Charles Miller, Jr. v. Eric Cotter

Issue Discussed: Arbitrability/Scope of Arbitration

Submitted by Natasha C. Lisman, Matthew C. Welnicki

Date Promulgated: March 30, 2007

Charles Miller, Jr. v. Eric Cotter, et al., 448 Mass. 671 (2007)

Issue Decided:

1. Where a plaintiff seeks to recover for the same tort from two defendants, one of whom is a party to an arbitration agreement with the plaintiff while the other is not, does the court have the power to deny enforcement of the arbitration agreement on the ground that forcing the plaintiff to maintain separate proceedings against the defendants would be inequitable, inefficient, and unnecessarily expensive?

2. Where an arbitration agreement with a nursing home was executed on behalf of a resident by his son, is the agreement unconscionable, either per se, or because the son, though capable of reading and understanding the agreement, did not read it “word-for-word”?

In Miller v. Cotter, the Massachusetts Supreme Judicial Court (“SJC”) held that (1) an arbitration agreement executed in the context of a resident’s admission to a nursing home was not unconscionable; and 2) the fact that the plaintiff would be required to maintain a separate judicial action against another defendant is not a ground to deny the enforcement of an arbitration agreement.

In arranging for the admission of his father to a nursing home, the plaintiff, Charles Miller, acting under a power of attorney, executed an agreement with the nursing home that required the submission of all disputes arising out of, or in connection with, the nursing home’s provision of services and health care for the father to arbitration. After his father’s death less than one month later, Mr. Miller filed a wrongful death action in state court against the nursing home, some of its employees, and a doctor, who was not an employee of the nursing home and, therefore, not a party to the arbitration agreement. The nursing home defendants moved to dismiss the complaint and to compel arbitration. The trial judge denied the motion, and the nursing home defendants appealed.

The SJC transferred the case from the intermediate appeals court for direct review on its own initiative. As a preliminary matter, in determining the enforceability of the arbitration agreement, the SJC applied the Uniform Arbitration Act as adopted in Massachusetts, but acknowledged the applicability of the Federal Arbitration Act as well. The SJC stated that applying the Massachusetts Act does not create a preemption problem because the Act does not limit the enforceability of arbitration contracts. Addressing the substantive issues on appeal, the SJC reversed the trial judge’s order and held that the nursing home defendants were entitled as a matter of law to a judgment dismissing Mr. Miller’s complaint and compelling arbitration.

The trial judge’s stated reason for denying the motion to dismiss and to compel was that “requir[ing] the plaintiff to arbitrate some part of this claim against the moving party, but not all claims or parties results in inequitable, [inefficient] and unnecessarily expensive duplication of effort that renders enforcement of this arbitration agreement to be [substantively] and procedurally unfair.” Characterizing this reason as an equitable ground for revocation of an arbitration agreement, the SJC found it to be without support in the rules of civil procedure or elsewhere, and rejected it, holding that a court cannot refuse to enforce a valid arbitration agreement on the ground that arbitration would be duplicative, inconvenient, or inefficient.

The SJC also examined whether the arbitration agreement was unenforceable on the ground that it was unconscionable. The Court declined to adopt a rule that predispute arbitration agreements between nursing homes and residents are per se unconscionable or void as a matter of public policy. The court explained that in making a determination of whether an arbitration agreement, or any other contract, is unconscionable, a court must look to the purpose and effect of the contract to determine whether, at the time of its execution, the contract could result in unfair surprise or was oppressive to the disadvantaged party. The SJC found “nothing in the specific facts of the case, or the nursing home context in general, that would lead [it] not to enforce the predispute arbitration agreement . . . .” The court also specifically ruled that, in the absence of fraud, one side’s failure to read a contract “word-for-word” would not support a finding of unconscionability.

* Natasha C. Lisman is a partner in the Boston litigation firm of Sugarman, Rogers, Barshak & Cohen, P.C., concentrating her practice on commercial, insurance, and reinsurance litigation and arbitration.

Matthew C. Welnicki is a litigation associate at Sugarman, Rogers, Barshak & Cohen, P.C., concentrating his practice on commercial dispute resolution.