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Kindred Nursing Centers East, LLC v. Estate of Nyce

United States District Court, D. Vermont

June 20, 2016


          OPINION AND ORDER (DOCS. 17, 24)

          Geoffrey W. Crawford, United States District Court Judge.

         In this diversity-jurisdiction case-removed from Vermont Superior Court-Plaintiff Kindred Nursing Centers East, LLC d/b/a Kindred Transitional Care and Rehabilitation-Birchwood Terrace ("Birchwood") sues the Estate of Barbara L. Nyce (the "Estate"), as well as Barbara Nyce's sons Kinsley F. Nyce, and Roger G Nyce, claiming that Birchwood provided Barbara with skilled nursing care until her death on May 25, 2015, but that Defendants failed to make payment in full or secure Medicaid benefits as required by Barbara's Admission Agreement. (Doc. 5.)[1] Birchwood asserts two causes of action. First, Birchwood claims that Defendants breached the Admission Agreement by failing to provide information to the Vermont Department of Children and Families (DCF), required for the assignment of Medicaid benefits to Birchwood. Second, Birchwood claims that Defendants violated the Vermont Uniform Fraudulent Transfer Act, 9 V.S.A. § 2285, et seq., by transferring Barbara's funds and real property to Kinsley and Roger. The Estate-represented by its counsel Renee L. Mobbs, Esq.- has filed cross-claims against Kinsley and Roger, alleging breach of fiduciary duty, conversion, and embezzlement, and seeking an accounting, a declaratory judgment voiding the transfer of property, and a constructive trust. (Doc. 20.)

         Currently pending are two motions filed by Kinsley. First is Kinsley's Rule 12(b)(6) motion, in which he argues that Birchwood has no direct action against him or Roger for failure to secure Medicaid payment, and that Birchwood's fraudulent-transfer claim fails because all of Birchwood's claims against Barbara abated at her death. (Doc. 17.) Kinsley has also filed a Rule 12(b)(1) motion, arguing that, under the "probate exception, " the court lacks subject-matter jurisdiction over the Estate's cross-claims against him. (Doc. 24.) The court heard argument on the motions on June 6, 2016, at which time the motions were taken under advisement.


         The allegations in Birchwood's Complaint include the following. At all times relevant, Roger and Kinsley acted as attorneys-in-fact for their mother, Barbara, under a general durable power of attorney executed on September 5, 2006 (the POA). Barbara was admitted to Birchwood's skilled-nursing facility on or about March 18, 2014, and was a resident there until her death on May 25, 2015.

         On or about March 18, 2014, in connection with her admission to Birchwood, Barbara entered into a written Admission Agreement with Birchwood. Under the terms of the Admission Agreement, Birchwood agreed to provide Barbara with skilled nursing services and other items in exchange for, among other things, the promise to pay Birchwood for services and care rendered, to secure third party payor sources such as Medicaid to pay for the cost of her care, and to assign all Medicaid benefits to Birchwood. Also under the Admission Agreement, any and all rights to receive third-party payments, including Medicaid, were assigned to Birchwood. Barbara also agreed to inform Birchwood of any changes in her assets and also to pursue obtaining Medicaid coverage on her behalf.

         After her admission, an application for Medicaid long-term care benefits was filed on her behalf with DCF. According to DCF, in the 60 months prior to her admission, Barbara owned: (a) certificates of deposit (CDs) with Citizen's Bank (Citizen's) jointly with Roger and Kinsley; (b) a retirement account with Citizen's; (c) CDs with People's United Bank (People's) jointly owned with Roger or Kinsley; (d) a checking account with People's owned jointly with Roger and Kinsley; and (e) a money market account with People's. In response to a verification request by DCF, Birchwood requested all statements for those accounts.

         On or about May 8, 2015, Birchwood discovered that at least $176, 506.35 of Barbara's funds, held individually at People's, were withdrawn by and paid to Kinsley and Roger on June 19, 2014. Birchwood also learned that at least $440, 089.22 of funds held jointly with Barbara were withdrawn by and paid to Kinsley and Roger. In addition, Birchwood discovered that approximately $119, 484.50 held by Citizen's were withdrawn by and paid to Kinsley or Roger.

         According to a Jointly Held Liquid Resource Statement prepared by Defendants on January 18, 2015 and submitted to DCF, the funds from the Citizen's Bank CDs were "no longer available" because "the funds have so far as is known been utilized for the life needs of Barbara L. Nyce." (Doc. 5-16 at 34.) The statement further indicated that Barbara also maintained a house and "was most demanding that the house, taxes, services, third party maintenance and work and all similar elements be maintained for her return to the residence. All of these costs as well as the predatory practices of several persons in the greater Burlington area substantially depleted Barbara's funds." (Id.) On or about March 3, 2015, DCF sent a verification request seeking proof to substantiate the claims in the Jointly Held Liquid Resource Statement. DCF further requested proof of the disposition of the People's accounts. After extensions of time, the deadline for providing verifications was October 7, 2015. As of the date the Complaint's verification was signed, September 25, 2015, no additional information had been provided to DCF.

         Birchwood provided Barbara with skilled nursing care and other services and items from the date of her admission through the date of her death on May 25, 2015. Defendants failed to make payment in full to Birchwood on Barbara's behalf, and failed to secure Medicaid benefits.

         On or about August 20, 2014, five months after Barbara's admission to Birchwood, she transferred her interest in her Shelburne, Vermont property to Kinsley and Roger for consideration of $ 10. At the time of that transfer, Barbara owed Birchwood over $31, 440.03. As a result of Defendants' failure to make payment in full or to secure Medicaid benefits, an outstanding balance of $137, 586.92 is owed to Birchwood.


         I. Kinsley's Rule 12(b)(6) Motion

         A. Rule 12(b)(6) Standard

         To survive a Rule 12(b)(6) motion, a complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal,556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Fed. R. Civ. P. 8(a)(2). Dismissal is appropriate when "it is clear from the face of the complaint, and matters of which the court may take judicial notice, that the ...

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