United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER
MATTER is before the Court on Plaintiff's Motion and
Memorandum of Law in Support of Its Motion to Compel
Arbitration, filed on March 11, 2017 (Doc. 5), and
Defendant's Motion to Dismiss, filed on March 24, 2017
(Doc. 13). Pursuant to 28 U.S.C. § 636(c) and
Fed.R.Civ.P. 73(b), the parties have consented to me serving
as the presiding judge and entering final judgment. See
Docs. 7, 11. The Court has heard oral argument
on this matter (see Doc. 31), and has given due
consideration to the record, submissions of counsel, and
relevant law. The Court finds that Plaintiff has established
that diversity jurisdiction exists in this matter and that
this Court should exercise its discretion and grant
Plaintiff's request to compel arbitration of the
underlying dispute between the parties to this action.
Jewel Blair, now deceased, was admitted to Life Care Center
of Farmington (the “Facility”), a 24-hour nursing
facility, on October 13, 2006. Doc. 1-5 (State
First Am. Compl.) ¶ 22. Ms. Blair designated her
son, Mr. David Rhoden, to serve as her general power of
attorney on June 19, 2006. Docs. 1 (Compl.)
¶ 6; 1-1. Mr. Rhoden signed the forms necessary
to admit his mother to the Facility on October 13, 2006.
See Docs. 1-2; 1-3. Relevant to this
Motion, Mr. Rhoden signed the Voluntary Agreement for
Arbitration (the Arbitration Agreement). Doc. 1-2.
Arbitration Agreement provides:
The following is an agreement (the “Arbitration
Agreement”) to arbitrate any dispute that might arise
between Jewel Blair (the “resident”) and
LCC of Farmington (the “Facility”).
(“Facility” includes the particular facility
where the Resident resides and Life Care Centers of America,
Inc.) . . .
The parties agree that they shall submit to binding
arbitration all disputes against each other and their agents,
partners, officers, directors, shareholders, owners,
employees, representatives, members, fiduciaries, governing
bodies, subsidiaries, parent companies, affiliates, insurers,
attorneys, predecessors, successors and assigns, or any of
them, and all persons, entities or corporations with whom any
of the former have been, are now or may be affiliated,
arising out of or in any way related or connected to the
Resident's stay and care provided at the Facility,
including but not limited to any disputes concerning alleged
personal injury to the Resident caused by improper or
inadequate care, including allegations of medical
malpractice; any disputes concerning whether any statutory
provisions relating to the Resident's rights under New
Mexico law were violated; and any other dispute under New
Mexico or federal law based on contract, tort, or statute. .
All claims based in whole or in part on the same incident,
transaction, or related course of care or services provided
by the Facility to the Resident, shall be arbitrated in one
Doc. 1-2 at 1, 2.
contends that Ms. Blair suffered injuries, pain, and
suffering while in the Facility's care. State First
Am. Compl. ¶¶ 27-33. Ms. Blair eventually
passed away, allegedly as a result of the inadequate care and
treatment she received at the Facility. Id. ¶
33. Mr. Rhoden was appointed personal representative of Ms.
Blair's estate and filed the First Amended Complaint in
the Eleventh Judicial District Court, County of San Juan,
State of New Mexico, on September 2, 2016, which includes a
claim for wrongful death. See Id. at 1, ¶ 2.
Rhoden named five defendants in his First Amended Complaint:
Life Care Centers of America, Inc., a Tennessee Corporation
(“Life Care”), the Farmington Facility, Ms.
Sandra Emily Rowe, Administrator, Ms. Brenda Carley-Dostaler,
Administrator, and Ms. Sandra K. Valentine, LPN
(collectively, “state court defendants”). See
Id. at 1. All of the named defendants in the state case
are represented by the same attorneys as Plaintiff in this
case. See Doc. 13 at 18-19; see also Doc.
13-B (“Defendants, Farmington Operations, LLC,
d/b/a Life Care Center of Farmington, Life Care Centers of
America, Inc., Sandra Emily Rowe, Brenda Carley-Dostaler, and
Sandra K. Valentine (‘Defendants') by and through
their attorneys of record Modrall Roehl Harris & Sisk,
P.A. (Michelle A. Hernandez and Tomas J. Garcia)”).
their October 6, 2016 Answer to Mr. Rhoden's First
Amended Complaint, the state court defendants did not
specifically assert arbitration as an affirmative defense in
their answer. See Doc. 13-B; see also Doc.
13 at 18. Defendants do reference here, however, the
eleventh affirmative defense set forth in their Answer which
states that “federal law preempts any conflicting state
law and state statutory law preempts any conflicting state
common law.” Doc. 13-B at 4.
addition to some discovery practice in the underlying dispute
(detailed later in Section III.C), the parties also
stipulated to a scheduling order in state court that was
entered on December 16, 2016. Doc. 13-N. The state
court presiding judge held a scheduling conference at which
the judge set the case for trial in 2018. Doc. 13 at
19; see also Doc. 13-O.
one of the five named defendants, Life Care of America, filed
the instant Complaint to Compel Arbitration in this federal
district court on February 21, 2017. See Compl. The
Estate opposes Life Care's Motion to Enforce the
Arbitration Agreement filed on March 11, 2017 (Doc.
5), and has responded by filing a Motion to Dismiss on
March 24, 2017. Doc. 13.
Motion to Compel Arbitration Standard
determining whether the parties agreed to arbitrate, the
Court “must give ‘the opposing party the benefit
of all reasonable doubts and inferences that may
arise.'” Fundamental Admin. Servs., LLC v.
Patton, 504 F. App'x 694, 698 (10th Cir. 2012)
(quoting DeArmond v. Halliburton Energy Servs.,
Inc., 81 P.3d 573, 576 (N.M. Ct. App. 2003) (internal
quotation omitted); citing Howard v. Ferrellgas Partners,
L.P., 748 F.3d 975, 978 (10th Cir. 2014) (“finding
that a court may grant a motion to compel arbitration when,
‘viewing the facts in the light most favorable to the
party opposing arbitration[, ]' it is clear that the
parties actually agreed to arbitrate”) (citation
Federal Arbitration Act (“FAA”) “provides a
procedure for parties to compel arbitration . . . .”
See 9 U.S.C. § 4. However, courts must first
establish whether an enforceable agreement to arbitrate
exists. Howard, 748 F.3d at 978. “The party
attempting to compel arbitration carries the burden of
demonstrating a valid arbitration agreement.”
Id. (quoting Corum v. Roswell Senior Living,
LLC, 248 P.3d 329, 331 (N.M. Ct. App. 2010) (internal
citations omitted)). “When parties dispute the making
of an agreement to arbitrate, a jury trial on the existence
of the agreement is warranted unless there are no genuine
issues of material fact regarding the parties'
agreement.” Avedon Eng'g, Inc. v. Seatex,
126 F.3d 1283 (10th Cir. 1997) (citation omitted).
“arbitration is a matter of contract, ” courts
“apply state contract formation principles [in order
to] decide whether or not the parties agreed to
arbitrate.” Howard, 748 F.3d at 977 (quotation
and citation omitted)). The New Mexico Uniform Arbitration
Act, N.M. Stat. Ann. §§ 44-7A-1 through 44-7A-32
(“NMUAA”), “provides that an agreement to
submit any controversy arising between the parties to
arbitration is ‘valid, enforceable and irrevocable
except upon a ground that exists at law or in equity for the
revocation of a contract.'” Thompson v. THI of
N.M. at Casa Arena Blanca, LLC, No. CIV 05-1331 JB/LCS,
2006 WL 4061187, at *4 (D.N.M. Sept. 12, 2006) (quoting N.M.
Stat. Ann. § 44-7A-7(a)). “Similar to the federal
courts' interpretation of the FAA, New Mexico courts have
viewed the NMUAA as an expression of a public policy favoring
arbitration.” Id. (citing United Tech.
& Res., Inc. v. Dar Al Islam, 846 P.2d 307, 309
(N.M. 1993)). “In New Mexico, when the court finds that
an arbitration agreement exists, then, in accordance with the
NMUAA, the court has a duty to enforce the provisions of the
agreement and order adherence to that arbitration
agreement.” Id. (citing Bernalillo Cty.
Med. Ctr. Emps. Ass'n Local 2370 v. Cancelosi, 587
P.2d 960, 961 (N.M. 1978)).
Standard for Motions to Dismiss Under Rule 12(b)(1)
courts are courts of limited jurisdiction; they are empowered
to hear only those cases authorized and defined in the
Constitution which have been entrusted to them under a
jurisdictional grant by Congress.” Fishback v. HSBC
Retail Servs. Inc., No. CIV 12-0533 JB, 2013 WL 3227458,
at *7 (D.N.M. June 21, 2013) (quoting Henry v. Office of
Thrift Supervision, 43 F.3d 507, 511 (10th Cir. 1994)
(internal citations omitted)). “A plaintiff generally
bears the burden of demonstrating the court's
jurisdiction to hear his or her claims.” Id.
(citing Steel Co. v. Citizens for a Better
Env't, 523 U.S. 83, 104 (1998) (internal citation
may dispute the court's lack of subject-matter
jurisdiction by filing a motion pursuant to Rule 12(b)(1).
Id. Such motions “generally take one of two
forms: (1) a facial attack on the sufficiency of the
complaint's allegations as to subject-matter
jurisdiction; or (2) a challenge to the actual facts upon
which subject-matter jurisdiction is based.”
Id. (quoting Ruiz v. McDonnell, 299 F.3d
1173, 1180 (10th Cir. 2002) (alteration in original, internal
On a facial attack, a plaintiff is afforded safeguards
similar to those provided in opposing a rule 12(b)(6) motion:
the court must consider the complaint's allegations to be
true. See Ruiz v. McDonnell, 299 F.3d at 1180;
Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir.
1981). But when the attack is aimed at the jurisdictional
facts themselves, a district court may not presume the
truthfulness of those allegations. A court has wide
discretion to allow affidavits, other documents, and a
limited evidentiary hearing to resolve disputed
jurisdictional facts under Rule 12(b)(1). In such instances,
a court's reference to evidence outside the pleadings
does not convert the motion to a Rule 56 [summary-judgment]
Id. at *7-8 (quoting Hill v. Vanderbilt Capital
Advisors, LLC, No. CIV 10-0133, 2011 WL 6013025, at *8
(D.N.M. Sept. 30, 2011) (internal quotation omitted)).
Rhoden offers several theories in support of his Motion to
Dismiss and his Response to Life Care's Motion to Compel:
(1) the Court lacks subject matter jurisdiction; (2) the
state court defendants are indispensable parties; (3) Life
Care has waived its right to arbitrate; (4) equitable
estoppel applies; and (5) the rules of the American
Arbitration Association (AAA) render the Arbitration
Agreement unenforceable. See Docs. 13; 14.
The Court will begin by examining the issues relating to this
Court's subject matter jurisdiction.
This Court has diversity subject matter
FAA does not itself confer subject matter
jurisdiction.” 1mage Software, Inc. v.
Reynolds & Reynolds Co., 459 F.3d 1044, 1054 (10th
Cir. 2006) (citations omitted). Indeed, Section 4 of the
Federal Arbitration Act provides:
A party aggrieved by the alleged failure, neglect, or refusal
of another to arbitrate under a written agreement for
arbitration may petition any United States district court
which, save for such agreement, would have jurisdiction under
Title 28, in a civil action or in admiralty of the subject
matter of a suit arising out of the controversy between the
parties, for an order directing that such arbitration proceed
in the manner provided for in such agreement.
9 U.S.C.A. § 4. In other words, an action to enforce an
agreement to arbitrate must have an independent basis for the
federal court to exercise subject matter jurisdiction:
The Arbitration Act is something of an anomaly in the field
of federal-court jurisdiction. It creates a body of federal
substantive law establishing and regulating the duty to honor
an agreement to arbitrate, yet it does not create any
independent federal-question jurisdiction under 28 U.S.C.
§ 1331 or otherwise. . . . [T]here must be diversity of
citizenship or some other independent basis for federal
jurisdiction before the order can issue.
Moses H. Cone Mem'l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 26 (1983) (citations omitted).
Life Care premises enforcement of the arbitration agreement
at issue on diversity of citizenship jurisdiction pursuant to
28 U.S.C. § 1332(a)(1). It is uncontroverted that the
named parties - Plaintiff Life Care and the Defendant Estate
- are citizens of different states and the amount in
controversy exceeds the requisite $75, 000 minimum.
the Courts of Appeal have been “unanimous in looking
only to the citizenship of the parties to the federal
action” when determining the existence of
diversity as the independent basis
for subject matter jurisdiction. Northport Health Servs.
of Ark., LLC v. Rutherford, 605 F.3d 483, 489 (8th Cir.
instance, in Moses H. Cone, the Hospital had
“entered into a contract for the construction of
additions to the Hospital building.” 460 U.S. at 4. The
contract between the Hospital and Mercury (the construction
company) included an arbitration clause. Id. After
substantial construction was completed, a dispute arose
regarding delay and costs. Id. at 6. The Hospital
filed a declaratory judgment action in state court, naming as
defendants Mercury and the independent Architect, who had
been hired by the Hospital to design and oversee the project.
Id. at 7. Although the construction company was a
citizen of a state different from the Hospital and therefore
diverse, the Architect was not. See Id. at 7 n.4.
Mercury then filed a § 4 petition against the Hospital
in federal court to compel arbitration with the Hospital as
contemplated by its contract. Id. at 7. The federal
district court stayed that lawsuit pending resolution of the
concurrent state-court action.
Supreme Court in Moses H. Cone examined whether the
district court should have stayed the “federal suit out
of deference to the parallel litigation brought in state
court.” Id. at 13 (citing Colo. River
Water Conservation Dist. v. United States, 424 U.S. 800
(1976)). Applying the Colorado River factors, the
Court found “no showing of the requisite exceptional
circumstances to justify the District court's
stay.” Id. at 19. The Moses H. Cone
Court thus rejected the trial court's
“abdication” of its duty to exercise jurisdiction
over the diversity action. See Id. at 14. In doing
so, the Supreme Court noted that the Hospital “ha[d]
two substantive disputes here - one with Mercury concerning
Mercury's claim for delay and impact costs, and the other
with the Architect, concerning the Hospital's claim for
indemnity for any liability it may have to Mercury.”
Id. at 20. In determining that the trial court was
obliged to exercise its diversity jurisdiction over the
§ 4 petition, the Supreme Court did not examine whether
the non-diverse Architect was a necessary and indispensable
party pursuant to Rule 19.
Rhoden nevertheless contends that this Court lacks subject
matter jurisdiction over the instant § 4 petition
because Life Care's Complaint does not represent the
“whole of the controversy.” Doc. 13 at
3-11. Mr. Rhoden argues that if the court looks to the entire
controversy encompassed in the state court case, federal
jurisdiction would fall away because the remaining named
state court defendants are non-diverse New Mexico citizens.
In essence, Mr. Rhoden maintains that in order to compel
arbitration, the federal court must have subject matter
jurisdiction over the entire controversy, and he relies on
the Supreme Court's reasoning in Vaden v. Discover
Bank, 556 U.S. 49, 59 (2009), to support this position.
Vaden, the Supreme Court examined the above-cited
language in 9 U.S.C. § 4 and determined that the issue
presented was two-fold: (1) “Should a district court,
if asked to compel arbitration pursuant to § 4,
‘look through' the petition and grant the requested
relief if the court would have federal-question jurisdiction
over the underlying controversy?” Vaden, 556
U.S. at 53. If the answer is yes, (2) “may a district
court exercise jurisdiction over a § 4 petition when the
petitioner's complaint rests on state law but an actual
or potential counterclaim rests on federal law?”
Id. The Vaden Court determined that it was
indeed necessary to perform a “look through” to
the underlying controversy to ascertain an independent basis
for federal-question subject matter
jurisdiction. Id. It further found that, consistent
with the well-pleaded complaint rule, federal jurisdiction
cannot be exercised over a § 4 petition if the
underlying claims rest on state law and only the counterclaim
rests on federal law. Id. at 53-54.
Vaden, state court plaintiffs have attempted to
extend Vaden's reasoning to
diversity-based § 4 petitions
in an effort to preclude a federal court from issuing an
order compelling arbitration. They have argued, as does Mr.
Rhoden here, that federal jurisdiction over a diversity-based
§ 4 petition to compel arbitration is simply unavailable
when a “look through” to the underlying
controversy implicates non-diverse state court defendants.
Eighth Circuit has explicitly rejected this proposition. In
the Rutherford case cited above, it set out to
examine whether Vaden implicitly overruled prior
decisions such as Moses H. Cone.
Rutherford, 605 F.3d at 485-86. The underlying facts
in Rutherford are similar to those here: a nursing
home resident signed an admission agreement that included an
arbitration clause. Id. at 485. After the
resident's death, the representative of the
resident's estate filed tort claims in state court
against the nursing home and its administrator. Id.
The nursing home, but not the non-diverse administrator,
filed a federal action to compel arbitration pursuant to 9
U.S.C. § 4, basing jurisdiction on diversity of
citizenship between the nursing home and the state court
plaintiff. Id. The representative did not contest
the federal court's jurisdiction, and the parties
proceeded to arbitration. Id.
meantime, the Supreme Court decided Vaden. The
estate's representative then moved to vacate the
court's arbitration order and argued that “a
federal court does not have diversity jurisdiction
over a § 4 petition to compel arbitration of claims that
are part of a pending state court action that ...