Sep 18 2013, 5:34 am
FOR PUBLICATION
ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:
DARREN A. CRAIG RHONDA L. WOOD
EDWARD L. HOLLORAN, III HARVEY L. LANCASTER
JULIA BLACKWELL GELINAS DAVID W. STEWART
Frost Brown Todd, LLC KIRK R. JOCHAM
Indianapolis, Indiana Stewart & Stewart Attorneys
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
ANONYMOUS, M.D. and LIFE CARE CENTERS)
OF AMERICA, INC., d/b/a LANE HOUSE, )
)
Appellant-Defendant, )
)
vs. ) No. 79A04-1304-CT-185
)
EVELYN HENDRICKS, )
)
Appellee-Plaintiff. )
APPEAL FROM THE TIPPECANOE SUPERIOR COURT
The Honorable Randy J. Williams, Judge
Cause No. 79D01-1210-CT-80
September 18, 2013
OPINION - FOR PUBLICATION
BARNES, Judge
Case Summary
Anonymous, M.D., and Life Care Centers of America, Inc., d/b/a Lane House
(collectively “Lane House”) appeal the trial court’s denial of their motion to compel
arbitration in a lawsuit filed by Evelyn Hendricks. We reverse and remand.
Issues
The reordered and restated issues before us are:
I. whether an arbitration agreement signed by
Hendricks’s health care representative, Marjorie
Benge, binds Hendricks; and
II. whether the arbitration agreement is still effective
despite the unavailability of the arbitrator named in the
agreement.
Facts
Hendricks was a resident of Lane House, a health care institution, from December
21, 2010 through December 29, 2010. Prior to her admission to Lane House, Hendricks
appointed Benge as one of her three health care representatives. The document
appointing Benge as a health care representative stated, in part, that Benge had the
authority to “[c]hoose, employ, consult with and discharge my attending physicians and
other health care providers” and to “[i]nstitutionalize and pay for all costs for my care
which my representative, based on medical advice, determines to be necessary or
advisable for my well-being.” App. p. 59. The document also stated that Hendricks
executed it “under the powers given me by the Indiana Health Care Consent Law, (I.C.
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16-36-1-1 et seq) and the Indiana Durable Power of Attorney Act (I.C. 30-5-5) . . . .” Id.
at 60.
At the time of Hendricks’s admission to Lane House, her right arm and wrist were
in a cast and she could not sign documents. Benge accompanied Hendricks to a meeting
with Lane House’s social services director, Paulette Hornback. Among other documents,
Hornback presented Hendricks and Benge with a “Voluntary Agreement for Arbitration.”
Id. at 23. The agreement specifically stated that execution of the agreement was “not a
precondition to receiving medical treatment at or for admission to the Facility.” Id. at 24.
The agreement also provided:
By signing this agreement, the resident agrees with the
Facility that any dispute regarding (1) any services rendered
prior to the date of this agreement; (2) any dispute arising out
of the diagnosis, treatment, or care of the resident, including
the scope of this arbitration clause; or (3) the arbitrability of
any claim or dispute, against whomever made . . . shall be
resolved by binding arbitration by the National Arbitration
Forum, under the Code of Procedure then in effect. Any
award of the arbitrator(s) may be entered as a judgment in any
court having jurisdiction. Information may be obtained and
claims may be filed at any office of the National Arbitration
Forum, at www.adrforum.com, or at P.O. Box 50191,
Minneapolis, MN 55405. If the National Arbitration Forum
is unwilling or unable to serve or the parties mutually agree
not to utilize the National Arbitration Forum for whatever
reason, then the parties shall mutually agree on some other
Alternative Dispute Resolution Service or method to
administer the binding arbitration proceeding.
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Id. Hendricks expressly instructed Benge to sign all of the admission documents to Lane
House on her behalf, including the arbitration agreement. Hendricks did not personally
sign it.
On October 26, 2012, Hendricks filed suit against Lane House, alleging she had
suffered injuries as the result of negligent medical treatment. Lane House moved to stay
the proceedings and compel arbitration. Hendricks responded that the arbitration
agreement was ineffective and impossible to perform because in 2009, the National
Arbitration Forum (“NAF”) had entered into a consent decree with the Minnesota
Attorney General barring it from conducting any future arbitrations involving disputes
between consumers and businesses. See Minnesota v. National Arbitration Found., No.
27-CV-09-18550 (Minn. Dist. Ct. July 17, 2009); Rivera v. American Gen. Fin. Servs.,
Inc., 259 P.3d 803, 808-09 (N.M. 2011). On March 22, 2013, the trial court denied Lane
House’s motion to stay the proceedings and compel arbitration. Lane House now
appeals.
Analysis
I. Signature of Health Care Representative
The first issue we address is whether Benge had the authority to execute the
arbitration agreement on behalf of Hendricks. Lane House contends that Hendricks
waived any argument that Benge lacked such authority by not adequately raising it before
the trial court. Generally, a party cannot raise an argument for the first time on appeal.
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Welty Bldg. Co. Ltd. v. Indy Fedreau Co., LLC, 985 N.E.2d 792, 799 (Ind. Ct. App.
2013).
Even if Hendricks had not waived this argument, it would fail on the merits. The
document granting Benge status as Hendricks’s health care representative explicitly
invoked Indiana’s Health Care Consent Act, Indiana Code Chapter 16-36-1, and the
Power of Attorney Act, Indiana Code Chapter 30-5-5, as its bases.1 The Health Care
Consent Act permits the appointment of a representative to act in all health care matters
for the appointor. See Ind. Code § 16-36-1-7. Additionally, Indiana Code Section 30-5-
5-16(b)(1) provides that language in a document “conferring general authority with
respect to health care powers means the principal authorizes the attorney in fact to . . .
[e]mploy or contract with servants, companions, or health care providers to care for the
principal.” The health care representative agreement in this case did grant such general
authority to Benge to act on Hendricks’s behalf in all health care matters. The arbitration
1
The document in the record before us appointing Benge a health care representative is dated August 31,
2012, or well after Hendricks’s admission to Lane House. After briefing was completed in this case by
Lane House’s filing of a reply brief, Hendricks filed a “Petition for Leave to Respond to Appellant’s
Reply,” seeking to file an additional brief arguing that this document was not in effect at the time of
Hendricks’s admission. We have denied this petition by separate order. This is because Hendricks
expressly admitted to the trial court that she had appointed Benge as her health care representative prior to
her admission to Lane House and she made no argument to the trial court regarding the date of this
document. Also, Lane House relied upon and cited this document in its opening brief, (not only its reply
brief, contrary to Hendricks’s claim), and Hendricks thus had the opportunity to make an argument in her
appellee’s brief regarding the date of the document, but she did not. In fact, Hendricks also cited and
quoted from the document in her brief in support of her arguments. Clearly, Hendricks has waived any
argument regarding the effective date of Benge’s appointment as a health care representative, having
previously failed to make any such argument despite two opportunities to do so. See, e.g., Newland
Resources, LLC v. Branham Corp., 918 N.E.2d 763, 770 (Ind. Ct. App. 2009) (“a party cannot argue on
appeal an issue that was not properly presented to the trial court”); Town of Chandler v. Indiana-
American Water Co., 892 N.E.2d 1264, 1267 (Ind. Ct. App. 2008) (noting rule that no new issues may be
raised in a reply brief) (citing Ind. Appellate Rule 46(C)).
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agreement here was part and parcel of the contract for the provision of health care
services by Lane House to Hendricks, though not a necessary part of the contract.
Arguably, Benge had the authority to execute that agreement on Hendricks’s behalf.
Not all courts would agree with that conclusion, however. For example, in Life
Care Centers of America v. Smith, 681 S.E.2d 182, 186 (Ga. Ct. App. 2009), cert. denied,
the court held that an arbitration agreement signed by a limited health care attorney-in-
fact, and not a general attorney-in-fact, upon an incapacitated patient’s entry into a health
care facility was not binding upon the patient. The arbitration agreement in Smith, as
here, was not a necessary precondition to admission to the facility. The Smith court said
it would not rely upon Sanford v. Castleton Health Care Center, LLC, 813 N.E.2d 411
(Ind. Ct. App. 2004), trans. dismissed, in which this court held that a patient’s legal
representative had waived the patient’s right to a jury trial when executing an arbitration
agreement. The Smith court correctly noted that this court was not specifically asked in
Sanford to decide whether the representative’s authority extended to executing arbitration
agreements on the patient’s behalf. Smith, 681 S.E.2d at 185 n.2; see also Mississippi
Care Ctr. of Greenville, LLC v. Hinyub, 975 So. 2d 211, 218 (Miss. 2008) (where
agreement to arbitrate was not necessary part of consideration for patient to receive
health care, patient’s health care representative lacked authority to bind patient to
arbitration agreement); Dickerson v. Longoria, 995 A.2d 721, 739 (Md. 2010) (agreeing
with Hinyub).
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The undisputed facts here, however, are that Hendricks expressly directed Benge
to sign the arbitration agreement on her behalf. There is no argument or contention that
Hendricks lacked the competency to make such a direction; the reason Hendricks herself
did not sign it only appears to be that she was physically unable to do so because of her
arm and wrist being injured. Even if we were to conclude that the appointment of Benge
as Hendricks’s health care representative did not grant Benge the authority to execute the
optional arbitration agreement with Lane House, a principal will be bound by a contract
signed by an agent if a principal expressly authorized the agent to enter into a contract on
behalf of the principal. See Heritage Dev. of Indiana, Inc. v. Opportunity Options, Inc.,
773 N.E.2d 881, 888 (Ind. Ct. App. 2002), trans. dismissed. Hendricks expressly
authorized Benge to sign the arbitration agreement on her behalf. Under general agency
principles, Hendricks is now bound by that signing. Cf. Dickerson, 995 A.2d at 735
(applying general agency principles in deciding appointed health care representative did
not possess authority to bind patient to arbitration agreement).
II. Unavailability of NAF as Arbitrator
Next, we address whether NAF’s unavailability to arbitrate any consumer
disputes, including the one between Lane House and Hendricks, invalidates the
arbitration agreement. We review de novo a trial court’s ruling on a motion to compel
arbitration. Welty, 985 N.E.2d 798. Indiana public policy favors enforcement of
arbitration provisions. Id. Additionally, because this case involves interstate commerce
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between parties from multiple states,2 the Federal Arbitration Act and cases decided
thereunder applies here. Id. at 798-99. “Federal policy, like Indiana’s, favors arbitration
when possible.” Id. at 799. “The United States Supreme Court has stated, in light of this
policy, that ‘any doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration, whether the problem at hand is the construction of the contract
language itself or an allegation of waiver, delay, or a like defense to arbitrability.’” Id.
(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103
S. Ct. 927, 941 (1983)).
When determining whether parties have agreed to arbitrate a dispute, we apply
state law interpretation principles governing contracts. Blimpie Intern., Inc. v. Choi, 822
N.E.2d 1091, 1094 (Ind. Ct. App. 2005). We must attempt to determine the intent of the
parties at the time the contract was made by examining the language used to express their
rights and duties. Id. Parties are bound to arbitrate all matters not explicitly excluded
that reasonably fit within the language used, although we will not extend arbitration
agreements by construction or implication. Id. Furthermore, when interpreting a
contract, we must read it as a whole and construe the language so as not to render any
words, phrases, or terms ineffective or meaningless. Brownsburg Mun. Bldg. Corp. v.
R.L. Turner Corp., 933 N.E.2d 905, 907 (Ind. Ct. App. 2010). Like any other contract,
arbitration agreements may be invalidated by generally applicable contract defenses such
2
Life Care Centers of America, Inc., is a Tennessee corporation.
8
as fraud, duress, impossibility, or unconscionability. Brumley v. Commonwealth
Business College Educ. Corp., 945 N.E.2d 770, 776 (Ind. Ct. App. 2011).
Hendricks argues that the outcome of this case is controlled by Geneva-Roth,
Capital, Inc. v. Edwards, 956 N.E.2d 1195 (Ind. Ct. App. 2011), trans. denied, cert.
denied. Geneva-Roth involved a “payday loan” agreement that contained the following
arbitration provision:
Arbitration: Both parties agree that any claim, dispute, or
controversy between us, any claim by either party against the
other or the agents, services, or assigns of the other, including
the validity of this agreement to arbitrate disputes as well as
claims alleging fraud or misrepresentation shall be resolved
by binding arbitration by and under the Code of Procedures of
the National Arbitration Forum (NAF) at the time the claim is
filed. Rules and form of the NAF may be obtained and all
claims shall be filed at any NAF office on the World Wide
Web at www. arbforum. com or at P.O. Box 50131,
Minneapolis, MN 55405. Any arbitration hearing, if one is
held, will take place at a location near Customer’s residence.
Customer’s arbitration fees will be waived by the NAF in the
event you cannot afford to pay them. This arbitration
agreement is made pursuant to a transaction involving
interstate commerce and shall be governed by the Federal
Arbitration Act 9 USC Section 1–18. Judgment upon the
award may be entered by any party in court having
jurisdiction. Notice: Without this arbitration agreement, both
parties have the right to litigate disputes through the law
courts but we have agreed instead to resolve disputes through
binding arbitration.
Geneva-Roth, 956 N.E.2d at 1197. After the borrower instituted suit against the lender,
the lender moved to compel arbitration based on the above provision. The borrower
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responded that the arbitration provision was impossible to perform because of NAF’s
unavailability following the Minnesota consent decree.
The trial court denied the motion to compel arbitration, and we affirmed.
Reviewing cases from other jurisdictions, we held that if an arbitration agreement’s
naming of a specific arbitrator is “integral” to the parties’ agreement to arbitrate, then the
arbitration agreement becomes null and void due to impossibility of performance if the
named arbitrator is unavailable. Id. at 1203. Additionally, Section 5 of the Federal
Arbitration Act, 9 U.S.C. § 5, which provides trial courts a mechanism for the
appointment of a substitute arbitrator under certain circumstances,3 cannot be invoked
when the naming of a specific arbitrator is “integral” to an arbitration agreement. Id. By
contrast, if the naming of a specific arbitrator in an arbitration agreement is merely a
matter of “ancillary logistical concern,” then the named arbitrator’s unavailability to
arbitrate does not invalidate the agreement and a substitute arbitrator may be appointed.
Id. at 1202.
3
This statute provides in full:
If in the agreement provision be made for a method of naming or
appointing an arbitrator or arbitrators or an umpire, such method shall be
followed; but if no method be provided therein, or if a method be
provided and any party thereto shall fail to avail himself of such method,
or if for any other reason there shall be a lapse in the naming of an
arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the
application of either party to the controversy the court shall designate
and appoint an arbitrator or arbitrators or umpire, as the case may
require, who shall act under the said agreement with the same force and
effect as if he or they had been specifically named therein; and unless
otherwise provided in the agreement the arbitration shall be by a single
arbitrator.
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Reviewing the particular arbitration agreement at issue in Geneva-Roth, we noted,
“[a]n express designation of a single arbitration provider weighs in favor of a finding that
the designated provider is integral to the agreement to arbitrate.” Id. Also, the arbitration
agreement stated in mandatory terms that any arbitration “shall” be conducted by NAF
and its rules, and that all claims “shall” be submitted to NAF. Id. at 1203. Ultimately,
we held that the naming of NAF as arbitrator was “integral” to the arbitration agreement
at issue and, therefore, NAF’s unavailability to arbitrate rendered the agreement null and
void. Id.; see also Apex 1 Processing, Inc. v. Edwards, 962 N.E.2d 663 (Ind. Ct. App.
2012) (reaching same conclusion regarding nearly identical arbitration agreement naming
NAF as arbitrator), trans. denied, cert. denied.
The arbitration agreement in the present case, however, contains language that is
conspicuously absent from the agreements in Geneva-Roth and Apex 1. Namely, after
reciting that NAF was the preferred entity to conduct any arbitration, the agreement goes
on to state: “If the National Arbitration Forum is unwilling or unable to serve or the
parties mutually agree not to utilize the National Arbitration Forum for whatever reason,
then the parties shall mutually agree on some other Alternative Dispute Resolution
Service or method to administer the binding arbitration proceeding.” App. p. 24.4
Hendricks attempts to dismiss this sentence as a “passing phrase . . . tacked on the end of
the Agreement . . . .” Appellee’s Br. p. 10. However, we cannot so easily dismiss the
sentence; to do so would effectively render it meaningless, contrary to standard contract
4
Also, unlike the agreements in Geneva-Roth and Apex 1, the agreement here stated in permissive terms
that any dispute “may” be filed with NAF, not that any dispute “shall” be so filed. App. p. 24.
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interpretation principles. We believe the phrase clearly was put into the agreement for a
reason. That reason was to embody the parties’ intent that it was not “integral” to the
arbitration agreement for NAF to conduct the arbitration and that, if NAF could not or
would not conduct the arbitration, it was acceptable to find another entity who would
conduct it. In other words, the naming of NAF in the arbitration agreement was only an
“ancillary logistical concern” and NAF’s current unavailability as an arbitrator does not
make it impossible to perform the agreement.
In Crewe v. Rich Dad Education, LLC, 884 F. Supp. 2d 60 (S.D. N.Y. 2012), the
court was faced with an arbitration agreement stating in part that, any dispute “shall be
resolved exclusively and finally by binding arbitration under the Federal Arbitration Act
administered by the National Arbitration Forum (NAF) under the Code of Procedure in
effect when the claim is filed,” but which also stated, “[w]e will agree on another binding
arbitration forum if NAF ceases operations.” Crewe, 884 F. Supp. 2d at 67. The court
held that the latter sentence “emphatically indicates that the NAF is not integral to the
agreement to arbitrate.” Id. at 77. It observed, “[w]here the parties’ agreement reflects a
broader intention to arbitrate even if the designated forum or fora prove unavailable, there
is no . . . barrier to the appointment of an alternative forum.” Id. at 76; see also In re
Checking Account Overdraft Litig., 734 F. Supp. 2d 1294, 1301 (S.D. Fla. 2010)
(holding arbitration agreement naming either NAF or American Arbitration Association
(“AAA”) as arbitrators was not rendered invalid by both NAF’s and AAA’s
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unavailability to arbitrate where agreement provided method for selecting alternate
arbitrator).
Despite Hendricks’s arguments to the contrary, we find Crewe to be legally
indistinguishable from the present case. She makes a corollary argument that because the
arbitration agreement specified the use of NAF rules of procedure during arbitration, and
supposedly only the NAF can utilize those procedures, the agreement is impossible to
perform. However, the agreement not only provides for choosing an alternate entity or
forum to conduct arbitration, but also an alternate method. This clearly contemplates the
use of non-NAF rules of procedure during arbitration if, indeed, only NAF can utilize
NAF rules but NAF is unavailable. In sum, we see no reason not to give effect to the
plain language of the parties’ arbitration agreement, providing for an alternate forum
and/or method of arbitration in the event of NAF’s unavailability. We reverse the denial
of Lane House’s motion to stay proceedings and compel arbitration and remand either for
the parties to select an alternate forum and/or method of arbitration or for the trial court to
select an alternate arbitrator in accordance with Section 5 of the Federal Arbitration Act if
the parties cannot reach agreement.
Conclusion
Benge’s signature on the arbitration agreement is binding upon Hendricks under
the undisputed facts of this case, and that agreement is not rendered impossible to
perform and invalid because of NAF’s unavailability to conduct the arbitration. We
reverse and remand for further proceedings consistent with this opinion.
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Reversed and remanded.
CRONE, J., and PYLE, J., concur.
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