Preferred Care, Inc. et al v. Roberts
ORDER: The Court ORDERS the Center's motion to alter, amend or vacate 19 this Court's denial of center's motion to compel the Estate to arbitrate its claims against the nonsignatories to arbitration agreement is DENIED. Signed by Judge Karen K. Caldwell on 5/19/2017.(KM)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION -- LEXINGTON
PREFERRED CARE, INC., et al.
CIVIL ACTION NO. 5:16-203-KKC
OPINION AND ORDER
JESSE ROBERTS, as administrator of
Kenneth Roberts’ estate,
This matter is before the Court on the plaintiffs’ motion to reconsider (DE 19) this Court’s
ruling that certain claims against non-parties to an arbitration agreement do not have to be
arbitrated. For the following reasons, the motion will be denied.
Kenneth Roberts died while a resident of the Stanton Nursing and Rehabilitation Center
located in Stanton, Kentucky. The administrator of his estate, Jesse Roberts (the “Estate”), filed
suit in Powell Circuit Court against the nursing center and several other companies that the
Estate alleged owned or operated the center. The Estate also named the center administrator and
two nurses and a doctor employed there. (DE 1-2, State Court Action.)
The center and three of the companies named as defendants in the state-court action
(collectively, the “Center”) then filed a claim in this Court asking for an order compelling the
Estate to arbitrate the claims filed in the state court action and also for an order enjoining the
Estate from pursing the state-court action. There is no dispute that the only plaintiff who was a
party to the arbitration agreement was Stanton Health Facilities, LP d/b/a Stanton Nursing and
In its motion to dismiss, the Estate argued that the nonsignatory plaintiffs could not
compel arbitration of the claims against them. In its response to that motion, the Center appeared
to make two arguments: the nonsignatories are third-party beneficiaries of the arbitration
agreement and the Estate should be judicially estopped from asserting that its claims against the
nonsignatories are not subject to the arbitration agreement. The Court found that neither theory
was applicable here. The Center had pointed to no evidence that the parties to the arbitration
agreement intended for the nonsignatories to receive the benefits of the arbitration agreement.
As to judicial estoppel, the Court noted that the Estate had not alleged under oath in the statecourt action that the nonsignatories were parties to the arbitration agreement. Further, the
Center had not alleged that any such allegation was accepted by the state court.
The Center now moves the Court to reconsider that ruling.
ARule 59(e) motions are aimed at reconsideration, not initial consideration. Thus, parties
should not use them to raise arguments which could, and should, have been made before
judgment issued. Motions under Rule 59(e) must either clearly establish a manifest error of law
or must present newly discovered evidence.@ Sault Ste. Marie Tribe of Chippewa Indians v.
Engler, 146 F.3d 367, 374 (6th Cir. 1998) (quoting FDIC v. World Univ. Inc., 978 F.2d 10, 16 (1st
In its motion to compel arbitration, the Center did not specifically mention the claims
against the nonsignatories to the arbitration agreement. It argued that the Court should compel
the Estate to arbitrate all of its claims but it did not explain why the claims against the
nonsignatories were also governed by the arbitration agreement.
In its response to the Estate’s argument that the claims against the nonsignatories were
not subject to the arbitration agreement, the Center did specifically address the claims against
the nonsignatories to the arbitration agreement. The Court will again carefully parse through the
arguments that the Center made in its response. (DE 11, Response at 38-41.)
The Center first very clearly argued that the nonsignatories could enforce the arbitration
agreement because they were “third-party beneficiaries of the ADR Agreement at issue.” (DE 11,
Response at 39.)
In support of that proposition, the Center cited Olshan Found. Repair & Waterproofing v.
Otto, 276 S.W.3d 827 (Ky. App. 2009). In that case, the Kentucky Court of Appeals determined
that the nonsignatory plaintiff homeowners were “third party direct beneficiaries” of certain
warranty agreements containing an arbitration clause. Id. at 831. This is because the
homeowners had produced evidence that “the signatories intended to benefit future third party
owners of the residence.” Id. at 831.
In its ruling on the motion to compel arbitration, this Court explained that, in order for
the Court to find the nonsignatories in this case were third-party beneficiaries of the arbitration
agreement, the Center must produce evidence that the two parties to the arbitration agreement
intended that the nonsignatories would benefit from it. The Center had pointed to no such
evidence and, thus, the Court could not find that the nonsignatories were third-party beneficiaries
of the agreement. The Center does not now object to that ruling.
The passage from Otto that the Center cited in its response brief states, “Nonsignatories
to a contract containing an arbitration agreement may be bound to the agreement, but only if the
nonsignatory receives a direct benefit from the contract.” Id. at 831 (citing Javitch v. First Union
Securities, Inc., 315 F.3d 619 (6th Cir. 2003)). The Center argued that the nonsignatories to the
arbitration agreement received “the direct benefit of a speedier, more efficient and cost-effective
process of arbitration, which is directly referenced in the ADR Agreement.” (DE 11, Response at
39.) Whether the Center made this argument to support a third-party beneficiary argument or
an estoppel argument, it was a misreading of Otto. Nonsignatories to an arbitration agreement
are not entitled to enforce it simply because they benefit from it.
Next in its response brief, the Center noted that the Estate asserted a breach of contract
claim against the nonsignatoriees. (DE 11, Response at 39-40.) It then very clearly argued that
“[t]he doctrine of judicial estoppel should be applied to prohibit a party from taking inconsistent
positions in judicial proceedings.” (DE 11, Response at 40.) The Center then cited two Kentucky
cases dealing with judicial estoppel. See Hisle v. Lexington-Fayette Urban Cty. Gov't, 258 S.W.3d
422, 434 (Ky. Ct. App. 2008) (“The doctrine of judicial estoppel, which is a subset of the quasiestoppel principle, also can be applied to prohibit a party from taking inconsistent positions in
judicial proceedings.”); Colston Inv. Co. v. Home Supply Co., 74 S.W.3d 759, 763 (Ky. Ct. App.
2001) (“The judicial estoppel doctrine protects the integrity of the judicial process by preventing
a party from taking a position inconsistent with one successfully and unequivocally asserted by
the same party in a prior proceeding.”) The Center argued that, because the Estate asserted a
breach of contract claim against the nonsignatories, it “should be judicially estopped from now
attempting to change that position to try to defeat the enforcement of this arbitration agreement.”
(DE 11, Response at 40.)
The Court determined that the doctrine of judicial estoppel did not apply to the Estate’s
claims against the nonsignatories. The Center does not dispute that ruling in its Rule 59(e)
Finally, the Center argued in response brief that the claims against the nonsignatories fit
within the scope of the arbitration agreement. (DE 11, Response at 40.) The Court having found
no basis for concluding that the nonsignatories could enforce the arbitration agreement, did not
address whether the specific claims asserted by the Estate against the nonsignatories fit within
the scope of the arbitration agreement.
The Court finds no reason to alter its ruling based on the arguments that the Center
presented to it before judgment was entered. In its motion to reconsider, the Center cites three
cases: Javitch v. First Union Securities, Inc., 315 F.3d 619 (6th Cir. 2003); Arnold v. Arnold Corp.,
920 F.2d 1269 (6th Cir. 1990); and Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773 (2d
Cir. 1995). The Center argues that these three cases expose a “clear error of law” in the Court’s
In its response brief, however, the Center did not discuss any of these cases. It cited Otto,
which, in turn, cites Javitch which, in turn, cites Arnold and Thomson-CSF. To the extent that
any of these cases are the very basis for the Center’s argument that the Estate’s claims against
the nonsignatories must be arbitrated, the Center should have made that argument in the
pleadings it filed before the Court entered judgment. The Court is unable to consider on a Rule
59(e) motion, any “new arguments that could have been raised prior to judgment.” Howard v.
United States, 533 F.3d 472, 475 (6th Cir. 2008).
Accordingly, the Court hereby ORDERS that the Center’s motion to alter, amend or vacate
(DE 19) this Court’s denial of the Center’s motion to compel the Estate to arbitrate its claims
against the nonsignatories to the arbitration agreement is DENIED.
Dated May 19, 2017.
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