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Preferred Care, Inc. v. Belcher

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

March 31, 2015

PREFERRED CARE, INC., et al., Plaintiffs,
KARL BELCHER, Defendant.


JOSEPH M. HOOD, Senior District Judge.

This matter is before the Court on several motions: Defendant Karl Belcher's Motion to Dismiss [DE 4; Response at DE 6] and Plaintiffs' Motion to Compel Arbitration and Motion to Enjoin Defendant [DE 5; Response at DE 7; Reply at DE 8]. These motions are ripe for consideration.

As an initial matter, Defendant seeks dismissal of this matter for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) and for failure to join a necessary party pursuant to Fed.R.Civ.P. 12(b)(7). Defendant also asks this Court to abstain from exercising any jurisdiction that it might have under the Colorado River abstention doctrine, which permits a federal court to dismiss a cause pending before it in favor of a parallel state court action in certain circumstances. Finally, Defendant asks this Court to dismiss Plaintiffs' claim pursuant to 12(b)(6) for failure to state a claim, on the grounds that the subject ADR Agreement is invalid and unenforceable. Plaintiff contends, in contrast, that the Court has jurisdiction over this matter, that the Court should not abstain, and that the ADR Agreement is valid and should be enforced, as a matter of law.

For the reasons set forth below, Defendant's Motion will be denied, and Plaintiffs' Motions will be granted.


Karl Belcher was a resident of Stanton Nursing and Rehabilitation Center f/k/a Stanton Nursing Center, located at 31 Derickson Lane, Stanton, Powell County, Kentucky 40380, from 2011 until July of 2013, except for times when he was hospitalized. On January 31, 2014, Defendant filed in the Circuit Court of Powell County, Kentucky, Case No. 14-CI-0020, a negligence, medical negligence, corporate negligence, and violation of long term care resident's rights, against Stanton Health Facilities, LP d/b/a Stanton Nursing and Rehabilitation Center; Stanton Health Facilities GP, LLC; Preferred Care Partners Management Group, L.P.; PCPMG, LLC; Preferred Care, Inc. d/b/a Preferred Care of Delaware, Inc.; Kentucky Partners Management Group, LLC; Thomas Scott; and Stanton Administrator Thomas B. Davis. In his complaint filed in Powell Circuit Court, Belcher claims that, while he resided at Stanton, he suffered physical and emotional injuries due to inadequate care and that his health and physical condition deteriorated beyond that caused by the normal aging process.

On March 10, 2014, the defendants in the Powell County Circuit Court Case filed an Answer to Karl Belcher's Complaint in the Powell County Circuit Court Case. The State Court defendants' Answer asserted that the State Court claims are subject to a binding Alternative Dispute Resolution Agreement ("ADR Agreement"). On March 21, 2014, the State Court corporate defendants from the Powell County Circuit Court Case filed a Complaint with this Court, as Plaintiffs, alleging federal subject matter jurisdiction by virtue of diversity and seeking substantially the same relief from this Court regarding arbitration as they had demanded in State court; namely, to find the ADR Agreement to be valid and enforceable; to compel Defendant to arbitrate the State Court claims; and to enter an order enjoining the Defendant from pursuing his claims in the State Court Action.

For the following reasons, Defendant moves this Court to dismiss Plaintiffs' Complaint.


The purpose of a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief. See Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). This requires a consideration of and a ruling upon the merits of a claim. In determining whether dismissal is warranted under Rule 12(b)(6), the complaint must be construed in the light most favorable to the nonmoving party and its allegations taken as true. Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995). If, in doing so, the Court determines that the case is legally insufficient, it will be dismissed,

The procedure under a motion to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) is quite different. At issue in a Rule 12(b)(1) motion is the trial court's jurisdiction-its very power to hear the case. In this context, the trial court may proceed as it never could under 12(b)(6)-no presumptive truthfulness attaches to either party's allegations and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover the party claiming jurisdiction will have the burden of proof that jurisdiction does in fact exist. RMI Titanium Co. v. Westinghouse Electric Corp., 78 F.3d 1125, 1134 (6th Cir. 1996)(internal citations omitted).


As an initial matter and in the face of Defendant's Motion to Dismiss Plaintiffs' claims pursuant to Fed.R.Civ.P. 12(b)(1) and (7), the Court concludes that it has jurisdiction to consider this matter. Defendant argues that there is no jurisdiction because Plaintiffs have failed to join a necessary party under Rule 19 and, once the citizenship of that necessary party is taken into account, there is a lack of subject-matter jurisdiction under 28 U.S.C. § 1332 because (1) the parties will not be of diverse citizenship and (2) the Federal Arbitration Act will not, alone, create a federal question which would confer jurisdiction under 28 U.S.C. § 1331 in this matter upon this Court.[1] As explained below, the Court disagrees with this analysis.

A Rule 12(b)(1) motion can either attack the claim of jurisdiction on its face, in which case all allegations of the plaintiff must be considered as true, or it can attack the factual basis for jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the burden of proving that jurisdiction exists. See RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1133-35 (6th Cir. 1996); United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994); Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990).

28 U.S.C. § 1332 provides that "district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between... citizens of different States, " and Plaintiff contends that this Court has jurisdiction based on the diversity of the parties. In the instant action, there is no dispute that the amount in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs. Further, there is no dispute that Defendant here is a resident of Kentucky and that each of the named Plaintiffs in this action is a citizen of another state.

However, Thomas B. Davis, the nursing home administrator who is named as a defendant in Belcher's state complaint but not as a party in the present matter, is a citizen of Kentucky. Defendant claims that complete diversity of citizenship among the parties cannot be maintained because, while Davis is not named as a plaintiff in this action, he is an indispensable party under Fed.R.Civ.P. 19 and his joinder would destroy the complete diversity among parties required by 28 U.S.C. 1332(a)(1). 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)).

The existence of a non-diverse party in the related state court action does not, on its own, destroy diversity:

Rule 19 deals with what were historically known as "necessary" and "indispensable" parties. The terms "necessary" and "indispensable" are terms of art in jurisprudence concerning Rule 19, and "necessary" refers to a party who should be joined if feasible, while "indispensable" refers to a party whose participation is so important to the resolution of the case that, if the joinder of the party is not feasible, the suit must be dismissed. If a necessary party cannot be joined without divesting the court of subject-matter jurisdiction, the Rule provides additional criteria for determining whether that party is indispensable, but if the court finds that the party is anything less than ...

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