Hardaway v. Quince Nursing and Rehabilitation Center, LLC

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

)

KEVIN HARDAWAY, as next of kin )

of Doris Albright, deceased, )

and on behalf of the wrongful )

death beneficiaries of Doris )

Albright, )

)

Plaintiff, )

)

v. ) No. 2:19-2464

)

QUINCE NURSING AND )

REHABILITATION CENTER, LLC, )

d/b/a QUINCE NURSING AND )

REHABILITATION CENTER; AURORA )

CARES, LLC; DTD HC; D&N, LLC; )

DONALD T. DENZ; and NORBERT A. )

BENNETT, )

)

Defendants. )

)

ORDER

Before the Court is Defendant Quince Nursing and

Rehabilitation Center, LLC’s (“Quince”) September 26, 2019

Motion to Compel Arbitration and Stay Proceedings (“Motion to

Compel”). (ECF No. 16.) Plaintiff Kevin Hardaway, as next of

kin of Doris Albright, deceased, and on behalf of the wrongful

death beneficiaries of Doris Albright (“Hardaway”), responded on

October 9, 2019. (ECF No. 20.) Quince replied on October 25,

2019. (ECF No. 29.)

For the following reasons, Quince’s Motion to Compel is

DENIED.

I. Background

This is a health care liability suit alleging a wrongful

death. Doris Albright was a resident of Quince Nursing and

Rehabilitation Center from about August 21, 2018, until her

death on August 29, 2019. (Compl., ECF No. 1 ¶¶ 20, 42.) On

admission to the nursing home, Doris Albright’s sister, Charitee

Albright, signed an arbitration agreement (the “Agreement”),

which stated that the parties, Doris Albright and Quince, agreed

to submit “[a]ny and all disputes” “arising out of or in any way

relating to . . . the Resident’s stay[] at the facility . . .”

to arbitration. (ECF No. 16-2 at 1 ¶ 3; id. at 3.) The

Agreement further stated that “[t]he term ‘Resident’ shall refer

collectively to those signing with or for the Resident” and that

“[a] person signing who routinely makes decisions for the

Resident, if not the Power of Attorney or Guardian/Conservator,

will be considered a health care surrogate/proxy and/or Legal

Representative.” (Id. ¶ 2.) The Agreement stated that the

arbitrator should apply the law of the state where the facility

is located, except that the Federal Arbitration Act should

exclusively govern the enforcement of the Agreement. (Id. ¶ 3.)

Doris Albright did not sign the Agreement. (See id. at 3.)

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There is no evidence in the record that Charitee Albright had

authorization to sign the Agreement on Doris Albright’s behalf.

On July 19, 2019, Kevin Hardaway instituted the present

action as son and next of kin of Doris Albright and on behalf of

all wrongful death beneficiaries. (ECF No. 1.) Hardaway brings

claims for statutory negligence under the Tennessee Health Care

Liability Act, Tenn. Code Ann. §§ 29-26-101, et seq. (“THCLA”),

negligence under Tennessee common law, and survival and wrongful

death, all arising from Doris Albright’s stay at Quince Nursing

and Rehabilitation Center. (Id. ¶¶ 47-70.)

On September 26, 2019, Quince filed the Motion to Compel.

(ECF No. 16.) Quince argues that the Agreement binds Doris

Albright and that all claims brought by Hardaway are subject to

arbitration. (ECF No. 16-1.) Quince asks the Court to compel

arbitration and stay all proceedings pending resolution of

arbitration.1 (ECF No. 16.)

On November 4, 2019, the Court held a scheduling conference

in which the Motion to Compel was discussed. (ECF No. 34.) The

Court granted the parties’ request to conduct discovery

1 In addition to the nursing home as a facility defendant, Hardaway

names other defendants, including corporate defendants and individuals

(the “Non-facility Defendants”). The Non-facility Defendants have

filed a concurrent motion to dismiss for lack of jurisdiction. (ECF

No. 17.) They argue that, if the Court finds them subject to personal

jurisdiction, the Agreement also binds Hardaway to arbitration of the

claims against them. (ECF No. 16-1 at 1 n.1.)

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addressing authorization to sign the Agreement. (See id.) A

subsequent Scheduling Order established January 31, 2020, as the

deadline for the parties to complete arbitration-related

discovery; March 2, 2020, as the deadline to file any

arbitration-related memoranda; and March 16, 2020, as the

deadline for the parties to respond to any arbitration-related

memoranda. (ECF No. 36.)

On March 2, 2020, both parties filed briefs addressing the

applicability of a recent Tennessee Court of Appeals decision

and reiterating arguments made in their October filings. The

parties produced no new evidence. (See ECF Nos. 46, 47.) On

March 16, 2020, Hardaway filed a response to Quince’s March 2,

2020 memorandum. (ECF No. 48.)

II. Jurisdiction and Choice of Law

The Court has diversity jurisdiction. 28 U.S.C. § 1332.

The amount in controversy exceeds $75,000. Hardaway is seeking

compensatory and punitive damages for, inter alia, survival and

wrongful death claims against multiple defendants. (ECF No. 1

¶¶ 53, 64, 70, 73; id. at 22 ¶¶ 1, 4.)

The parties are completely diverse. At the time of her

death, Doris Albright was a citizen of Tennessee. (ECF No. 50

¶ 1.) Kevin Hardaway is also a citizen of Tennessee. (Id.

¶¶ 2, 4-5.) None of the defendants is a citizen of Tennessee.

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Quince is a Tennessee limited liability company. (Id. ¶ 6.)

Aurora Cares, LLC is a New York limited liability company. (Id.

¶ 8.) For purposes of diversity jurisdiction, limited liability

companies have the citizenship of each of their members.

Americold Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. 1012,

1015 (2016) (citing Carden v. Arkoma Associates, 494 U.S. 185,

195-96 (1990)); accord Delay v. Rosenthal Collins Grp., LLC, 585

F.3d 1003, 1005 (6th Cir. 2009). The members of Quince and

Aurora Cares, LLC are D&N, LLC and DTD HC, LLC, which are also

named defendants. (ECF No. 50 ¶¶ 7, 9.) D&N, LLC and DTD HC,

LLC are New York limited liability companies. (Id. ¶¶ 10, 13.)

D&N, LLC’s members are Norbert A. Bennett, the Norbert A.

Bennett Children’s Trust, and the Norbert A. Bennett Grand-

Children’s Trust. (Id. ¶ 11.) Bennett is a citizen of New

York. (Id. ¶ 17.) The citizenship of a traditional trust is

that of its trustee. See GBForefront, L.P. v. Forefront Mgmt.

Grp., LLC, 888 F.3d 29, 38-40 (3d Cir. 2018) (citations

omitted). The trustee of the Norbert A. Bennett Children’s

Trust and the Norbert A. Bennett Grand-Children’s Trust is

Ronald Bennett, who is also a citizen of New York. (ECF No. 50

¶ 12.) DTD HC, LLC’s members are Donald T. Denz and the Donald

T. Denz Irrevocable Trust. (Id. ¶ 14.) Denz is a citizen of

New York. (Id. ¶ 17.) The trustee of the Donald T. Denz

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Irrevocable Trust is Martin Clifford, who is also a citizen of

New York. (Id. ¶ 15.)

The Court has diversity jurisdiction because the parties

are completely diverse and the amount in controversy exceeds

$75,000. 28 U.S.C. § 1332.

Federal courts sitting in diversity apply state law to

issues of substantive law and federal law to procedural issues.

Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80 (1938); see also

Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427

(1996). Under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§

1, et seq., arbitration agreements may be invalid on the grounds

that “exist at law” for the revocation of contracts. See 9

U.S.C. § 2. “In other words, whether an arbitration clause is

enforceable is governed by state law.” Stutler v. T.K.

Constructors, Inc., 448 F.3d 343, 345 (6th Cir. 2006). State

law determines the applicability of contract defenses such as

fraud, duress, or unconscionability. Doctor’s Assocs., Inc. v.

Casarotto, 517 U.S. 681, 686–87 (1996); see Floss v. Ryan’s Fam.

Steak House, Inc., 211 F.3d 306, 314–15 (6th Cir. 2000). When

there is no dispute that a certain state’s substantive law

applies, the court need not conduct a choice-of-law analysis sua

sponte. See GBJ Corp. v. E. Ohio Paving Co., 139 F.3d 1080,

1085 (6th Cir. 1998). The parties assume in their respective

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briefing that Tennessee substantive law governs Hardaway’s

claims. The Court applies Tennessee substantive law to

Hardaway’s claims.

III. Standard of Review

“When a suit is brought in federal court on issues that by

written agreement are subject to arbitration, the Federal

Arbitration Act requires that the court in which the suit is

pending, upon being satisfied that the issue involved in such

suit or proceeding is referable to arbitration[,] shall stay the

trial of the action.” O.J. Distrib., Inc. v. Hornell Brewing

Co., 340 F.3d 345, 355 (6th Cir. 2003) (alterations, quotation

marks, and citations omitted).

The FAA strongly favors arbitration. Albert M. Higley Co.

v. N/S Corp., 445 F.3d 861, 863 (6th Cir. 2006); see also EEOC

v. Waffle House, Inc., 534 U.S. 279, 289 (2002). One of a

court’s primary responsibilities under the FAA is to determine

whether there is a valid agreement to arbitrate. See 9 U.S.C.

§ 3; Mazera v. Varsity Ford Mgmt. Servs., LLC, 565 F.3d 997,

1001 (6th Cir. 2009) (“The court ‘must determine whether the

dispute is arbitrable, meaning that a valid agreement to

arbitrate exists between the parties and that the specific

dispute falls within the substantive scope of the agreement.’”)

(quoting Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559, 561

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(6th Cir. 2008). “Any doubts about whether an [arbitration]

agreement is enforceable, including defenses to arbitrability,

should be resolved in favor of arbitration.” Johnson v. Long

John Silver’s Rests., Inc., 320 F. Supp. 2d 656, 663 (M.D. Tenn.

2004) (citation omitted). “[A]bsent a showing of fraud, duress,

mistake, or some other ground upon which a contract may be

voided, a court must enforce a contractual agreement to

arbitrate.” Haskins v. Prudential Ins. Co. of Am., 230 F.3d

231, 239 (6th Cir. 2000), overruled on other grounds by Morrison

v. Circuit City Stores, Inc., 317 F.3d 646 (6th Cir. 2003) (en

banc).

The showing necessary to compel arbitration absent trial is

the same as the showing necessary for summary judgment in a

civil suit. Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th

Cir. 2002) (citing Doctor’s Assocs., Inc. v. Distajo, 107 F.3d

126, 129–30 (2d Cir. 1997)). The moving party must “clearly and

convincingly establish[] the nonexistence of any genuine issue

of material fact, and the evidence . . . must be read in a light

most favorable to the party opposing the motion.” Kochins v.

Linden-Alimak, Inc., 799 F.2d 1128, 1133 (6th Cir. 1986). The

moving party must show the existence of “a binding agreement to

arbitrate.” In re First Thermal Sys., Inc., 182 B.R. 510, 513

(Bankr. E.D. Tenn. 1995).

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If that showing is made, the burden shifts to the non-

moving party to demonstrate that the validity of the agreement

is “in issue.” Great Earth Cos., 288 F.3d at 889. That

requires evidence beyond mere allegations and denials. See id.

(citation omitted) (“In order to show that the validity of the

agreement is ‘in issue,’ the party opposing arbitration must

show a genuine issue of material fact as to the validity of the

agreement to arbitrate.”).

IV. Analysis

Hardaway argues that the Agreement does not bind Doris

Albright or subject his claims to arbitration because Charitee

Albright did not have legal authority to enter into and execute

the Agreement on Doris Albright’s behalf. (See ECF No. 20 at 7-

9.) Quince does not contest the lack of authority, but argues

that Doris Albright is bound to arbitration under a third-party

beneficiary theory. (ECF No. 29 at 2-5; ECF No. 47 at 2-4.)

Quince’s argument is not well taken.

Any authority to compel arbitration would be derived from

the existence of a contract binding Doris Albright. Hardaway

argues that Charitee Albright did not have the authority to bind

Doris Albright. If Charitee Albright’s signature does not bind

Doris Albright, there is no contract that would bind Doris

Albright to arbitration. See McKey v. Nat’l Healthcare Corp.,

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2008 WL 3833714, at *2 (Tenn. Ct. App. Aug. 15, 2008) (to bind

resident of nursing home to an arbitration agreement, the mother

or sister who signed the agreement had to have authority to act

as resident’s agent or surrogate); cf. United Steelworkers of

Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)

(“[A]rbitration is a matter of contract and a party cannot be

required to submit to arbitration any dispute which he has not

agreed so to submit.”). There is no evidence in the record that

Charitee Albright had authority to sign the Agreement on Doris

Albright’s behalf. No valid contract binds Doris Albright to

arbitration. Quince argues that, under a third-party

beneficiary theory, the parties should be required to arbitrate

their dispute regardless of whether Charitee Albright had

authorization to enter into the Agreement. (ECF No. 29 at 2-5;

ECF No. 47 at 2-4.)

“Generally, contracts are presumed to be ‘executed for the

benefit of the parties thereto and not third persons.’” Owner-

Operator Indep. Drivers Ass’n, Inc. v. Concord EFS, Inc., 59

S.W.3d 63, 68 (Tenn. 2001) (quoting Oman Constr. Co. v. Tenn.

Cent. Ry. Co., 370 S.W.2d 563, 572 (Tenn. 1963)). There is an

exception to that rule when “the contracting parties express an

intent that the benefits of the contract flow to a third party.”

Id. These “third-party beneficiaries” “may enforce a contract

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if they are intended beneficiaries of the contract.” Id.

(citations omitted). In Tennessee, “a third party is an

intended third-party beneficiary of a contract, and thus

entitled to enforce the terms of a contract, where (1) the

parties to the contract have not otherwise agreed,

(2) recognition of the third-party’s right to performance is

appropriate to effectuate the parties’ intent, and (3) terms or

circumstances indicate that performance of the promise is

intended or will satisfy an obligation owed by the promisee to

the third party.” Benton v. Vanderbilt Univ., 137 S.W.3d 614,

618 (Tenn. 2004) (citing Owner–Operator, 59 S.W.3d at 70).

Quince relies primarily on Benton, arguing that, as Quince

construes its holding, “[u]nder Tennessee law, a non-signatory

to an arbitration agreement may be compelled to arbitrate if

that non-signatory is a third-party beneficiary of that

arbitration agreement.” (ECF No. 29 at 2-5) (citing Benton, 137

S.W.3d at 618); (see also No. 47 at 2-3.) Quince cites language

in the Agreement providing that it is intended to be a part of a

broader “Admissions Agreement” and that “Resident [Doris

Albright] will be considered a third party beneficiary of this

Agreement and is intended to benefit directly from the execution

of this Agreement in conjunction with the corresponding

admission(s) and receipt of services.” (ECF No. 29 at 4)

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(citing No. 16-2 at 1 ¶ 2.) Quince argues that this language

requires the Court to enforce the Agreement against Doris

Albright.

Quince’s reliance on Benton is misplaced. Contrary to

Quince’s broader characterization, Benton held that “an

arbitration provision in a contract is binding against a third-

party beneficiary who brings an action seeking to enforce the

terms of that contract.” 137 S.W.3d at 618 (emphasis added).

Benton is distinguishable because Doris Albright, as the alleged

third-party beneficiary, is not “bring[ing] an action seeking to

enforce the terms of th[e] contract.” Id. The claims brought

by the plaintiff in Benton – abuse of process, breach of

contract, and a violation of the Tennessee Consumer Protection

Act – derived from the contract containing the arbitration

provision. See id. at 616. Benton declined to allow a

plaintiff to “have his cake and eat it too” by allowing him to

enforce certain favorable provisions of a contract while

avoiding provisions he viewed as unfavorable. See id. at 619–20

(“Thus, where a third-party beneficiary seeks to enforce rights

under a contract, an interpretation of the contract as a whole

requires that the third party not be permitted to interpret the

contract in a piecemeal fashion by avoiding unfavorable

terms.”).

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Here, Hardaway, on behalf of Doris Albright, is not

bringing contract claims or “seeking to enforce the terms of the

contract.” He is bringing claims for statutory and common law

negligence and for survival and wrongful death that do not arise

under the terms of the Agreement. (See ECF No. 1 ¶¶ 47-70.)

The Benton court specifically said that its analysis “is

applicable only to actions brought by a third-party beneficiary

seeking to enforce rights under that contract” and that “[a]n

arbitration provision may not be applicable in cases where

claims are raised under other legal theories and are not

intertwined with rights being enforced under the terms of the

contract.” 137 S.W.3d at 620 (emphasis added) (citations

omitted).

Quince’s argument also fails because the existence of a

valid contract is a threshold requirement for any third-party

beneficiary argument. Post-Benton, Tennessee courts have

rejected similar third-party beneficiary arguments on that

ground. See, e.g., Jones v. Allenbrooke Nursing & Rehab. Ctr.,

LLC, 2019 WL 6842372, at *6 (Tenn. Ct. App. Dec. 16, 2019);

Ricketts v. Christian Care Ctr. of Cheatham Cty., Inc., 2008 WL

3833660, at *4 (Tenn. Ct. App. Aug. 15, 2008). In Ricketts, the

Tennessee Court of Appeals decided that a nursing home contract

signed by a family member who did not have authority to act on

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behalf of the resident did not create a contract and, therefore,

that there could be no third-party beneficiary of a contract.

2008 WL 3833660, at *4. Ricketts reasoned:

Third party beneficiary concepts should not be used to

circumvent the threshold requirement that there be a valid

arbitration agreement. [The family member] signed the

admission agreement as [the resident’s] ‘representative.’

She was not entering into a contract on her own behalf, but

as her mother’s representative. The issue in this case is

whether [the family member] had authority to act as her

mother’s agent and to enter into a contract on her behalf.

If she did not have authority, there is no valid contract.

Without a valid contract, there can be no third party

beneficiary.

Id. Other courts are in accord. See, e.g., Hattiesburg Health

& Rehab Ctr., LLC v. Brown, 176 So. 3d 17, 22 (Miss. 2015)

(holding that for a third-party beneficiary to exist, there must

first be a valid contract executed by one who had authority);

Licata v. GGNSC Malden Dexter LLC, 2 N.E.3d 840, 848 (Mass.

2014) (same).

Quince relies on two orders in this District in which the

court granted motions to compel arbitration. (ECF No. 47 at 4

n.1) (citing Foley v. Allenbrooke Nursing and Rehab. Ctr., LLC,

2:18-cv-02741-JPM-cgc, ECF No. 52 (W.D. Tenn. May 2, 2019);

Farwell v. Quince Nursing and Rehab. Ctr., LLC, 2:18-cv-02795-

JPM-dkv, ECF No. 20 (W.D. Tenn. May 2, 2019)). In Foley and

Farwell, the court found that the arbitration agreements were

valid and did not reach the third-party beneficiary issue. See

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2:18-cv-02741-JPM-cgc, ECF No. 52 at 2 (“The Court, therefore,

may not decide the arbitrability issue which includes the extent

of rights conferred to Donna Foley as the third-party

beneficiary.”) (citation omitted); 2:18-cv-02795-JPM-dkv, ECF

No. 20 at 2 (same). Here, Charitee Albright lacked authority to

sign the Agreement. A valid contract does not exist.

Therefore, Foley and Farwell are not apposite.

Because there is no evidence that Charitee Albright had the

authority to act on behalf of Doris Albright, Doris Albright was

not bound by the Agreement. Doris Albright was not a third-

party beneficiary of the Agreement who would be precluded from

bringing this action. The Agreement does not bind Hardaway to

arbitration. Quince’s Motion to Compel is DENIED.

V. Conclusion

Quince’s Motion to Compel Arbitration and Stay Proceedings

is DENIED.

So ordered this 20th day of April, 2020.

/s/ Samuel H. Mays, Jr.

SAMUEL H. MAYS, JR.

UNITED STATES DISTRICT JUDGE

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