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Georgia Court of Appeals Affirms Decision Denying Arbitration

pen and inkSince passage of the Federal Arbitration Act of 1925, arbitration clauses have become a commonplace, if not boilerplate, provision utilized in contracts executed in the United States. However, given the ubiquity of adhesion contracts, many people are often unaware they are waiving the right to have their grievances decided in court and, more importantly, many of the procedural safeguards that exist in the judicial setting. However, even when parties have agreed to arbitrate, one can occasionally avoid compelled arbitration. Avoidance of mandatory arbitration is at the core of today’s case, Sunbridge Retirement Care Associates, LLC v. Smith (PDF-embedded link).

Sunbridge concerns an arbitration agreement between Cartersville Heights Care and Rehabilitation Center (“Cartersville”), a skilled nursing and rehabilitation center and the plaintiff in this action, and the daughter of a now-deceased resident of the facility. The agreement was executed on November 24, 2009, when the resident was in the admission process. The daughter had the power of attorney to enter into agreements on behalf of the resident, and she signed the arbitration agreement, which provided that “any and all claim or controversies arising out of or in any way relating to this agreement, the admission agreement or any of the resident’s stays at the Facility … shall be submitted to binding arbitration.” The agreement further provided that “the arbitrator shall apply the [National Arbitration Forum (“NAF”)] Code of Procedure,” which in turn provides that the Code governs the arbitration proceedings, unless the parties agreed otherwise. The Code further provided that in the event the parties are denied an opportunity to arbitrate, they retain the right to seek legal or other remedies.

Prior to the formation of this agreement, the Minnesota Attorney General filed a complaint against NAF, alleging various consumer fraud violations. This litigation led to the execution of a consent judgment, in which NAF agreed to not administer, process, or participate in any consumer arbitration filed on or after July 24, 2009. After spending only approximately 11 months at Cartersville, the resident died. Following the death, the daughter who executed the agreement and two siblings filed suit against Sunbridge Retirement Care Associates, LLC, which owns Cartersville, and several of Cartersville’s employees, asserting claims for wrongful death, medical malpractice, and ordinary negligence. Shortly after the action was initiated, the defendants moved to stay the case and compel arbitration, pursuant to the terms of the aforementioned arbitration agreement. The plaintiffs objected to enforcement of the arbitration on two grounds:  the arbitration agreement was void for impossibility, since the consent decree barred arbitration of these claims, and the agreement was unconscionable. The trial court denied the motion to compel arbitration without decision, and the defendants brought the current interlocutory appeal.

The Georgia Court of Appeals unanimously affirmed the trial court’s ruling. First, the court noted that one of the questions before it, whether arbitration can still be compelled if the arbitral forum designated in the arbitration agreement is not available, had been addressed in a decision issued by the Court of the Appeals only one year earlier, Miller v. GGNSC Atlanta (PDF-embedded link). In Miller, the Court of Appeals held that if “the language of the agreement reflects that the choice of arbitral forum is an integral part of the agreement to arbitrate, then the agreement will be considered void if the forum is unavailable.” 746 S.E.2d 680, 685 (Ga. App. 2013) (internal quotation marks omitted). In this case, the court held that the choice of NFA as the arbitral forum was not an “ancillary logistical concern” but rather integral to the agreement, since application of the NAF Code of Procedure is mandatory under the terms of the agreement. Although this agreement, unlike the agreement in Miller, contained a provision stating that the arbitrator need not be a NAF arbitrator, the court held that this distinction was not significant, for the substitute arbitrator would still need to apply the NAF Code, which had effectively been cancelled by the consent decree. Thus, since the forum was integral to the agreement, it followed that the unavailability of the forum rendered the agreement void.

As Sunbridge demonstrates, even if one has agreed to arbitrate, there do exist ways to avoid enforcement of the arbitration agreement. Indeed, given that the rules applied in arbitration tend to be less plaintiff-friendly than those applied in court, it can pay dividends to avoid arbitral resolution of claims. Accordingly, someone who is facing the prospect of arbitration should consider acquiring the guidance of counsel experienced in arguing against the enforcement of arbitration agreements. The Atlanta medical negligence attorneys at the Law Office of Terrence R. Bethune have experience with all facets of injury litigation, including fighting the enforcement of arbitration agreements, and are ready to answer questions regarding both arbitration and possible legal claims. Feel free to contact us, if you are interested in a complimentary case consultation.

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