Arbitration – Contract – Nursing Home – Tort/Negligence – Wrongful Death – AAA Rules

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Dean v. Heritage Healthcare of Ridgeway, LLC (Lawyers Weekly No. 010-060-14, 15 pp.) (Jean Hoefer Toal, Ch. J.) (Costa Pleicones, J., concurring in the result only without separate opinion) Appealed from Fairfield County Circuit Court (J. Ernest Kinard Jr., J.) S.C. S. Ct.

Holding: In light of Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995), the court overrules its holding in Timms v. Greene, 310 S.E. 469, 427 S.E.2d 642 (1993), and holds that a nursing home residency agreement implicates interstate commerce and thus the Federal Arbitration Act.

Furthermore, while the American Arbitration Association no longer arbitrates personal injury disputes without a post-injury agreement to arbitrate, the parties’ agreement to arbitrate according to the AAA’s rules does not require that the arbitration be conducted by the AAA.

We reverse the circuit court’s denial of defendants’ motion to arbitrate on these grounds and on the basis of waiver. We remand for consideration of whether plaintiff had authority to sign the agreement and whether there was a meeting of the minds between the parties.

Facts

Plaintiff signed a residency agreement and a separate arbitration agreement when she arranged to have her mother move in to defendants’ facility. Plaintiff’s mother fell several times at the facility, broke her hip, and died due to complications from hip surgery.

Timms

In Timms, this court found no interstate commerce implications in a nursing home residency agreement. The court found irrelevant the nursing home’s assertion regarding the goods that it bought in interstate commerce because those goods were not the basis of the residency contract. Therefore, Timms found the FAA inapplicable.

However, since the U.S. Supreme Court’s decision in Allied-Bruce, many – if not all – courts have held that nursing home residency contracts implicate interstate commerce and the FAA.

We likewise find the terms of the residency agreement here implicate interstate commerce and, thus, the FAA. Defendants were contractually required to provide meals and medical supplies, which are instrumentalities of interstate commerce. Although the meals and medical supplies are irrelevant to the current dispute, they must nonetheless be considered because the residency agreement specifically required defendants to provide these goods and supplies.

We explicitly overrule Timms and find that the residency agreement does, in fact, involve interstate commerce, and thus is governed by the FAA.

AAA Rules

We adopt the majority rule distinguishing between arbitrations to be conducted “in accordance with” AAA rules and those to be “administered by” the AAA. We find that the named arbitral forum is not a material term to agreements in which the parties agree to arbitrate “in accordance with” the named forum’s rules, absent other evidence to the contrary; however, when parties elect for a proceeding “administered by” a named forum, that forum should be viewed as integral to the arbitration agreement, absent other evidence to the contrary.

There is no reason any potential arbitration proceeding between the parties cannot follow the rules of the AAA in a different arbitral forum.

Further, the agreement says the parties wish to follow the AAA’s rules, not its policies. While the AAA has a policy not to arbitrate individual patients’ claims, it does not have a rule stating that such claims are not arbitrable.

We also reject plaintiff’s argument that the AAA rules themselves bar any non-AAA arbiter from applying the AAA’s rules.

Plaintiff cites only AAA Rule R-2, which states, “When parties agree to arbitrate under [the AAA’s] rules, … they thereby authorize the AAA to administer the arbitration.”

However, we find that authorization to administer does not rise to the level of contractual assent to have the matter administered exclusively before that forum. Further, had the parties truly intended that the AAA serve as the exclusive arbitral forum, they could have easily said so. By invoking only the AAA’s rules, and not the AAA itself, the agreement suggests that the parties anticipated an entity other than the AAA might conduct the arbitration.

Because a substitute arbitrator could easily apply the AAA’s rules, we find the parties did not select the AAA for its particular expertise.

In any event, the agreement contains a severance clause, indicating that the intention was not to make the AAA integral but rather only to have a dispute resolution process through arbitration.

Waiver

Defendants did not delay in filing their demand for arbitration. Rather, defendants participated in the statutorily required mediation process, and after plaintiff filed her formal complaint, defendants moved to compel arbitration at their first opportunity.

Further, even were we to find that defendants should have filed the motion to compel arbitration immediately after plaintiff filed her notice of intent, rather than after she filed the complaint, plaintiff has shown no prejudice or undue burden to her from the four-month delay.

Reversed and remanded.