GGNSC Omaha Oak Grove, LLC v. Ivan Payich

Filing

OPINION FILED - THE COURT: James B. Loken, Michael J. Melloy and Steven M. Colloton AUTHORING JUDGE:Michael J. Melloy (PUBLISHED) [4010552] [12-2592]

United States Court of Appeals
For the Eighth Circuit
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No. 12-2592
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GGNSC Omaha Oak Grove, LLC, doing business as Golden Living Center of Sorensen
lllllllllllllllllllll Plaintiff - Appellant
v.
Ivan Payich, as Special Administrator for the Estate of Nada Payich
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the District of Nebraska - Lincoln
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Submitted: December 11, 2012
Filed: March 4, 2013
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Before LOKEN, MELLOY, and COLLOTON, Circuit Judges.
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MELLOY, Circuit Judge.
GGNSC Omaha Oak Grove, LLC, d/b/a Golden Living Center of Sorensen
(“Sorensen”), appeals the district court’s1 denial of its Application to Compel
Arbitration in a suit filed by Ivan Payich, as Special Administrator for the Estate of
1

The Honorable John M. Gerrard, United States District Judge for the District
of Nebraska.

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Nada Payich (“the Estate”). Sorensen argues that Nada Payich was a third-party
beneficiary of an Arbitration Agreement between Sorensen and Ivan Payich and that
the Estate is therefore compelled to arbitrate its claims. Because we find no clear
error in the district court's determination that Sorensen failed to prove it executed a
valid contract with Ivan Payich, we affirm.
I.
On September 3, 2009, Nada Payich executed a Durable Power of Attorney
(“POA”) giving her son, Ivan Payich, authority over her healthcare decisions in the
event a physician deemed her incapable of making those decisions herself. On
September 4, 2009, Nada was admitted as a resident of the Golden Living Center of
Sorensen (“the Center”) in Omaha, Nebraska. Sorensen owns the Center. No party
claims a physician declared Nada incapable of making healthcare decisions, either by
September 4, 2009, or at any time prior to her death.
On the day Nada was admitted to the Center, Ivan signed an Admission
Agreement. The Admission Agreement states, “[D]isputes under this Agreement may
be submitted to arbitration, if the Resident elects to do so, by signing a separate
agreement executed between the parties. Agreeing to arbitration is not a condition
of admission or continuing care.” Ivan signed the Admission Agreement on the line
for Nada’s legal representative and wrote “(son)” after his signature. The Admission
Agreement names Nada and the Center as the parties to the contract. Nada did not
sign the Admission Agreement.
On the day Nada was admitted to the Center, Ivan also signed an Arbitration
Agreement. The Arbitration Agreement provides that all claims “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.” The Arbitration
Agreement allows an authorized representative to sign on the resident’s behalf “[i]f
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the resident is unable to consent or sign this provision because of physical disability
or mental incompetence.” Ivan signed on the line marked “Resident” and wrote
“(son)” after his signature. The Arbitration Agreement names Nada and the Center
as the parties to the contract. Nada did not sign the Arbitration Agreement.
Nada subsequently died. After Nada’s death, Ivan, as Special Executor for the
Estate, sued Sorensen in Nebraska state court for negligent care of Nada, among other
claims. Sorensen then filed an Application to Compel Arbitration in federal court.
Sorensen initially alleged that Ivan signed the Arbitration Agreement on Nada’s
behalf and that the Estate was therefore bound by it. Later, Sorensen alternatively
alleged that Ivan signed the Arbitration Agreement in his individual capacity and that
Nada was a third-party beneficiary of the contract between Sorensen and Ivan.
The district court first found Ivan did not have authority under the POA to sign
the Arbitration Agreement on Nada’s behalf because no physician had deemed Nada
incapable of making healthcare decisions. Additionally, the district court did not find
any evidence Nada had given Ivan any other form of authority to sign the Arbitration
Agreement on her behalf. Finally, the district court ruled Nada could not have been
a third-party beneficiary of the Arbitration Agreement because Sorensen did not
prove it executed a valid contract with Ivan in his individual capacity.
II.
The parties agree Nebraska law governs Sorensen’s Application to Compel
Arbitration. We have jurisdiction under 28 U.S.C. § 1291 because the district court’s
denial of Sorensen’s Application was a final decision disposing of all claims.
On appeal, Sorensen argues only that Nada was a third-party beneficiary of the
Arbitration Agreement—Sorensen has abandoned its argument that Ivan signed the
Arbitration Agreement on Nada’s behalf. For Nada to be a third-party beneficiary,
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Sorensen must have validly executed the Arbitration Agreement with Ivan in his
individual capacity. See Marten v. Staab, 543 N.W.2d 436, 442 (Neb. 1996) (“A
third-party beneficiary’s rights depend upon, and are measured by, the terms of the
contract between the promisor and promisee.”). “A party seeking to enforce a
contract has the burden of establishing the existence of a valid, legally enforceable
contract.” Houghton v. Big Red Keno, Inc., 574 N.W.2d 494, 498 (Neb. 1998) (citing
Hoeft v. Five Points Bank, 539 N.W.2d 637, 644 (Neb. 1995)). “The terms of a
contract are to be accorded their plain and ordinary meaning” and enforced according
to those terms. Stackhouse v. Gaver, 801 N.W.2d 260, 269 (Neb. Ct. App. 2011)
(quoting Ruble v. Reich, 611 N.W.2d 844, 849–50 (Neb. 2000)). Whether a contract
exists is a question of fact in Nebraska, see Gerhold Concrete Co. v. St. Paul. Fire &
Marine Ins. Co., 695 N.W.2d 665, 672 (Neb. 2005), and we review the district court’s
factual findings for clear error. Nitro Distrib., Inc. v. Alticor, Inc., 453 F.3d 995, 998
(8th Cir. 2006).
Sorensen argues “Ivan signed the Admission Agreement and Arbitration
Agreement with his mother as the intended beneficiary of both Agreements.” As
proof, Sorensen points to Ivan’s signature on the Arbitration Agreement and to the
fact that Sorensen provided Nada with care. According to Sorensen, Nada’s
acceptance of the benefits of the two agreements—her acceptance of care by the
Center—binds the Estate to the terms of the agreements.
We disagree.2 Neither Nada’s purported acceptance of benefits nor the terms
of the Arbitration Agreement prove a contract between the Center and Ivan. First,
and most significantly, the Arbitration Agreement names Nada and the Center as the
contracting parties. Additionally, the Arbitration Agreement only provides signature
2

Sorensen argues the Arbitration Agreement became part of the Admission
Agreement upon execution. However, the two agreements could only merge if both
were validly executed. We focus on the invalidity of the Arbitration Agreement and
express no opinion regarding the validity of the Admission Agreement.
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lines for the Center’s representative, for the resident, and, in case the resident is
incompetent, for the resident’s legal representative. Thus, on the face of the
Agreement, the parties intended only the Center and the resident or the resident’s
representative to enter the contract. Ivan was not the resident, and Sorensen has
abandoned its argument that Ivan was Nada’s representative. Although Ivan signed
on the line for the resident, he wrote “(son)” after his signature, suggesting he
attempted to sign as Nada’s representative rather than in his individual capacity. The
fact that all parties now agree Ivan was not authorized to sign on Nada's behalf does
not change the parties' intentions at the time of signing.
On this record, we find no clear error in the district court’s determination that
Sorensen did not prove a valid contract with Ivan. Without a contract between
Sorensen and Ivan, there is no contract of which Nada could have been a third-party
beneficiary.3 Therefore, the Estate is not bound by the Arbitration Agreement.
III.
We affirm the district court’s ruling.
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3

As Sorensen notes, some state courts have enforced arbitration agreements
against nursing home residents’ estates using the third-party beneficiary doctrine.
However, in those cases, “the agent entered the admissions agreement not merely as
a purported representative but also in his or her individual capacity.” Ping v. Beverly
Enters., Inc., 376 S.W.3d 581, 596 (Ky. 2012) (emphasis added) (citing Cook v.
GGNSC Ripley, LLC, 786 F. Supp. 2d. 1166 (N.D. Miss. 2011)); see also Forest Hill
Nursing Ctr., Inc. v. McFarlan, 995 So.2d 775 (Miss. Ct. App. 2008). In other words,
courts have enforced arbitration agreements using the third-party beneficiary doctrine
when they have concluded or assumed the nursing home and the signer formed a valid
underlying contract. Here, the district court specifically determined that the Center
and Ivan did not form a valid contract.
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