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Bemis v. Allied Property & Casualty Insurance Co.

April 20, 2006

GERALD H. BEMIS, SR., D.C., AND MARK J. EAVENSON, D.C., D/B/A MULTI-CARE SPECIALISTS, P.C. AND ACUNA, PT, INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
ALLIED PROPERTY & CASUALTY INSURANCE COMPANY, A MEMBER OF NATIONWIDE INSURANCE, AMCO INSURANCE COMPANY AND NATIONWIDE MUTUAL INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Herndon, District Judge

MEMORANDUM & ORDER

I. INTRODUCTION & BACKGROUND

Before the Court is Plaintiffs' Motion to Remand (Doc. 20), to which defendant Nationwide Mutual Insurance Company ("NMIC") has filed its opposing Response (Doc. 31), subsequently prompting Plaintiffs to thereafter file their Reply (Doc. 34).

On September 14, 2004, plaintiffs Gerald H. Bemis, Sr., D.C., and Mark J. Eavenson, D.C., d/b/a Multi-Care Specialists, P.C. ("Multi-Care") filed a class action against Allied Property & Casualty Ins. Co. ("Allied"), AMCO Ins. Co. ("AMCO"), and Nationwide Mutual Ins. Co. ("NMIC"), for Defendants' affiliates' alleged systematic and improper computer reduction of medical bills for services provided by licensed medical providers covered under the medical payments ("Medpay") provision of property and casualty insurance policies, issued or underwritten by Defendants (Doc. 21, p. 2).*fn1 Plaintiffs filed this class action in the Circuit Court of Madison County, Illinois. Plaintiffs sought leave to file a First Amended Complaint with the state court on February 16, 2005, so that they could add Acuna, P.T. ("Acuna") as an additional named plaintiff/class representative (Id.).

The state court granted Plaintiffs' motion on September 16, 2005, allowing Plaintiffs to file their First Amended Complaint. Thereafter, on October 17, 2005, NMIC removed this class action to federal district court (Doc. 1). NMIC's basis for removal was the Class Action Fairness Act ("CAFA"), codified under 28 U.S.C. §§ 1332(d) and 1453, pursuant to Public Law 109-2, 119 Stat. 4 (2005). NMIC asserts that when Plaintiffs amended their class action Complaint, it "commenced" a new action after CAFA's effective date (which is February 18, 2005), thereby making it appropriate for removal (Doc. 1).

Plaintiffs filed their Motion to Remand and supporting memorandum (Docs. 20 & 21). Essentially, Plaintiffs' argument for remand is that NMIC incorrectly based its removal upon CAFA. Plaintiffs assert that CAFA jurisdiction does not exist because the addition of a plaintiff (Acuna) to a pre-CAFA class action does not "commence" a new class action (Doc. 21, p. 1). Additionally, Plaintiffs argue NMIC has failed to present competent proof of the CAFA amount in controversy -- simply declaring in an affidavit that the amount in controversy exceeds the sum or value of $5,000,000 does not meet their burden of proof of CAFA jurisdiction (Id. at 14-16). Lastly, Plaintiffs request their attorneys fees and costs incurred as a result of the removal.

In determining the appropriateness of a remand in this case, the Court must therefore resolve the issue of whether CAFA applies to warrant Defendants' removal. Although both parties have extensive briefed the issue, at the time the Plaintiffs' Motion to Remand and NMIC's opposing Response were filed, there was no existing Seventh Circuit opinion addressing this particular issue. However, since the NMIC's Response, two Seventh Circuit opinions have been issued, which were subsequently briefed by the parties, beginning with Plaintiffs' Reply and NMIC's Notice of Supplemental Authority (Docs. 37-39). While the parties make valid arguments based upon analogous opinions by various district courts and sister circuits, the Court must adhere to the findings of the Seventh Circuit and therefore, will largely use these two opinions as guidance in analyzing the facts and the parties' respective arguments, rather than the other cases discussed in the briefings.

II. ANALYSIS

A. CLASS ACTION FAIRNESS ACT ("CAFA")

The Class Action Fairness Act ("CAFA"), enacted by Congress on February 18, 2005, alters the traditional requirements for federal diversity jurisdiction in class actions. However, CAFA is not retroactive and therefore only applies to class actions which are "commenced on or after the date of enactment . . ." of February 18, 2005. Pub. L. 109-2, § 9, 119 Stat. 4 (2005). For applicable cases, CAFA gives district courts original jurisdiction over a civil "class action . . ." with an amount in controversy in excess of $5,000,000. 28 U.S.C. § 1332(d). Therefore, class actions fitting within the scope of CAFA are removable in accordance with 28 U.S.C. § 1446. See 28 U.S.C. § 1453(b).

As Plaintiffs' class action Complaint in this case was filed before CAFA's enactment date of February 18, 2005, it is considered "pre-CAFA" and therefore, not within the ambit of CAFA's grant of original federal jurisdiction. Yet, Plaintiffs amended their class action Complaint in order to add Acuna as a named plaintiff/class representative after the CAFA enactment date. Therefore, the specific issue to be determine is whether Plaintiffs' act of amending their class action Complaint is considered "commencing" a new action, in order to trigger the applicability of CAFA to allow for removal of this case to federal district court. Further, when considering a motion to remand an action removed on the basis of CAFA, NMIC, as the removing party, bears the burden of persuasion to show that proper federal jurisdiction exists. Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir. 2005).

B. SEVENTH CIRCUIT OPINIONS

Since Plaintiff's Motion to Remand was filed, there have been two germane Seventh Circuit opinions issued: Knudsen v. Liberty Mutual Ins. Co., 435 F.3d 755 (7th Cir. 2006) ("Knudsen II") and Phillips v. Ford Motor Co., 435 F.3d 785 (7th Cir. 2006).

1. Knudsen v. Liberty Mutual Insurance Company Knudsen II was actually the second time the Seventh Circuit had reviewed the case on appeal -- the previous year the appellate court had found that the initial removal of the suit "was unavailing, because the suit had been 'commenced' in state court before February 18, 2005, the new Act's effective date." Knudsen II, 435 F.3d at 755 (citing Knudsen I, 411 F.3d 805 (7th Cir. 2005)). In Knudsen I, the plaintiffs alleged in their class action complaint "that Liberty Mutual pays unjustifiably little on claims for medical services under workers' compensation and casualty (accident) policies." Id. at 755-56. However, the plaintiffs subsequently amended their complaint, requesting an expansion of the class to make Liberty Mutual "responsible for all policies issued by any subsidiary or affiliate, about 35 firms in all . . . so that Liberty Mutual would be compelled to pay without proof that an affiliate had failed to honor any policy." Id. at 756. The state court ...


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