United States District Court, E.D. Virginia, Newport News Division
JOHN M. LOVELADY, AND BEVERLY C. LOVELADY, Plaintiffs,
FIVE STAR QUALITY CARE-VA, LLC, d/b/a DOMINION VILLAGE OF WILLIAMSBURG, Defendant.
OPINION AND ORDER
S. DAVIS, UNITED STATES DISTRICT JUDGE
matter is before the Court on a Motion to Remand filed by
Plaintiffs John M. Lovelady ("Mr. Lovelady") and
Beverly C. Lovelady ("Mrs. Lovelady") (collectively
"Plaintiffs"), ECF No. 10, and Five Star Quality
Care-VA, LLC, d/b/a Dominion Village of Williamsburg's
("Dominion Village" or "Defendant")
Motion to Dismiss Punitive Damages Claim, ECF No. 8, Motion
to Compel Arbitration, ECF No. 7, and a Motion for Protective
Order, ECF No. 21. For the reasons noted below, the Court
DENIES Plaintiffs' Motion to Remand, GRANTS
Defendant's Motion to Compel Arbitration and STAYS these
proceedings pending completion of arbitration, DENIES AS MOOT
Defendant's Motion to Dismiss Punitive Damages Claim, and
DENIES AS MOOT Defendant's Motion for Protective Order.
FACTUAL AND PROCEDURAL BACKGROUND
January 2018, Plaintiffs filed suit against Defendant, a
licensed assisted living facility, in the Circuit Court for
the City of Williamsburg and County of James City
("Circuit Court"). See Compl., ECF No. 1-1. Mr.
Lovelady is a resident of Virginia who is seventy-nine years
old and suffers from Alzheimer's Disease. Id.
¶ 1. Mrs. Lovelady is Mr. Lovelady" s spouse and
his attorney-in-fact. Id. ¶ 2. She is also a
resident of Virginia. Id. Defendant is a limited
liability company (WLLC") organized under the
laws of Delaware whose sole member has a principal place of
business in Massachusetts. Id. ¶ 3; Notice of
Removal ¶ 8, ECF No. 1-2. This suit concerns
Plaintiffs' effort to recover damages arising from breach
of contract and the allegedly unlawful termination of Mr.
Lovelady's Residency Agreement. Compl. at 2.
December 2016, Plaintiffs executed a Residency Agreement with
Defendant to allow Mr. Lovelady to live at Dominion Village.
Id. ¶ 5-6. Under the Residency Agreement, Mr.
Lovelady is the "Resident," and Mrs. Lovelady is
the "Responsible Person," meaning that she is the
person who has agreed to pay Defendant all amounts due on
behalf of Mr. Lovelady. Id. at 9. Plaintiffs have
attached a copy of the Residency Agreement that shows that
Mrs. Lovelady signed the Agreement on behalf of her husband
using her name and the letters "POA" on the line
for "Signature of John Lovelady." Res. Agr. at 9.
She also signed the Agreement in her capacity as the
"Responsible Person" on the line provided for her.
Id. On the same page, she initialed in a box next to
the statement "You acknowledge that you have signed a
separate Arbitration Agreement." Id.
has also submitted the Arbitration Agreement specifically
referenced in the Residency Agreement. See Arb. Agr., ECF No.
1-3. This document has spaces for four signatures:
"Resident One," "Resident Two,"
"Resident's Authorized Representative," and
"Five Star Quality Care, Inc." Id. at 13.
The only signatures that appear in this document are Mrs.
Lovelady's on the "Resident's Authorized
Representative" line and Executive Director Deirdre
Lund's on the "Five Star Quality Care, Inc."
December 2016 until August 2017, Mr. Lovelady lived at
Dominion Village. Compl. 2-3. In August 2017, Defendant
unilaterally terminated and discharged Mr. Lovelady from
Dominion Village, allegedly without a legal basis for doing
so. Id. at 2-3. Plaintiffs assert that Mr. Lovelady
at all times abided by the Residency Agreement and the rules
and policies of the Resident Handbook; he promptly paid all
required fees; his care needs never exceeded the services
that Defendant was required to provide under the Residency
Agreement; and his residency never endangered the health,
safety, or welfare of anyone. Id. at 3. According to
Plaintiffs, the real reason Defendant discharged Mr. Lovelady
was that Executive Director Deirdre Lund disliked Mrs.
Lovelady's advocacy for Mr. Lovelady and other residents
regarding the standards of cleanliness, hygiene, and care at
Dominion Village. Id. They claim that this alleged
retaliatory action violates the Standards for Licensed
Assisted Living Facilities, which provides:
The resident has the right to voice or file grievances, or
both, with the facility and to make recommendations for
changes in the policies and services of the facility. The
residents shall be protected by the licensee or
administrator, or both, from any form of coercion,
discrimination, threats, or reprisal for having voiced or
filed such grievances.
22 Va. Admin. Code 40-73-550(B).
result of the alleged breach of contract and unlawful
termination, Plaintiffs seek compensatory damages of $344,
194.00. Compl. 4. They also request punitive damages of $350,
000.00 for the "malicious, oppressive and unlawful"
retaliatory action of discharging Mr. Lovelady after
Plaintiffs exercised rights guaranteed to them by 22 Va.
Admin. Code § 40-73-550(B). Id.
February 13, 2018, Defendant filed a brief in the Circuit
Court containing three pleadings: (1) Plea in Bar to Stay or
Dismiss the Proceeding and Motion to Compel Arbitration
("Plea in Bar/Motion to Compel"),  (2) Demurrer of
Plaintiffs' Punitive Damages Claim ("the
Demurrer"), and (3) Answer and Affirmative Defenses. ECF
No. 1-3. In the Plea in Bar/Motion to Compel, Defendant notes
that the Residency Agreement provides for arbitration of
disputes arising under the agreement that potentially involve
more than $25, 000. Id. at 1-4. Defendant requested
that the Circuit Court compel Plaintiffs to submit to
arbitration and that the Court stay or dismiss the
proceedings pending the completion of arbitration.
Id. at 4. In the Demurrer, Defendant asserts that,
as a claim for punitive damages cannot stand without a
compensatory damages award for a common law tort claim,
Plaintiffs7 punitive damages claim related to a breach of
contract fails. Id. at 5-6. In Defendant's
answer, Dominion Village argues that Plaintiffs'
complaint is barred by the Arbitration Agreement, that
Plaintiffs committed the first material breach of the
Residency Agreement, that Plaintiffs have failed to exhaust
administrative remedies, that Plaintiffs have failed to
mitigate their damages, and that Plaintiffs are not entitled
to recover punitive or exemplary damages. Id. at
February 21, 2018, Dominion Village removed the instant
action to federal court based on diversity jurisdiction. See
Notice of Removal, ECF No. 1. On March 8, 2018, Defendant
filed the instant Motion to Compel Arbitration. ECF No. 6.
Two weeks later, Plaintiffs responded in opposition, arguing
that the arbitration agreement cannot be enforced because (1)
the agreement was not fully executed because Mrs. Lovelady
did not sign the agreement on behalf of Mr. Lovelady as his
attorney-in-fact; (2) the arbitration agreement cannot
provide relief for Plaintiffs' punitive damages claim;
(3) the arbitration agreement is unconscionable; and (4)
Defendant waived the right to arbitrate by pursuing a course
of litigation in state and federal court. See Pis.7 Opp'n
Mot. Compel Arb. 1, ECF No. 13. In late March, Defendant
filed its reply brief. ECF No. 15.
also filed its Motion to Dismiss Plaintiffs' Punitive
Damages Claim in March 2018. ECF No. 9. Later that month,
Plaintiffs filed their opposition. ECF No. 12. Therein,
Plaintiffs argue that, under certain exceptional
circumstances, a breach of contract may amount to an
independent, willful tort for which punitive damages may be
awarded. Id. at 1. Plaintiffs claim that
Defendant's breach of contract, when combined with its
alleged violation of its statutory duty to protect Mr.
Lovelady from reprisal, amount to an independent tort.
Id. at 2-3. On March 28, 2018, Defendant filed its
reply brief. ECF No. 16. Defendant argues that this is a
garden-variety breach of contract dispute for which punitive
damages may not be imposed, and also notes that, even if
Defendant has violated 22 Va. Admin. Code 40-73-550(B),
neither a private right of action nor punitive damages are
authorized to redress a violation of that provision.
Id. at 2-3.
March 9, 2018, Plaintiffs filed their Motion to Remand. ECF
No. 11. Plaintiffs claim that this suit must be remanded
because Defendant waived its right to remove by taking
"substantial defensive action" in state court
before petitioning for removal. Id. at 1. On March
23, 2018, Defendant responded in opposition. ECF No. 14. On
March 29, 2018, the deadline for Plaintiffs' response
passed without Plaintiffs filing a reply-brief regarding the
Motion for Remand.
been fully briefed, the instant motions are ripe for
MOTION TO REMAND
noted above, Defendant has removed this action to federal
court based on diversity jurisdiction. The parties appear to
agree that they are completely diverse and that the amount in
controversy exceeds $75, 000. Plaintiffs, however, argue that
Defendant's filing of its Plea in Bar/Motion to Compel
and Demurrer in state court before filing its notice of
removal constitute "substantial defensive action"
that waives its right to removal. See Pis.' Remand Br.,
ECF No. 11. Defendant responds by denying that its actions in
state court constitute voluntary availment of the state
court's jurisdiction. See Def.'s Remand Br., ECF No.
Diversity Jurisdiction and Removal
district courts are courts of limited subject matter
jurisdiction. United States ex rel. Vuyyuru v.
Jadhav, 555 F.3d 337, 347 (4th Cir. 2009) (citing
Exxon Mobile Corp. v. Allapattah Servs., Inc., 545
U.S. 546, 552 (2005)). They may exercise "only the
jurisdiction authorized them by the United States
Constitution and by federal statute.'7 Id.
(citing Bowles v. Russell, 551 U.S. 205 (2007)).
District courts may exercise diversity jurisdiction in civil
actions between "citizens of different states . . .
where the matter in controversy exceeds the sum or value of
$75, 000, exclusive of interest and costs." 28 U.S.C.
§ 1332(a). If complete diversity and the appropriate
amount in controversy requirements are met for a case that
was initially filed in state court, a federal court may
exercise jurisdiction over the case upon proper removal to
federal court. 28 U.S.C. §§ 1441,
1446. The federal removal statute provides as
follows:" [A] ny civil action brought in a State court
of which the district courts of the United States have
original jurisdiction, may be removed by the defendant or the
defendants to the district court of the United States for the
district and division embracing the place where such action
is pending." 28 U.S.C. § 1441(a).
Waiver of a Party's Right to Removal
statute, a defendant sued in state court has thirty days from
the date it is served to file a notice of removal in the
federal district court "for the district and division
within which such action is pending." 28 U.S.C. §
1446(a), (b) . "Although there is no statutory basis for
remand due to a party's waiver of its right of removal,
the Fourth Circuit Court of Appeals [has] recognized that a
district court could find a waiver under common law, but only
in very limited circumstances." Virginia Beach
Resort & Conference Ctr. Hotel Ass'n Condo. v.
Certain Interested Underwriters at Lloyd's, 812
F.Supp.2d 762, 764 (E.D. Va. 2011) (internal quotation marks
and citation omitted). To evaluate whether a defendant has
waived its right to removal, the court must make "a
factual and objective inquiry as to the defendant's
intent to waive." Grubb v. Donegal Mut. Ins.
Co., 935 F.2d 57, 59 (4th Cir. 1991) (citation omitted).
A defendant "may  waive its 3 0-day right to removal
by demonstrating a 'clear and unequivocal' intent to
remain in state court." Id. (citation omitted).
A clear intent to remain in state court is shown when a
defendant takes "substantial defensive action"
before removal. Aqualon Co. v. Mac Equip., 149 F.3d
262, 264 (4th Cir. 1998). For example, a defendant seeking a
final determination on the merits of the case in state court
would waive the right to remove. Wolfe v. Wal-Mart
Corp., 133 F.Supp.2d 889, 893 (N.D. W.Va. 2001) (holding
that the defendant's filing of a motion for summary
judgment in state court constituted waiver).
waiver of the right to removal "should only be found in
extreme situations." Id. (internal quotation
marks and citation omitted) (emphasis added). Remand based on
waiver should occur when justified by "the values of
judicial economy, fairness, convenience and comity."
Id. A court analyzing whether to remand based on a
waiver must be mindful that "the guiding rationale
behind the doctrine of waiver is concern for preventing a
removing defendant from 'test[ing] the waters in state
court and, finding the temperature not to its liking,
beat[ing] a swift retreat to federal court."7
Small v. Ramsey, No. 1:10CV121, 2010 U.S. Dist.
LEXIS 116179, at *14, 2010 WL 4394084 (N.D. W.Va. Nov. 1,
2010) (quoting Estate of Krasnow v. Texaco, Inc.,
773 F.Supp. 806, 809 (E.D. Va. 1991)).
noted above, the parties do not dispute that there is
complete diversity or that the amount in controversy exceeds
$75, 000. See Compl. ¶¶ 1-3 (noting that Plaintiffs
are citizens of Virginia and that Defendant is a limited
liability company organized under the laws of Delaware);
id. at 4 (demanding $344, 194 in compensatory
damages and $350, 000 in punitive damages); Notice of Removal
¶ 8 (noting that Defendant is an LLC whose sole member,
FSQ, Inc., is a Delaware corporation with its principal
office in Newton, Massachusetts). Because the Court is
satisfied that diversity jurisdiction is proper if Defendant
has not otherwise waived its right to removal, the Court
turns to the waiver issue.
chiefly rely on two cases in support of their position that
Dominion Village waived its right to removal. The first case,
Sood v. Advanced Computer Techniques, Corp., 308
F.Supp. 239, 240 (E.D. Va. 1969), involved a defendant who
filed a notice of removal three days after filing an answer
and three voluntary counterclaims. The plaintiff moved for
remand on the ground that the filing of the counterclaims
before the filing of the notice of removal constituted a
waiver of the right to removal. Id. The court began
its analysis by noting the principle established in
Merchants' Heat & Light Co. v. James B. Clow
& Sons, 204 U.S. 286, 289 (1907) that a defendant
does not waive its right to removal where it merely files
"pleadings to the merits, as required, after saving its
rights." The Merchants7 Heat court
contrasted this with the filing of a counterclaim, as
"by setting up its counterclaim the defendant became a
plaintiff in its turn, invoked the jurisdiction of the court
in the same action, and, by invoking, submitted to it."
Id., 204 U.S. at 289. Applying this principle to the
facts in Sood, the court noted that under Virginia
law the defendant was not required to bring the counterclaims
in the same action as the plaintiff's claims or face
their loss. 308 F.Supp. at 24 0. However, because the filing