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Ggnsc Frankfort, LLC v. Tracy

United States District Court, E.D. Kentucky, Central Division, Frankfort

March 31, 2015

GGNSC FRANKFORT, LLC, et. al., Plaintiffs,
DEBRA TRACY, as Administratrix of the Estate of DORIS CHRISTOPHER, deceased, Defendant.



Doris Christopher, a former resident of the Golden Living Center facility in Frankfort, Kentucky, signed an arbitration agreement prior to moving into the facility. Sadly, Defendants allege that Ms. Christopher suffered physical and emotional injuries due to inadequate care that resulted in an expedited, unnatural deterioration in her health and in her eventual death. The parties now contest how and where the claims arising out of these alleged injuries are to be adjudicated.


On March 17, 2006, Doris Christopher admitted herself into the Golden Living Center in Frankfort, Kentucky. [R. 1 at 4.] The nursing home is owned and operated by the Plaintiffs. Upon admission, Ms. Christopher signed a "RESIDENT AND FACILITY ARBITRATION AGREEMENT, " wherein she agrees to arbitrate "[a]ny and all claims, disputes, and controversies arising out of, or in connection with, or relating in any way to the Admission Agreement or any service or health care provided by the Facility to the Resident." [R. 1-2.] Ms. Christopher lived in the facility between June 2008 and May 2014, except for the times in which she was hospitalized. [R. 1 at 1.]

Two actions are presently pending. On March 17, 2014, Ms. Tracy brought suit in Franklin Circuit Court, Case No. 14-CI-00301, charging Golden Living with negligence, medical negligence, corporate negligence, a violation of long term care resident's rights, and wrongful death.[1] [R. 1-1; R. 4-1 at 1-2.] Soon thereafter, on April 16, the instant suit was filed wherein Golden Living moves to compel arbitration and enjoin the Defendant from further pursuing the state court action. [R. 1.] The Defendants answered with a motion to dismiss. [R. 4.] Because the Court finds that it has jurisdiction, no reason to abstain, and because the Defendant's arguments regarding the agreement's enforceability fail, the motion to dismiss will be DENIED.




Federal Rule of Civil Procedure 12(b)(1) provides that a defendant may assert lack of subject-matter jurisdiction as a defense. Fed.R.Civ.P. 12(b)(1). A motion to dismiss under Rule 12(b)(1) is different than a motion to dismiss under Rule 12(b)(6) because it challenges the Court's power to hear the case before it. When jurisdiction is challenged under this rule, the burden is on the plaintiff to prove that jurisdiction exists. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996). In answering this question, the Court is "empowered to resolve factual disputes" and need not presume that either parties' factual allegations are true. Id.


Federal Rule of Civil Procedure 12(b)(7) provides that a defendant may assert failure to join a party under Rule 19 as a defense. Fed.R.Civ.P. 12(b)(7). The relevant portion of Rule 19, which governs the joinder of parties, is reproduced below:

A person... must be joined as a party if: (A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing 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. P. 19. "[R]ule [19] is not to be applied in a rigid manner but should instead be governed by the practicalities of the individual case. Keweenaw Bay Indian Cmty. v. State, 11 F.3d 1341, 1346 (6th Cir. 1993).


In a motion to dismiss pursuant to Rule 12(b)(6), "[t]he defendant has the burden of showing that the plaintiff has failed to state a claim for relief." DirecTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) ( citing Carver v. Bunch, 946 F.2d 451, 454-55 (6th Cir. 1991)). When reviewing a Rule 12(b)(6) motion, the Court "construe[s] the complaint in the light most favorable to the plaintiff, accept[s] its allegations as true, and draw[s] all reasonable inferences in favor of the plaintiff." Id. (citation omitted). Such a motion "should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. (quoting Ricco v. Potter, 377 F.3d 599, 602 (6th Cir. 2004)). The Court, however, "need not accept as true legal conclusions or unwarranted factual inferences." Id. (quoting Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000)). Moreover, the facts that are pled must rise to the level of plausibility, not just possibility - "facts that are merely consistent with a defendant's liability... stop[ ] short of the line between possibility and plausibility." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007)). According to the Sixth Circuit, "[a] claim has facial plausibility 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).


As a threshold matter, Defendants argue that this Court lacks subject matter jurisdiction, that indispensable parties are not present, and that even if jurisdiction is found, the Court should abstain from hearing the case. The Court will consider these arguments in turn.


Both parties agree that the Federal Arbitration Act ("FAA") does not independently constitute a grant of subject matter jurisdiction. 9 U.S.C. § 4; see also Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26 n. 32 (1983). Instead, the Plaintiff must prove that circumstances exist to justify this Court's exercise of jurisdiction.

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action... for an order directing that such arbitration proceed in the manner provided for in such agreement.

9 U.S.C. § 4 (Federal Arbitration Act.) This Court has original "diversity" jurisdiction over all civil actions when "the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between" parties who are "citizens of different States." See 28 U.S.C. § 1332(a)(1). The Plaintiffs assert that complete diversity of citizenship exists between the parties and that the amount in controversy exceeds $75, 000. [R. 1 at 2-4.] Defendant disagrees, arguing that the parties are not diverse, so this Court must dismiss the action for want of subject matter jurisdiction.[2] [R. 4-1 at 3-18.] In order for the Court to come to this conclusion, the Defendant encourages the Court to "look through" the arbitration action, and beyond the parties listed on the pleadings, to consider the residence of the parties named in the State Court action. [ Id. ] If the Court did this, nursing home administrators Ann Phillips, Robert Durham, and Herschel B. Sedoris, III, who are parties to the state-court case and Kentucky citizens, would destroy diversity jurisdiction. Defendant alleges that these administrators owed Ms. Christopher duties arising under the laws of Kentucky, are covered by the arbitration agreement, and should be considered for purposes of determining whether diversity of citizenship exists. Why should the Court consider the residence of these non-parties? The Defendants contend the Supreme Court's decision in Vaden v. Discover Bank, 556 U.S. 49 (2009) answers this question.

The Chief Judge in this District recently confronted this identical legal issue. She summarized the Supreme Court's holding in Vaden as follows:

In Vaden, Discover Bank sued a credit card holder in state court to recover past-due charges. The credit card holder filed a counterclaim, also asserting state-law claims. But Discover Bank believed these claims were preempted by federal law, and filed an action in federal district court to compel arbitration of the counterclaims. The Supreme Court held that the district court lacked jurisdiction because the federal issue arose within the context of the state-court counterclaim, and federal courts cannot consider counterclaims when assessing federal question jurisdiction. Accordingly, the Supreme Court directed district courts to "look through" the arbitration action and determine whether federal question jurisdiction exists based on the underlying state-court suit. Id. at 62, 129 S.Ct. 1262.

Brookdale Sr. Living Inc. v. Stacy, No. CIV.A. 5:13-290-KKC, 2014 WL 2807524, at *3 (E.D. Ky. June 20, 2014), appeal docketed, No. 14-5848 (6th Cir. July 14, 2014). As in this case, the Defendant nursing home seeking dismissal in Stacy, argued that "the logic of Vaden applies with equal force in cases resting on diversity jurisdiction." Id. The Court recognized that the argument was inapposite because "the Supreme Court limited its approval of the look through' doctrine to cases involving Federal Question Jurisdiction, " specifically noting that the Supreme Court:

approve[s] the "look through" approach to this extent: A federal court may look through' a § 4 petition to determine whether it is predicated on an action that arises under' federal law; in keeping with the well-pleaded complaint rule... a federal court may not entertain a § 4 petition based on the contents, actual or hypothetical, of a counterclaim.

Stacy, 2014 WL 2807524, at *782 (quoting Vaden, 556 U.S. at 62 (emphasis added)).

This Court now joins a growing contingent of Courts, both in this District and outside of it, that have concluded that Vaden only applies to cases where Federal Question jurisdiction is asserted. See Richmond Health Facilities-Kenwood, LP v. Nichols, No. CIV.A. 5:14-141-DCR, 2014 WL 4063823, at *5 (E.D. Ky. Aug. 13, 2014); Brookdale Senior Living, Inc. v. Caudill, No. CIV.A. 5:14-098-DCR, 2014 WL 3420783, at *4 (E.D. Ky. July 10, 2014); Stacy, 2014 WL 2807524, at *4; Credit Acceptance Corp. v. Davisson, 644 F.Supp.2d 948, 953 (N.D.Ohio 2009) ("the Vaden Court explicitly limited its holding to cases where the controversy underlying the § 4 petition involves federal-question jurisdiction"); Northport Health Servs. of Arkansas, LLC v. Rutherford, 605 F.3d 483, 490-91 (8th Cir. 2010) (The existence of diversity jurisdiction in an action to compel arbitration under the FAA is determined "by the citizenship of the parties named in the proceedings before the district court, plus any indispensable parties who must be joined pursuant to Rule 19.") Because it is clear that Vaden does not apply in diversity cases, Defendant's argument that the Court must "look through" and consider the residence of the administrators fails.


Defendants next argue for dismissal on the grounds that the Plaintiffs failed to join the aforementioned administrators, who they deem to be necessary and indispensable parties to this action. [R. 4-1 at 18-23.] While the administrators might be necessary, they are not indispensable so dismissal would be inappropriate.

"Rule 19 of the Federal Rules of Civil Procedure establishes a three-step analysis for determining whether a case should proceed in the absence of a particular party." PaineWebber, Inc. v. Cohen, 276 F.3d 197, 200 (6th Cir. 2001). First, the Court must determine whether the party is necessary under Rule 19(a). Id. ...

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