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Ggnsc Holdings, LLC v. Shearer

United States District Court, E.D. Arkansas, Northern Division

September 30, 2014

GGNSC HOLDINGS, LLC, et al., Plaintiffs,
v.
YURI SHEARER, AS SPECIAL ADMINISTRATOR OF THE ESTATE OF ALMA M. SHEARER, Defendant.

OPINION AND ORDER

KRISTINE G. BAKER, District Judge.

Plaintiffs ("GGNSC") are unincorporated limited liability companies that collectively operate a nursing home in Arkansas. Plaintiffs filed this action to compel defendant Mr. Yuri Shearer, special administrator of the estate of Ms. Alma M. Shearer, to arbitrate claims brought by Mr. Shearer in the Circuit Court of Ouachita County, Arkansas. Mr. Shearer has filed suit in state court against GGNSC and others in a pending putative class action. Although the state court action commenced on June 3, 2011, Mr. Shearer did not appear in the state court action until September 9, 2013, when he and 44 other putative class representatives filed amended pleadings in the state court proceedings (Dkt. No. 1, p. 16). Here, GGNSC claims that Mr. Shearer, on behalf of the Estate of Alma Shearer, breached an arbitration agreement between GGNSC and Alma Shearer by filing suit against GGNSC in state court. GGNSC brings this diversity action pursuant to 28 U.S.C. § 1332(a)(1) and asks this Court to enforce its arbitration agreement with Ms. Shearer under the Federal Arbitration Act, 9 U.S.C. § 4 (Dkt. No. 1).

Before the Court is defendant's motion to dismiss plaintiffs' complaint to compel arbitration (Dkt. No. 8). Defendant moves to dismiss plaintiffs' complaint to compel arbitration pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction. Alternatively, defendant requests this Court to abstain from hearing plaintiffs' action to compel arbitration, relying on Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976). Moreover, defendant provided the Court with supplemental authority in support of defendant's motion to dismiss (Dkt. No. 11). Plaintiffs have responded to defendant's motion to dismiss (Dkt. No. 10) and to defendant's supplemental authority (Dkt. No. 12).

For the following reasons, the Court denies Mr. Shearer's motion to dismiss pursuant to Rule 12(b)(1). Furthermore, the Court denies Mr. Shearer's motion pursuant to Colorado River abstention insofar as it requests the Court to dismiss this case (Dkt. No. 8). On its own motion, the Court will stay this action according to Colorado River abstention until resolution of the pending appeal of the state court decision in GGNSC Holdings, LLC, et al. v. Kathryn S. Chappel et al., CA 14-138.

I. Background

Plaintiffs in this action include GGNSC Holdings, LLC; GGNSC Administrative Services, LLC; GGNSC Clinical Services, LLC; Golden Gate Ancillary, LLC; Golden Gate National Senior Care, LLC; and GGNSC Equity Holdings, LLC. These companies operate nursing homes in Arkansas. GGNSC Heber Springs, LLC (D/B/A Golden LivingCenter-Heber Springs) is also a plaintiff in this action. Collectively, all plaintiffs in this action ("GGNSC") operate a nursing home in Heber Springs, Arkansas.

The sole member of GGNSC Heber Springs, LLC is GGNSC Equity Holdings, LLC. The sole member of GGNSC Equity Holdings, LLC and GGNSC Clinical Services, LLC is Golden Gate National Senior Care, LLC. The sole member of Golden Gate National Senior Care, LLC; GGNSC Administrative Services, LLC and Golden Gate Ancillary, LLC is GGNSC Holdings, LLC. The sole member of GGNSC Holdings, LLC is Drumm Corporation. Drumm Corporation is a citizen of the State of California and the State of Delaware.

Defendant Yuri Shearer is the duly-appointed special administrator of the estate of Alma M. Shearer. Alma M. Shearer was a resident of GGNSC Heber Springs in Heber Springs, Arkansas, from 2006 to 2011. Based upon all documents before the Court, Mr. Shearer is a citizen of Arkansas.

On June 3, 2011, Kathryn Chappel, who is not a party to this action, filed a complaint as the special administrator of the Estate of W.C. Chappel in the Circuit Court of Ouachita County, Arkansas against certain parties to this action, including Golden Gate National Senior Care, LLC; GGNSC Administrative Services, LLC; GGNSC Clinical Services, LLC; Golden Gate Ancillary, LLC; and GGNSC Equity Holdings, LLC. Additionally, Ms. Chappel's original state court complaint named as defendants GGNSC Camden, LLC and three individuals who were members of the governing body of GGNSC Camden, LLC, including one Arkansas resident. Ms. Chappel's complaint sought relief for the wrongful death of W.C. Chappel and alleged claims of negligence, breach of contract, and violations of the Arkansas Long-Term Care Facility Resident's Rights Act.

On December 19, 2011, Ms. Chappel and seven others filed an amended complaint and class action complaint as putative class representatives against the original state action defendants and 33 newly named defendants, including GGNSC Heber Springs, LLC (Dkt. No. 10-1). This amended complaint and class action complaint did not list Mr. Shearer, defendant here, as a class representative. On December 20, 2012, the state court plaintiffs filed a motion for class certification, and on February 28 and 29, 2012, the GGNSC state court defendants filed motions to compel five of the putative class representatives to arbitrate their claims. The state court held a hearing on June 6, 2013, over the state court plaintiffs' motion for class certification and GGNSC's five motions to compel arbitration (Dkt. No. 8-3). At the June 6, 2013, hearing, the state court expressed intent to grant the motion for class certification. Accordingly, the Ouachita Circuit Court asked the state court plaintiffs to narrow the parties and issues through amended pleadings and to draft an order certifying and defining the proposed class (see Dkt. No. 8-3, pp. 97-100). The state court heard arguments on the motions to compel arbitration and ordered additional discovery related to the motions.

Mr. Shearer joined the state court action on September 9, 2013, when he and 44 other putative class representatives filed a second amended complaint and first amended class action complaint (Dkt. No. 1, p. 16). The state court plaintiffs filed an amended motion for class certification in state court on November 12, 2013. GGNSC-plaintiffs here and a subset of the state court defendants-filed this federal action against Mr. Shearer on January 7, 2014, to compel arbitration of Mr. Shearer's state court claims (Dkt. No. 1).

On January 30, 2014, the Arkansas Circuit Court entered an order denying the GGNSC state court defendants' motions to compel arbitration of five putative class representatives, which GGNSC had filed in February 2012. GGNSC appealed this order to the Arkansas Court of Appeals, and the Arkansas Supreme Court granted a motion to transfer the appeal to the Arkansas Supreme Court, where the parties have submitted briefs and await oral argument. On February 13, 2014, the Arkansas Circuit Court held a hearing over the amended motion for class certification. To the knowledge of this Court, the Arkansas Circuit Court has not entered a formal written order certifying the proposed class action. The Arkansas Circuit Court's oral order at the June 6, 2013, hearing is the only indication to this Court of the state court's intent regarding class certification.

As stated above, GGNSC claims this Court has jurisdiction based on diversity of citizenship under 28 U.S.C. § 1332(a)(1) and asks this Court, pursuant to 9 U.S.C. §4, to compel arbitration of Mr. Shearer's claims against GGNSC (Dkt. No. 1). Before the Court is defendant's motion to dismiss plaintiffs' complaint to compel arbitration (Dkt. No. 8). Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, defendant moves this court to dismiss plaintiffs' complaint for lack of subject matter jurisdiction. Alternatively, defendant requests the Court to abstain from hearing this action, relying on Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).

II. Motion To Dismiss Pursuant To Federal Rule Of Civil Procedure 12(b)(1)

Federal courts are courts of limited jurisdiction and have the power to hear only those cases that they have been authorized to hear by Congress or the Constitution. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). "[T]he party invoking federal jurisdiction bears the burden of establishing its existence." Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 104 (1998). To dismiss a complaint for lack of subject matter jurisdiction under Rule 12(b)(1), "the complaint must be successfully challenged on its face or on the factual truthfulness of its averments. In a facial challenge to jurisdiction, all of the factual allegations concerning jurisdiction are presumed to be true and the motion is successful if the plaintiff fails to allege an element necessary for subject matter jurisdiction." Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993) (internal citations omitted). "In a factual attack, the court considers matters outside the pleadings, and the non-moving party does not have the benefit of 12(b)(6) safeguards." Osborn v. United States, 918 F.2d 724, 729 (8th Cir. 1990).

The Court construes Mr. Shearer's motion as a facial challenge to jurisdiction and accepts as true GGNSC's factual allegations concerning jurisdiction as ...


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