Brookdale Senior Living Inc. et al v. Caudill

Filing 9

MEMORANUM OPINION AND ORDER: (1) Dft's 4 MOTION to Dismiss is DENIED. (2) Pla's 6 MOTION to Compel Arbitration and MOTION to Enjoin Defendant are GRANTED. (3) Pursuant to the Federal Arbitration Act, Dft Paul S. Caudill is COMPEL LED to submit his claims to arbitration under the terms of the arbitration agreement. Further Caudill is ENJOINED from pursuing his claims in the parallel state-court action. (4) This matter is STAYED until the ordered arbitration is concluded. The parties are directed to submit a joint status report regarding the progress of arbitration by December 8, 2014. Signed by Judge Danny C. Reeves on July 10, 2014. (AWD) cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
(at Lexington)
BROOKDALE SENIOR LIVING, INC.,
et al.,
Plaintiffs,
V.
PAUL S. CAUDILL, as Administrator of
the Estate of June Holliday, Deceased,
Defendant.

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Civil Action No. 5: 14-098-DCR

MEMORANDUM OPINION
AND ORDER

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Defendant Paul S. Caudill is the Administrator of the Estate of June Holliday. This
matter is pending for consideration of Caudill’s motion to dismiss this action. Conversely,
the plaintiffs have moved the Court to compel arbitration and enjoin Caudill from continuing
his state court action against them. [Record Nos. 4, 6] For the reasons set forth below, the
Court will compel arbitration and deny the defendant’s motion to dismiss. Additionally, the
Court will enjoin Caudill from pursuing the underlying state action.
I.
On November 19, 2013, Caudill filed an action in the Fayette Circuit Court regarding
the care and treatment of June Holliday at Richmond Place Rehabilitation and Health Center.
[Record No. 1-2]

On behalf of Holliday’s estate, Caudill alleged negligence, medical

negligence, corporate negligence, violation of a long term care resident’s rights, and
wrongful death against several entities and individuals. [Record No. 1-2] The defendants

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named in that action include: Brookdale Senior Living, Inc.; BLC Lexington SNF, LLC d/b/a
Richmond Place Rehabilitation and Health Center; American Retirement Corporation;
Richmond Place Administrator Jamie Gitzinger; Richmond Place Director of Nursing
Michele Combs; Richmond Place Assistant Director of Nursing Karen Hatfield; Richmond
Place Executive Director Carol Brinegar; Brookdale Senior Living, Inc. Regional Clinical
Nursing Consultant; and Brookdale Senior Living, Inc. Division Vice President Fred Ewing
(collectively, “the state court defendants”). [Id.]
The state court defendants asserted in their Answer that the claims are subject to a
binding alternative dispute resolution agreement contained in Holliday’s residency
agreement. The residency agreement was signed on May 16, 2012 – the date of Mrs.
Holliday’s admission into the nursing home – by Mrs. Holliday’s son, Caudill, acting as her
attorney-in-fact. [Record No. 1-1] The arbitration provision states, in relevant part:
Any and all claims or controversies arising out of or in any way relating to this
Agreement or the Resident’s stay at the company, excluding any action for
eviction, including disputes regarding the making, execution, validity,
enforceability,
voidability,
unconscionability,
severability,
scope,
interpretation, waiver, duress or any other defense to enforceability of this
Agreement or this Arbitration Provision, 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.
The parties to this Agreement further understand that a jury will not decide
their case.
[Record No. 1-1 (emphasis in original).]
Three of the nursing home state court defendants (Brookdale Senior Living Inc., BLC
Lexington SNF, LLC, and American Retirement Corporation) filed this action under the

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Federal Arbitration Act (“FAA”), seeking to compel arbitration and enjoin Caudill from
pursuing his claims against them in state court. Caudill then moved to dismiss the action,
arguing that this Court lacks subject matter jurisdiction, that the plaintiffs failed to join an
indispensable party, and that the arbitration agreement is unenforceable for a variety of
reasons.
II.
A.

Rule 12(b)(1)

Federal district courts have original jurisdiction over civil actions between citizens of
different states if the amount in controversy exceeds $75,000.00, exclusive of interest and
costs. 28 U.S.C. § 1332(a). If lack of subject-matter jurisdiction is raised in a motion to
dismiss, the plaintiff “bears the burden of proving jurisdiction . . . to survive the motion.”
Mich. S. R.R. Co. v. Branch & St. Joseph Counties Rail Users Ass’n, 287 F.3d 568, 573 (6th
Cir. 2002). However, the plaintiff will “survive the motion to dismiss by showing ‘any
arguable basis in law’ for the claims set forth in the complaint.” Id. (quoting Musson
Theatrical, Inc. v. Fed. Express Corp., 89 F.3d 1244, 1248 (6th Cir. 1996)).
Motions to dismiss based on Rule 12(b)(1) “generally come in two varieties: a facial
attack or a factual attack.” Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320,
330 (6th Cir. 2007). A facial attack “questions merely the sufficiency of the pleading.” Id.
Thus, the Court must accept the “allegations in the complaint as true” when reviewing a
facial attack, and “[i]f those allegations establish federal claims, jurisdiction exists.” Id. A
factual attack, on the other hand, is “not a challenge to the sufficiency of the pleading’s
allegations, but a challenge to the factual existence of subject matter jurisdiction.” United

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States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). When considering a factual attack, there
is no presumption of truthfulness applied to the allegations. Instead, the Court “must weigh
the conflicting evidence to arrive at the factual predicate that subject-matter [jurisdiction]
does or does not exist.” Gentek, 491 F.3d at 330.
B.

Rule 12(b)(6)

When evaluating a motion to dismiss under Rule 12(b)(6), the Court must determine
whether the complaint alleges “sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The plausibility standard is met “when
the plaintiff pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
This standard requires “more than a sheer possibility that a defendant has acted unlawfully.”
Id. Thus, although the complaint need not contain “detailed factual allegations” to survive a
motion to dismiss, “a plaintiff’s obligation to provide the grounds of his entitlement to relief
requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Twombly, 550 U.S. at 555 (internal quotation marks and
alteration omitted).
III.
A.

Subject Matter Jurisdiction

Under the FAA, a district court has jurisdiction over a petition to compel arbitration
only if the court would have jurisdiction over “a suit arising out of the controversy between
the parties” without the arbitration agreement. 9 U.S.C. § 4. That is, the FAA “bestow[s] no

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federal jurisdiction but rather require[s] an independent jurisdictional basis’ [for access to a
federal forum] over the parties’ dispute.” Vaden v. Discover Bank, 556 U.S. 49, 59 (2009)
(quoting Hall Street Assoc., LLC v. Mattel, Inc., 552 U.S. 576, 581-82 (2008) (internal
quotation marks omitted)); see also Moses. H. Cone Mem. Hosp. v. Mercury Const. Corp.,
460 U.S. 1 (1983). Thus, § 4 of the FAA neither expands nor contracts federal subject matter
jurisdiction. Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 747 n.7 (8th Cir.
1986). A petitioner proceeding under § 4 must assert an independent source of subject
matter jurisdiction. Here, the plaintiffs assert that the Court has subject matter jurisdiction
pursuant to 18 U.S.C. § 1332, the Court’s diversity jurisdiction.
Caudill first argues that the Court lacks subject matter jurisdiction because complete
diversity is lacking. Yet, diversity exists on the face of the federal Complaint. Plaintiff
Brookdale Senior Living, Inc., is a corporation formed under the laws of Delaware with its
principal place of business in Tennessee. [Record No. 1, p. 7] Plaintiff BLC Lexington
SNF, LLC, is a limited liability company formed under the laws of Delaware with its
principal place of business in Tennessee.

[Id.]

And Plaintiff American Retirement

Corporation, is a corporation formed under the laws of Tennessee with its principal place of
business in Tennesee. [Id.] Conversely, Caudill is a citizen of the Commonwealth of
Kentucky. [Id.]
Regarding the amount in controversy, “courts uniformly appl[y] a limited ‘look
through’ approach, determining whether the value at stake in the arbitration being sought in
the federal action could exceed $75,000, regardless [of] whether the claim(s) to be arbitrated
were part of a broader parallel state court action in which the total amount in controversy

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might be greater.” Northport Health Servs. of Arkansas, LLC v. Rutherford, 605 F.3d 483,
486-87 (8th Cir. 2010) (emphasis added) (internal quotation marks omitted). The claims that
the plaintiffs seek to arbitrate are for actual and punitive damages related to alleged
substandard medical care provided to Holliday while residing at the nursing home. [See
Record No. 1.] The plaintiffs have adequately shown that the amount in controversy exceeds
$75,000.00, exclusive of interest and costs. See 28 U.S.C. § 1332.
Caudill does not challenge that diversity jurisdiction exists based on the Complaint
itself. Rather, he contends that the Court lacks subject matter jurisdiction because the Court
should look through to the underlying controversy (which includes non-diverse defendants)
to find that diversity jurisdiction is defeated. Additionally, Caudill argues that the plaintiffs
have failed to join indispensable parties (i.e., the nursing home administrators that were sued
as joint tortfeasors in the state court action) that would destroy diversity.
1.

“Look Through” Approach

Caudill contends that the Court lacks subject matter jurisdiction because of the
Supreme Court’s decision in Vaden v. Discover Bank, 556 U.S. 49 (2009). The plaintiffs
counter that Vaden’s holdings are inapplicable to cases premised on diversity jurisdiction. In
Vaden, a credit card company, Discover, sued a cardholder for past-due charges in state
court. Id. at 53. The cardholder asserted state law counterclaims that Discover considered
preempted by federal banking law. Id. Discover also filed a § 4 petition in federal district
court to compel the arbitration of the counterclaims. Id. at 54. Tracking the language of 18
U.S.C. § 1331, the Court held that a federal court should “look through” a § 4 petition to
determine whether it is predicated on a controversy that “arises under” federal law. Id. at 66.

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The Vaden Court found that, when looking through to the whole controversy between the
parties, the action did not qualify for federal-court adjudication because there was no federal
question. Thus, the Supreme Court held that the district court lacked subject matter
jurisdiction. Id. at 72.
Although Caudill asserts that the Supreme Court’s conclusion in Vaden “appl[ies] to
the analysis of diversity cases as well as [] federal question cases,” he provides no support
for this contention.1 [Record No. 4-1, p. 14] Courts confronting the issue have consistently
rejected the “look through” analysis when considering whether the parties to a controversy
are completely diverse. See, e.g. Northport Health Servs. of Arkansas, LLC v. Rutherford,
605 F.3d 483, 490-91 (8th Cir. 2010). In Northport, the Eighth Circuit considered that the
Supreme Court “carefully limited its statement of the issues and holding to federal question
jurisdiction” and “cited the circuit court cases creating the federal question conflict but did
not cite any of the circuit court § 4 diversity cases.” Northport, 605 F.3d at 490-91. The
Northport Court was critical of a broad reading of Vaden, noting that the argument that
Vaden is equally applicable to diversity cases “distorted the Supreme Court’s decision.” Id.
at 488.
This Court is persuaded by the Eighth Circuit’s approach in Northport. See Sun
Healthcare Group, Inc. v. Dowdy, No. 5:13-CV-169, 2014 U.S. Dist. LEXIS 24285, *11

1

As noted by Judge Caldwell when considering a similar argument, Caudill’s argument is not
totally lacking in merit. Some of the Vaden Court’s broader statements could be read in the way Caudill
advances. See Vaden, 556 U.S. at 66. (“[W]e read § 4 to convey that a party seeking to compel
arbitration may gain a federal court’s assistance only if, ‘save for’ the agreement, the entire actual
‘controversy between the parties,’ as they have framed it, could be litigated in federal court.”) However,
the conclusion in Vaden is narrowed to federal question jurisdiction, and the issue was whether the

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(W.D. Ky. Feb. 26, 2014) (following the “well-reasoned” approach of the Eighth Circuit in
rejecting a similar argument). Further, other courts within this Circuit have found that Vaden
is limited to cases involving federal question jurisdiction. See Brookdale Senior Living v.
Teresa Stacy, No. 5:13-290-KKC, 2014 U.S. Dist. LEXIS 84460 (E.D. Ky. June 20, 2014)
(finding that Vaden does not apply to a diversity action under the same facts); Credit
Acceptance Corp. v. Davisson, 644 F. Supp. 2d 948, 953 (N.D. Ohio 2009) (“[T]he Vaden
Court explicitly limited its holding to cases where the controversy underlying the § 4 petition
involves federal-question jurisdiction.”). As a result, the Court will not “look through” to the
underlying state court action to find that diversity jurisdiction is defeated.
2.

Failure to Join – Indispensable Party

The defendant also argues that this Court lacks jurisdiction because certain
administrators who are named as defendants in the underlying state court action are
indispensable parties to the current controversy. “As with any federal action, diversity of
citizenship is determined by reference to the parties named in the proceeding before the
district court, as well as any indispensable parties who must be joined pursuant to Rule 19.”
Northport, 605 F.3d at 486 (quoting Doctor's Assocs. v. Distajo, 66 F.3d 438, 445 (2d Cir.
Conn. 1995)). Under Rule 19, the Court must first look to whether the individual defendants
are necessary parties. See PaineWebber, Inc. v. Cohen, 276 F.3d 197, 200 (6th Cir. 2001)
A party is necessary if:
(A)

in that person’s absence, complete relief cannot be accorded among those
already parties; or

controversy “arises under” federal law. See id. As a whole, it is clear that Vaden does not extend beyond
federal question jurisdiction.

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(B)

the person claims an interest relating to the subject of the action and is so
situated that the disposition of the action in the person’s absence may:
(i)

as a practical matter, impair or impede the person’s ability to
protect the interest; or

(ii)

leave an existing party subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations because
of the interest.

Fed. R. Civ. P. 19.
A person’s status as a joint tortfeasor does not make that person a necessary party,
much less an indispensable party. Id. at 204. Because the nursing home administrators have
been sued in the underlying state-court action, they have an interest in the controversy and
their absence from this matter results in claims left undecided. Thus, the Court will assume
that the state court defendants who are not joined in this action are necessary parties. See
Shields v. Barrow, 58 U.S. 130, 139 (1854) (a necessary party is one having an interest in the
controversy, and whose absence would result in some aspect of the suit being left
outstanding).
Because the nursing home administrators would destroy diversity jurisdiction, the
question becomes whether they are indispensable for the purposes of Rule 19. Provident
Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 118 (1968); PaineWebber, 276
F.3d at 200. The factors to consider regarding whether a party is indispensable include:
(1)

the extent to which a judgment rendered in the person’s absence
might prejudice that person or the existing parties;

(2)

the extent to which any prejudice could be lessened or avoided
by:

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(A)

protective provisions in the judgment;

(B)

shaping the relief; or

(C)

other measures;

(3)

whether a judgment rendered in the person’s absence would be
adequate; and

(4)

whether the plaintiff would have an adequate remedy if the
action were dismissed for nonjoinder.

Fed. R. Civ. P. 19(b).

The Court’s focus when weighing these factors is equity and good

conscience. Republic of Philippines v. Pimentel, 553 U.S. 851 (2008).
Looking to the first factor, Caudill asserts that he will be prejudiced by having to
pursue separate causes of action in both state and federal court. [See Record No. 4-1, p. 19.]
Yet the risk of having to proceed simultaneously in both courts (or in more than one
arbitration proceeding) is the result of Caudill’s decision to file suit in state court rather than
demand arbitration under the agreement.

PaineWebber, 276 F.3d at 200-06; see also

GGNSC Vanceburg, LLC v. Hanley, No. 13-106-HRW, 2014 U.S. Dist. LEXIS 42355, *11
(E.D. Ky. Mar. 28, 2014). As the Sixth Circuit has noted, “the possibility of piecemeal
litigation is an inevitable consequence of the FAA’s policy favoring arbitration.”
PaineWebber, 276 F.3d at 203. Likewise, the potential of this Court reaching a conflicting
conclusion when interpreting the arbitration agreement does not present the degree of
prejudice necessary to find the administrative defendants indispensable to this action. See id.
Rather, this possibility exists because of Caudill’s decision to name the corporate defendants
and administrative defendants in the state court action. Hanley, 2014 U.S. Dist. LEXIS
42355, at * 12.

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The final factor weighs in Caudill’s favor. [See Record No. 5, p. 8.] The plaintiffs
admit that they could seek to compel arbitration in the state court action. Thus, they have an
adequate remedy if the action were dismissed for nonjoinder. [Id.] Yet “the potential
existence of another forum does not, in and of itself, outweigh a plaintiff’s right to the forum
of his or her choice.” PaineWebber, 276 F.3d at 205. Other courts within this Circuit have
found that a nursing home administrator is not an indispensable party by virtue of being a
party to the underlying state-court action.2 GGNSC Louisville Hillcreek, LLC v. Warner, No.
3:13-CV-752-H, 2013 U.S. Dist. LEXIS 178136, *3-4 (W.D. Ky. Dec. 18, 2013); see also
Stacy, 2014 U.S. Dist. LEXIS 84460, at *16-17. And “every circuit to consider the issue[]
has concluded that a party joined in a parallel state court contract or tort action who would
destroy diversity jurisdiction is not an indispensable party under Rule 19 in a federal action
to compel arbitration.” Northport, 605 F.3d at 491 (citing Brown v. Pac. Life Ins. Co., 462
F.3d 384, 393-94 (5th Cir. 2006)); Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83
(4th Cir. 2005); and Paine Webber, 276 F.3d at 202-06.
After balancing the factors of Rule 19(b) and considering the Sixth Circuit’s rejection
of nearly-identical arguments, the Court finds that the state court administrators are not
indispensable parties. Caudill’s motion to dismiss will be denied.

2

Although Caudill spends a considerable amount of time arguing about the merits of his claims
against the nursing home administrators, the Court need not address these assertions because those
individuals are not parties to this action. [Record No. 4-1, pp. 9-11] In addition, Caudill’s discussion of
Cytec Industries, Inc. v. Powell, 630 F. Supp. 2d 580 (N.D.W. Va. 2009), is not persuasive because the
Sixth Circuit has spoken clearly regarding Caudill’s current arguments.

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B.

Abstention

Alternatively, Caudill argues that should the Court should abstain from exercising
jurisdiction under the abstention doctrine announced in Colorado River Water Conservation
District, et al. v. United States, 424 U.S. 800, 813 (1976). The factors to consider when
deciding whether to abstain from exercising jurisdiction under Colorado River include:
(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.

PaineWebber, 276 F.3d at 206 (citing Romine v. Compuserve Corp., 160 F.3d 337, 340-41
(6th Cir. 1998)).
The Court begins its analysis with the most important of these factors, 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 Ky., Inc. v.
Creation Ministries Int’l, Ltd., 556 F.3d 459, 467 (6th Cir. 2009) (internal quotation marks
omitted). The Sixth Circuit has answered this question in the negative: “[i]n the case of the
[FAA], there most clearly is not such a policy.” Id. at 467. This is due in part to the strong
federal policy favoring arbitration, “even where the result would be the possibly inefficient

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maintenance of separate proceedings in different forums.” Id. at 467-68. Thus, the most
important factor counsels in favor of exercising jurisdiction.
Other factors counsel against abstention. There is no indication that the state court
has assumed jurisdiction over any res or property, nor is there any indication that the federal
forum is less convenient to the parties than the Kentucky state court. See Stacy, 2014 U.S.
Dist. LEXIS 84460, at *19 (where the state court has not assumed jurisdiction over property
and both courts are geographically convenient, these factors go against abstention). The
remaining factors are mixed.

Factors four, seven, and eight slightly favor abstention.

Caudill filed the state court action on November 19, 2013, and the plaintiffs in this case filed
the action to compel on March 13, 2014. [Record No. 1] And although the state court action
was filed first, both matters are still in the pleading stage. [Record No. 4-1, p. 24] The fifth
factor also cuts against abstention. See PaineWebber, 276 F.3d at 208-09 (where the FAA is
the basis of interpreting the disputed arbitration agreement this factor weighs in favor of
exercising jurisdiction).
The Court is also mindful that abstention “is the exception, not the rule.” Colorado
River Water, 424 U.S. at 813. “The 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, 288 F.3d at 886 (internal quotation marks omitted). The most important factor in this
case counsels in favor of exercising jurisdiction. On balance, the other factors are not of
such a heavy weight to demand abstention.

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IV.
Having settled the threshold questions of jurisdiction and abstention, the Court turns
to the merits of the plaintiffs’ claims. The plaintiffs have moved to compel arbitration under
the agreement.

Under the FAA, arbitration clauses “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. This section of the FAA “is a congressional declaration of a liberal
federal policy favoring arbitration agreements, notwithstanding any state substantive or
procedural policies to the contrary.” Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, 595
(6th Cir. 1995) (internal quotation marks omitted) (citing Moses H. Cone, 460 U.S. at 24).
When considering a motion to compel arbitration, the Court considers: (i) whether the
parties agreed to arbitrate the claims; (ii) the scope of the arbitration agreement; (iii) whether
there are any federal statutory claims that are non-arbitrable; and (iv) whether to stay any
proceedings not subject to arbitration. Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir.
2000). Although Kentucky law governs the interpretation of the arbitration agreement, the
“liberal federal policy favoring arbitration agreements” must be taken into account even
when state-law issues are presented. Moses H. Cone, 460 U.S. at 24. Any doubts regarding
the parties’ intentions should be resolved in favor of arbitration. Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985).
A.

Agreement to Arbitrate

The arbitration provision in issue states that “any and all claims or controversies
arising out of, or in any way relating to, this Agreement,” which includes any “disputes

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regarding the making, execution, validity, enforceability, voidability, unconscionability,
severability, scope, interpretation, waiver duress, or any other defense,” are subject to
binding arbitration. [Record No. 1-1] The agreement states in a separate provision that the
parties “understand that a jury will not decide their case.” [Id.] Defendant Caudill – acting
under Holliday’s grant of a general power-of-attorney – signed the residency agreement on
behalf of Holliday. [See Record No. 6-1.]
Caudill asserts that the parties did not agree to arbitrate any claims. The main crux of
his argument is that he lacked the authority under his power-of-attorney agreement to bind
his mother’s estate to arbitration. [Record No. 7, p. 4] He relies heavily on the Supreme
Court of Kentucky’s decision in Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky.
2012), in support of this contention. In Ping, the court was faced with the enforceability of
an arbitration agreement executed by a nursing home resident’s daughter vested with a
durable power of attorney. Id. at 586. Ping’s daughter was granted a general power-ofattorney and was authorized to perform certain functions relating to collection of money,
management of accounts, sale of property, and decisions regarding medical care. Id. The
agreement in Ping contained an optional arbitration agreement whereby any of Ping’s claims
against the nursing home were subject to binding arbitration. Id. at 588-89. Analyzing
Kentucky agency law, the court held that Ping’s daughter lacked the authority to bind her to
an arbitration agreement under the general power-of-attorney. Id. at 590. In reaching this
decision, the distinction between an optional versus a non-optional residency agreement was
critical.

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On the one hand, 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. . . . On the other hand, where, as here,
the arbitration agreement is not a condition of admission to the nursing home,
but is an optional, collateral agreement, courts have held that authority to
choose arbitration is not within the purview of a health-care agency, since in
that circumstance agreeing to arbitrate is not a “health care” decision.
Id. at 593 (internal citations and quotation marks omitted).
Unlike the facts in Ping, Caudill was vested with “the full authority to act on
[Holliday’s] behalf in relation to all of [her] property and affairs.” [Record No. 6-1] And
there is a further critical distinction.

Holliday’s residency agreement contained the

arbitration provision as part and parcel of a “condition of admission,” rather than as a
separate, optional agreement. [Record No. 1-1] Caudill’s argument that the holding in Ping
mandates a finding that the arbitration agreement here is unenforceable is unavailing.3 See
Stacy, 2014 U.S. Dist. LEXIS 84460, at *36-37. Instead, the arbitration agreement will be
enforced. See id. (rejecting a similar argument in the same context); Hanley, 2014 U.S. Dist.
LEXIS 42355 (enforcing a similar arbitration agreement).
B.

Interstate Commerce & Validity

The FAA extends to transactions “in individual cases without showing any specific
effect upon interstate commerce if in the aggregate the economic activity would represent a
general practice . . . subject to federal control. Stacy, 2014 U.S. Dist. LEXIS 84460, at *38
(quoting Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56-57 (2003)). Numerous other courts

3

Because Ping is distinguishable from this case, the Court need not address the plaintiffs’
argument that Ping is preempted by the FAA. [See Record No. 6-2, p. 9 (citing Sout, 228 F.3d at 716)
(The FAA preempts state laws that are hostile to the purpose of the FAA); see also Record No. 7, pp. 11-

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have found that similar nursing home residency agreements are contracts “evidencing a
transaction involving commerce” pursuant to the FAA. See Stacy, 2014 U.S. Dist. LEXIS
84460, at *38-39; see also Hanley, 2014 U.S. Dist. LEXIS 42355, at *22-24; GGNSC
Vanceburg, LLC v. Taulbee, No. 5:13-CV-71-KSF, 2013 U.S. Dist. LEXIS 110878, at *4
(E.D. Ky. Aug. 7, 2013); and Warner, 2013 U.S. Dist. LEXIS 178136, at *8. And with good
reason. “The Supreme Court has interpreted the language ‘involving commerce’ in the FAA
as signaling the broadest permissible exercise of Congress’ Commerce Clause power.”
Dowdy, 2014 U.S. Dist. LEXIS 24285, at *31. The agreement here “is a component of a
larger contract that evidences a transaction involving interstate commerce.” Stacy, 2014 U.S.
Dist. LEXIS 84460, at *39. Interstate commerce is interpreted broadly and healthcare is an
economic activity that represents a general practice subject to federal control. See Ping, 376
S.W.3d at 589 (citing Alafabco, 539 U.S. at 56-57). Accordingly, Caudill’s objection on this
point is without merit.
Next, ignoring the fact that the arbitration agreement itself states that any claims that
the agreement is unconscionable or void are themselves subject to arbitration, Caudill attacks
the arbitration agreement on grounds of unconscionability and public policy. [Record No. 7,
p. 15] These arguments “have been squarely rejected by numerous courts.” Stacy, 2014 U.S.
Dist. LEXIS 84460, at *26. The unconscionability doctrine “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, 341-41 (Ky. Ct. App. 2001) (emphasis added).
14.]

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Caudill’s arguments regarding unconscionability of the agreement attack arbitration at its
core. Yet, these arguments ignore the “liberal federal policy favoring arbitration agreements,
notwithstanding any state substantive or procedural policies to the contrary.” Asplundh Tree,
71 F.3d at 595.
Caudill also argues that the arbitration agreement is against the public policy of
Kentucky. But the FAA “requires courts to enforce the bargain of the parties to arbitrate.”
See Marmet Health Care Center, Inc. v. Brown, 132 S. Ct. 1201, 1204 (2012). Caudill also
briefly states that the Court should permit discovery into the circumstances surrounding the
execution of the agreement, without any indication of what discovery would accomplish.
[Record No. 7, p. 15]

Finally, Caudill contends that the arbitration agreement is

unenforceable because the contract contains a limitation on liability that Caudill argues is
unenforceable. However, even if that were true, any unenforceable provision within the
agreement would be severable from the arbitration agreement itself. See Stacy, 2014 U.S.
Dist. LEXIS 84460, at *31-32. The clauses here are not so intertwined with each to be unseverable. See Francis v. Cute Suzie, LLC, No. 3: 10-CV-00704, 2011 U.S. Dist. LEXIS
58840, *1 (W.D. Ky. June 2, 2011) (an arbitration clause is valid despite an accompanying
limitation on liability because the limitation is severable in the event it is found
unconscionable).
None of the proffered reasons excuse Caudill from his obligation to arbitrate. Instead,
the Court finds that the agreement is valid and enforceable, and its broad terms clearly dictate
that Caudill’s claims are subject to arbitration. Caudill will be compelled to submit his

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claims regarding Holliday’s alleged substandard care to arbitration pursuant to the terms of
the arbitration agreement.
C.

Injunctive Relief

The Sixth Circuit has held that a district court may enjoin state-court proceedings
after compelling arbitration, and that activity does not violate the Anti-Injunction Act. Great
Earth, 288 F.3d at 893. Although they are “a delicate matter,” injunctions are sometimes
appropriate to protect the final judgment of the Court on an issue. See In re Arbitration
Between Nuclear Elec. Ins. Ltd. and Cent. Power & Light Co., 926 F. Supp. 428, 436
(S.D.N.Y. 1996) (“The courts in this district have consistently held that a stay [of state-court
proceedings], when issued subsequent to or in conjunction with an order compelling
arbitration concerning the same subject matter as the state-court proceeding, falls within one
or both of [the aid of jurisdiction exception or the relitigation exception].”); accord
TranSouth Fin. Corp. v. Bell, 149 F.3d 1292, 1297 (11th Cir. 1998) (“When a federal court
has ordered arbitration, a stay of the state-court action may be necessary to insure that the
federal court has the opportunity to pass on the validity of the arbitration award.”). An
injunction in this context falls within the exception because it is “necessary . . . to protect or
effectuate [the Court’s] judgments.” Great Earth, 288 F.3d at 893.
Although “it is doubtful that a state court would proceed where another court of
proper jurisdiction has ruled on the validity of an arbitration agreement,” the plaintiffs here
seek, and are entitled to, this assurance. Hanley, 2014 U.S. Dist. LEXIS 42355, at *27-28.
Having found that the parties entered into a binding arbitration agreement covering the scope
of Caudill’s claims against these three state court defendants, an injunction will effectuate the

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Court’s determination. Accordingly, the Court will enjoin Caudill from pursuing his claims
against the plaintiffs in his parallel state court case.
V.
For the foregoing reasons and analysis, it is hereby
ORDERED as follows:
1.

Defendant Paul S. Caudill’s motion to dismiss [Record No. 4] is DENIED.

2.

Plaintiffs Brookdale Senior Living, Inc., BLC Lexington SNF, LLC, and
American Retirement Corporation’s motion to compel arbitration and motion
to enjoin the defendant [Record No. 6] are GRANTED.

3.

Pursuant to the Federal Arbitration Act, Defendant Paul S. Caudill is
COMPELLED to submit his claims to arbitration under the terms of the
arbitration agreement. Further, Paul S. Caudill is ENJOINED from pursuing
his claims in the parallel state-court action.

4.

This matter is STAYED until the ordered arbitration is concluded. The parties
are directed to submit a joint status report regarding the progress of arbitration
by December 8, 2014.
This 10th day of July, 2014.

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