Golden Gate National Senior Care, Llc et al v. Bateman et al

REPLY BRIEF re MOTION for Summary Judgment

M.D. Pa.September 22, 2016

1 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA ______________________________________________________________________ GOLDEN GATE NATIONAL SENIOR CARE, LLC; GGNSC CAMP HILL WEST SHORE, LP, d/b/a GOLDEN LIVINGCENTER – WEST SHORE; GGNSC CAMP HILL WEST SHORE GP, LLC; GPH CAMP HILL WEST SHORE LP; GGNSC EQUITY HOLDINGS, LLC; GGNSC HOLDINGS, LLC; GGNSC ADMINISTRATIVE SERVICES, LLC; GGNSC CLINICAL SERVICES, LLC, Petitioners v. DONNA M. BATEMAN, Administratrix for the Estate of DORIS J. SNYDER, deceased, Respondent. CIVIL DIVISION No. 16-cv-00898-YK The Honorable Yvette Kane REPLY BRIEF IN SUPPORT OF RESPONDENT’S MOTION FOR SUMMARY JUDGMENT Respondent, Donna M. Bateman, as Administratrix for The Estate of Doris J. Snyder, deceased, by and through her undersigned counsel, files the instant Reply in Support of her Motion for Summary Judgment under Fed. R. Civ. P. 56(a) (Doc. 19) and Brief in Support thereof (Doc. 20). ADDITIONAL ARGUMENT Golden Living Petitioners’ Response (Doc. 25) includes almost no substantive discussion of the doctrines of issue preclusion or res judicata, and much of Respondent’s Motion is left unchallenged. Instead, Golden Living Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 1 of 10 2 criticizes the merits of the State Court Order denying arbitration pursuant to Taylor v. Extendicare Health Facilities, Inc., 113 A.3d 317 (Pa. Super. 2015), appeal granted, 122 A.3d 1036 (Pa. 2015). The propriety of the State Court Order is not at issue. Rather, this Court must only determine whether Pennsylvania state courts would consider the Order preclusive – not whether a federal court would decide the underlying issues differently. As set forth below, and in Respondent’s Motion for Summary Judgment and Brief in Support thereof (Docs. 19 & 20), this Court should follow controlling precedent from the Third Circuit – and join the four consecutive Western District courts who confronted this exact issue – by dismissing this arbitration action on res judicata/collateral estoppel grounds.1 I. Golden Living Petitioners Failed to Address the Full Faith and Credit Statute, 28 USCA § 1738 In opposing Respondent’s Motion for Summary Judgment on res judicata and issue preclusion grounds, Golden Living fails to address, let alone refute, the actual issue at bar: Whether the Full Faith and Credit Statute, 28 U.S.C. § 1738 1 See GGNSC Altoona Hillview LP v. Martz, 2016 WL 502089 at *5 (W.D. Pa. Feb 8, 2016) (Gibson, J.); GGNSC Erie Western Reserve, LP v. Stubits, CA 15-61 (ECF No. 33) (W.D.Pa. Nov. 9, 2015) (Rothstein, J.); GGNSC Uniontown, LP v. Bauer, 2015 WL 9304508, at *2 (W.D. Pa. Dec. 22, 2015) (Bissoon, J.); and Erie Operating, LLC v. Foster, CA 14-72 (W.D. Pa. July 20, 2016) (copies attached as exhibits to Original brief (Doc. 20)). Contrary to Golden Living’s claims, none of these decisions is on appeal to the Third Circuit. Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 2 of 10 3 and case law interpreting same require this Court to give preclusive effect to the State Court Order. The Full Faith and Credit Statute provides in part: “judicial proceedings of any State...shall have the same full faith and credit in every court within the United States and its Territories…as they have by law or usage in the courts of such State from which they are taken.” 28 U.S.C.A. § 1738. Therefore, for present purposes, this Court must interpret the State Court Order from a state-court perspective. See Allen v. McCurry, 449 U.S. 90, 96 (1980) (“Congress has specifically required all federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so.”). This matter is controlled by dispositive Third Circuit authority. See Towers, Perrin, Forster & Crosby, Inc., v. Brown, 732 F.2d 345, 350-351 (3d Cir. 1984) (an order denying arbitration is res judicata if the state court would deem it so, regardless of whether a federal court believes the order was incorrect on the law). The Towers court held that a California state court order denying arbitration was a final order on the merits and that res judicata foreclosed the federal action seeking to compel the same underlying claims to arbitration. Id. at 348. There, employees filed a declaratory judgment in state court seeking to render portions of an employment contract unenforceable. Id. In their state-court answer, the employer/defendant filed a petition to compel arbitration, which the state court Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 3 of 10 4 denied. Towers, 732 F.2d at 346-347. The employer also filed a petition in the District Court for the Eastern District of Pennsylvania to compel arbitration pursuant to the FAA and to stay the state court proceedings. Id. at 347. The District Court granted the employer/petitioner’s motion to compel arbitration and stayed the state court proceedings; and the employees/respondents appealed to the Third Circuit. Id. The Third Circuit reversed the District Court’s decision on res judicata grounds, holding that the California state court order denying arbitration had preclusive effect under 28 U.S.C. § 1738. Id. at 347, 351. Applying that statute, the Towers court interpreted the state court order just as a California would, and found it constituted a final judgment on the merits. Id. at 347. This case is directly analogous to Towers, and the same result is warranted here. The state court issued a final order denying Golden Living’s motion to compel arbitration, yet Golden Living is seeking to override that Order in federal court. In turn, this Court must look to whether Pennsylvania courts would give this order preclusive effect. As discussed in Respondent’s Brief (Doc. 20), all four prongs for issue preclusion are met in this case. Because Pennsylvania courts would find the Order to have preclusive effect, issue preclusion and res judicata applies. Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 4 of 10 5 II. The State Court Order Is A Final Judgment On The Merits Golden Living argues, without any meaningful analysis, that res judicata does not apply because the State Court Order is not a final judgment on the merits. No relevant authority is cited that supports this position. To the contrary, the Western District jurists in Bauer, Martz, Stubits and Foster (see footnote 1, supra), correctly applied Pennsylvania’s “broad view on what constitutes a ‘final judgment’ for purposes of res judicata.” Gen. Acc. Fire & Life Assur. Corp. v. Flamini, 445 A.2d 770, 772 (Pa. Super. 1982). First, Golden Living implies that the Order is not “final” because it is appealable. Pennsylvania law instructs otherwise. Indeed, a “judgment is deemed final for purposes of res judicata or collateral estoppel unless or until it is reversed on appeal.” Shaffer v. Smith, 673 A.2d 872, 874 (Pa. 1996) (emphasis added) (citations omitted).2 In Pennsylvania, an order resolving a party’s request for arbitration is preclusive on other Pennsylvania courts. See Flamini, 445 A.2d at 773 (a prior order compelling arbitration of claims was res judicata on subsequent action to 2 See also Regscan, Inc. v. Brewer, 2006 WL 401852, at *6 (E.D. Pa. Feb. 17, 2006) aff’d, 289 Fed. Appx. 488 (3d Cir. 2008) (“The Court in this case is applying Pennsylvania rules of preclusion, and the Shaffer case clearly establishes that a possible appeal by RegScan of the state court summary judgment order does not prevent the application of res judicata or collateral estoppel in the federal action.”); 10 Standard Pennsylvania Practice 2d § 65:83 (“pending appeal does not destroy finality of decision for purposes of collateral estoppel”). Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 5 of 10 6 enjoin the same court-ordered arbitration). As the Third Circuit explained in Towers, this conclusion is consistent with common sense and analogous decisions from other courts.3 It is respectfully requested that this Court reach the same conclusion. III. Golden Living Petitioners’ “Choice of Law” and Preemption Arguments Must Be Rejected Because (1) They Are Irrelevant to the Issue/Claim Preclusion Analysis; and (2) There is No Relevant Distinction Between the Taylor Agreement and the Agreement At Bar While largely sidestepping the issue/claim preclusion question, Golden Living tries in vain to undercut the four Western District decisions. Golden Living claims that those courts “miss[ed] the pertinent choice of law and federal preemption issues.” In Golden Living’s view, there is a “material distinction” between the arbitration agreement at issue and the one in Taylor; and that the supposed distinction, along with federal preemption principles, requires a different result. These arguments fail on their face because they have nothing to do with the question of whether the State Court Order has preclusive effect. Regardless of 3 Citing, inter alia, Merrill Lynch, Pierce, Fenner & Smith v. Haydu, 637 F.2d 391, 397–98 (5th Cir.1981) (if prior state determination that dispute was not arbitrable was a final order it would be res judicata, even if rights under the federal act were not asserted in the state court); Manes Organization, Inc. v. Standard Dyeing & Finishing Co., 472 F.Supp. 687 (S.D.N.Y.1979) (state court order compelling arbitration was res judicata in subsequent federal action for a stay of arbitration pending adjudication of the merits). Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 6 of 10 7 whether the State Court Order dealt with federal law and/or relied upon erroneous law, it nonetheless constitutes a final judgment on the merits. Golden Living essentially asks this Court to review the correctness of the State Court Order, rather than its preclusive effect, despite the teachings of applicable law. See Towers, 732 F.2d 345, 350-351 (3d Cir. 1984) (rejecting a similar supremacy clause argument, noting that federal district courts lack appellate jurisdiction over state courts). Furthermore, Golden Living is re-litigating the same exact arguments advanced – and rejected – in state court. In their briefs and during oral argument, counsel for Golden Living argued that the FAA preempts Taylor and that that case is distinguishable.4 Those arguments were rejected. Specifically, Golden Living claims that the agreement in Taylor is governed by the Pennsylvania Uniform Arbitration Act (PUAA), whereas the FAA and its corresponding case law govern this Agreement. Even if it were relevant (it is not), this argument is dead wrong. First, there is no meaningful “conflict” between the PUAA and the FAA, as they are “functionally equivalent” to one another. See e.g., PaineWebber Inc. v. Hartmann, 921 F.2d 507, 510 n.3 (3d Cir. 1990), overruled on other grounds by implication by, Howsam v. Dean Witter Reynolds, 537 U.S. 79, 85 (2002) (“the 4 See Doc. 20-5. Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 7 of 10 8 Federal Arbitration Act and the Pennsylvania Uniform Arbitration Act, and the case law that has developed under each, are functionally equivalent as regards to the authority of a district court to review an agreement to arbitrate and to stay or compel arbitration[.]”) (emphasis added). See also State Farm Mut. Auto. Ins. Co. v. Coviello, 233 F.3d 710, 713 n.1 (3d Cir. 2000) (“[T]here is no meaningful difference between federal and Pennsylvania law when reviewing the scope of an arbitration clause.”). Second, even if there was a meaningful difference between the PUAA and FAA, the arbitration agreement in Taylor makes clear – in no uncertain terms – that if arbitration is not possible under the PUAA, then the FAA will apply. The agreement in Taylor provides in pertinent part: 5. Governing Law: [T]his Agreement shall be governed by the terms of the Pennsylvania Uniform Arbitration Act which is set forth at 42 Pa. Cons. Stat. § 7301 et. seq. If for any reason there is a finding that Pennsylvania law cannot support the enforcement of this Agreement, then the Parties agree to resolve their disputes by arbitration (and not by recourse to a court of law) pursuant to the Federal Arbitration Act (9 U.S.C. Sections 1-16), and the Federal Arbitration Act shall apply to this Agreement and all arbitration proceedings arising out of this Agreement, including any action to compel, enforce, vacate or confirm any proceeding and award of an arbitrator.[5] 5 A copy of the arbitration agreement at issue in Taylor is attached as Exhibit “A.” Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 8 of 10 9 Consequently, the same federal preemption issue applied in Taylor. In any event, the “correctness” of Taylor is immaterial to the issue before this Court for the reasons discussed above. IV. CONCLUSION A Pennsylvania court would give the State Court Order preclusive effect. Given the dispositive authority discussed here and in Respondent’s initial Brief, this Court should do the same. Respectfully submitted this 22nd Day of September, 2016, By: Daniel R. McGrath, Esquire /s/ Daniel McGrath, Esquire PA ID: 319386 WILKES & McHUGH, P.A. Three Parkway 1601 Cherry Street, Suite 1300 Philadelphia, PA 19102 dmcgrath@wilkesmchugh.com Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 9 of 10 10 CERTIFICATE OF SERVICE I, Daniel R. McGrath, attorney for Respondent, hereby certify that on September 22, 2016, I electronically filed the foregoing with the Clerk of Court using the CM/ECF System, which shall send notification of such filing to the following: Jacqueline M. Carolan, Esquire Eric E. Reed, Esquire Christopher M. Varano, Esquire FOX ROTHSCHILD LLP 2000 Market Street, Twentieth Floor Philadelphia, PA 19103 Attorneys for Petitioners jcarolan@foxrothschild.com ereed@foxrothschild.com cvarano@foxfothschild.com WILKES & MCHUGH, P.A. Date: September 22, 2016 Daniel R. McGrath /s/ Daniel R. McGrath, Esquire Attorney for Respondent Case 1:16-cv-00898-YK Document 26 Filed 09/22/16 Page 10 of 10 Case 1:16-cv-00898-YK Document 26-1 Filed 09/22/16 Page 1 of 6 Case 1:16-cv-00898-YK Document 26-1 Filed 09/22/16 Page 2 of 6 Case 1:16-cv-00898-YK Document 26-1 Filed 09/22/16 Page 3 of 6 Case 1:16-cv-00898-YK Document 26-1 Filed 09/22/16 Page 4 of 6 Case 1:16-cv-00898-YK Document 26-1 Filed 09/22/16 Page 5 of 6 Case 1:16-cv-00898-YK Document 26-1 Filed 09/22/16 Page 6 of 6