Preferred Care, Inc. et al v. Belcher
Filing
9
MEMORANDUM OPINION AND ORDER: (1) Dft Belcher's 4 Motion to Dismiss is DENIED. (2) Plas' 5 Motion to Compel Arbitration and Enjoin Dft is GRANTED. (3) Dft shall prosecute all of his claims arising out of his residency at Stanton Nursi ng and Rehabilitation Center in accordance with the terms of the arbitration agreement that he signed. (4) Belcher is ENJOINED from pursing the pending state court action against Pla before the Powell Circuit Court. (5) This matter is STRICKEN FROM THE ACTIVE DOCKET, and following the conclusion of arbitration proceedings, either party may petition the Court to reopen this matter to take appropriate action as necessary. Signed by Judge Joseph M. Hood on March 31, 2015. (AWD) cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
PREFERRED CARE, INC., et al.,
)
)
)
)
)
)
)
)
)
)
)
Plaintiffs,
v.
KARL BELCHER,
Defendant.
Civil Case No. 14-cv-107-JMH
MEMORANDUM OPINION & ORDER
***
This
matter
is
before
the
Court
on
several
motions:
Defendant Karl Belcher’s Motion to Dismiss [DE 4; Response at DE
6] and Plaintiffs’ Motion to Compel Arbitration and Motion to
Enjoin Defendant [DE 5; Response at DE 7; Reply at DE 8].
These
motions are ripe for consideration.
As an initial matter, Defendant seeks dismissal of this
matter for lack of subject matter jurisdiction pursuant to Fed.
R. Civ. P. 12(b)(1) and for failure to join a necessary party
pursuant to Fed. R. Civ. P. 12(b)(7).
Defendant also asks this
Court to abstain from exercising any jurisdiction that it might
have under the Colorado River abstention doctrine, which permits
a federal court to dismiss a cause pending before it in favor of
a
parallel
state
court
action
in
certain
circumstances.
Finally, Defendant asks this Court to dismiss Plaintiffs’ claim
pursuant
to
12(b)(6)
for
failure
to
state
a
claim,
on
the
grounds
that
the
unenforceable.
subject
ADR
Agreement
is
invalid
and
Plaintiff contends, in contrast, that the Court
has jurisdiction over this matter, that the Court should not
abstain,
and
that
the
ADR
Agreement
is
valid
and
should
be
enforced, as a matter of law.
For the reasons set forth below, Defendant’s Motion will be
denied, and Plaintiffs’ Motions will be granted.
I.
Karl
Belcher
was
a
resident
of
Stanton
Nursing
and
Rehabilitation Center f/k/a Stanton Nursing Center, located at
31 Derickson Lane, Stanton, Powell County, Kentucky 40380, from
2011
until
July
hospitalized.
of
On
2013,
January
except
31,
for
2014,
times
Defendant
when
he
was
filed
in
the
Circuit Court of Powell County, Kentucky, Case No. 14-CI-0020, a
negligence,
medical
negligence,
corporate
negligence,
and
violation of long term care resident’s rights, against Stanton
Health Facilities, LP d/b/a Stanton Nursing and Rehabilitation
Center;
Stanton
Partners
Health
Management
Facilities
Group,
L.P.;
GP,
LLC;
PCPMG,
LLC;
Preferred
Preferred
Care
Care,
Inc. d/b/a Preferred Care of Delaware, Inc.; Kentucky Partners
Management Group, LLC; Thomas Scott; and Stanton Administrator
Thomas
B.
Davis.
Court,
Belcher
In
claims
his
that,
complaint
while
he
filed
in
resided
Powell
at
Circuit
Stanton,
he
suffered physical and emotional injuries due to inadequate care
2
and that his health and physical condition deteriorated beyond
that caused by the normal aging process.
On
March
10,
2014,
the
defendants
in
the
Powell
County
Circuit Court Case filed an Answer to Karl Belcher’s Complaint
in
the
Powell
defendants’
County
Answer
Circuit
asserted
Court
that
the
Case.
The
State
State
Court
Court
claims
are
subject to a binding Alternative Dispute Resolution Agreement
(“ADR Agreement”). On March 21, 2014, the State Court corporate
defendants from the Powell County Circuit Court Case filed a
Complaint
with
this
Court,
as
Plaintiffs,
alleging
federal
subject matter jurisdiction by virtue of diversity and seeking
substantially
the
same
relief
from
this
Court
regarding
arbitration as they had demanded in State court; namely, to find
the
ADR
Agreement
to
be
valid
and
enforceable;
to
compel
Defendant to arbitrate the State Court claims; and to enter an
order enjoining the Defendant from pursuing his claims in the
State Court Action.
For the following reasons, Defendant moves this Court to
dismiss Plaintiffs’ Complaint.
II.
The purpose of a motion to dismiss pursuant to Fed.R.Civ.P.
12(b)(6), is to allow a defendant to test whether, as a matter
of law, the plaintiff is entitled to legal relief. See Mayer v.
Mylod,
988
F.2d
635,
638
(6th
3
Cir.
1993).
This
requires
a
consideration of and a ruling upon the merits of a claim. In
determining whether dismissal is warranted under Rule 12(b)(6),
the complaint must be construed in the light most favorable to
the nonmoving party and its allegations taken as true. Miller v.
Currie, 50 F.3d 373, 377 (6th Cir. 1995). If, in doing so, the
Court determines that the case is legally insufficient, it will
be dismissed,
The procedure under a motion to dismiss for lack of subject
matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) is quite
different.
At
issue
in
a
Rule
12(b)(1)
motion
is
the
trial
court's jurisdiction—its very power to hear the case. In this
context, the trial court may proceed as it never could under
12(b)(6)—no presumptive truthfulness attaches to either party's
allegations and the existence of disputed material facts will
not
preclude
merits
of
the
trial
jurisdictional
court
from
claims.
evaluating
Moreover
the
for
itself
party
the
claiming
jurisdiction will have the burden of proof that jurisdiction
does in fact exist. RMI Titanium Co. v. Westinghouse Electric
Corp., 78 F.3d 1125, 1134 (6th Cir. 1996)(internal citations
omitted).
III.
As an initial matter and in the face of Defendant’s Motion
to
Dismiss
Plaintiffs’
claims
pursuant
to
Fed.
R.
Civ.
P.
12(b)(1) and (7), the Court concludes that it has jurisdiction
4
to consider this matter.
Defendant argues that there is no
jurisdiction because Plaintiffs have failed to join a necessary
party under Rule 19 and, once the citizenship of that necessary
party is taken into account, there is a lack of subject-matter
jurisdiction under 28 U.S.C. § 1332 because (1) the parties will
not be of diverse citizenship and (2) the Federal Arbitration
Act
will
not,
alone,
create
a
federal
question
which
would
confer jurisdiction under 28 U.S.C. § 1331 in this matter upon
this Court. 1
As explained below, the Court disagrees with this
analysis.
A
Rule
12(b)(1)
motion
can
either
attack
the
claim
of
jurisdiction on its face, in which case all allegations of the
plaintiff
must
be
considered
as
true,
or
it
can
attack
the
factual basis for jurisdiction, in which case the trial court
must weigh the evidence and the plaintiff bears the burden of
proving
that
jurisdiction
exists.
See
RMI
Titanium
Co.
v.
Westinghouse Elec. Corp., 78 F.3d 1125, 1133–35 (6th Cir. 1996);
1
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 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). Section 4 of the FAA
“neither expand[s] nor contract[s] federal subject matter jurisdiction.”
Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 747 n. 7 (8th Cir.
1986). Thus, a petitioner proceeding under § 4 must assert an independent
source of subject matter jurisdiction. Here, the plaintiffs assert only that
the Court has diversity jurisdiction pursuant to 18 U.S.C. § 1332.
5
United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994); Ohio
Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th
Cir. 1990).
28 U.S.C. § 1332 provides that “district courts shall have
original jurisdiction of all civil actions where the matter in
controversy exceeds the sum or value of $75,000, exclusive of
interest and costs, and is between ... citizens of different
States,” and Plaintiff contends that this Court has jurisdiction
based on the diversity of the parties.
In the instant action,
there is no dispute that the amount in controversy exceeds the
sum
or
value
of
$75,000,
exclusive
of
interest
and
costs.
Further, there is no dispute that Defendant here is a resident
of Kentucky and that each of the named Plaintiffs in this action
is a citizen of another state.
However, Thomas B. Davis, the nursing home administrator
who is named as a defendant in Belcher’s state complaint but not
as a party in the present matter, is a citizen of Kentucky.
Defendant claims that complete diversity of citizenship among
the parties cannot be maintained because, while Davis is not
named as a plaintiff in this action, he is an indispensable
party under Fed. R. Civ. P. 19 and his joinder would destroy the
complete
diversity
1332(a)(1).
among
parties
required
by
28
U.S.C.
If lack of subject-matter jurisdiction is raised in
a motion to dismiss, the plaintiff “bears the burden of proving
6
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 [a] 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)).
The existence of a non-diverse party in the related state
court action does not, on its own, destroy diversity:
Rule 19 deals with what were historically
known as “necessary” and “indispensable”
parties.
The
terms
“necessary”
and
“indispensable”
are
terms
of
art
in
jurisprudence
concerning
Rule
19,
and
“necessary” refers to a party who should be
joined if feasible, while “indispensable”
refers to a party whose participation is so
important to the resolution of the case
that, if the joinder of the party is not
feasible, the suit must be dismissed. If a
necessary party cannot be joined without
divesting
the
court
of
subject-matter
jurisdiction, the Rule provides additional
criteria for determining whether that party
is indispensable, but if the court finds
that
the
party
is
anything
less
than
indispensable, the case proceeds without
that party, and if, on the other hand, the
court finds that the litigation cannot
proceed in the party's absence, the court
must dismiss the case.
GGNSC Vanceburg, LLC, v. Hanley, Civil Action No. 13-106-HRW,
2014 WL 1333204, *3 (E.D. Ky. Mar. 28, 2014).
Accordingly,
the
Court
first
considers
whether
Davis
is
even a necessary party. He is a necessary party if, “in [his]
7
absence, complete relief cannot be accorded among those already
parties” or “[he] claims an interest relating to the subject of
the action and is so situated that the disposition of the action
in [his] absence may . . . , as a practical matter, impair or
impede [his] ability to protect the interest” or his absence
would “leave an existing party subject to a substantial risk of
incurring
double,
multiple,
or
otherwise
obligations because of the interest.”
inconsistent
Fed. R. Civ. P. 19.
Belcher’s claims against the defendants in the state court
action,
which
Plaintiffs
to
group
this
occurrence——the
of
action
alleged
defendants
and
Davis,
negligence
resulted in injury to him.
includes
the
are
based
the
nursing
at
on
various
the
same
home
that
The arbitration agreement, by its
terms, governs claims against the corporate parties as well as
the administrators and its enforceability with respect to all
parties, including Davis, is a matter pending before the state
court.
If
different
this
Court
conclusions
and
the
concerning
state
the
court
were
enforceability
to
of
reach
the
arbitration agreement, Belcher could be placed in a position
where he was obliged to arbitrate the claims with some of the
parties covered by the agreement and to proceed in litigation
before the state court with respect to another party, Davis, who
is arguably covered by the agreement.
Thus, Belcher is subject
to
inconsistent
a
substantial
risk
of
incurring
8
obligations
because of Davis’ interest in this matter.
Accordingly, the
Court concludes that Davis is a necessary party to the action.
As
the
joinder
of
Davis,
a
citizen
of
Kentucky,
would
destroy diversity jurisdiction, the Court must determine whether
he
is
“indispensable.”
Thus,
the
Court
must
balance
the
following factors: (1) the extent to which a judgment rendered
in his absence might prejudice him or the existing parties; (2)
the extent to which any prejudice could be lessened or avoided
by protective provisions in the judgment, shaping the relief, or
other measures; (3) whether a judgment rendered in his absence
would
be
adequate;
and
(4)
whether
Plaintiff
would
have
an
adequate remedy if the action were dismissed for non-joinder.
Fed. R. Civ. P. 19(b).
Belcher argues that he will not be afforded complete relief
in
the
absence
of
Davis
as
a
Plaintiff
to
this
action.
He
asserts that there could then be a duplication of proceedings
and that he will be unduly and unnecessarily prejudiced if he is
subjected to arbitration with just the named Plaintiffs. The
Court is not persuaded of his position.
The duplication of
proceedings alone in these circumstances is not a disqualifying
factor.
in
both
“[T]he possibility of having to proceed simultaneously
state
and
federal
court,”
or
in
two
separate
arbitrations for that matter, “is a direct result of [Belcher’s]
decision to file a suit naming [Plaintiffs and Davis] in state
9
court rather than to demand arbitration under the [arbitration
agreement].” PaineWebber, Inc. v. Cohen, 276 F.3d 197, 202 (6th
Cir. 2001).
Moreover, “the possibility of piecemeal litigation
is a necessary and inevitable consequence of the FAA's policy
that
strongly
favors
arbitration.”
Id.
The
Court
considers
that, while there is a risk that the state court will reach an
inconsistent outcome regarding the arbitration agreement as it
relates to Davis, it is a low risk.
degree
of
prejudice
required
indispensable. Id. at 203.
to
This does not rise to the
conclude
an
absent
party
is
Furthermore, “[w]here the risk of
prejudice is minimal, the Court need not consider how protective
provisions
in
the
judgment,
the
shaping
of
relief,
or
other
measures might reduce the risk of prejudice.” Id. at 205.
Finally, Belcher argues that an adequate remedy exists in
state court if this Court dismisses the case.
This is true, but
the factors, when balanced, do not militate in favor of the
conclusion that Davis is an indispensable party. It follows that
the failure to join him does not warrant dismissal.
Ultimately,
the requirements of diversity of jurisdiction have been met, and
this Court has subject matter jurisdiction
over this case.
IV.
Next, the Court considers whether it should, as Defendant
contends, abstain from exercising its jurisdiction in favor of
the
state
court
proceedings.
Several
10
other
courts
in
this
district
have
recently
inappropriate
in
presented
this
in
concluded
circumstances
matter.
that
substantially
See
Richmond
abstention
similar
Health
to
is
those
Facilities-
Kenwood, LP v. Nichols, Civil Action No. 5:14-141-DCR, 2014 WL
4063823 (E.D.Ky. Aug. 13, 2014); Brookdale Senior Living, Inc.
v.
Caudill,
Civil
Action
No.
5:14-098-DCR;
2014
WL
3420783
(E.D.Ky. July 10, 2014); GGNSC Vanceburg, LLC, v. Hanley, Civil
Action
No.
0:13-106-HRW,
2014
WL
1333204
(E.D.Ky.
Mar.
28,
2014); GGNSC Vanceburg, LLC, v. Taulbee, Civil Action No. 5:13cv-71-KSF, 2013 WL 4041174 (E.D.Ky. Dec. 19, 2013).
In each
instance, there was an allegation of negligence in care provided
at a nursing home.
The party claiming injury filed a civil
action in state court, and the nursing home then asserted that
the state court claims were subject to the binding arbitration
agreement
between
the
parties
and
demanded
the
dispute
be
referred to arbitration and the state court case dismissed with
prejudice.
In
each
instance,
the
nursing
home
then
filed
a
complaint in the federal court, alleging federal jurisdiction by
way of diversity (and omitting the nursing home administrators,
arguably
subject
to
the
arbitration
agreement
but
without
diverse citizenship, as a party in the federal court action),
arguing
that
the
arbitration
agreement
was
valid
and
enforceable, and asking the federal court to compel the party
claiming injury to arbitrate his or her state claims and to
11
enjoin him or her from further pursuing his or her claims in
state court.
In Taulbee, the late Karl S. Forester of this Court summed
up abstention doctrine as follows:
Even where federal courts properly have
jurisdiction over the matter, a district
court
may
abstain
from
exercising
its
jurisdiction and refrain from hearing a case
in
limited
circumstances,
Saginaw
Hous.
Comm'n v. Bannum, Inc., 576 F.3d 620, 625
(6th Cir.2009). This exception is narrow
because a district court presented with a
case
that
arises
under
its
original
jurisdiction has a “virtually unflagging
obligation” to exercise the jurisdiction
conferred upon it by the coordinate branches
of government and duly invoked by litigants.
Colorado River Water Conservation Dist. v.
United States, 424 U.S. 800, 817, 96 S.Ct.
1236, 47 L.Ed.2d 483 (1976). Abstention is
an “extraordinary and narrow exception to
the duty of a district court to adjudicate a
controversy properly before it.” Id. at 813.
Taulbee, 2013 WL 4041174 at *2.
Abstention is appropriate under
certain limited circumstances, as follows:
Under Colorado River, the threshold issue is
whether there are parallel proceedings in
state
court.
Crawley
v.
Hamilton
Cnty
Comm'rs, 744 F.2d 28, 31 (6th Cir. 1984).
Once a court has determined there are
parallel
proceedings,
the
Supreme
Court
identified eight factors that a district
court must consider when deciding whether to
abstain from exercising its jurisdiction due
to the concurrent jurisdiction of state
court. PaineWebber, Inc. v. Cohen, 276 F.3d
197, 206 (6th Cir. 2001). Those factors are:
(1) whether the state court has assumed
jurisdiction over any res or property; (2)
12
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 state and
federal proceedings; and (8) the presence or
absence of concurrent jurisdiction. Id.
Id.
The analysis is straightforward.
No one disputes that the
present action is parallel to the state court proceedings; thus,
the Court applies the eight factor test.
PaineWebber, 276 F.3d at 206).
As the Court sees the matter,
only two factors favor abstention.
the
federal
forum
is
less
See id. at *3 (citing
First, it is possible that
convenient
to
the
parties,
since
Lexington is some distance from Stanton (in which the injuries
allegedly occurred and near which the Court presumes that most
of the witnesses reside).
court
action
is
no
doubt
See id. at *3.
adequate
to
Second, the state
protect
the
federal
plaintiffs’ rights because, under the Supremacy Clause, a state
court is bound by the requirements of the FAA. Id.
The others favor federal jurisdiction, keeping in mind that
“the
balance
[is
to
be]
jurisdiction.”
heavily
of
the
U.S.
1,
16,
(1983).
The parties agree that the case does not involve real
property
or
of
13
Cone,
favor
of
assumption
H.
in
exercise
the
Moses
weighted
jurisdiction
460
over
any
res
or
property.
Thus,
the
first
factor
weighs
in
favor
of
the
exercise of federal court jurisdiction and against abstention.
Id. (citing Romine v. Compuserve Corp., 160 F.3d 337, 341 (6th
Cir. 1998)). The third factor offers little to no support for
Defendant’s argument in favor of abstention, since the desire to
avoid piecemeal litigation is insufficient to overcome a strong
federal policy in favor of arbitration or, in this instance, the
exercise of jurisdiction.
With
obtained
respect
by
each
to
PaineWebber, 276 F.3d at 207.
the
court,
order
in
“priority
which
should
jurisdiction
not
be
was
measured
exclusively by which complaint was filed first, but rather in
terms of how much progress has been made in the two actions.”
Moses H. Cone, 460 U.S. at 21. A call to the Powell Circuit
Clerk
reveals
that
little
has
happened
since
the
time
this
matter was removed to this Court and the present motions were
filed.
An
answer
was
filed,
warning
order
attorneys
were
appointed, and, mostly recently, the state court judge signed an
order approving the reports of warning order attorneys appointed
in that matter.
The instant action was filed just over a month
after Mr. Belcher filed in state court. As Judge Forester noted
in Taulbee, “[t]he passage of [a month] is too insignificant to
justify the use of abstention, especially when both cases remain
in the early pleading stage.” Taulbee, 2013 WL 4041174 at *4.
Thus, the fourth factor weighs against abstention.
14
For much the
same reason, the seventh factor—the relative progress of the
state
and
federal
proceedings—weights
against
abstention
as
there has been limited progress in the state court to date.
As to the fifth factor, regarding the source of law, while
it is true that state law will govern the standard contract
defenses Belcher raises against the arbitration agreement, the
Federal
Arbitration
arbitration
presents
a
agreements
“liberal
Act
governs
generally
federal
the
and
enforceability
applies
policy
here.
favoring
The
of
FAA
arbitration
agreements” that must be taken into account even when state-law
issues are presented. Moses H. Cone, 460 U.S. at 24. It follows
that this factor weighs in favor of federal court jurisdiction
or, at the very least, not against it in this instance.
The
final factor under Colorado River is the presence or absence of
concurrent jurisdiction. While there is concurrent jurisdiction,
this fact only marginally favors abstention, if at all. As noted
above,
the
governing
law
is
the
FAA,
which
“expresses
a
preference for federal litigation,” The existence of concurrent
jurisdiction “is insufficient to justify abstention” under the
circumstances. PaineWebber, 276 F.3d at 208–09.
On balance, the circumstances in this matter do not present
the “exceptional” circumstances necessary to compel this Court
to abandon the “virtually unflagging obligation of the federal
courts to exercise the jurisdiction given them.” Colorado River,
15
424
U.S.
at
817–1”.
Accordingly,
this
Court
declines
to
abstain.
V.
Finally, Defendant asks the Court to dismiss Plaintiffs’
Complaint
pursuant
to
Fed.
Plaintiffs’
Motion
to
Enforce
Plaintiffs’
fail
granted
because
to
the
state
R.
a
Civ.
P.
12(b)(6)
Arbitration
claim
underlying
ADR
upon
and
Agreement
which
Agreement
relief
is
deny
because
may
invalid
be
and
unenforceable as (1) it does not evidence a contract involving
interstate
commerce
and
against public policy. 2
(2)
is
unconscionable
and
void
as
The Court has carefully considered each
of these arguments and concludes that they are without merit.
Even assuming that Belcher correctly contends that the care
provided
to
him
occurred
only
within
the
borders
of
the
Commonwealth of Kentucky, this is a case which clearly falls
within the scope of the FAA.
The FAA applies to “contract[s]
evidencing a transaction involving commerce,” 9 U.S.C. § 2, and
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
2
Defendant’s Memorandum in support of his Motion to Dismiss also suggests that
Plaintiffs’ claim for relief fails because it is impossible to perform under
the Arbitration Agreement according to its terms.
The Court sees no
particular argument in support of this argument in his Memorandum and
assumes, therefore, that it was presented in conjunction with the other
arguments discussed above and resolved by this Court’s decision. Otherwise,
in the absence of argument, the Court considers this argument waived.
16
to federal control.” Citizens Bank v. Alafabco, Inc., 539 U.S.
52, 56–57 (2003) (quoted in Nichols, 2014 WL 4063823 at *8;
Brookdale Sr. Living Inc. v. Stacy, 27 F.Supp.3d 776, 791-92
(E.D.Ky. 2014)). “The Supreme Court has “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.”
Id. (citing Allied-Bruce Terminix Cos.,
513 U.S. 265, 273-274 (1995)).
Interstate commerce is interpreted broadly and healthcare
is
an
economic
activity
that
represents
a
general
practice
subject to federal control. See Ping v. Beverly Enterprises,
Inc., 376 S.W.3d 581, 589 (Ky.2012) (citing Alafabco., 539 U.S.
at 56–57). Courts in the Eastern District of Kentucky, as well
as
others,
agreements
have
are
found
contracts
that
similar
“evidencing
nursing
a
home
residency
transaction
involving
commerce,” under the FAA. See Nichols, 2014 WL 4063823 at *8;
Caudill, 2014 WL 3420783, at *9; see also Stacy, 27 F.Supp.3d at
791-92; Hanley, 2014 WL 1333204 at *8-9; GGNSC Taulbee, 2013 WL
4041174
at
*10-11
(remarking
that
courts
have
looked
to
the
acceptance of Medicare as evidence of interstate commerce); and
Warner, 2013 WL 6796421 at *7-8.
The arbitration agreement in this case is a component of a
larger
contract
that
evidences
17
a
transaction
involving
interstate commerce.
other
courts
durable
come
have
medical
from
See Stacy, 27 F.Supp.3d at 791-92.
pointed
supplies
somewhere.”
out,
that
Id.
“[t]he
[the
at
food,
plaintiffs]
*14
(quoting
As
medicine,
and
provided
must
GGNSC
Louisville
Hillcreek, LLC v. Warner, Civil Action No. 3:13-cv-752-H, 2013
WL 6796421, *8 (W.D.Ky. Dec. 19, 2013)).
Accordingly, Belcher’s
argument that the arbitration agreement is unenforceable under
the FAA because it does not evidence a transaction involving
interstate commerce is without merit.
Defendant argues next that the procedural and substantive
nature
of
the
ADR
Unconscionability,
in
Agreement
the
renders
Commmonwealth
it
of
unconscionable.
Kentucky,
is
a
doctrine that exists as a narrow exception to the 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. Conseco Finance
Servicing Corp. v. Wilder, 47 S.W.3d 335, 341 (Ky. Ct. App.
2001).
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.” Id. (citing Louisville Bear Safety Serv., Inc. v.
South Central Bell Tel. Co., 571 S.W.2d 438, 440 (Ky. Ct. App.
1978)).
18
Defendant
Agreement
complains
is
a
that,
in
this
mass-produced,
instance,
“[t]he
boiler-plate,
ADR
pre-printed
document, likely presented to the Defendant within a lengthy
stack of admissions paperwork.”
He suggests that it is even
more suspicious because “[t]here is an obviously gross disparity
of bargaining power between the parties in situations like the
instant case” and that when one party is a “healthcare services
conglomerate” and the other is “residents and their families”
who are “seeking necessary care for a loved-one from an unknown
third party”, then “arbitration agreements are not entered into
by
two
commercially
sophisticated
parties
seeking
mutual
benefits in order to promote commercial efficiency.”
Even
if
an
agreement
is
a
“boiler-plate,
pre-printed
document,” that alone does not render it unconscionable.
Id. at
342-43 (noting that the fact that an arbitration clause appeared
single spaced on the back of a preprinted form does not render
it
procedurally
contains
agreement;
the
(2)
unconscionable).
following
it
The
features:
consists
of
agreement
(1)
three
it
pages
is
in
a
question
stand-alone
printed
in
normal
font; (3) there is a bold face all capital letter provision
noting the agreement is not a condition of admission to the
facility; (4) it provides no limitation on type or amount of
damage claims; (5) there is no limitation on causes of action;
(6)
there
is
no
suspect
forum
19
selection;
(7)
the
agreement
provides no truncation of the otherwise applicable statute of
limitations;
person
of
and
(8)
ordinary
ultimately,
experience
the
and
terms
are
education
such
is
that
a
likely
to
that
the
understand them.
In
other
words,
there
is
nothing
to
suggest
agreement is “one-sided, oppressive and unfairly surprising” or
that the dichotomy between the parties, a health care company
and an individual seeking nursing home care, accompanied by his
family in seeking that care, resulted in some sort of bargain
that should not be enforced.
Conseco, 47 S.W.3d at 341.
For
this reason, other courts applying Kentucky law have found that
arbitration agreements similar to the one at bar and presented
as
part
of
the
nursing
home
admission
process
were
not
procedurally unconscionable. See, e.g., Nichols, 2014 WL 4063823
at
*9;
Abell
v.
Bardstown
Medical
Investors,
Ltd.,
2011
WL
2471210, *1–3 (W.D.Ky. June 20, 2011).
Moreover,
something
more,
the
arbitration
void
agreement
against
public
is
not,
policy.
It
without
is
well
established that there exists “an emphatic federal policy in
favor of arbitral dispute resolution.” KPMG LLP v. Cocchi, –––
U.S. ––––, 132 S.Ct. 23, 25 (2011). Recently, the United States
Supreme Court specifically rejected an argument that arbitration
agreements
can
be
voided
for
public
policy
reasons.
Marmet
Health Care Center, Inc. v. Brown, ––– U.S. ––––, 132 S.Ct.
20
1201,
1203–4,
“‘[w]hen
state
182
L.Ed.2d
law
42
The
high
outright
prohibits
(2012).
Court
the
held:
arbitration
of
a
particular type of claim, the analysis is straightforward: The
conflicting rule is displaced by the FAA.’” Id. (quoting AT & T
Mobility LLC v. Concepcion, 563 U.S. ––––, ––––, 131 S.Ct. 1740,
1747
(2011)).
Neither
42
C.F.R.
§
483.10
(setting
forth
resident rights in long term care facilities), nor any other
public policy authority cited by Defendant trumps the FAA as
Defendant suggests.
Nor does the Court agree with Belcher’s argument that the
agreement
was
one
of
protection
against
agreement
specifies
adhesion
because
involuntary
that
DJS
it
discharge
did
or
Adminsitrative
not
provide
because
Services
the
will
administer the arbitration – and Defendant has reason to believe
that
the
ADR
procedures
used
by
the
administrator
of
the
arbitration are too closely connected to the proponent of the
contract in this instance. 3
that
he
had
protections
or
administrators
bargained
a
is
The fact that Defendant may now wish
for
what
different
not
set
enough.
3
he
of
views
as
arbitration
“Mutual
promises
additional
rules
or
constitute
Belcher contends that there is a close relationship between DJS
Administrative Services, who the contract specifies will conduct the
arbitration using DJS rules of procedure and which lists two ADR procedures,
one called “Kindred ADR” on its webpage and which Defendant contends is,
“[i]n essence a nursing home’s code that will be used to decide any
disagreement between Kindred and Kindred residents.”
This speculation is
insufficient to give the Court pause.
Conspiracy theories have no place in
litigation.
21
adequate consideration if a benefit is conferred to the promisor
or a detriment is incurred by the promise.” Energy Home, Div. of
Southern Energy Homes, Inc. v. Peay, 406 S.W.3d 828, 835 (Ky.
2013) (citing More v. Carnes, 214 S.W.2d 984, 991 (Ky. 1948)).
“An arbitration clause requiring both parties to submit equally
to arbitration constitutes adequate consideration.” Id. (citing
Kruse v. AFLAC Intern., Inc., 458 F.Supp.2d 375, 385 (E.D.Ky.
2006); Walker v. Ryan's Family Steak Houses, Inc., 400 F.3d 370,
380 (6th Cir. 2005)); Shadeh v. Circuit City Stores, Inc., 334
F.Supp.2d 938, 941 (W.D.Ky. 2004)).
Finally,
evidentiary
Belcher
argues
standpoint,
that
the
unauthenticated
contract
and
that,
is,
from
thus,
an
there
exists no admissible written contract as required to enforce
such an agreement under 9 U.S.C. § 2, the Court is unpersuaded.
Defendant has neither alleged nor provided evidence that the
signature contained on the ADR Agreement is not his, and the
court declines to afford him relief on this ground.
2014
WL
maintains
1333204
at
that
*8
[the
(“In
agreement]
urging
has
See Hanley,
dismissal,
not
been
Defendant
properly
authenticated. This assertion is, at best, confusing and, at
worst, disingenuous. Defendant, who was herself present during
the
admissions
process,
has
not
alleged
in
any
pleading
or
affidavit that the mark contained on the arbitration agreement
is not representative of her signature”).
22
Since he has provided
no evidence challenging the authenticity of the document, his
argument in this regard is without merit.
VI.
Ultimately, Defendant's attempts to attack the validity and
enforceability
of
the
arbitration
agreement
are
contrary
to
established law and, thus, fall far short of requiring dismissal
pursuant to Rule 12(b)(6).
Rather, the Court concludes that
Plaintiffs have borne their burden of establishing that a valid,
enforceable agreement to arbitrate exists in this case.
See
Aircraft Braking Sys. Corp. v. Local 856, Int’l Union, UAW, 97
F.3d 155, 158 (6th Cir. 1996).
this
Court
to
enjoin Belcher
enforce
from
the
By motion, Plaintiffs have asked
contract,
pursuing
his
compel
claims
arbitration,
against
them
in
and
the
state forum.
The parties have “agree[d] that any disputes covered by
this Agreement . . . shall be resolved exclusively by an ADR
process that shall include mediation and, where mediation does
not successfully resolve the dispute, binding arbitration.”
1-1 at 1, Page ID#: 9.]
[DE
The “Covered Disputes,” section of the
ADR Agreement provides as follows:
This Agreement applies to any and all
disputes arising out of or in any way
relating
to
this
Agreement
or
to
the
Resident’s stay at the Center that would
constitute a legally cognizable cause of
action in a court of law sitting in the
Commonwealth of Kentucky and shall include,
23
but not be limited to, all claims in law or
equity arising from one Party's failure to
satisfy a financial obligation to the other
Party; a violation of a right claimed to
exist under federal, state, or local law or
contractual agreement between the Parties;
tort;
breach
of
contract;
fraud;
misrepresentation;
negligence;
gross
negligence; malpractice; death or wrongful
death and any alleged departure from the
applicable federal, state, or local medical,
health care, consumer or safety standards.
Covered
Dispute
shall
include
the
determination
of
the
Scope
of
or
applicability
of
this
Agreement
to
mediate/arbitrate.
[DE 1-1, at 3, Page ID#: 10.]
Defendant’s State Court Action alleges negligence, medical
negligence, “corporate negligence”, violations of long term care
resident’s rights, and negligence against the administrator. All
of these claims clearly fall within the broad scope of claims
encompassed
Agreement
in
the
outlined
“Covered
above.
Disputes”
Further,
as
section
plainly
of
stated
the
ADR
in
the
provisions of the ADR Agreement specifically cited above, any
disputes
regarding
interpretation
of
the
agreement
are,
if
mediation is not successful, to be referred to the arbitrator
for a decision.
While the FAA requires a federal court to stay their own
proceedings, it does not specifically authorize federal courts
to stay pending state court cases. Great Earth Co., Inc. v.
Simons, 288 F.3d 878, 893 (6th Cir. 2002). Rather, the federal
24
court's authority to enjoin state-court proceedings is subject
to the legal and equitable standards for injunctions generally,
including the Anti–Injunction Act, 28 U.S.C. § 2283.
Circuit
has
state-court
violate
concluded
that
proceedings
the
a
district
after
Anti–Injunction
compelling
Act
because
court's
The Sixth
injunction
arbitration
the
does
injunction
of
not
fell
“within the exception for injunctions ‘necessary ... to protect
or
effectuate
[district
court]
judgments.’”
Great
Earth,
288
F.3d at 894. It concluded that “[a]n injunction of the state
proceedings [was] necessary to protect the final judgment of the
district court on this issue.” Id. Since enjoining the state
proceeding is not barred by the Anti–Injunction Act and such
injunction would serve to protect or effectuate this Court's
judgments, Belcher is enjoined from pursuing the pending state
court action before the Powell Circuit Court.
VII.
For all of the reasons stated above, Defendant Belcher’s
Motion
to
Dismiss
shall
be
denied
and
Plaintiffs’
Motion
to
Compel Arbitration and Enjoin Defendant from engaging in further
state proceedings shall be granted.
Accordingly, IT IS ORDERED:
(1)
That Defendant Belcher’s Motion to Dismiss [DE 4] is
DENIED;
25
(2)
That
Plaintiffs’
Motion
to
Compel
Arbitration
and
Enjoin Defendant [DE 5] is GRANTED;
(3)
arising
That
Defendant
out
of
Rehabilitation
shall
his
Center
prosecute
residency
in
at
accordance
all
of
Stanton
with
the
his
claims
Nursing
terms
of
and
the
arbitration agreement that he signed;
(4)
That
Belcher
is
ENJOINED
from
pursuing
the
pending
state court action against Plaintiffs before the Powell Circuit
Court;
(5)
That this matter is STRICKEN FROM THE ACTIVE DOCKET,
and following the conclusion of arbitration proceedings, either
party
may
petition
the
Court
to
reopen
appropriate action as necessary.
This the 31st day of March, 2015.
26
this
matter
to
take
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?