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Watermark Harvard Square, LLC. v. Calvin

United States District Court, D. Colorado

March 6, 2018

WATERMARK HARVARD SQUARE, LLC a Delaware limited liability company, WATERMARK HARVARD SQUARE AP, LLC, a Delaware limited liability company, WATERMARK HARVARD SQUARE OWNER, LLC, a Delaware limited liability company, WATERMARK RETIREMENT COMMUNITIES, INC., an Arizona corporation, WATERMARK SERVICES I, LLC, a Delaware limited liability company, and WATERMARK SERVICES IV, LLC, a Delaware limited liability company, Plaintiffs,
v.
WILLIE LEE CALVIN, Defendant.

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          KATHLEEN M TAFOYA UNITED STATES MAGISTRATE JUDGE

         This case was initiated by way of a complaint filed on February 17, 2017. (See Doc. No. 1 [Compl.].) Embedded within the complaint is a petition seeking relief, inter alia, to compel arbitration. Defendant filed a response to the complaint on April 21, 2017. (Doc. No. 17 [Resp.]). Two replies were filed on May 5, 2017. Because several parties have since been dismissed through stipulation, [1] only one reply remains relevant-i.e., the reply filed by the Watermark Plaintiffs. (Doc No. 20 [Reply].) No further briefing has been filed.

         INTRODUCTION

         This case involves arbitration arising from facts in state court litigation. More specifically, on September 28, 2013, David Calvin-as attorney in fact for Ms. Willie Lee Calvin-signed a Resident Agreement for Ms. Calvin to be admitted to Watermark Harvard Square nursing care facility. This agreement included an arbitration clause (“Arbitration Agreement”) (See Doc. No. 1, Ex. 2 [Arbitration Agreement]).

         During her stay at Watermark Harvard Square, Ms. Calvin suffered injuries which led to her asserting claims in state court for negligence and violations of the Colorado Consumer Protection Act (“CCPA”).

         In the present case, Plaintiffs seek to compel arbitration and enjoin Defendant from pursuing claims in state court. (See Compl. ¶¶31-68.) Plaintiffs contend that the Arbitration Agreement governs disputes between the parties and that the Arbitration Agreement is valid and enforceable under the Federal Arbitration Act (“FAA”). Plaintiffs contend that the state court claims arise out of the services provided to Ms. Calvin by Plaintiffs and, as such, fall squarely within the scope of the Arbitration Agreement-requiring Ms. Calvin to refer her claims to mediation and binding arbitration.

         Defendant disputes any notion that her claims are controlled by the Arbitration Agreement and that, inter alia, state court is the proper forum to reconcile all claims between the parties.[2]

         ANALYSIS

         Defendant challenges arbitration on two fronts-specifically: (1) Defendant requests that this court abstain from ruling on the complaint and allow the state court to address the arbitration issue, and (2) if the court chooses not to abstain, Defendant requests that the complaint still be dismissed since the Arbitration Agreement is unenforceable under state law. Tethered to this second issue is a complex federal preemption analysis.

         In short, because abstention is not warranted-and because the Arbitration Agreement is enforceable-the court recommends that the District Judge hold in favor of Plaintiffs on both issues. Given this result, the District Judge should also compel Defendant to pursue her claims in accordance with the Arbitration Agreement and grant any residual relief relevant to same.

         A. Abstention

         Defendant argues abstention in accordance with the doctrine laid out in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).

         Abstention allows “a federal court ... [to] stay or dismiss a federal suit pending resolution of a parallel state court proceeding.” THI of N.M. at Vida Encantada, LLC v. Lovato, 848 F.Supp.2d 1309, 1318 (D.N.M. 2012) (citing Colo. River., 424 U.S. at 817; Fox v. Maulding, 16 F.3d 1079, 1081 (10th Cir. 1994).[3]

         Generally “the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction . . . .” Colo. River, 424 U.S. at 817. The Supreme Court has emphasized that the federal courts have a “virtually unflagging obligation . . . to exercise the jurisdiction given them, ” including in cases involving parallel state litigation. Id. Thus, abstention from the exercise of federal jurisdiction is “the exception, not the rule.” Id. at 813.

         The abstention analysis involves a two-step process. In declining jurisdiction, there must first be a showing that “the state and federal proceedings are parallel.” Fox v. Maulding, 16 F.3d 1079, 1081 (10th Cir. 1994). Under Tenth Circuit law, a court will “examine the state proceedings as they actually exist to determine whether they are parallel to the federal proceedings.” Id. If the cases are not parallel, the court must exercise jurisdiction. But if the cases are parallel, a second step is required-i.e., a court “must . . . determine whether deference to state court proceedings is appropriate.” Id. at 1082.

         To determine deference, the following factors are considered: “(1) whether either court has assumed jurisdiction over property; (2) the inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; and (4) the order in which the courts obtained jurisdiction.” Id. Other factors the court may consider include “the vexatious or reactive nature of either the federal or the state action, whether federal law provides the rule of decision, ... the adequacy of the state court action to protect the federal plaintiff's rights, ... [and] whether the party opposing abstention has engaged in impermissible forum shopping.” Id. (internal citations omitted). The court is to balance all the factors as they apply to this particular case, and “any doubt should be resolved in favor of exercising jurisdiction.” Id.

         1. Parallelism of State and Federal Proceedings

         Suits are parallel, for purposes of Colorado River abstention, if substantially the same parties litigate substantially the same issues in different forums. Fox, 16 F.3d at 1081-1082. Put differently, suits are parallel if the state court litigation will be an “adequate vehicle for the complete and prompt resolution of the issue between the parties, ” such that “the federal court will have nothing further to do in resolving any substantive part of the case.” Id. at 1081-1082.

         Here, Defendant satisfies the first step of the abstention analysis-parallelism. Most of the parties are the same, litigating substantially the same issues. The fact that one of the parties in the state action is not present in the federal action is “inconsequential.”[4] THI of New Mexico at Vida Encantada, LLC v. Archuleta, No. CIV. 11-0399 BB/ACT, 2012 WL 8169886, at *4 (D.N.M. Jan. 12, 2012) (“Asymmetry of parties is inconsequential especially where the parties are united by identical legal interests.”); see D.L. v. Unified Sch. Dist. No. 497, 392 F.3d 1223, 1230 (10th Cir. 2004).

         More critically, the core claims in each case conform-namely the federal arbitration claim. Moses H. Cone, 460 U.S. at 28. Still, Plaintiffs challenge such conformity, contending that the negligence and CCPA claims in the state action purportedly provide points of distinction- creating asymmetry between the claims. But the argument misses the mark. It ignores the fact that the arbitration issue is squarely before the state court and the federal court, respectively. Indeed, because the arbitration claim is the only claim before federal court, there is sufficient symmetry for parallelism purposes. See Day v. Union Mines, Inc., 862 F.2d 652, 656 (7th Cir. 1988) (In determining if suits are parallel, a court looks “not for formal symmetry between the two actions, but for a substantial likelihood that the state litigation will dispose of all claims presented in the federal case.”).

         In sum, because the threshold issue favors Defendant, the Court must next turn to the Colorado River factors to assess whether deference and abstention are warranted.

         2. Colorado River Factors - Exceptional Circumstances

         Holding that the claims are parallel at step one does not win the day for Defendant. The court must proceed to the second step and consider a non-exclusive list of factors to decide if “exceptional circumstances” exist to warrant abstention. Fox, 16 F.3d at 1082. No factor is dispositive, and the weight given to each factor is left to the court's discretion. Id.

         As an initial matter, and to support the second step of the analysis, Defendant placed much emphasis on a Sixth Circuit decision: Preferred Care of Delaware, Inc. v. VanArsdale, 676 F. App'x 388, 391 (6th Cir. 2017). While this case supports Defendant's position on the issue of parallelism, it is found wanting with respect to the step two of the abstention analysis. Significantly, in VanArsdale there is a critical factual distinction that undercuts Defendant's position-i.e., in VanArsdale, the state court disposed of the arbitration issue in advance of the federal court litigation. In this case, however, the arbitration issue is still in play-neither the state, nor federal forum has yet to make a decision on the Arbitration Agreement. With regard to several factors (e.g., third/fourth), the distinction is telling.

         Turning to the first factor, the parties are in fierce agreement that that there is no property in suit. This ...


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