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Convalescent v. O'Neill

Supreme Court of New Jersey

March 11, 2014

MANAHAWKIN CONVALESCENT, Plaintiff,
v.
FRANCES O'NEILL, Defendant, and FRANCES O'NEILL in her capacity as Executrix of the Estate of ELISE HOPKINS, Third-Party Plaintiff-Appellant,
v.
BROADWAY HEALTH CARE MANAGEMENT, LLC; M&A/COMPREHENSIVE HEALTH CARE MANAGEMENT SYSTEMS, LLC; M.R. OF MANAHAWKIN, LLC; and H.W. OF MANAHAWKIN, LLC d/b/a MANAHAWKIN CONVALESCENT CENTER, Third-Party Defendants-Respondents.

Argued October 22, 2013

On certification to the Superior Court, Appellate Division, whose opinion is reported at 426 N.J.Super. 143 (2012).

Sander D. Friedman argued the cause for appellant (Law Office of Sander D. Friedman, attorney; Mr. Friedman and Wesley G. Hanna, II, on the briefs).

Walter F. Kawalec, III, argued the cause for respondents (Marshall, Dennehey, Warner, Coleman & Goggin, attorneys; Tracy L. Burnley, on the briefs).

David G. McMillin argued the cause for amicus curiae Legal Services of New Jersey (Melville D. Miller, Jr., President, attorney; Mr. McMillin, Mr. Miller, and Gwen E. Orlowski, on the brief).

PATTERSON, J., writing for a unanimous Court.

In this appeal, the Court considers whether a contract between a nursing home and the daughter of one of its residents violated the Nursing Home Act (NHA), N.J.S.A. 30:13-1 to -17, which bars certain nursing homes from requiring third parties to guarantee payment as a condition of admitting or retaining a patient. The Court also considers the contract’s validity under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and the Truth-in-Consumer Contract, Warranty, and Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18.

In 2007, Elise Hopkins was admitted to Manahawkin Convalescent Center (Manahawkin), a Medicaid and Medicare certified nursing home. Hopkins’ daughter, Frances O’Neill elected not to assign Hopkins’ Social Security payments directly to Manahawkin, instead withdrawing the funds from Hopkins’ bank account to pay her bills. O’Neill signed Manahawkin’s “Rehabilitation and Nursing Home Admission Agreement” (Admission Agreement), which named her as the “Responsible Party” for purposes of paying her mother’s bills. Since Hopkins’ expenses were not privately funded, O’Neill did not sign the Private Pay Guarantor portion of the Admission Agreement, which required Responsible Parties to guarantee payment of resident costs. O’Neill also received the “Resident’s Bill of Rights, ” which stated that she was not required to guarantee payment from her own assets as a condition of her mother’s admission to, or retention in, the facility.

Following Hopkins’ death in 2008, and O’Neill’s appointment as executrix of the estate, a dispute arose between O’Neill and Manahawkin regarding an unpaid balance of $878.20. In March 2009, O’Neill received a letter from Manahawkin’s Collection Department stating that she, as the Responsible Party, had “the obligation to pay any debts owed by [Hopkins] to the facility.” The letter explained that failure to pay would result in legal action against O’Neill. In April 2009, Manahawkin filed a complaint in which O’Neill was named as the sole defendant. O’Neill asserted a counterclaim/third party complaint, claiming that the Admission Agreement violated the NHA, CFA, and TCCWNA. In September 2009, Manahawkin abandoned its efforts to claim the balance on Hopkins’ account, and its complaint was dismissed with prejudice.

In April 2011, O’Neill reasserted her NHA, CFA, and TCCWNA claims against several third-party defendants. The parties cross-moved for summary judgment, which was granted in defendants’ favor. The trial court concluded that the Admission Agreement did not compel a Responsible Party to assume personal liability for a Medicaid patient’s contractual obligation. It pointed out that O’Neill did not sign the Private Pay Guarantor section and had received the Resident’s Bill of Rights, which explicitly disclaimed any third party guarantee. The court also found that both the collection letter and the complaint, although poorly drafted, sought to compel O’Neill to pay the balance from her mother’s funds. The court held that the NHA and the Admission Agreement constrained Manahawkin from seeking to collect O’Neill’s personal assets as payment for her mother’s care.

O’Neill appealed, and the Appellate Division panel affirmed. Manahawkin Convalescent v. O’Neill, 426 N.J.Super. 143 (App. Div. 2012). The panel noted that federal and state law barred Manahawkin from legally requiring O’Neill to use her personal assets to satisfy her mother’s debts, and concurred that Manahawkin had neither expressly nor implicitly violated the NHA. The panel also found that Manahawkin had not violated the CFA since it had used lawful means to seek payment from O’Neill as the Responsible Party. Although not raised by any party, the panel concluded that nursing homes are exempted from the CFA by virtue of the learned professional exception to the statute. This Court granted O’Neill’s petition for certification. 212 N.J. 430 (2012).

HELD: Because Manahawkin’s Admission Agreement imposed no requirements on O’Neill that contravened the NHA, and neither the Admission Agreement nor Manahawkin’s collection complaint gave rise to a cause of action 2 under the CFA or the TCCWNA, dismissal of O’Neill’s claims was proper. However, nursing homes and their counsel should ensure that each party’s rights and remedies are clearly reflected in contracts and communications between facilities and individuals who arrange payment on a resident’s behalf.

1. The Court reviews the trials court’s summary judgment decision de novo, considering whether the evidence, when viewed in the light most favorable to the non-moving party, is sufficient to permit a rational factfinder to find in favor of the non-moving party. The trial court’s factual findings are accorded substantial deference, while legal conclusions are not. Appellate review of a trial court’s interpretation of a contract is de novo. (pp. 16-18)

2. The NHA complements the federal Nursing Home Reform Act, which, under 42 U.S.C.A. § 1396r(c)(5)(A)(ii), prohibits the requirement of third party guarantees of payment as a condition of admission to, or retention in, a nursing facility. In 1997, the NHA was amended to add similar language under N.J.S.A. 30:13-3.1. O’Neill’s NHA claim is premised on three alleged violations: (1) the Admission Agreement required that she spend her personal funds to pay her mother’s bills; (2) Manahawkin’s collection letter constituted an attempt to coerce her into using her own assets to pay the final bill; and (3) Manahawkin’s complaint improperly sought a remedy against O’Neill in her individual capacity. Reviewing the Admission Agreement as a whole, and considering the parties’ intent, the contract’s terms and purpose, and the surrounding circumstances, the Court concludes that it did not contravene federal law or the NHA. The Admission Agreement complied with the NHA by limiting O’Neill’s obligation to the payment of Hopkins’ bills with Hopkins’ assets. Similarly, although Manahawkin’s collection letter was inartfully drafted, it did not purport to assert rights beyond those authorized by the NHA. The complaint, although lacking in detail and improperly pled, also did not violate the NHA since did not allege that O’Neill was required to use her personal funds to pay Hopkins’ bills. Accordingly, the dismissal of O’Neill’s NHA claim was proper. (pp. 18-25)

3. The broadly-applied CFA was intended to greatly expand protections for New Jersey consumers by combating deceptive and fraudulent practices. A CFA claim requires proof of three elements: (1) unlawful conduct; (2) an ascertainable loss; and (3) a causal relationship between the unlawful conduct and the loss. Conduct constituting an unlawful practice under the CFA requires deceptive, fraudulent or other similar selling or advertising practices. In certain circumstances, an agreement containing an unlawful term may satisfy this element. O’Neill predicated her CFA claim on Manahawkin’s alleged violation of the NHA, as well as its alleged violation of the TCCWNA, which also is premised upon violation of the NHA. Since O’Neill’s CFA claim was tethered to her NHA claim, she cannot prove unlawful conduct. Thus, the claim was properly dismissed, and the Court need not reach the issues of whether Manahawkin’s conduct was exempt from the CFA under the “learned professional” exception or whether O’Neill suffered an ascertainable loss. (pp. 25-31)

4. The TCCWNA was enacted to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. Like her CFA claim, O’Neill’s TCCWNA claim is predicated upon an alleged violation of the NHA’s prohibition on Medicaid or Medicare certified nursing homes requiring third party guarantees of payment as a condition of admission or retention. Although the trial court improperly failed to specifically address O’Neill’s TCCWNA claim in its ruling, its determination that the Admission Agreement did not violate the NHA also resolved the TCCWNA claim. The Appellate Division’s subsequent dismissal of the TCCWNA claim was consistent with Rule 1:7-4. (pp. 31-33)

5. Although Manahawkin did not violate the NHA, CFA or TCCWNA, its Admission Agreement, collection letter and complaint all failed to adequately set forth the respective rights and duties of the parties. Thus, the Court urges counsel for the nursing home industry to ensure that contracts are prepared, and collection practices are conducted, in a manner that fosters a clear understanding of each party’s rights and remedies under the law. (pp. 33-35)

The judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE RABNER, JUSTICES LaVECCHIA and ALBIN, and JUDGES RODRÍGUEZ and CUFF (both temporarily assigned) join in JUSTICE PATTERSON’s opinion.

OPINION

PATTERSON JUSTICE

This appeal concerns a dispute between a nursing home and the daughter of one of its residents, arising from the nursing home's attempt to collect a claimed unpaid balance following the resident's death. The case requires the Court to determine whether the parties' contract, which imposed obligations on the daughter as a "Responsible Party, " violated the Nursing Home Act (NHA), N.J.S.A. 30:13-1 to -17, which bars certain nursing homes from requiring third parties to guarantee payment as a condition of admitting or retaining a resident. The appeal also involves two consumer protection statutes: the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and the Truth-in-Consumer Contract, Warranty, and Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18.

When Frances O'Neill (O'Neill) arranged for her mother, Elise Hopkins (Hopkins), to become a resident of Manahawkin Convalescent Center (Manahawkin), she decided to pay Manahawkin's bills from Hopkins' Social Security benefits, rather than arranging for those benefits to be directly paid to the facility. When her mother was admitted to the nursing home, O'Neill signed Manahawkin's "Rehabilitation and Nursing Home Admission Agreement" (Admission Agreement). The Admission Agreement designated O'Neill as the "Responsible Party" for purposes of processing her mother's bills, and set forth remedies in case of a default of that obligation. O'Neill did not sign a section of the Admission Agreement, applicable only to residents whose expenses were privately paid, which required Responsible Parties to guarantee payment of resident costs. She received a copy of a separate form that confirmed, consistent with the NHA, that Manahawkin could not require O'Neill to guarantee payment from her own assets as a condition of her mother's admission to the facility.

Following Hopkins' death, Manahawkin demanded in writing that O'Neill pay a balance due on her mother's account. It initially threatened, and then filed, a collection action against her. In a counterclaim, O'Neill asserted various causes of action, including claims based on the NHA, the CFA and the TCCWNA. After the parties stipulated to the dismissal of Manahawkin's collection action, resulting in no payment to Manahawkin, O'Neill reasserted her NHA, CFA and TCCWNA claims and sought class certification, which the trial court denied. The trial court granted summary judgment dismissing O'Neill's claims and construing the Admission Agreement to impose no obligation on O'Neill to devote her personal funds to her mother's care. The trial court therefore deemed the Admission Agreement to conform to the NHA, and dismissed O'Neill's remaining claims. An Appellate Division panel affirmed, holding that the Admission Agreement met the requirements of the NHA, and that Manahawkin accordingly committed no unlawful act within the meaning of the CFA.

We affirm the Appellate Division's judgment. We concur with the trial court's finding that the Admission Agreement imposed no requirements on O'Neill that contravened the NHA. We hold that neither the Admission Agreement nor the collection complaint filed by Manahawkin gave rise to a cause of action under the CFA or the TCCWNA, and that the trial court properly granted summary judgment dismissing O'Neill's claims. We caution nursing homes and their counsel, however, that the NHA's constraints on the liability of a "Responsible Party" should be clearly reflected in contracts and communications between facilities and individuals who arrange payment on a resident's behalf.

I.

On January 22, 2007, Hopkins was admitted to Manahawkin, a Medicaid and Medicare certified nursing home located in Manahawkin, New Jersey. Prior to Hopkins' admission, O'Neill obtained a durable power of attorney, and was managing Hopkins' bank account and other assets. Rather than assign Hopkins' Social Security payments directly to Manahawkin, O'Neill elected to have those payments deposited in her mother's bank account. She then used funds from that account to pay the nursing home's bills.

The Admission Agreement prepared by Manahawkin set forth the terms and conditions of O'Neill's residence at and treatment by Manahawkin, and provided that it was governed by New Jersey law. The Admission Agreement identified O'Neill as the "Responsible Party, " defined as "the person acting on behalf of the Resident as his or her representative and guardian in fact, or one who has been appointed by the Court as legal guardian." It described Manahawkin's responsibilities for Hopkins' care, including her diet, "lodging in a clean, healthful, properly outfitted sheltered environment, " twenty-four hour nursing care, assistance with daily living, a supply of hospital gowns and bed linens, social services, activities and opportunities for religious practice.

The Admission Agreement also described O'Neill's duties as "Responsible Party, " including the provision of personal clothing and effects, spending money and uninsured hospital costs, physician fees and medication costs. O'Neill agreed to "pay basic rates as agreed upon with [Manahawkin] at stated intervals, " to "comply with all terms and conditions of this Agreement, " and to "pay all costs, expenses and reasonable attorneys fees" for any collection action instituted by the nursing home for "sums due and owing by the Resident."

The Admission Agreement set forth the billing responsibilities of "Resident/Responsible Party" -- in this case, Hopkins and her daughter, O'Neill -- ...


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