United States District Court, S.D. Illinois
October 7, 2005.
PATRICK B. KOMESHAK, d/b/a KOMESHAK CHIROPRACTIC, and DALE FISCHER, D.C., d/b/a LEBANON CHIROPRACTIC, individually and on behalf of others similarly situated, Plaintiffs,
CONCENTRA, INC., Defendant and Third-Party Plaintiff, v. NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK) and THE AMERICAN NATIONAL RED CROSS, Third-Party Defendants. RICHARD COY, D.C., COY CHIROPRACTIC HEALTH CENTER, INC., and THOMAS L. KALTENBRONN, D.C., individually and on behalf of others similarly situated, Plaintiffs, v. FOCUS HEALTHCARE MANAGEMENT, INC., Defendant and Third-Party Plaintiff, v. NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK) and THE AMERICAN NATIONAL RED CROSS, Third-Party Defendants.
The opinion of the court was delivered by: DAVID HERNDON, District Judge
MEMORANDUM AND ORDER
Before the Court are (1) a motion to remand submitted by
Plaintiffs Patrick B. Komeshack, d/b/a Komeshak Chiropractic, and
Dale Fischer, D.C., d/b/a Lebanon Chiropractic, individually and
on behalf of others similarly situated (together, the "Komeshak
Plaintiffs" or "Plaintiffs") (Case No. 05-CV-261-DRH (hereinafter
"Komeshack"), Doc. 25); (2) a motion to remand submitted by
Plaintiffs Richard Coy, D.C., Coy Chiropractic Health Center,
Inc., and Thomas L. Kaltenbronn, D.C., individually and on behalf
of others similarly situated (together, the "Coy Plaintiffs" or
"Plaintiffs") (Case No. 05-CV-349-DRH (hereinafter "Coy"), Doc.
17); and (3) a motion to stay all proceedings submitted by
Defendant Concentra (Komeshak, Doc. 55).
In Komeshak v. Concentra, Inc., Plaintiffs filed a class
action against Defendant Concentra in St. Clair County Circuit
Court on February 15, 2005. (Komeshak, Doc. 9.) On April 12,
2005, Defendant Concentra removed the case to federal court.
(Komeshak, Doc. 1.) On the same day, Concentra filed a
third-party complaint against Defendants National Railroad
Passenger Corporation ("Amtrak") and The American Red Cross ("ARC"). (Komeshak, Doc. 6.)
Plaintiffs filed their motion to remand on May 4, 2005.
(Komeshak, Doc. 25.) Defendant Concentra and third-party
Defendant ARC respond in opposition. (Komeshak, Docs. 39, 40.)
On September 21, 2005 Defendant Concentra filed a motion to
stay all proceedings. (Komeshak, Doc. 55.) Third-party Defendant
ARC responds in opposition to that motion. (Komeshak, Doc. 56.)
In Coy v. Focus Healthcare Management, Inc., Plaintiffs filed
a class action against Defendant Focus Healthcare Management
("Focus") on February 11, 2005 in Madison County Circuit Court.
(Coy, Doc. 2.) Third-party Defendant ARC removed to federal court
on May 17, 2005. (Coy, Doc. 1.) Plaintiffs filed their motion to
remand on June 3, 2005. (Coy, Doc. 17.) Defendant ARC responds in
opposition. (Coy, Doc. 25.)
Because Concentra and Focus are affiliated companies, and
because both cases pose "substantially identical questions of law
and fact," these two matters were consolidated in this Court on
August 1, 2005. (Coy, Doc. 37; Komeshak, Doc. 50.)
The two class-action complaints before the Court are quite
similar. (Komeshak, Doc. 9; Coy, Doc. 2.) The Komeshak Complaint
alleges violations of the Illinois Consumer Fraud and Deceptive
Business Practices Act, 815 ILCS 505/1 et seq. and other state
consumer-protection statutes, unjust enrichment, and civil conspiracy. (Komeshak, Doc. 9, pp. 17-23.) The Coy Complaint
alleges those claims in addition to breach of contract. (Coy,
Doc. 2, pp. 10-17.) Both sets of Plaintiffs, individually and on
behalf of the putative classes, request damages and other
appropriate relief. (Komeshak, Doc. 9; Coy, Doc. 2.)
Concentra asserts that jurisdiction in this Court is proper for
two reasons. First, Concentra argues that this matter commenced
on the date it was removed to federal court, and, under the
Class Action Fairness Act of 2005, Pub.L. No. 109-2, § 9,
119 Stat. 14 (amending 28 U.S.C. § 1332) ("CAFA" or the "Act"),
federal jurisdiction is proper. (Komeshak, Docs. 1, 40.) Second,
Concentra argues that this Court should exercise supplemental
jurisdiction over Plaintiff's state-law claims because
Concentra's third-party complaint against Amtrak and ARC arise
out of the same case or controversy. (Id.)
To support its supplemental-jurisdiction allegations, Concentra
filed a third-party complaint against Amatrak and ARC. (Komeshak,
Doc. 6.) In that Complaint, Concentra alleges that both Amtrak
and ARC are "payor[s] with financial responsibility for paying
medical p roviders for valid, covered health care services
rendered to [their] employees" (Komeshak, Doc. 6, p. 4), and
therefore [t]o the extent that the plaintiffs are entitled to
recover any damages from Concentra pursuant to the Complaint,
Concentra is entitled to contribution from Amtrak in an amount
equal to Amtrak's proportionate share of liability." (Komeshak,
Doc. 6, pp. 5-6.)
The Komeshak Plaintiffs moved to remand on May 4, 2005. (Komeshak, Doc. 25.) Plaintiffs first argue that because they
filed their Complaint on February 15, 2005 three days prior to
the CAFA's effective date the CAFA does not apply here. Second,
Plaintiffs argue that Concentra's third-party claims are an
insufficient basis to keep its state-law claims in federal court.
Concentra responds by claiming both that the CAFA should apply
here and that the facts are sufficient to establish supplemental
jurisdiction over Plaintiff's state-law claims. (Komeshak, Doc.
40.) In its response, ARC forgoes a CAFA argument, but raises
supplemental jurisdiction. (Komeshak, Doc. 39.)
In Coy, third-party Defendant ARC not Focus removed to
federal court. (Coy, Doc. 1.) ARC bases its argument for
supplemental jurisdiction in Coy on the same arguments advanced
in Komeshak. (Coy, Docs. 1, 25.)
Concentra's Motion to Stay is based on a stipulation of
settlement entered in a Pennsylvania case, First State
Orthopedic v. Concentra, Inc., E.D. Pa. Civil Action No.
02:05-cv-04951-AB. (Komeshak, Doc. 55.) Concentra argues that
this proposed settlement "encompasses all claims in this matter."
(Komeshak, Doc. 55.) ARC responds that Conentra's claims against
it fall outside the scope of the Pennsylvania settlement.
(Komeshak, Doc. 56.)
A. Removal Standard
A defendant may remove a case only if a federal district court
would have original jurisdiction over the action. See
28 U.S.C. § 1441; Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Statutes providing for
removal are construed narrowly, and doubts about removal are
resolved in favor of remand. Doe v. Allied-Signal, Inc.,
985 F.2d 908, 911 (7th Cir. 1993). The burden of establishing
jurisdiction in the federal courts falls on the party seeking
removal. Doe v. Allied Signal, Inc., 985 F.2d 908, 911 (7th
B. Class Action Fairness Act
Here, Defendant Concentra argues that federal jurisdiction
exists based on the CAFA. (Docs. 1, 40.) The CAFA was enacted by
Congress on February 18, 2005, and only applies to cases
commencing thereafter. Class Action Fairness Act of 2005,
Pub.L. No. 109-2, § 9, 119 Stat. 14 (amending
28 U.S.C. § 1332(d)(2)). Concentra argues that a case "commences" on date it
is removed, not the date on which it is filed in state court.
(Doc. 40, pp. 8-13.) Plaintiffs believe the opposite to be true.
(Doc. 25, pp. 2-4.)
Since the parties filed their pleadings, the Seventh Circuit
has taken up this issue on which their disagreement is founded.
In Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805 (7th Cir.
2005), the Seventh Circuit adopted the Tenth Circuit's holding
in Pritchett v. Office Depot, 404 F.3d 1232 (10th Cir. 2005),
that a case "commences" for purposes of the CAFA when the
plaintiff's complaint is filed in state court, not when it is
removed. Knudsen, 411 F.3d at 806 ("[A] civil action is
`commenced' for [CAFA purposes] when it is filed in state court
and not when some later step occurs in its prosecution."). The Komeshak Plaintiffs filed their case in state court on
February 15, 2005, three days prior to the CAFA's February 18,
2005 enactment date. Therefore, the Court finds that the CAFA is
not a proper basis of removal.
C. Third-Party Defendant ARC's Removal
Though Plaintiffs do not raise the issue, there is a question
in Coy about whether the case was properly removed. While
Defendant Concen tra removed Komeshak, it was third-party
Defendant ARC not Focus that removed Coy. The Court finds
that this removal was improper. Third-party defendants in a
state-court action may not remove to federal court. See State
Street Bank & Trust Co. v. Morderosian, 2000 U.S. App. LEXIS
26856 (7th Cir. Oct. 10, 2000) (citing Thomas v. Shelton,
740 F.2d 478, 486-86 (7th Cir. 1984). However, because Plaintiffs
failed to object to this procedural defect within thirty days of
removal, the Court does not remand the case on this ground. See
28 U.S.C. § 1447(c) ("A motion to remand the case on the basis
of any defect other than lack of subject matter jurisdiction must
be made within 30 days after the filing of the notice of
D. Supplemental Jurisdiction
Federal courts may, under limited circumstances, exercise
jurisdiction over state-law claims. 28 U.S.C. § 1367(a). As the
language of 28 U.S.C. § 1367 indicates, the state-law claim
must be part of "the same case or controversy" as a claim for
which independent federal jurisdiction exists. See
28 U.S.C. § 1367(a) ("[I]n any civil action of which the district courts have
original jurisdiction, the district courts shall have
supplemental jurisdiction over all other claims that are so
related to claims in the action within such original jurisdiction
that they form part of the same case or controversy under Article
III of the United States Constitution."); see also Baer v.
First Options of Chicago, Inc., 72 F.3d 1294, 1298 (7th Cir.
1995); Myers v. County of Lake, Ind., 30 F.3d 847, 849-50
(7th Cir. 1994). Claims that properly state a federal question
may not be remanded pursuant to section 1367. See Baker v.
Kingsley, 387 F.3d 649, 656 (7th Cir. 2004) ("[T]he authority
to remand pursuant to § 1367 extends only to claims that are not
within the district court's original jurisdiction.").
A state claim is part of the same case or controversy as a
federal claim when the claims have a "common nucleus of operative
fact." United Mine Workers of Am. v. Gibbs, 383 U.S. 715
(1966); see also City of Chicago v. Int'l College of Surgeons,
522 U.S. 156, 164-65 (1997); Groce v. Eli Lilly & Co.,
193 F.3d 496, 500 (7th Cir. 1999). A common nucleus exists when "the
relationship between [the federal] claim and the state claim
permits the conclusion that the entire action before the court
comprises but one constitutional `case.'" Int'l College of
Surgeons, 522 U.S. at 165 (quoting Gibbs,
383 U.S. at 725).
In deciding whether to exercise ju risdiction over state-law
claims, district courts "consider and weigh the factors of
judicial economy, convenience, fairness and comity." Wright v.
Associated Insurance Cos., 29 F.3d 1244, 1251 (7th Cir. 1994) (citing Carnegie-Mellon Univ. v. Cohill,
484 U.S. 343, 350 (1988)); see also City of Chicago v. Int'l Coll.
of Surgeons, 522 U.S. 156, 172-73 (1997). Using these factors,
"[d]istrict courts have discretion to retain or remand
supplemental claims." Adkins v. Illinois Central R.R. Co.,
326 F.3d 828, 836 (7th Cir. 2003) (citing Groce v. Eli Lilly &
Co., 193 F.3d 496, 500-01 (7th Cir. 1999).
As an initial matter, the Court finds that Defendants'
third-party claims against Amtrak and ARC fall within the
original subject matter jurisdiction of the federal courts. See
Adkins, 236 F.3d at 835-36 ("It is clear that an original,
stand-alone lawsuit against Amtrak would fall within the original
subject matter jurisdiction of the federal court."); American
Nat'l Red Cross v. S.G., 505 U.S. 247, 248 (1992) ("[T]he Red
Cross Charter's `sue and be sued' provision should be read to
confer jurisdiction [in the federal courts]."). Because the
Court may not remand claims that are within its original
jurisdiction, these claims must be retained.
The Court also finds that Plaintiffs' claims and Defendants'
third-party claims against Amtrak and ARC share a common nucleus
of operative fact. Plaintiffs' central allegations are that
Defendants Concentra and Focus perpetrated fraud by
"systematically, arbitrarily, and unlawfully reducing or denying
payments for medical services based on use of biased and
arbitrary computer software programs." (Komeshak, Doc. 9, p. 2;
see also Coy, Doc. 2.) Defendants, in turn, allege that third-party Defendants Amtrak and ARC, as two
purchasers of the software programs in question, "would be liable
for all or part" of any damages awarded to Plaintiffs. (Komeshak,
Doc. 6, p. 2; Coy, Doc. 3, p. 2.) Defendants, in other words,
argue that third parties including Amtrak and ARC are liable
for Plaintiffs' alleged losses. As such, both sets of claims
emanate from the same nucleus of facts.
These issues disposed of, the remaining relevant question in
the removal context is whether the Court should assert
supplemental jurisdiction over Plaintiffs' state-law claims. In
making this determination, the Court is guided by the principles
of judicial economy, convenience, fairness, and comity. Wright,
29 F.3d at 1251.
Based on these principles, the Court finds that Plaintiffs'
state-law claims should be remanded. Amtrak and ARC are only two
of Defendants' clients all of which, presumably, share
liability under Defendants' arguments. To bring Plaintiffs'
state-law claims into federal court solely on the entitlements
Amtrak and ARC have to federal jurisdiction would unfairly
disrupt Plaintiffs' forum choice. Plaintiffs' claims were brought
against Concentra and Focus not their clients for alleged
fraudulent conduct. The C ou rt finds the prospect of secondary
liability on the part of Amtrak and ARC insufficient to require
Plaintiffs to adjudicate their state-law claims in federal court.
E. Stay "Federal district courts have the inherent power to administer
their dockets so as to conserve scarce judicial resources."
Trippe Mfg. Co. v. American Pow er Conservation Corp.,
46 F.3d 624, 629 (7th Cir. 1995). Here, Concentra's Motion to Stay, as
noted above, is based upon a stipulation of settlement entered
into between Concentra and a putative class in the Eastern
District of Pennsylvania. (Komeshak, Doc. 55.)
At the time Conce ntra filed its motion, however, Judge Brody
of the Eastern District of Pennsylvania had not approved the
proposed settlement. (Komeshak, Doc. 55, p. 3.) For this reason,
the Court finds that Concentra's Motion to Stay is premature.
Therefore, for the reasons stated above, the Court GRANTS in
part and DENIES in part Plaintiffs' Motions to Remand.
(Komeshak, Doc. 25; Coy, Doc. 17.) The Court REMANDS
Plaintiffs' state-law claims in Komeshak v. Concentra, Case
No. 05-CV-261-DRH to the Circuit Court of St. Clair County,
Illinois, and RETAINS only Defendant Conentra's claims against
third-party Defendants National Railroad Passenger Corporation
and The American Red Cross. In Coy v. Focus Healthcare
Management, Inc., Case No. 05-CV-349-DRH, the Court REMANDS
Plaintiffs' state-law claims to the Circuit Court of Madison
County, Illinois, and RETAINS only Defendant Focus Healthcare Mangement's claims against third-party
Defendants National Railroad Passenger Corporation and The
American Red Cross. Finally, the Court DENIES Defendant
Concentra's Motion to Stay. (Komeshak, Doc. 55.)
IT IS SO ORDERED.
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