Preferred Care of Delaware, Inc. v. Crocker
173 F. Supp. 3d 505
W.D. Ky.2016Background
- Plaintiffs are corporate entities operating Shady Lawn Nursing & Rehabilitation Center; Dorothy Crocker is attorney-in-fact for resident Frances Tyler and sued the facility in Trigg County, KY for negligence.
- Plaintiffs filed a federal action under FAA §4 to compel arbitration of Crocker’s state-law claims and to enjoin the state-court action; Crocker answered and filed counterclaims for fraud and conspiracy.
- Crocker joined four additional counter-defendants (two of whom, Dawn Tedder and Darla Joiner, are Kentucky citizens) in her counterclaims.
- Plaintiffs moved to strike/dismiss those counterclaims and to compel arbitration based on an admission Arbitration Agreement signed by Crocker as attorney-in-fact.
- Crocker contends (inter alia) she lacked authority to sign the arbitration clause, was fraudulently induced, did not knowingly waive rights, and that the agreement lacks consideration/definiteness.
- The court (1) found supplemental jurisdiction over Crocker’s counterclaims and denied motions to strike/dismiss and to compel arbitration, (2) held Kentucky Supreme Court rule in Whisman is preempted by the FAA, but (3) denied Plaintiffs’ request to enjoin the state-court action under the Anti‑Injunction Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Joinder of nonparties to counterclaims | Joinder improper under Rules 13/14; nonparties not in original complaint | Crocker: joinder proper under Rules 13(h)/19; claims are compulsory | Court: counterclaims compulsory; §1367(a) supplemental jurisdiction permits joinder; motions to strike/dismiss denied |
| Authority to sign arbitration (agency) | Arbitration agreement valid; power of attorney authorizes signing | Crocker: POA did not expressly authorize waiving access to courts per Ping/Whisman | Court: Whisman’s restrictive rule is preempted by FAA; POA language here authorized signing; arbitration provision valid on authority ground |
| Fraud in inducement | Plaintiffs: fraud claim insufficient | Crocker: admissions staff misrepresented arbitration as routine/mandatory; lacked opportunity to read | Court: fraud and conspiracy allegations survive Rule 12(b)(6) (plausibly pleaded) — cannot compel arbitration yet on this ground |
| Request to enjoin state-court proceedings | Plaintiffs: injunction necessary to protect federal determination on arbitrability | Crocker: Anti‑Injunction Act bars federal stay of state case | Court: injunction denied — Anti‑Injunction Act prohibits staying state-court action until federal court has decided arbitrability; exceptions do not apply |
Key Cases Cited
- Wisconsin Dep’t of Corr. v. Schacht, 524 U.S. 381 (U.S. 1998) (complete diversity required for original diversity jurisdiction)
- Masco Corp. v. Zurich Am. Ins. Co., 382 F.3d 624 (6th Cir. 2004) (standard for limited review of arbitrability)
- Preston v. Ferrer, 552 U.S. 346 (U.S. 2008) (FAA establishes national policy favoring arbitration)
- EEOC v. Waffle House, Inc., 534 U.S. 279 (U.S. 2002) (arbitration agreements treated like other contracts)
- Allied‑Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (U.S. 1995) (FAA applies in state and federal courts)
- Southland Corp. v. Keating, 465 U.S. 1 (U.S. 1984) (FAA substantive law applies in state courts)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (state rules cannot single out arbitration provisions for disfavored treatment)
- Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681 (U.S. 1996) (state labeling/notice rules that single out arbitration preempted by FAA)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (fraud-in-the-inducement of entire contract generally for arbitrator; fraud in inducement of arbitration clause for court)
- Rent‑A‑Ctr., W., Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (court decides arbitrability challenges to the arbitration clause itself)