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Eavenson v. Selective Insurance Co. of America

February 12, 2007


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


Before the Court is Plaintiffs', Mark J. Eavenson, D. C., d/b/a Multi-Care Specialists, P. C., individually and on behalf of others similarly situated, (collectively, "Eavenson") Motion to Remand (Doc. 8). The matter being fully briefed and the parties having been heard, the Court will grant Eavenson's motion for the reasons set forth below.

I. Factual Background and Procedural History

On September 20, 2006, Defendant Selective Insurance Company of America ("Selective") removed this action from the Circuit Court, Third Judicial Circuit, Madison County, Illinois. This putative nationwide class action is based on Selective's alleged improper discounting of a class of licensed healthcare providers' bills for medical services rendered to persons covered by Selective property and casualty insurance policies. The action involves the agreements, or lack thereof, among the parties to a Preferred Provider Organization ("PPO"), specifically, the preferred provider, the insurance companies or payors, and the administrator who establishes this arrangement, herein Eavenson, Selective and CorVel, respectively. See Plaintiff's Second Amended Complaint ("Second Am. Compl.") ¶ 10.

In the original complaint, Eavenson brought four counts: 1) that Selective breached its contract with its insured persons, under which Eavenson had a right of payment, by virtue of assignment or as a third party beneficiary; 2) that Selective was unjustly enriched by improperly paying Eavenson's bills at reduced PPO rates while providing no consideration to Eavenson; 3) that the court should enter "declaratory judgment" that Selective's payment of medical bills at discounted PPO rates is a breach of the applicable insurance contracts; and 4) that Selective violated the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq., and other substantially similar laws of other states, by committing these unfair and deceptive acts and by intending Eavenson to rely on its right to claim PPO discounted rates.

On or about October 29, 2004, Eavenson filed his First Amended Complaint, in which he added a count for civil conspiracy and dropped the counts for breach of contract and declaratory judgment. Selective moved to dismiss and Eavenson failed to respond. As a result, on or about June 29, 2006, the court dismissed the claims of unjust enrichment and violation of the Consumer Fraud Act. On or about August 21, 2006, Eavenson filed Second Amended Complaint, alleging consumer fraud and deceptive business practices, unjust enrichment, breach of contract and civil conspiracy. Thereafter, Selective removed the case.

In Eavenson's Second Amended Complaint, he alleges that Selective improperly discounted bills for medical services based on a purported PPO reduction. Second Am. Compl., ¶ 2. Eavenson states that Selective does not dispute the reasonableness or necessity of the medical charge nor that the treatment is for injuries relating to covered losses; rather, Selective systematically takes improper PPO reimbursement reductions on its payments for medical treatment without any valid right to do so. Id. According to Eavenson, Selective wrongfully and deceptively reduces payments to him and other licensed healthcare providers by claiming the benefits from purported PPO agreements without any evidence that valid PPO agreements exist and/or without performing the associated obligation of "preferring" the effected healthcare providers to their insureds/beneficiaries through financial incentives designed to channel patients to Eavenson. Id. at ¶¶ 3, 10. Eavenson asserts that Selective has illegally reaped huge savings while giving no consideration to healthcare providers for the right to apply these discounts. Id. at ¶ 28. Eavenson states that the improper practice employed by Selective is known in the insurance industry as a "silent PPO." Id. at ¶ 12.

The Class Action Fairness Act of 2005, Pub. L. 109-2, 119 Stat. 4 (Feb. 18, 2005) ("CAFA"), expressly applies to class actions commenced on or after its enactment. This class action was commenced on October 27, 2003, more than a year before the enactment of the CAFA.

Eavenson argues that this Court lacks jurisdiction because the CAFA does not apply to cases commenced before its enactment, and Selective failed to present competent evidence of the amount in controversy.

Selective responds that Eavenson's Second Amended Complaint asserts a new claim which commenced a new, removable cause of action and that the amount in controversy threshold has been met.

II. Legal Standards

A. Removal

Removal of actions from state court to federal court is governed by 28 U.S.C. § 1441, which provides that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). The defendant has the burden of establishing that an action is removable, and doubts concerning ...

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