CA Blank Order

Hon. John R. Storck

Circuit Court Judge

Justice Facility

210 West Center St.

Juneau, WI 53039

Lynn M. Hron

Clerk of Circuit Court

Dodge Co. Justice Facility

210 West Center Street

Juneau, WI 53039

Jacques G. Balette

Marks, Balette & Giessel PC

10000 Memorial Drive, Suite 760

Houston, TX 77024-3412

Matthew H. Boller

Boller & Vaughan, S.C.

605 W. Main St.

Madison, WI 53703-2633

Jeffrey A. Evans

von Briesen & Roper, S.C.

411 E. Wisconsin Avenue, Suite. 1000

Milwaukee, WI 53202

Henry P. Giessel

Marks, Balette & Giessel PC

10000 Memorial Drive, Suite 760

Houston, TX 77024-3412

Camille Godwin

Marks Balette & Giessel PC

10000 Memorial Drive, Suite 760

Houston, TX 77024-3412

Richard D. Humphrey

U. S. Attorney’s Office

660 West Washington Avenue, Suite 303

Madison, WI 53703

Robert F. Johnson

von Briesen & Roper, S.C.

411 E. Wisconsin Avenue, Suite 1000

Milwaukee, WI 53202

Jamie Stock-Retzloff

Dean Health Plan, Inc.

1277 Deming Way

Madison, WI 53717-1971

Before Higginbotham, Sherman and Kloppenburg, JJ.

GGNSC Holdings, LLC, and others (collectively “GGNSC”) appeal an order denying their motion to stay proceedings and compel arbitration.[1] GGNSC argues that the parties’ Resident and Facility Arbitration Agreement mandating arbitration is enforceable. Based upon our review of the briefs and the record, we conclude at conference that this case is appropriate for summary disposition. See Wis. Stat. Rule 809.21 (2011-12). We affirm.

The undisputed facts are as follows. Upon admittance to a nursing home facility owned and operated by GGNSC, Merlin Ziebell executed a Resident Admission Agreement and a Resident and Facility Arbitration Agreement. The GGNSC Agreement contains the following relevant provision:

It is understood and agreed by Facility and Resident that any and all claims, disputes, and controversies (hereafter collectively referred to as a “claim” or collectively as “claims”) arising out of, or in connection with, or relating in any way to the Admission Agreement or any service or health care provided by the Facility to the Resident shall be resolved exclusively by binding arbitration to be conducted at a place agreed upon by the Parties, or in the absence of such an agreement, at the Facility, in accordance with the National Arbitration Forum Code of Procedure ..., and not by a lawsuit or resort to court process. This agreement shall be governed by and interpreted under the Federal Arbitration Act, 9 U.S.C. Sections 1-16.

After Ziebell’s death in August 2007, Christine Ready, Ziebell’s daughter and the administrator of his estate, filed an action against the owners and operators of the nursing home. GGNSC moved to stay proceedings and compel arbitration pursuant to the GGNSC Agreement. The circuit court found that GGNSC waived its right to have the matter referred to arbitration.

GGNSC filed a notice of appeal and a petition for leave to appeal, because GGNSC was uncertain whether the order from which it appealed was final. We granted the petition without implying any opinion about the finality of the order and ordered supplemental briefing addressing the application of Riley v. Extendicare Health Facilities, Inc., 2013 WI App 9, 345 Wis. 2d 804, 826 N.W.2d 398, which this court decided on December 27, 2012, and ordered published on January 30, 2013.

GGNSC argues that this case is distinguishable from Riley because the GGNSC Agreement contains different language from that contained in the Riley Agreement.[2] We disagree. As we explain below, under the reasoning of Riley, the GGNSC Agreement is unenforceable.

This case involves issues of contract interpretation and arbitrability, questions of law that we review de novo. Cirilli v. Country Ins. & Fin. Servs., 2009 WI App 167, ¶10, 322 Wis. 2d 238, 776 N.W.2d 272. In Riley, this court reviewed a nursing home Alternative Dispute Resolution Agreement that included a non-exclusive arbitrator designation clause and a clause mandating use of the National Arbitration Forum Code of Procedure. Riley, 345 Wis. 2d 804, ¶25. The court reasoned that the clauses demonstrated the parties’ intent to arbitrate exclusively before NAF, and worked together to make the selection of NAF integral to the Riley Agreement. Id. The court concluded that the NAF selection was integral to the Riley Agreement, and that the Agreement was unenforceable in NAF’s absence. Id., ¶¶44, 47.

Several key points supported the conclusion in Riley that NAF was integral to the Riley Agreement. Id., ¶¶36-47. First, the parties used mandatory language when designating the NAF Code of Procedure as the governing procedural rules. Id., ¶36. Second, the fee schedule imposed by the NAF Code resulted in substantial arbitrary fees that would not be based on actual costs of non-NAF arbitrators and administrators. Id., ¶38. Third, the multiple references to NAF in the NAF Code of Procedure and the “pervasive intertwining of the NAF Rules of Procedure with the dispute resolution process prescribed by the [Riley] Agreement,” rendered the designation of NAF and the NAF Code integral to the agreement to arbitrate. Id., ¶¶39-40. Fourth, an alternate arbitrator could not be appointed because “even if the court were to appoint a substitute arbitrator, no applicable NAF rules exist for the substitute arbitrator to apply.” Id., ¶41. Finally, the NAF term was not severable because it was integral to the agreement and removing such an integral term would “‘run contrary to the clear intent of the parties as expressed by the plain language of the Agreement itself.’” Id., ¶46 (quoted source omitted).

GGNSC argues that we should rely not on the reasoning of Riley but on the reasoning in Meskill v. GGNSC Stillwater Greeley LLC, 862 F. Supp. 2d 966 (D. Minn. 2012), which involved a dispute between a nursing home and a former patient concerning an arbitration provision identical to that in the GGNSC Agreement. 862 F. Supp. 2d at 969. The Meskill court concluded that the NAF Code contained “nothing therein so unique to suggest that, by selecting that Code, the parties implicitly designated the NAF due to some particular expertise it held.” Id. at 973.

GGNSC interprets the analysis in Riley to suggest that if an arbitration agreement is identical to the agreement in Meskill, then the reasoning in Riley does not apply. GGNSC’s interpretation is incorrect. This court disregarded Meskill’s reasoning because the difference in the language of the Meskill agreement did not aid the analysis of the Riley Agreement. Although there may be factual similarities between the Meskill agreement and the GGNSC Agreement, the reasoning set out in Riley controls the analysis of the GGNSC Agreement.

Applying the reasoning in Riley to the GGNSC Agreement here establishes that the GGNSC Agreement is unenforceable. First, the GGNSC Agreement uses mandatory language, stating that any issue arising under the Resident Admission Agreement “shall be resolved exclusively by binding arbitration ... in accordance with the National Arbitration Forum Code of Procedure, which is hereby incorporated into this agreement.” In turn, Rule 1.A. of the NAF Code of Procedure includes additional mandatory language: “[t]his Code shall be deemed incorporated by reference in every Arbitration Agreement,” and “[t]his Code shall be administered only by the National Arbitration Forum.” The use of such mandatory language as “shall” and “exclusively” demonstrates the parties’ intent to use the NAF Code of Procedure.

Second, the GGNSC Agreement, by requiring use of the NAF Code of Procedure, imposes a fee schedule that does not reflect the costs of non-NAF arbitration. As in Riley, it would be unreasonable to impose the NAF fee schedule on the parties because the fees would not be based on the actual costs of the non-NAF arbitrators and administrators. Third, the required resort to the NAF Code of Procedure would result in the NAF Code controlling the outcome of the dispute resolution.

The GGNSC Agreement contains the same material terms as did the agreement in Riley, exclusively invoking NAF and its Code. Under Riley and as demonstrated above, the NAF Code of Procedure is an integral term of the GGNSC Agreement. Severing this term and appointing a substitute arbitrator would contradict the “‘clear intent of the parties.’” Riley, 345 Wis. 2d 804, ¶46 (quoting Stewart v. GGNSC-Canonsburg, L.P., 2010 PA Super 199, 9 A.3d 215, 221). Moreover, as noted in Riley, NAF stopped accepting new consumer arbitrations in 2009 and “‘there are simply no NAF rules currently in effect for such arbitrations.’” Riley, 345 Wis. 2d 804, ¶41 (quoting Rivera v. American Gen. Fin Servs., 2011-NMSC-033, 259 P.3d 803). Accordingly, we conclude that the entire agreement is unenforceable.

IT IS ORDERED that the order be summarily affirmed under Wis. Stat. Rule 809.21(1).

[1] This court granted leave to appeal the order on February 1, 2013. See Wis. Stat. § 809.50(3) (2011-12). All references to the Wisconsin Statutes are to the 2011-12 version unless otherwise noted.

[2] The relevant language in the Riley Agreement was as follows:

The National Arbitration Forum (NAF) shall serve as any arbitrator of any dispute. In the event that NAF is unable or unwilling to serve, the parties shall select an alternative neutral arbitration service within thirty (30) days after receipt of notice by NAF of such. Regardless of the entity chosen to be Administrator, unless the Parties mutually agree otherwise in writing, the Alternative Dispute Resolution process shall be conducted in accordance with the NAF Rules and Code of Procedure (hereinafter, collectively “NAF Rules of Procedure”) then in effect. This process shall include but not be limited to the selection of the Arbitrator and location of the Arbitration as set out in the NAF Rules of Procedure.

Riley, 345 Wis. 2d 804, ¶4.



	2012AP1521	Christine Ready v. GGNSC Holdings, LLC (L.C. # 2010CV380)