MEMORANDUM OPINION AND ORDER
KAREN B. MOLZEN, Magistrate Judge.
THIS 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.
Ms. 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.
The Arbitration Agreement provides:
Doc. 1-2 at 1, 2.
Plaintiff 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.
Mr. 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)").
In 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.
In 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 `. Doc. 13 at 19; see also Doc. 13-O.
Only 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.
II. Legal Standard
A. Motion to Compel Arbitration Standard
In 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 omitted)).
The 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).
Because "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)).
B. Standard for Motions to Dismiss Under Rule 12(b)(1)
"Federal 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 omitted)).
A party 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 citation omitted)).
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)).
Mr. 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.
A. This Court has diversity subject matter jurisdiction.
"[T]he 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:
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:
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26 (1983) (citations omitted).
Here, 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.
Historically, 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
For 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.
The 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.
Mr. 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.
In 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
Since Vaden, state court plaintiffs have attempted to extend Vaden's reasoning to
The 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.
In the 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 includes one or more non-diverse parties not named in the § 4 petition." Id.
The Eighth Circuit noted that prior to Vaden, every court of appeals had applied the same approach
Id. at 486 and n.2 (emphasis added) (gathering cases, citations omitted). Courts would then "look through" to determine "whether the value at stake in the arbitration being sought in the federal action could exceed $75,000, regardless whether the claim(s) to be arbitrated were part of a broader parallel state court action in which the total amount in controversy might be greater." Id. (quotation marks and citations omitted).
In rejecting the argument that the Vaden holding should apply to § 4 petitions to determine diversity of citizenship for jurisdictional purposes, the Rutherford court emphasized two main points. First, the Rutherford court noted that the Supreme Court in Vaden
Id. at 488 (quoting Vaden, 556 U.S. at 62 (emphasis added)).
Indeed, Vaden actually cited to Moses H. Cone with approval for the proposition that "`the controversy between the parties' means `the substantive conflict' between the parties." Id. at 62-63. And, in Moses H. Cone, the Supreme Court observed:
Moses H. Cone, 460 U.S. at 19-20. Thus, the Supreme Court appears to have rejected Mr. Rhoden's "fairness" argument that Life Care should not be allowed "to commandeer Defendant's underlying action in the [state court] and shear off the portion of it that they desire, when they have no legitimate reason to so do." Id. at 9. Instead, this binding precedent gives Life Care that legitimate reason — Life Care is the "party aggrieved by the alleged failure, neglect, or refusal of [Mr. Rhoden] to arbitrate under a written agreement for arbitration . . . ." 9 U.S.C. § 4. The FAA does not require that all parties to a controversy bring the petition to the district court. See id. If that were the case, a party to an arbitration agreement such as Life Care would need the permission of every involved party — even those not subject to an arbitration agreement — before seeking to compel arbitration. Moses H. Cone stands for the proposition that such a result is not within the contemplation of the FAA.
In summary, it seems to this Court that the clear language of § 4 of the FAA would dictate the "look through" approach advocated by Mr. Rhoden. Nevertheless, the Court feels constrained to find, as did the Eighth Circuit in Rutherford, that it cannot. Although a "uniform test" in assessing federal subject matter jurisdiction in the arbitration context would seem more consistent with the language of § 4 of the FAA,
In summary, the Court finds that the result reached here is in line with the Supreme Court's consistent interpretation of the FAA, with its decision in Moses H. Cone, and with Vaden's limited adoption of the "look through" approach for § 4 petitions based upon federal question jurisdiction. Moreover, the result is in line with the "traditional principle of diversity jurisdiction . . . that it cannot be defeated by a non-diverse joint tortfeasor who is not a party to the federal action, unless that party is indispensable under Rule 19." Rutherford, 605 F.3d at 490-91 (citing Temple v. Synthes Corp., 498 U.S. 5, 7, (1990)).
B. The state court defendants are not indispensable under Rule 19.
Defendant has moved to dismiss under Federal Rule of Civil Procedure 12(b)(7) for failure to join a party and argues that the state court defendants are necessary and indispensable pursuant to Rule 19. Doc. 13 at 11-16 (citing Fed. R. Civ. P. 19).
Courts use a three-part analysis to decide whether a party is indispensable. Begay v. Pub. Serv. Co. of N.M., 710 F.Supp.2d 1161, 1182 (D.N.M. 2010) (citing Citizen Potawatomi Nation v. Norton, 248 F.3d 993, 997 (10th Cir. 2001) (internal citation omitted)).
Id. (quoting Fed. R. Civ. P. 19(a)). "If a person is required, but has not been joined, the court must determine whether joinder is feasible." Id. (citing Citizen Potawatomi Nation, 248 F.3d at 997). "If the party is required but cannot be joined, the Court must then determine under rule 19(b) whether the party is indispensable." Id.
"To conclude that a party is indispensable, the Court must find `in equity and good conscience' that the action should not proceed in the party's absence." Id. (quoting Fed. R. Civ. P. 19(b); citing Sac & Fox Nation of Mo. v. Norton, 240 F.3d 1250, 1259 (10th Cir. 2001)).
Id. (quoting Fed. R. Civ. P. 19(b); citing Thunder Basin Coal Co. v. Sw. Pub. Serv. Co., 104 F.3d 1205, 1211 (10th Cir. 1997)).
1. The state court defendants are "necessary."
Defendant argues that the Facility is a "necessary" party, because it is a signatory to the Arbitration Agreement, and because granting Life Care's Motion would force Plaintiff to pursue his claims in multiple proceedings. Doc. 13 at 13. The Court agrees that the conditions of Rule 19(a)(ii) are met in this case. In fact, all of the non-diverse state court defendants are necessary under Rule 19(a)(ii), as the Arbitration Agreement expressly provides that "[a]ll 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 proceeding." Doc. 1-2 at 2. The Sixth Circuit found as much in PaineWebber, Inc. v. Cohen, 276 F.3d 197, 201 (6th Cir. 2001).
In PaineWebber, the state court plaintiff, Mr. Cohen, had signed a contract and arbitration agreement with PaineWebber that applied not only to the signatories, but also to PaineWebber's employees. Id. The Sixth Circuit affirmed the district court's finding that a PaineWebber employee, who was a non-diverse state court defendant not joined in the federal motion to compel arbitration, was a "necessary" party under Rule 19 due to the language in the contract that covered the employees. Id.
2. The state court defendants are not "indispensable."
Because the state court defendants are citizens of the New Mexico — the same state as Mr. Rhoden — their joinder would destroy diversity jurisdiction. Thus, the Court turns to whether any of the state court defendants are "indispensable" under Rule 19(b).
In THI of New Mexico at Vida Encantada, LLC v. Lovato, 848 F.Supp.2d 1309 (D.N.M. 2012), District Judge Martha Vazquez noted that "[i]n the context of a federal action to compel arbitration, `every circuit to consider the issue has concluded that a party joined in a parallel state court contract or tort action who would destroy diversity jurisdiction is not an indispensable party under Rule 19.'" 848 F. Supp. 2d at 1317 (quoting Rutherford, 605 F.3d at 491). The Court finds, however, that the facts in this case are distinguishable from those in both Lovato and Rutherford. Here, at least one of the non-diverse state court defendants was a signatory to the Arbitration Agreement, and the Agreement provides that all claims were to be arbitrated in a single proceeding. Neither of these factors was present in Lovato or Rutherford. For this reason, the Court finds it prudent to look more closely at whether it is appropriate to define the non-diverse state court defendants as "indispensable."
The parties presented no authority — binding or otherwise — with an analogous set of facts.
First, in Patriot Manufacturing, Inc. v. Dixon, No. CIV.A.05-0321-WS-M, 2005 WL 2233071 (S.D. Ala. Sept. 1, 2005), one of three state court defendants (Patriot) filed a federal action to compel arbitration. 2005 WL 2233071, at *1. The state court plaintiff asserted that the federal court lacked subject matter jurisdiction, because one of the remaining non-diverse state court defendants (not a party to the federal action), was also a signatory to the arbitration agreement that Patriot sought to enforce. Id. at *4. The state court plaintiff also argued for dismissal of the federal action pursuant to Rule 19 because the signatory was indispensable to the suit and its addition would destroy diversity. Id. Similarly, Mr. Rhoden argues here that the Facility — a signatory to the Arbitration Agreement — qualifies as "indispensable," because its "interest in enforcing the Arbitration Agreement may be effectively precluded by any decision of this Court via issue preclusion." Doc. 13 at 13.
The Patriot court acknowledged that "[t]here may be sound reasons for a single court to adjudicate a case where there is a risk that one court might compel arbitration and another court might deem an arbitration agreement invalid or unenforceable, thereby creating a factual and legal `whipsaw.'" Patriot Manufacturing, Inc., 2005 WL 2233071, at *5 (citing Owens-Ill., Inc. v. Meade, 186 F.3d 435, 441 (4th Cir. 1999)); see also PaineWebber, Inc., 276 F.3d at 201 ("deeming missing defendant a necessary party because state court plaintiff would be faced with inconsistent procedural remedies if the federal and state courts reached different conclusions regarding whether arbitration clauses apply")); Legacy Wireless Servs., Inc. v. Human Capital, L.L.C., 314 F.Supp.2d 1045, 1051 (D. Or. 2004) (finding non-diverse state court defendant, which was a signatory to the arbitration agreement at issue, was not indispensable pursuant to Rule 19). But, as in Patriot, Mr. Rhoden fails "to make any showing that such a risk exists here," because the issue of arbitration is not currently before the state court.
The Sixth Circuit's decision in PaineWebber bolsters this finding. See 276 F.2d at 202. There, the state court plaintiff Cohen "focuse[d] on the potentially inconsistent legal obligations that might result from conflicting interpretations of the arbitration clauses by state and federal courts" as well as on "the possibility of being involved with proceedings in both federal and state court because of the duplicate efforts and the risk of conflicting and inconsistent schedules, arbitration awards, discovery processes, and legal doctrines." Id. Like Cohen, Mr. Rhoden contends that he would be prejudiced if the Court grants Life Care's Motion, because he will be forced to proceed simultaneously in two proceedings. Doc. 13 at 13. Further, Defendant argues, the very terms of the Arbitration Agreement require all claims to be arbitrated in one proceeding, which may not happen if the Court grants Life Care's Motion without joining the remaining state court defendants. Id. at 14.
This potential for prejudice is Mr. Rhoden's strongest argument. Because Mr. Rhoden's underlying substantive claims against the Facility are intertwined with his claims against Life Care, there is a possibility of inconsistent judgments. Under Rule 19(b), however, the Court may look at "the extent to which any prejudice could be lessened or avoided by . . . protective provisions in the judgment; . . . shaping the relief; or . . . other measures." Fed. R. Civ. P. 19(b)(2). As Life Care asserted at oral argument on this issue, if the Court orders Defendant to submit his claim to arbitration, Mr. Rhoden will "have the power to identify any party" he wants to add to the arbitration. Doc. 31 at 33:19-34:1. He "can name all of the parties that [he] listed in the state court claim[,]" thus all his claims may be decided together. Id. at 34:1-3. Consequently, Mr. Rhoden has the ability to mitigate or even eliminate any potential prejudice he has identified.
Moreover, like the Sixth Circuit in PaineWebber, this Court finds that the potential for prejudice is "a direct result of [Defendant's] decision to file a suit . . . in state court rather than to demand arbitration under the" parties' contract. PaineWebber, Inc., 276 F.2d at 202. Mr. Rhoden's "status as the state court plaintiff and [the Facility's] position as a defendant in the state court action are of crucial significance in this regard." Id. (citations omitted).
Yet, "[e]ven if the parallel proceedings were not the result of [Defendant's] pending state court action, the possibility of piecemeal litigation is a necessary and inevitable consequence of the FAA's policy that strongly favors arbitration." Id. (citing Moses H. Cone, 460 U.S. at 20 ("the possibility of the plaintiff having to resolve its disputes in two forums — one in state court and one in arbitration — where one of the parties to the underlying dispute was not a party to the arbitration agreement, `occurs because the relevant federal law requires piecemeal resolution when necessary to give effect to an arbitration agreement'"); Doctor's Assocs., Inc. v. Distajo, 66 F.3d 438, 446 (2d Cir. 1995) ("concluding that the FAA's `strong bias in favor of arbitration' overcomes any possible prejudice due to piecemeal litigation caused by the absence of certain parties to the arbitration agreement")).
For these reasons, the Court finds that the non-diverse state court defendants are not indispensable under Rule 19, and the Court declines to grant Mr. Rhoden's Motion on this issue. With its jurisdictional basis secure, the Court further finds that Mr. Rhoden's other arguments relevant to subject matter jurisdiction, regarding the threat of piecemeal litigation and the principles of comity, unpersuasive. Doc. 13 at 8. Consequently, the Court rejects Mr. Rhoden's argument that the reasoning in Vaden requires a result different from that in the vast majority of cases to have examined this issue. The Court will deny Mr. Rhoden's Motion to Dismiss on this issue.
C. Life Care has not waived its right to arbitrate.
Mr. Rhoden argues that Life Care has waived its right to seek arbitration, because it substantially engaged in the litigation process in state court, and it waited nearly five months after filing its answer in state court before filing its Complaint to Compel Arbitration in this Court. Doc. 13 at 16-24; see also Doc. 14 at 4-5. Courts look at several factors to determine if a party has waived its right to arbitrate:
Cornoyer v. AT&T Mobility Servs., LLC, No. CIV 15-0474 JB/WPL, 2016 WL 6404853, at *11 (D.N.M. Oct. 5, 2016) (quoting Healey v. Cox Commc'ns (In re Cox Enters., Inc.), 790 F.3d 1112, 1116 (10th Cir. 2015)). Another "important consideration in assessing waiver is whether the party now seeking arbitration is improperly manipulating the judicial process." Hill v. Ricoh Americas Corp., 603 F.3d 766, 773 (10th Cir. 2010). "The critical question is what was happening in this litigation during the [almost five] months between the answer to the complaint and the demand for arbitration." Id. at 775.
Counsel for the state court defendants initiated discovery, though purportedly only on behalf of the Facility.
The state court defendants — including Life Care — stipulated to a scheduling order. Docs. 13 at 19; 13-N. The state court conducted a scheduling conference wherein the presiding state court judge set a `trial date. Docs. 13 at 19; 13-O. The Court notes that a party's decision to engage in limited discovery and the setting of deadlines and a trial date is not necessarily, without more, sufficient to constitute waiver. See Hill, 603 F.3d at 772-76.
Mr. Rhoden argues that of greatest significance is the conduct of counsel for the state court defendant in response to Mr. Rhoden's discovery requests. Doc. 13 at 19, 21-22. Ms. Hernandez sought permission for the Facility only — without Life Care or the other defendants — to answer the discovery requests. Doc. 13-F at 2; 13-I. Life Care asserts in its Response to the Motion to Dismiss that the Facility "needed to respond to the first round of discovery since it was best situated . . . to address questions . . . ." Doc. 20 at 10. Counsel for the state court defendants proceeded to answer some of Mr. Rhoden's requests, but it left others unanswered, at least one of which was specifically directed toward Life Care. Doc. 13-H at 2.
Mr. Rhoden contends that because Life Care failed to respond to the Requests for Admission, they are deemed admitted in state court. Doc. 13 at 21. See also Rule 1-036 NMRA ("The matter is admitted unless, within thirty (30) days after service of the request, or within such shorter or longer time as the court may allow, the party to whom the request is directed serves upon the party requesting the admission a written answer or objection addressed to the matter . . . ."). Mr. Rhoden maintains that he will incur prejudice if Life Care is allowed to avoid the consequences of its failure to respond to his discovery requests by ending its participation in the state court and moving to compel arbitration, where the Requests for Admission will not be deemed admitted. Doc. 13 at 21-22.
The Court finds that while Mr. Rhoden's argument regarding prejudice is weighty, it is insufficient to establish that the state court defendants had substantially invoked the litigation machinery or improperly manipulated the judicial system.
Mr. Rhoden raised an additional ground to support his argument for waiver in his Reply brief. He argues that Life Care is "precluded from seeking arbitration in state court because of a newly enacted rule[,]" Rule 1-007.2 NMRA. Doc. 23 at 4. Rule 1-007.2 provides that "[a] party seeking to compel arbitration of one or more claims shall file and serve on the other parties a motion to compel arbitration no later than ten (10) days after service of the answer or service of the last pleading directed to such claims." The rule became effective on December 31, 2016, almost four months
Rule 1-007.2 provides a time limit that is analogous to a statutory filing deadline. "Statutory filing deadlines are generally subject to the defenses of waiver, estoppel, and equitable tolling." United States v. Locke, 471 U.S. 84, 94 n.10 (1985) (citing Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 392-98 (1982)). The New Mexico Supreme Court has stated:
Brown v. Jimerson, 619 P.2d 1235, 1236 (N.M. 1980) (quoting Ed Black's Chevrolet Ctr., Inc. v. Melichar, 471 P.2d 172, 174 (1970) (internal citations omitted)). Clearly, Rule 1-007.2 was not in effect at the time Life Care answered the state court complaint. Doc. 14 at 12. There is no evidence that Life Care had knowledge of Rule 1-007.2 prior to its retroactive application to this case or that Life Care intended to relinquish its right to compel arbitration. Nor has Defendant alleged that Life Care misled him into believing that it intended or consented to such a waiver.
Moreover, Defendant has cited no authority to establish that Rule 1-007.2 binds this Court and "overcome[s] the strong federal policy supporting arbitration." See
PaineWebber, Inc., 276 F.3d at 207 (citations omitted). "The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone, 460 U.S. at 24-25. For all of these reasons, the Court declines to find that Life Care waived its FAA right to compel arbitration.
D. Life Care is not equitably estopped from moving to compel arbitration.
Mr. Rhoden posits that Life Care should be equitably estopped from compelling arbitration due to the very terms of the Arbitration Agreement. Mr. Rhoden asserts that Life Care "must bear the burdens of the agreement[,]" which requires that all claims be arbitrated in one proceeding. Docs. 13 at 24-25; 14 at 6. This argument fails for the reason the Court discussed above — Life Care needed to seek an order compelling arbitration precisely because Mr. Rhoden filed suit in state court rather than abiding by the terms of the contract.
Moreover, as Life Care asserted at oral argument on this issue and as discussed above, if the Court orders Defendant to submit his claim to arbitration, Mr. Rhoden will "have the power to identify any party" he wants to add to the arbitration. Doc. 31 at 33:19-34:1. Because Mr. Rhoden "can name all of the parties that [he] listed in the state court claim[,]" all the Estate's claims may be decided together. Id. at 34:1-3. Ultimately, the Court finds that Life Care is not equitably estopped from moving to compel arbitration.
E. The Arbitration Agreement is not rendered unenforceable because it requires the parties to use AAA procedural rules.
Finally, Mr. Rhoden argues that the Arbitration Agreement is unenforceable because it requires the parties to use the AAA's procedural rules, which by their terms "require a post-dispute agreement to" arbitrate in circumstances such as those here. Doc. 14 at 4 (citing Doc.14-B, the AAA Healthcare Policy Statement, which observes: "As a result of a review of its caseload in the health care area, the American Arbitration Association has announced that it will no longer accept the administration of cases involving individual patients without a post-dispute agreement to arbitrate").
As Life Care points out, however, the current Healthcare Policy Statement provides that "the AAA will administer disputes between patients and healthcare providers to the extent a court order directs such a dispute to arbitration where the parties' agreement provided for the AAA's rules or administration." Doc. 21 at 2 (quoting Doc. 21-A (AAA Healthcare Policy Statement)); see also AAA Healthcare Policy Statement, accessible at https://www.adr.org/sites/default/files/document_ repository/AAA_Healthcare_Policy_Statement.pdf (last visited June 30, 2017). Having found that the current Policy Statement applies, the Court's order compelling arbitration will direct that "the arbitrators . . . apply the applicable rules of procedure of the AAA" as provided for in the parties' Arbitration Agreement. See Doc. 1-2.
The Court finds that it has subject matter jurisdiction over Life Care's Complaint, and the state court defendants are not indispensable parties under Rule 19. Life Care has not waived its right to compel arbitration, nor is it equitably estopped from compelling arbitration. Finally, the Court finds the Arbitration Agreement is enforceable, notwithstanding the 2003 AAA Healthcare Policy Statement. The United States Supreme Court has consistently held "that the party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration." Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 92 (2000) (citations omitted). Mr. Rhoden has failed to do so.
(1) Defendant's Motion to Dismiss (Doc. 13) is
(2) Plaintiff's Motion and Memorandum of Law in Support of Its Motion to Compel Arbitration (Doc. 5) is
(3) Defendant shall file the matter for arbitration as provided for in the Arbitration Agreement;
(4) the arbitrator(s) shall use the AAA procedural rules as provided for in the Agreement and as allowed by the current AAA Healthcare Policy Statement; and
(5) having ordered the parties to arbitration, this case is hereby
Id. at 923. The opposing party in that case had not addressed the Vaden decision in its briefing and instead had argued that "ripeness" was a jurisdictional "question for the arbitrator, not the district court." Id. The Papalote Creek II court disagreed and held that ripeness one of the necessary aspects of conferring jurisdiction on the federal court in the first place. The Fifth Circuit therefore held that a federal court lacked jurisdiction to order arbitration of a breach of contract claim when a breach had not yet occurred. Id. at 927. The Papalote Creek II case is therefore distinguishable — it extended the use of the Vaden rationale to assessing the
The Eighth Circuit has also applied Vaden to determine whether the
Hill v. White, 167 F.R.D. 47, 49 (M.D. Tenn. 1996). "Unlike the factual situation in Jenkins, and the cases cited by the Jenkins court, however," a decision on one of the claims in the instant case does not necessarily dictate the same decision as to all of the defendants. Hill, 167 F.R.D. at 50 (noting that the Hill plaintiffs "d[id] not jointly possess an identical claim" as did the heirs in Jenkins). Thus, Jenkins is inapposite.
Mr. Rhoden propounded his first set of discovery requests to the state court defendants on November 7, 2016. Doc. 13-D. The discovery requested included Requests for Admission, Requests for Production, and Interrogatories. Id. Ms. Hernandez emailed counsel for Mr. Rhoden on December 21, 2016. Doc. 13-F. Ms. Hernandez wrote:
Id. at 2. Counsel for Mr. Rhoden agreed to Ms. Hernandez's request. Id. at 1. The Facility responded to Mr. Rhoden's Interrogatories and Requests for Production on January 6 and January 9, 2017. Doc. 13-G.
Ms. Hernandez emailed counsel for Mr. Rhoden separately about the Requests for Admission on November 15, 2016. Doc. 13-I at 2. Ms. Hernandez noted that the Requests for Admission are "addressed at every defendant in this case." Id. at 2. She asked if it was Mr. Rhoden's intent "to have each defendant respond to all of" the requests. Id. Counsel for Mr. Rhoden responded that it was their "general policy . . . to seek admissions from each of the defendants, as different facilities operate with different heads running various aspects of the facility. However, if you believe that some of these requests would be better directed to certain defendants, I am willing to at least look at limiting those RFAs to that request." Id. Ms. Hernandez replied, "May I suggest that we respond initially for the business entities and then you can let us know if you need the individuals to respond and if so for which requests?" Id. Counsel for Mr. Rhoden indicated his agreement. Id. at 1. Despite this email exchange, none of the state court defendants ever responded to Mr. Rhoden's Requests for Admission. See Doc. 13 at 19.