GGNSC Stanford, LLC v. Gilliam

• Decision Date: 07 September 2016
• Docket Number: Civil Action No. 5:16-004-DCR
• Citation: 205 F.Supp.3d 884
• Parties: GGNSC STANFORD, LLC, et al., Plaintiffs, v. Lisa GILLIAM, Administratrix of the Estate of Geneva Hammonds, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

205 F.Supp.3d 884

GGNSC STANFORD, LLC, et al., Plaintiffs,

v.Lisa GILLIAM, Administratrix of the Estate of Geneva Hammonds, Defendant.

Civil Action No. 5:16-004-DCR

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

Signed September 7, 2016

Marcia L. Pearson, Edward M. O'Brien, Wilson, Elser, Moskowitz, Edelman & Dicker LLP, Louisville, KY, for Plaintiffs.

Roscoe F. Mann, Wilkes & McHugh PA, Lexington, KY, for Defendant.

MEMORANDUM OPINION AND ORDER

Danny C. Reeves, United States District Judge

Defendant Lisa Gilliam is Geneva Hammonds' daughter and the administratrix of her estate. On December 22, 2015, Gilliam filed suit against GGNSC Stanford, LLC and others in state court, alleging that they were negligent in caring for Hammonds while she resided at a nursing home owned by GGNSC. On January 1, 2016, GGNSC and other state-court defendants filed suit in federal court, seeking to compel arbitration and enjoin the state court action based on an alternative dispute resolution agreement executed during Hammonds' stay at the nursing home. [Record Nos. 1, 4] Conversely, Gilliam has moved to dismiss this action. [Record No. 9] Both motions have been briefed fully and are ripe for consideration. For the foregoing reasons, the Court will compel arbitration and deny Gilliam's motion to dismiss. Additionally, the Court will enjoin Gilliam from pursuing the related state court action.

I.

In 2014, Geneva Hammonds was a resident of the Golden LivingCenter in Stanford, Kentucky ("GLC-Stanford"), a nursing home operated by GGNSC Stanford, LLC.¹ Lisa Gilliam was Ms. Hammonds' attorney-in-fact. Pursuant to the relevant Power of Attorney ("POA") document, Gilliam was expressly authorized "[t]o make and sign and all checks, contracts and agreements" on Hammonds' behalf. Further, Gilliam was vested with the authority to "institute or defend suits concerning [Hammonds'] property or rights" and to generally perform for her in her name all that she might do if present.² [Record No. 4–1, pp. 1–2]On July 14, 2014, Gilliam signed GLC-Stanford's Alternative Dispute Resolution Agreement ("ADR Agreement" or "Agreement") on Hammonds' behalf. [Record No. 1–2] The Agreement requires the arbitration of all disputes within its scope and purports to bind "all persons whose claim is or may be derived through or on behalf of [Hammonds]." [Id. , p. 1] The Agreement encompasses a variety of matters including violations of rights "under federal, state, or local law or contractual agreement between the Parties ... negligence; gross negligence; malpractice; and any alleged departure from any applicable federal, state, or local medical, health care, consumer, or safety standards." [Id. , p. 3] The Agreement provides that acceptance of its terms is not a condition of admission or continued residence in the facility. [Id. , p. 1] The Agreement further provides that it shall be governed by and interpreted under the Federal Arbitration Act, 9 U.S.C. § 1, et seq. [Id. , p. 13]

II.

Gilliam moves to dismiss this action pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, alleging that the Court lacks subject matter jurisdiction. Whether subject matter jurisdiction exists is a threshold determination the Court must make before proceeding further. See United Liberty Life Ins. Co. v. Ryan , 985 F.2d 1320, 1325 (6th Cir.1993). It is well-settled that the Federal Arbitration Act ("FAA") does not provide an independent basis for federal jurisdiction. 9 U.S.C. § 4 ; see Vaden v. Discover Bank , 556 U.S. 49, 59, 129 S.Ct. 1262, 173 L.Ed.2d 206 (2009). Rather, petitioners seeking to compel arbitration under the Act must assert an independent source of subject matter jurisdiction. Vaden , 556 U.S. at 59, 129 S.Ct. 1262 ; Ford v. Hamilton Invs. Inc. , 29 F.3d 255, 257–58 (6th Cir.1994). Here, the plaintiffs contend that diversity jurisdiction exists under 28 U.S.C. § 1332.

A. Look-Through Approach

Gilliam concedes that complete diversity exists on the face of the plaintiffs' Complaint. Indeed, the plaintiffs are Delaware limited liability companies with their principle places of business in Texas. Gilliam is a citizen of Kentucky, and the plaintiffs have no members that are citizens of Kentucky. Despite this prima facie showing of complete diversity, Gilliam insists that the Court should "look through" to the complaint in the underlying state court action to determine whether complete diversity actually exists. This Court, as well as others, have considered and rejected this argument, which is based on a strained interpretation of the Supreme Court's decision in Vaden , 556 U.S. 49, 129 S.Ct. 1262. See e.g., Brookdale Senior Living, Inc. v. Caudill , No. 5: 14–cv–098, 2014 WL 3420783, at *3 (E.D.Ky. July 10, 2014) (citing Northport Health Servs. of Arkansas, LLC v. Rutherford , 605 F.3d 483, 490–91 (8th Cir.2010) ); Preferred Care, Inc. v. Howell , No. 16-13-ART, 187 F.Supp.3d 796, 803–04, 2016 WL 2858523, at *1 (E.D.Ky. May 13, 2016). The Court remains persuaded that Vaden 's look-through approach applies only in cases invoking the court's federal-question jurisdiction. See id. See also Brookdale Senior Living, Inc. v. Walker , No. 5:15–cv–206–KKC, 2016 WL 1255722, at *2–3 (E.D.Ky. March 29, 2016) ; GGNSC Louisville Hillcreek, LLC v. Watkins , No. 3:15–cv–902–DJH, 2016 WL 815295, at *2 (W.D.Ky. Feb. 29, 2016). Accordingly, the court will determine diversity by examining the parties named in the federal complaint, plus any indispensable parties who must be joined under Rule 19 of the Federal Rules of Civil Procedure. See GGNSC Frankfort, LLC v. Tracy , No. 14–30–GFVT, 2015 WL 1481149, at *3 (E.D.Ky. March 31, 2015) (quoting Northport Health Servs. of Arkansas , 605 F.3d at 490–91 ).

B. Failure to Join an Indispensable Party

Gilliam alternatively argues that the Court lacks jurisdiction because the plaintiffs have failed to join an indispensable party who would destroy diversity if joined. See Fed. R. Civ. P. 12(b)(7). Specifically, Gilliam contends that the plaintiffs failed to join Kevin McCowan, a nursing home administrator who was named as a defendant in the state court complaint. The first step in determining whether McCowan is indispensable to the resolution of this matter is to determine whether he is necessary, as defined by Rule 19. A party is deemed necessary if:

(A) in that person's absence, the court cannot accord complete relief among existing parties; or

(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may:

(i) as a practical matter impair or impede the person's ability to protect the interest; or

(ii) 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(a).

Gilliam asserts that McCowan is a necessary party because the negligence claims against him in the underlying state cause of action are "intrinsically interwoven" with similar claims against the corporate parties. On the other hand, Gilliam argues, McCowan is not simply a joint tortfeasor, but is independently liable under Kentucky law. If this Court and the state court reached different conclusions concerning the enforceability of the arbitration agreement, McCowan would face inconsistent procedural remedies. Thus, the Court will assume that McCowan is a necessary party. See Richmond Health Facilities – Kenwood, LP v. Nichols , No. 5: 14–141–DCR, 2014 WL 4063823, at *5 (E.D.Ky. Aug. 13, 2014).

Because McCowan's joinder would destroy diversity, the Court must determine whether he is an indispensable party under Rule 19(b). See PaineWebber, Inc. v. Cohen , 276 F.3d 197, 200 (6th Cir.2001). This requires the Court to decide whether, in equity and good conscience, the action may proceed in McCowan's absence or should be dismissed. Fed. R. Civ. P. 19(b). See also Republic of Philippines v. Pimentel , 553 U.S. 851, 862–63, 128 S.Ct. 2180, 171 L.Ed.2d 131 (2008). The Court considers the following factors in resolving this issue:

(1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties;

(2) the extent to which any prejudice could be lessened or avoided by:

(A) protective provisions in the judgment;

(B) shaping the relief;

(C) other measures;

(3) whether a judgment rendered in the person's absence would be inadequate; and

(4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.

Fed. R. Civ. P. 19(b).

Gilliam contends that permitting this matter to proceed in federal court would expose her to the risk of piecemeal litigation. That risk, however, is a result of Gilliam's decision to file suit in state court rather than demanding arbitration under the Agreement. See Brookdale Senior Living Inc. , 2014 WL 3420783, at *5 (citing PaineWebber , 276 F.3d at 200–06 ; GGNSC Vanceburg, LLC v. Hanley , No. 13–106–HRW, 2014 WL 1333204, at *4 (E.D.Ky. March 28, 2014) ). Gilliam's concern that this Court and the state court will reach conflicting interpretations of the arbitration agreement does not constitute the type of prejudice necessary to support a finding that McCowan is an indispensable party. See PaineWebber, Inc. , 276 F.3d at 203. Further, there is no indication that any judgment rendered in McCowan's absence will be inadequate. Additionally, the possibility of Gilliam having to arbitrate her claims against the corporate parties while proceeding with her claims against McCowan in state court does not affect the adequacy of any judgment between Gilliam and the corporate parties. See id. at 205.

Only the final factor weighs in favor of dismissal. But while the state court presents an alternate forum for the plaintiffs to seek enforcement of the arbitration agreement, the "existence of another forum does not, in and of itself, outweigh a plaintiff's right to the forum of his or her...