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Scales v. SSC Winston-Salem Operating Company, LLC

United States District Court, M.D. North Carolina

October 5, 2017

GERALDINE I. SCALES, as Administratrix of the Estate of Lee Norman Scales, Plaintiff,



         This case comes before the Court on “SSC Winston-Salem Operating Company LLC d/b/a Brian Center Health and Retirement/Winston-Salem's Motion to Compel Arbitration and Stay Proceedings” (Docket Entry 2) (the “Arbitration Motion”). For the reasons that follow, the Court will grant in part and deny in part the Arbitration Motion.[1]


         Alleging various state-law torts related to the death of Lee Norman Scales (“Mr. Scales”), Geraldine I. Scales, as Administratrix of the Estate of Lee Norman Scales (the “Plaintiff”), initiated this lawsuit against SSC Winston-Salem Operating Company LLC d/b/a “Brian Center Health and Retirement/Winston-Salem” (the “Defendant”) in the Superior Court of North Carolina for Forsyth County. (See Docket Entry 6.) Defendant removed the lawsuit to this Court on the grounds of diversity jurisdiction (see Docket Entry 1 at 1-3)[2] and immediately moved to compel arbitration (see Docket Entry 2). More specifically, through the Arbitration Motion, Defendant seeks an order either (1) compelling arbitration in accordance with “the Agreement for Dispute Resolution Program made between the parties” or (2) authorizing discovery regarding the authority of Geraldine Scales (“Mrs. Scales”) “to enter into the arbitration agreement for her husband, ” Mr. Scales. (Id. at 2; see also Docket Entry 3 at 4-5.) In response, Plaintiff asserts that Mrs. Scales lacked authority to execute the “Agreement for Dispute Resolution Program” (Docket Entry 2-1) (the “Agreement”) on Mr. Scales's behalf, and asks the Court to deny the Arbitration Motion. (See Docket Entries 11, 11-1.)


         I. Applicable Legal Standards

         The Federal Arbitration Act (the “FAA”) renders enforceable written arbitration contracts, “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.[3] Pursuant to Section 4 of the FAA, “upon being satisfied that the making of the agreement for arbitration . . . is not in issue, the [C]ourt shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. . . . [However, i]f the making of the arbitration agreement . . . be in issue, the [C]ourt shall proceed summarily to the trial thereof.” 9 U.S.C. § 4. Accordingly, the Court can compel arbitration “under the FAA only when there is ‘a judicial conclusion' that there is a validly formed, express agreement to arbitrate.” Dillon v. BMO Harris Bank, N.A., 173 F.Supp.3d 258, 263 (M.D. N.C. 2016) (quoting Granite Rock Co. v. International Bhd. of Teamsters, 561 U.S. 287, 303 (2010)), appeal dismissed sub nom. Dillon v. Bay Cities Bank, No. 16-1373 (4th Cir. Apr. 5, 2016). In making this assessment, the Court looks to state-law contract principles. Id.; see also Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009) (“State law, therefore, is applicable to determine which contracts are binding . . . and enforceable under [the FAA] if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally.” (brackets, internal quotation marks, and emphasis omitted)); First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (“When deciding whether the parties agreed to arbitrate a certain matter . . ., courts generally . . . should apply ordinary state-law principles that govern the formation of contracts.”).

         The party seeking to compel arbitration bears the burden of establishing the existence of “an arbitration provision that purports to cover the dispute.” Dillon, 173 F.Supp.3d at 263. If the party makes this evidentiary showing, the party opposing arbitration must come forward with sufficient facts to place the entitlement to arbitration in dispute. See Chorley Enters., Inc. v. Dickey's Barbecue Rests., Inc., 807 F.3d 553, 564 (4th Cir. 2015) (“[T]he party seeking a jury trial [under Section 4] must make an unequivocal denial that an arbitration agreement exists - and must also show sufficient facts in support.” (citing Oppenheimer & Co. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995)), cert. denied, __ U.S. __, 136 S.Ct. 1656 (2016); see also Oppenheimer, 56 F.3d at 358 (“If the party seeking arbitration has substantiated the entitlement by a showing of evidentiary facts, the party opposing may not rest on a denial but must submit evidentiary facts showing that there is a dispute of fact to be tried.”). “This standard is akin to the burden on summary judgment.” Chorley, 807 F.3d at 564; accord Erichsen v. RBC Capital Mkts., LLC, 883 F.Supp.2d 562, 566 (E.D. N.C. 2012) (explaining “that the standard for deciding a motion to compel arbitration brought under the . . . FAA[], 9 U.S.C. § 4, is a standard similar to a motion for summary judgment”).

         In light of these respective burdens, courts typically grant leave to conduct discovery if the parties dispute the enforceability of an arbitration agreement. See, e.g., Dillon v. BMO Harris Bank, N.A., No. 1:13cv897, 2015 WL 6619972, at *3 (M.D. N.C. Oct. 30, 2015) (“Accordingly, if a party challenges the enforceability of an arbitration agreement, courts generally permit discovery regarding the formation and performance of the arbitration provision.” (collecting cases)); see also Livingston v. Assocs. Fin., Inc., No. 01 C 1659, 2001 WL 709465, at *2 (N.D. Ill. June 25, 2001) (observing, in analyzing request to conduct discovery in response to motion to compel arbitration, that a “party must be given an opportunity to pursue discovery related to the issue that it has the burden to prove”), report and recommendation adopted, No. 01 C 1659, 2002 WL 424352 (N.D. Ill. Mar. 6, 2002). Such discovery must remain “tailored to matters pertinent to the disposition of the petition to compel arbitration and/or stay litigation, ” namely “issues relating to the making and performance of the agreement to arbitrate.” Dillon, 2015 WL 6619972, at *3. These issues include “generally applicable contract defenses, ” id. at *3 & n.5 (internal quotation marks omitted), such as lack of authority to execute the agreement, see, e.g., Smith Wilson Co. v. Trading & Dev. Establishment, 744 F.Supp. 14, 16 (D.D.C. 1990) (explaining that, “while a signed arbitration agreement leaves a court with no choice but to compel arbitration, this proposition applies only if the individuals who signed the agreement are legally authorized to bind the respective parties” (citation omitted)).

         II. Factual Background

         This lawsuit arises from allegedly negligent care Mr. Scales received at a nursing home Defendant operates in North Carolina. (See Docket Entry 6.) Defendant contends that the Agreement governs Plaintiff's claims (see Docket Entry 2 at 1-2) and asks the Court to compel arbitration and stay this action, “including any potential merits-based discovery, ” pending arbitration (id. at 2). In support of this request, Defendant submitted the Agreement as well as various notices and forms signed by Mrs. Scales. (See Id. at 1-2; see also Docket Entries 2-1, 2-2.)

         Entitled “Agreement for Dispute Resolution Program, ” the Agreement describes Defendant's three-step “Dispute Resolution Program” (the “DPR”) (Docket Entry 2-1 at 2, 4), which culminates in binding arbitration (see id. at 4-5). The Agreement states that acceptance of the DPR “is voluntary” (id. at 2 (all-cap font omitted)) and does not impact an individual's admission to Defendant's facilities (id.). The Agreement provides two options for execution, depending on the resident's competence. In relevant part, the first option states:

If resident is competent, complete this ...

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