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Bartels v. Saber Healthcare Group, LLC

United States Court of Appeals, Fourth Circuit

January 23, 2018

JEANNE T. BARTELS, by and through William H. Bartels, Attorney-in-Fact; JOSEPH J. PFOHL, Executor of the Estate of Bernice C. Pfohl; CLAIRE M. MURPHY, by and through Michele Mullen, Attorney-in-Fact, Plaintiffs-Appellees,
v.
SABER HEALTHCARE GROUP, LLC; SABER HEALTHCARE HOLDINGS, LLC; FRANKLIN OPERATIONS, LLC, d/b/a Franklin Manor Assisted Living Center; SMITHFIELD EAST HEALTH HOLDINGS, LLC, d/b/a Gabriel Manor Assisted Living Center; QUEEN CITY AL HOLDINGS, LLC, d/b/a The Crossings at Steele Creek, Defendants-Appellants. JEANNE T. BARTELS, by and through William H. Bartels, Attorney-in-Fact; JOSEPH J. PFOHL, Executor of the Estate of Bernice C. Pfohl; CLAIRE M. MURPHY, by and through Michele Mullen, Attorney-in-Fact, Plaintiffs-Appellees,
v.
SABER HEALTHCARE GROUP, LLC; SABER HEALTHCARE HOLDINGS, LLC; FRANKLIN OPERATIONS, LLC, d/b/a Franklin Manor Assisted Living Center; SMITHFIELD EAST HEALTH HOLDINGS, LLC, d/b/a Gabriel Manor Assisted Living Center; QUEEN CITY AL HOLDINGS, LLC, d/b/a The Crossings at Steele Creek, Defendants-Appellants.

          Argued: September 13, 2017

         Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. Terrence W. Boyle, District Judge. (5:16-cv-00283-BO)

         ARGUED:

          Mary Beth Hickcox-Howard, WILLIAMS & CONNOLLY LLP, Washington, D.C., for Appellants.

          Stephen Jay Gugenheim, GUGENHEIM LAW OFFICES, P.C., Raleigh, North Carolina, for Appellees.

         ON BRIEF:

          Steven B. Epstein, POYNER SPRUILL LLP, Raleigh, North Carolina; Edward J. Bennett, WILLIAMS & CONNOLLY LLP, Washington, D.C., for Appellants.

          Daniel K. Bryson, Matthew E. Lee, Jeremy R. Williams, WHITFIELD BRYSON & MASON LLP, Raleigh, North Carolina; Andrew D. Hathaway, GUGENHEIM LAW OFFICES, P.C., Raleigh, North Carolina, for Appellees.

          Before TRAXLER, DIAZ, and FLOYD, Circuit Judges.

          TRAXLER, Circuit Judge:

         Saber Healthcare Holdings, LLC, sits at the top of a family of wholly owned limited-liability companies that own and operate dozens of assisted-living facilities and nursing homes in several states, including North Carolina. Current and former residents of one of Saber's North Carolina assisted-living facilities brought a putative class action in North Carolina state court against Saber Healthcare Holdings and certain of its subsidiaries, alleging that the defendants failed to deliver the contractually promised care and failed to comply with certain state law requirements. After the defendants removed the case to federal court, the district court granted the plaintiffs' motion to remand the case to state court, concluding that a forum-selection clause in the residents' contracts required the case to proceed in state court. The defendants appeal, arguing that the case was properly removed under the Class Action Fairness Act of 2005 ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of Title 28, United States Code), and that, in any event, the forum-selection clause does not prohibit removal. As we will explain, we vacate and remand for further proceedings and factual development on the question of whether all of the defendants are bound by the forum-selection clause contained in the contracts executed by the plaintiffs.

         I.

         The defendants in this case are Saber Healthcare Holdings, LLC ("Saber"); Saber Healthcare Group, LLC; Franklin Operations, LLC; Smithfield East Health Holdings, LLC; and Queen City AL Holdings, LLC. Saber is the sole member of each of the other defendant LLCs.

         As is relevant to this case, Saber and its related companies operate three assisted-living facilities in North Carolina: Franklin Manor Assisted Living Center, which is operated by Franklin Operations, LLC, and located in Franklin County; Gabriel Manor Assisted Living Center, which is operated by Smithfield East Health Holdings, LLC, and located in Johnston County; and The Crossings at Steele Creek, which is operated by Queen City AL Holdings, LLC, and located in Mecklenburg County. Each facility requires its residents to sign an "Assisted Living Residency Agreement, " which includes a forum-selection clause providing that "the county in which the Facility is located shall be the sole and exclusive venue for any dispute between the parties, including, but not limited to, litigation, special proceeding, or other proceeding between the parties that may be brought, arise out of or in connection with or by reason of this Agreement." J.A. 160.

         The plaintiffs are the representatives of three then-current and former residents of Saber facilities -- Jeanne Bartels, Bernice Pfohl, and Claire Murphy. Bartels was a resident of Franklin Manor for a few weeks in October and November 2015, and Pfohl was a resident of Franklin Manor from February 2014 through August 2015. Murphy was a resident of Franklin Manor from April 2015 through January 1, 2016. After spending a month in a rehabilitation hospital, Murphy was a resident of Gabriel Manor from February 4 through April 21, 2016. On April 21, 2016, Murphy returned to Franklin Manor, where she resided until sometime after this action was filed.[1]

         The plaintiffs filed this action on May 9, 2016, in Franklin County, North Carolina. The plaintiffs alleged that the defendants are all alter egos of each other and that they failed to provide the level of staffing necessary to satisfy North Carolina statutory requirements or to meet the basic needs of its residents. According to the plaintiffs, the defendants deliberately chose to understaff the facilities in order to "increase profits at the expense of its residents with Alzheimer's and dementia." J.A. 38.

         The plaintiffs sought a preliminary injunction, and the hearing on that motion took place on May 16 and 19, 2016, in courthouses located in Granville County and Wake County. At the conclusion of the hearing, the state court indicated that it would grant the injunction and appoint a monitor to ensure compliance with state law, but the court made it clear that the injunction would be effective on entry of a written order. See D. Ct. docket entry #34, exh. 2, pp. 5-6 ("[C]ome up with an order that memorializes that and I'm looking at it and either sign it or modify it as I think is appropriate and I'll make it effective when the order is signed." (emphasis added)). On May 24, the Saber defendants removed the case to federal court. A few days after removal, the state court entered a written order granting the injunction. The order stated that the injunction "was entered in open court on May 19, 2016 and is signed . . . on this, the 27th day of May 2016." J.A. 234. Recognizing that the case had been removed, the state court stayed the injunction "unless and until the case is remanded to this court for further proceedings." J.A. 235.

         The plaintiffs subsequently moved to remand, arguing that the forum-selection clauses in the contracts required the action to be prosecuted in Franklin County. Because there is no federal courthouse in Franklin County, the plaintiffs contended that the defendants were contractually precluded from removing the action. The defendants argued that the absence of a federal courthouse in Franklin County did not preclude removal and that, in any event, the only defendant bound by the forum-selection clause was Franklin Operations, LLC. Because CAFA authorizes removal by a single defendant and does not require the consent of other defendants, any of the other defendants were free to remove the case.

         The district court granted the motion to remand. The court concluded that the forum-selection clause required the action to proceed in Franklin County and that the absence of a federal courthouse in Franklin County precluded removal. The court rejected the defendants' argument that only Franklin Operations, LLC, was bound by the forum-selection clause, noting that the plaintiffs alleged that the entities were alter egos and that Saber was the sole member in each entity. This appeal followed.

         II.

         Before proceeding to the merits, we pause to address our jurisdiction over this appeal. Subject to certain exceptions, appellate review of orders remanding removed cases to state court is prohibited. See 28 U.S.C. § 1447(d). The defendants therefore proceeded under the Class Action Fairness Act and timely sought permission from this court to appeal the remand order. See 28 U.S.C. § 1453(c) ("[A] court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not more than 10 days after entry of the order.").

         The general statutory prohibition against appeals of remand orders, however, applies only where the remand was based on lack of subject-matter jurisdiction or on a timely raised defect in the removal procedure. See Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127-28 (1995); Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 196 (4th Cir. 2008). In this case, the district court did not remand because it lacked subject-matter jurisdiction or because of any defect in the removal procedure.[2] Instead, the court remanded because it concluded that the forum-selection clause effected a waiver of the defendants' right to remove the case to federal court. Consistent with the approach taken in other circuits, this court has concluded that a remand based on enforcement of a forum-selection clause "does not fall within the general prohibition of appellate review for remand orders pursuant to 28 U.S.C. § 1447(d)" and thus is "reviewable on appeal." FindWhere Holdings, Inc. v. Sys. Env't Optimization, LLC, 626 F.3d 752, 755 (4th Cir. 2010) (collecting cases). The order at issue in this case, therefore, is subject to appellate review under ordinary principles.[3]

         III.

         We turn now to the merits of this appeal. There is no question that under CAFA, a single defendant can remove a case without the consent of the other defendants. See 28 U.S.C. § 1453(b) ("A class action . . . may be removed by any defendant without the consent of all defendants." (emphasis added)); Lowery v. Ala. Power Co., 483 F.3d 1184, 1221 (11th Cir. 2007) ("[A]ny one defendant authorized under CAFA to remove the plaintiffs' claims against that defendant . . . may remove the action as a whole, regardless of whether other defendants in the action would be authorized to remove their claims."). Removal was therefore proper under CAFA if any one of the defendants was authorized to remove the case. Accordingly, the questions we must answer are whether the forum-selection clause prohibited removal, and, if so, whether all defendants are bound by the clause.

         A.

         As noted, the forum-selection clause contained in the residency agreements states that "the county in which the Facility is located shall be the sole and exclusive venue for any dispute between the parties, including, but not limited to, litigation, special proceeding, or other proceeding between the parties that may be brought, arise out of or in connection with or by reason of this Agreement." J.A. 160.

         The plaintiffs contend that under the plain language of this clause, all litigation springing from the contractual relationship must be pursued in the county where the facility is located. Thus, if there is a federal courthouse in that county, then removal would be consistent with the contract, because the litigation would still be proceeding in the required county. But if there is no federal courthouse in the designated county, then removal would be inconsistent with the contract, because the litigation would of necessity be proceeding in a different county. The defendants, however, argue that the clause does not preclude removal because the contract does not limit venue to the courts of North Carolina - language that is generally understood to require the case to proceed in state court. See FindWhere, 626 F.3d at 755. According to the defendants, the forum-selection clause should be understood as permitting removal to the federal court with jurisdiction over the specified county, regardless of whether there happens to be a federal courthouse physically located in that county.

         In our view, the plain language of the forum-selection clause compels the conclusion urged by the plaintiffs. The clause states that the county where the facility is located "shall be the sole and exclusive venue" for resolution of disputes between the parties, which unambiguously requires the case to be resolved in Franklin County, North Carolina. Because there is no federal courthouse in the designated county, removal of the case to federal court would mean that the dispute would be resolved in a county other than the one designated by the contract. To accept the defendants' argument would require us to re-write the clause to provide that "the sole and exclusive venue for any dispute between the parties shall be the county in which the Facility is located, or the county in which a federal courthouse is located that has jurisdiction over the county in which the Facility is located." This court, of course, may not re-write the contract; our role is limited to enforcing the contract as written.

         Although the defendants' argument is supported by a few district court opinions, every circuit court to have addressed this issue has agreed with the plaintiffs. For example, in Yakin v. Tyler Hill Corp., 566 F.3d 72 (2d Cir. 2009), the forum-selection clause provided that "the venue and place of trial of any dispute that may arise out of this Agreement . . . shall be in Nassau County, New York." Id. at 74. The defendant removed the state-court action to federal court, even though there was ...


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