GGNSC LOUISVILLE HILLCREEK, LLC; GGNSC ADMINISTRATIVE SERVICES, LLC; GGNSC HOLDINGS, LLC; GGNSC EQUITY HOLDINGS, LLC; GOLDEN GATE NATIONAL SENIOR CARE, LLC; GOLDEN GATE ANCILLARY, LLC; and GGNSC CLINICAL SERVICES, LLC, Plaintiffs,
RANDALL WARNER, Individually, Defendant.
MEMORANDUM OPINION AND ORDER
JOHN G. HEYBURN, II, District Judge.
Plaintiffs, GGNSC Louisville Hillcreek, LLC, et al. ("Golden Gate"), petition this Court under 9 U.S.C. § 4 to compel arbitration of the nursing home abuse and neglect claims of Defendant, Randall Warner ("Warner"). The odd procedural circumstance here is that Golden Gate filed a complaint in federal court to enjoin Warner's neglect claims from proceeding in state court. Warner has responded with a broad array of arguments to keep his state court case alive and well: lack of subject matter jurisdiction; abstention; inapplicability of the Federal Arbitration Act ("FAA") to the Arbitration Agreement Warner signed upon admission to the facility; and invalidity of the Agreement due to unconscionability and public policy. Each of these arguments raises interesting questions. Having considered all the arguments and for the reasons that follow, Warner's motion to dismiss is denied and Golden Gate's request for relief is granted in full.
Warner was a resident of Golden Gate's Golden Living Center-Hillcreek facility (hereinafter "Hillcreek") located in Louisville, Kentucky, from April 11, 2011 to June 11, 2012, save for intermittent terms of hospitalization. While a resident there, Warner suffered physical and emotional trauma due to allegedly negligent care. This accelerated the deterioration of his health beyond the normal aging process, leading to such injuries as pressure sores, infections, and falls with injury.
Upon admission to Hillcreek, Warner signed an ADR Agreement. The pertinent portion describing covered disputes reads as follows:
This Agreement applies to any and all disputes arising out of or in any way relating to this Agreement or to the Resident's stay at the Facility or the Admissions Agreement between the Parties.... Covered Disputes include but are not limited to.... violation[s] of  right[s] claimed to exist under federal, state, or local law...; tort; breach of contract; consumer protection; fraud; misrepresentation; negligence; gross negligence; malpractice; and any alleged departure from any applicable federal, state, or local medical, health care, consumer, or safety standards.
ECF No. 1, Ex. A, § III. On May 21, 2013, however, Warner filed suit in state court against Golden Gate and Tim Kravis-Hillcrest's Nursing Home Administrator during Warner's period of residency-alleging negligence, medical negligence, corporate negligence, and violations of Kentucky's Residents' Rights Act. Golden Gate filed an answer in state court raising the ADR Agreement as a defense. Shortly thereafter, Golden Gate filed the present complaint to compel arbitration of Warner's state claims and enjoin Warner from further pursuing his state court action against them. Golden Gate further requests that after compelling arbitration and enjoining Warner, the Court stay this matter pursuant to 9 U.S.C §3 until the arbitration is completed, at which time the Court may enter judgment on any arbitration award. Warner filed a motion to dismiss the federal action-first alleging lack of subject matter jurisdiction based on the absence of a federal question, later on the grounds of lack of complete diversity of the parties, abstention, inapplicability of the FAA to the ADR Agreement, and invalidity of the ADR Agreement on both unconscionability and public policy grounds.
The Federal Arbitration Act, 9 U.S.C. § 4, authorizes a United States district court to entertain a petition to compel arbitration if the court would have jurisdiction "save for [the arbitration] agreement" over "a suit arising out of the controversy between the parties." In its complaint, Golden Gate identified 28 U.S.C. 1332(a)(1) as the font of jurisdiction allowing this Court to entertain its petition. The first major hurdle for the Court is whether it can properly assert federal jurisdiction in circumstances such as these. Warner makes three separate arguments for this Court's lack of jurisdiction to even consider the motion to compel arbitration.
First, Warner argues that the amount at issue fails to meet the jurisdictional requirement.
The Sixth Circuit has instructed, "The true value of arbitration, the object of this [type of] litigation, cannot be determined without reference to the potential cost of the state claim [to the federal court plaintiff]." Woodmen of the World/Omaha Woodmen Life Ins. Soc'y v. Scarbro, 129 Fed.App'x. 194, 196 (6th Cir. 2005) (unpublished); s ee also CMH Homes, Inc. v. Goodner, 799 F.3d 832, 837-38 (8th Cir. 2013) (extending the holding in Vaden v. Discover Bank , 556 U.S. 49 (2009), to hold that, as in cases where subject matter jurisdiction to entertain a FAA petition is premised on the presence of a federal question, to resolve whether diversity jurisdiction exists on a petition to compel arbitration, a court considers whether the amount in controversy between the parties satisfies the jurisdictional minimum by "looking through" to the entire, actual controversy between the parties as they have framed it in state court); Jumara v. State Farm Ins. Co., 55 F.3d 873, 877 (3d Cir. 1995) ("[T]he amount in controversy in a petition to compel arbitration... is determined by the underlying cause of action that would be arbitrated."). But see We Care Hair Dev., Inc. v. Engen, 180 F.3d 838, 841 (7th Cir. 1999) ("Since the present suit is not a removal suit but rather an independent federal suit, it is the stakes of the arbitration and not the possible state court award that control.").
Here, Warner's state action seeks actual and punitive damages of an unspecified amount in excess of seventy-five thousand dollars and Golden Gate has specifically incorporated that amount into its federal petition as the amount in controversy. ECF No. 1, ¶ 12. Although Warner presumably calculated his damage claim by including the value of claims against Tim Kravis, the facility administrator who is not a named party to this action, Golden Gate has satisfied the bad faith standard with which district courts test claimed amounts in controversy: it does not appear to a legal certainty that Golden Gate's claim is really for less than the jurisdictional amount. See Lodal, Inc. v. Home Ins. Co. of Illinois, 156 F.3d 1230, 1998 WL 393766, **2 (6th Cir. 1998) (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 289 (1938)). Because Warner claims punitive damages, the economic value of the arbitration to Golden Gate could well exceed the seventy-five thousand dollar requirement.
Warner next contends that complete diversity of citizenship among the parties cannot be established because the Nursing Home Administrator named in Warner's state complaint, a Kentucky citizen who was not named as a plaintiff in this action, is an indispensable party under Federal Rule of Civil Procedure 19 and his joinder would destroy the complete diversity among parties required by 28 U.S.C. 1332(a)(1). There is no dispute that the rest of the parties named in this action are diverse.
Under Rule 19, the first step in determining whether Kravis is indispensable is to determine whether he is a necessary party. A party is necessary if:
(A) in that person's absence, complete relief cannot be accorded among those already parties; or
(B) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may:
(i) as a practical matter, impair or impede the person's ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.
Fed. R. Civ. Proc. 19. Warner's claims against both Kravis and the Golden Gate parties are based on the same occurrence-negligence that resulted in injury to Warner. Further, the arbitration agreement governs claims against the Golden Gate parties and against Kravis as administrator of the Hillcreek facility. Moreover, if this Court and the state court were to reach different conclusions regarding whether the arbitration agreement is enforceable,  Kravis would ...