GGNSC Stanford, LLC et al v. Gilliam
Filing
14
MEMORANDUM OPINION & ORDER: 1. The dft's motion 9 to dismiss is DENIED. 2. The Plaintiff's motion 4 to Compel Arbitration and Enjoin State Court Action is GRANTED. 3. Lisa Gilliam is COMPELLED to submit her claims to arbitration accord ing to the terms of her agreement and ENJOINED from proceedings with her action in state court. 4. The Court STAYS this proceedings until the conclusion of the arbitration. Parties directed to file a Joint Status Report each thirty days until the matter is completed.. Signed by Judge Danny C. Reeves on 09/07/2016.(LC)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
(at Lexington)
GGNSC STANFORD, LLC, et al.,
Plaintiffs,
V.
LISA GILLIAM, Administratrix of the
Estate of Geneva Hammonds,
Defendant.
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Civil Action No. 5: 16-004-DCR
MEMORANDUM OPINION
AND ORDER
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Defendant Lisa Gilliam is Geneva Hammonds’ daughter and the administratrix of her
estate. On December 22, 2015, Gilliam filed suit against GGNSC Stanford, LLC and others
in state court, alleging that they were negligent in caring for Hammonds while she resided at
a nursing home owned by GGNSC. On January 1, 2016, GGNSC and other state-court
defendants filed suit in federal court, seeking to compel arbitration and enjoin the state court
action based on an alternative dispute resolution agreement executed during Hammonds’ stay
at the nursing home. [Record Nos. 1, 4] Conversely, Gilliam has moved to dismiss this action.
[Record No. 9] Both motions have been briefed fully and are ripe for consideration. For the
foregoing reasons, the Court will compel arbitration and deny Gilliam’s motion to dismiss.
Additionally, the Court will enjoin Gilliam from pursuing the related state court action.
I.
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In 2014, Geneva Hammonds was a resident of the Golden LivingCenter in Stanford,
Kentucky (“GLC-Stanford”), a nursing home operated by GGNSC Stanford, LLC.1 Lisa
Gilliam was Ms. Hammonds’ attorney-in-fact. Pursuant to the relevant Power of Attorney
(“POA”) document, Gilliam was expressly authorized “[t]o make and sign and all checks,
contracts and agreements” on Hammonds’ behalf. Further, Gilliam was vested with the
authority to “institute or defend suits concerning [Hammonds’] property or rights” and to
generally perform for her in her name all that she might do if present.2 [Record No. 4–1, pp.
1–2]
On July 14, 2014, Gilliam signed GLC-Stanford’s Alternative Dispute Resolution
Agreement (“ADR Agreement” or “Agreement”) on Hammonds’ behalf. [Record No. 1–2]
The Agreement requires the arbitration of all disputes within its scope and purports to bind “all
persons whose claim is or may be derived through or on behalf of [Hammonds].” [Id., p. 1]
The Agreement encompasses a variety of matters including violations of rights “under federal,
state, or local law or contractual agreement between the Parties . . . negligence; gross
negligence; malpractice; and any alleged departure from any applicable federal, state, or local
medical, health care, consumer, or safety standards.” [Id., p. 3] The Agreement provides that
acceptance of its terms is not a condition of admission or continued residence in the facility.
The parties have provided conflicting information regarding Hammonds’ date of admission
to GLC-Stanford. While Gilliam reports that Hammonds was admitted on June 5, 2012,
[Record No. 1-1, p. 3], the plaintiffs state that Hammonds was admitted on July 14, 2014, the
same day Gilliam executed the ADR Agreement. [Record No. 1, p. 5]
1
2
This language is excerpted from the plaintiffs’ memorandum in support of their motion to
compel arbitration. Gilliam does not contest the accuracy of the language. It appears that the
plaintiffs intended to file the POA document as an exhibit to the Complaint, [Record No. 4–1,
pp. 1–2], but it is absent from the record. [See Record No. 1-3.]
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[Id., p. 1] The Agreement further provides that it shall be governed by and interpreted under
the Federal Arbitration Act, 9 U.S.C. § 1, et seq. [Id., p. 13]
II.
Gilliam moves to dismiss this action pursuant to Rule 12(b)(1) of the Federal Rules of
Civil Procedure, alleging that the Court lacks subject matter jurisdiction. Whether subject
matter jurisdiction exists is a threshold determination the Court must make before proceeding
further. See United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1325 (6th Cir. 1993). It is
well-settled that the Federal Arbitration Act (“FAA”) does not provide an independent basis
for federal jurisdiction. 9 U.S.C. § 4; see Vaden v. Discover Bank, 556 U.S. 49, 59 (2009).
Rather, petitioners seeking to compel arbitration under the Act must assert an independent
source of subject matter jurisdiction. Vaden, 556 U.S. at 59; Ford v. Hamilton Invs. Inc., 29
F.3d 255, 257–58 (6th Cir. 1994). Here, the plaintiffs contend that diversity jurisdiction exists
under 28 U.S.C. § 1332.
A.
Look-Through Approach
Gilliam concedes that complete diversity exists on the face of the plaintiffs’ Complaint.
Indeed, the plaintiffs are Delaware limited liability companies with their principle places of
business in Texas. Gilliam is a citizen of Kentucky, and the plaintiffs have no members that
are citizens of Kentucky. Despite this prima facie showing of complete diversity, Gilliam
insists that the Court should “look through” to the complaint in the underlying state court action
to determine whether complete diversity actually exists. This Court, as well as others, have
considered and rejected this argument, which is based on a strained interpretation of the
Supreme Court’s decision in Vaden, 556 U.S. 49. See e.g., Brookdale Senior Living, Inc. v.
Caudill, No. 5: 14-cv-098, 2014 WL 3420783, at *3 (E.D. Ky. July 10, 2014) (citing Northport
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Health Servs. of Arkansas, LLC v. Rutherford, 605 F.3d 483, 490–91 (8th Cir. 2010));
Preferred Care, Inc. v. Howell, No. 16-13-ART, 2016 WL 2858523, at *1 (E.D. Ky. May 13,
2016). The Court remains persuaded that Vaden’s look-through approach applies only in cases
invoking the court’s federal-question jurisdiction. See id. See also Brookdale Senior Living,
Inc. v. Walker, No. 5:15-cv-206-KKC, 2016 WL 1255722, at *2–3 (E.D. Ky. March 29, 2016);
GGNSC Louisville Hillcreek, LLC v. Watkins, No. 3:15-cv-902-DJH, 2016 WL 8155295, at
*2 (W.D. Ky. Feb. 29, 2016). Accordingly, the court will determine diversity by examining
the parties named in the federal complaint, plus any indispensable parties who must be joined
under Rule 19 of the Federal Rules of Civil Procedure. See GGNSC Frankfort, LLC v. Tracy,
No. 14-30-GFVT, 2015 WL 1481149, at *3 (E.D. Ky. March 31, 2015) (quoting Northport
Health Servs. of Arkansas, 605 F.3d at 490–91).
B.
Failure to Join an Indispensable Party
Gilliam alternatively argues that the Court lacks jurisdiction because the plaintiffs have
failed to join an indispensable party who would destroy diversity if joined. See Fed. R. Civ.
P. 12(b)(7). Specifically, Gilliam contends that the plaintiffs failed to join Kevin McCowan,
a nursing home administrator who was named as a defendant in the state court complaint. The
first step in determining whether McCowan is indispensable to the resolution of this matter is
to determine whether he is necessary, as defined by Rule 19. A party is deemed necessary if:
(A) in that person’s absence, the court cannot accord complete relief
among existing parties; or
(B) that person claims an interest relating to the subject of the action and
is so situated that disposing 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
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(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).
Gilliam asserts that McCowan is a necessary party because the negligence claims
against him in the underlying state cause of action are “intrinsically interwoven” with similar
claims against the corporate parties. On the other hand, Gilliam argues, McCowan is not
simply a joint tortfeasor, but is independently liable under Kentucky law. If this Court and the
state court reached different conclusions concerning the enforceability of the arbitration
agreement, McCowan would face inconsistent procedural remedies. Thus, the Court will
assume that McCowan is a necessary party. See Richmond Health Facilities-Kenwood, LP v.
Nichols, No. 5: 14-141-DCR, 2014 WL 4063823, at *5 (E.D. Ky. Aug. 13, 2014).
Because McCowan’s joinder would destroy diversity, the Court must determine
whether he is an indispensable party under Rule 19(b). See PaineWebber, Inc. v. Cohen, 276
F.3d 197, 200 (6th Cir. 2001). This requires the Court to decide whether, in equity and good
conscience, the action may proceed in McCowan’s absence or should be dismissed. Fed. R.
Civ. P. 19(b). See also Republic of Philippines v. Pimentel, 553 U.S. 851, 862–63 (2008). The
Court considers the following factors in resolving this issue:
(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:
(A) protective provisions in the judgment;
(B) shaping the relief;
(C) other measures;
(3) whether a judgment rendered in the person’s absence would be
inadequate; and
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(4) whether the plaintiff would have an adequate remedy if the action
were dismissed for nonjoinder.
Fed. R. Civ. P. 19(b).
Gilliam contends that permitting this matter to proceed in federal court would expose
her to the risk of piecemeal litigation. That risk, however, is a result of Gilliam’s decision to
file suit in state court rather than demanding arbitration under the Agreement. See Brookdale
Senior Living Inc., 2014 WL 3420783, at *5 (citing PaineWebber, 276 F.3d at 200–06;
GGNSC Vanceburg, LLC v. Hanley, No. 13-106-HRW, 2014 WL 1333204, at *4 (E.D. Ky.
March 28, 2014)). Gilliam’s concern that this Court and the state court will reach conflicting
interpretations of the arbitration agreement does not constitute the type of prejudice necessary
to support a finding that McCowan is an indispensable party. See PaineWebber, Inc., 276 F.3d
at 203. Further, there is no indication that any judgment rendered in McCowan’s absence will
be inadequate. Additionally, the possibility of Gilliam having to arbitrate her claims against
the corporate parties while proceeding with her claims against McCowan in state court does
not affect the adequacy of any judgment between Gilliam and the corporate parties. See id. at
205.
Only the final factor weighs in favor of dismissal. But while the state court presents an
alternate forum for the plaintiffs to seek enforcement of the arbitration agreement, the
“existence of another forum does not, in and of itself, outweigh a plaintiff’s right to the forum
of his or her choice.” PaineWebber, Inc., 276 F.3d at 205 (citation omitted). Important policy
considerations underlying the FAA require that federal courts remain available to enforce
arbitration agreements in diversity cases. See id. For the foregoing reasons, the Court
concludes that McCowan is not an indispensable party to this action.
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III.
A.
Colorado River Abstention
Gilliam also contends that the Court should abstain from exercising jurisdiction under
the doctrine announced in Colorado River Water Conservation District, et al. v. United States,
424 U.S. 800, 813 (1976). In Colorado River, the Supreme Court noted that federal courts
have a “virtually unflagging” obligation to exercise the jurisdiction given to them. Id. at 817.
Under limited circumstances, however, federal courts will abstain from exercising jurisdiction
and will defer to the concurrent jurisdiction of the state court. In determining whether
abstention is appropriate, the court will consider factors:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
whether the state court has assumed jurisdiction over any res or property;
whether the federal forum is less convenient to the parties;
avoidance of piecemeal litigation;
the order in which the jurisdiction was obtained;
whether the source of governing law is state or federal;
the adequacy of the state court action to protect the federal plaintiff’s rights;
the relative progress of the state and federal proceedings; and
the presence or absence of concurrent jurisdiction.
Romine v. Compuserve Corp., 160 F.3d 337, 340–41 (6th Cir. 1998) (citations omitted).
Before the Colorado River doctrine may be applied, the Court must determine whether
the concurrent state and federal actions are actually parallel. Id. at 339. While “exact
parallelism” is not required, the two proceedings must be “substantially similar.” Id. at 340
(alterations and internal quotation marks omitted). And while the relevant state and federal
actions differ procedurally, the parties (save McCowan) are the same and the actions involve
similar issues. Further, if the state proceeding was seen through to its conclusion, there is little
doubt that it would dispose of the claim presented in the federal case. See Preferred Care of
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Delaware, Inc. v. Vanarsdale, 152 F.Supp.3d 929, 931 (E.D. Ky. 2016). Accordingly, the two
actions are sufficiently parallel to proceed with the Colorado River inquiry.
In Colorado River, the paramount concern was whether there was a “clear federal
policy evinc[ing] . . . the avoidance of piecemeal adjudication” 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) (quoting Colorado River, 424 U.S. at 819). The Sixth Circuit has made
clear that, with respect to the Federal Arbitration Act, there is not such a policy. Id. The
purpose of the FAA is to enforce parties’ private agreements and this concern predominates,
even if piecemeal litigation results. Id. (citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S.
213, 221 (1985)). Accordingly, the most important factor weighs in favor of exercising
jurisdiction.
Other factors counsel against abstention or are neutral. There is no indication that the
state court has assumed jurisdiction over any property. There is also no indication that the
federal forum is less convenient to the parties than the Lincoln County Circuit Court. And
while Gilliam filed her action in state court on December 22, 2015, the plaintiffs filed the
present action very shortly thereafter on January 6, 2016. The fifth factor, which concerns the
source of governing law, also weighs against abstention because the FAA is the basis of
interpreting the disputed arbitration agreement. See PaineWebber, 276 F.3d at 208–09. While
state law also is implicated with respect to the validity of the arbitration agreement, “the
presence of federal law issues must always be a major consideration weighing against
surrender of federal jurisdiction in deference to state proceedings.” Howell, 2016 WL
2858523, at *4 (quoting PaineWebber, 276 F.3d at 208).
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The sixth factor requires the Court to examine the adequacy of the state court to protect
the federal plaintiffs’ rights. As Gilliam points out, the state court is bound to apply the FAA.
The Plaintiffs contend that, should this Court abstain, their rights would not be adequately
protected based on Kentucky courts’ growing hostility toward pre-dispute arbitration
agreements in the nursing home setting. See Record No. 11, p. 21–22, citing Extendicare
Homes Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2015). A sister court in the Western District of
Kentucky has voiced a similar concern. See GGNSC Louisville Hillcreek, LLC, 2016 WL
815295, at *3; Brandenburg Health Facilities, LP v. Mattingly, 3: 15-cv-833-DJH, 2016 WL
3448733, at *3 (W.D. Ky. June 20, 2016). The Court agrees and finds that this factor weighs
against abstention.
The seventh factor, which examines the relative progress of state and federal
proceedings, also weighs against abstention. Shortly after Gilliam filed the suit in state court,
the plaintiffs filed this action. The state court action remains in the early stages and the Court
has been advised that no motions or rulings have been filed in that action. Based on the
pending motions in the present case, it appears that the parties have invested significant time
and resources in federal court. The eighth and final factor—“the presence or absence of
concurrent jurisdiction,”—also weighs against abstention. While the presence of concurrent
jurisdiction typically weighs in favor of abstention, its presence is insufficient to justify
abstention “where a congressional act provides the governing law and expresses a preference
for federal litigation.” PaineWebber, 276 F.3d at 208–09. Because the FAA expresses a
preference for vindication by the federal courts, concurrent jurisdiction does not support
deference to the state court in this instance. See Moses H. Cone Memorial Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 25 n.32 (1983).
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Based on the foregoing analysis, no exceptional reason exists for this Court to abstain
from exercising jurisdiction over this matter. See id. at 25–26.
IV.
A.
Motion to Dismiss Under Rule 12(b)(6)
Validity of the Arbitration Agreement Under Ping and Whisman
Having resolved the preliminary questions regarding jurisdiction and abstention, the
Court turns to the enforceability of the Arbitration Agreement. Gilliam contends that she
lacked authority to execute the Agreement on Hammonds’ behalf in light of the Kentucky
Supreme Court’s holdings in Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012),
and Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2016). The plaintiffs contend
that the arbitration agreement is valid under Ping and that Whisman is preempted by the FAA.
The operative facts of Ping are similar to those of the present case. Donna Ping, the
daughter and executrix of the estate of her deceased mother, Alma Duncan, brought suit in
Kentucky state court against the nursing home where her mother resided prior to her death.
Several years before Duncan entered the nursing home, she executed a “General Power of
Attorney” in which she appointed Ping as her agent. The POA granted Ping the authority “to
do and perform any, all, and every act and thing whatsoever requisite and necessary to be done,
to and for all intents and purposes, as [Duncan] might or could do if personally present,
including but not limited to the following . . . .” The POA went on to enumerate specific acts
related to the management of Duncan’s property, finances, and healthcare. Ping, 376 S.W.3d
at 586–87.
Several years later, Duncan became incapacitated by a stroke and entered the nursing
home. Id. at 587. Upon Duncan’s admission, Ping signed a contract on Duncan’s behalf
agreeing to arbitrate any future disputes with the nursing home. Id. Later, after Ping sued the
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nursing home in state court, the Kentucky Supreme Court held that the POA did not grant Ping
the authority to enter into an arbitration agreement on Duncan’s behalf. Id. at 598–94.
Although Ping was granted “full and general power and authority to act on [Duncan’s] behalf,”
the court determined that an agent’s authority under a POA must be construed in reference to
the types of transactions expressly authorized in the document. Id. at 592. Accordingly, Ping’s
authority was limited to matters involving property, finances, and health care. See id. at 587,
592. In determining that Ping did not have authority to enter into the arbitration agreement,
the court reasoned that the decision to waive one’s constitutional right to a jury trial did not
relate to the management of property or finances. Id. at 593–94. And while an agreement to
arbitrate could be considered a healthcare decision if the agreement were a condition of
admission into the nursing facility, it was not a condition Duncan’s admission. Id. at 593.
The authority granted to Gilliam under Hammonds’ POA is significantly broader than
that at issue in Ping. Gilliam was expressly authorized to “make and sign any and all checks,
contracts and agreements” on Hammonds’ behalf. Further she was authorized to “institute or
defend suits concerning [her] property or rights” and to “generally perform for [her] in [her]
name all that [she] might do if present.” [Record No. 4-1, pp. 1–2] This distinguishes Ping
from the present case in a variety of important ways. First, Gilliam was expressly authorized
to make and sign any and all contracts and agreements on Hammonds’ behalf. Given its plain
meaning, this clause would include an arbitration agreement. Further, Gilliam was granted the
authority to initiate lawsuits, which provides strong evidence of Hammonds’ intent to give
Gilliam authority with respect to legal matters. Construing Gilliam’s broad authority with
reference to the types of transactions expressly mentioned in the POA, under Ping, Gilliam
possessed the authority to enter into the Arbitration Agreement on Hammonds’ behalf. See
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Pine Tree Villa, LLC v. Brooker, 612 F. App’x 340, 344–45 (6th Cir. 2015) (distinguishing
Ping from cases involving broader grants of authority).
In Whisman, the Kentucky Supreme Court expanded upon Ping, creating more exacting
requirements for POA documents which purport to grant an agent authority to enter into an
arbitration agreement on behalf of a principal. 478 S.W.3d 306. Whisman involved the
consolidation of three lawsuits in which nursing homes sought to enforce arbitration
agreements signed by their residents’ agents. Id. at 312. Examining each POA document
individually, the court concluded that language conferring “the power to institute or defend
suits concerning [the principal’s] property rights” was insufficient to confer authority to enter
into a pre-dispute arbitration agreement. Id. at 322–23. The court reasoned that instituting or
defending a suit is dissimilar to making an agreement that future claims will be arbitrated. Id.
at 323. Additionally, the court explained that “suit” is not tantamount to arbitration. Id. The
court also determined that language conferring the power “to draw, make and sign any and all
checks, contracts, notes, mortgages, agreements, or any other document” was insufficient to
confer authority because these matters pertain only to financial affairs. Id. at 324–25.
Ultimately, the court held that an agent’s authority to choose arbitration, thus waiving the right
to trial by jury, must be “unambiguously expressed in the text of the power-of-attorney
document.” Id. at 328.
The plaintiffs contend that Whisman is contradictory to the Federal Arbitration Act is
and thus preempted. See Circuit City, 532 U.S. at 111-12. The Court agrees with the United
States District Court for the Western District of Kentucky that Whisman is preempted by the
FAA. See, e.g., Preferred Care of Delaware, Inc. v. Crocker, 5: 15-cv-177-TBR, 2016 WL
1181786, *9 (W.D. Ky. March 25, 2016); GGNSC Louisville Hillcreek, LLC, 2016 WL
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815295, at *3. Congress enacted the FAA “to ensure judicial enforcement of privately made
agreements to arbitrate” and “to overrule the judiciary’s longstanding refusal to enforce
agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219–20 (1985).
While generally applicable state laws may invalidate arbitration agreements, a state law may
only affect arbitration agreements in the same way it affects contracts generally. Doctor’s
Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996); Perry v. Thomas, 482 U.S. 483, 492 n.9
(1987).
In determining whether the FAA preempts Whisman, the Court applies the test set out
in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). See Richmond Health Facilities
v. Nichols, 811 F.3d 192, 197–201 (6th Cir. 2016). Because Whisman does not prohibit the
arbitration of a particular type of claim outright, it does not offend the first prong of
Concepcion. 563 U.S. at 341. The Court will proceed directly to the second, more complex
analysis which focuses on whether a law normally thought to be generally applicable has been
applied in a way that disfavors arbitration or has a disproportionate impact on arbitration
agreements. See id.; Nichols, 811 F.3d at 198–99.
The rule announced in Whisman fails the second inquiry under Concepcion because it
stands as an obstacle to the accomplishment to the FAA’s objectives. See Concepcion, 563
U.S. at 341; see also Dean Witter Reynolds, Inc. 470 U.S. at 219–20. Courts may not invalidate
arbitration agreements based on state laws tailored to arbitration agreements, nor may state
courts single out arbitration agreements for suspect status. Doctor’s Assocs., Inc., 517 U.S. at
687. Rather, arbitration agreements must be placed “upon the same footing as other contracts.”
Id. Without question, the Kentucky Supreme Court has singled out arbitration agreements by
requiring that a POA expressly include an agent’s authority to enter into a pre-dispute
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arbitration agreement, as opposed to other types of contracts. Additionally, Kentucky courts
have disfavored arbitration agreements by reading in an exclusion from extremely broad grants
of authority. The requirement that a principal explicitly convey to an attorney-in-fact the
authority to enter into a pre-dispute arbitration agreement “places arbitration agreements in a
class apart from ‘any contract,’ and singularly limits their validity.” Id. at 688. Accordingly,
the rule announced in Whisman is preempted by the FAA.
B.
Interstate Commerce
Gilliam argues, alternatively, that this action should be dismissed because the
arbitration agreement does not evidence a transaction involving interstate commerce. 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.” Ping, 376 S.W.3d at 589 (quoting Citizens Bank v.
Alafabco, Inc., 539 U.S. 52, 56–57 (2003)). Such an arbitration agreement is viewed as a
component the larger residency contract, which typically involves interstate commerce under
the FAA. See e.g., Brookdale Senior Living, Inc. v. Hibbard, No. 5:13-289-KKC, 2014 WL
2548117, at *10 (E.D. Ky. June 4, 2014). Interstate commerce is defined broadly and
healthcare is an economic activity that represents a general practice subject to federal control.
See Ping, 376 S.W.3d at 589. Accordingly, Gilliam’s claim that the arbitration agreement is
unenforceable because it does not evidence a transaction involving interstate commerce is
without merit.
C.
Unconscionability
Gilliam also attacks the arbitration agreement on the grounds of unconscionability. She
contends that the ADR Agreement is part of a “mass-produced, boiler-plate, pre-printed
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document, likely presented to the Defendant within a lengthy stack of admissions paperwork.”
[Record No. 9–1, p. 26] However, the Agreement is marked with large, bold type which reads
“Alternative Dispute Resolution Agreement.” [Record No. 1–2, p. 1] Halfway down the first
page of the agreement in bold, capital letters, a disclaimer appears, indicating that by signing
the agreement, the parties waive their constitutional right to have disputes decided in court.
Id. Further, on the signature page, in bold, capital letters, the parties are cautioned that the
agreement “governs important legal rights” and to “read it carefully and in its entirety before
signing.” Id. at p. 7. Simply because the Agreement may have been part of a lengthy
admissions packet does not render it procedurally unconscionable. See Energy Home, Div. of
So. Energy Homes, Inc. v. Peay, 406 S.W.3d 828, 836 (Ky. 2013). Further, the Agreement
will not be invalidated because of uneven bargaining power, without more, or because it is the
product of an “old-fashioned bad bargain.” See id. (citing Schnuerle v. Insight Comms. Co.,
L.P., 376 S.W.3d 561, 575 (Ky. 2012)). See also Conseco Fin. Corp. v. Wilder, 47 S.W.3d
335, 341 (Ky. Ct. App. 2001).
Additionally, Gilliam has failed to demonstrate that the use of JAMS rules and
procedures is substantively unconscionable. JAMS’ discovery limitations apply to both parties
and can be modified by the arbitrator if there is reason to do so. See Golden Gate Nat’l Senior
Care, LLC v. Sulpizio, No. 1: 15-cv-174, 2016 WL 1271333, at *4 (M.D. Pa. March 31, 2016).
See also Jean v. The Stanley Works, No. 1: 04-cv-1904, 2008 WL 2778849, at *2 (N.D. Ohio
July 14, 2008). Gilliam argues that because the defendant will be responsible for paying the
bulk of arbitration fees, JAMS is unlikely to be neutral. [Record No. 9–1, p. 27] This
allegation is speculative, at best. Should the Agreement have allocated the differently, the
plaintiff may have been unduly burdened by them.
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V.
Anti-Injunction Act
Although the FAA requires a federal court to stay its own proceedings when arbitration
is required, it does not specifically authorize federal courts to stay pending state court
proceedings. Great Earth Co., Inc. v. Simons, 288 F.3d 878, 893 (6th Cir. 2002). Rather, the
federal court’s authority to enjoin state court proceedings is derived from the Anti-Injunction
Act, 28 U.S.C. § 2283. The Sixth Circuit has determined that a district court’s injunction of
state-court proceedings after compelling arbitration falls within the exception of the AntiInjunction Act necessary to protect or effectuate the district court’s judgments. Great Earth,
288 F.3d at 894. Because the Court has determined that the parties entered into a binding
arbitration agreement, it is necessary to enjoin Gilliam from pursuing her claims in state court.
Based on the foregoing analysis, it is hereby
ORDERED as follows:
1.
The defendant’s Motion to Dismiss [Record No. 9] is DENIED.
2.
The plaintiffs’ Motion to Compel Arbitration and Enjoin State Court Action
[Record No. 4] is GRANTED.
3.
Lisa Gilliam 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.
4.
The Court STAYS this proceeding until the conclusion of the ordered
arbitration. The parties are directed to file Joint Status Reports regarding the arbitration
proceeding each thirty days until the matter is completed.
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This 7th day of September, 2016.
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