Brookdale Senior Living Inc. et al v. Hibbard
Filing
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OPINION & ORDER: IT IS ORDERED that: 1. Dft's 4 MOTION to Dismiss is DENIED; 2. Pla's 6 MOTION to compel arbitration & enjoin the state-court proceeding is GRANTED; 3. Marilyn O. Hibbard is COMPELLED to submit her claims to arbitr ation according to the terms of her agreement & ENJOINED from proceeding w/ her action in state court; & 4. Court will stay this proceeding until the conclusion of the ordered arbitration. Signed by Judge Karen K. Caldwell on June 4, 2014. (MWZ) cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION AT LEXINGTON
BROOKDALE SENIOR
LIVING INC. et al,
CIVIL ACTION NO. 5:13-289-KKC
Plaintiffs,
V.
OPINION & ORDER
MARILYN O. HIBBARD,
Defendant.
*** *** ***
This matter is before the Court on a motion by the three plaintiff corporations to compel
arbitration and enjoin the defendant from pursuing her parallel suit in state court. (DE 6).
Defendant Marilyn O. Hibbard objects to the motion and has filed her own motion to dismiss. (DE
4). She contends that this Court should abstain from hearing this action in light of the pending
state-court matter; that the arbitration agreement at issue is invalid and unenforceable; and that
the Court should not exercise its power to enjoin her from continuing the prosecution of her statecourt action. For the following reasons, the Court will deny the defendant’s motion to dismiss, and
grant the plaintiffs’ motion to compel arbitration and enjoin the defendant.
I.
On July 22, 2013, Defendant Marilyn O. Hibbard filed a negligence suit in Fayette Circuit
Court in Fayette County, Kentucky regarding her care and treatment during her residency at
Homewood Residence at Richmond Place. See Marilyn O. Hibbard v. Brookdale Senior Living Inc.,
et al., Civil Action File No. 13-CI-3046 (Circuit Court of Fayette County, Ky., Division 9). The
plaintiffs subsequently filed the instant suit on September 4, 2013, alleging that Hibbard’s claims
in state court are subject to a binding arbitration agreement and she should be enjoined from
proceeding any further with her state-court action. The plaintiffs invoke this Court’s diversity
jurisdiction and seek relief under the Federal Arbitration Act as well as the Anti-Injunction Act.
Hibbard, on the other hand, contends that the arbitration agreement is invalid and unenforceable,
and that even if this were not the case the Court should abstain from hearing the present action
under the doctrine of Colorado River Water Conservation District v. United States, 424 U.S. 800
(1976).
The arbitration agreement at issue in this case was a mandatory component of Hibbard’s
Residency Agreement for her stay at Homewood Residence. Section V of the Residency Agreement
was titled “Arbitration and Limitation of Liability Provision,” which contained three subsections.
On its face Section V purports to make severable any provisions the Court might deem
unenforceable. It states that if “any of sub-sections A, B or C provided below, or any part thereof,
be deemed invalid, the validity of the remaining sub-sections, or parts thereof, will not be
affected.” (DE 1-1, at 7).
Subsection A outlines the provisions of the arbitration agreement. The first sentence of
Subsection A states the follow:
Any and all claims or controversies arising out of, or in any way
relating to, this Agreement or your stay at the Community, excluding
any action for eviction, and including disputes regarding
interpretation of this Agreement, whether arising out of State or
Federal law, whether existing or arising in the future, whether for
statutory, compensatory or punitive damages and whether sounding
in breach of contract, tort or breach of statutory duties, irrespective of
the basis for the duty or the legal theories upon which the claim is
asserted, shall be submitted to binding arbitration, as provided below,
and shall not be filed in a court of law.
(DE 1-1, at 7). The next sentence in Subsection A states in bold text that “[t]he parties to this
Agreement further understand that a jury will not decide their case.” (DE 1-1, at 7).
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Following Subsection A is the “Limitation of Liability Provision,” which purports to limit the
amount of damages each party would have to pay in the event of future litigation. This provision,
marked as Subsection B, is distinct from the prior provisions outlining the arbitration
requirements.
Finally, Subsection C is titled, “Benefits of Arbitration and Limitation of Liability Provisions.”
This subsection outlines what the parties agree are the benefits of the arbitration agreement and
limitation of liability. It states that “[t]he parties’ decision to select arbitration is supported by the
potential cost-effectiveness and time-savings offered by selecting arbitration, which may avoid the
expense and delay of judicial resolution in the court system.” (DE 1-1, at 10). Significantly, at the
end of Subsection C, and again in bold, emphasized text, the agreement states as follows:
The undersigned acknowledges that he or she has been
encouraged to discuss this Agreement with an attorney.
The parties to this Agreement further understand that a jury
will not decide their case.
(DE 1-1, at 10).
II.
As a threshold matter, Hibbard asks the Court to abstain from hearing the merits of this action
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, Inc. v. Cohen, 276 F.3d 197, 206 (6th Cir. 2001) (quoting
Colorado River, 424 U.S. at 817). 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 Water, 424 U.S. at 813.
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As such, “[t]he decision to dismiss a federal action because of a parallel state-court action rests ‘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.” Great Earth Cos., Inc. v. Simons, 288 F.3d 878,
886 (6th Cir. 2002) (emphasis added) (quoting Moses H. Cone Memorial Hosp. v. Mercury
Construction Corp., 460 U.S. 1, 16 (1983)).
Courts consider roughly eight factors when determining whether abstention under Colorado
River is necessary. PaineWebber, 276 F.3d at 206 (citing Romine v. Compuserve Corp., 160 F.3d
337, 340–41 (6th Cir. 1998)). These factors are:
(1) whether the state court has assumed jurisdiction over any res or
property; (2) whether the federal forum is less convenient to the
parties; (3) avoidance of piecemeal litigation; . . . (4) the order in which
jurisdiction was obtained[;] . . . (5) whether the source of governing
law is state or federal; (6) the adequacy of the state court action to
protect the federal plaintiff’s rights; (7) the relative progress of the
state and federal proceedings; and (8) the presence or absence of
concurrent jurisdiction.
Id. (citing Romine, 160 F.3d at 340–41). Although a few of these factors weigh in favor of
abstention, none are strong enough to make this case an exceptional circumstances necessitating
abstention. Moreover, the factors identified as the most important counsel in favor of exercising its
jurisdiction.
The first two factors weigh against abstention. In a similar case where “the state court did not
assume jurisdiction over any res or property,” and both courts are geographically convenient, the
Sixth Circuit has found these facts support exercising jurisdiction. PaineWebber, 276 F.3d at 207.
On the other hand, factors four, seven, and eight, favor abstention—but only very slightly. The
state court assumed jurisdiction first, but only by a few months, and nothing in the record
indicates the suit has progressed very far. The slight time difference between the state- and
federal-court filings is insufficient to persuade the Court to abstain. Where “there is no indication
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that any significant proceedings have taken place in the state court,” the importance of which
court assumed jurisdiction first is diminished significantly. See Great Earth, 288 F.3d at 887.
The “most important” factor is the third factor, which asks “whether there is a ‘clear federal
policy evinc[ing] . . . the avoidance of piecemeal adjudication’ found within the statutory scheme at
issue.” Answers in Genesis of Kentucky, Inc. v. Creation Ministries Int’l., Ltd., 556 F.3d 459, 467
(6th Cir. 2009). The Sixth Circuit Court of Appeals has held that “[i]n the case of the Federal
Arbitration Act, there most clearly is not such a policy.” Id. at 467. This is because the FAA
“requires district courts to compel arbitration . . . when one of the parties files a motion to compel,
even where the result would be the possibly inefficient maintenance of separate proceedings in
different forums.” Id. at 467–68. Thus, the most important factor when determining whether to
abstain counsels against abstention in this case.
The fifth factor, whether federal or state law is the source of the dispute, also favors exercising
jurisdiction. Here, the issues involve questions of both state and federal law. Important, however,
is the fact that the “FAA provides the source of law for interpreting the arbitration clause[.]”
PaineWebber, 276 F.3d at 208. Although it’s true that “this factor is less significant where the state
and federal courts have concurrent jurisdiction,” id., the Supreme Court has been careful to note
that the court’s “task in cases such as this is not to find some substantial reason for the exercise of
federal jurisdiction . . . ; rather, the task is to ascertain whether there exist ‘exceptional
circumstances’ . . . to justify the surrender of that jurisdiction.” Moses H., 460 U.S. at 25–26. Thus,
to the extent that this case raises mixed questions of both federal and state law—with the FAA at
the heart of the dispute—the fifth factor weighs in favor of exercising jurisdiction.
Finally, the sixth factor, which asks whether the state court will provide adequate protection of
the plaintiffs’ federal rights, favors abstention. Hibbard argues that state court is more than
capable of interpreting and applying the FAA, and that there is no reason to believe the plaintiffs’
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rights are in jeopardy in state court. Hibbard’s argument has support from the Sixth Circuit: in
PaineWebber, the court held that because the FAA is “binding on state courts that interpret
contracts involving interstate commerce,” the sixth factor weighs in favor of abstaining.
PaineWebber, 276 F.3d at 208.
In viewing all of the factors together, it’s clear that the balance in this case weighs against
abstention and in favor of the Court exercising its jurisdiction. Factors one, two, three, five, and six
all counsel against abstention, while the remaining factors only slightly favor the opposite.
Significantly, the third factor—which asks whether there is a clear federal policy evincing the
avoidance of piecemeal litigation—is the most important factor and it weighs in favor exercising
subject-matter jurisdiction. Courts both within this state and within the Sixth Circuit Court of
Appeals have declined to abstain under Colorado River in similar circumstances, and this Court
will do the same. See PaineWebber, 276 F.3d at 209; GGNSC Louisville Hillcreek, LLC v. Warner,
2013 WL 6796421, *6 (W.D. Ky. Dec. 19, 2013).
III.
Having determined that it will not abstain from ruling on the merits of this action, the Court
turns to the remaining issues. The plaintiffs move this Court to compel Hibbard to submit her
claims currently pending in state court to arbitration, as required in her Residency Agreement.
They further ask the Court to enjoin Hibbard from continuing to pursue her state-court action. In
response, Hibbard objects to enforcement of the arbitration agreement on the grounds that it is
unconscionable, against public policy, and was signed by an agent without the authority to do so.
Her objections are without merit and will be denied.
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A. Validity of the Arbitration Agreement
“When considering a motion to . . . compel arbitration under the” FAA, courts engage in a fourstep analysis. Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000). The first is to “determine
whether the parties agreed to arbitrate.” Id. If so, then the second step is to consider the scope of
the agreement. Id. Third, “if federal statutory claims are asserted, [the Court] must consider
whether Congress intended those claims to be nonarbitrable.” Id. Finally, “if the court concludes
that some, but not all, of the claims in the action are subject to arbitration, it must determine
whether to stay the remainder of the proceedings pending arbitration.” Id. See also Compuserve,
Inc. v. Vigny Int’l Finance, Ltd., 760 F. Supp. 1273, 1278 (S.D. Ohio 1990). In the present case, the
defendant only contests the first issue, which is whether the parties entered into a valid
arbitration agreement.
Hibbard contends that the arbitration agreement is invalid for a variety of reasons spanning
unconscionability, public policy, and agency law. Nearly all of the reasons advanced by Hibbard
are facially without any merit and have been repeatedly rejected by both federal and state courts.
The Court examines this case under the backdrop of a “strong federal policy in favor of
arbitration.” See Hurley v. Deutsche Bank Trust Co. Ams., 610 F.3d 334, 338 (6th Cir. 2010)
(quoting Albert M. Higley Co. v. N/S Corp., 445 F.3d 861, 863 (6th Cir. 2006). This policy arises
from the FAA, which “was designed to override judicial reluctance to enforce arbitration
agreements.” Stout, 228 F.3d at 714. Pursuant to the FAA, arbitration agreements “shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation
of any contract.” 9 U.S.C. § 2. But when evaluating the validity of an arbitration agreement, “any
ambiguities in the contract or doubts as to the parties’ intentions should be resolved in favor of
arbitration.” Id. (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626
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(1985) (“Thus, as with any other contract, the parties’ intentions control, but those intentions are
generously construed as to issues of arbitrability.”)).
But, as Hibbard correctly notes, “the federal policy in favor of arbitration is not an absolute
one. Arbitration under the Federal Arbitration Act is ‘a matter of consent, not coercion.’” Albert M.
Higley Co., 445 F.3d at 863 (quoting Volt Info. Scis., Inc. v. Bd. of Trs. Of Leland Stanford Junior
Univ., 489 U.S. 468, 479 (1989)). “[N]o matter how strong the federal policy favors arbitration,
arbitration is a matter of contract between the parties, and one cannot be required to submit to
arbitration a dispute which it has not agreed to submit to arbitration.” Simon v. Pfizer Inc., 398
F.3d 765, 775 (6th Cir. 2005) (internal quotations omitted). For this reason, state law regarding
the enforceability of contracts applies with equal force to the validity of contracts to arbitrate.
It is on this point that Hibbard grounds her argument, claiming that the arbitration agreement
is an invalid contract under Kentucky common law, and therefore unenforceable under the FAA.
Hibbard’s objection to the arbitration agreement comes largely in four parts. She argues that (1)
the contract is unconscionable under Kentucky common law; (2) the contract violates public policy
in light of the statutory protections afforded to nursing home residents; (3) the limitation on
damages violates Kentucky law; and (4) David Hibbard, who signed the agreement on behalf of the
defendant, did not have the authority to do so.
The first three of Hibbard’s objections have been squarely rejected by numerous courts. Under
Kentucky law, “[t]he doctrine [of unconscionability] is used by the courts to police the excesses of
certain parties who abuse their right to contract freely. It is directed against one-sided, oppressive
and unfairly surprising contracts, and not against the consequences per se of uneven bargaining
power or even a simple old-fashioned bad bargain.” Conseco Fin. Servicing Corp. v. Wilder, 47
S.W.3d 335, 341–42 (Ky. Ct. App. 2001) (quoting Louisville Bear Safety Serv., Inc. v. South Central
Bell Tel. Co., 571 S.W.2d 438, 440 (1978)). This doctrine is a “narrow exception” to the
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fundamental rule that “absent fraud in the inducement, a written agreement duly executed by the
party to be held, who had an opportunity to read it, will be enforced according to its terms.”
Schnuerle v. Insight Commc’ns Co., L.P., 376 S.W.3d 561, 575 (Ky. 2012) (quoting Conseco, 47
S.W.3d at 341–42). According to Hibbard, the arbitration agreement in this case is unconscionable
because it is “overbroad,” does not bind the facility, lacks consideration, and was “effectively
mandatory.” Not only do these arguments lack merit, most fly in the face of the clearly-established
federal policy favoring arbitration.
Hibbard’s arguments against enforcing this agreement—at their core—are nothing more than
objections to arbitration agreements in general, and therefore directly contradict the policy
embodied in the FAA. Like many arbitration agreements, the one in the instant case cites as
consideration the economic efficiencies gained through arbitration. Hibbard refers to this
consideration as “nonsensical” and accuses the plaintiff of engaging in “serious swindling.” (DE 7,
at 5). While Hibbard might believe that these significant economic efficiencies are “nonsensical,”
courts have recognized this benefit of arbitration as one of the reasons the FAA was instituted in
the first place. See Stout, 228 F.3d 714 (“The FAA was designed to . . . provide parties with a
speedier and less costly alternative to litigation.”). Hibbard also claims that the agreement is not
mutually binding because any claim the facility might have against Hibbard is “not the same
species as personal injury torts,” and thus the facility “cedes nothing” by agreeing to arbitration.
(DE 7, at 4). Again, this is nothing more than an attack on arbitration itself: if the court system is
sufficient to resolve both the claims brought by the facility and the resident, the only
distinguishing feature here is that Hibbard regards arbitration itself as insufficient, which says
nothing about whether the contract is unconscionable.
Nor is there any merit to Hibbard’s suggestion that the agreement is procedurally
unconscionable because it is a contract of adhesion. As the Supreme Court of Kentucky has said,
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“[a]dhesion contracts are not per se improper. On the contrary, they are credited with significantly
reducing transaction costs in many situations.” Schnuerle, 376 S.W.3d at 576. The Court in
Schnuerle rejected the argument that a “non-negotiable, take it or leave it, adhesion contract”
containing an arbitration agreement was procedurally unconscionable. Id. Instead, the Court
found that where the agreement “was not concealed or disguised” and “its provisions [were] clearly
stated such that purchasers of ordinary experience and education are likely to be able to
understand it, at least in its general import; and its effect is not such as to alter the principal
bargain in an extreme or surprising way,” such agreements are not unconscionable. Id. at 576–77.
Like Schnuerle, the agreement in this case was not concealed or disguised. On the contrary, the
arbitration agreement was contained within its own subsection of the contract, repeatedly advised
the parties to consult with an attorney before signing it, and made conspicuous all the important
terms—such as emphasizing within the text that the parties were agreeing to forgo any trial by
jury and submit their claims to arbitration. It is difficult to imagine what greater lengths the
plaintiffs could have taken to make the arbitration agreement in this case more transparent to the
consumer.
Hibbard’s claim that the arbitration agreement is against public policy must similarly be
rejected. She argues that under Kentucky law it is against public policy for a mandatory
arbitration agreement to be contained within an admission contract at a nursing-home facility.
Even if this is true, the FAA overrides such a public policy. See AT&T Mobility LLC v. Concepcion,
131 S. Ct. 1740, 1747–48 (2011) (explaining that “a court may not rely on the uniqueness of an
agreement to arbitrate as a basis for a state-law holding that enforcement would be
unconscionable”) (internal quotations omitted). In Marmet Health Care Center, Inc. v. Brown, 132
S. Ct. 1201 (2012), the Supreme Court reversed a decision by the West Virginia Supreme Court
that held several binding arbitration agreements within a series of nursing-home contracts
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invalid. Id. at 1203–04. The West Virginia Supreme Court determined that these arbitration
clauses were against the state’s public policy, which the FAA did not pre-empt. But in a per curiam
opinion, the Supreme Court of the United States flatly rejected this claim, holding that the FAA
“requires courts to enforce the bargain of the parties to arbitrate.” Id. at 1203. In doing so, the
Court reinforced the rule it set out in Concepcion, which states that “[w]hen state law prohibits
outright the arbitration of a particular type of claim, . . . [t]he conflicting [state law] is displaced by
the FAA.” Concepcion, 131 S. Ct. at 1747.
The Supreme Court’s logic applies with just as much force in the present case. Hibbard
contends that Kentucky’s public policy forbids mandatory arbitration agreements in the context of
nursing home contracts. But such a state law that singles out arbitration as applied to a particular
class of claims is preempted by the FAA. Thus, even if the public policy of Kentucky would render
a mandatory arbitration agreement for admission to a nursing home unenforceable, the FAA
controls.
The third argument advanced by Hibbard is that the entire arbitration agreement is
unenforceable because the contract contains a limitation of liability clause that Hibbard believes is
invalid under Kentucky law. Under Kentucky law, the unenforceability of a particular provision in
a contract does not render the entire agreement unenforceable or unconscionable. See Francis v.
Cute Suzie, LLC, 2011 WL 2174348, *1, Civil Action No. 3:10-CV-00704 (W.D. Ky. June 2, 2011);
Schnuerle, 376 S.W.3d at 565. Thus, the Court need not consider whether the limitation on
liability is itself enforceable if—as is the case here—the clause is severable from the agreement to
arbitrate.
Hibbard rests her argument on the holding in Mortgage Electronic Registration Systems, Inc. v.
Abner, 260 S.W.3d 351 (Ky. Ct. App. 2008), a Kentucky Court of Appeals case that found an
arbitration agreement substantively unconscionable because it was intertwined with a provision
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prohibiting the arbitrator from awarding punitive damages. Id. at 355. Importantly, the Abner
court found that the arbitration agreement was unconscionable because the arbitration clause
itself imposed a limitation on damages that deprived one of the parties of their substantive
statutory remedies. Id. But Abner does not stand for the proposition that all arbitration
agreements are unenforceable simply because the contract contains a separate and unconscionable
provision. Rather, as subsequent courts construing Abner have emphasized, the question is
whether the arbitration clause is so intertwined with the unconscionable provision that the two
clauses cannot be severed from each other. See Francis, 2011 WL 2174348 at *3–4 (holding that an
arbitration clause is valid despite an accompanying limitation on liability because the latter is
severable in the event it is found unconscionable). In Abner, the arbitration clause itself directly
limited the arbitrator’s ability to award damages and expressly prohibited it from modifying the
terms of the contract. There was no way for an arbitrator to sever the unconscionable clause from
the rest of the agreement.
But the instant case presents no such difficulty. The arbitration agreement in Hibbard’s
contract is clearly severable from the limitation on liability. Although they appear in the same
section of the Residency Agreement, the two provisions are outlined in separate subsections and
contain nothing that would suggest the validity of one is dependent on the other. In fact, the
contract explicitly states that if either provision is found invalid and unenforceable, it may be
severed from the remaining agreement. (DE 1-1, at 7). Because these clauses are severable from
each other, and the arbitrator is granted the express authority to interpret the terms of the
contract as needed, this Court need not resolve whether the former is unconscionable. Such a
decision falls within the scope of the arbitrator’s delegated authority.
The last of Hibbard’s objections to the enforceability of the arbitration agreement is that the
durable power of attorney granted to David Hibbard, which he used to sign the Residency
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Agreement on behalf of Marilyn Hibbard, did not grant him the authority to bind her to
arbitration. Whether David Hibbard had the authority to sign the arbitration agreement under his
power of attorney is determined by state law. In Kentucky, “an agent’s authority under a power of
attorney is to be construed with reference to the types of transaction expressly authorized in the
document and subject always to the agent’s duty to act with the ‘utmost good faith.’” Ping v.
Beverly Enterprises, Inc., 376 S.W.3d 581, 592 (Ky. 2012) (quoting Wabner v. Black, 7 S.W.3d 379,
381 (Ky. 1999)). Significantly, the Kentucky Supreme Court has held that when an agent engages
in an action within his expressly delegated authority, the action might nonetheless be invalid if its
incidental effect is to “create legal consequences for a principal that are significant and separate
from the transaction specifically directed by the principal.” Id. at 593 (quoting Restatement (Third)
of Agency § 2.02). In other words, Kentucky law holds that even when an agent has the express
authority to engage in a particular transaction, exercise of that authority might be considered
unauthorized if the incidental consequences of the transaction are so significant that they call into
question the agent’s good faith.
Hibbard argues that such is the case in the instant matter. She contends that although David
Hibbard had the authority to sign the Residency Agreement in order to ensure her medical care,
the “legal consequences” of the arbitration agreement “are significant and separate from the
transaction specifically directed by the principal,” and thus he exceeded his authority under his
durable power of attorney when he signed it. To construct this argument, Hibbard relies on Ping,
where the Supreme Court of Kentucky found that a power of attorney agreement specifically
authorizing the agent to make decisions reasonably necessary for the principal’s medical care was
not sufficient to authorize the agent’s decision to execute a binding but optional arbitration
agreement as part of a residency agreement at a nursing home.
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But in making her argument, Hibbard ignores clear language in Ping distinguishing it from
the circumstances of the instant case. In Ping, the Supreme Court of Kentucky explicitly based its
holding on the fact that the agent was only given the authority to make decisions reasonably
necessary for the principal’s medical care, and the arbitration agreement was optional. By
agreeing to the arbitration clause, the agent significantly limited the legal rights of the principal
and did so in a situation where it was not necessary. Unlike Ping, the arbitration agreement in the
present case was a mandatory component of the Residency Agreement. And as the Court in Ping
stated, “where an agreement to arbitrate is presented to the patient as a condition of admission to
the nursing home, courts have held that the authority incident to a health-care durable power of
attorney includes the authority to enter such an agreement.” Ping, 376 S.W.3d at 593.
Even if Ping had not been careful to distinguish its holding from cases like the present one,
David Hibbard’s durable power of attorney authorized a much broader set of actions than that
found in Ping. The agent in Ping had only the authority to make reasonably necessary medical
decisions and was thus limited to acting in pursuit of that power. David Hibbard, however, was
granted the power “to institute, prosecute, appear in, defend, compromise, arbitrate, settle, or
dispose of any legal, equitable, or administrative hearings, actions, suits, attachments, claims or
other proceedings . . . to which I am or may become a party or in which I have an interest.” (DE 13, at 1). David Hibbard’s authority to sign an arbitration agreement was an express component of
his authority, rather than an incidental consequence of his power to make healthcare decisions.
Thus, the defendant’s argument that David Hibbard lacked authority to enter into the arbitration
agreement on her behalf is without merit.
Finally, in her motion to dismiss Hibbard makes one more argument as to why this Court
should not enforce the arbitration agreement pursuant to the requirements of the FAA. She
contends that the arbitration agreement in this case is not governed by the FAA because it does
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not evidence a transaction involving interstate commerce. The FAA applies to “contract[s]
evidencing a transaction involving commerce.” 9 U.S.C. § 2. Under this provision, the scope of the
FAA mirrors Congress’s Article I power to regulate interstate commerce. See Citizens Bank v.
Alafabco, Inc., 539 U.S. 52, 56 (2003) (“We have interpreted the term ‘involving commerce’ in the
FAA as the functional equivalent of the more familiar term ‘affecting commerce’—words of art that
ordinarily signal the broadest permissible exercise of Congress’ Commerce Clause power.”).
Hibbard contends that the arbitration agreement evidences only an intrastate contract and is
therefore outside the scope of the FAA. But because its scope runs parallel to the Commerce
Clause, “the FAA encompasses a wider range of transactions than those actually . . . within the
flow of interstate commerce.” Id. This means that the FAA will extend to transactions “in
individual cases without showing any specific effect upon interstate commerce if in the aggregate
the economic activity in question would represent a general practice . . . subject to federal control.”
Id. at 56–57.
There is no dispute that the transaction in this case falls within the scope of the FAA. Hibbard
correctly contends that the care provided to her occurred only within the borders of Kentucky, but
this is not the relevant question at issue. As another court explained in a similar case, “[t]he food,
medicine, and durable medical supplies that [the plaintiffs] provided must come from somewhere.”
Warner, 2013 WL 6796421 at *8. There is no suggestion by Hibbard that the services rendered by
the plaintiffs were done so without the use of any goods purchased through interstate commerce,
and the Court would be skeptical of such a claim. More importantly, the “general activity” of
providing healthcare to Hibbard—even if contained to an intrastate market in this individual
case—is without a doubt the kind of activity that in the aggregate is subject to federal control
under the Commerce Clause. See Warner, 2013 WL 6796421 at *7–8. The arbitration agreement in
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this case is a component of a larger contract that evidences a transaction involving interstate
commerce.
The arbitration agreement in this case is valid and enforceable under both the FAA and
Kentucky law. Because this agreement is valid, Hibbard must submit her claims regarding the
care and treatment at her nursing home facility to arbitration according to the agreement’s terms.
B. Injunction Prohibiting Pursuit of Pending State-Court Action
Having found that Hibbard must submit her claims to arbitration, the question turns to
whether this Court should enjoin the defendant from pursuing her parallel action in state court.
The Court finds that such an injunction is necessary, and the defendant is enjoined from
proceeding with her state-court action. “Although the FAA requires courts to stay their own
proceedings where the issues to be litigated are subject to an agreement to arbitrate, it does not
specifically authorize federal courts to stay proceedings pending in state courts.” Great Earth, 288
F.3d at 893 (quoting Ultracashmere House, Ltd. V. Meyer, 664 F.2d 1176, 1180 (11th Cir. 1981))
(internal citations omitted). For this reason, “the district court’s authority to enjoin state-court
proceedings is subject to the legal and equitable standards for injunctions generally, including the
Anti Injunction Act.” Id. Pursuant to the Anti-Injunction Act, “[a] court of the United States may
not grant an injunction to stay proceedings in a State court except as expressly authorized by Act
of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.”
28 U.S.C. § 2283 (emphasis added).
An injunction in this case “properly falls within the exception for injunctions ‘necessary to
protect or effectuate [this Court’s] judgments.’” Great Earth, 288 F.3d at 894. The Court has
determined that the parties entered into a binding arbitration agreement covering the scope of
Hibbard’s claims. Having made such a determination and compelling Hibbard to submit to
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arbitration, it is necessary to enjoin Hibbard from pursing her claims in any alternative forum,
including state court. Otherwise, Hibbard would be permitted to circumvent her arbitration
agreement and in doing so, circumvent this Court’s judgment that she be compelled to arbitrate
her claims. Accordingly, the Court will order that Hibbard be enjoined from proceeding with her
pending state-court action.
IV.
The Court has found that the plaintiff corporations and Defendant Marilyn O. Hibbard entered
into a binding and valid arbitration agreement that covers within its scope Hibbard’s claims
brought in the pending action in Fayette Circuit Court. Because this agreement is valid, Hibbard
must submit her claims to arbitration and is enjoined from proceeding with her state-court action.
Accordingly, IT IS ORDERED that:
1. The defendant’s motion to dismiss (DE 4) is DENIED;
2. The plaintiffs’ motion to compel arbitration and enjoin the state-court proceedings (DE 6) is
GRANTED;
3. Marilyn O. Hibbard is COMPELLED to submit her claims to arbitration according to the
terms of her agreement and ENJOINED from proceeding with her action in state court;
and
4. The Court will stay this proceeding until the conclusion of the ordered arbitration.
Dated this 4th day of June, 2014.
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