Diversicare Leasing Corp. et al v. Hutchison et al
MEMORANDUM OPINION & ORDER, ; 1) Plaintiff's motion to Compel Arbitration and to Enjoin Defendant be SUSTAINED 8 ; 2) Defendant shall prosecute all of her claims arising out of John Hutchinson's residence at South Shore Nursing and Rehabi litation Center in accordance with terms of arbitration agreement 3) matter is DISMISSED WITH PREJUDICE AND STRICKEN from active docket of the Court; This Court will retain jurisdiction over this matter for purpose of enforcing any arbitration award.. Signed by Judge Henry R. Wilhoit, Jr on 2/7/18.(SMT)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
Civil Action No. 17-42-HRW
DIVERSICARE LEASING CORP., et al.,
MEMORANDUM OPINION AND ORDER
as Administratrix of the Estate of
This matter is before the Court upon Plaintiffs' Motion to Compel Arbitration and Enjoin
Defendant [Docket No. 8]. The matter has been fully briefed by the parties [Docket Nos. 8-1, 12
and 13]. For the reasons set forth herein, the Court will sustain the motion.
This case arises from John Hutchinson's residency at South Shore Nursing &
Rehabilitation Center, a nursing facility owned and operated by Plaintiffs. As part of the
admissions process, on April 30, 2015, John Hutchinson executed admissions documents in
connection with his admission to South Shore Nursing & Rehabilitation Center ("South Shore").Mr.
Hutchinson signed numerous documents related to his admission to South Shore, including:
Informed Consent to Decline Medical Treatment and/or Services; Resident Influenza Vaccine
Release and Informed Consent; Request to Decline Cardiopulmary Resuscitation, and;
Acknowledgment of Documents Signed and Reviewed. These documents are attached to Plaintiffs
Motion as Exhibit A.
The Admission Agreement contains an Arbitration Agreement, also executed by Mr.
Hutchinson. The contract requires any claims arising out of the Admission Agreement or related to
Mr. Hutchinson's medical care at South Shore are to be resolved exclusively through binding
arbitration. It provides, "that any legal dispute, controversy, demand, or claim that arises out of or
relates to the Resident Admission Agreement or is in any way connected to the Resident's stay at the
Facility shall be resolved exclusively by binding Arbitration and not by a lawsuit or resort to other
court process." [Docket No. 8-3].
The Agreement expressly includes the following: any claim for payment, non-payment, or
refund for services rendered to the Residency by the Facility, claims arising out of State or Federal
law, claims based upon breach of contract, breach of fiduciary duty, violation of rights, fraud, or
misrepresentation, common law or statutory negligence, gross negligence,malpractice, abuse, neglect
or any other claim based on any departure from accepted standards of medical or nursing care,
whether such claims be for statutory, compensatory, or punitive damages, and whether arising in the
future or presently existing. Id.
The signing parties acknowledged that they were "agreeing to mutual arbitration,
regardless of which of us may make a claim, and that we will mutually benefit from the resolution
of disputes through arbitration." Id.
The Arbitration Agreement also states that Mr. Hutchinson had the right to
consult with an attorney prior to signing the agreement. Id. It further states that Mr. Hutchinson
could rescind the Agreement by providing written notice to the facility within 30 days. Id.
According to the Complaint, Mr. Hutchinson did not provide such notice after he signed the
Mr. Hutchinson's daughter, Rose, filed an action in the Jefferson Circuit Court seeking
money damages for alleged injuries to her father arising out of his residency at South Shore
Nursing & Rehabilitation Center ("the State Court Action").
Plaintiffs allege that Defendant has refused to arbitrate his claims. Therefore, they
brought this petition under§ 4 of the Federal Arbitration Act.
Plaintiffs now move this Court to compel arbitration and enjoin the proceedings in the
State Court Action.
The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., "manifests a liberal federal
policy favoring arbitration agreements." Masco Corp. v. Zurich American Ins. Co., 382 F.3d 624,
626 (6th Cir.2004) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)) (internal quotation marks omitted).
Under the FAA, when contracts contain arbitration clauses, federal courts "are to examine
the language of the contract in light of the strong federal policy in favor of arbitration," and are
required to resolve any ambiguities in the agreement or doubts as to the parties' intentions in
favor of arbitration. Stout v. JD. Byrider, 228 F.3d 709, 714 (6th Cir.2000); see also AT & T
Techs., Inc. v. Communications Workers ofAm., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d
648 (1986) (explaining that when a "contract contains an arbitration clause, there is a
presumption of arbitrability in the sense that an order to arbitrate the particular grievance should
not be denied unless it may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute. Doubts should be in favor of
coverage.") (internal citations and quotation marks omitted).
Before compelling an unwilling party to settle a dispute by arbitration, the Court must
apply a two-part test "to determine whether the dispute is arbitrable; meaning that a valid
agreement to arbitrate exists between the parties, and that the specific dispute falls within the
substantive scope of that agreement." Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th
Cir. 2003). The Sixth Circuit has recognized hat even when applying state-law principles of
contract interpretation," 'due regard must be given to the federal policy favoring arbitration, and
ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration.' "
Bratt Enterprises, Inc., 338 F.3d at 613 (quoting Volt Info. Scis., Inc. v. Bd. of Trustees ofLeland
Stanford Junior Univ., 489 U.S. 468, 475-76, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)). The
court then "shall order arbitration upon being satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not in issue." Rent-A-Center, 130 S.Ct. at 2776
(quoting 9 U.S.C. § 4).
Finally, in evaluating motions to compel arbitration, "courts treat the facts as they would
in ruling on a summary judgment." Kovac v. Superior Dairy, Inc., 930 F.Supp.2d 857, 864
(N.D.Ohio 2013). Therefore, the party opposing arbitration bears the burden of "showing a
genuine issue of material fact as to the validity of the agreement to arbitrate." Great Earth Cos. v.
Simons, 288 F.3d 878, 889 (6th Cir.2002).
In seeking to avoid the agreement, Defendant contends it is not enforceable. She argues
that her father lacked the capacity to enter in the agreement. She alludes to a prior diagnosis of
dementia and states that he could not read the fine print.
Capacity is analyzed under state law. See Rowan, 647 F. App'x at 609. Under Kentucky
law, a signed contract "will not be lightly set aside in the absence of clear and convincing
evidence." Lausman v. Brown, 168 S.W.2d 579, 585 (Ky. 1943). A transaction with a person not
adjudicated mentally unsound will not be voided "unless the condition be so obvious that any and
all ordinarily prudent minded persons would observe the defect." Everett v. Downing, 182
S.W.2d 232, 236 (Ky. 1944). There is a presumption of contractual capacity. Rose v. Rose, 182
S.W.2d 977, 978 (1944). "[O]ld age does not constitute in itself incapacity to enter into a valid
contract or execute a deed ... " Id. "There must be some direct proof sufficient to convince the
minds of the court that at the time the transactions were entered into that he did not and could not
understand his acts." Revlett v. Revlett, 118 S.W.2d 150, 155 (Ky. 1938).
Federal courts in Kentucky have further articulated Kentucky's competency standard in
connection with the signing of an arbitration agreement upon admission to a long-term care
facility. In Abell v. Bardstown Med. Investors, Ltd., a case from the Western District of Kentucky
involving a claim that a patient suffering from a "major mental disorder" lacked the capacity to
enter into an arbitration agreement, the court, in its order enforcing the arbitration agreement,
As to the issue of mental competency, "courts will look only to the
adequacy of the understanding where the validity of an act is
questioned, and neither age, sickness, extreme distress, or debility
of the body will affect the capacity to make a contract
or conveyance, if sufficient intelligence remains to understand the
transaction." Hall v. Crouch, 341S.W.2d591, 594 (Ky.1961).
Because the law understands that individuals suffering from
conditions such as psychosis have lucid periods in which they
can conduct themselves and their business normally,
"unsoundness of mind to avoid a contract must relate to the
immediate time when the contract was made." Id. A person has
the requisite mental capacity if they have "the ability to understand
and appreciate the consequences of the particular transaction."
Conners v. Elbe, 269 S.W.2d 716, 718 (Ky.1954). As such, the
evidence must be such that it sufficiently proves that Plaintiff could
not, and did not, understand that she was signing an arbitration
Abell v. Bardstown Med. Investors, Ltd., 2011WL2471210 at *3 (W.D. Ky. June 20, 2011)
Given these periods of lucidity, evidence off "unsoundness of mind to avoid a contract
must relate to the immediate time when the contract was made." Hall v. Crouch, 341 S.W.2d
591, 594 (Ky. 1960) (quoting Jefferson Standard Life Ins. Co. v. Cheek's Adm'r, 80 S.W.2d 518,
521 (1935)).) See also, Abell v. Bardstown Med. Inv'rs, Ltd., at *3-4.
This is certainly true in Mr. Hutchinson's case. Stephanie Kramer, an employee at South
Shore Nursing & Rehabilitation Center, assisted Mr. Hutchinson with the admissions process on
April 30, 2-0145 and personally witnessed Mr. Hutchinson sign the Arbitration Agreement.
[Affidavit of Stephanie Kramer, Docket No. 13-1atif2-3]. Ms. Kamer read the Arbitration
Agreement to Mr. Hutchinson in its entirety and asked if he had any questions about it. Id. at if 6.
Mr. Hutchinson responded that he did not. Id. Throughout the admissions process, Mr.
Hutchinson responded appropriately to Ms. Kamer's questions and told her that he understood
what she was telling him on several occasions. Id. at if 7.
Mr. Hutchinson's medical records also support a conclusion that he was competent to
enter into the Arbitration Agreement upon his admission to South Shore. An evaluation dated
April 30, 2015, the day he signed the Arbitration Agreement, states he was alert and oriented to
person, place, and time. [Docket No. 8-2, pg. 1]. He was not confused or lethargic and he had no
notable memory problems. Id.
Mr. Hutchinson's admission Minimum Data Set (MDS) Assessment, which was
completed on May 9, 2015 and pertained to the prior seven days, including the day of his
admission to South Shore, notes that he had clear speech, was capable of expressing ideas and
wants, and had clear comprehension of verbal content. Id. at 2.
Mr. Hutchinson also signed other legal documents before and after his execution of the
Arbitration Agreement, including an informed consent to decline treatment and Power of
Attorney documents on April 7, 2015 and August 19, 2015. (Id. at 3; 12-19.) Notably, the August
19, 2015 Power of Attorney grants Rose Hutchinson, as the designated attorney-in-fact, the
power to arbitrate Mr. Hutchinson's claims. (Id. at 13.) The Sixth Circuit has noted that the
signing of a power of attorney in the month before a resident moved into a long-term care facility
"counsels against finding incapacity [to sign an arbitration agreement]." Rowan v. Brookdale
Senior Living Cmtys., Inc., 647 F. App'x 607, 610 (6th Cir. 2016) (holding that individual whose
treating physician documented had "limited insight/judgement as a result of either mild vascular
dementia or delirium" was competent to execute arbitration agreement).
Nothing in the screening indicates that, at the time Shelton signed the arbitration
agreement, he was unable to understand it. There is no opinion - professional or otherwise - to
that effect in the record. Accordingly, the Court cannot find that the Defendant has met her
burden of establishing by clear and convincing evidence that Shelton lacked the mental capacity
to enter into the agreement at the time of execution.
Nor can Defendant avoid the Arbitration Agreement on the grounds that Mr. Hutchinson
had trouble reading fine print. There is evidence in the records to suggest that Mr. Hutchinson
was capable of reading the regular print of the Arbitration Agreement. In a weekly nursing
assessment performed on May 5, 2015, and consistently throughout the residency period, it was
documented that Mr. Hutchinson's vision was "adequate - sees fine detail, including regular
print in newspapers/books." [Docket No. 8-2]. Likewise, in connection with his admission
MDS Assessment completed on May 9, 2015, Mr. Hutchinson's visual function was assessed and
he reported to staff of South Shore that he "just cannot see far away." Id.
Defendant attempts to argue that her wrongful death claim is not subject to arbitration.
This Court rejected an identical argument in Golden Gate National Senior Care v. Addington,
2015 WL 1526135 (Ky. 2015), holding that requirement that all wrongful death beneficiaries
sign the arbitration agreement violated the FAA. "Because it is impossible to identify all possible
wrongful death claimants at the time an arbitration agreement is signed and the resident is alive,
the Ping holding would effectively nullify arbitration in the wrongful death context, which is
precluded by the FAA." Id. at *8.
Having found that Defendant must submit her claims to arbitration, the question remains
whether this Court should enjoin her from pursuing her parallel action in state court. The Court
finds that such an injunction is necessary, and the Defendant is enjoined from proceeding in
Jefferson Circuit Court. "Although the FAA requires courts to stay their own proceedings where
the issues to be litigated are subject to an agreement to arbitrate, it does not specifically authorize
federal courts to stay proceedings pending in state courts." Great Earth Companies, Inv. v.
Simmons, 288 F.3d 878, 893 (6 1h Cir. 2002) (internal citations omitted). For this reason, "the
District Court's authority to enjoin state-court proceedings is subject to the legal and equitable
standards for injunctions generally, including the Anti Injunction Act." Id. Pursuant to the
Anti-Injunction Act, "[a] court of the United States may not grant an injunction to stay
proceedings in a State court except as expressly authorized by Act of Congress, or where
necessary in aid of its jurisdiction, or to protect or effectuate its judgments." 28 U.S.C. § 2283.
An injunction in this case "properly falls within the exception for injunctions 'necessary to
protect or effectuate [this Court's] judgments.' "Great Earth, 288 F.3d at 894. The Court has
determined that the parties entered into a binding arbitration agreement covering the scope of
Defendant's claims. Having made such a determination and compelling him to submit to
arbitration, it is necessary to enjoin Defendant from pursing his claims in any alternative forum,
including state court. Otherwise, she would be permitted to circumvent her arbitration agreement
and in doing so, circumvent this Court's judgment that she be compelled to arbitrate his claims.
Accordingly, the Court will order that Defendant be enjoined from proceeding with her pending
A valid and binding arbitration agreement was executed. This matter must be referred to
Accordingly, IT IS HEREBY ORDERED:
Plaintiffs' Motion to Compel Arbitration and to Enjoin Defendant [Docket No. 8]
Defendant shall prosecute all of her claims arising out of John Hutchinson's
residency at South Shore Nursing & Rehabilitation Center in accordance with the
terms of the arbitration agreement ; and
that this matter is hereby DISMISSED WITH PREJUDICE and STRICKEN
from the active docket of the Court.
This Court will retain jurisdiction over this matter for the purpose of enforcing any
day of February, 2018.
Heney R. Wilhoit Jr.
Un lted States District Judge
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