Northport Health Services of Arkansas, LLC et al v. Dauernheim
MEMORANDUM OPINION AND ORDER denying 9 Motion to Dismiss. Signed by Honorable P. K. Holmes, III on May 16, 2013. (sh) Modified on 5/16/2013 to add text (rw).
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
NORTHPORT HEALTH SERVICES OF
ARKANSAS, LLC d/b/a PARIS HEALTH
AND REHABILITATION CENTER;
NHS MANAGEMENT, LLC; NORTHPORT
HEALTH SERVICES, INC.; and
SENIOR CARE PHARMACY, INC.
Case No. 2:12-CV-02284
COMMUNITY FIRST TRUST COMPANY, as
Successor Personal Representative of the Estate
of HATTIE M. STEPHENS, deceased, and on
Behalf of the Wrongful Death Beneficiaries of
HATTIE M. STEPHENS
MEMORANDUM OPINION AND ORDER
This is an action to compel arbitration of a dispute currently pending in the Circuit Court of
Logan County, Arkansas. Before the Court are Defendant’s Motion to Dismiss (Doc. 9) and brief
in support (Doc. 10), in which Defendant asks the Court to exercise its discretion and abstain in
favor of the state court proceeding. Plaintiffs Northport Health Services of Arkansas, LLC d/b/a
Paris Health and Rehabilitation Center, NHS Management, Inc., and Northport Health Services, Inc.
have filed a Response in Opposition (Doc. 13). Separate Plaintiff Senior Care Pharmacy, Inc. has
also filed a Response in Opposition (Doc. 14) and a brief in support (Doc. 15), in which it adopts
the response and all legal arguments made in the other Plaintiffs’ Response. Because all Plaintiffs
in this action are asserting the same arguments, they will be referred to collectively as the “Northport
Parties” for the sake of clarity. For the reasons set forth herein, the Court finds that abstention is not
appropriate in this case and Defendant’s Motion to Dismiss is DENIED.
The Northport Parties filed this action to compel arbitration of claims asserted against them
in the Circuit Court of Logan County, Arkansas, by Defendant Community First Trust Company,
as successor personal representative of the estate of Hattie M. Stephens, deceased, and on behalf of
the wrongful death beneficiaries of Hattie M. Stephens (the “Estate”). The state court complaint
includes allegations of negligence, medical malpractice, and violations of the Arkansas Long-Term
Care Facility Resident’s Act. The defendants in that action—the Northport Parties and Matthew
Stengel, an administrator of Paris Health and Rehabilitation Center—asserted as an affirmative
defense that the claims are subject to a binding arbitration agreement. The Estate subsequently filed
a Motion to Stay Arbitration and Declare the Arbitration Agreement to be Non-Binding with the
state court, to which the Northport Parties and Stengel replied in opposition. The state court
discussed the Estate’s motion at a preliminary hearing on November 14, 2012, at which time the
Northport Parties disclosed their intent to file a federal action to compel arbitration. Accordingly,
the Northport Parties filed a Complaint in this Court on November 16, 2012,1 seeking to compel
arbitration under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–16.
The Estate filed the instant Motion to Dismiss on January 22, 2013, asking the Court to
exercise its discretion and abstain in favor of concurrent proceedings in the Logan County Circuit
Court. The Northport Parties oppose abstention and maintain that this Court should adjudicate their
claim because the state court proceeding is not sufficiently parallel to the federal action and also
because there are no exceptional circumstances that would justify the Court’s refusal to exercise
An Amended Complaint was filed on December 14, 2012.
“Federal courts have a ‘virtually unflagging obligation . . . to exercise the jurisdiction given
them,’ even when there is a pending state court action involving the same subject matter.”
Mountain Pure, LLC v. Turner Holdings, LLC, 439 F.3d 920, 926 (8th Cir. 2006) (quoting Colorado
River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)). However, in the
interest of wise judicial administration and with regard to conservation of judicial resources and
comprehensive disposition of litigation, there are certain limited circumstances permitting the
dismissal of a federal lawsuit due to the presence of a concurrent state proceeding. Colorado River,
424 U.S. at 817–818. “A federal court may divest itself of jurisdiction by abstaining [under
Colorado River] only when parallel state and federal actions exist and exceptional circumstances
warrant abstention.” Fru-Con Const. Corp. v. Controlled Air, Inc., 574 F.3d 527, 534 (8th Cir.
As a threshold matter, the Court must determine whether there are parallel proceedings
pending in state court. Fru-Con, 574 F.3d at 535. For purposes of Colorado River abstention, the
Eighth Circuit requires a substantial similarity between the state and federal proceedings, which
occurs “when there is a substantial likelihood that the state proceeding will fully dispose of the
claims presented in the federal court.” Id. It is not enough that the pending state claim is based on
the same general facts or subject matter as the federal claim and involves the same parties. Id. The
district court must analyze matters as they currently exist and resolve any doubt as to the parallel
nature of the proceedings in favor of exercising jurisdiction. Id.
Here, the Northport Parties contend that the dispute with the Estate in state court must be
submitted to arbitration. The same parties assert this same claim as an affirmative defense in the
underlying state court action. Although asserted in different capacities, both claims are premised
on the same wrong—the Estate’s failure to arbitrate—and both claims seek the same remedy,
enforcement of the arbitration clause. As matters currently exist, both the state and federal courts
must resolve the issue of whether the parties are obligated to arbitrate. The Northport Parties argue
that the proceedings are not parallel because they only asserted the defense to preserve their right
to arbitration, but they have not filed a motion to arbitrate or otherwise pursued the defense. It does
not follow that the issue is no longer before the state court merely because the Northport Parties
have not actively pursued their defense.
Also, the fact that the complaint in the state action seeks recovery for various tort and
statutory claims while the complaint in the federal action seeks only to compel arbitration does not
prevent the actions from being parallel. The proceedings do not have to be identical, and a court
must resolve the arbitrability issue whether it is asserted in a complaint or as an affirmative defense
in an answer. It is of no import that the federal suit is a reactive one, reversing the roles of the
parties to the state court litigation. See Fru-Con, 574 F.3d at 537 (noting that the same claim was
pending in both state and federal proceedings when it was raised by a party in a complaint in federal
court and asserted by the same party “out of an abundance of caution” in an answer and
counterclaim in state court). State and federal courts have concurrent jurisdiction over claims to
compel arbitration under the FAA, and, if the Northport Parties had not filed the federal action, the
state court proceeding would fully dispose of the arbitration claim. Therefore, for the purpose of
determining whether the Court should abstain under Colorado River, the Court finds that the
proceedings are sufficiently parallel.
Where, as here, there are parallel proceedings, the Court must determine whether
“exceptional circumstances warrant abstention.” Fru-Con, 574 F.3d at 534. In this Circuit, courts
determining whether exceptional circumstances exist in actions involving the FAA apply the
following non-exhaustive factors:2 (1) whether there is a res over which one court has established
jurisdiction; (2) the inconvenience of the federal forum; (3) whether maintaining separate actions
may result in piecemeal litigation, unless the relevant law would require piecemeal litigation and
the federal court issue is easily severed; (4) which case has priority, focusing on the relative progress
made in the cases; (5) whether state or federal law controls; and (6) the adequacy of the state forum
to protect the federal plaintiff’s rights. Mountain Pure, 439 F.3d at 926.
While these factors
provide a guideline for the Court’s analysis, “the decision whether to dismiss a federal action
because of parallel state-court litigation does not rest on a mechanical checklist, but on a careful
balancing of the important factors as they apply in a given case, with the balance heavily weighted
in favor of the exercise of jurisdiction.” Moses H. Cone, 460 U.S. at 16.
The first, second, and sixth factors are not implicated in this case and do not weigh in favor
of or against abstention. Both parties agree that there is no property at issue and both forums are
equally convenient, and the Northport Parties concede that both courts can adequately protect their
rights. The Court agrees with these conclusions.
In their brief, the Northport Parties point out that the Estate applies the factors as set forth
by the United States Supreme Court in Colorado River, which are not identical to the factors as set
forth by the Eighth Circuit. The Court finds this distinction irrelevant, as the Eighth Circuit derives
its analysis from Colorado River and Moses H. Cone Memorial Hospital v. Mercury Construction
Corp., 460 U.S. 1, 16 (1983), and the factors are not to be applied in a rigid, inflexible manner. See
Moses H. Cone, 460 U.S. at 16 (noting that the Colorado River Court “declined to prescribe a hard
and fast rule” and instead, described “some of the factors relevant to the decision.”).
The third factor, regarding the desire to avoid piecemeal litigation, weighs against abstention.
There is no clear federal policy of avoiding piecemeal adjudication of rights subject to arbitration
agreements. In fact, the FAA “requires piecemeal resolution when necessary to give effect to an
arbitration agreement.” Id. at 20 (emphasis added). Some degree of piecemeal litigation is an
inevitable result of the strong national policy favoring enforcement of private arbitration agreements.
Nationstar Mortg. LLC v. Knox, 351 Fed. Appx. 844, 851 (5th Cir. 2009). In addition, the issue of
arbitrability “is easily severable from the merits of the underlying disputes.” Moses H. Cone, 460
U.S. at 21.
As to the fourth factor, the relative priority of the state and federal proceedings, the
Northport Parties contend that this Court has progressed further in terms of resolving the arbitrability
dispute because they have not filed a motion to compel arbitration in state court. This is true but
misleading, as the state court specifically withheld ruling on the arbitrability issue because the
Northport Parties indicated they would file the instant action to compel arbitration. Moreover, both
parties have extensively briefed the issue in state court, while here, only the Northport Parties have
briefed the issue, in the form of the Amended Complaint. The Estate has not filed an Answer or
otherwise briefed the arbitrability issue; rather, it filed the instant Motion to Dismiss, remarking only
that the Estate denies that it is bound to the terms of the arbitration agreement.
consideration of the arbitrability
issue thus far has been limited to whether exceptional
circumstances exist such that the Court should refrain from deciding the issue on the merits.
Resolution of the arbitrability issue seems, therefore, to have reached the same level of progression
in both courts. Even if the state court were considered to have progressed further than this Court,
the priority factor is not weighted heavily in light of the relatively early stage of proceedings in both
courts, and does not support a finding of exceptional circumstances sufficient to justify abstention.
Consideration of the fifth factor, whether state or federal law controls, is also not a major
concern here. The matter at hand involves federal law, as the Northport Parties assert their right to
enforce an arbitration agreement. The arbitrability issue also involves some aspects of state law, as
state contract law controls the determination of whether a valid arbitration agreement exists. Faber
v. Menard, Inc., 367 F.3d 1048, 1052 (8th Cir. 2004) (“Whether an arbitration agreement is valid
is a matter of state contract law.”). Also, there is a dispute regarding the application and/or
interpretation of Arkansas statutory law. The Northport Parties argue that Ark. Code Ann. § 20-9602(11), which provides that an adult child may consent to recommended medical treatment for a
parent of unsound mind, conveyed authority for the deceased’s daughter to bind her to the arbitration
agreement. The Estate points out that Arkansas courts have not resolved whether this particular
statute applies in this context. Even so, the presence of state law issues in federal court rarely
weighs in favor of abstention, while “the presence of federal-law issues must always be a major
consideration weighing against surrender [of federal jurisdiction].” Moses H. Cone, 460 U.S. at 26.
While the source-of-law factor has some significance here due to the presence of an unsettled issue
of state law, the Court does not consider this one component of the case to be an exceptional
circumstance warranting abstention in light of the case as a whole.
In addition to the factors discussed above, the Estate urges the Court to abstain to prevent
forum shopping. The Court considers the need to discourage forum shopping to be a valid
consideration in certain circumstances, such as when a state court has decided the arbitration issue
and the federal suit is filed in an attempt to avoid an adverse ruling. See, e.g., THI of New Mexico
at Las Cruces v. Fox, 727 F. Supp. 2d 1195 (D.N.M. 2010) (relying in part on avoiding forum-
shopping concerns when abstaining where state court had already compelled the parties to arbitrate);
Garber v. Sir Speedy, Inc., 930 F. Supp. 267 (N.D. Texas 1995) (noting that a stay was appropriate
to discourage forum shopping when the federal action was filed in an apparent attempt to circumvent
the adverse ruling of the state court). Here, the state court has not decided whether the parties must
submit their dispute to arbitration. There are no facts before the Court to indicate that the federal
action was filed to avoid a decision made by the state court or that the Northport Parties were
otherwise forum shopping.
After weighing the appropriate factors, the Court finds that there are no exceptional
circumstances that would justify abstention. Furthermore, the present record does not present any
special facts or circumstances indicating that federal jurisdiction is inappropriate notwithstanding
the factors discussed above. Based on the information now before it, the Court cannot say that the
Northport Parties filed the federal suit for an improper purpose or otherwise engaged in forum
shopping. Instead, they appear to have exercised their right, under federal law, to choose a federal
forum in which to bring their complaint to compel arbitration. Accordingly, the Court declines to
abstain in favor of the concurrent state court action.
For the reasons set forth above, IT IS HEREBY ORDERED that Defendant’s Motion to
Dismiss (Doc. 9) is DENIED.
IT IS SO ORDERED this 16th day of May, 2013.
/s/P. K. Holmes, III
P.K. HOLMES, III
CHIEF U.S. DISTRICT JUDGE
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