Robinson Nursing and Rehabilitation Center, LLC v. Phillips/Concurrence-dissent Womack

by Shawn A. Womack

SHAWN A. WOMACK, Justice, concurring in part and dissenting in part. I agree with the majority that Phillips did not preserve issues regarding the law of the case doctrine and waiver arguments. I further agree that Phillips failed to present evidence regarding the genuineness of signatures of Robinson's representatives. Finally, I agree with the majority that the agreements not signed by Robinson should be excluded. However, a principal question on this appeal is whether the nursing home plaintiffs are required to arbitrate their claims against Robinson Nursing and Rehabilitation Center under the third-party beneficiary doctrine. I conclude that the arbitration agreements signed by "responsible parties" are subject to arbitration, and I would therefore reverse the circuit court's decision in relevant part. I must also dissent from the majority's analysis regarding the mutuality of obligations. Because I believe the $30,000 arbitration threshold does not foreclose mutuality, I would reverse the circuit court's decision on that issue as well.

I.

Robinson contends that because the "responsible parties" who signed the arbitration agreements were contracting in their individual capacities, the plaintiffs are bound by the agreement as third-party beneficiaries to the contracts. Applying the basic Arkansas contract principles relied upon in a similar case, Northport Health Servs. of Ark., LLC v. Rutherford, No. 07-5184, 2009 WL 10673107 (W.D. Ark. Mar. 17, 2009), I would direct the circuit court to compel arbitration as to those plaintiffs.^[1]

[p22] In Rutherford, an Arkansas federal district court examined whether an arbitration agreement signed by a "responsible party" for a nursing home resident bound the resident to the agreement as a third-party beneficiary. Id. at 5. Just as the agreements here, the Rutherford contract defined a "responsible party" as, in part, a person "who agrees to assist the [nursing home] in providing for [the resident's] health, care and maintenance." Id. This language indicates that by voluntarily signing as a "responsible party," the individual intends to be bound by the agreement for the purpose of assisting the nursing home in caring for the resident. Id. To hold otherwise would render the language defining a "responsible party" meaningless, which is contrary to Arkansas contract law. Id. (citing North v. Philliber, 269 Ark. 403, 602 S.W.2d 643 (1980)).

Applying Arkansas contract law, Rutherford determined there was "substantial evidence of a clear intention to benefit [the] third party" resident. Id. (quoting Perry v. Baptist Health, 358 Ark. 238, 245, 189 S.W.3d 54, 58 (2004)). This conclusion was further supported by language in the arbitration agreement that stated, in part, that execution of the agreement affects the individual rights of the responsible party. Id. Accordingly, the court found that the responsible party is bound individually by the agreement and the resident is a third-party beneficiary with respect to the contractual obligations. Id. This reasoning, founded on Arkansas contract law, has been subsequently applied to uphold similar provisions in other third-party beneficiary agreements. See, e.g., Northport Health Servs. of Ark., LLC v. Cmty. First Tr. Co., No. 2:12-CV-02284, 2014 WL 217893 (W.D. Ark. Jan. 21, 2014); Northport Health Servs. of Ark., LLC v. Medlock, No. 2:13-CV-02083 (W.D. Ark. May 30, 2014).

Because the language analyzed by the Arkansas federal district court is identical to the language here, application of those principles leads to the same result: persons who signed as [p23] "responsible parties" individually contracted with Robinson for the benefit of the residents and the residents are contractually bound as third-party beneficiaries. Moreover, there can be no question that Robinson and the "responsible parties" contracted to benefit the residents. Indeed, the residents' care was the animating purpose behind each agreement. The conclusion that the residents were third-party beneficiaries is easily reached.

In a footnote, the majority casually dismisses the federal court's interpretation sans analysis in favor of the court of appeals' approach. See Hickory Heights Health & Rehab, LLC v. Cook, 2018 Ark. App. 409, 557 S.W.3d 286. But that approach disregards our obligation to consider the sense and meaning of the words within the contract as they are taken and understood in their plain and ordinary meaning. See First Nat'l Bank of Crossett v. Griffin, 310 Ark. 164, 169–70, 832 S.W.2d 816, 819 (1992). It likewise disregards our responsibility to view the agreement as a whole and recognize that every word must be taken to have been used for a purpose. Id. (internal quotation omitted). In the event of ambiguity, we must reject any construction which neutralizes any provision if the contract can be construed to give effect to all provisions. Id.

The majority's adoption of the court of appeals' third-party beneficiary analysis conflicts with these well-established rules of contract interpretation. The majority contends that "[o]ther than the change in nomenclature, there is no real distinction" between agreements signed by "responsible parties," and those signed by "resident representatives" and "legal representatives." By minimizing the distinction between these terms, the majority ignores the terms' plain meaning. Moreover, the definition of "responsible party" includes a legal guardian, someone with power of attorney, "or some other individual or family member who agrees to assist [p24] [Robinson] in providing for [the resident’s] health, care and maintenance.” (emphasis added). To proclaim otherwise renders meaningless the language defining “responsible party.”

The Rutherford court’s interpretation of the third-party beneficiary doctrine in this context is the most faithful application of Arkansas contract law. Accordingly, I would direct the circuit court to compel arbitration of the residents’ claims whose arbitration agreements were signed by “responsible parties.”

II.

Turning to the issue of mutuality, Robinson contends there is a mutuality of obligations between the parties because the agreement does not specifically exclude any specific category of claims from arbitration. Rather, it imposes a monetary threshold requiring arbitration of all claims exceeding $30,000. Except for the monetary threshold, no other limitations exist as to the types of claims covered by the arbitration agreement. Accordingly, I believe the arbitration agreements satisfy the mutuality requirement.

We have held that a contract must impose mutual obligations on both parties to be enforceable. See Showmethemoney Check Cashers, Inc. v. Williams, 342 Ark. 112, 119–20, 27 S.W.3d 361, 366 (2000). If a promise made by either party does not by its terms fix a real liability upon one party, then such promise does not form consideration for the promise of the other party. Id. Accordingly, a contract which leaves it entirely optional with one party as to whether they will perform their promise is not enforceable. Id. In the context of arbitration, we have recognized that there is no mutuality of obligation where one party uses an arbitration agreement to shield itself from litigation, while reserving to itself the ability to pursue relief through the court system. Id.; see also E-Z Cash Advance, Inc. v. Harris, 347 Ark. 132, 60 S.W.3d 436 (2001).

[p25] The majority contends that the $30,000 threshold in the arbitration agreements precludes mutuality because the limitation shields Robinson from defending itself in court against most potential claims by residents, while reserving its right to utilize the courts for its claims against residents. But this conclusion turns on speculation about what types of hypothetical claims each party may potentially have against each other and the respective value of those claims. Except for a sole court of appeals’ opinion—which is not controlling on this court—the majority cites only to cases where the arbitration agreement expressly excludes specific categories from arbitration. See, e.g., Harris, 347 Ark. 132, 60 S.W.3d 436; The Money Place, LLC v. Barnes, 349 Ark. 411, 78 S.W.3d 714 (2002). That is not the case here, where the only limitation is a monetary threshold.

I am not convinced that there is a lack of mutuality in the arbitration agreements. It is certainly plausible that the residents could have a claim against Robinson that would compel arbitration. Indeed, the agreement is very broad in its coverage of claims. Apart from the $30,000 threshold, no limitations exist as to the types of claims that are covered. I therefore conclude that the arbitration agreements satisfy the mutuality requirement and would hold that the agreements are enforceable in relevant part.

Accordingly, I respectfully concur in part and dissent in part.

1. While a federal court decision construing Arkansas law is not binding on this court, we have long held that "the opinion of such eminent authority is persuasive." Baldwin Co. v. Maner, 224 Ark. 348, 349, 273 S.W.2d 28, 30 (1954); see also Roeder v. United States, 2014 Ark. 156, at 12 n.8, 432 S.W.3d 627, 635 n.8.