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Preferred Care of Delaware, Inc. v. Hewgley

United States District Court, W.D. Kentucky, Bowling Green Division

October 5, 2017



          Greg N. Stivers, Judge.

         This matter is before the Court on Petitioners' Motion to Compel Arbitration (DN 3) and Respondent's Motion to Dismiss (DN 8). The motions have been fully briefed by the parties and are ripe for adjudication. For the reasons outlined below, the Motion to Compel Arbitration is GRANTED IN PART and DENIED IN PART, and the Motion to Dismiss is GRANTED IN PART and DENIED IN PART.


         On January 15, 2017, a Warren District Court jury determined that June Hewgley (“Hewgley”) was wholly disabled and incapable of managing her personal affairs and financial resources. (Pet. Ex. C, at 1, DN 1-3). The Warren District Court then appointed the Kentucky Cabinet for Health and Family Services (“CHFS”) to act as Hewgley's guardian. (Pet. Ex. C., at 2-3).

         For the period of time-exclusive of hospitalizations-from January 16, 2015, to July 18, 2016, Hewgley was a resident of the Franklin-Simpson Nursing & Rehabilitation Center in Franklin, Kentucky, which is owned and operated by Franklin Health Facilities GP, LLC and other entities.[1] (Pet. Ex. A, ¶ 3, DN 1-1). At the time of her admission, Mark Smith (“Smith”), who is a representative of CHFS and was acting as Hewgley's guardian, executed the necessary admission paperwork, which included a document entitled “Alternative Dispute Resolution Agreement” (“Arbitration Agreement”). (Pet. Ex. B, at 5, DN 1-2). In relevant part, the Arbitration Agreement provided that “[t]he Parties voluntarily agree that any disputes covered by this Agreement (herein after referred to as ‘Covered Disputes') that may arise between the Parties shall be resolved exclusively by an ADR process that shall include mediation and, where mediation does not successfully resolve the dispute, binding arbitration.” (Pet. Ex. B, ¶ 3). As defined, the term “Covered Disputes” included any dispute arising from or related to care rendered by Preferred Care. (Pet. Ex. B, ¶ 4). The Agreement also defined the term “Resident” as follows:

[A]ll persons whose claim is or may be derived through or on behalf of the Resident, all persons entitled to bring a claim on behalf of the Resident, including any personal representative, responsible party, guardian, executor, administrator, legal representative, agent or heir of the Resident, and any person who has executed this Agreement on behalf of the Resident.

(Pet. Ex. B, ¶ 2(b)).

         On June 26, 2017, Tammy Hewgley, as Administratrix of the Estate of June Hewgley (“Estate”), filed a lawsuit in Simpson Circuit Court entitled Hewgley v. Preferred Care of Delaware, Inc., Civil Action No. 17-CI-00211 (the “State Court Action”). (Pet. Ex. A, at 1, DN 1-1). In the state court complaint, the Estate asserted claims for, inter alia, negligence, medical negligence, and wrongful death.[2] (Pet. Ex. A, ¶¶ 27-40, ¶¶ 55-66). Following the initiation of the State Court Action, Preferred Care filed this action in federal court asserting jurisdiction under 28 U.S.C. § 1332(a) and Section 4 (9 U.S.C. § 4) of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16. Preferred Care seeks to enforce the Arbitration Agreement executed by Hewgley's court-appointed guardian, and Respondent has moved to dismiss this case. (Pet. ¶¶ 28-37, DN 1; Pet'rs' Mot. Compel Arbitration, DN 3; Resp't's Mot. Dismiss, DN 8).


         In support of its motion to dismiss, Respondent asserts various bases pursuant to Fed.R.Civ.P. 12(b)(1), 12(b)(6), and 12(b)(7). In particular, Respondent raises the following arguments: (i) the Court lacks subject matter jurisdiction; (ii) Preferred Care failed to join indispensable parties-namely nursing home personnel who are defendants in the State Court Action-as parties to this action; (iii) the Court should abstain from exercising jurisdiction based upon the Colorado River abstention doctrine; (iv) the Arbitration Agreement is invalid and unenforceable; and (v) the Arbitration Agreement is unconscionable. (Resp't's Mem. Supp. Mot. Dismiss 2-28, DN 8-1). These same arguments have been unsuccessfully raised in numerous other recent cases before this Court challenging the enforcement of arbitration agreements between nursing homes and its residents or the residents' estates.[3] See GGNSC Louisville St. Matthews v. Grevious, No. 3:16-cv-829-DJH, 2017 WL 3623805 (W.D. Ky. Aug. 23, 2017); GGNSC Louisville St. Matthews, LLC v. Phillips, No. 3:17-CV-00406-JHM, 2017 WL 3446181 (W.D. Ky. Aug. 10, 2017); GGNSC Louisville Camelot, LLC v. Coppedge, No. 3:16-CV-00834-TBR, 2017 WL 3430579 (W.D. Ky. Aug. 9, 2017); GGNSC Louisville St. Matthews v. Madison, No. 3:16-CV-00830-TBR, 2017 WL 2312699 (W.D. Ky. May 26, 2017); GGNSC Louisville St. Matthews, LLC v. Saunders, No. 3:17-cv-00185-CRS-CHL, 2017 WL 2196752 (W.D. Ky. May 18, 2017); GGNSC Louisville Mt. Holly, LLC v. Turner, No. 3:16-CV-00149-TBR, 2017 WL 537200 (W.D. Ky. Feb. 9, 2017); GGNSC Louisville Mt. Holly LLC v. Stevenson, No. 3:16CV-00423-JMH, 2016 WL 5867427 (W.D. Ky. Oct. 6, 2016); Preferred Care of Del. Inc. v. Estate of Hopkins, No. 5:15-CV-00191-GNS-LLK, 2016 WL 3546407 (W.D. Ky. June 22, 2016); Diversicare Highland, LLC v. Lee, No. 3:15-CV-00836-GNS, 2016 WL 3512256 (W.D. Ky. June 21, 2016); Golden Gate Nat'l Senior Care, LLC v. Fleshman, No. 3:15-CV-00891-GNS, 2016 WL 3406159 (W.D. Ky. June 17, 2016); Owensboro Health Facilities, L.P. v. Henderson, No. 4:16CV-00002-JHM, 2016 WL 2853569 (W.D. Ky. May 12, 2016); Riney v. GGNSC Louisville St. Matthews, LLC, No. 3:16CV-00122-JHM, 2016 WL 2853568 (W.D. Ky. May 12, 2016); GGNSC Louisville Mt. Holly, LLC v. Mohamed-Vall, No. 3:16-cv-136-DJH, 2016 WL 9024811 (W.D. Ky. Apr. 6, 2016); Preferred Care of Del., Inc. v. Crocker, No. 5:15-CV-177-TBR, 2016 WL 1181786 (W.D. Ky. Mar. 24, 2016); GGNSC Louisville Hillcreek, LLC v. Watkins, No. 3:15-cv-902-DJH, 2016 WL 815295 (W.D. Ky. Feb. 29, 2016); Sun Healthcare Grp., Inc. v. Dowdy, No. 5:13-CV-00169-TBR, 2014 WL 790916 (W.D. Ky. Feb. 26, 2014); Life Care Ctrs. of Am., Inc. v. Estate of Neblett, No. 5:14-CV-00124-TBR, 2014 WL 5439623 (W.D. Ky. Oct. 22, 2014). See also Preferred Care, Inc. v. Howell, 187 F.Supp.3d 796 (E.D. Ky. 2016); GGNSC Frankfort, LLC v. Tracy, No. CIV. 14-30-GFVT, 2015 WL 1481149 (E.D. Ky. Mar. 31, 2015).

         After considering the arguments of the parties and the cases referenced above, the Court denies the motion to dismiss for the reasons set forth in Estate of Neblett and Crocker. In short, the Court finds that it has subject matter jurisdiction; that the nursing home personnel are not indispensable parties to this action; and that abstention is not appropriate. See Estate of Neblett, 2014 WL 5439623, at *2-7; Crocker, 2016 WL 1181786, at *4-6. With regard to the specific circumstances here, the Court will address the validity, unconscionability, and enforceability of the Arbitration Agreement executed by Hewgley's court-appointed guardian below.

         A. Interstate Commerce

         Under the FAA, a written agreement to arbitrate concerning a dispute arising out of a contract involving interstate commerce “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000) (quoting 9 U.S.C. § 2). Respondent asserts that the Arbitration Agreement is invalid because it does not evidence a transaction involving interstate commerce. Specifically, Respondent argues that“[t]he mere fact that the ADR Agreement asserts that it is a contract involving interstate commerce does not make it so.” (Resp't's Mem. Supp. Mot. Dismiss 24).

         This argument, however, lacks merit. As this Court reasoned in Turner:

The Supreme Court has interpreted the phrase “involving commerce” in the FAA as signaling the broadest permissible exercise of Congress' Commerce Clause power. Based upon that interpretation, this Court has found on multiple prior occasions that nursing home admission agreements implicate interstate commerce. In [GGNSC Louisville Hillcreek, LLC v. Warner, No. 3:13-CV-752-H, 2013 WL 6796421 (W.D. Ky. Dec. 19, 2013)], this Court emphasized that while the nursing care may occur wholly within the borders of Kentucky, the food, medicine, medical, and other supplies all likely come from elsewhere and that it would be impracticable for the nursing home to procure all goods necessary for the daily operations purely through intrastate channels. The Warner Court also noted that, like here, Defendant's state court complaint alleged that foreign entities owned, operated, managed, controlled, and provided services for the nursing home.

Id. at 83 (internal citations omitted) (citation omitted). Because the present facts are indistinguishable from Turner, the Court concludes that the Arbitration Agreement is a contract ...

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