Racher et al v. Westlake Nursing Home Limited Partnership et al

Filing 64

ORDER granting 54 Lusk's Motion to Dismiss Plaintiffs' Alter-Ego Liability Claim and dismissing plaintiffs' alter ego liability claim against Lusk (the Ninth Cause of Action in the Amended Complaint) (as more fully set out in order). Signed by Honorable Vicki Miles-LaGrange on 5/14/2014. (ks)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
DORIS RACHER,
SANDRA CRISPER, and
EARLENE ADKISSON, Co-personal
Representatives of the ESTATE OF
ERYETHA MAYBERRY, DECEASED,
Plaintiffs,
vs.
WESTLAKE NURSING HOME
LIMITED PARTNERSHIP, d/b/a Quail
Creek Nursing and Rehabilitation Center;
WESTLAKE MANAGEMENT
COMPANY, a Texas Corporation;
RON LUSK, an Individual;
QC PROPERTY HOLDINGS, LLC,
a Georgia limited liability company; and
QC NURSING LLC, a Georgia limited
liability company, d/b/a Quail Creek
Nursing and Rehabilitation Center,
Defendants.

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Case No. CIV-13-364-M

ORDER
Before the Court is defendant Ron Lusk’s (“Lusk”) Motion to Dismiss Plaintiffs’ Alter-Ego
Liability Claim, filed March 24, 2014. On April 14, 2014, plaintiffs filed their response, and on
April 21, 2014, Lusk filed his reply.
Eryetha Mayberry was a resident at the Quail Creek Nursing and Rehabilitation Center
(“Nursing Home”). Plaintiffs allege that on or about April 16, 2012, two employees of the Nursing
Home physically and verbally abused Ms. Mayberry. Specifically, plaintiffs allege the Nursing
Home’s staff shoved a rubber glove into Ms. Mayberry’s mouth, slapped Ms. Mayberry in the face
and head, forcefully threw Ms. Mayberry onto her bed, and struck Ms. Mayberry on the chest.

On April 15, 2013, plaintiffs filed the instant action, alleging the following causes of action
against defendants: (1) negligent care and treatment by defendants Westlake Nursing Home Limited
Partnership and Westlake Management Company, (2) negligent hiring, training, supervision and
staffing by defendants Westlake Nursing Home Limited Partnership and Westlake Management
Company, (3) defendant Ron Lusk’s negligence, (4) violation of the Nursing Home Care Act, Okla.
Stat. tit. 63, §§ 1-1901 et seq. against all defendants, (5) negligence per se against all defendants,
(6) intentional infliction of emotional distress against all defendants, (7) successor-corporation
liability against defendant QC Property Holdings, LLC, and (8) alter-ego liability against defendant
QC Nursing, LLC. On March 8, 2014, plaintiffs filed an Amended Complaint adding a cause of
action for alter ego liability against Lusk, alleging that defendants Westlake Management Company
and Westlake Nursing Home Limited Partnership are the alter egos of Lusk.
Lusk now moves this Court, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss
plaintiffs’ alter-ego liability claim against him for failure to state a claim upon which relief may be
granted. Regarding the standard for determining whether to dismiss a claim pursuant to Rule
12(b)(6), the United States Supreme Court has held:
To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is
plausible on its face. A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct
alleged. The plausibility standard is not akin to a “probability
requirement,” but it asks for more than a sheer possibility that a
defendant has acted unlawfully. Where a complaint pleads facts that
are merely consistent with a defendant’s liability, it stops short of the
line between possibility and plausibility of entitlement to relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and citations omitted). A court
“must determine whether the complaint sufficiently alleges facts supporting all the elements
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necessary to establish an entitlement to relief under the legal theory proposed.” Lane v. Simon, 495
F.3d 1182, 1186 (10th Cir. 2007) (internal quotations and citation omitted).
Lusk contends that Oklahoma law affirmatively prohibits plaintiffs from bringing an alter
ego claim against him until plaintiffs obtain a judgment against defendants Westlake Management
Company and/or Westlake Nursing Home Limited Partnership. Plaintiffs assert that they may bring
an alter ego liability claim against Lusk because the Oklahoma statute in question is a procedural
statute and the Federal Rules of Civil Procedure control over a conflicting state procedural statute.
Alternatively, plaintiffs assert that if the Court finds that the Oklahoma statute is substantive, the
statute cannot be applied retroactively and plaintiffs, thus, can bring their alter ego liability claim.
Section 682(B) of Title 12 of the Oklahoma Statutes became effective on November 1, 2013.
That section provides:
No suit or claim of any nature shall be brought against any officer,
director or shareholder for the debt or liability of a corporation of
which he or she is an officer, director or shareholder, until judgment
is obtained therefore against the corporation and execution thereon
returned unsatisfied. This provision includes, but is not limited to,
claims based on vicarious liability and alter ego. Provided, nothing
herein prohibits a suit or claim against an officer, director or
shareholder for their own conduct, act or contractual obligation
arising out of or in connection with their direct involvement in the
same or related transaction or occurrence.
Okla. Stat. tit. 12, § 682(B). The parties do not dispute that, if applicable, section 682(B) would
preclude plaintiffs’ alter ego claim against Lusk because no judgment has been obtained against
defendant Westlake Management Company or defendant Westlake Nursing Home Limited
Partnership. The Court, thus, must determine whether section 682(B) applies to plaintiffs’ alter ego
claim against Lusk.

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To make this determination, the Court must first determine whether section 682(B) is a
substantive law or a procedural law. It has long been established that federal courts sitting in
diversity “apply state substantive law and federal procedural law.” Hanna v. Plumer, 380 U.S. 460,
465 (1965). A substantive law “pertains to a ‘substantive right or remedy.’” Shady Grove
Orthopedic Assoc. v. Allstate Ins. Co., 559 U.S. 393, 415 (2010). In contrast, a procedural law is
“the judicial process for enforcing rights and duties recognized by substantive law and for justly
administering remedy and redress for disregard or infraction of them.” Sibbach v. Wilson & Co.,
312 U.S. 1, 14 (1941).
Having carefully reviewed the parties’ submissions, and having carefully read section
682(B), the Court finds that section 682(B) is a substantive law. Section 682(B) sets forth two
conditions that must be met before a party’s alter ego claim arises. First, judgment must be obtained
against the corporation, and second, execution on the judgment must be returned unsatisfied.
Because section 682(B) clearly pertains to a substantive right – an alter ego claim, section 682(B)
is a substantive law.
Now that the Court has determined that section 682(B) is a substantive law, the Court must
determine whether it should be applied to plaintiffs’ alter ego claim against Lusk set forth in
plaintiffs’ Amended Complaint filed on March 8, 2014. Plaintiffs assert that their alter ego claim
against Lusk relates back to the date of the original Complaint, filed April 15, 2013, because that
claim arises out of the transactions and conduct set out in the original Complaint. Plaintiffs further
assert that section 682(B) was not in effect on the date of the original Complaint and because section
682(B) is a substantive law, it cannot be applied retroactively. Lusk, on the other hand, asserts that
plaintiffs’ alter ego claim against him does not relate back to the date of the original Complaint.

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Lusk further asserts that section 682(B) was in effect on the date of the Amended Complaint and,
thus, applies to preclude plaintiffs’ alter ego claim.
Federal Rule of Civil Procedure 15(c)(1) provides, in part:
An amendment to a pleading relates back to the date of the original
pleading when:
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(B) the amendment asserts a claim or defense that arose out of the
conduct, transaction, or occurrence set out – or attempted to be set
out – in the original pleading . . . .
Fed. R. Civ. P. 15(c)(1)(B). “[R]elation back depends on the existence of a common ‘core of
operative facts’ uniting the original and newly asserted claims.” Mayle v. Felix, 545 U.S. 644, 659
(2005).
Having carefully reviewed the parties’ submissions, as well as the Complaint and Amended
Complaint, the Court finds that plaintiffs’ alter ego claim against Lusk does not relate back to the
date of the original Complaint. Specifically, the Court finds that plaintiffs’ alter ego claim does not
arise out of the same conduct, transactions and/or occurrences set out in the original Complaint.
Plaintiffs’ Complaint is based on the alleged abuse of Ms. Mayberry and alleged omissions by
nursing home staff in their treatment of Ms. Mayberry. In contrast, plaintiffs’ alter ego claim against
Lusk is not based on any alleged abuse of Ms. Mayberry or any alleged omissions by nursing home
staff in their treatment of Ms. Mayberry but is based on the relationship between Lusk and
defendants Westlake Nursing Home Limited Partnership and Westlake Management Company. The
Court, therefore, finds that plaintiffs’ alter ego claim is a new ground for relief supported by facts
that differ in both time and type from those of the Complaint.
Since plaintiffs’ alter ego claim does not relate back to the date of the original Complaint,
the Court finds that section 682(B) applies to plaintiffs’ alter ego claim against Lusk, which was
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filed on March 8, 2014, after the effective date of section 682(B). Further, because no judgment has
been obtained against defendant Westlake Management Company or defendant Westlake Nursing
Home Limited Partnership, the Court finds that plaintiffs’ alter ego claim against Lusk is premature
under section 682(B) and should be dismissed.
Accordingly, the Court GRANTS Lusk’s Motion to Dismiss Plaintiffs’ Alter-Ego Liability
Claim [docket no. 54] and DISMISSES plaintiffs’ alter ego liability claim against Lusk (the Ninth
Cause of Action in the Amended Complaint).
IT IS SO ORDERED this 14th day of May, 2014.

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