Carr et al v. Lake Cumberland Regional Hospital, LLC. et al

Filing 18

MEMORANDUM ORDER: IT IS ORDERED that Plaintiffs Motion to Remand (Doc. # 6 ) is denied. Signed by Judge David L. Bunning on 03/07/2016.(KJA)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
AT LONDON
CIVIL ACTION NO. 15-138-DLB
JOSEPH CARR

V.

PLAINTIFF

MEMORANDUM ORDER

LAKE CUMBERLAND REGIONAL
HOSPITAL, LLC, et al.

DEFENDANTS

*** *** *** ***
This matter is before the Court upon Plaintiff Joseph Carr’s Motion to Remand
this action to Pulaski County Circuit Court. (Doc. # 6). For the reasons set forth below,
Plaintiff’s Motion to Remand is denied.
I.

BACKGROUND
On July 9, 2015, Plaintiff filed this civil action against Defendant Lake

Cumberland Regional Hospital, LLC (“LCRH”) d/b/a Commonwealth Bariatric Center
and John D. Husted, M.D. (“ Defendant Husted”) in Pulaski County Circuit Court,
asserting claims for negligence, gross negligence, battery, negligent training and
supervision, willful and malicious injury, negligent misrepresentation, violation of
Kentucky’s Health Services and Facilities regulations,1 violation of the Kentucky
Consumer Protection Act, and punitive damages against Defendants. (Doc. # 1-3,
Complaint). On July 31, 2015, Defendants removed this case to federal court based on
diversity jurisdiction. (Doc. # 1).

In response, Plaintiff filed the instant Motion to

Remand, arguing that this case is not removable. Although Plaintiff acknowledges that
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902 KAR 20:260 § 4

the parties are diverse,2 Plaintiff claims Defendant LCRH is a citizen of Kentucky, and
thus, cannot remove this case to federal court under the “forum-defendant rule.” (Doc. #
6). LCRH claims it is a citizen of Delaware and Tennessee, not a citizen of Kentucky.
(Doc. # 7 at 6-10).
II.

ANALYSIS
A.

Standard of Review

A defendant may remove any civil action “of which the district courts of the
United States have original jurisdiction.” 28 U.S.C. § 1441(a). Once a case is removed,
a plaintiff may bring a motion to remand under 28 U.S.C. § 1447(c). “[R]emoval statutes
are to be narrowly construed.” Long v. Bando Mfg. of Am., Inc., 201 F.3d 754, 757 (6th
Cir. 2000). Therefore, “all doubts as to the propriety of removal are resolved in favor of
remand.” Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999); see also Her
Majesty the Queen in Right of the Province of Ontario v. City of Detroit, 874 F.2d 332,
339 (6th Cir, 1989).
However, when removal is based on diversity jurisdiction, the citizenship of the
defendant(s) must be considered. Pursuant to the forum-defendant rule, “[a] civil action
otherwise removable solely on the basis of [diversity jurisdiction] may not be removed if
any of the parties in interest properly joined and served as defendants is a citizen of the
State in which such action is brought.” 28 U.S.C. § 1441(b)(2). In other words, if a
defendant is a citizen of the state in which the action was brought, the action is not
removable, despite the parties’ diverse citizenship.

LCRH claims it is a citizen of

Tennessee and Delaware, based on the citizenship of its members. (Doc. # 7 at 6-10).

2

Plaintiff admits that Defendant Husted is a citizen of California. (Doc. # 1-3 at ¶ 12). Plaintiff admits that
he is a citizen of Ohio. (Id. at ¶ 1).
2

Plaintiff, however, claims LCRH is a citizen of Kentucky. Accordingly, the citizenship of
LCRH must be determined.
B.

Citizenship of Limited Liability Companies

For purposes of diversity jurisdiction, courts have created a distinction between
incorporated entities and unincorporated entities. 28 U.S.C. § 1332(c) indicates that a
corporation is a citizen of its incorporating state and its principal place of business. See
Hertz Corp. v. Friend, 559 U.S. 77, 93 (2010). However, “[t]he general rule is that all
unincorporated entities – of which a limited liability company is one – have the
citizenship of each partner or member.” Delay v. Rosenthal Collins Group, LLC, 585
F.3d 1003, 1005 (6th Cir. 2009) (emphasis added). Therefore, membership is the key
inquiry in determining a limited liability company’s citizenship for jurisdictional purposes.
C.

Citizenship of LCRH

LCRH is a limited liability company whose sole member is LifePoint of Lake
Cumberland, LLC (“LifePoint”), a limited liability company with a principal office in
Brentwood, Tennessee. (Doc. # 7 at 3; Doc. # 7-2).

LifePoint’s sole member is

LifePoint Holdings 2, LLC (“LifePoint Holdings”), a limited liability company with a
principal office in Brentwood, Tennessee. (Id.).

LifePoint Holding’s sole member is

LifePoint Hospitals Holdings, Inc., a corporation, incorporated in Delaware, with a
principal place of business in Tennessee. (Id.)
Plaintiff contends that LCRH is a Kentucky citizen, based on Brewer v.
SmithKline Beacham Corp., 774 F. Supp. 2d 720 (E. D. Pa. 2011), an Eastern District of
Pennsylvania case, which held that when a holding company is the sole member of a
limited liability company, citizenship is determined by the “nerve center” of the limited

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liability company – namely, the location of the company’s operational decision-making.
(Doc. # 6-1 at 5). Plaintiff further contends LCRH’s “multi-tiered structure is an artifice
to manipulate jurisdiction” and this Court should not “allow LCRH to selectively choose
when it is and is not affiliated with Kentucky.” (Doc. # 12 at 5-6).

In response,

Defendants rely on the Sixth Circuit’s decision in Delay and assert that LCRH “is a
citizen of both Delaware and Tennessee because its sub-members are citizens of those
two states, due to the fact that LifePoint Hospitals Holdings, Inc., is a Delaware
corporation with its principal place of business in Tennessee.” (Doc. # 7 at 6).
The Sixth Circuit has clearly established “that a limited liability company has the
citizenship of each of its members.” Delay, 585 F.3d at 1005 (“we so hold today”).3 The
“nerve center” test used in Brewer converts the test for a limited liability company’s
citizenship into the “principal place of business” test for a corporation if a holding
company is the sole member of a limited liability company. Brewer v, 774 F. Supp. 2d
720. While that may be the test in the Third Circuit, Brewer has no applicability in this
Circuit, and it conflicts with the citizenship test for limited liability companies established
by the Sixth Circuit.
Although LCRH’s membership requires the Court to analyze several layers of
membership, Delay envisioned such a multi-layer analysis:
When diversity jurisdiction is invoked in a case in which a limited liability
company is a party, the court needs to know the citizenship of each member of
the company. And because a member of a limited liability company may itself
have multiple members – and thus may itself have multiple citizenships – the
federal court needs to know the citizenship of each “sub-member” as well.
Indeed, if even one of RCG’s members – or one member of a member – were a
3

This principle is not dicta, as Plaintiff argues, and Delay continues to be cited with approval for that
proposition by the Sixth Circuit. See e.g., Varsity Brands, Inc. v. Star Athletica, LLC, 799 F.3d 468, 494
(6th Cir. 2015) (“We assess the citizenship of limited liability corporations [sic] (“LLC”) differently,
however: an LLC has the citizenship of each of its members.”).
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citizen of Ohio, then complete diversity, and with it federal jurisdiction, would be
destroyed.
Delay, 585 F.3d at 1005 (internal citations omitted.)
In fact, the Sixth Circuit recently engaged in the multi-layer analysis it
contemplated in Delay, and the Court finds that decision particularly instructive. See
Delphi Auto. Sys. v. United Plastics, Inc., 418 F. App’x 374 (6th Cir. 2011). In Delphi,
the Sixth Circuit questioned whether the district court’s exercise of diversity jurisdiction
was proper because it was unclear that the parties were actually diverse. Delphi, 418 F.
App’x at 378.

Specifically, the plaintiff-limited liability company, Delphi Automotive

Systems, LLC had three tiers of organization for the Sixth Circuit to analyze in order to
determine citizenship. Delphi Automotive Systems, LLC’s sole member was another
limited liability company, Delphi Holdings, LLC. Delphi Holdings, LLC’s sole member
was Delphi Corporation, a corporate entity organized and existing under the laws of
Delaware, with its principal place of business in Troy, Michigan. Accordingly, the Sixth
Circuit imputed Delphi Corporation’s Delaware and Tennessee citizenship to the
plaintiff, and held that the parties had established the existence of complete diversity.
Similarly, determining LCRH’s citizenship requires this Court to engage in a
multi-layer examination of several limited liability companies’ membership. LCRH is a
limited liability company whose sole member is another limited liability company,
LifePoint. (Doc. # 7 at 3; Doc. # 7-2). Therefore, as in Delphi, the diversity inquiry
continues.

LifePoint’s sole member is LifePoint Holdings, another limited liability

company. (Id.) LifePoint Holding’s sole member is LifePoint Hospitals Holdings, Inc., a
Delaware corporation, with a principal place of business in Tennessee. (Id.) Pursuant to
Delay and Delphi, LifePoint Hospitals Holdings, Inc.’s citizenship, in both Delaware and
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Tennessee, is imputed to the limited liability companies up the organizational chain, and
ultimately, to LCRH. Therefore, LCRH is a citizen of Delaware and Tennessee.
Accordingly, Defendants here have demonstrated that there is complete diversity
– Plaintiff is a citizen of Ohio, LCRH is a citizen of Delaware and Tennessee, and
Defendant Husted is a citizen of California. (Doc. # 1-3 at ¶ 12). Furthermore, because
LCRH is not a citizen of Kentucky, the forum-defendant rule does not apply, and this
case is removable under 28 U.S.C. § 1441. Therefore, this Court has subject matter
jurisdiction and Plaintiff’s Motion to Remand is denied.
III.

CONCLUSION
IT IS ORDERED that Plaintiff’s Motion to Remand (Doc. # 6) is denied.
This 7th day of March, 2016.

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