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.
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
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 ...