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Monday, April 21, 2014

Manahawkin Convalescent v. Frances O’Neill


 Manahawkin Convalescent v. Frances O’Neill (A-17-12;
          071033)
          Because Manahawkin’s Admission Agreement imposed no
          requirements on O’Neill that contravened the NHA, and
          neither the Admission Agreement nor Manahawkin’s
          complaint gave rise to a cause of action 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.  
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.
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.
2 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 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.  
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.
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.
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. 
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. 
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.
3-11-14