred her from bringing the claim in an arbitration proceeding.

We further note that there is a significant difference between the claim for wrongful death brought in this case and the claims of the plaintiff brought in Tillman based on single premium credit life and disability insurance with premiums less than $5,000. In Tillman, the small amount of the claim compared to the costs of arbitration made it difficult to procure legal representation to prosecute the claims. In this case, the claim is for wrongful death, a substantial claim. The nature and size of the claim in this case is not a barrier to obtaining legal representation. We hold that each of the grounds for substantive unconscionability found by the trial court is flawed.

There is no question that plaintiff, as attorney-in-fact for Chapman, entered into the arbitration agreement. She now asks the courts to set aside that agreement because she would prefer to litigate her claim in the courts rather than through arbitration. Plaintiff has failed to meet her burden of establishing procedural and substantive unconscionability. The ruling of the trial court denying defendant’s motion to compel arbitration is reversed, and this matter is remanded to the trial court for entry of an order directing the parties to submit this matter to arbitration in accordance with the terms of the arbitration agreement.