Jennings v. HCR Manorcare Inc et al
Filing
16
ORDER denying 7 Motion to Remand to State Court. Signed by Honorable Patrick Michael Duffy on October 3, 2012.(prei, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
Ermine Jennings, as Personal
Representative of the Estate of James
Walter Gantt
Plaintiff,
v.
HCR ManorCare Inc., HCR Healthcare,
LLC, HCR II Healthcare, Inc., HCR
III Healthcare, LLC, Manor Care, Inc.
f/k/a Manor Care of Charleston, Inc., and
West Ashley Rehabilitation and Nursing
Center-Charleston SC, LLC d/b/a
Heartland of West Ashley Rehabilitation
and Nursing Center, and Carrol Carlisle,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Civil Action No.: 2:12-cv-01397-PMD
ORDER
This matter is before the Court upon Plaintiff’s Motion to Remand pursuant to 28 U.S.C.
§ 1447. Plaintiff is a citizen of South Carolina and argues that there is no diversity because South
Carolina is the principal place of business of Defendant West Ashley Rehabilitation and Nursing
Center-Charleston SC, LLC (“Heartland of West Ashley”). For the reasons that follow, the Court
denies Plaintiff’s Motion to Remand.
FACTUAL AND PROCEDURAL BACKGROUND
This case arises out of alleged negligence in the care and treatment of Plaintiff James
Walter Gantt (“Gantt”) at Heartland of West Ashley,1 a nursing home operated by Defendants.
Gantt was admitted to this facility on December 18, 2009 and remained there, with intermittent
hospital admissions, until his death on January 9, 2010. At the time of admission, Gantt had
compromised mobility and was at great risk for complications associated with his decreased
1
Located at 1138 Sam Rittenberg Boulevard, Charleston, South Carolina, 29407.
1
functional abilities. He required skilled nursing care and was dependent upon the care provided
by Defendants. Plaintiff asserts various causes of action: (1) Negligence, (2) Negligence per se,
(3) Breach of Contract, (4) Fraud and Misrepresentation, (5) Violations of the South Carolina
Unfair Trade Practices Act (“SCUTPA”), (6) Intentional Infliction of Emotion Distress/Outrage,
(7) Negligence—Wrongful Death, and (8) Negligence—Survivorship.
This wrongful death and survival action against Heartland of West Ashley was originally
filed by Plaintiff Ermine Jennings, as Personal Representative of Gantt’s Estate, in the South
Carolina Court of Common Pleas for the Ninth Judicial Circuit on April 16, 2012. Defendants
removed the action on May 25, 2012 on the basis of diversity jurisdiction under 28 U.S.C. §
1441. Plaintiff filed a Motion to Remand on June 22, 2012, and Defendants filed a Response in
Opposition on July 23, 2012.
STANDARD OF REVIEW
1. Removal Jurisdiction
The burden of demonstrating jurisdiction resides with “the party seeking removal.”
Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004) (citing Mulcahey v. Columbia
Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994)). The court is obliged to construe
removal jurisdiction strictly because of the “significant federalism concerns” implicated. Id.
Section 1447(c) of the United States Code provides that, “[i]f at any time before final judgment it
appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28
U.S.C. § 1447(c). Therefore, “[i]f federal jurisdiction is doubtful, a remand [to state court] is
necessary.” Dixon, 369 F.3d at 816. Section 1441 of Title 28 provides that “any civil action
brought in a State court of which the district courts of the United States have original
jurisdiction, may be removed by the defendant or the defendants, to the district court of the
2
United States for the district and division embracing the place where such action is pending.” 28
U.S.C. § 1441(a). Federal district courts have original jurisdiction over a case if the case
involves citizens of different states and the amount in controversy exceeds $75,000, exclusive of
interest and costs. 28 U.S.C. § 1332. The complete diversity rule of § 1332 requires that the
citizenship of each plaintiff be different from the citizenship of each defendant. See Athena
Auto., Inc. v. DiGregorio, 166 F.3d 288, 290 (4th Cir. 1999).
2. Determining Citizenship for Diversity Jurisdiction
A corporation is a citizen of the state where it is incorporated and has its principal place
of business. 28 U.S.C. § 1332(c)(1).
In the face of “divergent and increasingly complex
interpretations” by the Courts of Appeals of the statutory phrase “principal place of business,”
the Supreme Court in Hertz Corporation v. Friend, 130 S.Ct. 1181 (2010), concluded that the
phrase “is best read as referring to the place where a corporation’s officers direct, control, and
coordinate the corporation’s activities”; the “nerve center,” which will “normally be the place
where the corporation maintains its headquarters—provided that the headquarters is the actual
center of direction, control, and coordination . . . not simply an office where the corporation
holds its board meetings.” Id. at 1192. In determining a corporation’s “nerve center,” a court is
to apply a qualitative, not quantitative, test; there is no weighing of different factors. See id. at
1193–94.
For purposes of diversity jurisdiction, the citizenship of a limited liability company is
determined by the citizenship of all of its members. See Cent. W. Virginia Energy Co. v.
Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir. 2011). Thus, an LLC’s members’
citizenship must be traced through however many layers of members there may be. See Gen.
Tech. Apps., Inc. v. Exro LTDA, 388 F.3d 114, 121 (4th Cir. 2004).
3
ANALYSIS
Heartland of West Ashley is an LLC and represents that it is organized under the laws of
Delaware and its sole member is HCR III Healthcare, LLC. In turn, there are a series of LLCs in
the ownership ladder—the sole member of HCR III Healthcare, LLC is HCR II Healthcare, LLC;
the sole member of HCR II Healthcare, LLC is HCR Healthcare, LLC; the sole member of HCR
Healthcare, LLC is Manor Care, Inc, which is a corporation organized under the laws of
Delaware and with its principal place of business in Ohio. Defendant Carrol Carlisle is a citizen
and resident of Georgia. Plaintiff does not dispute this corporate chain of ownership. Instead,
Plaintiff disputes Heartland of West Ashley’s claim that Ohio, by virtue of Manor Care, Inc, is
its principal place of business. Plaintiff argues that the Court should rely on Brewer v.
SmithKline Beacham Corp., 774 F. Supp. 2d 720 (E.D. Pa. 2011), and look to the “nerve center”
of the limited liability company, Heartland of West Ashley, as opposed to the “nerve center” of
Manor Care, Inc. Plaintiff claims that the Fourth Circuit tacitly accepted the Brewer court’s
ruling when it stated: “We recognize that the proliferation of complex corporate structures
among business enterprises may compel further attention to the issue of ‘principal place of
business’ under 28 U.S.C. § 1332.” Mountain State Carbon, LLC, 636 F.3d at 107 n.3.
In Brewer, the court held that
for purposes of determining the citizenship of a limited liability
company whose sole member is a holding company that does not
direct or control the operations of the liability company, [it will]
look to the ‘nerve center’ of the limited liability company to which
the holding company has delegated the operational decisionmaking.
Id. at 722. Important to the court’s decision were several facts: the LLC’s agreement listed its
business address in Philadelphia and required that its books, records, and accounts be kept in
Philadelphia; eight of the ten senior officers of the LLC directed and controlled the LLC’s
4
business from Philadelphia; its only member, Holdings, was a holding company, not an operating
company; and most importantly, Holdings delegated its rights and powers to manage and control
the business and affairs of the LLC to the LLC’s directors and officers in Philadelphia. Id. at
724–29. The court highlighted the fact that LLC is manager-managed and concluded that
because Holdings had elected individuals to manage and control the business and operations of
the LLC, Holdings had, under Del. Code Ann. tit. 6, § 18-407, in effect delegated all decisionmaking authority affecting the direction, control, and coordination of the LLC to those actually
running the LLC operation in Philadelphia. Id. at 728. It noted that had the LLC been membermanaged, then Holdings would have retained its absolute right, power, and authority to control
and operate the LLC’s business. Id. at 729; Del. Code Ann. tit. 6 § 18-402. In applying these
unique facts to the Hertz nerve center test, the court held that Philadelphia is the “nerve center”
because it is the place “where the top-level officers to whom Holdings delegated the decisionmaking authority are headquartered.” Id. Thus, in so delegating, “Holdings has effectively
transplanted the vast majority of its ‘brain’ or ‘nerve center’ to its managers in Philadelphia.” Id.
Here, Plaintiff argues that like in Brewer, Heartland of West Ashley is an LLC within a corporate
holding structure whose only member is traced back to Manor Care, Inc, a holding corporation.
According to Plaintiff, Heartland of West Ashley only operates at its location in Charleston and
all business activities are done in Charleston, with only limited corporate activity in Ohio. Thus,
Plaintiff contends that the “nerve center” of Manor Care Inc. for purposes of the direction,
control and coordination of Heartland of West Ashley’s activities is Charleston—the place where
the LLC’s managers perform the vast majority of the LLC’s decision-making.2
2
Additionally, Plaintiff notes that according to the South Carolina Department of Health and
Environmental Control (SCDHEC) and the South Carolina Department of Labor, Licensing, and
Regulation (SCDLLR), Heartland of West Ashley is listed as a Charleston County limited
5
The Court declines to adopt the reasoning of Brewer. It is well established that an LLC is
not a corporation and is not considered a citizen of its state of incorporation and principal place
of business. See Ferrell v. Express Check Advance of SC LLC, 591 F.3d 698, 703 (4th Cir.
2010); N.Y. State Teachers Retirement Sys. v. Kalkus, 764 F.2d 1015, 1017 (4th Cir. 1985);
Clephas v. Fagelson, Shonberger, Payne & Arthur, 719 F.2d 92, 93 (4th Cir. 1983). Instead, an
LLC’s (such as Heartland of West Ashley) citizenship is determined solely by the citizenship of
all its members (such as Manor Care, Inc.), not by the state in which it is legally organized or has
its nerve center. See Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010)
(holding that as with partnerships and other unincorporated associations, a limited liability
company’s citizenship is determined by the citizenship of its members). The record indicates
that Manor Care, Inc. is headquartered in Toledo, Ohio and that its high-level officers and
directors make significant corporate decisions and set corporate policy from their offices located
in the headquarters in Ohio. See Hoops Aff. at ¶¶ 10–11. Manor Care, Inc.’s nerve center is not
South Carolina by virtue of its investment, Heartland of West Ashley, operating there. As the
rule stands until changed by Congress,3 Manor Care, Inc.’s nerve center is where its ownership
decisions are made, which is Ohio. Therefore, Manor Care, Inc. and Heartland of West Ashley
are Ohio citizens because Manor Care, Inc.’s nerve center is there, and they are Delaware
liability company with a Charleston address and phone number. However, as Defendants point
out, in section 9 of the DHEC application, which addresses the “License” or “legal entity or its
governing body that has the ultimately responsibility and authority for the conduct of the facility
…,” Heartland of West Ashley is named with a mailing address in Toledo Ohio, at the Manor
Care, Inc. headquarters. Defs.’ Opp. Resp. at 6 (see Pl.’s Motion Remand, Exh. B).
3
The Fourth Circuit acknowledged that “[w]hile a manager-managed limited liability company
looks and acts somewhat like a corporation, especially with regard to derivative actions and
members’ claims, this argument misses the mark. A limited liability company organized under
the laws of a state is not a corporation and cannot be treated as such under section 1332 until
Congress says otherwise. Gen. Tech. Apps., Inc. v. Exro LTDA, 388 F.3d 114, 121 (4th Cir.
2004) (citing GMAC Commercial Credit LLC, 357 F.3d 827, 829 (8th Cir. 2004).
6
citizens because Manor Care, Inc. is incorporated in Delaware.
As the Supreme Court
emphasized in Hertz, the focus is not on the place where the daily management activities occur,
but the place where the corporation’s top officers direct those activities. See Mountain State
Carbon, 636 F.3d at 106 (citing Hertz, 130 S.Ct. at 1186, 1191–92) (emphasis added).
Additionally, the Supreme Court acknowledged that “the use of a ‘nerve center’ test may in some
cases produce results that seem to cut against the basic rationale for 28 U.S.C. § 1332,” but “in
view of the necessity of having a clearer rule, we must accept them.” Hertz, 130 S.Ct. at 1194.
Therefore, the Court finds that for diversity purposes, Ohio is the principal place of business of
Manor Care, Inc. and therefore, Ohio is also the principal place of business of Heartland of West
Ashley. Because there is complete diversity between the parties, the Court denies Plaintiff’s
Motion to Remand.
The Court is even more hesitant to adopt the reasoning of Brewer in light of the fact that
Brewer has been challenged by a subsequent decision in the same District on the ground that
such reasoning creates a result that Hertz sought to avoid. See Johnson v. Smithkline Beecham
Corp., No. 11-5782, 2012 WL 1057435, at *5–6 (E.D. Pa. Mar 29, 2012) (finding no decision,
other than Brewer, that adopts this delegation argument4 and concluding that by plaintiff’s logic,
“a Delaware corporation that holds fifteen [LLCs] operating in fifteen different states might well
have fifteen nerve centers. The Supreme Court has condemned precisely such an ‘anomalous
4
Stating that Holding’s decision to “delegate” operational authority is typical of all holding
companies and determines neither Holding’s nor LLC’s citizenship.” Johnson v. Smithkline
Beecham Corp., No. 11-5782, 2012 WL 1057435, at *6 (E.D. Pa. Mar. 29, 2012). See Carden v.
Arkoma Assocs., 494 U.S. 185, 192 (1990) (partnership’s citizenship determined by citizenship
of managing partners and non-managing partners alike); Zambelli, 592 F.3d at 419 (LLC takes
members’ citizenship despite their passive management role); Gen. Tech. Applications, Inc., 388
F.3d at 121 (LLC assumes citizenship of its corporate member).
7
result’”).5 Moreover, a sister court in this District has similarly found the Brewer court’s
reasoning at odds with the thorough analysis in Hertz. See Dalton v. Georgia-Pacific, LLC, No.
1:12-415-TLW-SVH, 2012 WL 2072766 (D.S.C. May 4, 2012) report and recommendation
adopted, 2012 WL 2072752 (D.S.C. June 8, 2012) (declining to follow the reasoning of Brewer,
in part, because of the Hertz Court’s “desire to craft a ‘clearer rule’ that ‘accept[s] occasionally
counterintuitive results [as] the price the legal system must pay to avoid overly complex
jurisdictional administration . . . ” (quoting Hertz, 130 S.Ct at 1194)).
CONCLUSION
For the foregoing reasons, it is hereby ORDERED that Plaintiff’s Motion to Remand is
DENIED.
AND IT IS SO ORDERED.
October 3, 2012
Charleston, SC
5
The Johnson court also noted that “there is no indication that the Hertz Court intended to create
a ‘holding company exception.’” Johnson, 2012 WL 1057435, at *6.
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?