Ivan Payich v. GGNSC Omaha Oak Grove, LLC

Filing 14

MEMORANDUM AND ORDER - On or before May 4, 2012, defendant GL Sorensen shall show cause why the present motion to compel (filing 1 ) should not be dismissed for lack of subject matter jurisdiction. Plaintiff's Motion for Leave to File a Responsive Brief (filing 12 ) is denied, without prejudice, as moot. Ordered by Judge John M. Gerrard. (TEL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
IVAN PAYICH, as Special
Administrator for the Estate of NADA
PAYICH,

4:12CV3040

Plaintiff,
MEMORANDUM AND ORDER
vs.
GGNSC OMAHA OAK GROVE, LLC
d/b/a GOLDEN LIVINGCENTER OF
SORENSEN, and JOHN DOES 1-20,
Real Names Unknown,
Defendants.
This matter is before the Court on the motion to compel arbitration
(filing 1) filed by defendant, GGNSC Omaha Oak Grove, LLC, d/b/a Golden
LivingCenter of Sorensen (“GL Sorensen”). This case originated in Nebraska
state court, where plaintiff Ivan Payich (“Ivan”) originally filed suit as special
administrator for the estate of his mother, Nada Payich (“Nada”). (Filing 2-2,
Complaint.) The complaint alleges that while Nada was a resident at a
skilled nursing facility owned and operated by GL Sorensen, she suffered
physical and mental injuries as a result of negligent care and treatment. (Id.
at ¶¶ 4–6, 27–35.) The complaint also alleges that defendants John Does 1–
10 (contractors, subcontractors, and employees of GL Sorensen) and John
Does 11–20 (the owners and administrators of GL Sorensen) were negligent
in their care and treatment of Nada. (Id.)
In response, GL Sorensen filed the present motion, seeking an order
from this Court compelling arbitration under the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 4. Defendant contends that an arbitration provision
included in the admission agreement through which Nada was admitted to
the skilled nursing facility controls any disputes regarding Nada’s care at the
facility.
However, before the Court may consider the merits of the pending
motion to compel arbitration, the Court must determine whether it has
jurisdiction. This Court has an obligation to consider whether it has subject
matter jurisdiction in every case, and this includes the responsibility to

consider the issue sua sponte. Hart v. United States, 630 F.3d 1085, 1089 (8th
Cir. 2011). For the reasons discussed below, the Court finds that it lacks
subject matter jurisdiction to consider GL Sorensen’s motion to compel
arbitration.
1. FEDERAL JURISDICTION AND THE FAA
While § 4 of the FAA provides that any party may file a motion in
federal district court to compel arbitration, it does not provide an
independent jurisdictional basis for filing in federal court. Express Scripts,
Inc. v. Aegon Direct Marketing Services, Inc., 516 F.3d 695, 699 (8th Cir.
2008). As the Court explained in Moses H. Cone Mem’l Hosp. v. Mercury
Const. Corp., 460 U.S. 1, 25 n.32 (1983), the FAA
is something of an anomaly in the field of federal-court
jurisdiction. It creates a body of federal substantive law
establishing and regulating the duty to honor an agreement to
arbitrate, yet it does not create any independent federal-question
jurisdiction . . . . Section 4 provides for an order compelling
arbitration only when the federal district court would have
jurisdiction over a suit on the underlying dispute; hence, there
must be diversity of citizenship or some other independent basis
for federal jurisdiction before the order can issue.
GL Sorensen has invoked the Court’s diversity jurisdiction under 28
U.S.C. § 1332(a), asserting that the amount in controversy exceeds $75,000
and GL Sorensen and plaintiff are citizens of different states. (Filing 1, at ¶
4.) As the party invoking the Court’s jurisdiction, GL Sorensen must show, by
a preponderance of the evidence, facts supporting jurisdiction. Schubert v.
Auto Owners Ins. Co., 649 F.3d 817, 822 (8th Cir. 2011).
2. DIVERSITY JURISDICTION AS BETWEEN PLAINTIFF AND GL
SORSENSEN
The amount in controversy requirement has been satisfied. This
requires only that the Court find by a preponderance of the evidence that "a
fact finder could legally conclude, from the pleadings and proof adduced to
the court before trial, that the damages that the plaintiff suffered are greater
than $75,000." Kopp v. Kopp, 280 F.3d 883, 885 (8th Cir. 2002) (emphasis
supplied). Plaintiff’s complaint states that the damages claimed are “far in
excess of any minimum jurisdictional requirement of this Court or any
Federal Court . . . .” (Filing 2-2, at ¶ 8.) Defendant agrees with this assertion.
(Filing 1, at ¶ 7.) This assertion is credible: plaintiff has alleged that Nada
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suffered physical injuries, physical and mental pain and suffering, and
medical expenses as a result of defendants’ negligence. (Filing 2-2, at ¶¶ 30–
33 .)
GL Sorensen has also shown that diversity exists between itself and
the plaintiff. Ivan Payich brings this suit in his capacity as special
administrator of the estate of Nada Payich. For purposes of this dispute, he is
a citizen of Nebraska. The legal representative of the estate of a decedent is
deemed to be a citizen of the same state as the decedent. 28 U.S.C. §
1332(c)(2). At all relevant times, Nada was a resident of Nebraska, (Filing 22, at ¶ 2), and Ivan is therefore deemed a citizen of Nebraska.
GL Sorensen is a limited liability company (LLC) organized under the
laws of Delaware. (Filing 1, at ¶ 6.) For diversity purposes, an “ordinary”
corporation is a citizen of every state in which it has been incorporated and
where it has its principal place of business. 28 U.S.C. § 1332(c)(1). This rule
does not apply to an LLC, however, whose citizenship is instead the
citizenship of all its members. GMAC Commercial Credit LLC v. Dillard
Dep’t Stores, 357 F.3d 827, 829 (8th Cir. 2004). The sole member of GL
Sorensen is GGNSC Equity Holdings LLC, a Delaware LLC; whose sole
member, in turn, is Golden Gate National Senior Care LLC, a Delaware LLC;
whose sole member, in turn, is GGNSC Holdings LLC, a Delaware LLC.
(Filing 1, at ¶ 6.) Finally, the sole member of GGNSC Holdings LLC is
Drumm Corporation, an “ordinary” corporation organized under the laws of
Delaware, with its principal place of business in California. (Id.) Drumm
Corporation is thus a citizen of Delaware and California. 28 U.S.C. §
1332(c)(1). The LLCs stacked within GL Sorensen are therefore all citizens of
Delaware and California, and so is GL Sorensen.
However, Ivan Payich and GL Sorensen are not the only parties to this
dispute. Ivan’s complaint also alleges that John Does 1–20 were negligent in
their care and treatment of Nada. And to maintain diversity jurisdiction,
there must be “complete diversity,” which requires that no defendant hold
citizenship in the same state as any plaintiff. Junk v. Terminix Int’l Co., 628
F.3d 439, 445 (8th Cir. 2010). The citizenship of the John Doe defendants is
not known, nor alleged by either party.
3. JOHN DOE DEFENDANTS AND DIVERSITY JURISDICTION
Federal courts are divided on the question of how to handle “John Doe”
defendants of unknown citizenship for purposes of original diversity
jurisdiction, that is, where the party asserting jurisdiction starts by bringing
its case (or, as here, motion) in federal court. In contrast, for cases removed to
federal court on the basis of diversity jurisdiction, the answer is clear. Title
28 U.S.C. § 1441(b)(1) provides, “In determining whether a civil action is
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removable on the basis of the jurisdiction under section 1332(a) of this title,
the citizenship of defendants sued under fictitious names shall be
disregarded.” This sentence was added by Congress as part of the Judicial
Improvements and Access to Justice Act of 1988. Pub. L. 100-702, Title X, §
1016(a), 102 Stat. 4669. However, Congress made no similar change to the
statute governing original diversity jurisdiction, 28 U.S.C. § 1332. Federal
courts are divided on the significance of this omission and on how the
presence of John Doe defendants affects original diversity jurisdiction.1
Several courts have held that, because Congress amended § 1441 but
not § 1332, it would be improper to “import” the changes governing removal
into the original jurisdiction statute, reasoning that it is “for Congress to
define the jurisdiction of the federal courts, and not for any federal district
court to engage in judicial legislation.” Controlled Env’t Sys. v. Sun Process
Co., Inc., 936 F. Supp. 520, 522 (N.D. Ill. 1996); see, also, Howell by Goerdt v.
Tribune Entertainment Co., 106 F.3d 215, 218 (7th Cir. 1997); McMann v.
Doe, 460 F. Supp. 2d 259, 263–65 (D. Mass. 2006); Meng v. Schwartz, 305 F.
Supp. 2d 49, 55–56 (D.D.C. 2004). These courts hold that the presence of
John Doe defendants destroys original diversity jurisdiction, because courts
cannot simply presume diversity is present and the proponent of jurisdiction
cannot prove diversity without some indication of the Does’ citizenship. See,
e.g., Howell by Goerdt, 106 F.3d at 218; Meng, 305 F. Supp. 2d at 56.
Other courts have held that the mere presence of Doe defendants does
not destroy diversity, unless, of course, they are later revealed to have the
same citizenship as a plaintiff. These courts reason that applying different
standards under § 1441 and § 1332 would lead to inequitable results, in that
plaintiffs would be forced to remain in state court in order to sue Doe
defendants, but identified defendants could readily remove the same cases to
federal court. Macheras v. Center Art Galleries–Hawaii, Inc., 776 F. Supp.
1436, 1440 (D. Haw. 1991); see, also, Johnson v. Rite Aid, 2011 WL 2580375
(D. N.J. June 28, 2011); Doe v. Ciolli, 611 F. Supp. 2d 216, 220 (D. Conn.
2009).
This Court adopts the former view, and will apply § 1332 per its plain
text, without importing the amendments to § 1441. The starting point for
The Eighth Circuit does not appear to have addressed this issue. In
Pecherski v. Gen. Motors Corp., 636 F.2d 1156 (8th Cir. 1981), the court held
that removal jurisdiction was improper when the removing defendant failed
to establish diversity between the plaintiff and a Jane Doe defendant.
Pecherski offers little guidance on how to handle original diversity
jurisdiction, and, in any event, was overruled by the 1988 amendments to §
1441.
1

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statutory interpretation is the text itself. Graphic Commc’ns Local 1B Health
& Welfare Fund “A” v. CVS Caremark Corp., 636 F.3d 971, 974 (8th Cir.
2011). As regards John Doe defendants, the text of § 1332 is clear. Section
1332(a)(1) requires that diversity suits be brought between citizens of
different states. Congress was surely aware of the basic proposition, long
established, that the party invoking jurisdiction bears the burden of pleading
or showing “the facts essential to show jurisdiction.” McNutt v. Gen. Motors
Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936). Congress chose to ease
this burden in § 1441 by explicitly taking “fictitious defendants” out of the
analysis. Congress made no change to § 1332, and there is no basis for
inferring a Congressional intent to change the law governing original
diversity jurisdiction. Nor does the differential treatment of original and
removal jurisdiction lead to an “absurd” result that could give rise to an
inference that Congress intended to change § 1332. Cf. Arlington Cent. Sch.
Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 296–97 (2006).
Defendant GL Sorensen, as the party asserting jurisdiction, must show
that the John Doe defendants are not citizens of Nebraska. Schubert, 649
F.3d at 622. The Court may not simply presume the John Doe defendants are
diverse from the plaintiff. That is especially so where, as here, the John Doe
defendants are employees, administrators, and owners of a facility located in
Omaha, Nebraska. It is not only possible, but likely, that at least one of these
20 potential defendants is a Nebraska citizen.
In the present case, insisting upon the difference between original and
removal jurisdiction might appear to elevate form over substance. If GL
Sorensen had simply removed this entire case from Nebraska state court, and
then filed a motion to compel arbitration, this Court would have diversity
jurisdiction, despite the presence of John Doe defendants. The Court is not
aware of any reason that GL Sorensen could not have proceeded in this
manner. But, the Court notes, jurisdiction (and even removal) could be
defeated at any time if the plaintiff simply filed an amended complaint
identifying even one of the “John Doe” defendants as a citizen of Nebraska.
As a result, failure to properly address jurisdiction at this stage might
result in further delays and additional costs down the line. Parties may not
establish subject matter jurisdiction by waiver or consent, and challenges to
subject matter jurisdiction may be raised at any time, even for the first time
on appeal. United States v. Afremov, 611 F.3d 970, 975 (8th Cir. 2010). If the
Court were to proceed, decide the pending motion to compel, and later be
found to have lacked jurisdiction, the resulting inconvenience—not to
mention the waste of the parties’ and this Court’s resources—would be
significantly greater than simply addressing the issue now. Accordingly,

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IT IS ORDERED:
1.

On or before May 4, 2012, defendant GL Sorensen shall show cause
why the present motion to compel (filing 1) should not be dismissed for
lack of subject matter jurisdiction; and

2.

Plaintiff’s Motion for Leave to File a Responsive Brief (filing 12) is
denied, without prejudice, as moot.
Dated this 24th day of April, 2012.
BY THE COURT:

John M. Gerrard
United States District Judge

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