Salyersville Health Facilities, L.P. et al v. Blackburn
OPINION & ORDER: 1. this matter is STAYED pending parallel action in Magoffin Circuit Court; 2. all pending motions are DENIED AS MOOT; 3. Plas are ORDERED to file a Notice of Status of State Court Proceedings once every 6 months until parallel state court proceeding has been fully adjudicated; and 4. Plas are further ORDERED to file a Notice of Completion of State Court Proceedings as soon as the parallel state court action has been fully adjudicated. Signed by Judge Karen K. Caldwell on 8/1/2017. (RCB)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
FACILITIES, L.P., d/b/a
SALYERSVILLE NURSING &
SALYERSVILLE HEALTH FACILITIES
GP, LLC, KENTUCKY PARTNERS
PREFERRED CARE PARTNERS
MANAGEMENT GROUP, LP, PCPMG,
LLC, and PREFERRED CARE OF
DELAWARE, INC., d/b/a PREFERRED
OPINION & ORDER
LENORA BLACKBURN, as Power of
Attorney for, KATHERINE BARNETT,
*** *** ***
Katherine Barnett is a former resident of the Salyersville Nursing and Rehabilitation
Center. Lenora Blackburn, Barnett’s power of attorney, brought suit in state court asserting
a number of state law claims related to Barnett’s stay at the nursing home. Salyersville
Health Facilities, L.P. (“Salyersville”) then filed a petition in this Court seeking to enforce an
arbitration agreement signed by the parties and to compel the parties arbitrate those claims
pursuant to Section 4 of the Federal Arbitration Act (DE 1). While this Court considered
Salyersville’s motion to expedite consideration (DE 3) of its petition, Blackburn filed a motion
for summary judgment and declaratory relief regarding the enforceability of the arbitration
agreement at issue in Magoffin County Circuit Court (DE 9). On April 24, 2017, the same
day that the petition to compel arbitration became ripe for consideration in this Court, the
Magoffin County state court issued a one-page order granting Blackburn’s motion for
summary judgment, finding the arbitration agreement between the two parties to be
unenforceable for a lack of mutuality of obligation (DE 18-1). Salyersville has since appealed
the state court judgment (DE 22).
Squarely now before this Court is a similar situation faced by another court in this
district. In Preferred Care of Delaware, Inc. v. VanArsdale, a district court relied upon the
abstention doctrine set forth in Colorado River Water Conservation Dist. v. United States, 424
U.S. 800 (1976), to decline its exercise of jurisdiction after a state court issued an
interlocutory ruling on the enforceability of an arbitration agreement. 152 F.Supp.3d 929,
930–32 (E.D. Ky. 2016). That decision was subsequently affirmed by the Sixth Circuit Court
of Appeals in Preferred Care of Delaware, Inc. v. VanArsdale, 676 F. App’x 388 (6th Cir. Jan
13, 2017). Despite the “virtually unflagging obligation of the federal courts to exercise the
jurisdiction given them, considerations of judicial economy and federal-state comity may
justify abstention in situations involving the contemporaneous exercise of jurisdiction by
state and federal courts.” Romine v. Compuserve Corp., 160 F.3d 337, 339 (6th Cir. 1998).
After careful consideration and in light of the Sixth Circuit’s decision in VanArsdale, the
Court concludes that Colorado River abstention is appropriate in this case and will decline
to exercise jurisdiction.
There is a two-step process for determining whether abstention is appropriate under
Colorado River. The Court must first decide whether the federal and state suits are similar
enough to be parallel. Romine, 160 F.3d at 339. It is not necessary that the proceedings be
identical, nor is it necessary that the parties be identical. Id. Instead, as long as the claims
raised “are predicated on the same allegations as to the same material facts” and the parties
are “substantially similar,” the dual actions are similar enough to qualify as parallel under
Colorado River. Id. at 340.
The parties are parallel in this case. Save for one nursing administrator, the parties
overlap in the federal and state court action, and both cases turn on the same ultimate legal
question—whether the arbitration agreement is enforceable and requires that Blackburn
arbitrate her claims brought against Salyersville. Accordingly, “the two actions are similar
enough to satisfy the threshold requirement under Colorado River that they be parallel.”
VanArsdale, 676 F. App’x at 394.
Now to the propriety of abstention under Colorado River. To determine whether this
case fits under the exceptional circumstances counseling in favor of abstention, the Court
considers a list of factors. The factors are:
(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) whether the two cases would cause piecemeal litigation;
(4) the order in which the state and federal courts obtained jurisdiction;
(5) whether the source of governing law is state or federal;
(6) whether the state court will adequately protect the federal plaintiff's rights;
(7) how far the state and federal cases have proceeded; and
(8) whether or not the courts have concurrent jurisdiction over the issues.
Romine, 160 F.3d at 340–41. These factors are not meant to be a “mechanical checklist.” Id.
at 341. Rather, the Court should balance all of them to decide whether Colorado River
abstention is appropriate with the scale initially tilting in favor of exercising jurisdiction. See
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 15–16 (1983).
The first two factors carry no weight at all, which means they counsel against
abstention. The state court has not assumed any jurisdiction over any property. Likewise,
there is no real argument that the federal forum in Pikeville is any less convenient to the
parties that the state forum in Magoffin County, despite Blackburn’s contention that the
forty-five mile distance between courthouses weighs in favor of abstention. (DE 14, at 9). See
PaineWebber, Inc. v. Cohen, 276 F.3d 197, 207 (6th Cir. 2001).
The third and “paramount” factor under Colorado River—avoiding piecemeal
litigation—supports abstention in this specific case. As explained in Moses H. Cone, the
danger for piecemeal litigation is the reason why Colorado River abstention doctrine exists
in the first place. Moses H. Cone, 460 U.S. at 19. When two courts adjudicate the same issue,
they “duplicat[e] judicial effort” and “potentially render[ ] conflicting results.” Romine, 160
F.3d at 341. But “the mere potential for conflict” does not alone “warrant staying [the]
exercise of federal jurisdiction.” Colorado River, 424 U.S. at 816.
The Sixth Circuit’s decision in VanArsdale explains the issue in this case. As in
VanArsdale, this Court, without abstaining, “would necessarily have to litigate the same
issue resolved by the state trial court and now under consideration by the state intermediate
court”—whether the arbitration agreement is enforceable. VanArsdale, 676 F. App’x at 395.
“[T]his is the very definition of creating piecemeal litigation—where different courts
adjudicate the identical issue, thereby duplicating judicial effort and potentially rendering
conflicting results.” Id. (internal quotations and citations omitted).
Salyersville rejects this conclusion and argues that “the FAA and the strong federal
policy favoring arbitration ‘require piecemeal resolution when necessary to give effect to an
arbitration agreement.’” (DE 17, at 16) (quoting Moses H. Cone, 460 U.S. at 20) (emphasis in
original)), which means that it is “rarely appropriate for a federal court to abstain from ruling
on a motion to compel arbitration.” (DE 17, at 16) (quoting R.J. Griffin & Company v. Beach
Club II Homeowners Ass’n, Inc., 3 Fed. App’x 43, 45 (4th Cir. 2001) (citing Moses H. Cone,
460 U.S. at 25)).
The Court finds VanArsdale’s discussion and resolution of the same argument
Preferred Care disputes this conclusion by pointing to language in Moses H.
Cone apparently suggesting that this factor concerns not which court decides
arbitrability, but “whether failure to abstain would cause piecemeal resolution
of the parties' underlying disputes.” It is true that the concern for piecemeal
litigation rejected in Moses H. Cone was based on the possibility of different
fora resolving different underlying disputes, and the Supreme Court said this
was inherent in suits involving underlying contractual claims not all of which
are subject to arbitration. The Court did not address piecemeal litigation of the
arbitration issue itself, but that is the issue here. Bearing more directly on
these facts is this court’s holding in Romine, echoing Colorado River and earlier
Supreme Court cases, see Colorado River, 424 U.S. at 818, 96 S.Ct. 1236 (citing
Brillhart v. Excess Ins. Co., 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620
(1942)), which makes clear that by resolving a claim already considered in a
state court, a federal court would also be creating piecemeal litigation within
the meaning of this factor, by duplicating the resolution of the very same issue
in different courts. Romine, 160 F.3d at 341. As that would necessarily occur
in this case if the federal court were now to decide the arbitrability issue for
itself, this factor accordingly counsels abstention.
VanArsdale, 676 F. App’x at 395.
The fourth factor—the order in which the courts respectively gained jurisdiction—and
the seventh factor—the relative progress of the state and federal proceedings—both weigh in
favor of abstention. While Salyersville is correct that the issue of the enforceability of the
arbitration was first raised in this Court in Salyersville petition to compel arbitration, the
state court disposed of the arbitration issue on the day the matter became ripe in this Court
and before the Court was able to issue any ruling. In terms of the progress of the proceedings,
there is no doubt that the state proceeding has advanced beyond that of the federal court.
The state court granted summary judgment (DE 18) on April 27, 2017, and Salyersville
appealed, (DE 22), placing the issue before the state intermediate court. Both factors, then,
weigh in favor of abstention.
The fifth factor, which concerns the source of governing law, “does not clearly favor or
disfavor abstention,” VanArsdale, 676 F. App’x at 396. Thus, it must weigh, however slightly,
toward not abstaining. The FAA is the basis of interpreting the disputed arbitration
agreement as a whole, see PaineWebber, 276 F.3d at 208–09, and 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.” PaineWebber, 276 F.3d at 208. But given that
the enforceability of the arbitration agreement in the central issue before both courts, state
law is “at least as much at issue as federal law.” VanArsdale, 676 F. App’x at 396. Thus, the
fifth factors tilts the scale ever-so slightly against abstention.
The eighth factor under Colorado River is the presence or absence of concurrent
jurisdiction. Under this factor, if concurrent jurisdiction exists, the court is more likely to
abstain. There is concurrent jurisdiction in this case over the question of arbitrability. The
existence of concurrent jurisdiction, standing alone, “is insufficient to justify abstention,”
This factor, however, “is insufficient to justify abstention despite concurrent jurisdiction in
state and federal court where a congressional act provides the governing law and expresses
a preference for federal litigation,” PaineWebber, 276 F.3d at 208, as the FAA does here.
Moses H. Cone, 460 U.S. at 25 n. 32. Nevertheless, as set out in PaineWebber, the existence
of concurrent jurisdiction “marginally, if at all, favors abstention.” PaineWebber, 276 F.3d at
208; VanArsdale, 676 F. App’x at 397 (“[PaineWebber] nevertheless concluded that, because
the source-of-law factor there favored exercising jurisdiction, this factor likewise weighed in
favor of exercising jurisdiction and thus against abstention.  Here, by contrast, where the
source of the relevant law lies at least partly with the state, this factor accordingly tips,
however slightly, in favor of abstention.”).
The final factor to consider is whether the state court will adequately protect the
federal plaintiff’s rights. The FAA “extends Congress’s legislative authority to the maximum
extent permitted under the Commerce Clause, and is therefore binding on state courts that
interpret contracts involving interstate commerce.” PaineWebber, 276 F.3d at 208 (citation
omitted). That effect “presents the strongest basis for abstaining, because the state court
action is adequate to protect” Salyersville’s interest. Id.; Preferred Care, Inc. v. Howell, 187
F. Supp.3d 796, 806 (E.D. Ky. 2016) (“And this Court sees no reason why the state court
would shirk its duty to adequately enforce the FAA in this case.”). Salyersville argues that
this case is unlike the others in that here the state court relied on another state’s law to find
the arbitration agreement unenforceable. (DE 21, at 9). It is impossible to say, Salyersville
argues, that the state forum can protect its rights because the state court has already
seemingly shirked its duty to apply Kentucky law. True enough, the Court can offer no
explanation for why the state court decided to not to cite Kentucky law in its decision.
However, it remains true that the FAA is binding on the state intermediate court. Moreover,
the issue of the arbitration agreement’s validity is one of state law. This Court is reluctant to
say that the state intermediate court could not or will not rule inconsistently with its own
law, thereby protecting Salyersville’s rights under the FAA.
This Court is mindful that abstention “is the exception, not the rule,” Colorado River,
424 U.S. at 813, and that it requires such exceptional circumstances to abstain from the
“virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.”
Id. at 817–18. However, whether to abstain is an inquiry largely dependent on the careful
balancing of factors in a given case. Moses H. Cone Mem. Hosp., 460 U.S. at 16. In close calls,
then, it is only right that the Court look up to superior courts for guidance. In this instance,
the Sixth Circuit has ruled on a strikingly similar case in VanArsdale. While Salyersville
reminds that it is not binding, it is certainly unwise for a district court to ignore the
persuasive authority of a case that is on point, particularly when it is issued by the Sixth
Circuit. VanArsdale affirmed a district court’s decision to abstain in a case where a state
court had already disposed of issue central to both state and federal action, the state court
decision was under consideration by state intermediate court where both courts had
jurisdiction over question of arbitrability, and where district court would necessarily have
had to litigate same issues without abstention. That case is this case. “Although the balance
of considerations made relevant by Colorado River would ordinarily weigh heavily against
abstention,” VanArsdale, 676 F. App’x at 397, under the narrow circumstances of this case,
it is appropriate to decline to exercise its jurisdiction.
Accordingly, IT IS ORDERED that:
1. That this matter is hereby STAYED pending the parallel action in Magoffin Circuit
2. That all pending motions in this matter are hereby DENIED AS MOOT;
3. That the Plaintiffs are ORDERED to file a Notice of Status of State Court
Proceedings once every six (6) months until the parallel state court proceeding has
been fully adjudicated; and
4. That the Plaintiffs are further ORDERED to file a Notice of Completion of State
Court Proceedings as soon as the parallel state court action has been fully adjudicated.
Dated August 1, 2017.
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