HAWTHORNE v. FUNDAMENTAL LONG TERM CARE HOLDINGS, LLC et al

Filing 54

OPINION resolving defendants' Motion to Compel Arbitration. Signed by Judge David S. Cercone on 9/19/13. (kak)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
JANET L. HAWTHORNE,
as Administratrix of the Estate of
DONALD C. HAWTHORNE, deceased,

)
)
)
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Plaintiff,
)
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v.
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FUNDAMENTAL LONG TERM CARE )
HOLDINGS, LLC; THI OF
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PENNSYLVANIA AT GREENERY OF )
CANONSBURG, LLC d/b/a
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GREENERY SPECIALTY CARE
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CENTER OF CANONSBURG;
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FUNDAMENTAL CLINICAL
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CONSULTING, LLC a/k/a
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FUNDAMENTAL ADMINISTRATIVE
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SERVICES, LLC; FUNDAMENTAL
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CLINICAL AND OPERATIONAL
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SERVICES, LLC; THI OF
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PENNSYLVANIA, LLC; THI OF
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BALTIMORE, INC.; ANDREW
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LEROY, NHA,
)
)
Defendants.
)

2:12cv1826
Electronic Filing

OPINION
Plaintiff commenced this wrongful death action in her capacity as the personal
representative of the estate of her deceased husband, Donald C. Hawthorne ("decedent").
Plaintiff's complaint seeks to establish defendants' liability pursuant to causes of action for
negligence, corporate negligence and wrongful death. Presently before the court is a motion to
compel arbitration which has been filed by all defendants except Fundamental Long Term Care
Holdings, LLC., and Fundamental Administrative Services, LLC. For the reasons set forth
below, the motion will be granted.

When ruling on a motion to compel arbitration, the court employs the summary judgment
standard. Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980).
"Only when there is no genuine issue of fact concerning the formation of the agreement should
the court decide as a matter of law that the parties did or did not enter into such an agreement."
Id. The party opposing the motion receives "the benefit of all reasonable doubts and inferences
that may arise." Id. If there is a genuine issue of fact, the Federal Arbitration Act directs that a
trial be held to determine whether an arbitration agreement exists. 9 U.S.C. § 4.
In determining whether the parties agreed to arbitrate a particular claim, the ordinary
state-law principles governing contract formation apply. China Minmetals Materials Imp. &
Exp. Co., Ltd. v. Chi Mei Corp., 334 F.3d 274, 285 (3d Cir. 2003). “Under Pennsylvania law,
contract formation requires: (1) a mutual manifestation of an intention to be bound, (2) terms
sufficiently definite to be enforced, and (3) consideration.” Kirleis v. Dickie, McCamey &
Chilcote, P.C., 560 F.3d 156, 160 (3d Cir. 2009). Even where these requirements are satisfied,
an agreement to arbitrate may be unenforceable based on a generally applicable contractual
defense, such as unconscionability. Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 264 (3d Cir.
2003) (citation omitted).
On February 2, 2011, decedent was discharged from Kindred Hospital and transferred to
the THI of Pennsylvania at Greenery of Canonsburg, LLC, doing business as Greenery Specialty
Care Center of Canonsburg ("the facility"), for admission and long-term skilled nursing care.
His medical history included diagnoses for COPD, respiratory failure, pneumonitis, on-going
tobacco and narcotic abuse, gastro esophageal reflux disease, hypertension, anxiety, depression,
chronic pain, deep vein thrombus, pneumonia, left below knee amputation, MRSA in his left
knee stump, osteomyelitis, cellulitis, tracheostomy, aspiration, peripheral vascular disease, sepsis
and multiple pressure ulcers. At the time of transfer neither decedent nor his family could
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provide the sustained level of care decedent required and he was dependent upon the staff at the
facility to accomplish all of his activities of daily living.
On February 11, 2011, plaintiff executed an admission agreement for decedent and
signed a "voluntary arbitration agreement."1 The admission agreement expressly provided for
decedent's admission into the facility. It outlined the treatment and care the facility would
provide and the terms and conditions under which such treatment and care would be provided. It
also outlined the obligations of (1) decedent as a resident receiving such treatment and care and
(2) any representative of the decedent.
Plaintiff acknowledged in the admission agreement that she was entering into the
agreement in her personal capacity and as decedent's "representative." In doing so she
specifically agreed to "abide by the terms and conditions set forth in this agreement and the
policies of [the] facility." She also acknowledged that she had received and read the admission
handbook and the other admission materials that had been provided by the facility and
understood that by expressed reference to these documents they were being made part of the
admission agreement. The arbitration agreement was one of the referenced documents.
The arbitration agreement was a separate document. It directed the recipient to read it
carefully and provided that the agreement was "voluntary and not a condition of admission." It
further provided an executing party seven days to rescind the agreement and explained that the
patient's "admission to [the] Facility and the services provided will not be effected [sic] by the
exercise of this cancellation provision." Plaintiff signed the document as the "representative" of
decedent. See Doc. No. 8-1 at 16. Plaintiff did not rescind the arbitration agreement.
The arbitration agreement provides:

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Decedent was competent and coherent at this time and could have executed these documents.
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It is further understood that in the event of any controversy or dispute between the
parties, arising out of or relating to the Facility's Admission Agreement, or breach
thereof, or relating in any way to Resident's stay at the Facility, or to the
provisions of care or services to Resident, including but not limited to any alleged
tort, personal injury, negligence or other claim, or any federal or state statutory or
regulatory claim of any kind, or whether or not there has been a violation of any
right(s) granted under State law (collectively disputes), and the parties are unable
to resolve such through negotiation, the parties agree that such Dispute(s) shall be
resolved by arbitration.
Decedent was identified as the "Resident" in the agreement. The agreement further
provides that discovery shall be governed by the Pennsylvania Rules of Civil Procedure,
the arbitration shall occur at the facility or as close thereto as practical, and the cost of
arbitration shall be borne by the facility (save that the arbitrator may shift certain costs to
the resident/representative in the event the facility prevails in the proceeding). The
decision of the arbitrator shall be binding on the parties and may be enforced in a court of
competent jurisdiction.
Defendants seek to enforce the arbitration agreement pursuant to a third-party
beneficiary theory and equitable estoppel. They maintain that plaintiff signed the
admission and arbitration agreements as decedent's representative and those agreements
are enforceable against plaintiff as a contracting party and against decedent's estate as a
third-party beneficiary. The arbitration agreement contractually is enforceable by each of
the moving defendants as either a parent company, agent or as an employee of the facility
and legally is enforceable by these defendants under the circumstances and Pennsylvania
law in any event. In addition, defendants argue that decedent and his estate equitably are
estopped from arguing that the arbitration agreement is not binding and enforceable by
each of the defendants.
Plaintiff contends that discovery is required in order to develop an evidentiary
record and rule on the motion to compel. Specifically, plaintiff did not possess the
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authority to waive decedent's constitutional right to a jury trial at the time the agreements
were executed. In addition, plaintiff "anticipates that there will be significant issues
regarding who the actual parties to the arbitration agreement are." She seeks 90 days of
discovery in order to develop an evidentiary record and a jury trial on any disputed
matters. Plaintiff also argues that the arbitration agreement is unconscionable and/or
unenforceable because it (1) was procured by fraud, (2) violates the Pennsylvania and
United States Constitutions (3) lacks consideration, (4) is void as against public policy
and (5) is a contract of adhesion.
Plaintiff has failed to identify any issue of material fact that precludes
enforcement of the arbitration agreement pursuant to a third-party beneficiary theory. A
party will be recognized as a third-party beneficiary "where both parties to the contract
express an intention to benefit the third party in the contract itself" or " the circumstances
are so compelling that recognition of the beneficiary's right is appropriate to effectuate
the intention of the parties, and . . . the circumstances indicate that the promisee intends
to give the beneficiary the benefit of the promised performance." Scarpitti v. Weborg,
609 A.2d 147, 150-51 (Pa. 1992).
The basic purpose of the admission agreement was to provide for the treatment
and care of decedent. It identified the terms and conditions pursuant to which the facility
would provide the same and the obligations of decedent as the resident and plaintiff as his
representative in return. In other words, in the formation of their agreement the executing
parties had the expressed intent to benefit decedent. In addition, plaintiff entered into the
agreement solely for the purpose of obtaining the facility's treatment and care for
decedent and the facility promised to provide the benefit of its promised performance to

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decedent. Consequently, decedent was a third-party beneficiary of the agreement
between plaintiff and the facility.
Third-party beneficiaries enjoy the same contractual rights and can be required to
bear the same obligations and limitations as the original contracting parties. Miller v.
Allstate Ins. Co., 763 A.2d 401, 404 n.1 (Pa. Super. 2000) (citing General Accident
Insurance Company of America v. Parker, 665 A.2d 502, 504 (Pa. Super. 1995)
(collecting cases)). These principles apply with equal force to agreements to arbitrate.
Highmark Inc. v. Hospital Service Association of Northeastern Pennsylvania, 785 A.2d
93, 99 (Pa. Super. 2001) (third-party beneficiary may enforce an arbitration provision
pursuant to the principle that it enjoys the same rights and limitations as the contracting
parties). In other words, a third-party beneficiary may enforce an arbitration provision in
a contract providing it with benefits and is bound to comply with such a provision when it
properly has been invoked. See Johnson v. Pennsylvania National Ins. Companies, 594
A.2d 296, 509 (Pa. 1991) ("As a third party beneficiary under that [contract of insurance],
the appellee's rights are 'vulnerable to the same limitations which may be asserted
between the promisor and the promisee.' . . . Thus, appellee is bound by the limitations
contained in the contract she seeks to enforce.") (quoting Jewelcor Jewelers &
Distributors, Inc. v. Corr, 542 A.2d 72, 80 (Pa. Super. 1988), appeal denied, sub nom.,
Granjewel Jewelers & Distributors, Inc. v. Corr, 569 A.2d 1367 (Pa. 1989)); accord Ross
Brothers Const. Co., Inc. v. International Steel Services, Inc., 283 F.3d 867, 876 (7th Cir.
2002) (under Pennsylvania law an arbitration agreement may be enforced by and against
a third-party beneficiary) (citing Highmark, 785 A.2d at 99 and Johnson, 594 A.2d at
298-99)).

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Decedent was the third-party beneficiary of the admission agreement. The
agreement incorporated the arbitration agreement as one of its terms. By voluntary
choice of the contracting parties the arbitration agreement was executed, not rescinded
and became part of the operative contract. As part of the executed contract the arbitration
agreement is enforceable against plaintiff as a contracting party. It also is enforceable
against decedent as a third-party beneficiary and by extension decedent's estate.2
Each of the moving defendants are entitled to enforce the arbitration agreement.
Plaintiff essentially alleges that each defendant may be held accountable under theories of
ownership and control, agency, joint venture and integrated enterprise. Specifically, it is
averred that defendants collectively managed the (1) operation, (2) planning and (3)
quality control of the facility, which included control over the quality of care provided.
THI of Pennsylvania is a parent corporation of the facility and THI of Baltimore
is the parent corporation of THI of Pennsylvania. Fundamental Clinical and Operational
Services, LLC, and Fundamental Clinical Consulting, LLC, were agents providing
services to the facility. Andrew Leroy was an employee of the facility. The arbitration
agreement is expressly applicable to plaintiff's claims against the facility's parent entities,

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The same result follows under the principles of equitable estoppel. See THI of S. Carolina at
Columbia, LLC v. Wiggins, 2011 WL 4089435, *6 (D.S.C. Sept. 13, 2011) reconsideration
denied, 2011 WL 6012498 (D.S.C. Nov. 30, 2011) ("It is undisputed that the Contract was
signed by an immediate family member of Hall (Wiggins) for the purpose of obtaining
residential care for Hall at Magnolia Manor. After execution of the Contract, Hall became a
resident of Magnolia Manor and, for an extended period of time, received the benefits provided
for in the Contract. Under these circumstances, where the entity operating Magnolia Manor
performed in reliance on the terms of the Contract and Hall received the benefit of the Contract,
it would be inequitable for Hall's estate (through its personal representative, Wiggins) to avoid
the Contract's Arbitration Provision.") (citing Int'l Paper Co. v. Schwabedizzen Maschinen &
Anlagen GMBH, 206 F.3d 411, 417–18 (4th Cir. 2000) (To permit a party to "claim the benefit
of the contract and simultaneously avoid its burdens would both disregard equity and contravene
the purposes underlying enactment of the [FAA].").
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affiliates, owners, employees and agents. Thus, the provisions of the contract extend to
each of these defendants.
Furthermore, plaintiff claims against all the moving parties are based on a theory
of unified operation and control. Each is said to have participated in exactly the same
wrongful conduct. Agency law extends the right to enforce an arbitration award against
agents, sister corporations, subsidiaries, and parent/ownership entities of a contracting
party "where the interests of such parties are directly related to, if not congruent with,
those of a signatory." Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d
1110, 1112 (1993) (citing Isidor Paiwonsky Associates, Inc. v. Sharp Properties, 998 F.2d
145, 155 (3d Cir. 1993). Under all accounts advanced by plaintiff each of the moving
parties is a parent entity, agent or employee of the facility that shares a congruent interest.
Plaintiff thus presumptively would be able to enforce any judgment from the proceeding
against these defendants and in turn each can rely on the principles of agent law and the
broad scope of the FAA to compel and participate in the arbitration agreement. Cf. Id.
("Where the parties to such a clause unmistakably intend to arbitrate all controversies
which might arise between them, their agreement should be applied to claims against
agents or entities related to the signatories."); Sharp Properties, 998 F.2d at 155
("Applying Barrowclough [v. Kidder, Peabody & Co., 752 F.2d 923 (3d Cir. 1985)]' s
logic here, because Bared's and ARI's interests are directly related, if not in fact
congruent, it can fairly be assumed that within the arbitration proceedings ARI advanced
arguments protective of Bared's interests. There is, therefore, no reason to conclude that
the Federal Arbitration Act's overarching policy favoring the enforcement of arbitration
awards does not apply to this case.").

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Against this backdrop plaintiff has failed to identify any material issue of fact that
might bar enforcement of the arbitration agreement and would therefore warrant further
discovery and adjudication. She was a contracting party and thus fully was aware of the
circumstances surrounding her assent to the agreements. She has not identified any
factual basis that plausibly would support a finding that the agreements are
unconscionable and/or unenforceable because they were procured by fraud, violate the
Pennsylvania and United States Constitutions, lack consideration, or are void as against
public policy. Plaintiff also has not explained how defendants would hold exclusive
information that is unique or informative to these defenses.
Similarly, plaintiff has failed to allege any factual grounds to support the notion
that she was forced into a contract of adhesion with the facility. Plaintiff has not asserted
that other facilities offering long-tern nursing care were unavailable to decedent or that
no other facility would admit him under the attendant circumstances. She does not
dispute that the arbitration agreement was a voluntary document that did not affect
decedent's admission into the facility or the care he would receive.
Plaintiff's litany of defenses are not based on any factual foundation that can be
gleaned from the facts and circumstances. The operative facts and circumstances
generally are known to plaintiff at this juncture. As aptly noted by defendants in their
reply brief, each advanced defense is undermined sufficiently by the current record. The
invocation of the right to discovery must be based on more than a thinly veiled attempt to
initiate a fishing expedition.
Moreover, it is well settled that under the standards governing summary judgment
the opponent cannot “merely rely upon conclusory allegations in [its] pleadings or in
memoranda and briefs.” Harter v. GAF Corp., 967 F.2d 846 (3d Cir. 1992). Likewise,
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mere conjecture or speculation by the resisting party will not provide a basis upon which
to deny the motion. Robertson v. Allied Signal, Inc., 914 F.2d 360, 382-83 n.12 (3d Cir.
1990). It follows from these principles that plaintiff's factually unsupported boiler-plate
defenses fail to provide shelter from the enforcement of an unwanted contractual
obligation.
For the reasons set forth above, defendants' motion to compel arbitration will be
granted. An appropriate order will follow.

Date: September 19, 2013
s/ David Stewart Cercone
David Stewart Cercone
United States District Judge
cc:

Peter D. Giglione, Esquire
Ryan J. Duty, Esquire
Joseph D. Talarico, Esquire
Michael H. Weiss, Esquire
Benjamin R. Ogletree, Esquire
William J. Moorhead, Jr., Esquire
Eugene A. Giotto, Esquire
Patrick M. Quinn, Esquire
Rick L. Brunner, Esquire
(Via CM/ECF Electronic Mail)

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