GGNSC Louisville St. Matthews et al v. Madison
Filing
13
MEMORANDUM OPINION & ORDER Signed by Senior Judge Thomas B. Russell on 5/25/2017 granting 4 Motion to Expedite; granting 4 Motion to Compel; denying 7 Motion to Dismiss; denying 7 Motion to Dismiss for Failure to State a Claim; denying 7 Motion to Dismiss for Lack of Jurisdiction. cc: Counsel, David Nicholson, Jefferson Circuit Clerk(KJA)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:16-CV-00830-TBR
GGNSC LOUISVILLE ST. MATTHEWS,
d/b/a Golden Living Center––St. Matthews, et al.,
Plaintiffs,
v.
ANTHONY MADISON, as Guardian of
William Madison, Incapacitated,
Defendant.
MEMORANDUM OPINION AND ORDER
In 2012, William Madison, Jr. was admitted to the Golden Living Center, a
nursing home operated by GGNSC Louisville St. Matthews, LLC. Prior to admission,
Anthony Madison, Sr. signed an arbitration agreement as William Madison, Jr.’s
attorney-in-fact. During William Madison, Jr.’s stay at the Golden Living Center, he
allegedly suffered physical and emotional injuries due to inadequate care. The instant
action raises questions about how the claims related to those alleged injuries must be
adjudicated. Anthony Madison, Sr. (as William Madison, Jr.’s guardian) maintains that
any litigation ought to proceed in state court. In contrast, GGNSC argues that the dispute
should go to an arbiter.
The Court agrees with GGNSC.
Accordingly, Anthony
Madison, Sr.’s Motion to Dismiss, [R. 7], is DENIED, and GGNSC’s Motion to Compel
Arbitration and Enjoin Proceedings, [R. 4], is GRANTED.
I.
A.
In August 2012, William Madison, Jr. was admitted to the Golden Living Center,
a nursing home operated by GGNSC Louisville St. Matthews, LLC, in Louisville,
Kentucky. [R. 1 at 5, ¶ 17 (Complaint).] During the relevant time period, Anthony
1
Madison, Sr. exercised control over William Madison, Jr.’s affairs as his attorney-in-fact.
[Id., ¶ 18.] The power of attorney granted Anthony Madison, Sr.
maximum power under law to perform any act on [William Madison,
Jr.’s] behalf that [he] could do personally including but not limited to, all
acts relating to any and all of [William Madison, Jr.’s] financial
transactions and/or business affairs including all banking and financial
institution transactions, all real estate or personal property transactions, all
insurance or annuity transactions, all claims and litigation, and any and all
business transactions.
[R. 1-3 at 2 (Power-of-Attorney Document).] As part of the admissions process, Anthony
Madison, Sr. signed an arbitration agreement on William Madison, Jr.’s behalf. [R. 1 at
5, ¶ 19.] The arbitration agreement required the parties to arbitrate “any and all disputes
arising out of or in any way relating to [the arbitration agreement] or [William Madison,
Jr.’s] stay” at the Golden Living Center. [R. 1-2 at 3, § III (Arbitration Agreement).]
During William Madison, Jr.’s stay at the Golden Living Center, he allegedly
suffered physical and emotional injuries due to inadequate care, resulting in an expedited,
unnatural deterioration in his health. [R. 1-1 at 13, ¶¶ 29–30 (State Court Complaint).]
In response, Anthony Madison, Sr. (as his guardian) sued GGNSC and its affiliated
entities, along with various administrators at the Golden Living Center, in Jefferson
County Circuit Court for negligence, medical negligence, corporate negligence, and for
violating a long-term care resident’s statutory rights.1 [Id. at 14–29, ¶¶ 32–74.] The
record does reveal much about the status of the state-court litigation.
1
The corporate entities named in the state-court action (as well as this action) include GGNSC
Louisville St. Matthews LLC, d/b/a Golden Living Center—St. Matthews; GGNSC Administrative
Services, LLC; GGNSC Holdings, LLC; GGNSC Equity Holdings, LLC; GGNSC Equity Holdings II,
LLC; Golden Gate National Senior Care, LLC; Golden Gate Ancillary, LLC, d/b/a Golden Innovations;
GGNSC Clinical Services, LLC, d/b/a Golden Clinical Services; and GPH Louisville St. Matthews, LLC.
[R. 1-1 at 5–9, ¶¶ 4–12 (State Court Complaint).] For simplicity’s sake, the Court will refer to those
entities collectively as “GGNSC.”
2
B.
Before answering the allegations made in the state-court litigation, GGNSC filed
this action against Anthony Madison, Sr. [R. 1 at 8–10, ¶¶ 33–44.] Soon after, it filed a
motion to compel arbitration and enjoin the state-court litigation discussed earlier. [R. 4
(Motion to Compel Arbitration and Enjoin Litigation).] In lieu of an answer, Anthony
Madison, Sr. moved to dismiss GGNSC’s action on several grounds. [R. 7 (Motion to
Dismiss).] Those competing motions are ripe for decision.
II.
The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1–16, “embodies [a] national
policy favoring arbitration and places arbitration agreements on equal footing with all
other contracts.” Richmond Health Facilities v. Nichols, 811 F.3d 192, 195 (6th Cir.
2016) (quoting Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir.
2007)). Under the Act, a written agreement to arbitrate disputes arising out of a contract
or transaction involving interstate commerce “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2. There are “two parallel devices for enforcing an arbitration
agreement: a stay of litigation in any case raising a dispute referable to arbitration, 9
U.S.C. § 3, and an affirmative order to engage in arbitration, § 4.” Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22 (1983). Before compelling a party to
arbitration under 9 U.S.C. § 4, the Court “must engage in a limited review to determine
whether the dispute is arbitrable,” meaning “[1] that a valid agreement to arbitrate exists
The administrators named in the state-court action include Joshua Schindler, Brian Mueller,
Allyson Skaggs, Lisa Davis, and Kristi Noah. [Id. at 9–11, ¶¶ 13–17.] The Court will refer to them as the
“administrators.” None of the administrators are parties to the instant action.
3
between the parties and [2] that the specific dispute falls within the substantive scope of
the agreement.” Richmond Health Facilities, 811 F.3d at 195 (quoting Javitch v. First
Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003)); see also Masco Corp. v. Zurich Am.
Ins. Co., 382 F.3d 624, 627 (6th Cir. 2004). If the Court is satisfied that the parties
formed a valid agreement to arbitrate, it must compel the parties resolve the covered
dispute in the contracted-for manner. See 9 U.S.C. § 4.
III.
The Court first addresses Anthony Madison, Sr.’s motion to dismiss before
turning to GGNSC’s motion to compel arbitration. Anthony Madison, Sr. makes seven
arguments in an effort to escape arbitration. None of them are novel. In some form or
fashion, each one has been raised before and rejected time and again. Still, the Court will
address each in turn. Ultimately, it finds no reason to depart from this Circuit’s wellsettled positions.
A.
Anthony Madison, Sr. begins with an attack directed at the Court’s subject-matter
jurisdiction. [R. 7-2 at 3–11 (Memorandum in Support).] Of the two kinds of original
jurisdiction, see 28 U.S.C. §§ 1331–1332, this case concerns the one labeled “diversity.”
The Court exercises such jurisdiction in “all civil actions where the matter in controversy
exceeds the sum or value of $75,000, exclusive of interest and costs, and is between”
parties who are “citizens of different States.” 28 U.S.C. § 1332(a)(1). If a party thinks
that such jurisdiction might be wanting, the Federal Rules of Civil Procedure afford that
person an avenue for relief.
4
Pursuant to Federal Rule of Civil Procedure 12(b)(1), the doubting party may
move to dismiss an action for lack of subject-matter jurisdiction. Challenges of that sort
come in one of two forms: a facial attack or a factual attack. Wayside Church v. Van
Buren Cty., 847 F.3d 812, 816 (6th Cir. 2017). A facial attack questions “merely the
sufficiently of the pleading.” Gentek Bldg. Prod., Inc. v. Sherwin-Williams Co., 491 F.3d
320, 330 (6th Cir. 2007) (citing Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320,
325 (6th Cir. 1990)). In a challenge of that sort, the Court takes the allegations in the
complaint as true. Id. (citing Ohio Nat’l Life Ins. Co., 922 F.2d at 325). When assessing
a factual attack, in contrast, the Court “does not presume that the plaintiff’s factual
allegations are true.” Glob. Tech., Inc. v. Yubei (XinXiang) Power Steering Sys. Co., 807
F.3d 806, 810 (6th Cir. 2015) (citing Russell v. Lundergan-Grimes, 784 F.3d 1037, 1045
(6th Cir. 2015)). Instead, the Court must “weigh evidence to confirm the existence of the
factual predicates for subject-matter jurisdiction.” Carrier Corp. v. Outokumpu Oyj, 673
F.3d 430, 440 (6th Cir. 2012) (citing RMI Titanium Co. v. Westinghouse Elec. Corp., 78
F.3d 1125, 1133 (6th Cir. 1996)).
No one disputes that complete diversity of the parties is apparent from the face of
GGNSC’s complaint.
GGNSC and its affiliated entities are variously citizens of
California, Delaware, Virginia, North Carolina, Ohio, Iowa, and Nebraska. [R. 1 at 2–4,
¶¶ 2–9.] Anthony Madison, Sr. is a citizen of the Commonwealth of Kentucky. [Id. at 4,
¶ 10.] Therefore, it appears that GGNSC has sufficiently pleaded diversity of citizenship.
See 28 U.S.C. § 1332(a)(1).
But Anthony Madison, Sr. disagrees. Relying on Vaden v. Discover Bank, 556
U.S. 49 (2009), he urges the Court to “look through” GGNSC’s petition to his state-court
5
action for purposes of determining the diversity of the parties. If the Court were to do
that, the inclusion the administrators (who are citizens of Kentucky) in the jurisdictional
calculus would destroy complete diversity.
The Court declines to do so. Anthony Madison, Sr.’s argument rests on a strained
interpretation of Vaden. Vaden dealt with a petition to compel arbitration premised on
federal-question jurisdiction. Id. at 59–60. In that context, the Supreme Court instructed
federal courts to “look through” the petition to the predicate state-court action and
determine if that action, standing alone, met the requirements of 28 U.S.C. § 1331. Id. at
62.
However, Vaden’s holding is limited to those cases involving federal-question
jurisdiction. See Northport Health Servs. of Ark., LLC v. Rutherford, 605 F.3d 483, 488
(8th Cir. 2010). It has no application to cases, such as this one, involving diversity
jurisdiction. See, e.g., GGNSC Stanford, LLC v. Gilliam, 205 F. Supp. 3d 884, 888 (E.D.
Ky. 2016); Preferred Care, Inc. v. Howell, 187 F. Supp.3d 796, 804–05 (E.D. Ky. 2016);
Brookdale Sr. Living Inc. v. Stacy, 27 F. Supp. 3d 776, 781–82 (E.D. Ky. 2015).
Therefore, the Court has subject-matter jurisdiction over this action under 28 U.S.C. §
1332(a).
B.
In the alternative, Anthony Madison, Sr. maintains that GGNSC’s action must be
dismissed for failure to join the administrators, whom he labels as indispensable parties.
[R. 7-2 at 11–16.] Federal Rule of Civil Procedure 12(b)(7) creates an avenue to dismiss
an action for failure to join an indispensable party. Fed. R. Civ. P. 12(b)(7). To determine
whether a person qualifies as an indispensable party, the Court conducts a three-step
analysis.
PaineWebber, Inc. v. Cohen, 276 F.3d 197, 200 (6th Cir. 2001) (citing
6
Keweenaw Bay Indian Cmty. v. State, 11 F.3d 1341, 1345 (6th Cir. 1993)); see also
Laethem Equip. Co. v. Deere & Co., 485 F. App’x 39, 43 (6th Cir. 2012). Under the first
step, which is a threshold requirement, the Court must determine “whether the person or
entity is a necessary party under Rule 19(a).” Glancy v. Taubman Ctrs., Inc., 373 F.3d
656, 666 (6th Cir. 2004) (citing Temple v. Synthes Corp., 498 U.S. 5, 8 (1990)). A person
becomes a “necessary party” to litigation 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
(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)(1); see also Wilson v. Gordon, 822 F.3d 934, 956 (6th Cir. 2016). If
the person is a necessary party, then the Court considers whether joinder of that person is
feasible. PaineWebber, Inc., 276 F.3d at 200. So long as the person is subject to
personal jurisdiction in the forum state and the addition of that person would not destroy
subject-matter jurisdiction, then joinder is feasible. Fed. R. Civ. P. 19(a). However, if
joinder of a necessary party is not feasible, the Court must take the third and final step of
deciding whether the person qualifies as an indispensable party. PaineWebber, Inc., 276
F.3d at 200. To make that determination, the Court looks to the following factors:
(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:
7
(A) protective provisions in the judgment;
(B) shaping the relief; or
(C) other measures;
(3) whether a judgment rendered in the person’s absence would be
adequate; and
(4) whether the plaintiff would have an adequate remedy if the action were
dismissed for nonjoinder.
Fed. R. Civ. P. 19(b).
An action need only be dismissed if, after weighing those factors, the Court finds
that the nonjoined person is truly indispensable. For the sake of argument, the Court will
assume that the administrators qualify as “necessary” parties whose joinder would not be
feasible under Rule 19(a).
That notwithstanding, nothing makes the administrators
indispensable under Rule 19(b).
Having considered the factors laid out in Rule 19(b), there is no roadblock to
proceeding without them. First, the risk of prejudice to anyone concerned is minimal at
best. It is true, for example, that Anthony Madison, Sr. risks having to proceed in two
different forums. Yet, he occasioned that risk when he decided to litigate in state court
instead of demanding arbitration in the first place. Second, in light of the minimal
prejudice, there is no need to resort to mitigating measures. Third, there is nothing to
indicate that a judgment returned in the administrators’ absence will be inadequate.
Fourth, because GGNSC could attempt to compel arbitration in state court, it has an
adequate remedy if this action were dismissed. Nonetheless, the balance of the remaining
factors militates against finding the administrators indispensable to this action. See, e.g.,
Diversicare of Nicholasville, LLC v. Lowry, 213 F Supp. 3d 859, 862–65 (E.D. Ky.
8
2016). Accordingly, the Court finds that, in equity and good conscience, this action
ought to continue.
C.
Next, Anthony Madison, Sr. encourages the Court to abstain from exercising
jurisdiction.
[R. 7-2 at 16–20.]
The obligation of federal courts to exercise the
jurisdiction granted to them is close to unflagging. Quackenbush v. Allstate Ins. Co., 517
U.S. 706, 716 (1996). Of course, no rule is without exception. In Colorado River Water
Conservation District v. United States, 424 U.S. 800 (1976), the Supreme Court
recognized that federal courts should sometimes abstain from exercising jurisdiction over
an action involving “substantially the same issues and substantially the same parties as a
parallel case in state court.” Total Renal Care, Inc. v. Childers Oil Co., 743 F. Supp. 2d
609, 612 (E.D. Ky. 2010) (citing Colorado River, 424 U.S. at 817–21).
The threshold question in Colorado River abstention is whether there are parallel
proceedings in state court. Bates v. Van Buren Twp., 122 F. App’x 803, 806 (6th Cir.
2004) (citing Crawley v. Hamilton Cty. Comm’rs, 744 F.2d 28, 31 (6th Cir. 1984)). “The
state court proceedings need not be identical, merely ‘substantially similar.’” Id. (quoting
Romine v. Compuserve Corp., 160 F.3d 337, 340 (6th Cir. 1998)). The Court will
assume, arguendo, that this action and the state-court litigation are sufficiently parallel.
In this Circuit, courts then weigh a number of factors to determine if abstention is
appropriate. Great Earth Cos. v. Simons, 288 F.3d 878, 886 (6th Cir. 2002). The list of
factors includes:
(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) avoidance of piecemeal litigation; . . . (4) the order in which
jurisdiction was obtained[;] . . . (5) whether the source of governing law is
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state or federal; (6) the adequacy of the state-court action to protect the
federal plaintiff’s rights; (7) the relative progress of the state and federal
proceedings; and (8) the presence or absence of concurrent jurisdiction.
Id. (alterations in original) (quoting PaineWebber, Inc., 276 F.3d 206). Of those eight,
the most important factor is “whether there exists a ‘clear federal policy evinc[ing] . . .
the avoidance of piecemeal adjudication.’” Answers in Genesis of Ky., Inc. v. Creation
Ministries Int’l, Ltd., 556 F.3d 459, 467 (6th Cir. 2009) (alterations in original) (quoting
Colorado River, 424 U.S. at 819).
In this case, the balance of those factors weighs against abstention. First, property
is not at issue in this action. Second, litigation in this forum is just as convenient as
litigation in state court.
Third, the FAA prioritizes the enforcement of arbitration
agreements—even when, as in most cases, it might result in piecemeal litigation. See
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217 (1985). Fourth, the state court
obtained jurisdiction first, but GGNSC filed this action less than two weeks later. Fifth,
while state law will govern the contractual defenses that Anthony Madison, Sr. raises
against the arbitration agreement, the FAA governs the enforceability of that agreement.
Sixth, the state-court action seems adequate to protect GGNSC’s federal rights. Seventh,
there is no discernable difference between the progress of the state-court litigation and
this action. Lastly, concurrent jurisdiction is present. In sum, nearly all of the relevant
factors counsel against abstention. See, e.g., GGNSC Frankfort, LLC v. Tracy, No. CIV.
14-30-GFVT, 2015 WL 1481149, at *7–9 (E.D. Ky. Mar. 31, 2015). Therefore, the
Court declines to abstain.
D.
Turning to the substantive aspects of this dispute, the Court tackles Anthony
Madison, Sr.’s remaining merits-based defenses, along with GGNSC’s motion to compel
10
arbitration and to stay the state-court litigation. To begin, Anthony Madison, Sr. claims
that GGNSC’s complaint fails to plead a connection between the arbitration agreement at
issue and interstate commerce. [R. 7-2 at 21–23.]
A complaint must contain “a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). In order to survive a motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6), a party must “plead enough
‘factual matter’ to raise a ‘plausible’ inference of wrongdoing.” 16630 Southfield Ltd.
P’ship v. Flagstar Bank, F.S.B., 727 F.3d 502, 504 (6th Cir. 2013) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)). A claim becomes plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007)). Should the well-pleaded facts support no “more
than the mere possibility of misconduct,” then dismissal is warranted. Id. at 679. The
Court may grant a motion to dismiss “only if, after drawing all reasonable inferences
from the allegations in the complaint in favor of the plaintiff, the complaint still fails to
allege a plausible theory of relief.” Garceau v. City of Flint, 572 F. App’x 369, 371 (6th
Cir. 2014) (citing Iqbal, 556 U.S. at 677–79).
The FAA mandates that an arbitration clause, such as the provision involved in
this action, in a “contract evidencing a transaction involving interstate commerce . . .
shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” 9 U.S.C. § 2. The phrase “involving interstate
commerce” as used in the Act carries the same meaning as the similar phrase found in the
Commerce Clause of the Constitution. Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56
11
(2003) (citing Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273–74 (1995)). In
other words, there will be a sufficient nexus even without “showing any specific effect
upon interstate commerce” resulting from the individual case if, in the aggregate, “the
economic activity in question would represent ‘a general practice . . . subject to federal
control.’” Id. at 56–57 (alteration in original) (quoting Mandeville Island Farms v. Am.
Crystal Sugar Co., 334 U.S. 219, 236 (1948)).
In the complaint, GGNSC alleged that the “transactions and contracts . . . that are
the subject of this action involve commerce among the several states.” [R. 1 at 4, ¶ 13.]
There is nothing implausible about that allegation. It blinks reality to say that, in the
aggregate, the nursing home industry does not affect interstate commerce. Cf. Glen
Manor Home for Jewish Aged v. NLRB, 474 F.2d 1145, 1149 (6th Cir. 1973). GGNSC
alone does business in at least eight states.
Its activities are not confined to the
Commonwealth’s borders. See, e.g., GGNSC Louisville Mt. Holly, LLC v. Turner, No.
3:16-CV-00149-TBR, 2017 WL 537200, at *3 (W.D. Ky. Feb. 9, 2017). The complaint
plausibly alleges that William Madison, Jr.’s admissions papers (and the arbitration
provision within them) reflect a transaction involving interstate commerce.
E.
Even so, Anthony Madison, Sr. takes issue with whether the power of attorney
provided sufficient authority to enter into an arbitration agreement on William Madison,
Jr.’s behalf. [R. 7-2 at 23–26.] Because arbitration agreements are, in essence, contracts,
Kentucky law guides the Court’s inquiry into the question of contract formation. See
Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630–31 (2009). Contrary to Anthony
12
Madison, Sr.’s argument, however, the Court finds that William Madison, Jr.’s power of
attorney authorized his attorney-in-fact to execute the arbitration agreement at issue.
1.
As discussed earlier, William Madison, Jr.’s power of attorney granted Anthony
Madison, Sr.
maximum power under law to perform any act on [William Madison,
Jr.’s] behalf that [he] could do personally including but not limited to, all
acts relating to any and all of [William Madison, Jr.’s] financial
transactions and/or business affairs including all banking and financial
institution transactions, all real estate or personal property transactions, all
insurance or annuity transactions, all claims and litigation, and any and all
business transactions.
[R. 1-3 at 2 (emphasis added).] Significantly, the language used is broad: It empowers
William Madison, Jr.’s attorney-in-fact to act on his behalf with respect to many different
types of transactions. In that way, the power of attorney is distinct from those in cases
such as Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012), and Pine Tree
Villa, LLC v. Brooker, 612 F. App’x 340, 341 (6th Cir. 2015), where the powers-ofattorney just discussed the agent’s authority to make health care decisions.
Here,
William Madison, Jr.’s power of attorney contemplated something more than that. The
Court concludes that it permitted Anthony Madison, Sr. to execute the arbitration
agreement in question. See, e.g., Diversicare of Nicholasville, LLC, 213 F. Supp. 3d at
869 (holding grant of power to “enter into binding contracts” sufficient to execute
arbitration agreement); GGNSC Stanford, LLC, 205 F. Supp. 3d at 892–93 (holding grant
of power to “make and sign any and all checks, contracts and agreements” and to
“institute or defend suits concerning [decedent’s] property or rights” sufficient to execute
arbitration agreement); Brookdale Sr. Living Inc., 27 F. Supp. 3d at 790–91 (holding
grant of power to “make, execute, and deliver for [decedent] and in [her] name any and
13
all deeds, documents, writings, checks, drafts and notes, of all kinds and descriptions” to
be sufficient to execute arbitration agreement).
2.
In the alternative, Anthony Madison, Sr. stresses that, under Kentucky law, a
power-of-attorney document must expressly and unambiguously grant the attorney-infact authority to execute an arbitration agreement. [R. 7-2 at 26.] Absent an express
grant, he says, the attorney-in-fact is without authority sign such an agreement. In
support of that position, Anthony Madison, Sr. points to Extendicare Homes, Inc. v.
Whisman, 478 S.W.3d 306 (Ky. 2015), in which the Kentucky Supreme Court held just
that. Nonetheless, the point is moot in light of Kindred Nursing Centers Ltd. P’ship v.
Clark, ––– U.S. ––––, 2017 WL 2039160 (2017), which reversed the Kentucky Supreme
Court on this precise issue. Anthony Madison, Sr. argument is accordingly without
merit.
F.
Next, Anthony Madison, Sr. attacks the arbitration agreement as an
unconscionable contract.
[R. 7-2 at 26–28.]
Generally speaking, the doctrine of
unconscionability is “one of the grounds upon which any contract may be revoked.”
Energy Home, Div. of S. Energy Homes, Inc. v. Peay, 406 S.W.3d 828, 835 (Ky. 2013)
(citing AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 341–42 (2011); Schnuerle v.
Insight Commc’ns Co., 376 S.W.3d 561, 575 (Ky. 2012); Conseco Fin. Servicing Corp. v.
Wilder, 47 S.W.3d 335, 341 (Ky. Ct. App. 2001)). “An unconscionable contract is ‘one
which no man in his sense, not under delusion, would make, on the one hand, and which
no fair and honest man would accept, on the other.’” Schnuerle, 376 S.W.3d at 575
14
(quoting Louisville Bear Safety Serv., Inc. v. S. Cent. Bell Tel. Co., 571 S.W.2d 438, 440
(Ky. Ct. App. 1978)).
Kentucky law recognizes two theories of unconscionability:
procedural and substantive. Energy Home, 406 S.W.3d at 835; accord In re Merv Props.,
L.L.C., 539 B.R. 516, 531 (B.A.P. 6th Cir. 2015). Here, Anthony Madison, Sr. relies on
both theories, but each comes up short.
1.
First,
nothing
unconscionability.
of
the
arbitration
agreement
smacks
of
procedural
“Procedural unconscionability relates to the process by which an
agreement is reached and to the form of the agreement.” Energy Home, 406 S.W.3d at
835 (citing Schnuerle, 376 S.W.3d at 576–77). It includes, for example, “the use of fine
or inconspicuous print and convoluted or unclear language that may conceal or obscure a
contractual term.” Id. (citing Schnuerle, 376 S.W.3d at 576–77). When evaluating
whether a contract is procedurally unconscionable, the Court ought to consider factors
such as “the bargaining power of the parties, ‘the conspicuousness and comprehensibility
of the contract language, the oppressiveness of the terms, and the presence or absence of
a meaningful choice.’” Schnuerle, 376 S.W.3d at 576 (quoting Jenkins v. First Am. Cash
Advance of Ga., LLC, 400 F.3d 868, 875–76 (11th Cir. 2005)).
Anthony Madison, Sr.’s procedural unconscionability challenge rests, in part, on
the disparity of bargaining power between family members confronted with the
emotional and difficult task of admitting loved-ones to nursing homes and the corporate
entities which run them.
[R. 7-2 at 27.]
A mere difference in bargaining power,
however, does not make an agreement unconscionable. Anthony Madison, Sr. also
complains about the volume of paperwork required to complete the nursing home
15
admissions process. [Id.] Of course, many situations in life—such as buying a home or
beginning a new job—involve “a lengthy process in which an individual must complete a
substantial amount of paperwork.” GGNSC Louisville Hillcreek, LLC v. Watkins, No.
3:15-CV-902-DJH, 2016 WL 815295, at *6 (W.D. Ky. Feb. 29, 2016). But there is no
basis to avoid those types of transactions as unconscionable—and so too here. In short,
nothing about the agreement itself is unfairly presented:
It is plainly stated; its
implications are in bold type; it does not limit recovery; it is reciprocal; and Anthony
Madison, Sr. could have opted out of the agreement within thirty days of signing it. [R.
1-2 at 2–5.]
Taking those things into account, the arbitration agreement is not
unconscionable from a procedural standpoint.
2.
Second, the arbitration agreement is not substantively unconscionable either.
“Substantive unconscionability refers to contractual terms that are unreasonably or
grossly favorable to one side and to which the disfavored party does not assent.” Energy
Home, 406 S.W.3d at 835 (citing Schnuerle, 376 S.W.3d at 577). Factors relevant to the
substantive unconscionability inquiry include “the commercial reasonableness of the
contract terms, the purpose and effect of the terms, the allocation of the risks between the
parties, and similar public policy concerns.” Id. (quoting Schnuerle, 376 S.W.3d at 577).
On that front, Anthony Madison, Sr.’s arguments are nothing more than
objections to the way that arbitration works. [R. 7-2 at 27–28.] Whatever weight those
objections might carry elsewhere, none represent a proper basis for refusing to enforce an
arbitration clause under the doctrine of unconscionability. See, e.g., GGNSC Louisville
16
Hillcreek, LLC v. Warner, No. 3:13-CV-752-H, 2013 WL 6796421, at *9 (W.D. Ky. Dec.
19, 2013).
G.
Lastly, Anthony Madison, Sr. urges the Court to refrain from enjoining the parties
from litigating in state court. [R. 7-2 at 28–31.] Although the FAA requires this Court to
stay proceedings before it where the issues to be litigated are subject to an arbitration
agreement, see 9 U.S.C. § 3, it does not explicitly authorize the same relief with respect
to parallel litigation in state court, Great Earth Cos., 288 F.3d at 893. Instead, the
Court’s authority to “enjoin state-court proceedings is subject to the legal and equitable
standards for injunctions generally,” including the Anti-Injunction Act. Id. at 894 (citing
28 U.S.C. § 2283). The Anti-Injunction Act, in turn, prohibits the Court from issuing an
“injunction to stay proceedings” in state court “except as expressly authorized by Act of
Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its
judgments.” 28 U.S.C. § 2283; see also 202 N. Monroe, LLC v. Sower, 850 F.3d 265,
271 (6th Cir. 2017). It is well-established that an injunction issued concurrent with an
order to compel arbitration falls into the exception “to protect or effectuate [the Court’s]
judgments.” Great Earth Cos., 288 F.3d at 894. Therefore, enjoining Anthony Madison,
Sr. from proceeding against GGNSC in the state-court litigation does no violence to the
Anti-Injunction Act. See, e.g., Brandenburg Health Facilities, LP v. Mattingly, No. 3:15CV-833-DJH, 2016 WL 3448733, at *5 (W.D. Ky. June 20, 2016). The Court will enjoin
him accordingly.
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IV.
IT IS HEREBY ORDERED that Anthony Madison, Sr.’s Motion to Dismiss,
[R. 7], is DENIED.
IT IS FURTHER ORDERED that GGNSC Louisville St. Matthews LLC, d/b/a
Golden Living Center—St. Matthews; GGNSC Administrative Services, LLC; GGNSC
Holdings, LLC; GGNSC Equity Holdings, LLC; GGNSC Equity Holdings II, LLC;
Golden Gate National Senior Care, LLC; Golden Gate Ancillary, LLC, d/b/a Golden
Innovations; GGNSC Clinical Services, LLC, d/b/a Golden Clinical Services; and GPH
Louisville St. Matthews, LLC’s Motion to Compel Arbitration and Enjoin Proceedings,
[R. 4], is GRANTED. Anthony Madison, Sr. is ENJOINED from proceeding against
the aforementioned parties in the action styled Madison ex rel. Madison v. GGNSC
Louisville St. Matthews, LLC, Civil Action No. 16-CI-006218, in Jefferson County
Circuit Court, Kentucky. Anthony Madison, Sr. is COMPELLED to submit his claims
against the aforementioned parties to arbitration in accordance with the terms of the
Alternative Dispute Resolution Agreement, [R. 1-2]. The instant action is STAYED
pending conclusion of arbitration. The parties SHALL promptly inform the Court when
arbitration is complete.
IT IS SO ORDERED.
Date:
May 25, 2017
cc:
Counsel of Record
David L. Nicholson, Jefferson Circuit Clerk
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