Sorrell v. Regency Nursing, LLC
Filing
16
MEMORANDUM OPINION & ORDER granting 5 Motion to Compel Arbitration; denying 7 Motion to Remand; granting in part and denying in part 8 Motion to Amend/Correct. Signed by Senior Judge Thomas B. Russell on 5/27/2014. cc:counsel (KJA)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:14-CV-00304-TBR
NAOMI SORRELL
Plaintiff
v.
REGENCY NURSING, LLC, d/b/a REGENCY CENTER
Defendant
MEMORANDUM OPINION AND ORDER
This matter is before the Court upon Defendant Regency Nursing, LLC d/b/a
Regency Center’s Motion to Enforce Arbitration Agreement. (Docket No. 5.) Plaintiff
Naomi Sorrell has responded, (Docket No. 13), and Defendant has replied, (Docket No.
14.) Also pending before the Court are Plaintiff’s Motion to Remand to State Court,
(Docket No. 7), and Motion to Amend Complaint and for Expedited Trial, (Docket No.
8). These matters all are fully briefed and ripe for adjudication. For the reasons that
follow, Defendant’s Motion to Compel Arbitration, (Docket No. 5), will be GRANTED;
Plaintiff’s Motion to Remand, (Docket No. 7), will be DENIED; and Plaintiff’s Motion
to Amend Complaint, (Docket No. 8), will be GRANTED IN PART and DENIED IN
PART.
BACKGROUND
Plaintiff Naomi Sorrell executed a durable power of attorney (POA) on
December 10, 2012, designating her daughter, Cynthia Bennett, as her true and lawful
attorney. (Docket No. 5-2, at 1-4.) The POA outlined a number of authorities given to
Bennett, including:
Page 1 of 18
To demand, sue for, collect, recover and receive all debts,
monies, interest and demands whatsoever now due or that may
hereafter be or become due to me (including the right to institute
legal proceedings therefore).
....
To make, execute and deliver deeds, releases, mortgages,
conveyances and contracts of every nature in relation to both real
and personal property . . . .
(Docket No. 5-2, at 1-2.) The POA provides additional incidental authority relating to
the other authorities granted elsewhere in the POA. (Docket No. 5-2, at 2 (“To do and
perform all acts necessary or incidental to the carrying out of the powers conferred
. . . .”).) The POA also contains a broad “catch all” provision, which provides:
I hereby further grant unto my said attorney in fact full power
in and concerning the above premises and to so any and all acts,
including but not limited to the above, as fully as I could do if I
were personally present, and I do ratify and confirm whatever my
said attorney in fact shall lawfully do under these presents.
(Docket No. 5-2, at 3.)
On January 5, 2012, Sorrell was transferred to Defendant Regency Nursing,
LLC d/b/a Regency Center f/k/a Regency Care and Rehabilitation Center (Regency).
That same day, Bennett executed admission documents on behalf of Sorrell. Among
those documents was a “Long Term Care Arbitration Agreement” (Arbitration
Agreement). The Arbitration Agreement provides, in pertinent part:
AGREEMENT TO ARBITRATE “DISPUTES”: Any and all
claims or controversies arising out of or in any way relating to this
Agreement, the Admission Agreement or any of the Resident’s
stays at this Facility, . . . whether or not related to medical
malpractice, including but not limited to disputes regarding the
making,
execution,
validity,
enforceability,
voidability,
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unconscionability, severability, scope, interpretation, preemption,
waiver, or any other defense to enforceability of this Agreement or
the Admission Agreement, whether arising out of State or Federal
law, whether existing now or arising in the future, whether for
statutory, compensatory, or punitive damages and whether
sounding in breach of contract, tort or beach of statutory duties,
regardless of the basis for the duty or of the legal theories upon
which the claim is asserted, shall be submitted to binding
arbitration.
(Docket No. 5-2, at 8.) The Arbitration Agreement also provided the right to rescind the
agreement by providing written notice within 30 days of admission. (Docket No. 5-2, at
10 (“RIGHT TO CHANGE YOUR MIND: This Agreement may be cancelled by
written notice . . . from you within thirty (30) calendar days of the Resident’s date of
admission. . . .”).) The Arbitration Agreement recites that Bennett acknowledges having
received a copy and that Bennett “has had an opportunity to read it and ask questions
about it before signing.” (Docket No. 5-2, at 11.) The Arbitration Agreement goes on
to state:
Right to Consult with Attorney: Please read this Agreement very
carefully and ask any questions that you have before signing it.
Feel free to consult with an attorney of your choice before signing
this Agreement. Other facilities may or may not request residents
to sign such an Agreement, and you have a choice as to which
facility you desire to live in.
Waiver of Trial by Judge or Jury: By signing this Agreement,
the Parties are giving up and waiving their right to have any
Dispute decided in a court of law before a judge and/or jury.
(Docket No. 5-2, at 11.)
The Arbitration Agreement states that execution of the
Arbitration Agreement is voluntary and not a condition of admission:
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VOLUNTARY AGREEMENT: If you do not accept this
Agreement, you will still be allowed to live in, and received
services in, this Facility.
(Docket No. 5-2, at 12.) Finally, the Arbitration Agreement concludes, just
above the signature lines, with the statement:
BY SIGNING BELOW, THE UNDERSIGNED PARTIES
CONFIRM THAT EACH OF THEM HAS READ ALL SIX (6)
PAGES OF THIS AGREEMENT AND UNDERSTANDS
THAT EACH HAS WAIVED HIS/HER OR ITS RIGHT TO A
TRIAL, BEFORE A JUDGE AND/OR A JURY, AND THAT
EACH OF THEM VOLUNTARILY CONSENTS TO ALL OF
THE TERMS OF THIS AGREEMENT.
(Docket No. 5-2, at 13.) Bennett initialed pages 1 through 5 and signed page 6 as
Sorrell’s legal representative. (Docket No. 5-2, at 8-13.)
Sorrell filed this action in Jefferson Circuit Court on March 14, 2014. (See
Docket Nos. 1; 1-1.) Regency timely removed to this Court on April 10, 2014, on
diversity grounds. (Docket No. 1.) Sorrell alleges three counts in her Complaint: (1)
negligence and gross negligence in relation to the care she has received at Regency, (2)
violations of long-term-care residents’ rights pursuant to Ky. Rev. Stat. § 216.510 et
seq., and (3) breach of contract. (Docket No. 1-1, at 3-5.)
DISCUSSION
Regency moves to compel arbitration and stay these proceedings, and Sorrell
moves to amend her complaint and to remand this action to state court. The Court will
begin by addressing Sorrell’s Motion to Amend Complaint, (Docket No. 8), and Motion
to Remand, (Docket No. 7), before turning to Regency’s Motion to Compel Arbitration.
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I.
Sorrell’s Motion to Amend Complaint and Motion to Remand
In her first Motion, Sorrell seeks to amend her Complaint to add nine corporate
entities in the corporate chain above Regency. (Docket No. 8-1.) Regency states that it
has no procedural objection to granting Sorrell leave to file her proposed amended
complaint naming these entities as defendants. (Docket No. 11.) As such, and in
accordance with Federal Rule of Civil Procedure 15(a)(2)’s policy that courts should
freely grant leave to amend a pleading when justice so requires, the Court will GRANT
Plaintiff’s motion for leave to file an amended complaint, (Docket No. 8), and her
Amended Complaint, (Docket No. 8-2), will be docketed in this matter.. In that same
Motion, Sorrell also requests that the Court set an expedited trial date. (Docket No. 8-1,
at 4.) In view of the Court’s conclusions below relative to Regency’s Motion to Compel
Arbitration, Sorrell’s request for an expedited trial date will be DENIED.
In her second Motion, Sorrell moves the Court to remand this action to Jefferson
Circuit Court on the basis that “additional Unknown Defendants,” will, when named,
destroy this Court’s diversity jurisdiction. (Docket No. 7-1, at 1.) (Docket No. 7-1, at
1.) Sorrell states that she “fully intends to discover [these Unknown Defendants’]
identity and include them as litigants.” (Docket No. 15, at 3.) Sorrell insists that “[i]n
all likelihood . . . these defendants once identified are Kentucky residents.” (Docket No.
7-1, at 1.)
“[A]ny civil action brought in a State court of which the district courts of the
United States have original jurisdiction may be removed by the defendant . . . to the
district court . . . embracing the place where such action is pending.” 28 U.S.C. §
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1441(a).
A federal district court has original diversity jurisdiction over an action
between citizens of different states and where the amount in controversy exceeds
$75,000, exclusive of interest and costs. Id. § 1332(a). Diversity jurisdiction requires
complete diversity, meaning that no plaintiff and no defendant are citizens of the same
state. See U.S. Fidelity & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1089 (6th
Cir. 1992). There is no dispute here whether the amount-in-controversy threshold is
satisfied. Instead, the question before the Court is whether diversity jurisdiction exists
where Sorrell has named certain “Unknown Defendants,” who, according to her, “[i]n
all likelihood . . . are Kentucky residents.” (Docket No. 7-1, at 1.)
It is well settled that the Court’s diversity jurisdiction is established at the time
of removal. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 284, 28990 (1938). The removal statute, 28 U.S.C. § 1441(b), provides that in determining
whether an action is removable on the basis of diversity, “the citizenship of defendants
sued under fictitious names shall be disregarded.” The clear language of § 1441(b) is
dispositive here. The Court will address the question whether Sorrell should be granted
leave to file a subsequent amended complaint naming one or more nondiverse
defendants if and when she moves for such leave. As of now, diversity exists, and
Sorrell’s Motion to Remand will be DENIED.
II.
Regency’s Motion to Compel Arbitration
Regency moves the Court to compel arbitration and to stay this action pending
the conclusion of arbitration proceedings. Sorrell argues that arbitration should not be
compelled and offers two arguments as to why the Arbitration Agreement is not
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enforceable: (1) that Bennett lacked the authority under the POA to bind Sorrell to
arbitration, and (2) that Regency concealed that the Arbitration Agreement was optional
and not a condition of Sorrell’s admission to Regency. The Court will address each of
Sorrell’s arguments in turn.
A.
Bennett had authority to execute the Arbitration Agreement on
behalf of Sorrell.
Congress enacted the United States Arbitration Act of 1925, more commonly
referred to as the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1–16, in response to the
common law hostility toward arbitration and the refusal of many courts to enforce
arbitration agreements. The United States Supreme Court has since interpreted the FAA
as codifying “a national policy favoring arbitration when the parties contract for that
mode of dispute resolution.” Preston v. Ferrer, 552 U.S. 346, 349 (2008). The Supreme
Court has further stated that the FAA’s underlying purpose is to put arbitration
agreements “upon the same footing as other contracts.” EEOC v. Waffle House, Inc.,
534 U.S. 279, 289 (2002) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
20, 24 (1991)). The FAA establishes a procedural framework applicable in both federal
and state courts, and also mandates that substantive federal arbitration law be applied in
both. See Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995); Southland Corp.
v. Keating, 465 U.S. 1, 16 (1984).
Section 2 of the FAA, which governs the enforceability of arbitration
agreements, provides that a written agreement to arbitrate disputes arising out a contract
involving interstate commerce “shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C.
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§ 2. Whereas § 2 mandates enforcement, § 3 permits a party seeking to enforce an
arbitration agreement to request that litigation be stayed until the terms of the arbitration
agreement have been fulfilled. 9 U.S.C. §§ 2–3. Section 4 goes on to provide the
mechanism by which a party may petition a court to compel arbitration:
A party aggrieved by the alleged failure, neglect, or refusal of
another to arbitrate under a written agreement for arbitration may
petition any United States district court . . . for an order directing
that such arbitration proceed in the manner provided for in such
agreement. . . . The court shall hear the parties, and upon being
satisfied that the making of the agreement for arbitration or the
failure to comply therewith is not in issue, the court shall make
an order directing the parties to proceed to arbitration in
accordance with the terms of the agreement. . . . If the making of
the arbitration agreement or the failure, neglect, or refusal to
perform the same be in issue, the court shall proceed summarily
to the trial thereof.
Id. § 4. Thus, before compelling arbitration, the Court “must engage in a limited review
to determine whether the dispute is arbitrable.” Masco Corp. v. Zurich Am. Ins. Co.,
382 F.3d 624, 627 (6th Cir. 2004) (quoting Javitch v. First Union Sec., Inc., 315 F.3d
619, 624 (6th Cir. 2003)). Such review, the Sixth Circuit advises, requires the Court to
determine first whether “a valid agreement to arbitrate exists between the parties,” and
second whether “the specific dispute falls within the substantive scope of the
agreement.” Id. (quoting Javitch, 315 F.3d at 624).
Sorrell does not appear to argue that her claims fall outside the scope of the
arbitration agreement; rather, she argues that no valid arbitration agreement exists
between herself and Regency because the POA did not give Bennett the authority to
enter into any arbitration agreement on her behalf. Thus, the first issue that must be
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resolved is the proper scope of the POA and whether it encompasses the Arbitration
Agreement.
“Because arbitration agreements are fundamentally contracts,” the Court must
“review the enforceability of an arbitration agreement according to the applicable state
law of contract formation.” Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972
(6th Cir. 2007) (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943-44
(1995)).
However, “the FAA preempts ‘state laws applicable only to arbitration
provisions.’” Great Earth Cos. v. Simons, 288 F.3d 878, 889 (2002) (quoting Doctor’s
Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). “Therefore, state law governs
‘generally applicable contract defenses . . . such as fraud, duress, or unconscionability.’”
Id. (alteration in original) (quoting Casarotto, 517 U.S. at 687).
Sorrell relies principally on the Kentucky Supreme Court’s recent decision in
Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012). The facts in Ping are
similar to those here in many respects. Like Bennett, Donna Ping also was the daughter
of a woman admitted to a nursing home. Pursuant to a power of attorney, Ping signed
all documents for her mother, including an arbitration agreement. After her mother
died, Ping brought a wrongful death action against the facility. The nursing home
demanded arbitration in accordance with the terms of the arbitration agreement that
Ping signed on her mother’s behalf upon admission to the facility. The Kentucky
Supreme Court ultimately refused to compel arbitration, finding that the power of
attorney did not vest Ping with authority to execute the arbitration agreement on behalf
of her mother. Id., at 586, 594.
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The conclusion in Ping was based on the Kentucky Court’s examination of the
terms of the “General Power of Attorney” granted to Ping. That document granted Ping
authority over two aspects of her mother’s affairs: first, Ping was authorized to make
financial decisions on behalf of her mother, including “acts pertaining to the
management of [her mother’s] property and finances,” and, second, Ping was authorized
“[t]o make any and all decisions of whatever kind, nature or type regarding [her
mother’s] medical care.” Id. at 586-87 (second alteration in original). Although the
power of attorney contained a “catch all” provision granting Ping the “full and complete
power and authority to do and perform any, all, and every act and thing whatsoever
requisite and necessary to be done, . . . as I might or could do if personally present,” the
Kentucky Court refused to find that this catch-all authorized Ping to execute the
arbitration agreement. Id. at 586, 590-91. The Court reasoned that “[the] power of
attorney relate[d] expressly and primarily to the management of [her mother’s] property
and financial affairs and to ensuring that health care decisions could be made on her
behalf.” Id. at 592 (second alteration in original). The Court further noted that the
general catch-all provision, by its own terms, was limited to those acts “requisite and
necessary.” Id. The Court interpreted this language as limiting Ping’s authority to those
acts which were required or necessary to give effect to the financial and health care
authorities expressly granted. Id.
Additionally, the Kentucky Court emphasized that the power of attorney did not
authorize Ping to perform collateral acts with “significant legal consequences,” such as
to waive her mother’s right to seek redress in a court of law. Id. at 593. On this point,
the Court explained: “Absent authorization in the power of attorney to settle claims and
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disputes or some such express authorization addressing dispute resolution, authority to
make such a waiver is not to be inferred lightly. Here, nothing in [her mother’s] power
of attorney suggests her intent that Ms. Ping make such waivers on her behalf.” Id.
Thus, the Ping Court concluded that the power of attorney only authorized Ping
to make financial and health care decisions for her mother. The Court found that the
decision to sign the arbitration agreement was not a health care decision because the
execution of that agreement was not a prerequisite for her mother’s admission to the
facility. Id. The Court also concluded that the decision to execute the arbitration
agreement was not a financial decision. Id. 594.
The case at hand is distinguishable from Ping in several significant ways. Most
obviously, unlike the power of attorney in Ping, the POA here grants Bennett authority
to act well beyond the categories of health care and financial decisions, including the
authority “[t]o make, execute and deliver . . . contracts of every nature.” (Docket No. 52, at 2.) Also unlike the power of attorney in Ping, the POA here grants Bennett the
express authority “[t]o demand, sue for, collect, recover and receive all debts, monies,
interest and demands whatsoever now due or that may hereafter be or become due to me
(including the right to institute legal proceedings therefore).” (Docket No. 5-2, at 1.)
Thus, the POA gives Bennett both a broad contract authority as well as the authority to
perform acts with significant legal consequences.
Furthermore, the catch-all provision in the POA contains no limiting language as
did the power of attorney in Ping—to the contrary, the POA specifically provides that
Bennett’s scope of authority is not limited to its recitation of specific powers but instead
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grants Bennett the expansive authority “to do any and all acts, including but not limited
to the above, as fully as I could if I were personally present.” (Docket No. 5-2, at 3.)
Read in light of Ping, the powers granted by the POA here are more than adequate to
allow Bennett to execute the Arbitration Agreement and bind Sorrell to its terms.
Although the POA does not expressly authorize Bennett to enter into arbitration
agreements, the Court can find no reasonable interpretation of the POA that would limit
her authority to do so on Sorrell’s behalf.
Both this Court and the Eastern District of Kentucky have analyzed similar
powers of attorney since Ping and reached the same conclusion.
See Oldham v.
Extendicare Homes, Inc., 2013 WL 1878937, at *5 (W.D. Ky. May 3, 2013); GGNSC
Vanceburg, LLC v. Taulbee, 2013 WL 4041174, at *8-9 (E.D. Ky. Aug. 7, 2013). And
even more recently, the Kentucky Court of Appeals, in applying Ping, likewise
concluded that a power of attorney similar to the POA here granted the authority to
execute an arbitration agreement on behalf of a resident. See Kindred Healthcare, Inc.
v. Cherolis, No. 2012-CA-002074-MR, 2013 WL 5583587 (Ky. Ct. App. Oct. 11, 2013),
motion for discretionary review filed, 2013-SC-000759. 1
1
Although Cherolis has been designated “To Be Published,” that decision is not yet final, and
a motion for discretionary review currently is pending before the Kentucky Supreme Court.
Intermediate state appellate courts’ decisions are not binding on this Court but are “viewed as
persuasive unless it is shown that the state’s highest court would decide the issue differently.”
In re Dow Corning Corp., 419 F.3d 543, 549 (6th Cir. 2005). At this juncture, it does not
appear to this Court that Cherolis is inconsistent with Ping or would be decided differently if
granted discretionary review. Therefore, to the extent Cherolis is relevant here, its reasoning
supports the Court’s conclusion, as well as the conclusions in Oldham and Taulbee.
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For these reasons, the Court finds that Bennett had authority to execute the
Arbitration Agreement on behalf of Sorrell and, therefore, to bind Sorrell to arbitrate her
claims against Regency.
B.
The Arbitration Agreement is valid and enforceable.
Sorrell argues that even if the POA authorized Bennett to execute an arbitration
agreement, the Court nonetheless should refuse Regency’s Motion because Bennett was
unaware that the Arbitration Agreement was optional. To this end, she urges that
Regency should not be allowed “to benefit from its misleading presentation of the
admission documents to Ms. Bennett.” 2 (Docket No. 13-1, at 8.) In support of this
argument, Sorrell has submitted Bennett’s affidavit, in which Bennett states that she was
“provided admission documents . . . for completion before Regency would accept Ms.
Sorrell as its resident” and “instructed . . . to complete the documents.” (Docket No.
13-3, at 1-2.)
Bennett maintains that “[a]t no time during the execution of [the
admission documents] did anyone acting on behalf of Regency identify that the
Arbitration Agreement was optional [or] state that Ms. Sorrell would still be admitted as
a Resident even if the Arbitration Agreement was not executed.” (Docket No. 13-3, at
2.)
She states she “believed from the presentation of the admission documents that the
2
Sorrell’s position on this issue is, to some degree, logically flawed. Bennett states in her
affidavit that she believed the Arbitration Agreement was mandatory. (Docket No. 13-3, at 2.)
She also states that she believes her authority under the POA is limited to managing Sorrell’s
finances and health care. (Docket No. 13-3, at 2.) In Ping, the Kentucky Supreme Court
recognized that “where an agreement to arbitrate is presented to the patient as a condition of
admission to the nursing home . . . the authority incident to a health-care durable power of
attorney includes the authority to enter such an agreement.” Ping, 376 S.W.3d at 593. Thus, if
Bennett’s belief that the POA limited her to making health care decisions and her belief that the
Arbitration Agreement was mandatory both are correct, then she would have had the authority
to enter into that agreement on Sorrell’s behalf.
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Arbitration Agreement was mandatory.” (Docket No. 13-3, at 2.) Bennett further
acknowledges that “since [she] thought all the documents signed on January 5, 2012,
were mandatory prerequisites to admission, [she] did not read the Arbitration
Agreement.” (Docket No. 13-3, at 2.)
Regency, for its part, has submitted the affidavit of Lenora White, the
Admissions Coordinator for Regency who oversaw the admissions process for Sorrell.
(Docket No. 5-2, at 14-15.) White states that she explained the admission documents
and the Arbitration Agreement to Bennett during the admissions process. White also
states, “I explained to her that if she signed the optional arbitration agreement, the
parties were agreeing that any disputes that might arise between Ms. Sorrell and
Regency Center would be resolved through arbitration and would not go to a jury trial
in court.” (Docket No. 5-2, at 14.) White insists that both Bennett and Sorrell had an
opportunity to read the Arbitration Agreement and to request a copy to take with them if
they wanted a copy to review later. (Docket No. 5-2, at 14.)
Regardless of the conflicting recollections of Bennett and White, Sorrell cannot
avoid the Arbitration Agreement simply because Bennett erroneously believed that the
Arbitration Agreement was mandatory or because Bennett failed to read it before
signing. As the Kentucky Supreme Court recently reaffirmed, “[i]t is the settled law in
Kentucky that one who signs a contract is presumed to know its contents, and that if he
has an opportunity to read the contract which he signs he is bound by its provisions,
unless he is misled as to the nature of the writing which he signs or his signature has
been obtained by fraud.” Hathaway v. Eckerle, 336 S.W.3d 83, 89-90 (Ky. 2011)
(alteration in original) (quoting Clark v. Brewer, 329 S.W.2d 384, 387 (Ky. 1959)). It is
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not entirely clear whether Sorrell is alleging fraud or, instead, is arguing that the
Arbitration Agreement is unconscionable because of the way it was presented to
Bennett. The Court will briefly consider both possibilities.
To show fraud under Kentucky law, a plaintiff must establish six elements by
clear
and
convincing
evidence:
that
the
defendant
(1)
made a material
misrepresentation, (2) which was false, (3) which was known to be false or made
recklessly, (4) which was made with inducement to be acted upon, (5) which the
plaintiff acted in reliance upon, and (6) which caused the plaintiff injury. Holifield v.
Beverly Health & Rehab. Servs., Inc., 2008 WL 2548104, at *2 (W.D. Ky. June 20,
2008) (citing United Parcel Serv. v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999)). Sorrell
argues that Bennett was instructed to complete the admission paperwork but was not
told that the Arbitration Agreement was optional. Notably, Sorrell does not say that
Regency told Bennett that her signing of the Arbitration Agreement was a requirement
for admission, only that the presentation of the admission documents left Bennett with
that impression. Without more, these allegations are insufficient to establish fraud and
to overcome the presumption that Bennett would exercise ordinary care by reading the
documents she was signing. See Cline v. Allis-Calmers Corp., 690 S.W.2d 764, 767
(Ky. Ct. App. 1985) (“[N]egligence in failing to read the contract prevents any reliance
on oral representations at the time of signing.”); see also Mayo Arcade Corp. v. Bonded
Floors Co., 41 S.W.2d 1104, 1109 (Ky. 1931) (“As a rule, if a party is able to read and
has a chance to do so, but omits this precaution because of his adversarys’ [sic]
statements, as to the contents of the instrument, his negligence will estop him from
claiming that the instrument is not binding.” (citation omitted)). In sum, Sorrell simply
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has not shown that Regency fraudulently induced Bennett to execute the Arbitration
Agreement.
As for unconscionability, in Kentucky, “the doctrine of unconscionability is a
‘narrow exception’ to the fundamental rule that a ‘written agreement duly executed by
the party to be held and who had an opportunity to read it, will be enforced according to
its terms.’” Holifield, 2008 WL 2548104, at *4 (quoting Conseco Fin. Servicing Corp.
v. Wilder, 47 S.W.3d 335, 341 (Ky. Ct. App. 2001)).
An unconscionable contract is
“one which no man in his senses, not under delusion, would make, on the one hand, and
which no fair and honest man would accept, on the other.” Conseco, 47 S.W.3d at 341
(citation omitted). “Substantive unconscionability ‘refers to contractual terms that are
unreasonably or grossly favorable to one side and to which the disfavored party does
not assent.’” Id. at 342 n.22 (citation omitted). Procedural unconscionability or “unfair
surprise,” on the other hand, “pertains to the process by which an agreement is reached
and the form of an agreement, including the use therein of fine print and convoluted or
unclear language.” Id. (citation omitted).
Sorrell has not shown that the Arbitration Agreement here is either substantively
or procedurally unconscionable. The Arbitration Agreement does not unreasonably
favor one side; it merely sets the forum in which disputes are to be contested. Its terms
are written in plain, easily understood language. It encourages consultation with an
attorney before signing. It provides a 30-day window during which Bennett could have
rescinded the agreement if desired.
It states clearly and conspicuously in bold,
underlined, all-capital letters, “VOLUNTARY AGREEMENT,” followed by the single
sentence, “If you do not accept this Agreement, you will still be allowed to live in, and
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receive services in, this Facility.” (Docket No. 5-2, at 12.) And just above the signature
lines, it recites again in bold, all-capital lettering that the undersigned has read the entire
agreement and understands that by signing she is waiving her right to a trial. (Docket
No. 5-2, at 13.) Bennett does not claim that she did not have the opportunity to read the
Arbitration Agreement; rather, she admits she simply did not read it. There is nothing to
indicate that the Arbitration Agreement was hidden or concealed—indeed, the fact that
Bennett initialed the first five pages before signing the last page indicates just the
opposite. Even assuming that Regency did not identify the Arbitration Agreement or
explain to Bennett that it was not a prerequisite for admission, Regency’s failure to do
so does not rise to the level of unconscionable conduct.
The Court thus finds no reason to deny Regency’s Motion to Compel Arbitration
on the basis of either fraud or unconscionability.
***
Therefore, having found that Bennett had authority to execute the Arbitration
Agreement on behalf of Sorrell, that the Arbitration Agreement is valid and enforceable
under the FAA, and that Sorrell’s claims all are included within the terms of the
Arbitration Agreement, the Court is required by the FAA to compel arbitration.
Accordingly, Regency’s Motion to Compel Arbitration, (Docket No. 5), will be
GRANTED.
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CONCLUSION
Having considered the parties’ respective arguments and being otherwise
sufficiently advised, for the foregoing reasons;
IT IS HEREBY ORDERED as follows:
(1) Sorrell’s Motion to Amend Complaint, (Docket No. 8), is
GRANTED IN PART and DENIED IN PART as
follows:
(a) Sorrell’s motion for leave to file her amended
complaint is GRANTED, and her Amended
Complaint, (Docket No. 8-2), shall be docketed in
this matter;
(b) Sorrell’s request for an expedited trial date is
DENIED;
(2) Sorrell’s Motion to Remand, (Docket No. 7), is DENIED;
(3) Regency’s Motion to Compel Arbitration, (Docket No. 5),
is GRANTED, and this matter shall be STAYED pending
the conclusion of the arbitral proceedings in accordance
with the terms of the Arbitration Agreement;
(4) The telephonic status/scheduling conference presently
scheduled for May 30, 2014, at 12:30 p.m. (EDT) is
CANCELLED.
IT IS SO ORDERED.
Date:
cc:
May 27, 2014
Counsel
Page 18 of 18
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