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Donald W. Haag, as Executor of Estate of Julia M. Haag v. Manor Care of Lebanon PA LLC, et al No. 2015-02167

Civil Action-Law-Medical Malpractice-Nursing or Residential Facility-Preliminary Objections-Power of Attorney-Agent-Arbitration Agreement-Voluntariness-Unconscionable Agreement

Plaintiff Donald W. Haag (“Son”) completed paperwork necessary to admit his mother, Julia M. Haag (“Mother”), to HCR Manor Care Nursing Home (“Manor Care”) under a power of attorney authorizing him to admit her to a nursing or residential facility and to pursue claims and litigation. The paperwork completed by Son for Mother’s admission to Manor Care included a voluntary arbitration agreement wherein the parties waived the right to a trial before a judge or jury in any dispute between them. Son, who was appointed as executor of Mother’s Estate following her death on August 1, 2015, filed a Complaint against Defendants alleging that Mother died as a result of inadequate and deficient care provided at Manor Care. Defendants lodged Preliminary Objections to the Complaint on the basis that jurisdiction over the litigation must be transferred to a Board of Arbitrators pursuant to the arbitration agreement.

1. Pennsylvania has a well established public policy that favors arbitration, which applies equally to arbitration agreements involving nursing homes. A party challenging an arbitration clause bears the burden of proving why the clause should not be enforced.

2. To determine whether a dispute must be arbitrated, it must be determined whether the dispute should be arbitrated and the dispute at hand is within the scope of the arbitration agreement.

3. Unconscionable agreements to arbitrate are not valid. In an unconscionable agreement, there is an absence of meaningful choice on the part of one of the parties together with contract terms that unreasonably are favorable to the other party.

4. An arbitration agreement cannot be binding upon those who did not sign it. When a personal representative signs a document as a “responsible person,” the personal representative does not modify or disrupt his or her own right or the rights of other family members or beneficiaries to bring a wrongful death claim before the trial court. Burkett v. St. Francis Country Home, 133 A.3d 22 (Pa.Super. 2016).

5. While inclined under the current state of Pennsylvania law to sustain the Preliminary Objections in light of the fact that Son signed the agreement once in his capacity as power of attorney for his mother and once individually, the agreement contained language indicating that Mother would receive services at Manor Care whether or not the agreement was signed, the agreement contained conspicuous language that should have alerted Son of the rights he was foregoing and the agreement required application of the same rules of evidence and civil procedure governing the Court, final decision regarding whether the litigation must be transferred to a Board of Arbitrators will be deferred until more guidance can be obtained from the Pennsylvania Supreme Court so that the Court may retain jurisdiction while discovery proceeds.

L.C.C.C.P. No. 2015-02167, Opinion by Bradford H. Charles, Judge, October 17, 2016.

IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY, PENNSYLVANIA

CIVIL ACTION – LAW No. 2015-02167

DONALD W. HAAG, as Executor of the Estate of JULIA M. HAAG, Plaintiff

v.

MANOR CARE OF LEBANON PA, LLC, d/b/a MANORCARE HEALTH SERVICES-LEBANON, HCR MANORCARE, LLC, MANORCARE HEALTH SERVICES, INC., MANOR CARE, INC., HCR MANORCARE, INC., HCR IV HEALTHCARE, LLC, HCR III HEALTHCARE, LLC, HCR II HEALTHCARE, LLC, HCR HEALTHCARE, LL, HCRMC OPERATIONS, LLC, HCR MANORCARE OPERATIONS II, LLC, HEARTLAND EMPLOYMENT SERVICES, LLC, Defendants

ORDER OF COURT

AND NOW, to wit, this 17th day of October, 2016, upon consideration of the Preliminary Objections filed by the Defendants and in accordance with the attached Opinion, the Order of this Court is as follows:

1. The Defendants’ Preliminary Objections seeking to compel arbitration are DENIED without prejudice to the ability of the Defendants to file a Motion to Compel Arbitration at any time hereafter.

2. The intent of this Court is to retain jurisdiction over the above-referenced case through the discovery phase of litigation. We hope and expect that the Pennsylvania Supreme Court will issue decisional precedent regarding enforceability of arbitration clauses while the parties pursue discovery. It is the hope and expectation of this court that the Supreme Court’s forthcoming decisions will render self-evident the question of whether the above-referenced matter should be arbitrated or whether it should remain under the jurisdiction of this Court.

BY THE COURT,

BRADFORD H. CHARLES, Judge

APPEARANCES:

Ian T. Norris, Esquire For Plaintiff

Brian D. Reddick, Esquire

Brent L. Moss, Esquire

REDDICK MOSS, PLCC

William J. Mundy, Esquire For All Defendants

John M. Skrocki, Esquire

BURNS WHITE LLC

Opinion, Charles, J., October 17, 2016

At a seminar attended by the undersigned in 2015, the lead speaker described the enforcement of arbitration clauses as “the next hot-button topic in medical malpractice law.” That has certainly proved to be the case. Currently, multiple arbitration clause cases are pending before our Commonwealth’s highest court and the Pennsylvania Superior Court has stopped issuing precedential opinions on the topic. Some of the open questions that need to be addressed include:

(1) Can a personal representative agree to an arbitration under a power of attorney that does not specifically authorize the waiver of a right to trial?

(2) Under what circumstances should an arbitration clause be deemed unconscionable?

(3) Can an arbitration clause signed by the personal representative affect the rights of other beneficiaries of wrongful death damages?

Each of the above issues has been implicated in the above-referenced case.

Ultimately, we believe that jurisdiction over this case will likely be transferred to a Board of Arbitrators. However, at least for now, we will temporarily retain authority to shepherd this case through the pleadings and discovery phase of litigation. Hopefully, by the time that discovery is concluded, the Supreme Court will have provided more definitive guidance regarding the “hot-button topic” of whether and how arbitration clauses are to be enforced. The reasons for the decision articulated above will be set forth below.

I. FACTS

On December 13, 2013, Donald Haag completed paperwork necessary to admit his mother, Julia M. Haag, to the HCR Manor Care Nursing Home in Lebanon (said facility and all other Defendants will hereafter be referred to as “MANOR CARE”). When Donald Haag signed the necessary papers to admit Julia Haag, he did so under the authority of a power of attorney dated on July 27, 2011. It afforded Donald W. Haag with the authority “to authorize my admission to a medical, nursing, residential or similar facility and to enter into agreements for my care.” (¶ 8 of Power of Attorney). The Power of Attorney also authorized Mr. Haag “to pursue claims and litigation.” (¶ 20 of Power of Attorney). The Power of Attorney was broad. However, it did not specifically authorize Donald W. Haag to waive Ms. Haag’s constitutional right to a trial by jury.

Among the documents signed by Mr. Haag was a conspicuously marked “voluntary arbitration agreement.” The preamble to the arbitration agreement set forth in capital letters and bold face type stated the following:

The parties are waiving their right to a trial before a judge or jury of any dispute between them . . . The patient will receive services in this center whether or not this agreement is signed.

At the end of the two-page document, and directly above the signature line, the following additional language was set forth in capital letters and bold face type:

The parties confirm that each of them understands that each has waived the right to trial before a judge or jury and that each consents to all of the terms of the voluntary agreement. Patient acknowledges the right to review this agreement with an attorney or family before signing.

The arbitration agreement called for the appointment of a three member arbitration panel. The agreement directed each party to select one arbitrator and provided that the two party-designated arbitrators would select the third. Each arbitrator was required to possess at least ten years of experience as a lawyer.

Under the arbitration agreement, the panel is required to apply Pennsylvania State Rules of Evidence and Pennsylvania Rules of Civil Procedure as applicable. All pretrial issues are to be resolved by the panel. Once a trial is conducted, the panel will be required to enter a unanimous decision. If the panel is unable to reach a unanimous decision, the dispute will revert to this Court. If a unanimous decision is rendered, the agreement declared that the decision will be binding upon the parties.

The arbitration agreement does not contain any limitation of liability or limitation of damages. All remedies available under Pennsylvania law will be available to the arbitration panel. With respect to counsel fees, the arbitration agreement requires both parties to bear their own counsel fees and costs. All costs and fees of the arbitration panel itself will be paid by MANOR CARE.

According to Plaintiff’s Complaint, Julia Haag was a resident of MANOR CARE between December 12, 2013 and July 25, 2015. Ms. Haag died on August 1, 2015. According to the Complaint, MANOR CARE retained “complete and total control over the healthcare” of Ms. Haag while she was a resident. Plaintiffs allege that the staff assigned by MANOR CARE to its Lebanon facility was woefully inadequate to provide proper care for Ms. Haag. Plaintiffs allege that Ms. Haag developed pressure ulcers, sepsis, urinary tract infections, conjunctivitis, a yeast infection, dehydration and malnutrition as a result of defective care at MANOR CARE’s facility. Ultimately, Plaintiffs allege that Ms. Haag died as a result of the poor treatment she received at MANOR CARE.

Upon the death of Julia Haag, Donald W. Haag was appointed as executor of her estate. Donald W. Haag is also the sole remaining beneficiary of Ms. Haag.

On July 5, 2016, Defendants filed Preliminary Objections to Plaintiff’s Complaint. The Defendants argued in their Preliminary Objections that jurisdiction over the above-referenced litigation should be transferred to a Board of Arbitrators pursuant to the arbitration agreement. On July 12, 2016, Plaintiffs responded and opposed MANOR CARE’s Preliminary Objections. After a brief detour created by a discovery dispute, the parties have submitted their arbitration arguments to this Court. Today, we will defer a final decision regarding the arbitrability of the above-referenced case in order to give the Pennsylvania Supreme Court time to provide guidance on the issue.

II. DISCUSSION

At some point within the past decade, certain segments of the health care industry decided that it would be best to arbitrate disputes that would otherwise be submitted to a jury. As more and more arbitration clauses appeared in hospital and nursing home admission packets, the issue of how and whether the arbitration clauses could be enforced began to percolate within Pennsylvania’s justice system. While everyone is now waiting for Pennsylvania’s Supreme Court to weigh in on the issue, it would nevertheless be helpful to set forth a survey of some of the appellate decisional precedence exists on the topic.

The key case regarding health care arbitration clauses is MacPherson v. McGee Memorial Hospital, 128 A.2d 1209 (Pa.Super. 2015). MacPherson was decided on preliminary objections. Within that context, the Superior Court declared that a party challenging an arbitration clause bears the burden of proving why the clause should not be enforced. This burden is imposed because “Pennsylvania has a well-established public policy that favors arbitration . . . This policy applies equally to all arbitration agreements, including those involving nursing homes.” Id. at 1219.

In MacPherson, the Superior Court employed a two-step test to determine whether the dispute should be arbitrated:

(1) Does a valid arbitration agreement exist? and

(2) Is the dispute at hand within the scope of the agreement?

The Court in MacPherson recognized that “unconscionable” agreements to arbitrate are not valid. The Court employed a “classic and off-quoted definition” of “unconscionability:” “Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” Id. at 1220, citing Williams v. Walker-Thomas Furniture, 350 F.2d 445 (D.C.Cir. 1965). See also, McNulty v. H&R Block, Inc., 843 A.2d 1267, 1273 (Pa.Super. 2004). Applying this law, the Court in MacPherson upheld the arbitration agreement found in the admission documents prepared by McGee Memorial Hospital. The MacPherson case was therefore transferred out of the Pennsylvania court system and into the realm of arbitration.

Since MacPherson, many other cases have found their way to our appellate courts. In no particular order of importance, the cases we found to be particularly interesting were:

Burkett v. St. Francis Country Home, 133 A.3d 22 (Pa. Super. 2016) – Burkett involved a situation where the arbitration agreement was not signed by all of a decedent’s beneficiaries. Relying upon Pisano v. Extendicare Homes, Inc., 77 A.3d 651 (Pa.Super. 2013), the Court in Burkett declared that an arbitration agreement cannot be binding upon those who did not sign it. Specifically, the Court declared that an agreement signed by a personal representative did not bar other wrongful death beneficiaries from pursuing their rights in the Pennsylvania court system. The Court stated that when a personal representative signs a document as a “responsible person,” “he did not modify or disrupt his own right, or the rights of other family members and/or beneficiaries to bring a wrongful death claim before the trial court.” Id. at 30.

Wisler v. Manor Care of Lancaster, 124 A.3d 317 (Pa.Super. 2015) – This case focused upon the contents of a power of attorney and whether it authorized the personal representative to waive a right to a trial by jury. In Wisler, the Trial Court refused to compel arbitration because it concluded that the Plaintiff lacked the authority under his power of attorney to sign an arbitration agreement. The Superior Court concluded that Manor Care “had a duty to ascertain the nature and extent of the written power of attorney . . . Manor Care failed to do so at its own peril.” Id. at 324. Accordingly, the Superior Court concluded: “Here, Manor Care would have a court conclude – from the absence of evidence – that it met its burden of proving that H. Randall Wisler had the authority to sign the arbitration agreement for decedent. Understandably, we decline to find trial court error on this basis.” Id. 327.

Washburn v. Northern Health Facilities, Inc., 121 A.3d 1008 (Pa.Super. 2015) – In Washburn, a wife signed admission papers on behalf of her husband. An arbitration agreement was among the papers that the wife signed. The Superior Court refused to enforce the arbitration agreement because Mrs. Washburn lacked the authority to bind her husband. The Court stated:

Tremont, the party asserting agency, has the burden of establishing an agency relationship . . . It is well settled that neither a husband or wife has the power to act as agent for the other merely due to the marriage relationship. However, the law recognizes that, due to the nature of the relationship, there may be circumstances where one spouse has apparent authority to act for the other . . . The flaw in Tremont’s position is that while there is evidence that Ms. Washburn previously acted on husband’s behalf, the record is devoid of evidence that Mr. Washburn ever authorized his wife to do so.

Id. at 1012. In absence of a specific agreement authorizing Mrs. Washburn to act on her husband’s behalf, the Court refused to enforce the agreement she signed requiring arbitration.

Taylor v. Extendicare Health Facilities, Inc., 113 A.3d 317 (Pa.Super. 2015) – The question presented in Taylor is whether wrongful death and survival claims could be severed from one another so that the survival claim would be arbitrated and the wrongful death claim would be tried before a Court of Common Pleas. The Superior Court, again relying on Pizano v. Extendicare Homes, supra, recognized that a wrongful death action is a separate action belonging to the beneficiaries of a tort. While wrongful death claims focus upon the same tortious act as a survival claim, the Court declared that they are “not derivative of the decedent’s rights. Thus, an arbitration agreement signed by the decedent or his or her authorized representative is not binding upon non-signatory wrongful death beneficiaries, and they cannot be compelled to litigate their claims in arbitration.” Id. at 320-21. With the above being declared, the Superior Court refused to sever the wrongful death and the survival claims. The Superior Court stated:

On the facts herein, the wrongful death beneficiaries’ constitutional right to a jury trial and the state’s interest in litigating wrongful death and survival claims together require that they all proceed in court rather than arbitration. In so holding, we are promoting one of the two primary objectives of arbitration, which is to ‘achieve streamline proceedings and expeditious results.’

Id. at 328.

Probably because many of the above-referenced cases were appealed to the Supreme Court, our Superior Court stopped issuing binding published opinions regarding arbitration clauses. See, e.g. Christman v. Manor Care of West Reading, 2016 WL81771 (Pa.Super. 2016) and Garcia ex rel. Eckert v. HCR Manor Care, LLC, 2016 WL127514 (Pa.Super. 2016). From this, it appears as though even Pennsylvania’s Superior Court is waiting for our Commonwealth’s highest court to rule regarding thorny arbitration clause issues.

If we were required to render a final decision today, it would be in favor of enforcing the arbitration clause between Haag and MANOR CARE. In this case, Donald W. Haag signed the arbitration agreement twice, once in his capacity as power of attorney for his mother, and once again “individually.” Mr. Haag is the sole wrongful death beneficiary of Julia M. Haag. Moreover, the arbitration agreement itself contained conspicuous language that should have alerted Mr. Haag about the rights he was forgoing. The arbitration clause did not limit MANOR CARE’s liability, nor did it impose a greater standard of proof upon Mr. Haag. Moreover, the arbitration clause did not incorporate unspecified rules from an arbitration company that could have included landmines detrimental to pursuit of a claim; the arbitration agreement obligated the arbitrators to apply the same rules of evidence and civil procedure that would govern this Court.

The bottom line is that nothing that we read in the parties’ arbitration agreement offended our sense of justice and fair play. As we read the agreement, it was primarily intended to remove final decision-making authority from a jury and place it in the hands of three lawyers with ten years legal experience or more. We certainly would not declare such an agreement to be unconscionable.

With the above being said, we also recognize that the power of attorney from which Donald W. Haag derived his authority, was devoid of any language authorizing arbitration or waiving the right to a jury trial. Under the United States Constitution and the Pennsylvania Constitution, individuals possess an absolute right to have their disputes decided by a jury of their peers. This has been referred to as a “fundamental” right. See, e.g. Duncan v. Louisiana, 391 U.S. 145, 153-54 (1968). Whether a general power of attorney is sufficient to waive such a fundamental right is an open question that has not yet been decided by our Commonwealth’s highest court.

While we would be inclined under the current state of Pennsylvania law to grant MANOR CARE’s preliminary objections, we see little harm in deferring a final decision regarding arbitration until more guidance can be received from Pennsylvania’s Supreme Court. If we were to immediately refer this matter to arbitration, discovery could be stymied as the parties appoint arbitrators and wait for the two party-assigned arbitrators to select a third. Moreover, if any issues pertaining to discovery would arise, they would have to be decided by an arbitration panel who would have to be paid to complete research, get together to discuss their positions and then render a decision. At least at this point, it would be more efficient and less costly to the parties for this Court to retain jurisdiction while the discovery process moves forward.

Both counsel in this case are experienced and capable. We know that counsel will monitor decisions from the Pennsylvania Supreme Court that are relevant to healthcare arbitration clauses. We also know that counsel will have read the “initial inclination” we have intentionally set forth within this opinion. It is our expectation that when the discovery phase of litigation draws to a close, counsel will get together and reach an agreement with respect to whether this case should be arbitrated or whether it should proceed before this Court. If no agreement can be reached at that time, we will stand ready via a Motion to Compel Arbitration to render a final decision as to whether the above-referenced case will be arbitrated or remain in this court. An Order to accomplish the above will be entered today’s date.

1) In some cases, we have encountered arbitration agreements that incorporate arcane rules that in some cases suspend substantive law and create hurdles that clearly benefit one of the parties. Such is not the case here.

2) To the extent necessary, we wish to definitively declare that we would not consider Manor Care to have waived its request for arbitration by accepting the terms of our Court Order and not appealing it. Our hope is that we can move the parties forward to the discovery phase of litigation and this Court remains willing to shepherd this case through discovery if and as necessary. To the extent necessary, both parties must be aware that the decision we have rendered today is “without prejudice” and that a “final” decision regarding arbitrability of the above-referenced matter is being deferred.

 

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