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Roche v. Country Mutual Insurance Co.

July 6, 2007

KATHLEEN ROCHE, D.C., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
COUNTRY MUTUAL INSURANCE COMPANY, D/B/A COUNTRY COMPANIES, A/K/A COUNTRY CASUALTY INSURANCE COMPANY, DEFENDANT.



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

MEMORANDUM AND ORDER

This matter is before the Court on the order to show cause why this case should not be remanded for lack of subject matter jurisdiction entered June 12, 2007 (Doc. 11). Defendant Country Mutual Insurance Company ("Country") has responded to the order (Doc. 13). In its response to the order, Country has responded also to the motion for remand to state court brought by Plaintiff Kathleen Roche (Doc. 12). For the following reasons, this action is REMANDED to the Circuit Court of the Twentieth Judicial Circuit, St. Clair County, Illinois, for lack of subject matter jurisdiction.

BACKGROUND

This case is a putative class action that was filed in Illinois state court on April 17, 2007, then removed by Country to this Court. Federal subject matter jurisdiction is alleged on the basis of 28 U.S.C. § 1332, as amended by the Class Action Fairness Act of 2005 ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.). Roche, a chiropractor based in Belleville, Illinois, alleges that in 2003 she became a member of a preferred provider organization ("PPO") network administered by Corvel Corporation ("Corvel"). See Class Action Complaint ("Compl.") ¶ 7, ¶ 45.*fn1 Although Roche's PPO contract with Corvel is not before the Court, Roche alleges that under the contract she agreed to furnish health care services at discounted rates, while Corvel agreed to market Roche's services to third-party payors for health care services. See id.¶ 45.

Roche alleges that in 2005 she provided health care services to a Country insured, and that Country discounted her claim for reimbursement in accord with the terms of her PPO agreement with Corvel. See Compl. ¶¶ 40-44 & Ex. 1. Roche alleges that the claim was not subject to a preferred provider plan under the relevant Country automobile insurance policy. See id.¶ 3, ¶ 7, ¶ 12, ¶ 16. Roche alleges that, pursuant to a so-called "silent PPO" scheme, Country was able to access Corvel's network of providers and schedule of discounts, and used this access to discount claims for reimbursement by providers like Roche, in return for remitting a percentage of the discounted amounts to Corvel. See id.¶¶ 12-17. In her complaint Roche alleges violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1-505/12 ("ICFA"), fraud, unjust enrichment, and civil conspiracy, see Compl. ¶¶ 77-119, and seeks to represent a class defined as "All licensed healthcare providers in Illinois who: (a) submitted medical claims to Country; (b) received or were tendered partial payment but in an amount less than the submitted medical expenses based on a Corvel PPO discount[;] and (c) received or were tendered an amount less than the stated policy limits." Id. ¶ 63. Having reviewed the record carefully, the Court concludes that this case is due to be remanded to state court for lack of subject matter jurisdiction.

DISCUSSION

Under CAFA, federal courts have jurisdiction in diversity over class actions and putative class actions commenced on or after February 18, 2005, involving one hundred or more class members in which any member of the plaintiff class is a citizen of a state different from that of any defendant, and in which, after aggregating all claims of the members of a class or proposed class, an amount in excess of $5 million, exclusive of interest and costs, is in controversy. See 28 U.S.C. § 1332(d)(1)(B), (d)(2)(A), (d)(5)(B), (d)(6), (d)(8); Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 571 (7th Cir. 2006); Knudsen v. Liberty Mut. Ins. Co., 435 F.3d 755, 758 (7th Cir. 2006); Pfizer, Inc. v. Lott, 417 F.3d 725, 726 (7th Cir. 2005); Kitson v. Bank of Edwardsville, Civil No. 06-528-GPM, 2006 WL 3392752, at *2 (S.D. Ill. Nov. 22, 2006); Buller Trucking Co. v. Owner Operator Indep. Driver Risk Retention Group, Inc., 461 F. Supp. 2d 768, 772 (S.D. Ill. 2006).*fn2 Class actions filed in state court on or after the effective date of CAFA in which the statutory prerequisites for jurisdiction are met may be removed to federal court. See 28 U.S.C. § 1453(b); Phillips v. Ford Motor Co., 435 F.3d 785, 786 (7th Cir. 2006); Schorsch v. Hewlett-Packard Co., 417 F.3d 748, 749 (7th Cir. 2005); Schillinger v. 360Networks USA, Inc., Civil No. 06-138-GPM, 2006 WL 1388876, at *2 (S.D. Ill. May 18, 2006). A removing defendant has the burden of establishing that the prerequisites for the exercise of federal jurisdiction on removal under CAFA are satisfied, and doubts as to the propriety of such removal must be resolved in favor of remand to state court. See Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir. 2005); Kitson, 2006 WL 3392752, at *1; In re General Motors Corp. Dex-Cool, No. Civ. MDL-03-1562-GPM, Civ. 05-10008-GPM, 2006 WL 2818773, at *1 (S.D. Ill. Sept. 27, 2006).

In this instance the parties do not dispute, and the record shows, that this is an action commenced after the effective date of CAFA in which an amount in excess of $5 million, exclusive of interest and costs, is in controversy. See Notice of Removal ("Notice"), Ex. C ¶¶ 5-6.*fn3 What is at issue here is whether CAFA's requirement of minimal diversity of citizenship is met. It is undisputed that both Roche and Country are Illinois citizens for diversity purposes, see Compl. ¶ 7; Notice ¶ 12, while the proposed class is drawn to include only Illinois citizens.*fn4 Country argues that the requisite minimal diversity of citizenship exists in this case because Corvel, a citizen of Delaware and California, see Notice ¶ 11, must be joined as a party defendant by virtue of being both a real party in interest and a person needed for just adjudication of this action within the meaning of Rule 19 of the Federal Rules of Civil Procedure.

The Court recognizes, of course, that as a general rule diversity jurisdiction must exist both when a suit is filed and when it is removed to federal court, see Vogel v. Merck & Co., 476 F. Supp. 2d 996, 1006 n.6 (S.D. Ill. 2007) (citing Kanzelberger v. Kanzelberger, 782 F.2d 774, 776-77 (7th Cir. 1986)), and that in evaluating the existence of diversity jurisdiction in a removed case a court normally must disregard post-removal events. See Gould v. Artisoft, Inc., 1 F.3d 544, 547 (7th Cir. 1993) (in determining the existence of federal subject matter jurisdiction in a case removed from state court, "[w]e look to the facts that existed at the time of removal to determine our jurisdiction, for a plaintiff . . . may not manipulate the process . . . to defeat federal jurisdiction and force a remand once the case has been properly removed."); Shaw v. Dow Brands, Inc., 994 F.2d 364, 367 (7th Cir. 1993) ("[J]urisdiction depends on the situation at the time of removal, and . . . once a case is successfully removed a plaintiff cannot do anything to defeat federal jurisdiction and force a remand.") (citations omitted). This rule is subject to the important qualification, however, that a court may consider any post-removal event that sheds light on the existence offederal subject matter jurisdiction when a case was filed or removed. See Harmon v. OKI Sys., 115 F.3d 477, 479-80 (7th Cir. 1997) (in evaluating the existence of diversity jurisdiction in a case removed from state court, a district court did not err considering the plaintiffs' responses to post-removal interrogatories to determine whether the jurisdictional amount in controversy was satisfied).

It is well settled that, where a non-diverse party is required to be joined under Rule 19, a district court is placed in effectively the same position as though jurisdiction never existed. "Although jurisdiction will not be ousted by a subsequent change in parties who are ancillary to the suit and whose presence . . . is not essential to an adjudication on the merits, a change in parties that goes to the very essence of the district court's ability to adjudicate the merits of the dispute effectively -- most notably the addition of indispensable parties -- may destroy it." 14B Charles Alan Wright, Arthur R. Miller, Edward H. Cooper & Joan E. Steinman, Federal Practice & Procedure § 3723 (3d ed. 1998 & Supp. 2007) (footnotes omitted) (collecting cases). See also Vasilakos v. Corometrics Med. Sys., Inc., No. 93 C 5343, 1993 WL 390283, at *2 (N.D. Ill. Sept. 30, 1993) (a post-removal joinder of a mandatory non-diverse party requires remand, whereas leave to join non-mandatory parties that defeat diversity after removal is discretionary). The Court has not been able to locate a case that addresses the precise issue presented by this case, namely, whether post-removal joinder of a mandatory party can create minimal diversity of citizenship for CAFA purposes. However, the Court sees no principled distinction between, on the one hand, destruction of jurisdiction by the joinder of a mandatory party and, on the other hand, creation of jurisdiction by such joinder. Accordingly, the Court concludes that Country's argument for federal subject matter jurisdiction does not violate the rule that the existence of such jurisdiction must be evaluated as of the time of removal and will proceed to address the argument on its merits.

Turning first to the question of whether, as a real party in interest, Corvel must be joined, the Supreme Court of the United States clarified recently that the requirement set out in Rule 17 of the Federal Rules of Civil Procedure that "[e]very action shall be prosecuted in the name of the real party in interest" generally has no bearing on the scope of federal subject matter jurisdiction, save in a narrow class of cases where there has been collusion to manufacture federal jurisdiction or a nominal party has been joined to defeat such jurisdiction. Lincoln Prop. Co. v. Roche, 126 S.Ct. 606, 613-14 (2005) (quoting Fed. R. Civ. P. 17(a)) (emphasis omitted). Technically Rule 17 has no bearing at all on the joinder of defendants, only plaintiffs. "[T]he real party in interest principle is a means to identify the person who possesses the right sought to be enforced. Therefore, the term directs attention to whether [the] plaintiff has a significant interest in the particular action he has instituted, and Rule 17(a) is limited to plaintiffs." 6A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1542 (collecting cases). As a matter of federal common law, however, courts sometimes invoke the real party in interest rule in situations where the joinder of merely nominal defendants is an obstacle to federal jurisdiction. See, e.g., Wormley v. Wormley, 21 U.S. (8 Wheat.) 421, 451 (1823) ("This Court will not suffer its jurisdiction to be ousted by the mere joinder or non-joinder of formal parties; but will rather proceed without them, and decide upon the merits of the case between the parties, who have the real interests before it, whenever it can be done without prejudice to the rights of others."); Jones v. Griffith, 870 F.2d 1363, 1366 (7th Cir. 1989) (assuming for the sake of argument that service of a complaint for medical malpractice on a state insurance commissioner and on the chairman of a state medical review panel, as required by state law, rendered those persons parties to a litigation, they were purely nominal parties with no stake in the litigation whose citizenship did not defeat diversity jurisdiction).

In general, a nominal party is simply a stakeholder in a litigation. As this Court explained recently, "[a] . . . nominal defendant . . . is a person who can be joined to aid the recovery of relief without an assertion of subject matter jurisdiction only because he has no ownership interest in the property which is the subject of litigation." Yount v. Shashek, 472 F. Supp. 2d 1055, 1061 (S.D. Ill. 2006) (quoting SEC v. Cherif, 933 F.2d 403, 414 (7th Cir. 1991)). "A nominal defendant holds the subject matter of the litigation . . . in a subordinate or possessory capacity as to which there is no dispute . . . . Because the nominal defendant is a . . . trustee, agent, or depositary, . . . who has possession of the funds which are the subject of litigation, he must often be joined purely as a means of facilitating collection." Id. See also Matchett v. Wold, 818 F.2d 574, 576 (7th Cir. 1987) ("The addition to a lawsuit of a purely nominal party -- the holder of the stakes of the dispute between the plaintiff and the original defendant -- does not affect diversity jurisdiction."). In this case it is clear that Country is not merely a stakeholder or otherwise a nominal party to this dispute. While Corvel certainly would be an appropriate party to join in this action, the Court is not aware of any authority that compels a plaintiff to join all defendants who are real parties in interest to a dispute. To the contrary, "if [a] named party's interest is real, the fact that other interested parties are not joined 'will not affect the jurisdiction of the . . . federal courts[.]'" Lincoln Prop. Co., 126 S.Ct. at 615 (quoting Little v. Giles, 118 U.S. 596, 603 (1886)). See also Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 410 (7th Cir. 2000) ("[P]laintiffs as masters of the complaint may include (or omit) claims or parties in order to determine the forum."); Boyer v. Snap-on Tools Corp., 913 F.2d 108, 110 (3d Cir. 1990) (noting that, although a plaintiff's decisions regarding joinder of parties "may have repercussions for purposes of diversity jurisdiction, there is no reason for a court to interfere with this inevitable consequence of a plaintiff's election" in the absence of collusive joinder to invoke federal jurisdiction in violation of 28 U.S.C. § 1359 or fraudulent joinder to defeat diversity).

Having determined that the real party in interest rule does not mandate the joinder of Corvel, the Court turns to Country's argument that Corvel must be joined under Rule 19.*fn5 The clear import of the allegations of Roche's complaint is that Country and Corvel have engaged in a course of joint wrongdoing that has caused injury to Roche and similarly situated health care providers. It is extremely well settled that "it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit" and that "a tortfeasor with the usual 'joint-and-several' liability is merely a permissive party to an action against another with like liability." Temple v. Synthes Corp., 498 U.S. 5, 7 (1990) (quoting Fed. R. Civ. P. 19 advisory committee's note). See also Salton, Inc. v. Philips Domestic Appliances & Personal Care B.V., 391 F.3d 872, 877 (7th Cir. 2004) (noting the settled common-law rule that joint tortfeasors are not mandatory parties to an action against them; instead, "the victim of a tort is entitled to sue any of the joint tortfeasors and recover his entire damages from that tortfeasor."); Hammond v. Clayton, 83 F.3d 191, 195 (7th Cir. 1996) (because a plaintiff can recover all of his or her damages from any or all of the tortfeasors responsible for an injury, a tortfeasor not joined in a suit is not a person in whose absence complete relief cannot be accorded within the meaning of Rule 19 and therefore is not an indispensable party to the action); Cognis Corp. v. CHEMCENTRAL Corp., 430 F. Supp. 2d 806, 809 (N.D. Ill. 2006) (it is not necessary for all joint tortfeasors to be named as defendants in single lawsuit); Hess v. Gray, 85 F.R.D. 15, 21 (N.D. Ill. 1979) (because "the liability of joint tort-feasors is both joint and several, . . . while the joinder of joint tort-feasors is permissible, it is not compulsory.").

As a corollary of the rule that joint tortfeasors are not mandatory parties who must be joined under Rule 19, co-conspirators are not deemed to be mandatory parties either. "[C]oconspirators, like other joint tort-feasors, will not be deemed indispensable parties." 7 Wright, Miller & Kane, Federal Practice & Procedure § 1623 (collecting cases). See also Lawlor v. National Screen Serv. Corp., 349 U.S. 322, 329-30 (1955) (members of an alleged conspiracy to monopolize the business of distributing motion picture accessories were, as joint tortfeasors, not indispensable parties to an antitrust suit); Georgia v. Pennsylvania R.R. Co., 324 U.S. 439, 463 (1945) ("In a suit to enjoin a conspiracy not all the conspirators are necessary parties defendant."); Pasco Int'l (London) Ltd. v. Stenograph Corp., 637 F.2d 496, 501 n.10 (7th Cir. 1980) ("Prior to the 1966 amendments to Rule 19, coconspirators were not indispensable parties, . . . and the 1966 amendments did not alter this established principle."); Harley-Davidson Motor Co. v. Chrome Specialties, Inc., 173 F.R.D. 250, 253 (E.D. Wis. 1997) ("It is well established that co-conspirators . . . are not indispensable parties under Rule 19(a)."). Accord Herpich v. Wallace, 430 F.2d 792, 817 (5th Cir. 1970) (noting "the well-established authority to the effect that joint tortfeasors or coconspirators are not persons whose absence from a case will result in dismissal for non-joinder"); Philip Morris Capital Corp. v. Century Power Corp., 788 F. Supp. 794, 796-97 (S.D.N.Y. 1992) (quoting Samaha v. Presbyterian Hosp. in City of N.Y., 757 F.2d 529, 531 (2d Cir. 1985)) (a non-diverse defendant was not an indispensable party to claims for breach of contract and fraud where the non-diverse defendant was alleged to be jointly and severally liable with diverse defendants in an alleged fraud and conspiracy to commit fraud: "[I]t is settled federal law that joint tortfeasors are not indispensable parties"); Grumman Sys. Support Corp. v. Data Gen. Corp., 125 F.R.D. 160, 165 (N.D. Cal. ...


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