Getting Your LTC Arbitration Dispute into Federal Court

Last week, I noted that it often can be crucial – if you want to arbitrate a long term care (LTC) tort claim – to keep that claim out of state court.  But, as I also noted, this can be easier said than done.  Plaintiff’s lawyers often will sue employees of the LTC facilities (most often nursing home administrators) as co-defendants, and while the facility itself may be a foreign corporation, the employees normally are Colorado residents, thus spoiling diversity jurisdiction.  So does that mean the LTC facility is stuck in a potentially hostile state court venue if it wants to try to compel arbitration?

Not so fast.  Normally, plaintiffs do not bring the arbitration claim in the first instance – and why would they, given that they never want to arbitrate?  So the arbitration claim will not become a part of the state tort claim unless the defendant wants it to.

And while the defendant will want to raise the arbitration issue at some point, there’s no reason that it has to be in the case and the court in which it was sued.  It’s normally perfectly acceptable to bring a new, affirmative lawsuit attempting to compel arbitration.  But why include the resident employee?  The saying is that a plaintiff is the master of his claim, and if a LTC facility doesn’t want to include the employee, it doesn’t have to.  Voila!  Now you have diversity jurisdiction.

It may seem unfair to let a state court defendant manufacture diversity jurisdiction to take the arbitrability question into federal court despite a pending tort case.  Maybe it is and maybe it isn’t, but the point is, courts let defendants do that sort of thing all the time.  This is not to say that federal courts automatically will hear a complaint seeking to compel arbitration; it is possible that the resident defendant might be held to be an indispensable party under Rule 19 of the Federal Rules of Civil Procedure, and if that’s the case, dismissal will be warranted.  But nursing home administrators seem not to fall in that category too often.

Arbitration is not a panacea, of course.  Many LTC facilities are (understandably) wary of participating in a alternative dispute resolution process with little formal standards or appeal rights.  In most cases, it may be preferable to stay in state court.  But most is not all.  There are certain jurisdictions where a LTC defendant will want to get out of the forum at all costs.  In those places, it might be helpful to get to federal court, even if it’s just on the arbitration issue.  (It’s also important to note that even if the federal trial court is skeptical of the arbitration petition, the LTC facility will have appeal rights pursuant to Section 16 of the Federal Arbitration Act, so there is even a safeguard against an unfriendly district court judge.)

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