United States District Court, D. Vermont
KINDRED NURSING CENTERS EAST, LLC d/b/a KINDRED TRANSITIONAL CARE AND REHABILITATION -BIRCHWOOD TERRACE, Plaintiff,
ESTATE OF BARBARA L. NYCE, KINSLEY F. NYCE, and ROGER G. NYCE, Defendants.
DECISION ON MOTION TO DISMISS OR STRIKE, CROSS-MOTION
FOR PARTIAL SUMMARY JUDGMENT, AND MOTION FOR LEAVE TO FILE
SECOND AMENDED COMPLAINT (Docs. 74, 78, 83)
Geoffrey W. Crawford, Judge United States District Court
case is a dispute between a nursing home (Plaintiff Kindred
Nursing Centers East, LLC ("Kindred")); the Estate
of Barbara Nyce; and Roger and Kinsley Nyce, sons of Barbara
Nyce, who received care from Kindred before her death on May
25, 2015. Alleging fraudulent conveyance and breach of
contract, Kindred originally sought to recover a substantial
balance owed for nursing home care provided to Barbara Nyce.
Kindred alleges that the sons made use of a power of attorney
during the last years of their mother's life to enrich
themselves at her expense.
motions are currently pending. First, Kindred seeks to strike
or dismiss the counterclaims against it. (Doc. 74.) Second,
the Estate seeks partial summary judgment as to
paragraphs 42 and 43 in Kindred's Amended Complaint.
(Docs. 77, 78.) Third, Kindred seeks to file a Second Amended
Complaint which sets forth a single cause of action under the
Vermont Fraudulent Transfer Act, 9 V.S.A. §§
2285-2295. (See Doc. 83-4.) Before addressing those
pending motions, the court pauses briefly to address
jurisdictional and real-party-in-interest questions that it
asked the parties to brief.
Jurisdiction and Real Party in Interest
Entry Order filed on March 28, 2017, the court expressed
concern regarding subject matter jurisdiction in this case,
as well as whether Kindred is the real party in interest.
(Doc. 88.) The parties have filed memoranda at the
court's request. (Docs. 90, 91, 92, 93.) The court
appreciates the parties' attention to these concerns, and
sets forth its conclusions below.
parties agree that there is complete diversity in this case.
(Doc. 90 at 1; Doc. 91 at 1; Doc. 92 at 1.) The court sees no
basis for concluding otherwise.
the amount in controversy, the proposed Second Amended
Complaint (Doc. 83-4) seeks less than the $75, 000 sum that
is necessary for diversity jurisdiction under 28 U.S.C.
§ 1332. Notwithstanding that development, it appears
that the court's jurisdiction is not jeopardized.
"nce a case that was initiated in state court has
been removed properly, subsequent events that reduce the
amount recoverable-such as the plaintiffs amendment of the
complaint-will not defeat the federal court's
subject-matter jurisdiction." Charles Alan Wright, et
al., Federal Practice & Procedure: Jurisdiction and
Related Matters § 3725.2 (4th ed.) (WL updated Apr.
2017) (citing cases, including St. Paul Mercury Indemnity
Co. v. Red Cab Co., 303 U.S. 283 (1938)). In 1988, after
St. Paul Mercury was decided, 28 U.S.C. § 1447
was amended to include the following: "If at any time
before final judgment it appears that the district court
lacks subject matter jurisdiction, the case shall be
remanded." 28 U.S.C. § 1447(c). Kindred suggests
that the change to § 1447 overturned the holding in
St. Paul Mercury. (Doc. 91 at 4.)
court rejects that argument for the reasons articulated in
Flynn v. Schwan 's Consumer Brands Inc., No. 15
Civ. 4509(CM), 2015 WL 4560870, at *2 (S.D.N.Y. July 27,
2015), and Purple Passion, Inc. v. RCN Telecom Services,
Inc., 406 F.Supp.2d 245, 245 (S.D.N.Y. 2005). The 1988
amendment to § 1447 was stylistic; cases since 1988
affirm that jurisdiction is not divested by subsequent
events; and a conclusion to the contrary would facilitate
gamesmanship and forum-shopping. Flynn, 2015 WL
4560870, at *2. The Supreme Court's decision in
Powerex Corp. v. Reliant Energy Services, Inc., 551
U.S. 224 (2007), is not to the contrary. See Beck
Chevrolet Co. v. Gen. Motors LLC, No. 11 Civ. 2856
(AKH), 2012 WL 12925023, at *1 (S.D.N.Y. Aug. 23, 2012).
Real Party in Interest
court previously expressed its concern that Kindred might
lack authority to pursue claims on behalf of the Estate
against the Nyce sons. (Doc. 88 at 2.) Kinsley Nyce and the
Estate assert that Kindred is not the real party in interest
to pursue claims for disgorgement and other equitable
remedies intended to recover amounts allegedly taken
improperly from Barbara Nyce by her sons. (Doc. 90 at 3.)
They argue that, under the proposed Second Amended Complaint
(Doc. 83-4), "there is no valid claim for attorney's
fees, and there can be no valid fraudulent transfer
claim." (Doc. 90 at 3.) They further argue that, if
there were a valid fraudulent-transfer claim, the resulting
money judgment would become a perfected claim against the
Estate in the probate proceedings, thereby running afoul of
the "probate exception" to federal jurisdiction.
real party in interest principle . . . ensures that only a
person who possesses the right to enforce [a] claim and who
has a significant interest in the litigation can bring the
claim." Cortlandt St. Recovery Corp. v. Hellas
Telecomms. S.A.R.L., 790 F.3d 411, 420 (2d Cir. 2015)
(alteration in original) (internal quotation marks omitted).
Kindred is the proper party to pursue a claim for the
attorneys' fees it incurred in obtaining relief from
Medicaid's suspension of Barbara Nyce's coverage. It
alleges that it paid the fees and that the suspension
occurred due to misconduct by Kinsley and Roger Nyce.
Whatever the merits of the claim may be-and these are
discussed below-Kindred is the correct party to seek recovery
of the legal expenses it paid out to address the suspension
does not appear to have any interest (obviously) in the
alleged conversion of Barbara Nyce's assets, both cash
and real property, by her sons before her death. But unless
the court is mistaken, it was Kindred which opened the estate
and it is Kindred's chosen attorney Ms. Mobbs who is
pursuing a claim for disgorgement against the heirs Kinsley
and Roger Nyce for the ultimate benefit of the heirs Kinsley
and Roger Nyce. (See Doc. 35-1 at 1 (June 21, 2016
probate court Order noting that Kindred opened the estate on
Ms. Nyce's behalf as a principal creditor).)
court intends no criticism of Ms. Mobbs for opening the
estate. No one else had done so, and at the time the estate
appears to have owed a substantial amount of money to Kindred
for care provided to Barbara Nyce. Section 903(2) of Title 14
authorizes a creditor of the decedent to serve as
administrator under certain conditions. The appointment of
the administrator lies outside the authority of this court
and is exclusively reserved to the probate court.
appears that Kindred is no longer a creditor. One point on
which both sides agree is that the acceptance by Kindred of
the Medicaid payment relieved the estate of any further
obligation to pay for Barbara Nyce's care. For what
purpose then does an attorney retained by Kindred remain
active in this court seeking an accounting, disgorgement, and
other remedies against the Nyce brothers? Before this case
proceeds further, this court seeks clarification of the
following question: does Attorney Mobbs have authority from
the probate court to sue in this court to recover the money
and property which she alleges the Nyce brothers took
improperly from their mother during her last year of life?
This claim for disgorgement is entirely distinct from
Kindred's own claim against the Nyce brothers for legal
may take the form of an order from the probate court. The
parties may stipulate to it (unlikely) or there may be some
resolution which the court does not foresee. But the pursuit
of the Nyce brothers by counsel chosen by Kindred on behalf
of the Nyce brothers (and other heirs if there are any) is an
issue which must be resolved before the court and the parties
can plan for a trial. The court requires a filing by Attorney
Mobbs on this issue within 30 days. Kinsley Nyce may respond
within 15 days.
Kindred's Motion to Amend
proposed Second Amended Complaint would eliminate the
breach-of-contract claim, and allege only a single cause of
action under the Vermont Fraudulent Transfer Act (VFTA), 9
V.S.A. §§ 2285-2295. (See Doc. 83-4.)
Kindred alleges that, when Barbara Nyce was admitted to its
nursing home in March 2014, Defendants agreed to inform
Kindred of any changes in her assets and to pursue obtaining
Medicaid coverage on her behalf. (Id. ¶ 13.)
Kindred alleges that Defendants did neither of those things.
Kindred asserts that Barbara Nyce's sons fraudulently
transferred her assets to enrich themselves. (See
Id. ¶¶ 17-19, 29.) According to Kindred,
Defendants failed to secure Medicaid benefits on behalf of
Barbara Nyce, and Kindred itself incurred expenses in
obtaining those benefits. (Id. ¶¶31, 39.)
relief requested, Kindred notes that Barbara Nyce's
monthly "patient share" was allowed a deviation for
payment of non-covered medical expenses owed to Burlington
Health & Rehab, and that Defendants do not owe any
payment for the "patient share." (Id.
¶ 43.) With the balance of the nursing home bill
eliminated, Kindred seeks only payment of attorney fees and
costs it incurred in obtaining Medicaid coverage for Barbara
Nyce. The amount of this claim is $68, 007.74. (Id.
¶¶ 44, 61.) Kindred also seeks punitive damages and
a broad order against the two Nyce sons enjoining them from
dissipating Barbara Nyce's funds, selling her home,
spending fire insurance proceeds, and recovering funds taken
by the Nyce sons from their mother's bank accounts.
(Id. at 15-16.)
Federal Rules of Civil Procedure Rule 15(a)(2), a party may
amend its pleading with the court's leave, which
"should freely give leave when justice so
requires." Leave to amend "should generally be
denied in instances of futility, undue delay, bad faith or
dilatory motive, repeated failure to cure deficiencies by
amendments previously allowed, or undue prejudice to the
non-moving party." United States ex rel. Ladas v.
Exelis, Inc., 824 F.3d 16, 28 (2d Cir. 2016) (quoting
Burch v. Pioneer Credit Recovery, Inc., 551 F.3d
122, 126 (2d Cir. 2008)).
Nyce and the Estate oppose the proposed amendment, arguing
that it would be futile for four reasons. First, they argue
that there is no basis for recovery of fees and costs under
the American Rule. Second, they argue that there is no basis
for recovery of fees and costs under the third-party
litigation exception. Third, Kinsley Nyce asserts that he
cannot be personally liable for fees and costs because there
is nothing in the Durable Power of Attorney that creates