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Kaltenbronn v. Liberty Mutual Insurance Co.

September 24, 2007

THOMAS L. KALTENBRONN, D.C., COY CHIROPRACTIC HEALTH CENTER, AND DALE A. FISCHER, D. C., INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
LIBERTY MUTUAL INSURANCE COMPANY AND LIBERTY MUTUAL FIRE INSURANCE COMPANY, D/B/A LIBERTY MUTUAL GROUP, DEFENDANTS.



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

MEMORANDUM AND ORDER

Before the Court is Plaintiffs' Motion to Remand (Doc. 12). The matter is fully briefed and ready for disposition.

I. Factual Background/Procedural History

On January 19, 2007, Defendants Liberty Mutual Insurance Company and Liberty Mutual Fire Insurance Company (collectively, "Liberty") removed this action from the Circuit Court, Third Judicial Circuit, Madison County, Illinois. This putative nationwide class action is based on Liberty's alleged improper discounting of a class of licensed healthcare providers' bills for medical services rendered to persons covered by Liberty's property and casualty insurance policies.

Plaintiffs allege that Liberty wrongfully and deceptively reduces payments to Plaintiffs by claiming the benefits from purported Preferred Provider Organization ("PPO") agreements without any evidence that valid PPO agreements exist and/or without performing the associated obligation of "preferring" the affected healthcare providers to their insureds/beneficiaries through financial incentives designed to channel patients to Plaintiffs. Plaintiffs state that Liberty is not entitled to retain these monies, nor is it otherwise entitled to any PPO discounts from Plaintiffs and the Class. Plaintiffs state that the improper practice employed by Liberty is known in the insurance industry as a "silent PPO."

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 by Plaintiff Kaltenbronn on December 27, 2004, almost two months before the enactment of CAFA. The original complaint alleged three causes of action: violation of the Illinois Consumer Fraud Act, civil conspiracy and unjust enrichment. Liberty moved to dismiss; however, its motion was not called for hearing. On May 19, 2006, First Amended Class Action Complaint was filed, adding three new plaintiffs: Coy Chiropractic Health Services, Dr. Frank C. Bemis & Associates and Dale A. Fischer, D. C. Other than the addition of these Plaintiffs, the First Amended Complaint was identical to the original Complaint.

On December 20, 2006, Plaintiffs filed their second amended complaint which reiterated the three counts raised in the earlier pleading and added a count, in the alternative, for breach of contract. Plaintiffs' second amended complaint also contained new allegations of fraudulent concealment, asserting that "[t]he running of the statute of limitations has been suspended with respect to any claims that Plaintiffs or other members of the Class have brought or could have brought as a result of the unlawful and fraudulent course of conduct described herein." Second Am. Compl., ¶ 48. Thereafter, Liberty removed the case.

In Plaintiffs' second amended complaint, they allege that Liberty improperly discounted bills for medical services rendered to persons covered by Liberty's property and casualty insurance policies based on a purported PPO reduction. Second Am. Compl., ¶ 1. Plaintiffs state that Liberty does not dispute the reasonableness or necessity of the medical charge nor that the treatment is for injuries relating to covered losses; rather, Liberty systematically takes improper PPO reimbursement reductions on its payments for medical treatment without any valid right to do so. Id. at ¶ 2. According to Plaintiffs, Liberty wrongfully and deceptively reduced payments to them 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 Plaintiffs. Id. at ¶ 3. Plaintiffs assert that Liberty has illegally reaped huge savings while giving no consideration to healthcare providers for the right to apply these discounts. Id. at ¶ 42. Plaintiffs state that the improper practice employed by Liberty is known in the insurance industry as a "silent PPO." Id. at ¶ 16.

Plaintiffs argue that this Court lacks jurisdiction because the CAFA does not apply to cases commenced before its enactment. According to Plaintiffs, the second amended complaint added an additional theory of recovery arising from the same conduct but did not commence a new civil action. Liberty responds that the addition of a new claim for breach of contract in Plaintiffs' second amended complaint commenced a new, removable cause of action. Because the statute of limitations for a breach of contract claim is ten years, Liberty contends that the second amended complaint expanded claims to challenge conduct that occurred prior to December, 1999, i. e., in "1997, 1998 or the first 11 months of 1999." Doc. 22, p. 3. Also, Liberty states that Plaintiffs alleged for the first time that Liberty had fraudulently concealed its practices from Plaintiffs and that this fraudulent concealment tolled the statute of limitations with respect to any claims that Plaintiffs brought or could have brought against Liberty. Id.

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 removal must be resolved in favor of remand to the state court. See Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir. 2005).

B. Diversity Jurisdiction under the CAFA

Under the CAFA, federal courts have jurisdiction in diversity, with exceptions not at issue here, see 28 U.S.C. § 1332(d)(3), (d)(4), (d)(5), (d)(9), over class actions with one hundred or more class members, see 28 U.S.C. § 1332(d)(5)(B), in which any member of the plaintiff class is a citizen of a state different from that of any defendant, or any member of a plaintiff class or any defendant is a foreign state or a citizen or subject of a foreign state. See 28 U.S.C. § 1332(d)(2). In a class action in which the CAFA's requirement of minimal diversity is met, a federal court has jurisdiction if, after aggregating class members' claims, more than $5 million, exclusive of interest and costs, is in controversy. See 28 U.S.C. ...


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