THE ESTATE OF LLOYD JACK TRANTHAM, JR. V. LIVING CENTERS - SOUTHEAST, INC., ET AL.
Filing
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MEMORANDUM OPINION AND ORDER signed by CHIEF JUDGE WILLIAM L. OSTEEN, JR on 01/20/2016; that Defendant's Motion to Compel Arbitration and Stay Proceedings (Doc. 2 ) is GRANTED. FURTHER ORDERED that this action is STAYED u ntil arbitration has been had in accordance with the terms of the dispute resolution agreement. The Clerk shall mark the case as inactive. Within 30 days of completion of the arbitration, the parties shall file a joint report advising the court of completion of the arbitration and whether further proceedings in this court are required. (Garland, Leah)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
THE ESTATE OF LLOYD JACK
TRANTHAM, JR., by and through
its Administrator Shelia
Trantham,
Plaintiff,
v.
SSC LEXINGTON OPERATING
COMPANY, LLC, a North Carolina
Limited Liability Company,
d/b/a Brian Center Nursing
Care/Lexington;
Defendant.
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1:15CV726
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Plaintiff, the Estate of Lloyd Jack Trantham, Jr., by and
through its administrator, Shelia Trantham (“Plaintiff”)
commenced this action by filing a Complaint in the General Court
of Justice, Superior Court Division, Davidson County, North
Carolina, against Defendants Living Centers - Southeast, Inc.,
SSC Lexington Operating Company, LLC, a North Carolina Limited
Liability Company, doing business as Brian Center Nursing
Care/Lexington, and Mariner Health Central, Inc. (collectively
“original Defendants”). The original Defendants removed the
action to federal court on September 2, 2015, based on diversity
jurisdiction. (Notice of Removal (Doc. 1).) On September 30,
2015, Plaintiff filed notices of voluntary dismissal as to
Living Centers – Southeast (Doc. 15) and Mariner Health Central
(Doc. 16).
Per a September 30, 2015 Stipulation (Doc. 17), SSC
Lexington Operating Company, LLC, doing business as Brian Center
Nursing Care/Lexington (“Defendant”) is the only remaining
defendant in this suit.
Presently before this court is Defendant’s Motion to Compel
Arbitration and Stay Proceedings. (Def.’s Mot. to Compel
Arbitration and Stay Proceedings (“Mot. to Compel”) (Doc. 2).)
Plaintiff has not responded to the motion, the time for response
has run, and the matter is ripe for ruling. 1 This court has
carefully considered the motion and supporting documentation.
For the reasons stated fully below, this court will grant the
motion.
I.
BACKGROUND
As asserted by Defendant, this case involves medical care
and treatment provided to Lloyd Jack Trantham, Jr., at a nursing
home operated by Defendant. (See Def.’s Mem. in Supp. of Mot. to
1
Pursuant to Local Rule 7.3(c)(1), “[m]otions shall be
considered and decided . . . without hearing or oral argument,
unless otherwise ordered by the Court.” LR 7.3(c)(1).
Furthermore, if no response is filed, “the motion will be
considered and decided as an uncontested motion.” LR 7.3(k).
Nevertheless, this court has reviewed and considered Defendant’s
motion independently, notably with respect to the contract,
attached as Exhibit A to the motion. (Mot. to Compel, Ex. A
(Doc. 2-1).)
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Compel Arbitration and Stay Proceedings (“Def.’s Mem.”) (Doc. 3)
at 1.) 2 Plaintiff filed the present action to recover damages
from Defendant, alleging vicarious liability for common law and
medical negligence committed by Defendant’s employees while
caring for Lloyd Jack Trantham, Jr. (See Complaint (“Compl.”)
(Doc. 8) ¶ 11.) Defendant moves this court to compel arbitration
and stay proceedings based on a Dispute Resolution Program
between the parties that includes an arbitration provision. (See
Def.’s Mot. (Doc. 2) at 1-2; Def.’s Mem. (Doc. 3) at 1-2.)
II.
ANALYSIS
A.
Enforceability of the Arbitration Agreement
Fourth Circuit case law dictates:
a litigant can compel arbitration under the FAA if he
can demonstrate “(1) the existence of a dispute
between the parties, (2) a written agreement that
includes an arbitration provision which purports to
cover the dispute, (3) the relationship of the
transaction, which is evidenced by the agreement, to
interstate or foreign commerce, and (4) the failure,
neglect or refusal of the defendant to arbitrate the
dispute.”
Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir.
2
All citations in this Memorandum Opinion and Order to
documents filed with the court refer to the page numbers located
at the bottom right-hand corner of the documents as they appear
on CM/ECF.
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2002) (quoting Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th
Cir. 1991)). 3
As to the first requirement, Plaintiff filed suit alleging
negligence by Defendant and corresponding damages. Defendant’s
answer, (Doc. 4), denying the allegations and seeking to require
arbitration, demonstrates its dispute as to that claim. Thus,
the first requirement is satisfied.
As to the second requirement, the issue of whether an
arbitration agreement exists between the parties is generally a
question of state contract law.
See First Options of Chi., Inc.
v. Kaplan, 514 U.S. 938, 944 (1995); Adkins, 303 F.3d at 501
(“Whether a party agreed to arbitrate a particular dispute is a
question of state law governing contract formation.”). “Section
2 of the FAA provides that arbitration agreements ‘shall be
valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract.’”
Muriithi v. Shuttle Exp., Inc., 712 F.3d 173, 178-79 (4th Cir.
2013) (citing 9 U.S.C. § 2). “We apply ordinary state law
3
Because “the FAA alone does not supply jurisdiction to the
Court, . . . ‘there must be diversity of citizenship or some
other independent basis for federal jurisdiction before the
order [compelling arbitration] can issue.’ ” Nat’l Home Ins. Co.
v. Bridges, Misc. Action No. 6:15-00112-MGL, 2015 WL 6688117, at
*3 (D.S.C. Oct. 30, 2015) (citing Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 25 n.32 (1983)). The case at
hand was removed to this court on the basis of § 1332 diversity
jurisdiction. (See generally Notice of Removal (Doc. 1).)
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principles governing the formation of contracts, including
principles concerning the ‘validity, revocability, or
enforceability of contracts generally.’ We also apply the
federal substantive law of arbitrability, which governs all
arbitration agreements compassed by the FAA.” Id. (citations
omitted). “Although federal law governs the arbitrability of
disputes, ordinary state-law principles resolve issues regarding
the formation of contracts.” Am. Gen. Life & Acc. Ins. Co. v.
Wood, 429 F.3d 83, 87 (4th Cir. 2005) (citations omitted). 4 In
considering these principles,
[s]pecifically, “courts should remain attuned to wellsupported claims that the agreement to arbitrate
resulted from the sort of fraud or overwhelming
economic power that would provide grounds for the
revocation of any contract.” For instance, “generally
applicable contract defenses, such as fraud, duress,
or unconscionability, may be applied to invalidate
arbitration agreements without contravening § 2.”
Id. (citations omitted).
4
In determining which state’s contract law applies, this
court must apply North Carolina’s conflict of laws analysis.
See Eli Research, Inc. v. United Commc’ns Group, LLC, 312 F.
Supp. 2d 748, 754 (M.D.N.C. 2004). “For a contract claim, the
governing law is determined by lex loci contractus, or the law
of the place where the contract was formed.” Id. (citing
Fortune Ins. Co. v. Owens, 352 N.C. 424, 428, 526 S.E.2d 463,
466 (2000)). And, “[t]he place where a contract is formed is
determined by the ‘place at which the last act was done by
either of the parties essential to a meeting of the minds.’ ”
Id. (citing Key Motorsports, Inc. v. Speedvision Network, LLC,
40 F. Supp. 2d 344, 347 (M.D.N.C. 1999)).
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Like the federal government, see Muriithi, 712 F.3d at
179, North Carolina has a strong public policy favoring
arbitration and, where there is any doubt concerning the
existence of an arbitration agreement, it should be resolved in
favor of arbitration.
Martin v. Vance, 133 N.C. App. 116, 120,
514 S.E.2d 306, 309 (1999); see also Moses H. Cone Mem’l Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (“[Q]uestions
of arbitrability must be addressed with a healthy regard for the
federal policy favoring arbitration.”). Further, North Carolina
law makes it clear that “[w]here each party agrees to be bound
by an arbitration agreement, there is sufficient consideration
to uphold the agreement.”
Martin, 133 N.C. App. at 122, 514
S.E.2d at 310 (citing Johnson v. Circuit City Stores, 148 F.3d
373, 378 (4th Cir. 1998)).
In the case at hand, there is no allegation or indication
of fraud, unbalanced economic power, or duress. In fact, the
agreement itself provides that “[w]e will not refuse to admit,
attempt to discharge the resident or take any other adverse
action against the resident based on a revocation of the
opportunity to participate in DRP [the dispute resolution
program].” (Mot. to Compel, Ex. A (Doc. 2-1) at 3.) The terms
appear to show mutual consideration, providing the same terms
for both parties, (id. at 5 (“If a party to this Agreement has a
disagreement with the other party . . . .”)), and also
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determining that “[u]nder DRP, the Facility will pay for ninety
percent (90%) of the fees for mediation and arbitration and you
will pay for the remaining ten percent (10%). Each party shall
be responsible for their own attorneys’ fees.” (Id. at 6.)
Additionally, the signed agreement shows a meeting of the minds
in that it clearly states, in multiple places and in conspicuous
typeface, that the parties voluntarily agree to waive their
rights to the courts and agreed to have the dispute resolved
through an arbitration process. (See generally id.) Further,
under North Carolina law, because both parties agreed to be
bound by the provision, the agreement is supported by sufficient
consideration. Thus the agreement exists. 5
As to the second part of the second element - whether the
agreement includes an arbitration provision that purportedly
covers the dispute - the requirement is also satisfied. The
5
As to applicable law, the agreement provides that
[T]he Federal Arbitration Act (“FAA”), not state law,
will control and applies to the arbitration of
disagreements between the parties and the parties
agree to incorporate such laws into this Agreement.
This Agreement will otherwise be governed by the State
law where the Facility is located. This shall include
local court rules governing discovery, and state law
governing state medical liability act(s), if
applicable. If it is determined that the FAA does not
apply to arbitration under this Agreement, the parties
agree to resolve any disagreement through arbitration
under control of state law.
(Mot. to Compel, Ex. A (Doc. 2-1) at 7.)
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agreement states that “[b]y agreeing to participate[,] all
disagreements must be resolved through the dispute resolution
program.” (Id. at 4.) Covered parties under the agreement
include “all family members who would have a right to bring a
claim in state court on behalf of the resident or the resident’s
estate . . . or any other person that may have a cause of action
arising out of or relating in any way to the resident’s stay at
the facility.” (Id.) Dispute is defined to include “any claim or
dispute totaling $50,000.00 individually or in the aggregate
that would constitute a cause of action that either party could
bring in a court of law . . . .” (Id.) The term “any claim or
dispute . . . that either party could bring in a court of law”
is very broad and may be construed to include the claims at
issue here. However, the provision stating that the agreement
applies to claims “totaling $50,000.00 individually or in the
aggregate,” (id.), is explicit and very narrow. Such language
would not, on its face, appear to apply here, as the parties
seem to agree for jurisdictional purposes that the claims are in
excess of $75,000.00. (See Notice of Removal (Doc. 1).) It is
possible, however, that this phrase is ambiguous and can be
construed by reference to other parts of the contract.
See,
e.g., State v. Philip Morris USA Inc., 363 N.C. 623, 631-32, 685
S.E.2d 85, 90-91 (2009)(“‘Interpreting a contract requires the
court to examine the language of the contract itself for
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indications of the parties’ intent . . . . Intent is derived not
from a particular contractual term but from the contract as a
whole. . . .’ However, we are also mindful that in reviewing the
entire agreement, our task is not ‘to find discord in differing
clauses, but to harmonize all clauses if possible.’” (citations
omitted)). Because the agreement explicitly does not apply to a
claim or dispute of an amount less than $50,000.00, (see Mot. to
Compel, Ex. A (Doc. 2-1) at 4-5), the agreement may be construed
to apply to claims totaling $50,000.00 or more. In the absence
of any response or objection from Plaintiff, this court will
find that the agreement applies to the claims at issue here.
The third requirement requires that the transaction have a
relationship to interstate or foreign commerce, evidenced by the
agreement. “[T]he reach of the [FAA] statute is broad. . . . The
Supreme Court has interpreted this provision as exercising the
full scope of Congress’s commerce-clause power.” Rota-McLarty v.
Santander Consumer USA, Inc., 700 F.3d 690, 697 (4th Cir. 2012)
(citations omitted). While diversity of citizenship alone is not
enough to classify a transaction, see id., factors such as the
fact that “the FAA does not impose a burden upon the party
invoking the FAA to put forth specific evidence proving the
interstate nature of the transaction,” and the fact that “in
deciding to apply the FAA, [a court] need not identify any
specific effect upon interstate commerce, so long as ‘in the
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aggregate the economic activity in question would represent “a
general practice . . . subject to federal control,”’” id. at
697-98, also support the interstate nature of the transaction in
this case. The agreement itself also states that “DRP and the
nature and extent of our business activities substantially
affects, relates, and involves the purchase of substantial
quantities of goods and services that are produced outside of
the state and shipped across state lines to the Facility, which
is referred to as interstate commerce.” (Mot. to Compel, Ex. A
(Doc. 2-1) at 7.) In the absence of a response or objection from
Plaintiff, this court accepts the representations of interstate
commerce set forth in the agreement. Further, but not
dispositive, the agreement is between a Delaware entity and a
North Carolina individual. In concert, these factors show that
the third requirement is satisfied.
Finally, Plaintiff has refused to arbitrate the dispute.
This is clear as Plaintiff has not engaged in the process for
mediation and arbitration set forth in the agreement, (see
generally id.), and has instead filed suit. Thus, the four
elements for compelling arbitration under the FAA have been met
in this case and this court will grant Defendant’s motion to
compel arbitration.
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B.
Stay Pending Arbitration
The FAA provides:
If any suit or proceeding be brought in any of the
courts of the United States upon any issue referable
to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such
suit or proceeding is referable to arbitration under
such an agreement, shall on application of one of the
parties stay the trial of the action until such
arbitration has been had in accordance with the terms
of the agreement, providing the applicant for the stay
is not in default in proceeding with such arbitration.
9 U.S.C. § 3 (emphasis added). The Fourth Circuit has held that
“[t]his stay-of-litigation provision is mandatory. A district
court therefore has no choice but to grant a motion to compel
arbitration where a valid arbitration agreement exists and the
issues in a case fall within its purview.” Adkins v. Labor
Ready, Inc., 303 F.3d 496, 500 (4th Cir. 2002) (citations
omitted).
Consequently, this court will also grant Defendant’s motion
with respect to the request for a stay.
III. CONCLUSION
For the reasons set forth herein, IT IS HEREBY ORDERED that
Defendant’s Motion to Compel Arbitration and Stay Proceedings
(Doc. 2) is GRANTED.
IT IS FURTHER ORDERED that this action is STAYED until
arbitration has been had in accordance with the terms of the
dispute resolution agreement.
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The Clerk shall mark the case as inactive.
Within 30 days
of completion of the arbitration, the parties shall file a joint
report advising the court of completion of the arbitration and
whether further proceedings in this court are required.
This the 20th day of January, 2016.
_______________________________________
United States District Judge
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