HCR ManorCare, Inc. et al v. Carr

Filing 27

MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S MOTION 5 TO DISMISS OR, IN THE ALTERNATIVE, MOTION TO ABSTAIN AND GRANTING PLAINTIFFS' MOTION 13 TO COMPEL ARBITRATION. Judgment is to be entered in favor of the Plaintiffs and this case is ordered removed from the docket. Signed by Chief Judge Gina M. Groh on 1/20/2017. (tlg)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MARTINSBURG

HCR MANORCARE, INC.;
HEARTLAND OF MARTINSBURG WV, LLC;
HCR MANORCARE, LLC; MANOR CARE, INC.;
HCR MANOR CARE SERVICES, LLC; HCR IV
HEALTHCARE, LLC; and HEARTLAND
EMPLOYMENT SERVICES, LLC,
Plaintiffs,
v.

CIVIL ACTION NO.: 3:16-CV-68
(GROH)

TAMMY CARR,
on behalf of the Estate of Helen Carr,
Defendant.

MEMORANDUM OPINION AND ORDER DENYING DEFENDANT’S
MOTION TO DISMISS OR, IN THE ALTERNATIVE, MOTION TO ABSTAIN
AND GRANTING PLAINTIFFS’ MOTION TO COMPEL ARBITRATION
Currently pending before the Court is the Defendant Estate’s Motion to Dismiss or,
in the Alternative, Motion to Abstain [ECF No. 5] and the Plaintiffs’ Motion to Compel
Arbitration [ECF No. 13].

For the reasons set forth below, the Court DENIES the

Defendant’s Motion to Dismiss or, in the Alternative, Motion to Abstain and GRANTS the
Plaintiffs’ Motion to Compel Arbitration.
I. Background
Helen Carr (“the decedent”) was a nursing home resident at Heartland of
Martinsburg

WV,

LLC

(“Heartland”)—a

subsidiary

of

HCR

ManorCare,

Inc.

(“ManorCare”)—from April 1, 2014 through October 24, 2014. On April 2, 2014, and May

16, 2014, the decedent signed voluntary arbitration agreements with Heartland. The
arbitration agreements provide, in pertinent part:
All claims arising out of or relating to this Agreement, the
Admission Agreement or any and all past or future admissions
of the Patient at this Center, or any sister Center operated by
any subsidiary of HCR ManorCare, Inc. (“Sister Center”),
including claims for malpractice, shall be submitted to
arbitration.
ECF No. 3-1 at 1, 3. As a result of alleged medical negligence during her residency at
Heartland, the decedent suffered physical and emotional injury and subsequently died on
November 2, 2014.
On November 18, 2015, the Estate of Helen Carr served a notice of claim and
certificate of merit upon ManorCare; HCR ManorCare, LLC; HCRMC Operations, LLC;
Manor Care, Inc.; HCR Manor Care Services, LLC; HCR IV Healthcare, LLC; Heartland
Employment Services, LLC; Heartland; and Nancy Mason. The notice of claim stated the
Estate’s intent to file a medical malpractice suit related to the decedent’s care and
treatment while at Heartland. Following their receipt of the notice of claim, on December
16, 2015, and again on January 19, 2016, the Plaintiffs in the above-styled action sent
the Estate letters demanding that arbitration be initiated, pursuant to the April 2, 2014,
and May 16, 2014 arbitration agreements. The Estate did not reply to the Plaintiffs’
arbitration demand and instead filed a wrongful death action against them in the Circuit
Court of Kanawha County, West Virginia, on April 4, 2016. The following month, on May
20, 2016, the Plaintiffs filed a complaint with this Court to compel arbitration against the
Estate and stay the state court action.
On July 18, 2016, the Estate filed its motion to dismiss or abstain in this case,
raising several arguments. First, the Estate argues that the arbitration agreements signed

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by the decedent do not apply to it as a nonsignatory. Next, the Estate contends that the
Plaintiffs’ complaint should be dismissed because it failed to join Nancy Mason, the
licensed nursing home administrator of Heartland during the decedent’s residency, who
the Estate avers is a necessary and indispensable party. As an alternative to dismissal,
the Estate argues that the Court should abstain from exercising jurisdiction pursuant to
Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). Finally,
the Estate requests that in the event this Court proceeds on the merits of the arbitration
issue, a period of discovery is necessary. On July 29, 2016, the Plaintiffs filed their motion
to compel arbitration, arguing that the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16,
is applicable to the Estate’s claims presented in the state court wrongful death action and
requesting that this Court compel the Estate to arbitrate pursuant to the terms of the
arbitration agreements.
II. Standards of Review
A.

Rule 12(b)(6) Motion to Dismiss

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows a defendant to
challenge the sufficiency of a complaint by moving to dismiss it for failing “to state a claim
upon which relief can be granted.” When reviewing a 12(b)(6) motion, the Court must
assume all of the allegations contained within the complaint to be true, resolve all doubts
and inferences in favor of the plaintiff and view the allegations in a light most favorable to
the plaintiff. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999). If a
complaint fails to allege “enough facts to state a claim to relief that is plausible on its face,”
it must be dismissed. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Even though
“detailed factual allegations” are not required, a complaint must offer “more than an

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unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (internal quotations and citation omitted). For example, a complaint that
provides “labels and conclusions or a formulaic recitation of the elements of a cause of
action will not do.” Id. (internal quotations and citation omitted). Likewise, a complaint
that tenders only “naked assertion[s] devoid of further factual enhancement” does not
suffice. Id. (alteration in original) (internal quotations and citation omitted). A plaintiff is
required to articulate facts that, when accepted as true, “show” he is plausibly entitled to
relief. Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (citing Iqbal, 556 U.S. at
678). In reviewing a Rule 12(b)(6) motion, courts may consider facts derived from sources
beyond the four corners of the complaint, including documents attached to the complaint
and the motion to dismiss, “so long as they are integral to the complaint and authentic.”
Philips v. Pitt Cty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
B.

Rule 12(b)(7) Motion to Dismiss

Rule 12(b)(7) of the Federal Rules of Civil Procedure allows for dismissal of an
action when a necessary and indispensable party has not been joined as required by Rule
19. In considering a 12(b)(7) motion, the court must first determine, pursuant to Rule
19(a), whether the absent party “is necessary to a proceeding because of its relationship
to the matter under consideration.” Owens-Illinois, Inc. v. Meade, 186 F.3d 435, 440 (4th
Cir. 1999) (internal quotations omitted) (quoting Teamsters Local Union No. 171 v. Keal
Driveaway Co., 173 F.3d 915, 917-18 (4th Cir. 1999)). If the absent party is necessary,
then the court will order its joinder. Id. However, if joinder will destroy diversity, then the
court must determine, pursuant to Rule 19(b), whether the case can continue in the party’s
absence. Id. If not, then “the party is indispensable and the action should be dismissed.”

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Teamsters, 173 F.3d at 918. Dismissal for nonjoinder is disfavored, see Meade, 186 F.3d
at 441, and the moving party bears the burden of demonstrating that joinder is required,
see Am. Gen. Life and Accident Ins. Co. v. Wood, 429 F.3d 83, 92 (4th Cir. 2005).
III. Discussion
A.

Joinder of Nancy Mason

Because it raises questions of jurisdiction, the Court will first consider the Estate’s
argument regarding the joinder of Nancy Mason. In its motion to dismiss, the Estate
argues that dismissal of this action is required because the Plaintiffs failed to join Nancy
Mason, a resident of West Virginia who the Estate claims is a necessary and
indispensable party.

The Estate avers that Nancy Mason is a necessary and

indispensable party in light of her status as the licensed nursing home administrator of
Heartland during the decedent’s residency. However, “in the case of nursing home
administrators . . . courts have held that those administrators are not necessary parties
under Rule 19 when another alleged joint tortfeasor seeks to enforce arbitration.” Canyon
Sudar Partners, LLC v. Cole, Civil Action No. 3:10-1001, 2011 WL 1233320, at *3 (S.D.
W. Va. Mar. 29, 2011); see also Northport Health Servs. of Ark., LLC v. Rutherford, 605
F.3d 483, 491 (8th Cir. 2010) (collecting cases) (“In the arbitration context, to our
knowledge every circuit to consider the issue has concluded that a party joined in a
parallel state court contract or tort action who would destroy diversity jurisdiction is not an
indispensable party under Rule 19 in a federal action to compel arbitration.”) Here,
alleged tortfeasors other than Nancy Mason are seeking to enforce arbitration.
Accordingly, she is not a necessary party and therefore is not required to be joined as a
plaintiff. Thus, complete diversity remains between the parties.

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B.

The Arbitration Agreements

The principal argument set forth by the Estate is that the arbitration agreements
entered into between Heartland and the decedent do not apply to it as a nonsignatory. In
response, the Plaintiffs aver that, based upon the derivative nature of wrongful death
actions, the Estate, as a wrongful death beneficiary, is bound by the arbitration
agreements.
It is well settled that “the interpretation of an arbitration agreement is generally a
matter of state law.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 681
(2010) (citation omitted). Therefore, a federal court sitting in diversity interprets the
language and meaning of an arbitration agreement according to state law. See Adkins v.
Labor Ready, Inc., 303 F.3d 496, 501 (4th Cir. 2002). Specifically, “[w]hether a party
agreed to arbitrate a particular dispute is a question of state law governing contract
formation.” Id. (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). In
addition, federal courts must pay heed to the law set forth in the FAA. See 9 U.S.C. §§ 116. The FAA applies to “[a] written provision in any . . . contract evidencing a transaction
involving commerce to settle by arbitration a controversy thereafter arising out of such
contract or transaction, or the refusal to perform the whole or any part thereof.” 9 U.S.C.
§ 2. The FAA favors arbitration of disputes. Adkins, 303 F.3d at 500. This policy of
favoring arbitration reflects “Congress’s view that arbitration constitutes a more efficient
dispute resolution process than litigation.” Id. (citing Hightower v. GMRI, Inc., 272 F.3d
239, 241 (4th Cir. 2001)). In fact, the inclination toward arbitration is so strong that “when
the scope of an arbitration clause remains ‘open to question’ regarding the inclusion of a
particular issue, a court must declare that the issue is subject to arbitration.” Great Am.

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Ins. Co. v. Hinkle Contracting Corp., 497 F. App’x 348, 352 (4th Cir. 2012) (emphasis
added) (citing Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809, 812
(4th Cir. 1989)).
1.

Enforceability of the Arbitration Agreements Against the Estate

Before this Court addresses whether or not the Plaintiffs are able to compel
arbitration under the FAA, it must determine whether the Estate, as a nonsignatory, is
bound by the arbitration agreements. The Estate’s state court cause of action alleges
corporate and individual negligence, medical malpractice, fraud and violations of the West
Virginia Consumer Credit and Protection Act against the Plaintiffs and other individual
defendants. The Estate contends that these alleged violations caused the decedent to
sustain physical and emotional injury and, ultimately, death. West Virginia’s wrongful
death statute provides, in pertinent part:
Whenever the death of a person shall be caused by wrongful act, neglect,
or default, and the act, neglect or default is such as would (if death had not
ensued) have entitled the party injured to maintain an action to recover
damages in respect thereof, then, and in every such case, the person who,
or the corporation which, would have been liable if death had not ensued,
shall be liable to an action for damages, notwithstanding the death of the
person injured.
W. Va. Code § 55-7-5. As evident from the statute, wrongful death actions in West
Virginia are derivative in nature. See Syl. Pt. 4, Davis v. Foley, 457 S.E.2d 532 (W. Va.
1995) (“The damages in a wrongful death action arise out of the death of the decedent
thereby making a wrongful death action a derivative claim.”). Section 55-7-5 “preserve[s]
a deceased person’s right of action after the person’s death, by permitting the claim to be
brought by the deceased person’s personal representative,” Brooks v. Weirton, 503
S.E.2d 814, 821 n.7 (W. Va. 1998), and thus a wrongful death cause of action may be

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maintained only if “the deceased person himself could have maintained an action for
damages had he survived,” Panagopoulous v. Martin, 295 F. Supp. 220, 223 (S.D. W.
Va. 1969) (first citing Hoover’s Adm’x v. Chesapeake & Ohio Ry. Co., 33 S.E. 224 (W.
Va. 1899); then citing Wright v. Davis, 53 S.E.2d 335 (W. Va. 1949)). It therefore follows
that an administrator cannot bring a wrongful death suit “where the deceased was guilty
of contributory negligence, or received satisfaction or executed a release during his
lifetime” because the statute gives rise to a cause of action “only where the deceased
[himself] might have maintained an action.” Hoover’s Adm’x, 33 S.E. at 225.
According to West Virginia law, the Estate’s state court wrongful death action
exists only insofar as the decedent herself could have maintained an action for
negligence, or other wrongful acts, against the Plaintiffs. The state court action, and any
potential recovery resulting therefrom, is derivative based upon the decedent’s own ability
to recover. Thus, here, had the decedent survived, she would have been “limited in form
to arbitration.” See Wilkerson ex rel. Estate of Wilkerson v. Nelson, 395 F. Supp. 2d 281,
289 (M.D.N.C. 2005). Accordingly, the Estate is likewise limited, and bound, by the
arbitration agreements.
2.

Compelling Arbitration Under the Federal Arbitration Act

Upon finding that the Estate is subject to the arbitration agreements, the Court
must next consider whether the Plaintiffs are able to compel arbitration under the FAA. A
litigant may compel arbitration under the FAA
if he can demonstrate (1) the existence of a dispute between the parties, (2)
a written agreement that includes an arbitration provision which purports to
cover the dispute, (3) the relationship of the transaction, which is evidenced
by the agreement, to interstate or foreign commerce, and (4) the failure,
neglect or refusal of [the other party] to arbitrate the dispute.

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Adkins, 303 F.3d at 500-01 (internal quotations omitted) (quoting Whiteside v. Teltech
Corp., 940 F.2d 99, 102 (4th Cir. 1991)). Here, the Plaintiffs have demonstrated all four
necessary elements. First, there is a dispute between the parties. On November 18,
2015, the Estate notified the Plaintiffs of its intent to file suit by serving its notice of claim
and certificate of merit.

In response, the Plaintiffs sent the Estate multiple letters

demanding that arbitration be initiated pursuant to the arbitration agreements. The Estate
did not reply to the letters and, instead, filed a wrongful death suit in the Circuit Court of
Kanawha County, West Virginia. Second, there are two written arbitration agreements—
applicable to the Estate—which purport to cover the wrongful death claims.

Both

agreements define “disputes” as
[a]ll claims arising out of or relating to this Agreement, the Admission
Agreement or any and all past or future admissions of the Patient at this
Center, or any sister Center operated by any subsidiary of HCR ManorCare,
Inc. (“Sister Center”), including claims for malpractice.
ECF No. 3-1 at 1, 3. The state court complaint alleges that instances of negligence,
medical malpractice and fraud occurred during the decedent’s residency at Heartland, a
subsidiary of HCR ManorCare, Inc. It is thus clear that these claims are considered
“disputes” under the arbitration agreements.

Third, the agreements are related to

interstate commerce because they stipulate by their own terms that “the Admission
Agreement and the Patient’s stays at the Center substantially involve interstate
commerce.” ECF No. 3-1 at 1, 3; see GGNSC Morgantown, LLC v. Phillips, Civil Action
No. 1:14CV118, 2014 WL 5449674, at *2 (N.D. W. Va. Oct. 24, 2014) (finding the third
element satisfied where “the ADR Agreement by its terms” stated that it “evidence[d] a
transaction in interstate commerce governed by the [FAA]”). Finally, it is evident that the
Estate refuses to arbitrate. On April 4, 2016, it filed its wrongful death suit in state court

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and, more recently, on August 3, 2016, it filed its response in opposition to the Plaintiff’s
motion to compel arbitration with this Court.

Therefore, because the arbitration

agreements apply to the Estate’s state court wrongful death action, and because the
Plaintiffs have demonstrated the four elements under Adkins, the Estate’s claims must
proceed to arbitration.
C.

Colorado River Abstention

As an alternative to 12(b)(6) dismissal, the Estate argues that the Court should
exercise abstention pursuant to the Colorado River doctrine, which permits federal courts
to refrain from hearing claims “in favor of ongoing, parallel state proceedings in cases
where ‘considerations of wise judicial administration, giving regard to conservation of
judicial resources and comprehensive disposition of litigation’ clearly favor abstention.”
Ackerman v. ExxonMobil Corp., 734 F.3d 237, 248 (4th Cir. 2013) (quoting Colorado
River, 424 U.S. at 817). The Court weighs six factors, “with the balance heavily weighted
in favor of the exercise of jurisdiction,” Moses H. Cone Mem’l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 16 (1983), in determining whether Colorado River abstention is proper:
(1) whether the subject matter of the litigation involves property where the
first court may assume in rem jurisdiction to the exclusion of others; (2)
whether the federal forum is an inconvenient one; (3) the desirability of
avoiding piecemeal litigation; (4) the relevant order in which the courts
obtained jurisdiction and the progress achieved in each action; (5) whether
state law or federal law provides the rule of decision on the merits; and (6)
the adequacy of the state proceeding to protect the parties' rights.
Chase Brexton Health Servs., Inc. v. Maryland, 411 F.3d 457, 463-64 (4th Cir. 2005)
(citations omitted). Courts should apply the Colorado River doctrine only in exceptional
circumstances. See id. at 463.
Before considering the six Colorado River factors, courts must first determine
whether there are actively pending and parallel federal and state cases.
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Id. (“The

threshold question . . . is whether there are parallel federal and state suits.”) State and
federal actions are considered parallel when “substantially the same parties litigate
substantially the same issues in different forums,” id. at 464 (internal quotations and
citation omitted), and “there is a substantial likelihood that the [state litigation] will dispose
of all claims presented in the federal case,” AAR Int’l, Inc. v. Nimelias Enters. S.A., 250
F.3d 510, 518 (7th Cir. 2001) (internal quotations and citation omitted). If the court
determines that the federal and state cases are not parallel, then the Colorado River
doctrine is inapplicable. Interstate Material Corp. v. Chicago, 847 F.2d 1285, 1287 (7th
Cir. 1988); see also Am. Family Life Assurance Co. of Columbus v. Biles, 714 F.3d 887,
892 (5th Cir. 2013); Al-Abood v. El-Shamari, 217 F.3d 225, 232 (4th Cir. 2000); Crawley
v. Hamilton Cty. Comm’rs, 744 F.2d 28, 31 (6th Cir. 1984); Shields v. Murdoch, 891 F.
Supp. 2d 567, 578 (S.D.N.Y. 2012); Hayes v. City of Columbus, No. 2:10 CV 0513, 2011
WL 2174973, at *4 (S.D. Ohio June 3, 2011).
Here, the state and federal cases are not parallel. Although the underlying facts
overlap, factual commonality alone does not lead to a finding that two proceedings are
parallel. See New Beckley Mining Corp. v. Int’l Union, United Mine Workers of Am., 946
F.2d 1072, 1074 (4th Cir. 1991) (“[S]ome factual overlap does not dictate that proceedings
are parallel.”). A review of the state and federal complaints shows two completely distinct
causes of action.

The state complaint raises claims of corporate and individual

negligence, nursing home violations, medical malpractice, fraud and violations of the
West Virginia Consumer Credit and Protection Act. In contrast, the complaint before this
Court requests only that the Estate be ordered to arbitrate its claims consistent with the
agreements between the parties and the FAA. Unlike the state proceeding, the instant

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case does not involve wrongful death claims but rather raises only one question: whether
the Estate may be compelled to arbitrate. See Am. Family, 714 F.3d at 892. Therefore,
because the Court does not find the state and federal cases parallel, the Colorado River
doctrine is inapplicable.
D.

Discovery

Finally, the Estate argues that if the Court declines to grant its motion to dismiss,
the parties should be granted leave to conduct discovery on the issue of arbitrability
pursuant to Brown v. Genesis Healthcare Corp. (Brown II), 729 S.E.2d 217 (W. Va. 2012).
In Brown II, the Supreme Court of West Virginia held that where contract
unconscionability is at issue, discovery is warranted. See id. at 225-26. Here, the Estate
does not allege that the arbitration agreements are unconscionable. Rather, it argues
only that the agreements do not apply to it as a nonsignatory. Accordingly, the holding in
Brown II is inapplicable to this case.

Moreover, granting discovery would hinder

“arbitration’s goal of resolving disputes in a timely and cost efficient manner.” Hay Grp.,
Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 409 (3d Cir. 2004) (internal quotations and
citation omitted). Therefore, the Estate’s request for discovery is DENIED.
IV. Conclusion
Accordingly, the Court ORDERS that the Defendant Estate’s Motion to Dismiss or,
in the Alternative, Motion to Abstain [ECF No. 5] is DENIED. The Court ORDERS that
the Plaintiffs’ Motion to Compel Arbitration [ECF No. 13] is GRANTED. The parties are
DIRECTED to proceed to arbitration consistent with the terms of the April 2, 2014, and
May 16, 2014 arbitration agreements.

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Insofar as the Plaintiffs request a stay of the state court proceeding, the request is
DENIED.1
There being no other issues to address, the Court DIRECTS the Clerk to enter a
separate judgment order in favor of the Plaintiffs, remove this case from the Court’s active
docket and transmit copies of this Order to all counsel of record herein.
DATED: January 20, 2017

The Plaintiffs’ motion to compel arbitration does not move the Court to stay the state court proceedings.
However, the complaint does request such relief. The Court is aware of no authority suggesting that it may,
in violation of the Anti-Injunction Act, 28 U.S.C. § 2283, “grant a stay of state court proceedings in
conjunction with a motion to compel arbitration.” See Canyon Sudar, 2011 WL 1233320, at *11. There is,
however, no prohibition on a court’s issuance of an order compelling arbitration, which indirectly restricts
the prosecution of claims in related state court proceedings. See, e.g., Nat’l Home Ins. Co. v. Bridges, 142
F. Supp. 3d 425, 433-35 (D.S.C. 2015); Canyon Sudar, 2011 WL 1233320, at *11-12; Galloway and
Assocs., PLLC v. Fredeking & Fredeking Law Offices, LC, Civil Action No. 3:10-0830, 2010 WL 3955790,
at *8-9 (S.D. W. Va. Oct. 8, 2010). Therefore, considering the “serious concerns of federalism and comity”
arising from a federal court’s stay of state court proceedings, United Serv. Prot. Corp. v. Lowe, 354 F. Supp.
2d 651, 659 (S.D. W. Va. 2005), although the Court finds that the Estate is bound by the arbitration
agreement, it declines to enjoin the related state court proceeding. See Atl. Coast Line R.R. Co. v. Bhd. of
Locomotive Eng’rs, 398 U.S. 281, 297 (1970) (“Any doubts as to the propriety of a federal injunction against
state court proceedings should be resolved in favor of permitting the state courts to proceed in an orderly
fashion to finally determine the controversy.”).
1

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