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Hager v. Smithfield East Health Holdings, LLC

Court of Appeals of North Carolina

March 19, 2019


          Heard in the Court of Appeals 15 January 2019.

          Appeal by Defendants from order entered 6 February 2018 by Judge Thomas H. Lock in Johnston County No. 17 CVS 2177 Superior Court.

          Gugenheim Law Offices, P.C., by Stephen J. Gugenheim, for Plaintiff-Appellee.

          Cranfill Sumner & Hartzog LLP, by Carl Newman and Katherine Hilkey-Boyatt, for Defendants-Appellants.

          INMAN, JUDGE.

         A daughter's difficult decision to admit her father, who suffered from dementia, to a long-term assisted living and memory care facility as his attorney-in-fact did not create a fiduciary duty between the father and the facility.

         This case arises out of a medical malpractice, negligence, and wrongful death action brought by the plaintiff Patricia Hager ("Ms. Hager"), daughter to and executrix of the Estate of Albert Hoffmaster ("Mr. Hoffmaster") against defendants Smithfield East Health Holdings, LLC d/b/a Gabriel Manor Assisted Living Center ("Smithfield East"), Smithfield Operations, LLC ("Smithfield Operations"), Saber Healthcare Holdings, LLC ("Saber Holdings"), Saber Healthcare Group, LLC ("Saber Healthcare"), and Sherry Tabor ("Tabor," collectively with Smithfield East, Smithfield Operations, Saber Holdings, and Saber Healthcare as "Defendants"). Defendants appeal the trial court's order denying their motion to compel arbitration, which found both the existence of a fiduciary relationship between Smithfield East and Mr. Hoffmaster and a breach of the corresponding fiduciary duty because Smithfield East failed to fully disclose the significance of an arbitration agreement presented to and signed by Ms. Hager as attorney-in-fact for Mr. Hoffmaster. After careful review of the record and applicable law, we reverse the order of the trial court in part and remand for entry of an order compelling arbitration of the claims against Smithfield East. We affirm the trial court's denial of the motion to compel arbitration by all other defendants except Smithfield Operations, and remand for the trial court to make findings and conclusions regarding that defendant.


         The record tends to show the following:

         From September 2014 until late October 2015, Ms. Hager cared for her father, Mr. Hoffmaster, who suffered from dementia, in her home in Johnston County. On the morning of 27 October 2015, Ms. Hager found Mr. Hoffmaster in the bathroom after he had urinated on the carpet and disassembled a lamp in his bedroom. He insisted that he had called for Ms. Hager all night, though she had checked on him frequently throughout that time. Ms. Hager immediately decided she needed to admit Mr. Hoffmaster to a long-term care facility; she later explained in an affidavit that she "did not feel as though [she] could violate his dignity by bathing and toileting him" and "had told [Mr. Hoffmaster] that when the day came that [she] could not care for him with bathing and personal care [she] would have to make that decision."

         Ms. Hager called her chiropractor's office for a recommendation to a nursing home facility close to her home. Ms. Hager's chiropractor referred her to Gabriel Manor, a facility where the chiropractor provided treatment to some residents. Ms. Hager telephoned Gabriel Manor and asked if there was a room available in the memory ward, which serves patients with dementia and other cognitive disabilities. Ms. Hager stated that she needed an immediate placement for her father; in response, the representative from Gabriel Manor offered Ms. Hager the opportunity to bring Mr. Hoffmaster by that day, tour the facility, and have lunch. Though she did not have the heart to tell her father, Ms. Hager had already resolved to admit him to Gabriel Manor before they left their home. She also called a family friend, Esta List ("Ms. List"), about the morning's events. Ms. List accompanied Ms. Hager and Mr. Hoffmaster to Gabriel Manor later that morning.

         After arriving at Gabriel Manor, the three toured the facility and ate lunch in its dining room. Ms. Hager "decided right then that she was going to admit her father to Gabriel Manor that day" and informed facility staff. Ms. Hager entered a conference room with a Gabriel Manor representative where, as part of the intake process, she was presented with multiple documents to sign as Mr. Hoffmaster's attorney-in-fact. Among the documents she signed were an Assisted Living Residency Agreement, Patient Information Forms for Doctors Making Housecalls, and the Resident and Facility Arbitration Agreement ("Arbitration Agreement"). In completing the forms, Ms. Hager provided confidential information regarding Mr. Hoffmaster, including his social security number, contact information for his physicians, a list of medications, his Alzheimer's diagnosis, health insurance cards and policy numbers, credit card numbers, and signed authorizations to release Mr. Hoffmaster's medical records to Doctors Making Housecalls.

         Of the several documents presented to Ms. Hager, no particular attention was directed towards the Arbitration Agreement. The representative did not discuss the Arbitration Agreement with Ms. Hager, and she did not ask any questions concerning it; indeed, Ms. Hager signed the document without ever reading it.

         The Arbitration Agreement itself, which by its terms is governed by the Federal Arbitration Act ("FAA"), begins with the text "NOT A CONDITION OF ADMISSION - READ CAREFULLY" in bolded, all capital letters. It also includes, in bolded typeface, provisions: (1) allowing Ms. Hager to cancel the agreement for any reason within 60 days of signing it; (2) allowing Ms. Hager the opportunity to read, ask questions, and propose revisions to the document prior to signing; and (3) informing Ms. Hager of her right to retain counsel to review the agreement and advising her to do so. The final provision of the agreement, in bolded and italicized capital letters, states that "THE PARTIES UNDERSTAND THAT BY ENTERING INTO THIS AGREEMENT, THE PARTIES ARE GIVING UP THEIR CONSTITUTIONAL RIGHT TO HAVE ANY CLAIM DECIDED IN A COURT OF LAW BEFORE A JUDGE AND A JURY, AS WELL AS ANY APPEAL FROM A DECISION OR AWARD OF DAMAGES."

         After signing the documents presented to her, Ms. Hager was provided with copies of each in a folder. She took them home and never looked at them again, and at no point exercised her right to cancel the Arbitration Agreement. Ms. Hager discarded the documents after Mr. Hoffmaster passed away on 25 February 2016, four months after his admission to Gabriel Manor.

         Ms. Hager filed suit on behalf of her father's estate against Defendants, alleging claims of negligence, medical malpractice, and wrongful death in the passing of her father while in Defendants' care at Gabriel Manor. The complaint further alleged that each of the Defendants "was the agent, partner, joint venturer, representative, and/or employee of the remaining Defendants, and was acting within the course and scope of such agency, partnership, joint venture, and/or employment." Defendants filed a combined answer, motion to dismiss, and motion to compel arbitration, admitting that Smithfield East owns Gabriel Manor but denying any other alleged connection between the facility and the remaining Defendants. Saber Healthcare's general counsel filed an affidavit concurrently with the Defendants' pleading, stating that Saber Healthcare and Saber Holdings are not licensed in North Carolina and have "no involvement in the management of staff, the provision of care, control over the day to day operations, or oversight of the operation or management of Smithfield East[.]"

         The motion to compel arbitration came on for hearing on 8 January 2018. In a written response to the motion and during the hearing, counsel for Ms. Hager asserted that: (1) there was no evidence that any of the Defendants was a party to the Arbitration Agreement and therefore they lacked standing to compel arbitration; and (2) Defendants, if parties to the Arbitration Agreement, owed and breached a fiduciary duty to Mr. Hoffmaster in failing to fully disclose the terms and consequences of the Arbitration Agreement prior to obtaining Ms. Hager's signature. The trial court agreed with Ms. Hager, finding in part in a written order filed 6 February 2018 that Smithfield East was the only defendant party to the Arbitration Agreement and concluding that it breached a fiduciary duty owed to Mr. Hoffmaster in "requesting that Ms. Hager sign a document with substantial legal ramifications and which they believed to be of benefit to ...

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