Kutner v. Emeritus Corporation et al

Filing 14

ORDER Defendants' Motion to Compel Arbitration (Doc. 11 ) is GRANTED. The parties are directed to submit this matter to arbitration consistent with the terms of their agreement and the provisions of the Federal Arbitration Act, 9 U.S.C. § ;§ 1 et seq. Upon completion of the arbitration proceedings, the parties are directed to comply with the provisions of 9 U.S.C. §§ 9-13, as applicable. This action is STAYED pursuant to 9 U.S.C. § 3. The parties shall file a joint status report concerning their arbitration on or before March 4, 2013, and every 90 days thereafter until the stay has been lifted. Signed by Judge G Murray Snow on 12/4/2012. (KMG)

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WO

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Marilyn Kutner, a single person,
Plaintiff,

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No. CV-12-01682-PHX-GMS
ORDER

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v.

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Emeritus Corporation, a Washington
corporation; Black & White Corporation IV,

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Defendants.

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Pending before the Court is Defendants’ Motion to Compel Enforcement of an

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Arbitration Agreement. (Doc. 10.) For the reasons discussed below, the motion is

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granted.
FACTUAL BACKGROUND

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On June 13, 2011, Plaintiff Marilyn Kutner fell and allegedly suffered an injury on

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the premises of Chris Ridge Village. (Doc. 1 (Kutner Compl.) ¶¶ 5-8.) She was a resident

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at the Village, which appears to be an “elder community” that has both assisted and

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independent living units.

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On March 17, 2012, Kutner signed an “Agreement to Resolve Disputes by

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Binding Arbitration.” (Doc. 11 at 14-15; Doc. 12 at 18-19.) The agreement was part of a

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larger packet of Chris Ridge policies that Kutner received when her monthly fee was

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adjusted. (Doc. 12 at 6-19.) The arbitration agreement provides that

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any action, dispute, claim or controversy of any kind, whether in contract or
in tort, statutory or common law, personal injury, property damage, legal or

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equitable or otherwise, arising out of the provision of assisted living
services, healthcare services, or any other goods or services provided under
the terms of any agreement between the Parties, . . . or any other dispute
involving acts or omissions that cause damage or injury to either Party . . .
shall be resolved exclusively by binding arbitration and not by lawsuit or
resort to the judicial process.

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(Doc. 11 at 14; Doc. 12 at 18) (emphasis in original). The arbitration agreement provided

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that the resident had a right to legal counsel at the proceedings. In addition, the agreement

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contained an opt-out provision allowing revocation by written notice within 15 days of

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signing. The agreement concluded with the following paragraph in italics:

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The Resident understands that the result of this Arbitration Agreement is
that claims, including personal injury claims that the Resident may have
against the Community cannot be brought in a lawsuit in court before a
judge or jury, and agrees that all such claims will be resolved as described
in this Arbitration Agreement. Admission to the Community is not
contingent upon signing this Agreement.
(Doc. 11 at 15; Doc. 12 at 19.)
Kutner filed a Complaint against Defendant Emeritus Corporation in Maricopa
County Superior Court on June 19, 2012. (Doc. 1.) Emeritus removed to this Court on
August 8, 2012. (Id.) It has now moved to compel enforcement of the March 2012
arbitration agreement and stay this action.
DISCUSSION
The arbitration agreement between Kutner and Emeritus provides that “any action,
dispute, claim or controversy of any kind . . . shall be resolved exclusively by binding
arbitration.” (Doc. 11 at 14; Doc. 12 at 18.) On August 22, 2012, Emeritus requested that
Kutner dismiss this action and submit to arbitration. (Doc. 11 at 12-13.) Kutner declined.
Emeritus now asks the Court to stay this action and compel arbitration pursuant to the
parties’ contract and the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq.
The FAA broadly provides that written agreements to arbitrate disputes arising out
of transactions involving interstate commerce “shall be valid, irrevocable, and
enforceable” except upon grounds that exist at common law for the revocation of a

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contract. 9 U.S.C. § 2 (2006); see Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 113-

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19 (2001). Absent a valid contract defense, the FAA “‘leaves no place for the exercise of

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discretion by a district court, but instead mandates that district courts shall direct the

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parties to proceed to arbitration on issues as to which an arbitration agreement has been

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signed.’” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.

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2000) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985)) (emphasis

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in original). The district court’s role under the FAA is “limited to determining

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(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement

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encompasses the dispute at issue.” Id.

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I.

Validity of the Agreement

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Kutner does not contest her signature on the agreement; instead, she challenges the

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validity of the arbitration agreement on three grounds. First, she claims that her counsel

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had contacted Emeritus previous to her signing the arbitration agreement, and that the

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agreement was therefore an attempt to circumvent inevitable litigation. Other than the

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bare assertion by her counsel in the Response, however, Kutner has not produced any

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evidence of communications by her attorney to Emeritus that predate the agreement. The

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Response references a letter sent by Kutner’s attorney on March 29, 2012, that requested

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compensation for the injury. (Doc. 12 at 2.) Yet Kutner has not attached the letter. The

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Court cannot rely on unsupported statements by counsel in legal memoranda. And in any

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event, the alleged letter was sent 12 days after the agreement had been signed, and is

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consequently not evidence that Emeritus was trying to cut off litigation. There is no

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evidence of fraud or duress.

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Second, Kutner asserts that the arbitration agreement lacks mutual consent

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because Kutner is “an 84 year old woman with [a] serious case of osteoporosis and

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Parkinson’s disease [and] believe[d] that she was merely signing papers related to

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continuing her tenancy in Chris Ridge Village.” (Id.) Once again, this statement does not

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come from the allegations of the Complaint or a supporting affidavit, but is an assertion

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by Kutner’s counsel in a legal memorandum. Facts—or even formal allegations—“cannot
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be created by a party simply making assertions in its legal memoranda.” Cumis Ins. Soc.,

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Inc. v. Merrick Bank Corp., 480 F. Supp. 2d 1077, 1083 (D. Ariz. 2010) (citing S.A.

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Empresa De Viacao Aerea Rio Grandense v. Walter Kidde & Co., 690 F.2d 1235, 1238

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(9th Cir. 1982)). That failure is reason enough to reject the argument. Even assuming the

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statements in the memorandum are true, the argument fails on the merits. That Kutner is

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84 years old does not demonstrate that she lacks mental capacity. Nor does the assertion

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that she did not understand the agreement support her defense. Kutner appears to suggest

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that, because the arbitration agreement was part of a larger packet of materials given to

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her (like pet or parking policies), she did not know what she was signing. Arizona law,

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however, strictly adheres to the maxim that “a person who is competent is held as a

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matter of law to know the contents of an agreement [s]he signs.” In re Henry’s Estate, 6

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Ariz. App. 183, 186, 430 P.2d 937, 940 (1967). The signature “demonstrates beyond

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question that she had knowledge of . . . the agreement at the time it was signed.” In re

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Estate of Cortez, 226 Ariz. 207, 212, 245 P.3d 892, 898 (Ct. App. 2010). The lack of

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evidence that Kutner was mentally incompetent at the time she signed the agreement

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defeats her claim that she lacked capacity to contract.

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Kutner’s third defense is that the agreement lacks consideration because (1) she

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has resided at the Village for ten years and (2) the new agreement involved an increase in

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her monthly fee. These two facts do not demonstrate a lack of consideration.

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Furthermore, the arbitration agreement is mutual—Emeritus is also bound by its terms.

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That mutuality is sufficient consideration. Malcoff v. Coyier, 14 Ariz. App. 524, 526, 484

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P.2d 1053, 1055 (1971) (“We agree that it is essential to an enforceable contract that

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there be a consideration or a mutuality of obligation . . . .”).

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Consequently, Kutner has failed to raise a valid defense to enforcement of the agreement

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she entered with Emeritus to arbitrate all claims. II.

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Kutner’s Claim

The Agreement Encompasses

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The Supreme Court has made clear that “any doubts concerning the scope of

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arbitrable issues should be resolved in favor of arbitration[.]” Moses H. Cone Mem’l
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Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); see EEOC v. Waffle House, Inc.,

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534 U.S. 279, 289 (2002). There is thus a “liberal federal policy favoring arbitration.”

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Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 725 (9th Cir. 2007). The language

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“any action, dispute, claim or controversy of any kind” arising out of the relationship

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between Kutner and Emeritus encompasses the personal injury claims she raises in her

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Complaint. The fact that Kutner’s injury allegedly occurred prior to her entering the

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arbitration agreement does not remove it from the scope of the agreement. See Zink v.

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Merrill Lynch Pierce Fenner & Smith, 13 F.3d 330, 333 (10th Cir. 1993) (rejecting

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argument that broad arbitration clause did not cover disputes that occurred prior to the

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execution of the agreement). Again, “‘questions of arbitrability must be addressed with a

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healthy regard for the federal policy favoring arbitration’ with ‘any doubts concerning the

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scope of arbitrable issues . . . resolved in favor of arbitration.’” Bennett v. Liberty Nat.

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Fire Ins. Co., 968 F.2d 969, 971 (9th Cir. 1992) (quoting Cone Hospital, 460 U.S. at 24-

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25 (1983)). Kutner does not contest that her claim would otherwise fall within the scope

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of the agreement. Because her common law defenses to enforcement of the agreement

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fail, her claim must proceed to arbitration.

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IT IS THEREFORE ORDERED:

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1.

Defendants’ Motion to Compel Arbitration (Doc. 11) is GRANTED.

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2.

The parties are directed to submit this matter to arbitration consistent with

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the terms of their agreement and the provisions of the Federal Arbitration Act, 9 U.S.C.

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§§ 1 et seq.
3.

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Upon completion of the arbitration proceedings, the parties are directed to

comply with the provisions of 9 U.S.C. §§ 9-13, as applicable.
4.

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This action is STAYED pursuant to 9 U.S.C. § 3.

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5.

The parties shall file a joint status report concerning their arbitration on or

before March 4, 2013, and every 90 days thereafter until the stay has been lifted.
Dated this 4th day of December, 2012.

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