Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 1 of 11 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF KENTUCKY SOUTHERN DIVISION LONDON Defendant. Civil No. 09-200-GFVT ORDER *** *** *** *** This matter is before e Court on Defendant Motion to Dismiss and/or Transfer. [R. 8.] In seeking dismissal, argues at e Court lacks subject matter jurisdiction to hear is action for declaratory judgment and venue is improper. [Id.] Alternatively, he seeks a transfer to e United States District Court for e Middle District of Tennessee, which he claims is a more convenient forum. [Id.] Alough e Court finds at subject matter jurisdiction exists, it declines to exercise its discretionary jurisdiction pursuant to 28 U.S.C. 2201(a. Therefore, is action will be dismissed wiout prejudice. This case arises out of a plan by I. or hospital to recruit plastic surgeons to its facility in Somerset, Kentucky. [Plaintiff s Response, R. 15 at 3.] To assist in ese efforts, arent corporation, engaged Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 1 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 2 of 11 LLC ( in June of 2008 to find candidates for e hospital. [Defendant s Motion to Dismiss, R. 8, Attach 2 at 2; Affidavit of mon, Seaboard s chief operating officer, R. 8, Attach. 4.] That same identified Defendant as a possible recruit and presented his curriculum vitae to Affidavit at 6.] At e time, was sixty-two years old, lived in New York and practiced medicine in Massachusetts. [See Affidavit of R. 8, Attach 2.] Lake Cumberland s chief executive officer, expressed interest in hiring and invited him to e facility. [Herrington Affidavit at 6a, 7.] visited e hospital over two days in August and met wi he hospital s director of physician relations, and oer physicians. [Id.] By September, it seemed as ough would formally make Haidek and offer. [Id. at 8.] According to however, informed him in early October at some at e facility and were worried about age. [Id. at 10.] assured at he intended to continue his practice for several more years, and e hospital sent him a written contract to review. [Id. at 10-11; Plaintiff s Response to Defendant s Motion to Dismiss, R. 15 at 4.] however, ultimately widrew e contract and decided to hire anoer, younger physician living and practicing in Kentucky. Affidavit at 14-15; Plaintiff s Response at 4.] Upon learning is news, says he informed and at is decision would expose e hospital to age discrimination litigation and ceased referring candidates to and e hospital. [ Affidavit at 16, 18.] filed a charge of discrimination wi e Equal Employment Opportunity Commission in January 2009, alleging at widrew its offer on account of his age. [Charge of Discrimination, R. 18, Attach 2.] In February, attorney, Joshua Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 2 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 3 of 11 Friedman, sent a letter to chief legal officer, requesting mediation or settlement of his client s claims. [Affidavit of Joshua Freidman, R. 8, Attach. 6.] Alough never responded, Friedman subsequently received a call from who said he was former partner and indicated at wanted to discuss resolving is matter. [Id.] requested a written settlement demand, which Friedman transmitted on behalf on April 20, 2009. By reply email at mon, advised at it would take irty days or so to provide a response. [Id.] On May 28, Friedman emailed seeking an update. [Id.] dvised at he had researched e matter and needed to consult his client. [Id.] When Friedman had not heard from by June 8, he sent anoer email to stating at he had drafted a complaint and inquired wheer he needed to file it. [Id.] Peters responded e same day, anking him for his patience and saying at he would let him know one way or e oer by Friday, June 12. [Id.] When at day arrived, called Friedman and informed him at filed e instant action for declaratory judgment in e Eastern District of Kentucky. [Id.] More specifically, Complaint for Declaratory Judgment seeks a declaration at e contemplated relationship between e Hospital and pursuant to e recruiting agreement was one of independent contractor and not employer/employee. Complaint, R. 1 at 12.] Accordingly, claims at if was never an applicant for employment en he would not be entitled to any relief under e Age Discrimination in Employment Act ( ADEA, 29 U.S.C. 621, et seq., or e Kentucky Civil Rights Act ( KCRA, Ken. Rev. Stat. 344.010, et seq. [Id. at 15.] On June 18, 2009, filed a complaint against and in e Middle District of Tennessee on e grounds at eir actions violated ADEA and KCRA. Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 3 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 4 of 11 Complaint, R. 8, Attach 5.] Shortly ereafter, filed e instant motion to dismiss and/or transfer is case. II. A. In his motion to dismiss, first challenges e jurisdiction of is Court. Alough originally invoked is Court s diversity jurisdiction under 28 U.S.C. 1332, it now agrees at complete diversity of citizenship is lacking. [Plaintiff s Response, R. 15 at 2.] For purposes of diversity jurisdiction It argued complete diversity existed because it believed 1 is a citizen of Delaware and Tennessee. was a resident of eier New York or Massachusetts when it brought is action. [Plaintiff s Complaint, R. 1 at 2.] states at alough he lived in New York and practiced medicine in Massachusetts when first recruited him, he is a citizen of Tennessee now because he relocated to Tullahoma, Tennessee in April of 2009 and continues to reside ere. Affidavit at 5-6.] oes not challenge ese assertions and concedes at since moved prior to it filing is action, e parties are not diverse. [Plaintiff s Response at 2.] Nevereless, question jurisdiction exists because now argues at, pursuant to 28 U.S.C. 1331, federal subsequently-filed suit in e U.S. District Court for e Middle District of Tennessee seeks relief for a violation of federal law, e ADEA. In 1 Since is a limited liability company, it has e citizenship of all of its members. See Homfeld II, LLC v. Comair Holdings, Inc., 53 F. App x 731, 732 (6 Cir. 2002. is e sole member of [R. 1 at 1.] Unlike a LLC, a corporation is a citizen of e state under whose laws it is organized and e state where its principal place of business is located. 28 U.S.C. 1332(c(1. is organized under e laws of Delaware and has its principal place of business in Nashville, Tennessee. [R. 1 at 1.] Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 4 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 5 of 11 response, invokes e well-pleaded complaint rule, arguing at has failed to properly allege federal question jurisdiction in its complaint for declaratory judgment and has not sought leave to amend its complaint. argument misses e mark. Ordinarily, to invoke federal question jurisdiction, a federal question must appear on e face of e plaintiff s complaint, and not in anticipation of a defense based on federal law. Louisville & Nashville R.R. v. Mottley, 211 U.S. 149 (1908. However, e rule is different when a declaratory judgment plaintiff brings an action under 28 U.S.C. 2201 at asserts a defense to an impending claim. In such situations, federal question jurisdiction will be found when e declaratory judgment defendant s reatened coercive action would present a federal question. See Skelly Oil v. Phillips Petroleum Co., 339 U.S. 667 (1950; Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1 (1983; AmSou Bank v. Dale, 386 F.3d 763 (6 Cir. 2004. Thus, it is e character of e reatened action, and not e defense, which will determine wheer ere is federal-question jurisdiction in e District Court. AmSou, 386 F.3d at 775 (quoting Pub. Serv. Comm n v. Wycoff Co., 344 U.S. 237, 248 (1952. By its very nature, en, is inquiry is not confined to e allegations contained in e initial pleading seeking declaratory relief. 2 That Haidek s reatened action presents a federal question and ereby confers subject matter jurisdiction over is case is beyond doubt. Haidek believed at Lake Cumberland had discriminated against him because of his age when it rescinded its recruitment offer. Among oer ings, e federal ADEA prohibits an employer from refusing to hire an individual because 2 Moreover, e Court does not agree at a federal issue is absent from e face of complaint for declaratory relief. Alough e complaint does not allege federal question jurisdiction as e basis for is Court s subject matter jurisdiction, it specifically sought a declaration at was not entitled to any relief under e federal Age Discrimination in Employment Act. [R. 1 at 15.] Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 5 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 6 of 11 of his age, and expressly auorizes private causes of action provided certain administrative steps are first taken. 29 U.S.C. 623, 626. In January 2009, took e first step towards bringing an action when he filed a charge of discrimination against Equal Employment Opportunity Commission. Moreover, i e was apparently aware at was contemplating a claim under e ADEA because its declaratory complaint expressly requests a determination at was not entitled to any relief under e ADEA. Eventually, action before e federal court in Tennessee would be predicated on e ADEA, and us a federal question. Accordingly, e Court finds at it has jurisdiction over complaint despite e fact at it failed to allege e presence of a federal question in its initial pleading. B. Having found at subject matter jurisdiction exists, e Court now must determine wheer it should exercise its discretionary jurisdiction under e Declaratory Judgment Act, 28 U.S.C. 2201(a. See Brillhart v. Excess Ins. Co., 316 U.S. 491, 494 (1942 (exercise of jurisdiction under e Declaratory Judgment Act is not mandatory; see also Bituminous Cas. Corp. v. J & L Lumber Co., Inc., 373 F.3d 807, 812 (6 Cir. 2004. [D]istrict courts possess discretion in determining wheer and when to entertain an action under e Declaratory Judgment Act, even when e suit oerwise satisfies subject matter jurisdictional prerequisites. Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995. In oer words, alough e District Court has jurisdiction of e suit brought under e Declaratory Judgment Act, it [i]s under no compulsion to exercise at discretion. Brillhart, 316 U.S. at 494. Moreover, a district court does not need to point to exceptional circumstances in declining to exercise jurisdiction in a Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 6 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 7 of 11 declaratory judgment suit. See Wilton, 515 U.S. at 286. Therefore, because eeks a declaratory judgment, is Court, in its discretion, must determine wheer is case is appropriate for such relief. In making is assessment, e Court should determine wheer e judgment will serve a useful purpose in clarifying and settling e legal relationships in issue and wheer it will terminate and afford relief from e uncertainty, insecurity, and controversy giving rise to e proceeding. Broerhood Mut. Ins. Co. v. United Apostolic Lighouse, Inc., 200 F. Supp. 2d 689, 692 (E.D. Ky. 2002 (citations omitted. A full inquiry into all relevant considerations must be made, taking into account e following five factors: (1 wheer e declaratory action would settle e controversy; (2 wheer e declaratory action would serve a useful purpose in clarifying e legal relations in issue; (3 wheer e declaratory remedy is being used merely for e purpose of procedural fencing or to provide an arena for a race for res judicata; (4 wheer e use of a declaratory action would increase e friction between our federal and state courts and improperly encroach on state jurisdiction; and (5 wheer ere is an alternative remedy which is better or more effective. See Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6 Cir. 2000 (citations omitted. Here, ese factors do not weigh in favor of exercising discretional jurisdiction to resolve e controversy. Wi regard to e first factor, a declaration about wheer e contemplated relationship between e parties was at of an independent contractor or employer-employee would not necessarily settle e matter. If e Court were to determine at e recruiting agreement would have established an employment relationship between and en e broader issues of wheer e hospital violated federal and state age discrimination laws by widrawing e proposed contract and giving it to anoer physician would remain for e federal court in Tennessee to resolve. Accordingly is factor weighs against discretionary jurisdiction. Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 7 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 8 of 11 The Court also believes e second factor - wheer e declaratory judgment would serve a useful purpose in clarifying e legal relations at issue - weighs against hearing is case. The Six Circuit has noted at ere is little utility in a declaratory action at is brought for a determination of liability on an already-accrued damages claim when a suit for relief on e underlying coercive claim is also pending. See AmSou Bank v. Dale, 386 F.3d 763, 786-87 (6 Cir. 2004. This is e situation here since e injuries alleged by are dependent on historical occurrences raer an ongoing conditions. See id. at 787-88. Moreover, e Six Circuit was emphatic at where resolution of a pending coercive suit would address e issues raised in e declaratory action, e second factor weighs heavily in favor of dismissing e declaratory judgment suit. Id. at 786. As e AmSou court noted, Where a pending action, filed by e natural plaintiff, would encompass all e issues in e declaratory judgment action, e policy reasons underlying e creation of e extraordinary remedy of declaratory judgment are not present, and e use of at remedy is unjustified. AmSou, 386 F.3d at 787. In is case, defense at it contemplated a independent contractor, and not a employer-employee, relationship would need to be resolved by e federal court in Tennessee, if e hospital chooses to raise it. Under e ird factor, is case presents e appearance of procedural fencing or a race for res judicata, which weighs in favor of dismissal. Instead of filing suit immediately, contacted in an attempt to enter good fai settlement negotiations. It complied wi request for a written settlement demand and acceded to its request at it be given irty days or so to look into e matter. When at time was up, e hospital indicated it would need more time to make a decision. About ten days later, on June 8, informed e hospital at he had drafted a complaint and was ready to file and wanted to Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 8 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 9 of 11 know wheer he would need to do so. again demurred, saying at it should have someing substantive [ ] one way or e oer by e end of e week. When e week s end arrived, counsel for advised apparently out of e blue, at e instant declaratory action had been filed. rejects e implication at it sandbagged does not contest ese facts but [Plaintiff s Response at 11.] Instead, it states at is declaratory action was necessary because it was oerwise presented wi a Hobson s choice - eier settle Haidek s claims or face e possibility of having to defend itself in New York or Massachusetts or Tennessee or whatever oer jurisdiction Defendant chose. [Id.] Wheer or not is can be called sandbagging, such stalling by a declaratory plaintiff so at it might be able to file first and get its choice of venue is precisely what e ird factor aims to discourage. Again, e Six Circuit s opinion in AmSou is instructive. Faced wi similar dilatory tactics by e declaratory plaintiff, e Six Circuit held at such maneuvering weighs heavily against e exercise of jurisdiction. See AmSou, 386 F.3d at 788-790. It stated, Courts take a dim view of declaratory plaintiffs who file eir suits mere days or weeks before e coercive suits filed by a natural plaintiff and who seem to have done so for e purpose of acquiring a favorable forum. Allowing declaratory actions in ese situations can deter settlement negotiations and encourage races to e courouse, as potential plaintiffs must file before approaching defendants for settlement negotiations, under pain of declaratory suit. This also dovetails wi [e second factor]: where a putative defendant files a declaratory action whose only purpose is to defeat liability in a subsequent coercive suit, no real value is served by e declaratory judgment except to guarantee to e declaratory plaintiff her choice of forum - a guarantee at cannot be given consonant wi e policy underlying e Declaratory Judgment Act. Id. at 788. The court furer invoked case law from oer jurisdictions finding at allowing declaratory actions to continue under ese circumstances would lead to needless litigation occasioning waste of judicial resources, delay in resolution of controversies and misuse of Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 9 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 10 of 11 judicial process to harass an opponent in litigation. Id. (citing BASF Corp. v. Symington, 50 F.3d 555, 558-59 (8 Cir. 1995. The four factor requires a determination of wheer e use of a declaratory action would increase friction between federal and state courts. Courts usually consult several factors in 3 making is determination. However, since ere is no parallel state court proceeding between e parties, ere is little risk of friction between federal and state courts in is case. Moreover, because underlying coercive action is predicated on bo state and federal causes of action ere is no reason to believe at a state court would be in a better position to evaluate factual issues in is case. Accordingly, is factor weighs in favor of exercising jurisdiction. Finally, under e fif factor, e Court must determine wheer ere is an alternative remedy which is better or more effective. In evaluating is factor, e Six Circuit in AmSou noted at [t]he existence of a coercive action is important to our determination at is declaratory action would serve no useful purpose. Id. at 791. Alough it cited case law from district courts in Michigan finding at a pending coercive action helps to sharpen and refine issues to be decided, see id. (citing Albie s Food, Inc. v. Menusaver, Inc., 170 F.Supp.2d 736, 740 (E.D. Mich. 2001; Pakideh v. Ahadi, 99 F.Supp.2d 805, 807-09 (E.D. Mich. 2000, it ultimately was unsure at is factor weighs heavily in favor of or against entertaining ese declaratory actions. AmSou, 386 F.3d at 788. For many of e reasons already stated, e Court believes at is factor tends to weigh against exercising discretion in e present case, albeit only moderately so. 3 Courts consider (1 wheer e underlying factual issues are important to an informed resolution of e case; (2 wheer e state trial court is in a better position to evaluate ose factual issues an is e federal court; and (3 wheer ere is a close nexus between e underlying factual and legal issues and state law and/or public policy, or wheer federal common or statutory law dictates a resolution of e declaratory judgment action. Scottsdale, 211 F.3d at 968. Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 10 of 11
Case 6:09-cv-00200-GFVT Document 19 Filed 03/17/10 Page 11 of 11 In sum, en, ere are four factors at weigh in favor of dismissing is case, two of which weighing heavily so, and one factor at weighs in favor of exercising jurisdiction. On balance, erefore, e clear weight of ese factors falls against exercising jurisdiction, and e Court will decline to do so. As a result, e Court need not reach e arguments concerning venue. as follows: III. Accordingly, and e Court being duly and sufficiently advised, it is hereby ORDERED 1. The Defendant s Motion to Dismiss [R. 8] is GRANTED and alternative Motion to Transfer [R. 8] is DENIED; 2. This matter is DISMISSED WITHOUT PREJUDICE and STRICKEN from e Court s active docket; and This e 17 day of March, 2010. Case 3:09-cv-00570 Document 36-1 Filed 03/18/2010 Page 11 of 11