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Ggnsc Vanceburg, LLC v. Taulbee

United States District Court, Sixth Circuit

August 7, 2013

LOIS TAULBEE, Defendant.


KARI S. FORESTER, Senior District Judge.

This matter is before the Court on the motion of Defendant Lois Taulbee ("Taulbee") to dismiss this action and the motion of Plaintiff Golden Living Center - Vanceburg ("Golden Living") to compel arbitration and enjoin Taulbee from pursuing litigation in state court. For the reasons discussed below, the motion to dismiss will be denied, and the motion to compel will be granted.


Defendant, Lois Taulbee, was a resident of a Golden Living Center's Vanceburg, Kentucky, location from February 20, 2012 to December 24, 2012. While a resident, Ms. Taulbee suffered physical and emotional trauma due to the alleged negligent care given to her by Golden Living. Taulbee alleges that this inadequate care caused her physical condition to deteriorate beyond the normal aging process.

Taulbee had given her daughter, Sheila Gay Osborne, a General Power of Attorney on September 10, 2009. DE 1-2. Based on that power of attorney, Osborne signed an Alternative Dispute Resolution Agreement ("ADR Agreement") between Taulbee and Golden Living in 2012. DE 1-1.

On February 15, 2013, Taulbee filed suit in state court against Golden Living, alleging negligence, medical negligence, corporate negligence, and a violation of the long-term-care resident's rights. Golden Living answered that the state court claims are subject to the binding ADR Agreement between the parties and demanded the dispute be referred to arbitration and the state court case dismissed with prejudice.

Golden Living then filed a complaint with this Court, alleging federal jurisdiction by way of diversity. It argues that the ADR Agreement is valid and enforceable and asks this court to compel Taulbee to arbitrate her state claims and to enjoin her from further pursuing her claims in state court. Taulbee filed a motion to dismiss alleging lack of subject matter jurisdiction, abstention, equitable estoppel and failure to state a claim upon which relief can be granted. Taulbee's opposition to arbitration focuses primarily on the scope of the power of attorney and whether it encompasses an agreement to arbitrate.


A. Applicable Jurisdiction and Abstention Standards

Before ruling on the merits of any case, jurisdiction must be established as a threshold matter. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 95 (1998). Federal courts are courts of limited jurisdiction, and subject matter jurisdiction may be obtained only with the existence of diverse parties or a federal question. Heartwood, Inc. v. Agpaoa, 628 F.3d 261, 266 (6th Cir. 2010); 28 U.S.C. §§ 1331, 1332. When subject matter jurisdiction is challenged, the party claiming jurisdiction bears the burden of establishing its existence. Ohio Nat. Life. Ins. Co. v. United States, 922 F.2d 320, 324 (6th Cir. 1990). When dealing with factual challenges to subject matter jurisdiction, courts have significant leeway to consider evidence outside of the pleadings to resolve the matter. O'Bryan v. Holy See, 556 F.3d 361, 376 (6th Cir. 2009). Furthermore, when diversity jurisdiction is invoked in a case involving a limited liability company ("LLC"), the court must examine the citizenship of each of the LLC's members to determine citizenship of the LLC. Delay v. Rosenthal Collins Group, LLC, 585 F.3d 1003, 1005 (6th Cir. 2009).

Even where federal courts properly have jurisdiction over the matter, a district court may abstain from exercising its jurisdiction and refrain from hearing a case in limited circumstances. Saginaw Hous. Comm'n v. Bannum, Inc., 576 F.3d 620, 625 (6th Cir. 2009). This exception is narrow because a district court presented with a case that arises under its original jurisdiction has a "virtually unflagging obligation" to exercise the jurisdiction conferred upon it by the coordinate branches of government and duly invoked by litigants. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). Abstention is an "extraordinary and narrow exception to the duty of a district court to adjudicate a controversy properly before it." Id. at 813.

Taulbee argues that Colorado River abstention is applicable here. Under Colorado River, the threshold issue is whether there are parallel proceedings in state court. Crawley v. Hamilton County Comm'rs, 744 F.2d 28, 31 (6th Cir. 1984). Once a court has determined there are parallel proceedings, the Supreme Court identified eight factors that a district court must consider when deciding whether to abstain from exercising its jurisdiction due to the concurrent jurisdiction of state court. PaineWebber, Inc. v. Cohen, 276 F.3d 197, 206 (6th Cir. 2001). Those factors are:

(1) whether the state court has assumed jurisdiction over any res or property; (2) whether the federal forum is less convenient to the parties; (3) avoidance of piecemeal litigation; (4) the order in which jurisdiction was obtained; (5) whether the source of governing law is state or federal; (6) the adequacy of the state court action to protect the federal plaintiff's rights; (7) the relative progress of state and federal proceedings; and (8) the presence or absence of concurrent jurisdiction.

Id. When examining these factors, the court must not issue an opinion based upon "a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction. " Id. at 207 (emphasis added).

B. Subject Matter Jurisdiction

Taulbee argues that Golden Living's Complaint should be dismissed pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction. Specifically, Taulbee asserts that the parties are not diverse, and there is no federal question involved in the case. This Court agrees there is no federal question, but the parties are diverse and jurisdiction does exist.

Golden Living rightfully notes that the Federal Arbitration Act ("FAA"), which governs the alleged ADR Agreement, does not by itself create subject matter jurisdiction. American Federation of Television and Radio Artists v. WJBK-TV, 164 F.3d 1004, 1007 (6th Cir. 1999). Taulbee is incorrect, however, in arguing that the parties lack diversity. In support of this assertion, Taulbee relies on Golden Living's annual reports filed with the Kentucky Secretary of State, which list four members in 2011, one of whom is Melissa S. Bentley, a Kentucky resident. Taulbee argues there is no diversity because both Golden Living and Taulbee are Kentucky citizens. The 2012 annual report does not provide an address for Ms. Bentley or any other officer, but lists 1017 Fairlane Dr., Vanceburg, KY 41179 as Golden Living's principal office address.

Golden Living responds that Ms. Bentley's employment with the company ended on August 9, 2012 before the current suit was filed, and that her status as a member of the company ended at the same time. No member is currently a citizen of Kentucky. In addition, Golden Living correctly points out that Taulbee misconstrues the purpose and meaning of annual reports filed with the Kentucky Secretary of State. Annual reports do not provide evidence of citizenship for diversity purposes. Rizzo v. GGNSC Holdings, LLC., No. 10-45-HRW, 2010 WL 3724216, at *1 (E.D. Ky. Sept. 15, 2010). LLC's are required to file annual reports in order to comply with KRS 275.115, which in turn requires that LLC's maintain a registered office in Kentucky. Id.

The annual reports in this case only prove that Golden Living is operating in Kentucky, but do not provide evidence of citizenship for the purpose of diversity jurisdiction. Here, Golden Living has demonstrated that the parties are diverse and subject matter jurisdiction is present.

C. Colorado River Abstention

As noted above, a court considering whether to apply Colorado River abstention must first determine if there are parallel state court proceedings and then apply the eight-factor test. Paine-Webber, 276 F.3d at 206. Taulbee correctly argues that this case is parallel to the state court action. The parties are nearly identical, both cases involve the same claims of personal injury, and both cases focus on the validity of the ADR Agreement. "Exact parallelism is not required; it is enough if the two proceedings are substantially similar." Romine v. Compuserve Corp., 160 F.3d 337, 340 (6th Cir. 1998). Having found that the proceedings are parallel, the Court will next consider the Colorado River factors to determine if abstention is warranted.

Both parties agree that the case does not involve any real property nor any assumed jurisdiction over any res or property, but disagree as to how this factor should apply. Golden Living argues this factor should count in its favor, and their position is supported by the case law. When there is no property in issue, the factor weighs in favor of the exercise of jurisdiction and against abstention. Romine v. Compuserve Corp., ...

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