Preferred Care, Inc. v. Roberts
| Decision Date | 31 January 2017 |
| Docket Number | CIVIL ACTION NO. 5:16-203-KKC |
| Parties | PREFERRED CARE, INC., et al. Plaintiff, v. JESSE ROBERTS, as administrator of Kenneth Roberts' estate, Defendant. |
| Court | U.S. District Court — Eastern District of Kentucky |
This matter is before the Court on the plaintiffs' motion to compel arbitration (DE 2) and the defendant's motion to dismiss (DE 8). For the following reasons, both motions will be granted in part and denied in part.
Kenneth Roberts died while a resident of the Stanton Nursing and Rehabilitation Center located in Stanton, Kentucky. The administrator of his estate, Jesse Roberts (the "Estate"), filed suit in Powell Circuit Court against the nursing center and several other companies that the Estate alleged owned or operated the center. The Estate also named the center administrator and two nurses and a doctor employed there. (DE 1-2, State Court Action.)
The center and three of the companies named as defendants in the state-court action (collectively, the "Center") then filed a claim in this Court asking for an order compelling the Estate to arbitrate the claims filed in the state court action and also for an order enjoining the Estate from pursing the state-court action. The Estate moves to dismiss this action.
The Court must, of course, first address any challenges to its jurisdiction. The Estate concedes that this Court has diversity jurisdiction over this action but argues that the Court should abstain from exercising it under the Colorado River doctrine. Under that docrtine, "[i]n certain 'exceptional' circumstances, [ ] a federal district court may abstain from exercising its subject matter jurisdiction due to the existence of a concurrent state court proceeding, based on 'considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.'" Paine Webber, Inc. v. Cohen, 276 F.3d 197, 200 (6th Cir.2001) (quoting Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976)). But "[a]bstention from the exercise of federal jurisdiction is the exception, not the rule," and this "extraordinary and narrow exception" is only justified when it "would clearly serve an important countervailing interest." Colorado River, 424 U.S. at 813.
Neither party addresses it but the first issue on the abstention analysis is whether there is, in fact, a parallel state court proceeding. While for purposes of Colorado River abstention, the state and federal proceedings need only be "substantially similar," Romine v. Compuserve Corp., 160 F.3d 337, 340 (6th Cir. 1998), the two actions cannot be said to be parallel if the claims presented in this Court are not presented in the state court action at all. There is no evidence in the record before this Court that either party has moved to compel arbitration in the state-court action. Nor is there any evidence indicating that either party has actually asked the state court to determine whether the arbitration agreement is valid and, if so, whether the agreement requires that the Estate's state-court claims be arbitrated. Nothing in the record before this Court indicates that any of the parties to this action have requested the state court to make any determinations regarding the arbitration agreement or the arbitrability of the Estate's state-law claims. Accordingly, the Court cannot find that this action and the state-court action are parallel.
Furthermore, even if a party had moved the state court to compel arbitration, the Court could not find abstention warranted. "[T]he decision to dismiss a federal action because of a parallel state-court action rests 'on a careful balancing of the important factors as they apply ina given case, with the balance heavily weighted in favor of the exercise of jurisdiction.'" Great Earth Cos., Inc. v. Simons, 288 F.3d 878, 886 (6th Cir.2002) (quoting Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 16 (1983)).
Courts consider roughly eight factors when determining whether abstention under Colorado River is necessary. PaineWebber, 276 F.3d at 206 (citing Romine, 160 F.3d at 340-41. These factors are:
Id. (citing Romine, 160 F.3d at 340-41).
The first and second factors favor this Court exercising jurisdiction in this action. There is no res. And, given the proximity of the two courts, this federal forum is just as convenient to the parties as the Powell Circuit Court.
The Estate makes only one argument with regard to convenience. It argues that the arbitration agreement mandates that any action to compel arbitration be filed in the Kentucky state court. This argument goes to whether this action should be dismissed because this forum is not a "convenient" one under the doctrine of forum non conveniens. The Court will address this question after deciding whether to exercise jurisdiction in this action. For purposes of determining whether to abstain from exercising its jurisdiction under Colorado River, however, any forum-selection clause in the agreement does not render this forum so inconvenient that the Court should find that an exception exists to its obligation to exercise jurisdiction where it exists.
As to the fourth and seventh factors, they again favor the exercise of federal jurisdiction. The state court action was filed before this but there is no evidence in this record that the state court has been asked to address the arbitration issue at all.
The "most important" factor is the third factor, which asks "whether there is a 'clear federal policy evinc[ing]. . . the avoidance of piecemeal adjudication' found within the statutory scheme at issue." Answers in Genesis of Kentucky, Inc. v. Creation Ministries Int'l., Ltd., 556 F.3d 459, 467 (6th Cir.2009) (quoting Colorado River, 424 U.S. at 819). The Sixth Circuit has held that "[i]n the case of the Federal Arbitration Act, there most clearly is not such a policy." Id. at 467. This is because the Federal Arbitration Act, 9 U.S.C. § 1, et seq. ("FAA") "requires district courts to compel arbitration . . . when one of the parties files a motion to compel, even where the result would be the possibly inefficient maintenance of separate proceedings in different forums." Id. at 467-68. Thus, the most important factor when determining whether to exercise this Court's jurisdiction weighs in favor of doing so.
The fifth and eighth factors also weigh in favor of exercising jurisdiction. This Court has jurisdiction over the issue presented in the complaint. The Estate disputes whether the FAA or the Kentucky Arbitration Act governs this dispute. Regardless, this Court is capable of applying either law. The sixth factor weighs in favor of abstention because the state court has not been asked to protect the Center's arbitration rights. Further, the state court would not likely protect those rights because, as will be discussed, the arbitration agreement is not enforceable under current Kentucky law. Considering all of these factors, the Court will not abstain from exercising its jurisdiction over this action.
As discussed, the Estate argues that the arbitration agreement at issue contains a provision that requires that this action be filed in the Powell Circuit Court. Relying solely on that provision, it argues that this action must be dismissed under the forum non conveniensdoctrine. See Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568, 580 (2013) () At the same time, however, the Estate argues that this action must be dismissed because the arbitration agreement is not enforceable. Before addressing whether the action should be dismissed solely because the arbitration agreement requires that it be filed in Powell Circuit Court, the Court must first address the Estate's alternative argument that the arbitration agreement is not even enforceable.
The Estate argues that the agreement is not enforceable because it was signed, not by the nursing home resident himself - the deceased Kenneth Roberts - but by a court-appointed guardian, Marcie Lainhart, who is employed by the Kentucky Cabinet for Health and Family Services. The Estate argues that Lainhart did not have authority under Kentucky law to waive Kenneth Roberts' rights to a jury trial. For this argument, the Estate relies on Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2015), as corrected (Oct. 9, 2015), reh'g denied (Feb. 18, 2016), cert. granted sub nom. Kindred Nursing Centers Ltd. P'ship v. Clark, 137 S. Ct. 368 (2016). In Whisman, the Kentucky Supreme Court held, "an agent's authority to waive his principal's constitutional right to access the courts and to trial by jury must be clearly expressed by the principal." Id. at 331.
The order appointing Lainhart emergency guardian grants her the power to enter into contractual relationships on Roberts' behalf. But it does not expressly grant her the power to waive Roberts' right to a jury trial or to enter into arbitration agreements. Accordingly, under Kentucky law as it now stands, Lainhart did not have the authority to enter into the arbitration agreement on Roberts' behalf and the arbitration agreement is not enforceable.
The problem, however, is that multiple federal court d...
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