Advocat Inc. et al v. Nunley et al
Filing
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MEMORANDUM OPINION AND ORDER pursuant to the defendants' 5 MOTION to Abstain, or in the Alternative, Motion to Dismiss; the parties to submit and address, as directed and set forth more fully herein, and in accordance with the following sc hedule: Parties' Joint Stipulation and Status Report due by 1/10/2014; Plaintiffs' Memorandum as to items 3-6, herein, due by 1/17/2014; Defendant's Response to Plaintiffs' Memorandum due by 1/31/2014; Plaintiffs' Reply due by 2/07/2014. In all other respects, the additional briefing to comply with the requirements of Local Rule 7.1.Signed by Judge John T. Copenhaver, Jr. on 12/24/2013. (cc: attys; any unrepresented party) (taq)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
ADVOCAT INC.
and DIVERSICARE MANAGEMENT SERVICES CO.
and DIVERSICARE LEASING CORP.,
Plaintiffs,
v.
Civil Action No. 2:13-19119
CHARLES R. NUNLEY
on behalf of the Estate of
DOROTHY G. NUNLEY,
Defendant.
MEMORANDUM OPINION AND ORDER
Pending is the Motion to Abstain, or in the
Alternative, Motion to Dismiss, filed on September 12, 2013, by
the defendant, Charles Nunley, on behalf of the Estate of
Dorothy Nunley (“Nunley”).
Dorothy Nunley was admitted as a resident to the Boone
Nursing & Rehabilitation Center (the “Center”) on May 5, 2011,
and remained there until her death on January 25, 2012.
On May
31, 2013, Nunley filed a lawsuit in the Circuit Court of Boone
County, West Virginia, against the plaintiffs, Advocat Inc.
(“Advocat”), Diversicare Management Services Co. (“Diversicare
Management”), and Diversicare Leasing Corp. (“Diversicare
Leasing”), as well as three other parties, Sterling Health Care
Management Inc. (“Sterling”), Omega Healthcare Investors, Inc.
(“Omega”), and Steven Gardner (“Gardner”), who are not joined in
this action.
In his state-court action, Nunley asserted that
Dorothy sustained personal injuries and ultimately died as a
result of the negligence and malpractice of the state-court
defendants.
Soon thereafter, on July 11, 2013, Advocat,
Diversicare Leasing, and Diversicare Management -- but not
Sterling, Omega, or Gardner -- filed a petition in this court
seeking an order staying the state court proceeding and
compelling Nunley to arbitrate his state-court claims against
them.
The plaintiffs contend that Nunley executed an
arbitration agreement on Dorothy’s behalf that requires his
claims on behalf of her estate to be resolved through
arbitration, rather than by the state-court action.
In his motion to dismiss,1 Nunley argues, among other
things, that the court lacks subject matter jurisdiction over
the plaintiffs’ petition.
Specifically, he claims that the
court lacks jurisdiction because Sterling, Omega, and Gardner
1
Although alternatively styled as a motion to abstain, Nunley’s
motion is limited to arguments in favor of dismissal on
jurisdictional or substantive grounds.
2
are indispensable parties to this action who must be joined
under Rule 19 of the Federal Rules of Civil Procedure.
He
maintains that, once joined, the presence of these additional
parties will destroy complete diversity of citizenship, thereby
divesting the court of subject-matter jurisdiction.
Several factual matters, including the nature of the
relationship between Advocat, Diversicare Leasing, Diversicare
Management, Sterling, Omega, and Gardner, remain less than
clear.
The petition to compel reveals only that Advocat is a
Delaware corporation, and that Diversicare Leasing and
Diversicare Management are Tennessee corporations.
Nunley’s
motion to dismiss the petition explains that all of the state
court defendants (including Advocat, Diversicare Leasing and
Diverscare Management) were sued in their capacity as “the
owners, operators, and managers of Boone Nursing and
Rehabilitation” Center, Def.’s Mem. at 1, but does not explain
the relationship between the corporate entities.
It is unclear, for example, which, if any, of the
state-court defendants are parties to the arbitration agreement
at issue here, or whether any of them are entitled to enforce
its terms against Nunley.
The plaintiffs’ petition states that
“[t]he Arbitration Agreement is . . . binding against the
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related or affiliated businesses of Boone Nursing &
Rehabilitation Center,” Pet. Compel Arbitration ¶ 21, but the
parties’ briefing does not address whether the plaintiffs are
“related or affiliated businesses,” or how they are otherwise
parties to the arbitration agreement.
Rather, the petition
simply states that “[a]lthough [p]laintiffs are not signatories
of the Arbitration Agreement, they are entitled to compel
arbitration under the well-recognized doctrine of equitable
estoppel[.]”
Id. ¶ 25.
It is true that “[a] non-signatory may invoke an
arbitration clause under ordinary state-law principles of agency
or contract,” Long v. Silver, 248 F.3d 309, 320 (4th Cir. 2001),
and the Supreme Court of Appeals of West Virginia has recognized
in certain circumstances “a clear exception to the rule against
compelling nonsignatories to arbitrate,” United Asphalt
Suppliers, Inc. v. Sanders, 511 S.E.2d 134, 138 (W. Va.
1998)(recognizing exception where signatory and nonsignatory
have similar corporate identity or interests).
But the Supreme
Court of Appeals has also emphasized that courts should not
lightly assume -- based on nothing more than the bare assertions
of the parties -- that exceptions to the nonsignatory rule apply
in a particular case.
Id. (“While a clear exception to the rule
against compelling nonsignatories to arbitrate does exist, the
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limited record upon which this case was submitted does not
permit us to even consider whether that exception applies under
the facts of this case. . . . [T]he record before us contains
nothing other than a bare assertion [that the exception
applies].
We are understandably reluctant to accept such
allegation as true without an affidavit or other document
evidencing the [applicability of the exception].”).
The plaintiffs claim that the exception applies
because [Nunley’s] claims are: “(1) Dependent upon duties
created by the [nursing home] Admission Contract; (2) Predicated
upon allegations that [p]laintiffs acted in concert and
interdependently with Boone Nursing & Rehabilitation Center in
causing Ms. Nunley’s alleged injuries; and (3) Founded upon and
intertwined with the alleged duty of Boone Nursing &
Rehabilitation Center owed Ms. Nunley that arise from the
parties’ Admission/Financial Agreement that incorporates by
reference the Arbitration Agreement.”
¶ 25.
Pet. Compel Arbitration
Neither party has submitted a copy of the state-court
complaint, nor any other records from that proceeding, leaving
the court with nothing but the plaintiffs’ bare assertions that
the exception applies.
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The lack of information concerning the parties and
their relationship to the state-court action undermines Nunley’s
motion to dismiss as well.
Nunley suggests that Sterling,
Omega, and Gardner are necessary parties under Rule 19 at least
in part because they are also deemed parties to the arbitration
agreement.
A non-joined party may be considered “necessary”
under Rule 19(a)(1)(B)(ii) if he claims an interest in the
action and “is so situated that disposing of the action in [his]
absence may . . . leave an existing party subject to a
substantial risk of incurring double, multiple, or otherwise
inconsistent obligations[.]”
Fed. R. Civ. P. 19(a)(1)(B)(ii).
Nunley seems to assert that “the three non-joined parties” are
necessary on this basis because they might “attempt to move to
compel arbitration in state court, which would then place
[Nunley] at substantial risk of incurring inconsistent
obligations.”
Def.’s Mem. at 7.
Elsewhere, he seems to suggest
that the non-joined plaintiffs have already “assert[ed] the
existence of the arbitration agreement as a defense” in the
state-court action.
Id. at 2.
Once again, however, the court
has nothing but Nunley’s bare assertions to guide its analysis.
Before the court can decide the motion to dismiss or
the petition to compel arbitration, the parties must clarify
these underlying factual issues.
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Furthermore, Nunley’s motion to dismiss is
alternatively styled as a motion to abstain, but he has not
addressed whether and on what basis this court should refrain
from exercising jurisdiction in light of the ongoing state-court
action.
Although the court may raise the issue of abstention
sua sponte, Bellotti v. Baird, 428 U.S. 132, 143 n.10 (1976)
(“It would appear that abstention may be raised by the court
[s]ua sponte.”), briefing from the parties may be useful in
sharpening the inquiry.
Finally, as noted, Nunley disputes the
court’s jurisdiction to decide the petition to compel
arbitration, but he has not addressed whether the Supreme
Court’s decision in Vaden v. Discover Bank, 556 U.S. 49, (2009),
is applicable to the jurisdictional inquiry in this case.
Accordingly, it is ORDERED that the parties be, and
hereby are, directed to: (1) submit a joint stipulation of facts
explaining the relationship between the Boone Nursing &
Rehabilitation Center and the state-court defendants; (2) submit
a joint report on the status of the state-court action as well
as a copy of the complaint, any answer(s), and any motion(s) to
compel arbitration that have been filed in that case; (3)
address whether the plaintiffs or the non-joined state-court
defendants are parties to the arbitration agreement because they
are “related or affiliated businesses of Boone Nursing &
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Rehabilitation Center”; (4) address why and on what grounds the
nonsignatory exception permits the plaintiffs or the non-joined
state-court defendants to assert rights under the arbitration
agreement; (5) address whether abstention, including Colorado
River abstention, is proper in this case; and (6) address
whether Vaden v. Discover Bank, 556 U.S. 49 (2009), is
applicable to this case, according to the following schedule:
Case Event
Due Date
Parties’ Joint Stipulation and Status Report
01/10/2014
Plaintiffs’ Memorandum as to items 3-6
01/17/2014
Defendant’s Response to Plaintiffs’ Memorandum
Plaintiffs’ Reply
01/31/2014
02/07/2014
In all other respects, the additional briefing shall
comply with the requirements of Local Rule 7.1.
ENTER: December 24, 2013
John T. Copenhaver, Jr.
United States District Judge
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