Preferred Care, Inc. v. Howell

• Decision Date: 13 May 2016
• Docket Number: Civil No. 16-13-ART
• Citation: 187 F.Supp.3d 796
• Parties: Preferred Care, Inc., et al., Plaintiffs, v. Randy Howell, Administrator of the Estate of George Howell, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

187 F.Supp.3d 796

Preferred Care, Inc., et al., Plaintiffs,

v.Randy Howell, Administrator of the Estate of George Howell, Defendant.

Civil No. 16-13-ART

United States District Court, E.D. Kentucky, Southern Division. Pikeville.

Signed May 13, 2016

Anthony Bradley Gray, J. Peter Cassidy, III, Quintaros, Prieto, Wood & Boyer, P.A., Lexington, KY, Donald L. Miller, II, Quintairos, Prieto, Wood & Boyer, P.A., Louisville, KY, for Plaintiffs.

Miller Kent Carter, Miller Kent Carter & Michael Lucas, PLLC, Pikeville, KY, for Defendant.

MEMORANDUM OPINION AND ORDER

Amul R. Thapar, United States District Judge

George Howell ("George") was a resident of Salyersville Nursing and Rehabilitation Center ("Salyersville") for eight years. George was of unsound mind throughout his stay at Salyersville. R. 1-2 ¶ 2. Because of this, defendant Randy Howell ("Randy"), George's son, was appointed George's guardian. R. 1-3 (order of appointment of guardian). While acting as George's guardian, Randy allegedly signed an Alternative Dispute Resolution Agreement (the "arbitration agreement") at Salyersville's request. R. 1-1 (arbitration agreement). This agreement stated that any disputes arising out of George's stay at Salyersville would be resolved by arbitration, rather than in the court system. Id. at 1–2. Randy asserts that he does not believe that Salyersville ever asked him to sign the arbitration agreement or ever gave him a copy of the agreement. R. 7-5 at 1. The agreement, however, does appear to bear Randy's signature. R. 1-1 at 5.

Randy alleges that his father developed serious injuries while under the care of the plaintiffs, causing him to suffer pain and mental anguish. R. 1-2 ¶ 39. After his father's death, Randy filed a state-court action on December 17, 2015, alleging negligence and several other claims against the plaintiffs in this action. See id. (passim ). In that action, Randy also sued Sharon Welch, Glenn Cox, and Elaine Jones, all of whom were administrators at Salyersville. Id. Welch and Cox are Kentucky citizens. Id. ¶¶ 21–22.

Six weeks later, the defendants in the underlying state-court action filed this action against Randy—thus becoming the plaintiffs for the purposes of this lawsuit—asserting breach of the arbitration agreement and seeking the enforcement of that agreement under the Federal Arbitration Act ("FAA"). R. 1. But the three administrators that Randy sued in the underlying state-court action did not join the plaintiffs in this action. See id. Randy now moves to dismiss this action on three grounds: lack of subject-matter jurisdiction, Colorado River abstention, and failure to state a claim under Rule 12(b)(6). R. 7. Because the wrongful-death beneficiaries were not parties to the arbitration agreement, the agreement is not enforceable against them. So Randy's motion to dismiss will be granted with respect to those claims. For the reasons discussed below, however, Randy's remaining arguments fail. So the motion to dismiss will be denied with respect to those arguments.

I.

Randy first argues that the Court lacks subject-matter jurisdiction over this case because the plaintiffs brought it under the FAA. The FAA does not provide an independent basis of federal jurisdiction. Vaden v. Discover Bank , 556 U.S. 49, 53, 129 S.Ct. 1262, 173 L.Ed.2d 206 (2009) ( "Section 4 of the Federal Arbitration Act, 9 U.S.C. § 4, authorizes a United States district court to entertain a petition to compel arbitration if the court would have jurisdiction, save for the arbitration agreement, over a suit arising out of the controversy between the parties." (internal quotation marks omitted)); Sun Healthcare Grp., Inc. v. Dowdy, No. 5:13–CV–00169–TBR, 2014 WL 790916, at *5 (W.D.Ky. Feb. 26, 2014) ("The FAA bestows no federal jurisdiction but rather requires for access to a federal forum an independent jurisdictional basis over the parties' dispute."). Thus, courts have jurisdiction over an FAA action only if there is another basis for jurisdiction. Here, the plaintiffs argue that the Court has jurisdiction on the basis of diversity. In their complaint, the plaintiffs assert that they are all citizens of Texas, that Randy is a citizen of Kentucky, and that the amount in controversy is more than 75,000 dollars. See R. 1 at 3–4. Thus, it seems that the plaintiffs have sufficiently pled diversity of citizenship. See 28 U.S.C. § 1332(a).

Randy responds that the plaintiffs failed to join two administrators¹ whom Randy named as defendants in his state-court complaint. R. 7-1 at 4. Because Randy sued these administrators below, he argues, they are indispensable parties to the plaintiffs' federal-court action to compel arbitration. Thus, he asserts, the plaintiffs were required to join these administrators when the plaintiffs filed suit in federal court. And since the two non-joined administrators and Randy are all Kentucky citizens, Randy argues that there is not complete diversity.

The central premise of this argument is that the administrators are in fact indispensable parties. See Temple v. Synthes Corp. , 498 U.S. 5, 7, 111 S.Ct. 315, 112 L.Ed.2d 263 (1990) (explaining that diversity jurisdiction can only be defeated by a non-joined, non-diverse joint tortfeasor if that party is indispensable under Rule 19). But here, Randy sued the administrators as joint tortfeasors. See R. 1-2. And the Supreme Court has held that joint tortfeasors are simply permissive parties to an action against one of them. Temple , 498 U.S. at 8, 111 S.Ct. 315 ; see also Fed. R. Civ. P. 19 Advisory Comm. Notes (clarifying that "a tortfeasor with the usual ‘joint-and-several’ liability is merely a permissive party to an action against another with like liability").

The Sixth Circuit agreed that joint tortfeasors are not indispensable parties to an action to compel arbitration in PaineWebber, Inc. v. Cohen , 276 F.3d 197, 206 (6th Cir.2001). There, the plaintiff sued a brokerage firm in state court and joined the firm's branch manager as a defendant. The firm then sued the plaintiff in federal court, seeking to compel arbitration under the Federal Arbitration Act. In response, the plaintiff moved to dismiss for lack of subject-matter jurisdiction, arguing that the branch manager was an indispensable party to the litigation. The circuit rejected that argument, holding that, when a company sues a plaintiff seeking to compel arbitration, it need not join any of its employees, even if the plaintiff joined them below. Id. at 205–06. As the circuit explained, "[a]ny ruling to the contrary would virtually eliminate the availability of federal courts to enforce arbitration clauses in diversity cases by the simple expedient of one of the parties filing a preemptive suit in state court with at least one non-diverse defendant." Id. at 205 (citing Doctor's Assocs., Inc. v. Distajo , 66 F.3d 438, 445 (2d Cir.1995) ). Thus, the administrators here are not an indispensable party to the plaintiffs' federal action to compel arbitration.

Randy seems to argue that PaineWebber has been abrogated by the Supreme Court's decision in Vaden v. Discover Bank , 556 U.S. 49, 129 S.Ct. 1262, 173 L.Ed.2d 206 (2009). In Vaden , the Court held that a federal court should determine if it has jurisdiction over an FAA action by "looking through" an FAA petition to the parties' underlying substantive controversy. Id. at 62, 129 S.Ct. 1262. The Court also held that a district court has jurisdiction under the FAA "only if, ‘save for’ the [arbitration] agreement, the entire, actual ‘controversy between the parties,’ as they have framed it, could be litigated in federal court." Id. at 66, 129 S.Ct. 1262. Thus, according to Randy, Vaden requires this Court to ask if it can "hypothetically step into the shoes of the State's trial court, in resolving the underlying dispute." R. 7-1 at 16. If the answer is no, he says, the federal court does not have jurisdiction to enforce the agreement. Id.

But Randy ignores the fact that Vaden explicitly limited its holding to cases involving federal-question jurisdiction. 556 U.S. at 62, 66, 129 S.Ct. 1262 ; Rutherford , 605 F.3d at 488 (" Vaden does not directly control [diversity] cases because the Supreme Court carefully defined the issues and limited its holding to [FAA petitions] based upon federal question jurisdiction[.]"). As such, PaineWebber is still good law, and the plaintiffs' failure to join the two administrators does not undermine this Court's jurisdiction.

II.

Randy next argues that this Court should abstain from exercising jurisdiction in favor of the pending state-court action. R. 7-1 at 22. Federal courts have a "virtually unflagging obligation ... to exercise the jurisdiction given them," so "abstention from the exercise of federal jurisdiction is the exception, not the rule." Colo. River Water Conservation Dist v. United States , 424 U.S. 800, 813, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). In some "exceptional" circumstances, however, a federal district court may abstain from exercising its jurisdiction due to a concurrent state-court action. Id. at 817, 96 S.Ct. 1236. The decision to abstain in such situations is based on "considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation." Id. (internal quotation marks omitted).

A district court must consider eight factors when deciding whether to abstain from exercising its jurisdiction in favor of the state court's jurisdiction. Romine v. Compuserve Corp. , 160 F.3d 337, 340–41 (6th Cir.1998). These factors are: "(1) whether the state court has assumed jurisdiction over any res or property; (2) whether the federal forum is less convenient to the parties; (3) avoidance of piecemeal litigation; ... (4) the order in which jurisdiction was obtained[;] ... (5) whether the source of governing law is state or federal; (6) the adequacy of the state court action to protect the federal plaintiff's rights; (7) the relative...