United States District Court, E.D. Kentucky, Central Division, at Lexington
MEMORANDUM OPINION AND ORDER
DANNY C. REEVES, District Judge.
On June 22, 2012, Charlie Nichols filed an action in the Madison Circuit Court regarding his care and treatment while a resident at the Kenwood Health & Rehabilitation Center. On October, 28, 2012, Mr. Nichols passed away. Subsequently, Adrianne Nichols was named the administratrix of his estate and an Amended Complaint was filed. [ Id. ] The Amended Complaint alleges claims based on negligence, medical negligence, corporate negligence, violation of a long term care resident's rights, and wrongful death. [Record No. 1-1]
This separate civil action is pending for consideration of Nichols' motion to dismiss. [Record No. 4] For the reasons set forth below, the motion will be denied.
The defendants named in the state action include: Fir Lane Terrace Convalescent Center, Inc. d/b/a Kenwood Health and Rehabilitation Complex; Extendicare, Inc.; Extendicare Health Network, Inc.; Extendicare Homes, Inc.; Extendicare REIT; Extendicare, LP; Extendicare Holdings, Inc.; Extendicare Health Services, Inc.; Extendicare Health Facility Holdings, Inc.; Richmond Health Facilities - Kenwood, LP d/b/a Kenwood Health and Rehabilitation Center; Richmond Health Facilities - Kenwood G.P., LLC; Preferred Care Partners Management Group, LP; PCPMG, LLC; Preferred Care, Inc. d/b/a Preferred Care of Delaware, Inc.; Kentucky Partners Management Group, LLC; Thomas Scott; Christy King, in her capacity as Administrator of Kenwood Health and Rehabilitation Center; and John Does 1 through 5 Unknown Defendants (collectively, "the state court defendants"). [Record No. 1-1, p. 25] Four of the state court defendants (Richmond Health Facilities - Kenwood, L.P, BLC Preferred Care Partners Management Group, L.P., Preferred Care, Inc., and Kentucky Partners Management Group, LLC) filed this action under the Federal Arbitration Act ("FAA"), seeking to compel arbitration and enjoin Nichols from pursuing her claims against them in state court. The plaintiffs assert that Nichols' claims are subject to a binding alternative dispute resolution agreement contained in Charlie Nichols's residency agreement.
The residency agreement was signed by Charlie Nichols on October 14, 2011, the date of his admission into the nursing home. [Record No. 1, p. 3] The arbitration provision of the agreement states, in relevant part:
[A]ny and all disputes arising out of or in any way relating to this Agreement or to the Resident's stay at the Center that would constitute a legally cognizable cause of action in a court of law sitting in the Commonwealth of Kentucky and shall include, but not be limited to, all claims in law or equity arising from one Party's failure to satisfy a financial obligation to the other Party; a violation of a right claimed to exist under federal, state, or local law or contractual agreement between the Parties; tort; breach of contract; fraud; misrepresentation; negligence; gross negligence; malpractice; death or wrongful death; and any alleged departure from any applicable federal, state, or local medical, health care, consumer or safety standard, Covered Dispute shall include the determination of the scope of or applicability of this Agreement to mediate/arbitrate.
[ Id. ]
Nichols argues in the pending motion to dismiss that this Court lacks subject matter jurisdiction. She also asserts that the plaintiffs failed to join an indispensable party and that the arbitration agreement is unenforceable for a variety of reasons. [Record No. 4]
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 [a] 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 examining 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).
C. 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). Section 4 of the FAA "neither expand[s] nor contract[s] federal subject matter jurisdiction. Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 747 n.7 (8th Cir. 1986). Thus, a petitioner proceeding under § 4 must assert an independent source of subject matter jurisdiction. Here, the plaintiffs assert that the Court has diversity jurisdiction pursuant to 18 U.S.C. § 1332. [Record No. 1, p. 3]
Nichols argues that the Court lacks subject matter jurisdiction because complete diversity is lacking. [Record No. 4-1, p. 3] Yet, diversity exists on the face of the federal Complaint. Plaintiff Richmond Health Facilities - Kenwood, LP, is a limited partnership with its principal place of business in Texas and none of its members are Kentucky citizens. [Record No. 1, p. 2] Plaintiff Preferred Care Partners Management Group, LP, is a limited partnership with its principal place of business in Texas and none of its members are Kentucky citizens. [ Id. ] Plaintiff Preferred Care, Inc., is a corporation formed under the laws of Texas with its principal place of business in Texas. [ Id. ] And Plaintiff Kentucky Partners Management Group, LLC, is a Texas limited liability company with its principal place of business in Texas and none of its members are Kentucky citizens. [ Id. ] Conversely, Charlie Nichols' estate 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). Here, the claims that the plaintiffs seek to arbitrate are for actual and punitive damages related to alleged substandard medical care provided to Charlie Nichols 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.
Nichols does not challenge that diversity jurisdiction exists based on the face of the Complaint. Rather, she contends that the Court lacks subject matter jurisdiction because the Court should "look through" to the underlying controversy (which includes non-diverse defendants) and find that diversity jurisdiction is defeated. Nichols also argues that the plaintiffs have failed to join an indispensable party ( i.e., the nursing home administrator who was sued as a joint tortfeasor in the state court action) that would otherwise destroy jurisdiction.
1. The "Look Through" Approach
Nichols contends that the Court lacks subject matter jurisdiction based on the Supreme Court's decision in Vaden v. Discover Bank, 556 U.S. 49 (2009). [Record No. 4-1, pp. 12-17] The plaintiffs counter that Vaden's holding is 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 court to compel the arbitration of the counterclaims. Id. at 54. Tracking the language of 18 U.S.C. § 1331, Vaden 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 ...