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Preferred Care, Inc. v. Roberts

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

May 19, 2017

PREFERRED CARE, INC., et al. Plaintiff,
v.
JESSE ROBERTS, as administrator of Kenneth Roberts' estate, Defendant.

          OPINION AND ORDER

          KAREN K. CALDWELL, CHIEF JUDGE UNITED STATES DISTRICT COURT.

         This matter is before the Court on the plaintiffs' motion to reconsider (DE 19) this Court's ruling that certain claims against non-parties to an arbitration agreement do not have to be arbitrated. For the following reasons, the motion will be denied.

         I. Background

         Kenneth Roberts died while a resident of the Stanton Nursing and Rehabilitation Center located in Stanton, Kentucky. The administrator of his estate, Jesse Roberts (the “Estate”), filed suit in Powell Circuit Court against the nursing center and several other companies that the Estate alleged owned or operated the center. The Estate also named the center administrator and two nurses and a doctor employed there. (DE 1-2, State Court Action.)

         The center and three of the companies named as defendants in the state-court action (collectively, the “Center”) then filed a claim in this Court asking for an order compelling the Estate to arbitrate the claims filed in the state court action and also for an order enjoining the Estate from pursing the state-court action. There is no dispute that the only plaintiff who was a party to the arbitration agreement was Stanton Health Facilities, LP d/b/a Stanton Nursing and Rehabilitation Center.

         In its motion to dismiss, the Estate argued that the nonsignatory plaintiffs could not compel arbitration of the claims against them. In its response to that motion, the Center appeared to make two arguments: the nonsignatories are third-party beneficiaries of the arbitration agreement and the Estate should be judicially estopped from asserting that its claims against the nonsignatories are not subject to the arbitration agreement. The Court found that neither theory was applicable here. The Center had pointed to no evidence that the parties to the arbitration agreement intended for the nonsignatories to receive the benefits of the arbitration agreement. As to judicial estoppel, the Court noted that the Estate had not alleged under oath in the state-court action that the nonsignatories were parties to the arbitration agreement. Further, the Center had not alleged that any such allegation was accepted by the state court.

         The Center now moves the Court to reconsider that ruling.

         II. Analysis

         ARule 59(e) motions are aimed at reconsideration, not initial consideration. Thus, parties should not use them to raise arguments which could, and should, have been made before judgment issued. Motions under Rule 59(e) must either clearly establish a manifest error of law or must present newly discovered evidence.@ Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998) (quoting FDIC v. World Univ. Inc., 978 F.2d 10, 16 (1st Cir.1992)).

         In its motion to compel arbitration, the Center did not specifically mention the claims against the nonsignatories to the arbitration agreement. It argued that the Court should compel the Estate to arbitrate all of its claims but it did not explain why the claims against the nonsignatories were also governed by the arbitration agreement.

         In its response to the Estate's argument that the claims against the nonsignatories were not subject to the arbitration agreement, the Center did specifically address the claims against the nonsignatories to the arbitration agreement. The Court will again carefully parse through the arguments that the Center made in its response. (DE 11, Response at 38-41.)

         The Center first very clearly argued that the nonsignatories could enforce the arbitration agreement because they were “third-party beneficiaries of the ADR Agreement at issue.” (DE 11, Response at 39.)

         In support of that proposition, the Center cited Olshan Found. Repair & Waterproofing v. Otto, 276 S.W.3d 827 (Ky. App. 2009). In that case, the Kentucky Court of Appeals determined that the nonsignatory plaintiff homeowners were “third party direct beneficiaries” of certain warranty agreements containing an arbitration clause. Id. at 831. This is because the homeowners had produced evidence that “the signatories intended to benefit future third party owners of the residence.” Id. at 831.

         In its ruling on the motion to compel arbitration, this Court explained that, in order for the Court to find the nonsignatories in this case were third-party beneficiaries of the arbitration agreement, the Center must produce evidence that the two parties to the arbitration agreement intended that the nonsignatories would benefit from it. The Center had pointed to no such evidence and, thus, the Court could not find ...


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