United States District Court, N.D. Illinois, Eastern Division
December 13, 2005.
DR. KIRSTEN KNUDSEN, D.C., Plaintiff, and CHRIS BAKER and VIKKI BAKER, Plaintiffs-Intervenors
LIBERTY MUTUAL INSURANCE COMPANY, Defendant.
The opinion of the court was delivered by: RUBEN CASTILLO, District Judge
MEMORANDUM OPINION AND ORDER
Dr. Kirsten Knudsen and Chris and Vikki Baker ("Plaintiffs")
sued Liberty Mutual Insurance Company ("Liberty") in March 2000
on behalf of themselves and a class of similarly situated
persons, alleging that Liberty improperly used medical cost and
utilization databases to reduce amounts paid for claims to
reimburse its customers for medical expenses incurred under its
insurance policies. On September 29, 2005, Cook County Circuit
Court Judge Julia Nowicki certified Plaintiffs' amended class
definition, and Liberty filed its second notice of removal to
federal court. At issue is Plaintiffs' motion to remand the case
to state court.
On March 30, 2005, Liberty filed its first notice of removal
from the Circuit Court of Cook County on the grounds that the
Class Action Fairness Act of 2005, Pub.L. 109-2, 119 Stat. 4
(2005) ("CAFA"), permitted removal of the class action to federal
court. On April 19, 2005, this Court ruled that the case was
improperly removed to federal court and remanded the case to
state court. See Order of April 19, 2005. Liberty petitioned for leave to
appeal the remand. The Seventh Circuit denied Liberty's petition.
Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805, 806 (7th Cir.
Liberty filed another notice of removal to federal court on
October 14, 2005 (R. 1), after the state court entered an order
on September 29, 2005, certifying the following plaintiff class:
All insureds of Liberty Insurance Company, its
affiliates and subsidiaries (collectively "Liberty"),
their third party beneficiaries and their assignees
who (1) submitted medical bills covered by a Liberty
insurance policy, (2) whose claims were adjusted by
Liberty, and (3) whose claims were paid in an amount
less than the medical charge, based upon the
application of a medical cost and utilization
(R. 22, Motion to Remand, Ex. A, Sept. 29 Order at 2.) On October
18, Liberty filed a Corrected Notice of Removal (R. 12), in which
Liberty contends that removal is now proper under the Class
Action Fairness Act because: (1) the September 29 order adds new
claims that do not relate back to the filing of the original
complaint in March 2000; and (2) some of the new claims are
completely preempted under the Employee Retirement Income
Security Act ("ERISA"). Plaintiffs filed the instant motion to
II. Class Action Fairness Act
The Class Action Fairness Act of 2005, Pub.L. 109-2,
119 Stat. 4 (2005), permits defendants to remove certain class actions to
federal court if minimal diversity of citizenship exists. CAFA
applies only to suits commenced on or after the date of its
enactment, February 18, 2005. Knudsen, 411 F.3d at 806. In
Liberty's first attempt at removal, Liberty argued that
Plaintiffs' proposed change of the class definition from "all Liberty insureds" to
"All Liberty Insurance Company and Liberty Fire Insurance Company
insureds," commenced a new action under CAFA. Id. at 806-07. In
denying Liberty's petition for leave to appeal, the Seventh
Circuit held that a new action was not commenced by the proposed
change in class definition. Id. While the Seventh Circuit left
open the possibility that "a new claim for relief (a new `cause
of action' in state practice), the addition of a new defendant,
or any other step sufficiently distinct that courts would treat
it as independent for limitations purposes, could well commence a
new piece of litigation for federal purposes," the Seventh
Circuit held that "[t]his possibility does Liberty no good,
however, because the change in class definition does not present
a novel claim for relief or add a new party." Id. at 807.
Since Knudsen, the Seventh Circuit has considered three other
cases where the defendant argued that a change in class
definition was sufficiently distinct so as to constitute the
commencement of a new action.*fn2 The Seventh Circuit denied
the petition for leave to appeal the district court's remand
order in each case and emphasized the unlikelihood that the
amendment to a class definition could ever constitute the
commencement of a new action under CAFA. In Schorsch v.
Hewlett-Packard, although the Seventh Circuit stated that it
"can imagine amendments [to the class definition] that kick off
wholly distinct claims," the Court of Appeals reiterated that
"creative lawyering will not be allowed to smudge the line drawn
by the 2005 Act. . . . Amendments to class definitions do not
commence new suits." 417 F.3d 748, 751 (7th Cir. 2005). Likewise,
in Schillinger v. Union Pacific R. Co., the Seventh Circuit
repeated that "the expansion of a proposed class does not
change the parties to the litigation nor does it add new claims."
425 F.3d 330, 334 (7th Cir. 2005) (emphasis added).
Nevertheless, Liberty claims that the instant case is the
"possibility" that the Seventh Circuit "can imagine." In other
words, Liberty argues that the state court certification of
Plaintiffs' amended class definition from all insureds of Liberty
Insurance Company to all insureds of Liberty, its affiliates and
subsidiaries, commenced a new action. The test for whether an
expanded class definition commences a new action for CAFA removal
purposes is whether the new claim "relates back" to the original
claim. A claim relates back when it arises out of the same
transaction or occurrence as the claim in the original
complaint.*fn3 Schorsch, 417 F.3d at 751. An amendment
relates back in Illinois "when the original complaint furnished
to the defendant all the information necessary . . . to prepare a
defense to the claim subsequently asserted . . ." Id.
Liberty alleges that the new class definition contains wholly
distinct claims because it: (1) involves additional policies; (2)
creates different theories of liability; (3) reaches back farther
in time; and (4) arises under federal law. Each of Liberty's
arguments fail. First, while the expanded class definition does
involve additional and different policies, "the potential for a
larger amount of legal research and discovery in and of itself is
not a significant enough step to create new litigation."
Schillinger, 425 F.3d at 334. In Schillinger, the plaintiffs
wanted to expand the class from Illinois land owners who
allegedly had been harmed by Union Pacific Railroad Company's
("UPRR") use of rights-of-way on their land to property owners
nationwide who owned land over which UPRR had a right-of-way.
Id. at 333. Despite the creation of a nationwide class of
plaintiffs, the Seventh Circuit held that this change did not
create new litigation. Id. at 334. In the instant case, the expansion in research and discovery for Liberty under the new
class definition is narrower than in Schillinger and involves
entities related to Liberty. Thus, the new class definition does
not commence a new action by expanding the sheer number of
policies at issue.
Second, Liberty argues that the addition of its "affiliates and
subsidiaries" created new legal theories of liability based on
the claim that Liberty is an "alter-ego" of the affiliates and
subsidiaries. However, Illinois state courts and the Seventh
Circuit agree that new legal theories, in particular those adding
vicarious liability theories of liability, do not create new
claims. See Knudsen, 411 F.3d at 806 ("a plaintiff may assert
an entirely novel legal theory in midsuit without creating a
`new' claim in the sense that the defendant could block it by
asserting that it had been propounded after the period of
limitations expired"); Marek v. O.B. Gyne Specialists II, S.C.,
319 Ill. App. 3d 690, 699, 746 N.E.2d 1, 9 (1st Dist. 2001)
(claim related back because party could not claim surprise or
prejudice where amended pleading contained allegations identical
to those made against party's agent, employee and shareholder in
original complaint); Steinberg v. Dunseth,
276 Ill. App. 3d 1038, 1046, 658 N.E.2d 1239, 1246 (4th Dist. 1995) (finding that
the addition of vicarious liability counts that were similar to
direct liability counts in the original complaint related back,
and "the fact that there is a change in [legal] theory is not
significant" by itself). Liberty's reliance on Kennedy v. King,
252 Ill. App. 3d 52, 56, 623 N.E.2d 955, 958 (4th Dist. 1993), is
misplaced. While Liberty alleges a new claim commenced a new
action in the instant case, in Kennedy, the state court held
that a subsequent action for agency or negligent entrustment
did not relate back to an original action for negligence
against the automobile owner. Id. Thus, new legal theories, if
any, do not provide a basis for removal to federal court.
Third, Liberty argues that the class certification order
created new claims because the order reaches farther back in time. Although the original class
definition did not specify a time frame, Liberty did not begin
using medical cost and utilization databases to adjust claims for
medical benefits under the policies Liberty wrote until 1994. The
amendment to the class definition, however, allegedly added two
Liberty affiliates or subsidiaries Liberty Life and Employers
of Wausau that began using medical cost and utilization
databases to adjust claims for reimbursement of medical bills
under group-health policies in the mid-1980's.
The alleged change in time-frame, like the increase in the
number of policies at issue, does nothing more than increase "the
potential for a larger amount of legal research and discovery."
Schillinger, 425 F.3d at 334. In Schillinger, the Seventh
Circuit reasoned that expanding the plaintiff class from
state-wide to nation-wide did not commence a new action because
the suit still involved "the same claim alleged in the original
complaint" and plaintiffs similarly situated to the Schillingers.
Id. That same reasoning applies in this case. The class
certification order does not change Plaintiffs' original claim:
that "claims were paid in an amount less than the medical charge,
based upon the application of a medical cost and utilization
database." In addition, the plaintiffs, regardless of how far
back in time their medical claims reach, all share this ultimate
The Illinois cases to which Liberty cites do not change this
analysis. In Flynn v. Szwed, the plaintiff's original complaint
contained specific allegations of medical negligence occurring in
1980, and the plaintiff attempted to add other, distinct claims
of negligence that occurred in 1978 and 1979,
224 Ill. App. 3d 107, 115, 586 N.E.2d 539, 544 (1st Dist. 1991). The state court
held that these discrete acts did not constitute a continuous,
regular course of treatment, and thus did not relate back.
Similarly, in Strickland v. Commc'ns & Cable of Chi., Inc., the
plaintiff attempted to amend the original complaint to include a
distinct claim of negligence. The plaintiff, who had been
assaulted by an employee of the defendant, originally alleged that the
defendant was negligent for not adequately investigating its
employee's background before hiring him. 304 Ill. App. 3d 679,
687, 710 N.E.2d 55, 61 (1st Dist. 1999). The state court held
that the plaintiff could not amend her complaint to add claims
that the defendant approved and ratified the assault, because
this was a separate claim of negligence that occurred after the
assault. Id. at 685, 60.*fn4 In contrast, in the instant
case, as in Schillinger, the expanded class involves the same
allegations of use of the medical cost and utilization database
to pay plaintiffs less than the medical charge, and thus relates
back to the original complaint.
Liberty next contends that its case must be removed because the
expanded class definition adds ERISA claims. Liberty argues that
the addition of ERISA claims both commences a new action under
CAFA, and provides grounds for removal to federal court under the
complete preemption doctrine. The ERISA claims allegedly arise
from two of Liberty's affiliates, Liberty Fire and Employers of
Wausau, who issued group health policies as part of
employee-benefit plans and used medical cost and utilization
databases to reduce payments under those policies. Liberty claims
that the expanded plaintiff class includes insureds under these
plans, who will seek to recover benefits due to them under the
terms of the plans.
The class certification order, however, neither adds ERISA
claims nor presents a basis for complete preemption. The civil enforcement provision of ERISA,
Section 502(a), allows a plan participant or beneficiary to bring
a civil action "to recover benefits due to him under the terms of
his plan, to enforce his rights under the terms of the plan, or
to clarify his rights to future benefits under the terms of the
plan." Section 502(a) completely preempts state law causes of
action that fall within the scope of that provision. Moran v.
Rush Prudential HMO, Inc., 230 F.3d 959, 967 (7th Cir. 2000)
(quoting ERISA, § 502(a)(1)(B)). Considered in a vacuum, Section
502(a) appears to be implicated in the expanded class definition
of "all insureds" of Liberty, its affiliates and subsidiaries.
However, as Liberty bases its arguments for removal on the state
court's class certification order, Liberty cannot look to the
class definition while ignoring the state court's clear intent in
the certification order. The class certification order must be
read in its entirety, together with the class definition, to
determine if removal is proper. The first paragraph of the state
court's certification order and opinion shows that ERISA claims
are not covered by the new class definition:
This case involves a class action suit brought in
connection with payments made by Liberty Insurance
Company (`Liberty') pursuant to workers compensation
and automobile policies allegedly issued by Liberty.
Liberty's property and casualty policies obligate it
to pay for all reasonable expenses for medical
treatment related to covered occurrences.
(R. 22, Mot. to Remand, Ex. A, Sept. 29 Order at 1.)*fn5
Thus, in the first paragraph of her order and opinion, Judge
Nowicki explained that the new class would only include insureds
of "workers compensation and automobile policies," or "property
and casualty policies." Id. Although the class definition says
"all insureds," not excepting those insured under group health
policies, neither Liberty, Plaintiffs, nor the state court ever contemplated ERISA
claims. This is not an attempt at "artful pleading" by Plaintiffs
to avoid a federal claim; rather, it is a creative attempt by
Liberty to find another way into federal court. Lehmann v.
Brown, 230 F.3d 916
, 919 (7th Cir. 2000). While a claim to ERISA
benefits necessarily arises under federal law, there is no claim
to ERISA benefits here. Id. ("[C]ourts look at substance, see
the importance of federal law to recovery, and permit removal").
Indeed, a "mere simulacrum of a possible unasserted ERISA claim
[is] insufficient to form a basis for federal jurisdiction."
Karambelas v. Hughes Aircraft Co., 992 F.2d 971
, 975 (9th Cir.
For the reasons set forth above, Plaintiffs' Motion to Remand
is GRANTED, and this case is remanded to state court based on
lack of federal jurisdiction, in accordance with
28 U.S.C. § 1447(c). Section 28 U.S.C. § 1447(c) makes an award of attorneys'
fees "the norm" for improper removal. Schorch, 417 F.3d at 751.
In view of the history of the case, the Court will adhere to the
norm and hereby awards reasonable attorneys' fees to Plaintiffs.
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