United States District Court, E.D. Kentucky, Central Division, Lexington
MEMORANDUM OPINION AND ORDER
DANNY C. REEVES, District Judge.
Defendant Paul S. Caudill is the Administrator of the Estate of June Holliday. This matter is pending for consideration of Caudill's motion to dismiss this action. Conversely, the plaintiffs have moved the Court to compel arbitration and enjoin Caudill from continuing his state court action against them. [Record Nos. 4, 6] For the reasons set forth below, the Court will compel arbitration and deny the defendant's motion to dismiss. Additionally, the Court will enjoin Caudill from pursuing the underlying state action.
On November 19, 2013, Caudill filed an action in the Fayette Circuit Court regarding the care and treatment of June Holliday at Richmond Place Rehabilitation and Health Center. [Record No. 1-2] On behalf of Holliday's estate, Caudill alleged negligence, medical negligence, corporate negligence, violation of a long term care resident's rights, and wrongful death against several entities and individuals. [Record No. 1-2] The defendants named in that action include: Brookdale Senior Living, Inc.; BLC Lexington SNF, LLC d/b/a Richmond Place Rehabilitation and Health Center; American Retirement Corporation; Richmond Place Administrator Jamie Gitzinger; Richmond Place Director of Nursing Michele Combs; Richmond Place Assistant Director of Nursing Karen Hatfield; Richmond Place Executive Director Carol Brinegar; Brookdale Senior Living, Inc. Regional Clinical Nursing Consultant; and Brookdale Senior Living, Inc. Division Vice President Fred Ewing (collectively, "the state court defendants"). [ Id. ]
The state court defendants asserted in their Answer that the claims are subject to a binding alternative dispute resolution agreement contained in Holliday's residency agreement. The residency agreement was signed on May 16, 2012 - the date of Mrs. Holliday's admission into the nursing home - by Mrs. Holliday's son, Caudill, acting as her attorney-in-fact. [Record No. 1-1] The arbitration provision states, in relevant part:
Any and all claims or controversies arising out of or in any way relating to this Agreement or the Resident's stay at the company, excluding any action for eviction, including disputes regarding the making, execution, validity, enforceability, voidability, unconscionability, severability, scope, interpretation, waiver, duress or any other defense to enforceability of this Agreement or this Arbitration Provision, whether arising out of State or Federal law, whether existing or arising in the future, whether for statutory, compensatory or punitive damages and whether sounding in breach of contract, tort or breach of statutory duties, irrespective of the basis for the duty or the legal theories upon which the claim is asserted, shall be submitted to binding arbitration, as provided below, and shall not be filed in a court of law. The parties to this Agreement further understand that a jury will not decide their case.
[Record No. 1-1 (emphasis in original).]
Three of the nursing home state court defendants (Brookdale Senior Living Inc., BLC Lexington SNF, LLC, and American Retirement Corporation) filed this action under the Federal Arbitration Act ("FAA"), seeking to compel arbitration and enjoin Caudill from pursuing his claims against them in state court. Caudill then moved to dismiss the action, arguing that this Court lacks subject matter jurisdiction, that the plaintiffs failed to join an indispensable party, and that the arbitration agreement is unenforceable for a variety of reasons.
A. Rule 12(b)(1)
Federal district courts have original jurisdiction over civil actions between citizens of different states if the amount in controversy exceeds $75, 000.00, exclusive of interest and costs. 28 U.S.C. § 1332(a). If lack of subject-matter jurisdiction is raised in a motion to dismiss, the plaintiff "bears the burden of proving jurisdiction... to survive the motion." Mich. S. R.R. Co. v. Branch & St. Joseph Counties Rail Users Ass'n, 287 F.3d 568, 573 (6th Cir. 2002). However, the plaintiff will "survive the motion to dismiss by showing any arguable basis in law' for the claims set forth in the complaint." Id. (quoting Musson Theatrical, Inc. v. Fed. Express Corp., 89 F.3d 1244, 1248 (6th Cir. 1996)).
Motions to dismiss based on Rule 12(b)(1) "generally come in two varieties: a facial attack or a factual attack." Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007). A facial attack "questions merely the sufficiency of the pleading." Id. Thus, the Court must accept the "allegations in the complaint as true" when reviewing a facial attack, and "[i]f those allegations establish federal claims, jurisdiction exists." Id. A factual attack, on the other hand, is "not a challenge to the sufficiency of the pleading's allegations, but a challenge to the factual existence of subject matter jurisdiction." United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). When considering a factual attack, there is no presumption of truthfulness applied to the allegations. Instead, the Court "must weigh the conflicting evidence to arrive at the factual predicate that subject-matter [jurisdiction] does or does not exist." Gentek, 491 F.3d at 330.
B. Rule 12(b)(6)
When evaluating a motion to dismiss under Rule 12(b)(6), the Court must determine whether the complaint alleges "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The plausibility standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). This standard requires "more than a sheer possibility that a defendant has acted unlawfully." Id. Thus, although the complaint need not contain "detailed factual allegations" to survive a motion to dismiss, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (internal quotation marks and alteration omitted).
A. Subject Matter Jurisdiction
Under the FAA, a district court has jurisdiction over a petition to compel arbitration only if the court would have jurisdiction over "a suit arising out of the controversy between the parties" without the arbitration agreement. 9 U.S.C. § 4. That is, the FAA "bestow[s] no federal jurisdiction but rather require[s] an independent jurisdictional basis' [for access to a federal forum] over the parties' dispute." Vaden v. Discover Bank, 556 U.S. 49, 59 (2009) (quoting Hall Street Assoc., LLC v. Mattel, Inc., 552 U.S. 576, 581-82 (2008) (internal quotation marks omitted)); see also Moses. H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1 (1983). Thus, § 4 of the FAA neither expands nor contracts federal subject matter jurisdiction. Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 747 n.7 (8th Cir. 1986). A petitioner proceeding under § 4 must assert an independent source of subject matter jurisdiction. Here, the plaintiffs assert that the Court has subject matter jurisdiction pursuant to 18 U.S.C. § 1332, the Court's diversity jurisdiction.
Caudill first argues that the Court lacks subject matter jurisdiction because complete diversity is lacking. Yet, diversity exists on the face of the federal Complaint. Plaintiff Brookdale Senior Living, Inc., is a corporation formed under the laws of Delaware with its principal place of business in Tennessee. [Record No. 1, p. 7] Plaintiff BLC Lexington SNF, LLC, is a limited liability company formed under the laws of Delaware with its principal place of business in Tennessee. [ Id. ] And Plaintiff American Retirement Corporation, is a corporation formed under the laws of Tennessee with its principal place of business in Tennesee. [ Id. ] Conversely, Caudill is a citizen of the Commonwealth of Kentucky. [ Id. ]
Regarding the amount in controversy, "courts uniformly appl[y] a limited look through' approach, determining whether the value at stake in the arbitration being sought in the federal action could exceed $75, 000, regardless [of] whether the claim(s) to be arbitrated were part of a broader parallel state court action in which the total amount in controversy might be greater." Northport Health Servs. of Arkansas, LLC v. Rutherford, 605 F.3d 483, 486-87 (8th Cir. 2010) (emphasis added) (internal quotation marks omitted). The claims that the plaintiffs seek to arbitrate are for actual and punitive damages related to alleged substandard medical care provided to Holliday while residing at the nursing home. [ See Record No. 1.] The plaintiffs have adequately shown that the amount in controversy exceeds $75, 000.00, exclusive of interest and costs. See 28 U.S.C. § 1332.
Caudill does not challenge that diversity jurisdiction exists based on the Complaint itself. Rather, he contends that the Court lacks subject matter jurisdiction because the Court should look through to the underlying controversy (which includes non-diverse defendants) to find that diversity jurisdiction is defeated. Additionally, Caudill argues that the plaintiffs have failed to join indispensable parties ( i.e., the nursing home administrators that were sued as joint tortfeasors in the state court action) that would destroy diversity.
1. "Look Through" Approach
Caudill contends that the Court lacks subject matter jurisdiction because of the Supreme Court's decision in Vaden v. Discover Bank, 556 U.S. 49 (2009). The plaintiffs counter that Vaden's holdings are inapplicable to cases premised on diversity jurisdiction. In Vaden, a credit card company, Discover, sued a cardholder for past-due charges in state court. Id. at 53. The cardholder asserted state law counterclaims that Discover considered preempted by federal banking law. Id. Discover also filed a § 4 petition in federal district court to compel the arbitration of the counterclaims. Id. at 54. Tracking the language of 18 U.S.C. § 1331, the Court held that a federal court should "look through" a § 4 petition to determine whether it is predicated on a controversy that "arises under" federal law. Id. at 66. The Vaden Court found that, when looking through to the whole controversy between the parties, the action did not qualify for federal-court adjudication because there was no federal question. Thus, the Supreme Court held that the district court lacked subject matter jurisdiction. Id. at 72.
Although Caudill asserts that the Supreme Court's conclusion in Vaden "appl[ies] to the analysis of diversity cases as well as  federal question cases, " he provides no support for this contention. [Record No. 4-1, p. 14] Courts confronting the issue have consistently rejected the "look through" analysis when considering whether the parties to a controversy are completely diverse. See, e.g. Northport Health Servs. of Arkansas, LLC v. Rutherford, 605 F.3d 483, 490-91 (8th Cir. 2010). In Northport, the Eighth Circuit considered that the Supreme Court "carefully limited its statement of the issues and holding to federal question jurisdiction" and "cited the circuit court cases creating the federal question conflict but did not cite any of the circuit court § 4 diversity cases." Northport, 605 F.3d at 490-91. The Northport Court was critical of a broad reading of Vaden, noting that the argument that Vaden is equally applicable to diversity cases "distorted the Supreme Court's decision." Id. at 488.
This Court is persuaded by the Eighth Circuit's approach in Northport. See Sun Healthcare Group, Inc. v. Dowdy, No. 5:13-CV-169, 2014 U.S. Dist. LEXIS 24285, *11 (W.D. Ky. Feb. 26, 2014) (following the "well-reasoned" approach of the Eighth Circuit in rejecting a similar argument). Further, other courts within this Circuit have found that Vaden is limited to cases involving federal question jurisdiction. See Brookdale Senior Living v. Teresa Stacy, No. 5:13-290-KKC, 2014 U.S. Dist. LEXIS 84460 (E.D. Ky. June 20, 2014) (finding that Vaden does not apply to a diversity action under the same facts); Credit Acceptance Corp. v. Davisson, 644 F.Supp.2d 948, 953 (N.D. Ohio 2009) ("[T]he Vaden Court explicitly limited its holding to cases where the controversy ...