MEMORANDUM OPINION AND ORDER
ROBERT C. CHAMBERS, District Judge.
Pending before the Court is a Motion to Compel Arbitration and Stay State-Court Proceedings by Plaintiff Seventeenth
FACTUAL AND PROCEDURAL HISTORY
As this Court recently stated in its Memorandum Opinion and Order entered on January 31, 2012,
In response to the first state court action, CSP, SVCare Holdings LLC, Sava Senior Care LLC, and SSC Equity Holdings LLC
In the Memorandum Opinion and Order entered by this Court on March 29, 2011, the Court rejected Ms. Cole's arguments and granted the Motion to Compel Arbitration. In doing so, the Court specifically found, inter alia, that Ms. Cole was able to bind her mother to the agreement and that West Virginia Code § 16-5C-15(c),
According to Seventeenth Street Associates, after this Court ruled in the first federal action, Ms. Cole did not initiate arbitration proceedings. Instead, she filed a motion in state court to add Seventeenth Street Associates as a party defendant. In Response, Seventeenth Street Associates filed the present federal action to enforce the arbitration agreement based upon this Court's ruling in the first federal action. Ms. Cole moved to dismiss this second action on the ground that this Court lacked jurisdiction because diversity did not exist. The Court denied her motion on January 31, 2012, and directed that the parties complete their briefing on the Motion to Compel Arbitration and Stay State-Court Proceedings. Briefing is now complete, and the motion is ripe for decision.
In its Complaint to Compel Arbitration and Stay State-Court Proceedings, Seventeenth Street Associates asserts, inter alia, that Ms. Cole is barred from contesting the validity of the arbitration agreement under the doctrine of res judicata. Compl. to Compel Arbitration and Stay State-Court Proceedings, at 6. Seventeenth Street Associates does not directly raise the issue of res judicata in its motion, but it does argue the claim is barred by the doctrine in its Reply brief. Ms. Cole makes no arguments with respect to whether res judicata applies to this situation. Although the parties have raised other issues in their briefs as well, the Court finds that res judicata controls this Court's decision.
"Under the doctrine of res judicata, a judgment on the merits in a prior suit bars a second suit involving the same parties or their privies based on the same cause of action." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). When, as here, a federal court's jurisdiction is based upon diversity of citizenship, the court must look to state law to determine whether res judicata applies. Witthohn v. Federal Ins. Co., 164 Fed.Appx. 395, 397 n. 2 (4th Cir. 2006) (stating West Virginia law controls whether the plaintiff's claim was barred by res judicata); Graves v. Associated Transport, Inc., 344 F.2d 894, 896 (4th Cir.1965) (holding that state law governs the parties' rights and obligations when diversity of citizenship is the sole basis of jurisdiction); cf. Braxton v. Matthews, 883 F.Supp. 1068 (S.D.W.Va.1995) (applying West Virginia law with respect to collateral estoppel). In West Virginia, res judicata applies when three criteria are met. These criteria are:
In the first federal action, the Court entered its decision on March 29, 2011, and administratively closed the case pending completion of arbitration. As discussed below, this constitutes a final decision on the merits. Thus, the first criteria under West Virginia law is met.
What constitutes a final decision is well established in American jurisprudence. In Green Tree Financial Corp. v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), the Supreme Court stated that a "final decision" is one "that ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment." 531 U.S. at 86, 121 S.Ct. 513 (internal quotation marks and citations omitted). In the case before it, the Supreme Court was asked to determine "whether an order compelling arbitration and dismissing a party's underlying claims is a `final decision with respect to an arbitration' within the meaning of § 16(a)(3) of the" FAA and, therefore, immediately appealable under the Act.
Petitioners in Green Tree argued the arbitration order was not a final order because it occurred in an "embedded" proceeding, which is an action that contains a request for arbitration together with other claims for relief. Id. at 87, 121 S.Ct. 513. The Supreme Court recognized that some Courts of Appeal held orders compelling arbitration in embedded proceedings, even if the other claims are dismissed, are not final orders. In contrast, arbitration orders entered in "independent" proceedings, in which a request to enforce arbitration is the only issue before the court, are final orders. Id. Finding no indication by Congress that it intended to apply such a complex distinction to § 16(a)(3) when it was enacted in 1988, the Supreme Court rejected the notion and simply applied the well-established meaning of the term "final decision" to the provision. Id. at 88-89, 121 S.Ct. 513.
In Penn-America Insurance Co. v. Mapp, 521 F.3d 290 (4th Cir.2008), the Fourth Circuit applied this same definition to a declaratory judgment action in an insurance case. In the case, April Mapp filed suit in state court against the owner of a bar that served alcohol to a driver of a motorcycle that struck her. 521 F.3d at 292. The bar owner's insurance company brought a declaratory judgment action in the district court asserting it was not obligated to defend or indemnify the bar owner. Id. at 293. Upon cross motions, the district court resolved some of the issues before it, but it withheld ruling on the indemnification issue until after the state court reached a decision on the merits. Id. at 293-94. The district court then dismissed the declaratory judgment action from the active docket of the court, with a provision that the parties may move to have it reinstated. Id. at 294. The district court also entered a judgment order, "dismissing the case from the active docket." Id. at 294 (internal quotation marks
In determining it did not have jurisdiction to entertain the appeal pursuant to 28 U.S.C. § 1291,
In support of its decision in Penn-America, the Fourth Circuit also cited the Ninth Circuit's decision in Dees v. Billy, 394 F.3d 1290 (9th Cir.2005). In Dees, the plaintiff-appellant filed a medical malpractice case against the defendants-appellees in state court. The defendants-appellees removed the action to the district court and sought to enforce arbitration. 394 F.3d at 1291. The district court "stayed the action, compelled arbitration, and administratively closed the case." Id. (footnote omitted). The plaintiff-appellant appealed.
In considering whether it had jurisdiction to hear the appeal under § 16(a)(3) of the FAA, the Ninth Circuit stated that an administrative closure "is a docket management tool that has no jurisdictional effect." Id. 1294. Instead, a court must look to the definition of a "final decision," as stated in Green Tree, and determine whether a final, appealable order was entered. As the medical malpractice case in the action before it was stayed pending arbitration, rather than dismissed, the Ninth Circuit held the order was not final because the medical malpractice action remained pending before the court. Id. at 1293-94.
In so holding, the Ninth Circuit distinguished the facts before it from those considered by the Fifth Circuit in American Heritage Life Insurance Co. v. Orr, 294 F.3d 702 (5th Cir.2002). American Heritage is similar to the present case. In American Heritage, the appellants filed suit against the appellees in state court. As in this case, the appellees then brought an independent action in the district court seeking to compel arbitration under the FAA and stay the state court proceedings. The district court entered an order compelling arbitration, staying the related state court proceedings, and closing — but did not dismissing — the federal action. Id. at 706. On appeal from that order, the Fifth Circuit looked to § 16(a)(3) and the Supreme Court's pronouncement in Green Tree and stated that "[t]here is no practical distinction between `dismiss' and `close' for purposes of appeal. The application of each word results in a termination on the merits, leaving the judgment-rendering court with nothing more to
The importance of these cases is clear: When deciding whether an order is a "final decision," a court must look to whether the order ends the litigation before it on the merits with nothing left for the court to do other than execute the judgment. If a matter is administratively closed in an arbitration case, an order will still be deemed final if it otherwise meets the definition of a "final decision" under § 16(a)(3). Green Tree, 531 U.S. at 86, 121 S.Ct. 513. Even if one of the parties later seeks to have the court enter a judgment, vacate, or modify an arbitration award, it may be brought in a separate action under the FAA, which does not alter the character of an otherwise final order. Id. at 86, 121 S.Ct. 513.
In this case, like American Heritage, a declaratory judgment action was brought in the first federal action to compel arbitration under the FAA and stay the state court proceedings. The underlying claims remained in state court. Thus, when this Court entered its order granting arbitration and denying the motion to stay, the Court resolved all the issues before it and there was nothing left for this Court to do other than execute the judgment. The fact the Court administratively closed the case for docket management purposes is of no consequence to the finality of the decision. As neither party appealed, the March 29, 2011 Memorandum Opinion and Order constitutes a final decision on the merits for purposes of the first requirement of res judicata under West Virginia law.
Turning next to the issue of privity, the Court has no difficulty finding Seventeenth Street Associates is in privity with CSP and the other corporate entities named in the first federal action. As stated in this Court's previous Memorandum Opinion and Order denying Ms. Coles' Motion to Dismiss, CSP is the primary parent company of Seventeenth Street Associates and directly related to the other companies through the establishment of a series of limited liability companies.
Finally, the cause of action in this case is identical to the cause of action in the first case. Therefore, the third requirement of res judicata is met.
Although, as previously stated, Ms. Cole makes no argument with respect to whether res judicata applies, the Court recognizes there is support for an exception to the doctrine under West Virginia case law if there is such a material change of circumstances or law subsequent to the first judgment that res judicata should not be applied. See Blethen v. W. Va. Dep't of Revenue, 219 W.Va. 402, 633 S.E.2d 531 (2006); Huntington Brick & Tile Co. v. Public Serv. Comm'n, 107 W.Va. 569, 149 S.E. 677 (1929). One of the arguments Ms. Cole makes in response to Seventeenth Street Associates' motion is that the agreement is contrary to West Virginia law and against public policy as stated by the West Virginia Supreme Court in Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (W.Va.2011),
Ms. Cole also argues for the first time in this case that the arbitration agreement is unenforceable because a substantive and material term of the agreement cannot be
Finally, Seventeenth Street Associates argues, like its counterparts did in the first federal action, that this Court should enjoin the state court from acting or, in the alternative, enjoin Ms. Cole from prosecuting her state action. For the reasons set forth in the first case, however, this Court declines to do so. As this Court stated in the first case, it fully expects Ms. Cole will refrain from pursing those claims which are subject to the motion to compel.
Accordingly, for the foregoing reasons, the Court
W. Va.Code § 16-5C-15(c).
Id. at 4. Ms. Cole made no argument with respect to the unavailability of NAF or JAMS, see JAMS "Consumer Arbitration Policy: Minimum Standards of Procedural Fairness" (effective July 15, 2009), in the first federal action or the impact the savings clause has on the enforcement of the agreement. It is simply too late to do so now.