United States Court of Appeals
Fifth Circuit
F I L E D
REVISED JULY 19, 2007
UNITED STATES COURT OF APPEALS July 16, 2007
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
06-60603
JP MORGAN CHASE & CO;
J. P. MORGAN TRUST COMPANY NA,
Plaintiffs-Appellants,
v.
DELORES CONEGIE,
by and through her next friend Deola Lee,
Defendant-Appellee.
Appeal from the United States District Court for the
Northern District of Mississippi
Before SMITH, BENAVIDES, and DENNIS, Circuit Judges.
BENAVIDES, Circuit Judge:
The Plaintiffs-Appellants, JP Morgan Chase & Company and J. P.
Morgan Trust Company (“Chase”), appeal the district court’s denial
of its motion to compel arbitration. We reverse.
I. BACKGROUND
The Defendant-Appellee, Delores Conegie, suffers from a
condition known as Huntington’s chorea which causes severe physical
and neurological problems, including dementia psychosis. Conegie
was admitted to a nursing home in Greenville, Mississippi. The
nursing home admission agreement, which her mother signed on her
behalf, contained an arbitration clause. The crux of this case is
whether the arbitration clause is enforceable against Conegie as a
non-signatory. The district court ruled that Conegie’s mother did
not have the authority to sign a nursing home admission agreement
on her behalf, finding no agency relationship existed.
II. ANALYSIS
A. STANDARD OF REVIEW
Chase argues that the district court erred in denying its
motion to compel. We review de novo a district court’s denial of
a motion to compel arbitration. Freudensprung v. Offshore
Technical Services, Inc., 379 F.3d 327, 337 (5th Cir. 2004).
There is a two-step inquiry to determine whether a party
should be compelled to arbitrate. Washington Mut. Fin. v. Bailey,
364 F.3d 260, 263 (5th Cir. 2004). This Court must first ascertain
whether the parties agreed to arbitrate the dispute. Id. In
determining this question, there are two considerations: “‘(1)
whether there is a valid agreement to arbitrate between the
parties; and (2) whether the dispute in question falls within the
scope of that arbitration agreement.’” Will-Drill Res., Inc. v.
Samson Res. Co., 352 F.3d 211, 214 (5th Cir. 2003). If it is
determined that the parties agreed to arbitrate, this Court must
determine “whether any federal statute or policy renders the claims
nonarbitrable.” Bailey, 364 F.3d at 263. As previously set forth,
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the court below found no valid or enforceable agreement.
Generally, principles of state contract law govern the
question of whether the parties formed a valid agreement to
arbitrate. Bailey, 364 F.3d at 264. Here, the parties disagree
regarding whether state or federal law applies to the question of
whether a non-signatory is bound by an arbitration clause. There
is Fifth Circuit precedent applying state law1 and federal law2 to
this question. We need not resolve this dispute because both
Mississippi and federal law compel arbitration.
B. MISSISSIPPI LAW
Subsequent to the district court’s decision, the Mississippi
Supreme Court issued a decision that controls the disposition of
this appeal. Covenant Health Rehab of Picayune, L.P., v. Brown,
949 So.2d 732 (Miss. 2007). In that case, Bernice Brown’s estate
filed a wrongful death suit against a convalescent center. On
Brown’s behalf, Brown’s adult daughter, Sharon Goss, signed the
1
Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069, 1073
(5th Cir. 2002) (applying Texas state law to the question of
whether the non-signatories were bound by the arbitration
agreement).
2
In a footnote, although expressly recognizing this Court’s
previous precedent applying state law, this Court agreed with the
Fourth Circuit’s conclusion that “because the determination of
whether a non-signatory is bound by an arbitration provision
‘presents no state law question of contract formation or validity,’
a court should ‘look to the federal substantive law of
arbitrability to resolve this question.’” Bailey, 364 F.3d at 267-
68 n.6 (quoting Int’l Paper v. Schwabedissen Maschinen & Anlagen
GMBH, 206 F.3d 411, 417 n.4 (4th Cir. 2000)).
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admission agreement to the convalescent center. Relying on the
arbitration clause in the admission agreement, the defendant filed
a motion to compel arbitration. The trial court found the
arbitration clause unconscionable. On appeal, Brown’s estate
argued that the agreement was unconscionable because Brown was
incompetent and Brown’s daughter did not have the authority to bind
Brown to the contract. Id. at 736.
In support of its argument that her adult daughter had the
authority to bind Brown, the defendant-appellant relied on a
Mississippi statute. Miss. Code Ann. § 41-41-211. Section 41-41-
211 provides:
(1) A surrogate may make a health-care decision for a
patient who is an adult or emancipated minor if the
patient has been determined by the primary physician to
lack capacity and no agent or guardian has been appointed
or the agent or guardian is not reasonably available.
(2) An adult or emancipated minor may designate any
individual to act as surrogate by personally informing
the supervising health-care provider. In the absence of
a designation, or if the designee is not reasonably
available, any member of the following classes of the
patient's family who is reasonably available, in
descending order of priority, may act as surrogate:
(a) The spouse, unless legally separated; (b) An adult
child; (c) A parent; or (d) An adult brother or sister.
(7) A health-care decision made by a surrogate for a
patient is effective without judicial approval.
There was no declaration by Brown’s primary physician that she
lacked capacity to manage her affairs prior to the signing of the
admission agreement. Nonetheless, the estate had submitted in its
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motion that (1) Brown was incapable of managing her affairs and (2)
her admitting physician at the hospital found that she did not have
the capacity to manager her affairs. Brown, 949 So.2d at 736-37.
The Mississippi Supreme Court found the estate’s admission with the
corroboration from her physician sufficient to establish incapacity
under the statute. Id. The court further stated that Brown’s
adult daughter “was an appropriate member of the classes from which
a surrogate could be drawn, and thus, Goss could contractually bind
Brown in matters of health care.” Id. at 737. The court also
rejected the argument that the agreement was unconscionable because
it was a contract of adhesion. Id.
In the case at bar, Conegie’s brief admits that she has been
“diagnosed” with dementia psychosis and that she did not have “the
the capacity to sign the Admission Agreement.” In light of the
Mississippi Supreme Court’s holding that a similar concession
satisfied the statute’s required showing, we are persuaded that
Conegie’s admissions satisfy the statute. Additionally, Conegie’s
mother was “an appropriate member of the classes from which a
surrogate could be drawn.” Id.; see Miss. Code Ann. § 41-41-
211(2)(c). Thus, Conegie’s mother “could contractually bind [her]
in matters of health care.” Brown, 949 So.2d at 737. The district
court erred in ruling that Conegie’s mother could not sign the
agreement on Conegie’s behalf.
C. FEDERAL LAW
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Alternatively, assuming federal law applies, we conclude that
Conegie is bound as a non-signatory. Chase argues that Conegie was
required to arbitrate as a third-party beneficiary of the
agreement. To determine whether the third-party beneficiary
doctrine applies, this Court looks to the parties’ intentions at
the time the contract was executed. Bridas S.A.P.I.C. v. Gov’t of
Turkmenistan, 345 F.3d 347, 362 (5th Cir. 2003). Although there is
a presumption that parties are contracting only for themselves, it
may be rebutted “if the intent to make someone a third-party
beneficiary is clearly written or evidenced in the contract.” Id.
(internal quotations marks and citation omitted).
The agreement expressly names Conegie as the resident
receiving care and services from the nursing home. Indeed, as
Chase points out, in Conegie’s complaint she states that the
agreement was “with, or on behalf of, Delores Conegie and/or her
family, in 2000, wherein Defendants promised to provide basic care
for Ms. Conegie.” Thus, the parties’ intent to make Conegie a
beneficiary of the contract is clearly written in the agreement.
As a third-party beneficiary, she is bound by the agreement to
arbitrate any dispute arising from it.3
III. CONCLUSION
In conclusion, we hold that the district court erred in
3
Conegie raises several alternative grounds for affirming
the district court’s denial of the motion to compel arbitration.
We have reviewed her arguments and find them to be without merit.
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finding the arbitration agreement unenforceable. Accordingly, we
REVERSE the denial of Chase’s motion to compel arbitration and
REMAND for entry of an order compelling arbitration.
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