Stevens v, Diversicare Leasing, et al
ORDER granting 14 Motion to Remand by Mitzie Stevens ; terminating 3 MOTION to Dismiss filed by Steven Levato, terminating 7 MOTION for Summary Judgment filed by Diversicare Leasing Corp., Advocate, Inc., Diversicare Management Services Company.; ***Civil Case Terminated.. Signed by Honorable Jimm Larry Hendren on May 4, 2009. (dmc)
IN THE UNITED STATES DISTRICT COURT W E S T E R N DISTRICT OF ARKANSAS H O T SPRINGS DIVISION M I T Z I E STEVENS, AS SPECIAL A D M I N I S T R A T O R OF THE ESTATE OF HARVEY FRAZIER, DECEASED, A N D CHARLES KUNTZ, AS SPECIAL A D M I N I S T R A T O R OF THE ESTATE OF FLORA KATHLEEN KUNTZ, DECEASED v. C i v i l No. 09-6008
D I V E R S I C A R E LEASING CORP., D I V E R S I C A R E MANAGEMENT SERVICES COMPANY, ADVOCATE, INC., AND S T E V E N LEVATO
ORDER N O W on this 4th day of May, 2009 comes on for consideration the f o l l o w i n g motions and respective responses thereto: * Defendant Steven Levato's Motion to Dismiss (document #3); * Defendant Advocat, Inc., Diversicare Leasing Corpation, and Diversicare Management Services Company's Motion for Summary
J u d g m e n t and to Dismiss Plaintiff's Class Action Complaint (document #7); * Plaintiffs' Motion to Remand (document #14). T h e Court, having reviewed the pleadings of the parties, and all other matters of relevance before it, and being well and
s u f f i c i e n t l y advised, finds and orders as follows:
On January 2, 2009, Plaintiffs Mitzie Stevens, as Special
A d m i n i s t r a t o r of the Estate of Harvey Frazier, deceased, and Charles K u n t z , as Special Administrator of the Estate of Flora Kathleen K u n t z , deceased, ("Plaintiffs") commenced this class action lawsuit i n the Circuit Court of Garland County, Arkansas against Defendants D i v e r s i c a r e Leasing Corporation, Diversicare Management Services C o m p a n y , Advocate, Inc., and Steven Levato, Administrator of the G a r l a n d Nursing & Rehabilitation Center ("Defendants"). In their complaint, Plaintiffs allege that Defendants breached t h e i r statutory and contractual obligations to all residents of the G a r l a n d Nursing & Rehabilitation Center ("the Center") by, among o t h e r things, failing to properly staff the Center and failing to p r o v i d e a clean and safe living environment. that such failure to properly staff and Plaintiffs also claim operate the Center
c o n s t i t u t e s a breach of Defendants' fiduciary duty and duty of care o w e d to all residents. P l a i n t i f f s request that a class be certified consisting of all r e s i d e n t s and estates of residents who resided in the Center at a n y t i m e during the five year period prior to the filing of the c o m p l a i n t , through the date of trial. Moreover, Plaintiffs seek
c o m p e n s a t o r y and punitive damages, attorneys' fees, interest, and c o s t s in an unspecified amount. 2. On January 26, 2009, Defendants removed the instant matter
t o this Court pursuant to 28 U.S.C. § 1332 - asserting that the
f e d e r a l jurisdiction minimum.
Defendants also base the removal of
t h i s action on the Class Action Fairness Act ("the CAFA"), 28 U.S.C. § 1332(d)(2). 3. The Court will first address Plaintiffs' pending Motion to In their motion, Plaintiffs argue that
R e m a n d (document #14).
f e d e r a l diversity jurisdiction is not proper, because the parties a r e not completely diverse. residents Plaintiffs of are the Center, Specifically, Plaintiffs say that as which is located in Arkansas, Steve all
( " L e v a t o " ) , Administrator of the Center, and Diversicare Leasing C o r p o r a t i o n ("DLC") are also Arkansas residents. P l a i n t i f f s also say that Defendants have failed to establish t h a t the CAFA's amount in controversy requirement is satisfied here. Additionally, Plaintiffs contend that jurisdiction is not proper u n d e r the CAFA because the Act's local controversy and home state e x c e p t i o n s apply. In response, Defendants argue that complete diversity exists b e c a u s e Levato was fraudulently joined to defeat federal diversity jurisdiction. Defendants say that no cause of action lies against
L e v a t o and the claims against him should be dismissed accordingly. Defendants also deny that DLC is an Arkansas resident. Moreover,
D e f e n d a n t s say that the jurisdictional requirements of the CAFA have b e e n satisfied here.
The party seeking to invoke the jurisdiction of the federal
c o u r t s has the burden of proving the existence of such jurisdiction. M c N u t t v. General Motors Acceptance Corp. of Indiana, 298 U.S. 178, 5 6 S.Ct. 780, 785 (1936). Thus, in removal cases the burden is on
t h e defendant to establish subject matter jurisdiction, and all d o u b t s are to be resolved in favor of remand. In re Business Men's A s s u r a n c e Co. of America, 992 F.2d 181, 183 (8th Cir. 1993). In class action lawsuits, the CAFA gives federal courts
o r i g i n a l jurisdiction where minimal diversity exists (at least one p l a i n t i f f and one defendant are from different states) and the a m o u n t in controversy exceeds $5,000,000. 28 U.S.C. § 1332(d)(2). The aggregate number of proposed class members must be 100 or more. Id. at § 1332(d)(5)(B). a prima facie Demonstration case for of these requirements and
s a t i s f i e s the removing party's burden. O n c e those requirements have been satisfied, the party seeking r e m a n d has the burden of establishing the prerequisites for the e x c e p t i o n s to jurisdiction contained in 28 U.S.C. § 1332(d)(3) and ( d ) ( 4 ) . See Preston v. Tenet Healthsystem Memorial Medical Center, I n c . , 485 F.3d 793, 797 (5th Cir. 2007); Hart v. FedEx Ground P a c k a g e System Inc., 457 F.3d 675, 680 (7th Cir. 2006); Serrano v. 1 8 0 Connect, Inc., 478 F.3d 1018, 1024 (9th Cir. 2007). 5. In the instant matter, it is undisputed that minimal
d i v e r s i t y exists.
As to the number of proposed class members, the
class, as described by Plaintiffs, consists of all residents and e s t a t e s of residents who lived in the Center at anytime within the p a s t five years, from the date the complaint was filed herein, t h r o u g h the time of trial. Doc. 2 at 1. Plaintiffs further state
t h a t they seek both compensatory and punitive damages in excess of the federal jurisdictional minimum ($75,000) for each of the
p u t a t i v e class members.
Thus, a determination of likely class size
w i l l bear directly upon the amount in controversy. To that end, Defendants have offered minimum staffing report f o r m s for the relevant time period as evidence that the proposed c l a s s exceeds 100 people. See Doc. 1-6. These forms show the number
o f residents who occupied a bed at the Center on particular days. Plaintiffs argue that these forms are not helpful in determining the proposed nursing class home size because can resident stay for names weeks, are not listed or and
However, taking even the lower average of daily occupants at the C e n t e r , over a more than five year period, it appears that the class s i z e is well above 100. Plaintiffs say as much in their complaint,
w h i c h states that "[a] class action is clearly a more efficient way o f handling a case when there is a predominating common issue to be r e s o l v e d for hundreds of class members." Doc. added). M o r e o v e r , Defendants have offered the affidavit of Levato, w h e r e i n he states that, "the total number of all persons, living or 2 at 16 (emphasis
dead, who have resided in the Garland facility from January 2004 u n t i l the present date exceeds 100 persons in number." Doc. 21-5. As administrator of the Center, Levato is the very person who should h a v e such knowledge and information. And, if the proposed class
s i z e exceeds 100 persons (which the Court believes it does), the a m o u n t in controversy certainly exceeds $5,000,000 - as Plaintiffs s e e k s compensatory and punitive damages in excess of $75,000 for e a c h putative class member. C o n s i d e r i n g the foregoing, the Court believes that Defendants h a v e satisfied their burden of showing that the CAFA's class size and amount in controversy requirements are satisfied here.
P l a i n t i f f s have offered no evidence to refute this conclusion. 6. The Court will now consider whether this case falls within
t h e CAFA's local controversy exception, 28 U.S.C. § 1332(d)(4)(A). This jurisdictional exception provides that a district court shall d e c l i n e to exercise jurisdiction over a class action in which: ( 1 ) greater than two-thirds of the members of all proposed p l a i n t i f f classes in the aggregate are citizens of the S t a t e in which the action was originally filed; ( 2 ) at least 1 defendant is a defendant -- (a) from whom s i g n i f i c a n t relief is sought by members of the plaintiff c l a s s ; (b) whose alleged conduct forms a significant basis f o r the claims asserted by the proposed plaintiff class; a n d (c) who is a citizen of the State in which the action w a s originally filed; and (3) principal injuries resulting from the alleged conduct o r any related conduct of each defendant were incurred in t h e State in which the action was originally filed; and
(4) during the 3-year period preceding the filing of that c l a s s action, no other class action has been filed a s s e r t i n g the same or similar factual allegations against a n y of the defendants on behalf of the same or other persons. 2 8 U.S.C. § 1332(d)(4)(A). T h e parties do not dispute that the first, third, and fourth e l e m e n t s set forth above are satisfied here. e l e m e n t which is contested. It is the second
Plaintiffs say that both Levato and the
C e n t e r are residents of Arkansas and that their conduct forms a s i g n i f i c a n t basis for the claims asserted against Defendants. In
r e s p o n s e , Defendants argue that: (1) Levato was fraudulently joined t o defeat federal jurisdiction and there are no tenable claims a g a i n s t him and (2) the Center is not an Arkansas resident, as its p r i n c i p a l place of business is Tennessee. A s to whether Levato satisfies the criteria set forth above, t h e Court first observes that it does not agree with Defendants' a s s e r t i o n that this individual defendant was fraudulently joined. Joinder is fraudulent and removal is proper when "there exists no r e a s o n a b l e basis in fact and law supporting a claim against the r e s i d e n t defendants." Wiles v. Capitol Indemnity Corp., 280 F.3d 8 6 8 , 871 (8th Cir. 2002). That is, the Court must determine whether
t h e r e is arguably a reasonable basis for predicting that applicable s t a t e law might impose liability based upon the facts involved. W i l k i n s o n v. Shackelford, 478 F.3d 957, 963 (8th Cir. 2007).
The Court agrees with Defendants in that Plaintiffs' statutory c l a i m under Arkansas Code § 20-10-1201 et seq., Protection of LongT e r m Care Facility Residents (the "Residents' Rights Act"), can only b e maintained against the Center's licensee - that being, DLC. See H e a l t h Facilities Management Corp. v. Hughes, 227 S.W.3d 910 (Ark. 2 0 0 6 ) (holding that non-licensee defendant was not subject to suit f o r violations under the Residents' Rights Act). Nevertheless, the Court believes there is arguably a reasonable b a s i s for predicting that state law might impose liability on Levato t h r o u g h theories of breach of the general duty of care, breach of f i d u c i a r y duty, and/or breach of contract. The conflicting case law
c i t e d by the opposing parties in their briefs leads the Court to c o n c l u d e that Arkansas law is not clear regarding the extent and m a n n e r by which an administrator, such as Levato, may be held liable f o r harms alleged by long-term care facility residents. However, in view of Levato's administrative duties of hiring a n d maintaining adequate staffing and overseeing the operation of t h e Center, the Court is of the opinion that Levato's actions or l a c k thereof are at the heart of this case. This conclusion is
s u p p o r t e d by the fact that the damages alleged herein resulted from the under-staffing of the Center and other such administrative
f a i l u r e s that go directly to Levato's duties. say that Defendants were engaged in a
Moreover, Plaintiffs joint enterprise of
m i s m a n a g e m e n t which led to the claimed abuses and resident neglect.
While the relationship of the various Defendants and their r e s p e c t i v e relationships with Plaintiffs is not yet clear, the Court b e l i e v e s there is a reasonable basis for predicting that Levato m i g h t be held liable for the harms alleged. Thus, in view of the
f o r e g o i n g , the Court finds that Levato was not fraudulently joined a s Defendants maintain. Moreover, the Court finds that Levato is a resident of Arkansas w h o s e conduct forms a significant basis for the claims asserted by t h e proposed plaintiff class. As previously stated, Levato was
c h a r g e d with ensuring that the Center maintained adequate staffing a n d resident care. It is significant, then, that the harms alleged
i n the complaint stem, in large part, from the Center's inadequate staffing. Thus, it appears that Levato's conduct and performance as
a d m i n i s t r a t o r forms a significant basis for the claims asserted. A s to whether significant relief is sought by members of the p r o p o s e d class against Levato, the Court notes that Levato was (and c o n t i n u e s to be) the Center's administrator during the majority of t h e relevant time-frame for this lawsuit. That is, Levato began his The proposed
j o b as the Center's administrator in August 2005.
c l a s s consists of all residents from January 2004 through the time o f trial. Thus, it appears that a large majority of the proposed
c l a s s members were harmed or otherwise impacted by Levato's actions a s administrator. Levato is a Further, it is clear from the complaint that focus of Plaintiffs' Court, claims, not merely a
significant relief is sought against Levato by the plaintiff class v i e w e d as a whole. In view of the foregoing, the Court finds that the CAFA's local controversy exception This history. applies in this is case to defeat by the the federal CAFA's local
c o n t r o v e r s y exception, Senate Report 109-14 states: T h i s provision is intended to respond to concerns that c l a s s actions with truly local focus should not be moved t o federal court under this legislation because state c o u r t s have a strong interest in adjudicating such d i s p u t e s . At the same time, this is a narrow exception t h a t was carefully drafted to ensure that it does not b e c o m e a jurisdictional loophole. Thus, [...] in a s s e s s i n g whether each of these criteria is satisfied by a particular case, a federal court should bear in mind t h a t the purpose of each of these criteria is to identify a truly local controversy - a controversy that uniquely a f f e c t s a particular locality to the exclusion of all others. S e n . R. 109-14, 38 (Feb. 28, 2005). The Senate Report goes on to
p r o v i d e the following example of how the local controversy exception w a s intended to work: A class action is brought in Florida state court against a Florida funeral home regarding alleged wrongdoing in b u r i a l practices. Nearly all the plaintiffs live in F l o r i d a (about 90 percent). The suit is brought against t h e cemetery, a Florida corporation, and an out-of-state p a r e n t company that was involved in supervising the cemetery. No other class action suits have been filed a g a i n s t the cemetery. This is precisely the type of case f o r which the Local Controversy Exception was developed. Although there is one out-of-state defendant (the parent c o m p a n y ) , the controversy is at its core a local one, and t h e Florida state court where it was brought has a strong i n t e r e s t in resolving the dispute. Thus, this case would r e m a i n in state court.
Id. at 41. C l early illustration. the facts of the case at bar align with this
Here all of the proposed plaintiff class members are While the corporate defendants are out-ofThe
A r k a n s a s residents.
s t a t e , Levato, a central defendant, is an Arkansas resident.
c o n t r o v e r s y centers on a local nursing home and implicates questions o f Arkansas law - some of which, it appears from the parties' b r i e f s , have not yet been resolved. opinion that the Arkansas state Thus, the Court is of the where this action was The
b r o u g h t , has a strong interest in resolving this dispute.
C o u r t , therefore, believes that this is the very sort of local m a t t e r anticipated by the CAFA's local controversy exception and the C o u r t will grant Plaintiffs' motion to remand accordingly. IT IS THEREFORE ORDERED that Plaintiffs' Motion to Remand
( d o c u m e n t #14) should be, and it hereby is, GRANTED and the Clerk of t h e Court is directed to remand this matter to the Circuit Court of G a r l a n d County, Arkansas, Civil Division. The parties shall bear
t h e i r own costs and expenses incurred as a result of Defendants' r e m o v a l of this matter. H a v i n g granted Plaintiffs' Motion to Remand, the Court will not a d d r e s s the other pending motions in this case. I T IS SO ORDERED. /s/ Jimm Larry Hendren JIMM LARRY HENDREN U N I T E D STATES DISTRICT JUDGE
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