Tuesday, January 13, 2009

Lawrence v. Beverly Manor[1]

Opinion handed down January 13, 2009
Link to Mo. Sup. Ct. Opinion

The Missouri Supreme Court held that an arbitration agreement found in a nursing home admission contract did not bind a plaintiff in a wrongful death action against the nursing home because a wrongful death claim is not "derived through" an underlying tort claim of the decedent.[2] The lawsuit, therefore, could proceed without arbitration. The holding clarified a previous decision where the Court stated that, for the purpose of venue, a wrongful death claim is not a new cause of action but one "derivative of the underlying tortious acts."[3]



I. Facts & Holding[4]

Dorothy Lawrence moved into the Beverly Manor nursing home in March, 2003. Upon admittance to Beverly Manor, Dorothy's daughter, Phyllis Skoglund, acting under power of attorney for her mother, signed a form arbitration agreement. The agreement purported to compel arbitration by any party whose claim is "derived through or on behalf of [Dorothy Lawrence]."[5]

Shortly after admittance, Dorothy Lawrence died. Her son, Dale Lawrence, filed a wrongful death lawsuit pursuant to Mo. Rev. Stat. § 537.080,[6] alleging that Dorothy died due to the negligent actions of Beverly Manor's employees. The circuit court denied Beverly Manor's motion to compel arbitration because "nothing in the arbitration agreement [could have] be[en] construed to extend to new and independent causes of action . . . ."[7] Beverly Manor appealed and the Missouri Supreme Court granted transfer. The Missouri Supreme Court held that a wrongful death action is a distinct claim from any underlying tort claims. The claim is distinct because Dorothy, by definition of the claim, could not have brought a wrongful death claim had she lived, and any damages recovered would not be awarded on behalf of Dorothy or her estate. Therefore, Dale Lawrence's wrongful death action was not "derived through" a tort claim of Dorothy's, and, accordingly, the arbitration agreement did not bind the plaintiffs.

II. Legal Background

Since the arbitration agreement purported to bind any claims "derived through" a claim by Dorothy, the Court framed the legal issue as to "whether a suit for wrongful death can be considered derivative of any underlying tort claims that could have been brought by the deceased."[8] The Court, affirming past precedent, answered this question in the negative, finding that a wrongful death "creates a new cause of action . . . and [does] not revive a cause of action belonging to the deceased,"[9] and the "wrongful death claim does not belong to the deceased or even to a decedent's estate."[10] The Court further noted that the remedies for a wrongful death action are different than the remedies for any claim sounding in personal injury that Dorothy could have brought had she lived.[11]

Beverly Manor, relying upon the 2007 Missouri Supreme Court case State ex rel. Burns v. Whittington, argued that a wrongful death claim is "derived from" the underlying tortious actions. In Burns, Burns claimed that the defendant's product caused his leukemia.[12] After filing the negligence suit, the venue statutes of Missouri were amended.[13] The amendments applied only to cases filed after the effective date of the amendments.[14] Burns then died and his son amended the petition to include a wrongful death claim.[15] The defendants argued that the wrongful death claim was a new cause of action falling under the new venue rules, which dictated the proper venue was another jurisdiction. They moved for transfer. Denying the motion, the Missouri Supreme Court held that the "[wrongful death] cause of action is derivative of the underlying tortious acts that caused the fatal injury."[16]

In the present case, the Court explicitly limited the Burns holding to venue analysis. The Court differentiated the present case from Burns by the issue presented in each case: "Burns dealt with whether the subsequent wrongful death suit has a sufficient tie to the original venue, whereas [here], the question is whether one is bound by another's agreement to which one was not a party. The different issues necessitate different analyses."[17]

The concurring opinion, authored by Special Judge Glenn Norton and joined by Judge Teitelman, struck a harder tone against such arbitration agreements. Finding the particular arbitration agreement both procedurally and substantively unconscionable, the concurrence sought to cast a wider net: "[P]rovisions requiring a resident and nursing home to arbitrate any personal injury claims, and requiring them to waive their right to have any such claims decided in a court of law, are unenforceable . . . ."[18]

III. Commentary

Adhering to principles of judicial restraint, the Court decided the opinion on the narrowest grounds possible, that is, strict construction of the contract before it. The plain language of the contract arguably captures wrongful death claims: "this Arbitration Agreement...shall...bind the parties, their successors, and assigns, including . . . all persons whose claim is derived through or on behalf of [Dorothy Lawrence], including any parent, spouse, sibling, child, guardian, executor, legal representative, administrator or heirs of [Dorothy Lawrence]. The parties further intend that this agreement is to survive the lives or existence of the parties hereto."[19] This broad contract language in combination with Burns demonstrates that Beverly Homes had a defensible argument.

The majority opinion can be viewed as a consumer-protectionist decision. The Court is willing to strictly construe form contracts, especially when they purport to restrict access to the courts, as arbitration agreements do. Moreover, the concurring opinion highlights the animosity the judiciary bears for arbitration agreements found in form contracts signed in the nursing home context. It also arguably indicates that if the majority had not been able to strictly construe the contract to avoid arbitration, then the Court may have struck it down as unconscionable.

- David R. Swaney

[1] No. SC89291 (Mo. 2009) (en banc). The West reporter citation is Lawrence v. Beverly Manor, 273 S.W.3d 525 (Mo. 2009) (en banc).
[2] "Derived through" is language the Court directly pulled from the arbitration agreement. See infra note 4 for text of arbitration agreement.
[3] State ex rel. Burns v. Whittington, 219 S.W.3d 224, 225 (Mo. 2007) (en banc).
[4] Lawrence, 2009 WL 77897, at *1.
[5] In relevant part, the signed arbitration agreement stated: “It is understood and agreed by [Beverly Manor] and [Dorothy Lawrence] that any and all claims, disputes and controversies . . . arising out of, or in connection with, or relating in any way to the Admission Agreement or any service or health care provided by [Beverly Manor] to [Dorothy Lawrence] shall be resolved exclusively by binding arbitration[.]It is the intention of the parties to this Arbitration Agreement that it shall inure to the benefit of and bind the parties, their successors, and assigns, including without limitation the agents, employees and servants of [Beverly Manor], and all persons whose claim is derived through or on behalf of [Dorothy Lawrence], including any parent, spouse, sibling, child, guardian, executor, legal representative, administrator or heirs of [Dorothy Lawrence]. The parties further intend that this agreement is to survive the lives or existence of the parties hereto.” Lawrence at *1.
[6] Mo. Rev. Stat. § 537.080 (2000).
[7] Lawrence, 2009 WL 77897, at *1.
[8] Id.
[9] Id. at 2 (quoting O'Grady v. Brown, 654 S.W.2d 904, 910 (Mo. 1983) (en banc).
[10] Id. (quoting Finney v. Nat'l Healthcare Corp., 193 S.W.3d 393, 395 (Mo. App. 2006).
[11] Id. at 3.
[12]Burns, 219 S.W.3d at 224-25 (Mo. 2007).
[13] Id. at 225.
[14] Id.
[15] Id.
[16] Id.
[17] Lawrence, 2009 WL 77897, at *3.
[18] Id. at *4 (Norton, Sp. J., concurring).
[19] Id. at *1 (emphasis added).