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April 14, 2004.

IN RE: ESTATE OF ELIZABETH ELAINE RATH, a disabled adult, on behalf of it and all others similarly situated, Plaintiffs,

The opinion of the court was delivered by: MICHAEL J. REAGAN, District Judge


On January 21, 2004, the Estate of disabled adult Elizabeth Elaine Rath (referred to herein simply as "Rath") filed a putative class action suit in the Circuit Court of St. Clair County, Illinois. Rath alleged that Abbott Laboratories, Inc. (a) engaged in unfair and deceptive practices which violated the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2, and (b) was unjustly enriched through an unlawful scheme which entailed manipulation of Medicare reimbursement rates. More specifically, Rath claimed as follows.

Abbott manufactures and sells durable medical equipment, including enteral feeding equipment (sold by Abbott's "Ross Products" division). Through Ross Products, Abbott counseled health care providers such as skilled nursing facilities (the "Providers") to submit claims to the Medicare program for enteral feeding pumps and plastic pump sets. Through Ross Products, Abbott further advised the Providers that Medicare allowed separate reimbursement for enteral feeding pumps and plastic pump sets. Acting on this advice, the Providers fraudulently billed Medicare for this equipment, which resulted in the Providers receiving two payments from Medicare — one via reimbursement for the plastic pump set and another through a separate charge for the enteral feeding pump itself, despite the fact that the enteral feeding pump had been supplied to the Providers at no cost.

  Additionally, Abbott (through Ross Products) offered up-front payments to the Providers who entered into written contracts with Ross Products. Abbott told the Providers that by calling the up-front payment a "signing bonus" or a "conversion bonus," the Providers would be excused from reporting the up front-payment to the Government as a discount on durable medical equipment. Thus, Rath alleged, Abbott (through Ross Products) attempted to prevent Medicare from determining the actual per product price which Ross charged the Providers for enteral feeding equipment. Finally, Rath alleged that Ross provided false documentation to the Providers, documentation used to establish a per pump cost in the event of a Medicare audit. These deceptive practices resulted in the payment of fraudulently — inflated prices for enteral feeding equipment by Rath and similarly situated individuals.

  As class representative, Rath sought damages on behalf of all persons in the United States who paid some proportion of the Medicare — charged costs, submitted under Medicare Part B, for enteral feeding pumps manufactured by Abbott, its subsidiaries or agents, from January 1, 1992 to May 15, 2003. Rath estimated this class to include "at least tens of thousands of Medicare patients throughout the United States" (Doc. 2, p. 8).

  Served with Rath's complaint on January 29, 2004 (see Doc. 1, ¶ 1), Abbott removed the action to this United States District Court on March 1, 2004 (the 30th day after service of the complaint). The case was assigned to Judge Herndon, who recused himself on March 5, 2004, to Judge Stiehl, who recused himself on March 8, 2004, and to Chief Judge Murphy, who recused himself on March 10, 2004.

  Thereafter, the case was assigned to the undersigned District Judge, before whom the case now comes for threshold review.*fn1 The principal purpose of this review is to ascertain that subject matter jurisdiction properly lies. See, e.g., Wisconsin Knife Works v. National Metal Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986)("The first thing a federal judge should do when a complaint is filed is check to see that federal jurisdiction is properly alleged."). The party invoking federal jurisdiction — here, Defendant Abbott — bears the burden of demonstrating that all jurisdictional requirements have been met. Chase v. Shop 'N Save Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997).

  Rath's state court complaint expressly disavows any federal jurisdictional basis for this lawsuit: "There are no federal questions raised, and diversity is lacking because Defendant is an Illinois corporation, with its principal place of business in Illinois, and plaintiff is an Illinois citizen, as are many others in the class." Doc. 2, ¶ 7. In the removal notice, however, Defendant Abbott claims that this Court may exercise subject matter jurisdiction under the federal question statute, 28 U.S.C. § 1331: "federal question jurisdiction exists in this action because plaintiff's right to relief under its state law claim depends on the resolution of substantial questions of federal Medicare law." Doc. 1, ¶ 13.

  28 U.S.C. § 1331 confers original jurisdiction on federal district courts over all civil actions arising under the Constitution or laws of the United States. In assessing the propriety of removal based on federal question jurisdiction, this Court applies the well-pleaded complaint rule. That rule provides that a "cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law." Moran v. Rush Prudential HMO, Inc., 230 F.3d 959, 966 (7th Cir. 2000), citing Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 61 (1987).

  Under the well-pleaded complaint rule, the Court examines the state court complaint, not the defendant's response, "to determine whether the plaintiff's claim falls under federal question jurisdiction." Id.

  A federal defense to a claim arising under state law does not create jurisdiction "and therefore does not authorize removal." Moran, 230 F.3d at 967, citing Blackburn v. Sundstrand Corp., 115 F.3d 493, 495 (7th Cir.), cert. denied, 522 U.S. 997 (1997). Similarly insufficient is the fact that a federal question may be implicit in a plaintiff's claim. See Doe v. Allied — Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993).*fn2

  In MerrellDow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 807-08 (1986), the United States Supreme Court explained:

  Article III of the Constitution gives the federal courts power to hear cases "arising under" federal statutes. That grant of power, however, is not self-executing, and it was not until the Judiciary Act of 1875 that Congress gave the federal courts general federal — question jurisdiction. Although the constitutional meaning of "arising under" may extend to all cases in which a federal question is "an ingredient" of the action, Osborn v. Bank of the United States, 9 Wheat. 738, 823, 6 L.Ed. 204 (1824), we have long construed the statutory grant of federal — question jurisdiction as conferring a more limited power. . . . Under our longstanding interpretation of the current statutory scheme, the question whether a claim "arises under" federal law must be determined by reference to the "well-pleaded complaint." The Supreme Court concluded that even if a complaint alleges a violation of a federal statute as an element of a state cause of action, unless Congress provided a federal private right of action for that violation, the complaint does not state a claim "arising under" federal law. Id., 478 U.S. at 817.

  In the case at bar, Abbott maintains that Rath's claims "rise or fall" depending on the determination of questions of federal Medicare law. Doc. 27, p. 1. Having carefully assessed the ...

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