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rejecting the plaintiff's argument that the parties’ arbitration agreement violated public policy because its fees and costs provision eliminated the plaintiff's statutory right to prevailing party fees and holding that the provision was severable because it did not go to the essence of the arbitration agreement, which was the "selection of a forum in which to resolve disputes as an alternative to litigation in court"
Summary of this case from Phillips v. Lyons Heritage Tampa, LLCOpinion
Case No. 2D18-3668
03-13-2020
4927 VOORHEES ROAD, LLC; Genesis Healthcare, LLC; and Genesis HealthCare, Inc., Appellants, v. Francis V. TESORIERO, as personal representative of the Estate of Nureya Tesoriero, Appellee.
Lissette Gonzalez of Cole, Scott & Kissane, P.A., Miami, for Appellants. Lisa M. Tanaka, Megan L. Gisclar, and Joanna Greber Dettloff of Wilkes & McHugh, P.A., Tampa, for Appellee.
Lissette Gonzalez of Cole, Scott & Kissane, P.A., Miami, for Appellants.
Lisa M. Tanaka, Megan L. Gisclar, and Joanna Greber Dettloff of Wilkes & McHugh, P.A., Tampa, for Appellee.
ATKINSON, Judge.
4927 Voorhees Road, LLC; Genesis Healthcare, LLC; and Genesis Healthcare, Inc. (collectively, Orchard Ridge), appeal the trial court's order denying their motion to compel arbitration and stay the action brought against them by the Estate of Nureya Tesoriero (the Estate). Orchard Ridge argues that the trial court erred in denying their motion because the offending provisions can be severed from the arbitration agreement. We agree and reverse.
Mrs. Tesoriero resided at Orchard Ridge, a nursing home, from September 15, 2016, through September 23, 2016. During her stay, her husband executed the Voluntary Binding Arbitration Agreement (the Arbitration Agreement) on her behalf as her attorney-in-fact, agreeing to resolve any disputes related to her stay at Orchard Ridge through binding arbitration.
The Arbitration Agreement includes a Limitation on Damages provision, which states that "any award (including compensatory and punitive damages, fees and other costs), regardless of the manner of the dispute, shall not exceed the lesser of (a) 3 times the amount of the prevailing party's compensatory damages or (b) any applicable caps on damages under the state law where the Center exists." Within the Limitation on Damages provision is a severability clause that provides the following: "If any terms of this Section titled ‘Limitation on Damages’ is [sic] determined to be invalid or unenforceable for any reason, then the parties' intent is that only such terms be severed, and this Agreement's remaining terms shall be enforced."
The Arbitration Agreement also includes a Fees and Costs provision, which provides that each party is responsible for their own attorney's fees and costs in any dispute. Unlike the Limitation on Damages provision, the Fees and Costs provision does not have its own severability clause. However, the Arbitration Agreement has a severability clause applicable to all its provisions: "If any term of this Agreement is determined to be invalid or unenforceable for any reason, then the parties' intent is that only such term be severed, and this Agreement's remaining terms shall be enforced."
On October 17, 2016, Mrs. Tesoriero passed away. The Estate then filed suit against Orchard Ridge, alleging negligence and wrongful death in violation of section 400.022, Florida Statutes (2018) ; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; and violations of section 415.1111, Florida Statutes (2018). Orchard Ridge moved to compel arbitration. The Estate argued that the Arbitration Agreement was unenforceable because it violated public policy by containing two provisions undermining the Estate's statutory remedies. The Limitations on Damages provision limits the total damages and punitive damages in contravention of chapter 400. See Shotts v. OP Winter Haven, Inc., 86 So. 3d 456, 474 (Fla. 2011). The Fees and Costs provision, which requires each party to pay for their own attorney's fees, is in derogation of the fee-shifting provision of section 415.1111. See Hochbaum ex rel. Hochbaum v. Palm Garden of Winter Haven, LLC, 201 So. 3d 218, 221 (Fla. 2d DCA 2016).
Orchard Ridge pointed to the two severability clauses in the Arbitration Agreement and argued that the parties intended to sever any offending provisions in an effort to preserve the agreement. The Estate argued that the offending provisions, when viewed jointly, could not be severed because they went to the essence of the Arbitration Agreement. The trial court agreed with the Estate and denied the motion.
A trial court's ruling on a motion to compel arbitration is reviewed de novo. Chaikin v. Parker Waichman LLP, 253 So. 3d 640, 643 (Fla. 2d DCA 2017) (citing Roth v. Cohen, 941 So. 2d 496, 499 (Fla. 3d DCA 2006) ). A trial court's construction of an arbitration provision, and its application of the law to the facts, is also reviewed de novo. Green Tree Servicing, LLC v. McLeod, 15 So. 3d 682, 687 (Fla. 2d DCA 2009) (citing Gainesville Health Care Ctr., Inc. v. Weston, 857 So. 2d 278, 283 (Fla. 1st DCA 2003) ).
The parties do not dispute that the Limitation on Damages and Fees and Costs provisions violate public policy. The issue is whether these provisions are severable.
The existence of the two severability clauses in the Arbitration Agreement does not actually resolve the issue of whether the offending provisions are severable under Florida law. See Rockledge NH, LLC v. Miley ex rel. Miley, 219 So. 3d 246, 248 (Fla. 5th DCA 2017) ("The existence of a severability clause is not dispositive of whether a void clause invalidates the entire arbitration agreement." (citing Estate of Novosett v. Arc Villages II, LLC, 189 So. 3d 895, 896 (Fla. 5th DCA 2016) )); Hochbaum, 201 So. 3d at 220. The Florida Supreme Court has established that, even with a severability clause, an offending provision is severable only if it does not go to the "essence" of the agreement and, "with the illegal portion eliminated, there remain valid legal obligations." Shotts, 86 So. 3d at 478 (quoting Fonte v. AT & T Wireless Servs., Inc., 903 So. 2d 1019, 1024 (Fla. 2005) ("Although the arbitration agreement in this case contains a severability clause, the AHLA provision goes to the very essence of the agreement."); see Gessa v. Manor Care of Fla., Inc., 86 So. 3d 484, 490 (Fla. 2011) (recognizing the "general standard" for determining severability requires that the "illegal portion of the contract does not go to its essence" and holding that provisions limiting noneconomic damages and eliminating punitive damages were not severable from an arbitration agreement because they constituted its "financial heart" (quoting Local No. 234 v. Henley & Beckwith, Inc., 66 So. 2d 818, 821–22 (Fla. 1953) )).
The essence of an arbitration agreement is the selection of a forum in which to resolve disputes as an alternative to litigation in court, something embodied in the language of the first provision of the agreement at issue in this case: "Arbitration is an alternative means of resolving a dispute without involving the courts.... The dispute will not be heard or decided by a judge or jury." Whereas rules and procedures peculiar to the chosen forum might arguably go to the essence of an arbitration agreement, the same cannot be said for extraneous substantive provisions governing available damages or attorney's fees. See Hochbaum, 201 So. 3d at 223 ("[S]everance of the attorneys' fees provision would not require a drastic rewriting of the agreements and would preserve the intent of the parties to adjudicate their disputes in arbitration."); LTCSP-St. Petersburg, LLC v. Robinson, 96 So. 3d 986, 988 (Fla. 2d DCA 2012) (holding that a limitation of liability provision was severable from an arbitration agreement due to the presence of a severability clause); Estate of Deresh ex rel. Schneider v. FS Tenant Pool III Tr., 95 So. 3d 296, 301 (Fla. 4th DCA 2012) ("Striking the punitive damages limitation would preserve the forum and the finder of fact so central to the agreement.").
Yet, the Estate argues, and the trial court agreed, that Shotts and Gessa support the position that the offending damages and fees provisions are not severable from the Arbitration Agreement. Neither case supports the Estate's position. In Shotts, despite the presence of a severability clause, the court held that a provision that required arbitration be conducted in accordance with the American Health Lawyers Association (AHLA) rules—effectively shifting the plaintiff's burden of proof for certain damages—could not be severed because "the trial court would be forced to rewrite the agreement and to add an entirely new set of procedural rules and burdens and standards."Shotts, 86 So. 3d at 471–74, 478. In other words, the specific method of adjudicating their dispute inherent in their forum choice would be supplanted by another. Here, unlike in Shotts, the severance of the offending provisions would not require a rewriting of rules of engagement specific to the forum the parties selected in the Arbitration Agreement. In Gessa, the arbitration agreement contained two offending provisions, one that placed a cap on noneconomic damages and the other that eliminated punitive damages altogether. Gessa, 86 So. 3d at 492–93. However, unlike this case, there was no severability clause in the arbitration agreement. Id. at 489 ; see Obolensky v. Chatsworth at Wellington Green, LLC, 240 So. 3d 6, 10 (Fla. 4th DCA 2018) ("In the instant case, there are severability clauses; therefore, the supreme court's reasoning in Gessa need not extend to the instant case.").
The court did not address severability with regard to an offending punitive damages provision. See Shotts, 86 So. 3d at 478–81.
For this same reason, the Estate's reliance on Klemish v. Villacastin, 216 So. 3d 14 (Fla. 5th DCA 2016), Fletcher v. Huntington Place Ltd. Partnership, 952 So. 2d 1225 (Fla. 5th DCA 2007), and Place at Vero Beach, Inc. v. Hanson, 953 So. 2d 773 (Fla. 4th DCA 2007), is misplaced because these cases involved offending provisions that, if eliminated, would require the trial court to add new rules or procedures to the agreements. See Klemish, 216 So. 3d at 17–18 (holding that an agreement that incorporated some, but not all, of the provisions of Florida's Medical Malpractice Act violated public policy and was not severable despite the presence of a severability clause); Fletcher, 952 So. 2d at 1227 (holding that an agreement that required arbitration be conducted in accordance with the AHLA rules violated public policy and was not severable notwithstanding a severability clause); Place at Vero Beach, 953 So. 2d at 775–76 (same).
The court in Gessa determined that the two provisions were intended to make the "extent of liability ... reasonably foreseeable" and concluded that, with these provisions eliminated, "the two provisions constitute the financial heart of the agreement" because "the extent of liability would be open-ended." Gessa, 86 So. 3d at 490. Not so in this case, in which two severability clauses evidence the contracting parties' commitment to arbitrate disputes even without the offending provisions. See Obolensky, 240 So. 3d at 10–11 ("This express severability clause is a material distinction from Gessa that strongly indicates—by the clause's plain terms—that the limited liability provisions were not the essence of the arbitration agreement between the parties."); see also Deresh, 95 So. 3d at 301.
But see Estate of Reinshagen ex rel. Reinshagen v. WRYP ALF, LLC, 190 So. 3d 224, 225 (Fla. 5th DCA 2016) (holding that provisions that placed a cap on noneconomic damages and eliminated punitive damages were not severable from an arbitration agreement despite the presence of a severability clause and certifying question of great public importance whether Gessa's holding controls where an agreement contains a severability clause); Novosett, 189 So. 3d at 895–96 (same).
The severability clause that appears within the Limitation on Damages provision is a fatal shot through the "financial heart" theory advanced by the Estate. If the parties agreed they could live without that specific provision, then it manifestly was not the essence of their agreement. And it is difficult to square the argument that the Fees and Costs provision goes to the essence of the agreement in light of the Arbitration Agreement's general severability provision that was not present in the agreement at issue in Gessa.
Consequently, the Estate's argument that the two provisions constitute the financial heart "when viewed jointly" is not compelling. See Deresh, 95 So. 3d at 300 ("[T]he Court [in Gessa ] ruled that, ‘when viewed jointly,’ the two ‘limitation of liability provisions’ were ‘not severable from the remainder of the agreement.’ " (quoting Gessa, 86 So. 3d at 490 )). The sum of two things that do not go to the essence of the agreement is not greater than its parts; two provisions that, in isolation, are not essential to the agreement do not become the agreement's heart when added together.
Courts must honor contractual rights manifested by the language agreed to by the parties. The Estate has failed to establish why the plain meaning of the severability provisions should not be enforced to preserve the parties' agreement on an alternative forum to adjudicate their disputes. See Obolensky, 240 So. 3d at 11 ("Applying Shotts and Gessa in a manner to negate the arbitration provisions would ignore the fact that this agreement had a severability clause that was intended to be used in a situation as was presented here; by effectuating the severability clause, the parties were able to retain the ‘essence’ of the agreement at issue.").
Because the offending provisions are severable from the arbitration agreement, we reverse the trial court's order denying arbitration and remand for further proceedings. We certify conflict with the Fifth District in Reinshagen and Novosett, which held that similar provisions were not severable despite the presence of a severability clause.
Reversed and remanded for further proceedings; conflict certified.
CASANUEVA and MORRIS, JJ., Concur.