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Jeager v. Peak Medical Montana Operations, LLC

United States District Court, D. Montana, Butte Division

March 10, 2017



          SAM E. HADDON United States District Judge.


         Plaintiff Gina Jaeger, sister of Charlene Hill ("Hill"), and Personal Representative of the Estate of Charlene Hill, filed this action in state court alleging claims relating to Hill's inpatient care provided from August 13, 2015, to August 25, 2015, at a nursing facility known as the Butte Center in Butte, Montana.[1] The case was removed to this Court on June 10, 2016.[2] An amended complaint was filed on August 2, 2016.[3]

         The Court, following removal, denied Plaintiffs motion to remand and dismissed for fraudulent joinder and without prejudice three individual defendants named in the amended complaint.[4] The Court also granted Genesis Healthcare, Inc.'s motion to dismiss, leaving Peak Medical Montana Operations, LLC ("Peak") as the sole remaining defendant.[5] The claim against Peak asserts vicarious liability based on the purported negligence of the same three previously dismissed individual Montana citizen employees of Peak alleged in the amended complaint to have caused Hill's personal injury and subsequent death.[6]

         Motion to Compel Arbitration

         On February 14, 2017, Peak moved "for an order compelling the parties to submit to arbitration and staying this action until arbitration has been completed."[7] The motion is grounded in a Voluntary Binding Arbitration Agreement (the "Agreement") entered into between Hill and Peak on August 14, 2015.[8] Plaintiff opposes enforcement of the Agreement with the argument that "[w]hen Charlene Hill, a person of limited education, with a severe anxiety disorder signed this agreement under the influence of narcotics, the Arbitration agreement as to her situation is clearly unconscionable."[9]

         Federal Arbitration Act

         The Federal Arbitration Act[10] ("FAA") was enacted "to 'ensur[e] that private arbitration agreements are enforced according to their terms.'"[11] It "provide[s] for the enforcement of arbitration agreements within the full reach of the Commerce Clause."[12]

         Section 2 of the FAA, "the primary substantive provision of the Act, "[13] is recognized "as reflecting both a 'liberal federal policy favoring arbitration, ' and the 'fundamental principle that arbitration is a matter of contract[.]'"[14]

         Saving Clause

         "As federal substantive law, the FAA preempts contrary state law."[15]However, the final phrase of § 2 of the FAA, termed the saving clause, "permits agreements to arbitrate to be invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability.'"[16] The saving clause however is not to be construed with "an intent to preserve state-law rules that stand as an obstacle to the accomplishment of the FAA's objectives."[17]

         Determination of whether a contract is unconscionable under Montana law "is a two-step inquiry: (1) whether the provision fits the doctrine of a contract of adhesion such that the weaker bargaining party had no meaningful choice regarding its acceptance; and (2) whether the contractual terms are unreasonably favorable to the drafter, usually the party with superior bargaining power."[18] "Whether or not the clause is unreasonably favorable to the drafter in turn involves an inquiry into whether the clause is within the reasonable expectations of the weaker party or is unduly oppressive to the weaker party."[19] Factors to be considered in determining whether a provision is outside a party's reasonable expectations include:

[1] [W]hether the waiver clause was conspicuous and explained the consequences of the provision (e.g. waiver of the right to trial by jury and right of access to the courts); [2] whether a disparity existed in the bargaining power of the contracting parties; [3] whether a difference in business experience and sophistication of the parties existed; [4] whether the party charged with the waiver was represented by counsel at the time the agreement was executed; [5] whether economic, social or practical duress compelled a party to execute the contract; [6] whether the parties actually signed the agreement or separately initialed the waiver provision; and [7] whether the waiver clause was ambiguous or misleading.[20]

         The Agreement

         Plaintiff fails to demonstrate the Agreement is unconscionable under Montana law. The FAA's clear mandate that private arbitration agreements are to be enforced according to their terms governs.

         The Agreement is not a contract of adhesion. It unambiguously states: "THIS AGREEMENT IS VOLUNTARY AND IS NOT A PRECONDITION TO ...

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