Green et al v. Skyline Highland Holdings LLC et al
ORDER denying 17 plaintiffs' motion to remand. Signed by Chief Judge Brian S. Miller on 12/4/2017. (kdr)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF ARKANSAS
JAMES GREEN, as Special Administrator of the
Estate of Felix Williams, deceased; et al.
CASE NO. 4:17-CV-00534 BSM
SKYLINE HIGHLAND HOLDINGS LLC; et al.
Plaintiffs’ motion to remand [Doc. No. 17] is denied.
Plaintiffs bring this class action lawsuit on behalf of all residents or estates of
residents who stayed at four defendant nursing homes between April 1, 2016, to the present.
Plaintiffs allege that defendants breached contractual and statutory duties owed to the
plaintiffs by failing to adequately staff the nursing homes.
The corporate structure and relationships among the various defendants are as follows:
Defendant nursing homes are separate limited liability companies that share a common
corporate parent, defendant JS Highland Holdings, LLC (“JS”). In addition to acting as the
holding company of its four nursing home subsidiaries, JS also provides the nursing homes
with various administrative and management services. Defendant Skyline Holdings LLC
(“Skyline”) is another subsidiary of JS and also provides administrative and management
services for the defendant nursing homes. JS’s sole member is defendant Joseph Schwartz,
a citizen of New York. Schwartz is therefore the sole member and effective owner of all
Moreover, all of the LLC defendants are registered in and have their
primary place of business in Arkansas. Each defendant nursing home separately employs its
respective administrative and nursing directors, who are all citizens of Arkansas.
Defendants removed this case from the Pulaski County Circuit Court, alleging that
jurisdiction was proper under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C.
sections 1332(d), et seq.; diversity jurisdiction; and federal question jurisdiction. See Doc.
No. 1. Plaintiffs move to remand, arguing that while CAFA’s threshold requirements are
satisfied, CAFA’s “local controversy,” “home state,” and discretionary remand exceptions
apply. Defendants respond by arguing that none of CAFA’s exceptions apply, and diversity
and federal question jurisdiction independently confer subject matter jurisdiction.
The motion to remand is denied because none of the CAFA exceptions apply and
therefore subject matter jurisdiction properly lies herein. Whether diversity-of-citizenship
or federal question jurisdiction independently confer jurisdiction need not be addressed.
II. LEGAL STANDARD
CAFA eases the diversity requirements in certain class action lawsuits. Under CAFA,
a federal district court has original subject matter jurisdiction where at least $5,000,000 is in
controversy, the proposed class consists of over 100 members, and minimal diversity is
satisfied. 28 U.S.C. § 1332(d)(2).
CAFA has several exceptions, but only three are relevant in this case. First, the “local
controversy” exception provides that when the following criteria are met, the federal district
court must “decline to exercise jurisdiction”:
1) more than two-thirds of the proposed class members are
citizens of the state where the action was originally filed,
2) the class seeks significant relief from at least one defendant
who is a citizen of the same state in which the action was
originally filed and whose conduct forms a significant basis for
the claims asserted,
3) principal injuries resulting from the conduct of each
defendant were incurred in the state in which the suit was
originally filed, and
4) No other class actions have been filed asserting the same or
similar allegations against any of the defendants on behalf of the
same or other persons during the three-year period preceding the
filing of the current class action.
28 U.S.C. § 1332(d)(4)(A). Second, the “home state” exception provides that a “district
court shall decline to exercise jurisdiction . . . over a class action in which . . . two-thirds or
more of the members of all proposed plaintiff classes in the aggregate, and the primary
defendants, are citizens of the State in which the action was originally filed.” Id. at §
1332(d)(4)(B). Third, the discretionary remand exception allows a district court to decline
to exercise jurisdiction in certain cases where more than one-third but less than two-thirds
of the members of the proposed class and all “primary defendants” are citizens of the state
in which the class action was originally filed. Id. at § 1332(d)(3). A number of factors are
then considered in deciding whether discretionary remand is appropriate, including whether
the claims involve issues of national importance, whether the forum’s law principally
governs issues in the case, and whether the action was brought in a forum with a nexus to the
parties or alleged harm. See, e.g., Hart v. FedEx Ground Package System Inc., 457 F.3d 675,
681 (7th Cir. 2006); Hirschback v. NVE Bank, 496 F. Supp.2d. 451, 461 (D. N.J. 2007).
Once the threshold requirements for CAFA jurisdiction have been satisfied, the party
seeking remand has the burden of establishing that an exception applies. See, e.g., Westerfeld
v. Independent Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010); Preston v. Tenet
Healthsystem Memorial Medical Center, Inc., 485 F.3d 793, 797 (5th Cir. 2007); Serrano
v. 180 Connect, Inc., 478 F.3d 1018, 1024 (9th Cir. 2007). No presumption favoring remand
applies in CAFA cases, and all doubts should be construed in favor of exercising federal
jurisdiction. Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547, 554 (2014).
Plaintiffs concede that the threshold requirements for CAFA jurisdiction, such as the
amount-in-controversy exceeding $5,000,000 and the putative class consisting of over 100
members, are satisfied. The remaining question is whether a CAFA exception applies.
At the outset, it is important to note that the various LLC, administrator, and nursing
home defendants are all Arkansas citizens under CAFA. CAFA displaces the traditional rule
of basing LLC citizenship on that of its members. 28 U.S.C. § 1332(d)(10); Ferrell v.
Express Check Advance of SC LLC, 591 F.3d 698, 700 (4th Cir. 2010); Davis v. HSBC Bank
Nev. N.A., 557 F.3d 1026, 1032 & n.13 (9th Cir. 2009). Under CAFA, an LLC is a citizen
of the state(s) in which it is organized and has its principal place of business. Ferrell, 591
F.3d at 701–05; Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008). It
is undisputed that all defendant LLCs are registered in and have their principal places of
business in Arkansas, so they are undoubtedly Arkansas citizens under CAFA. Moreover,
it is also undisputed that all named administrative directors and nursing directors are
Arkansas citizens. In fact, the only non-Arkansas defendant is Joseph Schwartz.
Local controversy exception
The local controversy exception does not apply because plaintiffs have failed to
demonstrate that there is one Arkansas defendant, common to all class members, whose
conduct formed a “significant basis” for plaintiffs’ claims and from whom “significant relief”
is sought. 28 U.S.C. § 1332(d)(4)(A)(2).
“CAFA itself does not describe the type or character of conduct that would form a
‘significant basis’ of plaintiffs’ claims or define the term ‘significant relief.’” Tuohey v.
Chenal Healthcare, LLC, No. 4:15-CV-00506 JLH, 2015 WL 12776598, at *3–4 (E.D. Ark.
Oct. 8, 2015) (quoting Woods v. Standard Ins. Co., 771 F.3d 1257, 1265 (10th Cir. 2014)).
The Eighth Circuit, however, has held that the “significant basis” element requires that a
local defendant’s conduct be a significant ground for claims asserted by all the class
members and not simply that of a subclass. Westerfeld, 621 F.3d at 824–25. Additionally,
“[w]hether the defendant’s alleged conduct is significant cannot be decided without
comparing it to the alleged conduct of all the Defendants.” Id. at 825 (quoting Kaufman v.
Allstate New Jersey Ins. Co., 561 F.3d 144, 157 (3rd Cir. 2009)).
Plaintiffs mistakenly argue, however, that simply because twenty-one of the twentytwo defendants are Arkansas residents from whom the class seeks collective relief, there
must be at least one local defendant whose conduct forms a “significant basis” for the claims
asserted by all or even a majority of class members. The proposed class is effectively an
aggregation of four subclasses, each having allegedly suffered harm at the hands of four
separate defendant nursing homes and their respective administrative and nursing directors.
Although alleging that all defendants, in part, engaged in a common civil conspiracy,
plaintiffs have not met their burden of showing how any one of these separate nursing homes
and its respective administrative or nursing director was a significant basis of harm and
resulting claims of class members residing at the other nursing homes. See Westerfeld, 621
F.3d at 824–25; Tuohey, 2015 WL 12776598 at *3. These defendants, therefore, are not
common and significant to the class as a whole, but instead specific to the respective subclass
of residents who stayed at that particular nursing home.
The only common defendants to all class members are Skyline, JS, and Joseph
Schwartz. The complaint, however, alleges that each of these defendants jointly engaged in
the underlying misconduct that resulted in defendants’ breach of contractual and statutory
duties owed to the class members. It fails to specify the conduct of any particular defendant
and instead refers to defendants’ collective conduct in alleging the various counts in the
complaint. See Tuohey, 2015 WL 12776598 at *3–4 (citing Opelousas Gen. Hosp. Auth. v.
FairPay Solutions, Inc.,655 F.3d 358, 362 (5th Cir. 2011)). At this point, the relative
conduct of the various defendants cannot be compared to determine which defendants, if any,
are more culpable or responsible for the claims alleged in the complaint. See also Kaufman,
561 F.3d at 157. The plaintiffs, therefore, have not adequately identified any particular
defendant whose conduct forms a significant basis for the claims they assert under CAFA.
Moreover, the complaint seeks no individualized relief against a single defendant. It
seeks to hold all defendants jointly and severally liable for collective misconduct. For this
reason, the class has not identified any particular defendant from whom “significant relief”
is sought. See, e.g., Evans v. Walter Indus., 449 F.3d 1159, 1167 (11th Cir. 2006); Grosshart
v. State Farm Mutual Automobile Insurance Co., Case No. 16-CV-00766-W-DW, 2016 WL
5661526, at *3 (W.D. Mo. Sept. 29, 2016); Robinson v. Cheetah Transp., No. Civ.A.
06-0005, 2006 WL 468820, at *3 (W.D. La. Feb. 27, 2006).
Home State Exception
To qualify for remand under the home state exception, no primary defendant can be
a citizen of a state other than where the case was filed. 28 U.S.C. § 1332(d)(4)(B); see also
Anthony v. Small Tube Mfg. Corp., 535 F. Supp.2d 506, 515 (E.D. Pa. 2007). This exception
does not apply because Schwartz, a New York resident, is a primary defendant.
CAFA does not define “primary defendant.” The “courts have taken varying
approaches leading to some incongruency,” but a “primary defendant is one: (1) who has the
greater liability exposure; (2) is most able to satisfy a potential judgment; (3) is sued directly,
as opposed to vicariously, or for indemnification or contribution; (4) is the subject of a
significant portion of the claims asserted by plaintiffs; or (5) is the only defendant named in
one particular cause of action.” Brook v. UnitedHealth Group Incorporated, No. 06 CV
12954 (GBD), 2007 WL 2827808 at *5 (S.D.N.Y Sept. 27, 2007) (citations omitted).
The complaint does not single out any particular defendant as more responsible for
the alleged harm than any other defendant. Indeed, the complaint indicates that all
defendants are engaged in a common enterprise and should be held joint and severally liable
for their conduct. See, e.g., Nicholson v. Prime Tanning Corp., No. 09–6083–CV–SJ–GAF,
2009 WL 2900042, at *2 (W.D. Mo. Sept. 3, 2009) (“Courts have routinely held that when
a complaint fails to distinguish among defendants as to theories of liability, all are considered
primary defendants.”); Moua v. Jani-King of Minnesota, Inc., 613 F. Supp.2d 1103, 1108–09
(D. Minn. 2009); Brook, 2007 WL 2827808 at *6 (“Since plaintiffs themselves maintain that
defendants are each equally culpable and liable for the injuries purportedly suffered by the
putative class members, there is no rational basis upon which to differentiate the
defendants’ status as being primary or secondary.”); Green v. SuperShuttle Intern., Inc., Civil
No. 09–2129 ADM/JJG, 2010 WL 419964, at *4 (D. Minn. Jan. 29, 2010) (finding that all
defendants are “primary defendants” under CAFA when a complaint does not make facial
distinctions among defendants).
Moreover, Schwartz’s relationship with the various defendant LLCs suggests that he
is, in fact, a primary defendant. Schwartz arguably faces the greatest liability of all
defendants due to his ownership of, and independent connection with, each of the defendant
nursing homes. The complaint does not distinguish or apportion liability among defendants
in a way that suggests Schwartz is not directly liable, as opposed to simply vicariously liable,
for his alleged role in defendants’ joint conspiracy. Instead, the complaint states that
“Schwartz’s conduct forms a significant basis for the claims asserted herein and from whom
Plaintiffs seek significant relief.” Am. Compl. ¶ 9. For these reasons, all defendants,
including Schwartz, are primary defendants under the home state exception. Schwartz’s
presence as an out-of-state primary defendant defeats the home state exception.
Discretionary remand is not available because Schwartz is a citizen of New York and
a primary defendant. Discretionary remand, like the home state exception, is available only
when all primary defendants are citizens of the state in which the case was filed. See 28
U.S.C. § 1332(d)(3). Additionally, plaintiffs concede that greater than two-thirds of the
proposed class are also Arkansas residents, which independently forecloses discretionary
For these reasons, none of the CAFA exceptions apply, federal jurisdiction is proper,
and plaintiffs’ motion to remand [Doc. No. 17] is denied.
IT IS SO ORDERED this 4th day of December 2017.
UNITED STATES DISTRICT JUDGE
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