Diversicare of Nicholasville, LLC v. Lowry, Action No. 5:16-cv-53-JMH

• Decision Date: 30 September 2016
• Docket Number: Action No. 5:16-cv-53-JMH
• Citation: 213 F.Supp.3d 859
• Parties: DIVERSICARE OF NICHOLASVILLE, LLC, et al., Plaintiffs, v. Marsha LOWRY, as Administratrix of Estate of Ruth Harvey, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

213 F.Supp.3d 859

DIVERSICARE OF NICHOLASVILLE, LLC, et al., Plaintiffs,

v.Marsha LOWRY, as Administratrix of Estate of Ruth Harvey, Defendant.

Action No. 5:16-cv-53-JMH

United States District Court, E.D. Kentucky, Central Division at Lexington.

Signed September 30, 2016

Donald L. Miller, II, Quintairos, Prieto, Wood & Boyer, P.A., Louisville, KY, J. Peter Cassidy, III, Matthew Coleman Cocanougher, Quintaros, Prieto, Wood & Boyer, P.A., Lexington, KY, for Plaintiffs.

Brian M. Jasper, Wilkes & McHugh PA, Lexington, KY, for Defendant.

MEMORANDUM OPINION AND ORDER

Joseph M. Hood, Senior U.S. District Judge

This matter is before the Court on Defendant Lowry's Amended Motion to Dismiss [DE 6] pursuant to Fed. R. Civ. P. 12(b)(7) for failure to join a necessary party under Rule 19.¹ In her Response, Defendant asks this Court to determine that it lacks jurisdiction in this matter or, in the alternative, abstain from exercising jurisdiction and to dismiss the Plaintiffs' Complaint under the Colorado River abstention doctrine in favor of the parallel state court action pending in the Jessamine Circuit Court. She further asserts that, in any event, that any injunctive relief would be inappropriate under the Anti-Injunction Act. As explained below, the Court disagrees.

Rather, Plaintiffs' Motion for Expedited Consideration of Complaint to Compel Arbitration and to Enjoin Defendant [DE 3] is well-received, at least in part. For the reasons which follow, relief will be afforded both parties, but Defendant will be enjoined from pursuing a subset of her claims before the Jessamine Circuit Court.

I.

On December 28, 2015, Defendant in this action filed a Complaint in the Jessamine Circuit Court alleging negligence in the care and treatment provided to Ruth Harvey during her stay at Diversicare of Nicholasville, a skilled nursing facility located in Nicholasville, Kentucky, which resulted in Harvey's injury and premature demise. Lowry, who is a citizen of Kentucky as is Harvey's estate, seeks relief against Diversicare of Nicholasville, LLC, Diversicare Healthcare Services, Inc., Diversicare Management Services Co., Diversicare Leasing Corp., Diversicare Leasing Company II, LLC, Omega Healthcare Investors, Inc., and Royal Manor, Inc., as well as against certain administrators of Royal Manor n/k/a Diversicare of Nicholasville: Benjamin Sparks, Terry W. Willis, and Sam Frazier.

Diversicare of Nicholasville, LLC, Diversicare Healthcare Services, Inc., Diversicare Management Services Co., Diversicare Leasing Corp., and Diversicare Leasing Company II, LLC, are citizens of other jurisdictions for the purposes of the action before this Court and are named as Plaintiffs in this action. Neither Sparks, Willis, or Sam Frazier, all of whom are citizens of Kentucky, are named as plaintiffs in the matter pending before this Court.

By virtue of their Complaint in this action, Plaintiffs ask this Court to enforce an arbitration agreement entered into on behalf of Ruth Harvey by Marcia Lowry, then serving as Harvey's attorney-in-fact, and Diversicare of Nicholasville, LLC, and to stay the pursuit of the action in Jessamine Circuit Court in order that any arbitration ordered may proceed.

II.

As an initial matter and in the face of Defendant's Motion to Dismiss Plaintiffs' claims pursuant to Fed. R. Civ. P. 12(b)(1) and (7), the Court concludes that it has jurisdiction to consider this matter. Defendant argues that there is no jurisdiction because Plaintiffs have failed to join a necessary party under Rule 19 and, once the citizenship of that necessary party is taken into account, there is a lack of subject-matter jurisdiction under 28 U.S.C. § 1332 because (1) the parties will not be of diverse citizenship and (2) the Federal Arbitration Act will not, alone, create a federal question which would confer jurisdiction under 28 U.S.C. § 1331 in this matter upon this Court.² For the same reasons announced in Preferred Care, Inc. v. Belcher , No. 14–CV–107–JMH, 2015 WL 1481537, at *1–3 (E.D. Ky. Mar. 31, 2015), the Court disagrees.

A Rule 12(b) (1) motion can either attack the claim of jurisdiction on its face, in which case all allegations of the plaintiff must be considered as true, or it can attack the factual basis for jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the burden of proving that jurisdiction exists. See RMI Titanium Co. v. Westinghouse Elec. Corp. , 78 F.3d 1125, 1133–35 (6th Cir. 1996) ; United States v. Ritchie , 15 F.3d 592, 598 (6th Cir. 1994) ; Ohio Nat'l Life Ins. Co. v. United States , 922 F.2d 320, 325 (6th Cir. 1990).

28 U.S.C. § 1332 provides that "district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between ... citizens of different States," and Plaintiffs contend that this Court has jurisdiction based on the diversity of the parties. In the instant action, there is no dispute that the amount in controversy exceeds the sum or value of $75,000, exclusive of interest and costs. Further, there is no dispute that Defendant is a resident of Kentucky and that each of the named Plaintiffs in this action is a citizen of another state. However, Sparks, Willis, and Frazier, nursing home administrators named as defendants in the state complaint but not as a party in the present matter, are citizens of Kentucky. Defendant claims that complete diversity of citizenship among the parties in this case cannot be maintained because, while Sparks, Willis, and Frazier are not named as plaintiffs in this action, they are indispensable parties under Fed. R. Civ. P. 19 and their joinder would destroy the complete diversity among parties required by 28 U.S.C. § 1332(a)(1).

If lack of subject-matter jurisdiction is raised in a motion to dismiss, the plaintiff "bears the burden of proving jurisdiction ... to survive the motion." Mich. S. R.R. Co. v. Branch & St. Joseph Counties Rail Users Ass'n , 287 F.3d 568, 573 (6th Cir. 2002). However, the plaintiff will "survive [a] motion to dismiss by showing ‘any arguable basis in law’ for the claims set forth in the complaint." Id. (quoting Musson Theatrical, Inc. v. Fed. Express Corp. , 89 F.3d 1244, 1248 (6th Cir. 1996) ). The existence of a non-diverse party in the related state court action does not, on its own, destroy diversity:

Rule 19 deals with what were historically known as "necessary" and "indispensable" parties. The terms "necessary" and "indispensable" are terms of art in jurisprudence concerning Rule 19, and "necessary" refers to a party who should be joined if feasible, while "indispensable" refers to a party whose participation is so important to the resolution of the case that, if the joinder of the party is not feasible, the suit must be dismissed. If a necessary party cannot be joined without divesting the court of subject-matter jurisdiction, the Rule provides additional criteria for determining whether that party is indispensable, but if the court finds that the party is anything less than indispensable, the case proceeds without that party, and if, on the other hand, the court finds that the litigation cannot proceed in the party's absence, the court must dismiss the case.

GGNSC Vanceburg, LLC, v. Hanley , Civil Action No. 13–106–HRW, 2014 WL 1333204, *3 (E.D. Ky. Mar. 28, 2014).

Accordingly, the Court first considers whether Sparks, Willis, and Frazier are even necessary parties, which they are if, "in [their] absence, complete relief cannot be accorded among those already parties" or "[their] claims an interest relating to the subject of the action and is so situated that the disposition of the action in [their] absence may ..., as a practical matter, impair or impede [their] ability to protect the interest" or their absence would "leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest." Fed. R. Civ. P. 19.

The claims against the defendants in the state court action, which group of defendants includes the various Plaintiffs to this action and Sparks, Willis, and Frazier, are based on the same occurrence—the alleged negligence at the nursing home that resulted in injury to Harvey. The arbitration agreement, by its terms, governs claims against the corporate parties as well as the administrators and its enforceability with respect to all parties, including Sparks, Willis, and Frazier, is a matter pending before the state court. If this Court and the state court were to reach different conclusions concerning the enforceability of the arbitration agreement, Lowry could be placed in a position where she was obliged to arbitrate the claims with some of the parties covered by the agreement and to proceed in litigation before the state court with respect to other parties, Sparks, Willis, and Frazier, who are arguably covered by the agreement. Thus, Lowry is subject to a substantial risk of incurring inconsistent obligations because of Sparks, Willis, and Frazier's interests in this matter. Accordingly, the Court concludes that Sparks, Willis, and Frazier are necessary parties to the action.

As the joinder of Sparks, Willis, and Frazier, citizens of Kentucky, would destroy diversity jurisdiction, the Court must determine whether they are "indispensable." Thus, the Court must balance the following factors: (1) the extent to which a judgment rendered in their absence might prejudice them or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by protective provisions in the judgment, shaping the relief, or other measures; (3) whether a judgment rendered in his absence would be adequate; and (4) whether Plaintiff would have an adequate remedy if the action were dismissed for non-joinder. Fed. R. Civ. P. 19(b).

Lowry argues that she will not be afforded complete relief in the absence of Sparks, Willis, and Frazier...