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Richmond Health Facilities- Madison, L.P. v. Shearer

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

August 1, 2017




         We have been here before. The facts are familiar: Tamra Shearer, as Administratrix of the Estate of Betty Reed and emergency guardian, signed an arbitration agreement with Madison Health & Rehabilitation Center when Reed was admitted there.[1] After Reed's death, Shearer, on behalf of Reed, sued Madison Health-in state court-alleging various claims against Madison Health related to the care Reed received at the nursing facility. (DE 1-1). The claim is familiar: Madison Health wants to enforce the arbitration agreement under the Kentucky Uniform Arbitration Act, KRS § 417.045 et seq. and the Federal Arbitration Act, 9 U.S.C. § 2 (FAA), so it filed a motion to compel arbitration in this Court (DE 1, 3). Also familiar is the response: Shearer wants out of the agreement and moves to dismiss Madison Health's action on several grounds: lack of subject-matter jurisdiction, failure to join indispensable parties, Colorado River abstention, and failure to state a claim (DE 9, 10). Given that virtually every federal district court in Kentucky, in some form or fashion, has considered all of the arguments offered by both parties, the result too should be expected: Only Shearer's wrongful death claims will be allowed to proceed in state court. The remainder of her motion to dismiss will be denied. Madison Health's motion to compel arbitration will be enforced in part, and the concurrent state proceedings will be enjoined as the claims that must be arbitrated.


         Beginning on May 6, 2016, and lasting until March 24, 2017, Betty Reed was a resident of Madison Health, a nursing home facility in Madison County, Kentucky. Shearer, Reed's daughter, was appointed Reed's emergency guardian at the time Reed entered Madison Health by an “Emergency Guardian Order” entered by the Estill District Court two days earlier on May 4, 2016 (DE 1-3, May 4, 2016, Court Order). Reed was of unsound mind before she entered Madison Health. Shearer, as Administratrix of the Estate of Betty and emergency guardian, signed an “Alternative Dispute Resolution Agreement” on May 6, 2016. (DE 1-2). The arbitration agreement stated that “[a]ny and all disputes arising out of or in any way relating to” Reed's stay at Madison Health would be resolved by arbitration. (DE 1-2, at 41, § 5). Though the arbitration agreement contained a revocation clause allowing Shearer to back out of the agreement “by providing notice . . . within thirty (30) days of signing it, ” (DE 1-2, at 43, § 13), the arbitration agreement was never revoked.

         According to Shearer, Reed's stay at Madison Health was anything but good, and Shearer believes that Madison Health was the cause. On May 22, 2017, she filed suit against Madison Health in Madison County Circuit Court alleging claims of negligence, medical negligence, corporate negligence, a violation of long-term care rights, and wrongful death. (DE 1-1). In response, Madison Health sued Shearer in this Court. Madison Health alleged that Shearer violated the arbitration agreement when she filed her state court suit and seeks to compel the parties into arbitration and enjoin Shearer's state court proceeding. Shearer filed a motion to dismiss. The claims are now ripe for review.


         This discussion begins with some context. Nothing about this case is novel. Shearer is not the first guardian of a nursing home resident who, after signing an arbitration agreement, decided to take her case to the courts instead of to an arbitrator. Nor is she the first to move to dismiss an action to compel arbitration using the arguments she puts forth here. Without doubt, Shearer's motion looks up at mountain of precedent that has uniformly considered and rejected, in one way or another, the main thrust of her claims. See GGNSC Louisville Mt. Holly, LLC v. Turner, No. 3:16-CV-00149-TBR, 2017 WL 537200, at *3 (W.D. Ky. Feb. 9, 2017) (listing cases by eleven out of thirteen federal who have addressed and rejected similar arguments). There is no reason to depart from what is well-settled. Accordingly, a walkthrough analysis will suffice to address these claims.


         In her motion to dismiss, Shearer attacks this Court's subject-matter jurisdiction to adjudicate this case. The Court therefore must address those arguments first. See Douglas v. E.G. Baldwin & Associates, 150 F.3d 604, 607 (6th Cir. 1998) (“The first and fundamental question presented by every case brought to the federal court is whether it has jurisdiction to hear the case.”).

         12(b)(1) Subject-Matter Jurisdiction

         The FAA is “something of an anomaly” in that it “‘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, 56 (2009) (quoting Hall Street Assoc., LLC v. Mattel, Inc., 552 U.S. 576, 581-82 (2008)). Thus, a petitioner proceeding under § 4 must assert an independent source of subject matter jurisdiction. Here, Madison Health has alleged that the amount in controversy exceeds $75, 000 exclusive of interest and costs and that complete diversity exists between Madison Health, who are all citizens of Texas, and Shearer, who is a citizen of Kentucky. This is enough to establish diversity jurisdiction under 28 U.S.C. § 1332.

         Shearer argues that this finding is not so simple because Thomas Tackett, a citizen of Kentucky, is a named party defendant in the state court action. Unlike the state court action, Tackett is not included in the federal claim. She alleges that “the corporate defendants strategically plucked themselves out” of the state court so as to manufacture diversity jurisdiction in federal court. (DE 9-1, at 4). Shearer asks this Court to apply Vaden to “look through” the underlying controversy, the state court action, and take the citizenship of Tackett into account when evaluating subject-matter jurisdiction. Courts have found, however, that Vaden does not apply to cases involving diversity jurisdiction. Indeed, Shearer's arguments to the contrary have been roundly rejected by multiple other courts within this District alone. See e.g., GGNSC Frankfort, LLC, v. Moore, 3:17-45-GFVT, 2017 WL 2805147, at *2 (E.D. Ky. June 28, 2017); Brookdale Sr. Living Inc. v. Walker, No. 5:15-206-KKC, 2016 WL 1255722, *2-*3 (E.D. Ky. Mar. 29, 2016) (collecting cases). Accordingly, this Court will not apply Vaden. Jurisdiction in this case is based on diversity.

         12(b)(7) Failure to Join Indispensable Parties

         But, Shearer argues, notwithstanding Vaden, things are not as they seem. Even if the Court will not “look through” the complaint, Shearer protests that Tackett, a non-corporate entity, is “in fact a necessary and indispensable party to the § 4 petition, ” which requires the petition to be dismissed under Federal Rule of Civil Procedure 19(a) because Tackett's inclusion would destroy complete diversity. (DE 9-1, at 4).

         There is just one problem with this argument. Nursing home administrators, like Tackett, are not indispensable parties in this action because joint tortfeasors-of which Tackett is alleged to be in the state court action-are permissive, not indispensable parties in actions to compel arbitration. See e.g., PaineWebber, Inc. v. Cohen, 276 F.3d 197, 206 (6th Cir. 2001) (holding that a company seeking to compel arbitration need not join any of its own employees, even though plaintiff joined them in state court); Preferred Care, Inc. v. Howell, 187 F.Supp.3d 796, 804 (E.D. Ky. 2016) (applying PaineWebber to identical argument). As PaineWebber explained, “[a]ny ruling to the contrary would virtually eliminate the availability of federal courts to enforce arbitration clauses in diversity cases by the simple expedient of one of the parties filing a preemptive suit in state court with at least one non-diverse defendant.” 276 F.3d at 205. Thus, Tackett need not be named here, as Madison Health's exclusion of a non-diverse nursing administrator does not destroy the Court's diversity jurisdiction.

         Colorado River Abstention

         Shearer contends that even if this Court has subject-matter jurisdiction, it should abstain from hearing the merits on the basis that there is a parallel suit pending in state court. “In certain ‘exceptional' circumstances, [] a federal district court may abstain from exercising its subject matter jurisdiction due to the existence of a concurrent state court proceeding, based on ‘considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.'” PaineWebber, 276 F.3d at 206 (quoting Colorado River Water Conservation District v. United States, 424 U.S. 800, 817 (1976)). But “[a]bstention from the exercise of federal jurisdiction is the exception, not the rule, ” and this “extraordinary and narrow exception” is only justified when it “would clearly serve an important countervailing interest.” Colorado River, 424 U.S. at 813.

         There is a two-step process for determining whether abstention is appropriate under Colorado River. The Court must first decide whether the federal and state suits are similar enough to be parallel. Romine v. Compuserve Corp., 160 F.3d 337, 339 (6th Cir. 1998). It is not necessary that the proceedings be identical, nor is it necessary that the parties be identical. Id.

         Instead, as long as the claims raised “are predicated on the same allegations as to the same material facts” and the parties are “substantially similar, ” the dual actions are similar enough to qualify as parallel under Colorado River. Id. at 340.

         The parties are parallel in this case. Save for one nursing administrator, the parties overlap in the federal and state court action, and both cases turn on the same ultimate legal question-whether the arbitration agreement is enforceable and requires that Shearer arbitrate her claims brought against Madison Health. Accordingly, the two actions are ...

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