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Sue Carter, Special Adm'r of the Estate of Joyce Gott, Deceased v. Ssc Odin Operating Company

September 20, 2012


The opinion of the court was delivered by: Justice Theis

JUSTICE THEIS delivered the judgment of the court, with opinion.

Chief Justice Kilbride and Justices Thomas, Garman, and Burke concurred in the judgment and opinion.

Justices Freeman and Karmeier took no part in this decision.


¶ 1 This appeal involves an arbitration agreement between plaintiff's decedent and defendant nursing home. At issue is whether the arbitration agreement is enforceable and, if so, whether plaintiff can be compelled to arbitrate a wrongful-death claim against defendant. The appellate court ruled in favor of plaintiff, holding that the arbitration agreement is unenforceable based on a lack of mutuality of obligation, and that the wrongful-death claim is not subject to arbitration in any event. 2011 IL App (5th) 070392-B, ¶¶ 29, 34. The appellate court thus affirmed the trial court's denial of defendant's motion to compel arbitration. Id. ¶ 36.

¶ 2 For the reasons that follow, we affirm in part and reverse in part the judgment of the appellate court, and remand to the trial court for further proceedings.


¶ 4 Plaintiff, Sue Carter, as the special administrator of the estate of Joyce Gott, deceased, filed a complaint in the circuit court of Marion County against defendant, SSC Odin Operating Company, LLC, that does business as Odin Healthcare Center, a nursing home located in Odin, Illinois. Gott was a resident of the nursing home for a two-month period during 2005, and again in early 2006 until her death on January 31, 2006. In count I, a survival action (755 ILCS 5/27-6 (West 2006)), plaintiff alleged that defendant violated the Nursing Home Care Act (210 ILCS 45/1-101 et seq. (West 2006)) and, as a result, Gott sustained personal injury including gastrointestinal bleeding, anemia, and respiratory failure. In count II, a claim under the Wrongful Death Act (740 ILCS 180/0.01 et seq. (West 2006)), plaintiff sought damages for injuries sustained by Gott's heirs resulting from Gott's wrongful death.

¶ 5 Defendant filed a motion to compel arbitration, relying on two identical arbitration agreements executed at the time of Gott's 2005 and 2006 nursing home admissions. The 2005 agreement was signed by plaintiff as Gott's "Legal Representative." The 2006 agreement was signed by Gott herself. The parties agreed that, with respect to claims where the amount in controversy is at least $200,000, "they shall submit to binding arbitration all disputes against each other and their representatives, affiliates, governing bodies, agents and employees arising out of or in any way related or connected to the Admission Agreement and all matters related thereto including matters involving the Resident's stay and care provided at the Facility, including but not limited to any disputes concerning alleged personal injury to the Resident caused by improper or inadequate care including allegations of medical malpractice; any disputes concerning whether any statutory provisions relating to the Resident's rights under Illinois law were violated; any disputes relating to the payment or non-payment for the Resident's care and stay at the Facility; and any other dispute under state or Federal law based on contract, tort, statute (including any deceptive trade practices and consumer protection statutes), warranty or any alleged breach, default, negligence, wantonness, fraud, misrepresentation or suppression of fact or inducement."

¶ 6 The parties also agreed that defendant would pay the fees of the arbitrators; defendant would pay up to $5,000 of the resident's attorney fees and costs in claims against defendant; the resident would have the right to choose the location of the arbitration; and the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA) would govern the agreements.

¶ 7 After briefing, and without an evidentiary hearing, the trial court denied defendant's motion to compel arbitration. The trial court ruled that the agreements were unenforceable because they violated Illinois public policy and lacked mutuality of obligation; the wrongful-death claim was not arbitrable; and the agreements did not evince a transaction involving commerce within the meaning of the FAA. Defendant appealed. The appellate court affirmed the denial of defendant's motion to compel arbitration. Carter v. SSC Odin Operating Co., 381 Ill. App. 3d 717 (2008).

¶ 8 The appellate court examined Illinois public policy as set forth in sections 3-606 and 3-607 of the Nursing Home Care Act, which provide that any waiver by a resident, or his legal representative, of the right to commence an action under the Nursing Home Care Act, or to a jury trial of such action, shall be "null and void." 210 ILCS 45/3-606, 3-607 (West 2006). The appellate court held that these antiwaiver provisions present a legitimate state law contract defense to the arbitration agreements that is not preempted by the FAA. Carter, 381 Ill. App. 3d at 722-23. We allowed defendant's petition for leave to appeal and reversed the judgment of the appellate court. Carter v. SSC Odin Operating Co., 237 Ill. 2d 30 (2010). We held that the antiwaiver provisions of sections 3-606 and 3-607 of the Nursing Home Care Act are the functional equivalent of antiarbitration legislation, which is preempted by the FAA and Supreme Court precedent. Id. at 48-49 (citing Southland Corp. v. Keating, 465 U.S. 1 (1984)). We remanded the cause to the appellate court for consideration and resolution of the remaining issues on appeal. Id. at 51.

¶ 9 On remand, the appellate court again affirmed the trial court's denial of defendant's motion to compel arbitration. 2011 IL App (5th) 070392-B, ¶ 1. The appellate court first held that the arbitration agreements evince a transaction involving interstate commerce, rendering them subject to the FAA. Id. ¶ 21. The appellate court next held, over a dissent, that defendant's promise to arbitrate was illusory, and that the arbitration agreements were thus unenforceable for lack of mutuality of obligation. Id. ¶ 29. The appellate majority explained:

"By excluding all claims but those $200,000 and greater from the requirements of the arbitration agreement, the defendant essentially ensured that none of its claims against Joyce [Gott] would have to be arbitrated under the terms of the agreement. Instead, only Joyce's claims for personal injuries due to the defendant's improper or inadequate care would ever have to be arbitrated under the agreements. The defendant cannot offer any realistic scenario where the amount in controversy in disputes relating to the nonpayment of Joyce's care would equal or exceed $200,000. The arbitration agreements, therefore, do not contain mutually binding promises to arbitrate, but only a unilateral obligation on the part of Joyce to arbitrate her personal injury claims. The agreements, therefore, are not enforceable." Id.

The dissenting justice would not have found defendant's promise to arbitrate to be illusory, noting that a claim against a nursing home resident in excess of $200,000 could arise where, for example, the resident intentionally or unintentionally started a fire causing damage to the nursing home. Id. ¶¶ 40-41 (Spomer, J., concurring in part and dissenting in part).

¶ 10 The appellate court unanimously held, however, that even if the arbitration agreements are enforceable, plaintiff cannot be compelled to arbitrate the wrongful-death claim because plaintiff did not sign the arbitration agreement in her individual capacity. Id. ¶ 34. The appellate court disagreed with defendant that the "derivative" nature of a wrongful-death claim required a different result. Id. ¶¶ 33-34.

¶ 11 We allowed defendant's petition for leave to appeal. Ill. S. Ct. R. 315(a) (eff. Feb. 26, 2010).


¶ 13 I. Standard of Review

¶ 14 The facts relevant to defendant's motion to compel arbitration are not in dispute, and the trial court's decision denying defendant's motion was based on purely legal issues: (1) the enforceability of the arbitration agreement, and (2) the arbitrability of the wrongful-death claim, which raises issues of statutory construction. Accordingly, our review proceeds de novo. See Royal Indemnity Co. v. Chicago Hospital Risk Pooling Program, 372 Ill. App. 3d 104, 107 (2007); Carter, 237 Ill. 2d at 39.

¶ 15 II. Mutuality of Obligation

¶ 16 The appellate court held that the arbitration agreements at issue here "evidence a transaction involving interstate commerce" and are thus governed by the FAA. 2011 IL App (5th) 070392-B, ¶¶ 16-21. Plaintiff did not seek review of that issue before this court. Thus, we will proceed from the premise that, as held by the appellate court and expressly stated in the arbitration agreements, the FAA governs the agreements.

¶ 17 Originally adopted in 1925, the FAA was enacted "to reverse the longstanding judicial hostility to arbitration agreements" and "to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). Section 2 of the FAA provides in relevant part that:

"A written provision in *** a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction *** shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." (Emphasis added.) 9 U.S.C. §2 (2012).

ΒΆ 18 Thus, an arbitration agreement may be invalidated by a state law contract defense of general applicability, such as fraud, duress, or unconscionability, without contravening section 2. Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687 (1996). An arbitration agreement may not be ...

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