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In re Safeco Insurance Company of America

October 22, 2009

IN RE: SAFECO INSURANCE COMPANY OFAMERICA, ET AL., PETITIONERS.


On Petition for Leave to Appeal Under 28 U.S.C. § 1453(c). No. 3:09-cv-00315-GPM-PMF-G. Patrick Murphy, Judge.

The opinion of the court was delivered by: Ripple, Circuit Judge.

Before RIPPLE, MANION and KANNE, Circuit Judges.

On February 11, 2005, F. Ryan Bemis, an Illinois chiropractor, filed a class action in the Illinois state court. On February 18, 2005, seven days later, the Class Action Fairness Act of 2005 became effective. Four years later, on March 25, 2009, the state court granted class certification. On April 24, 2009, the Safeco Insurance Company of America ("SICA") and Safeco Insurance Company of Illinois ("SICI") (collectively hereinafter referred to as "Safeco" or "petitioners") re-moved the action to the district court, but the district court granted Dr. Bemis' motion to remand the action to the state court. Safeco then filed this petition for permission to appeal under 28 U.S.C. § 1453(c). We grant the petition for leave to appeal and, for the following reasons, affirm the judgment of the district court.

I. BACKGROUND

A. The Parties and the Allegations

Dr. Bemis filed this action in Illinois state court, alleging that Safeco had employed a computerized bill payment program to underpay systematically claims made under automobile insurance policies. The introductory paragraph of the complaint established the gravamen of the action: "This is a case about a scheme by [SICA] and [SICI] (collectively, "Defendants" or "Safeco") and its Safeco insurer affiliates (such as American States) to mislead and improperly reduce payouts under medical payments coverage by using biased third party bill audit software programs to adjust those medical expense claims." S.A. 1. The complaint alleged three causes of action based on state law: (1) breach of contract, (2) violation of various*fn1 Illinois consumer fraud statutes and (3) unjust enrichment. The only named defendants were SICA and SICI. The complaint further explained that the suit was brought as a class action on behalf of:

All insured persons and licensed medical providers who: (a) submitted first-party medical claims to a Safeco member company pursuant to a Safeco insurance policy; (b) had their claim submitted to computer review, [sic] (c) received or were tendered an amount less than the submitted medical expenses and [sic] (d) received or were tendered an amount less than the stated policy limits.

S.A. 9.*fn2

SICA and SICI are both wholly owned subsidiaries of Safeco Corporation, which, in turn, is wholly owned by a holding company. The ultimate owner is Liberty Mutual Group Inc. SICA adjusts claims for some other companies owned by Safeco Corp. SICI only adjusts its own claims. S.A. 457. It appears that, at all relevant times, SICA adjusted claims for at least five other Safeco Corporation companies.*fn3

In October 1997, Safeco Corporation acquired American States Financial Corporation, the corporate parent of six other insurance companies. Prior to the acquisition, the*fn4 American States companies were competitors of the Safeco companies. SICA did not begin to adjust claims made under policies issued by the American States companies until December 1998 at the earliest.

B. Proceedings in the State and Federal Courts

1.

The state court initially dismissed Count I of the complaint (breach of contract) because of insufficient evidence that the rights under the contract had been assigned to Dr. Bemis, but granted leave to amend. Dr. Bemis then filed a first amended complaint that contained the required assignment as an exhibit, but Safeco concedes that, in all other material respects, this pleading was identical to the initial complaint. Later, Dr. Bemis voluntarily dismissed the consumer fraud and unjust enrichment causes of action; only the breach of contract claim remains.

On March 25, 2009, long after the effective date of the Class Action Fairness Act of 2005, Pub. L. 109-2, 119 Stat. 4 (2005) ("CAFA"), Dr. Bemis sought, and was granted, class ...


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