Community Foundation of Northeast Alabama v. Anniston HMA LLC et al

Filing 9

MEMORANDUM OPINION AND ORDER Because the court finds AHMA and HMA have demonstrated by a preponderance of the evidence that the amount in controversy exceeds $75,000, the court DENIES the Foundation's motion to remand. Signed by Chief Judge Karon O Bowdre on 5/10/17. (SAC )

FILED
2017 May-10 PM 04:26
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
COMMUNITY FOUNDATION OF
NORTH ALABAMA,
Plaintiff,
v.

ANNISTON HMA LLC., et al.
Defendants.

)
)
)
)
)
)
)
)
)
)
)

CASE NO.: 1:17-cv-00715-KOB

MEMORANDUM OPINION AND ORDER
This case stems from a dispute concerning assignment of a lease made between
Community Foundation of North Alabama and Anniston HMA, which is fully guaranteed by
Health Management Associates. The Foundation sued AHMA in the Circuit Court of Calhoun
County, Alabama, seeking a declaratory judgment that the lease had already been assigned and
asking for an injunction against AHMA proceeding to arbitration. The Foundation then moved to
remand the case back to state court based on insufficient amount in controversy. (Doc. 4). Because
the court finds it has subject matter jurisdiction over this matter, the court DENIES the
Foundation’s motion.
I.

BACKGROUND
The Foundation is a non-profit organization that operates as a testamentary trust whose

purpose is to establish a hospital to serve the local community. In 2008, the Foundation and
AHMA executed a 40-year lease of the hospital established by the trust. The rent per year under
the lease was $600,000. HMA fully guaranteed the lease.
In November 2016, AHMA and The Health Care Authority of Anniston, which operates as
1

Regional Medical Center (“RMC”), began negotiations to structure a deal where AHMA would
sell its assets, including the lease with the Foundation, to RMC. AHMA and RMC drafted an Asset
Purchase Agreement to that effect, which was agreed to on March 3, 2017 and closed on May 1,
2017.
The lease specifies that assignments are not permitted unless specific conditions are
satisfied. If the Foundation consents to the assignment, Section 17.4 allows the lease to be assigned
without recourse against AHMA or HMA. 1 Section 17.5 allows the lease to be assigned without
the Foundation’s consent, so long as AHMA and HMA remained fully obligated under the lease. 2
Finally, Section 17.6 provides that if the Foundation declines to consent under Section 17.4, the
question of the assignability of the lease could be submitted to arbitration. 3
On April 5, 2017, AHMA and HMA asked the Foundation for consent to assign the lease to
RMC. On April 27, the Foundation’s Board met and declined the request. The next day, AHMA
and HMA served the Foundation with a demand for arbitration under Section 17.6 of the lease. On
May 3, the Foundation sued in Calhoun County Circuit Court seeking a declaratory judgment that
the lease had already been assigned under Section 17.5 on May 1, 2017, when the APA closed, and
requested an injunction preventing AHMA and HMA from pursuing arbitration. AHMA and
HMA removed the action on the same day it was filed.
At the Foundation’s request, the court set a hearing for May 4 on its request for emergency
1 Section 17.4 states: “This Lease shall be fully assignable, without recourse, by Lesee and such assignment shall
relieve Lessee (and any guarantor of Lessee’s obligations) of all its obligations under this Lease, provided that lessor
consents in writing to such assignment, which consent shall not be unreasonably withheld, delayed, or conditioned.”
(Doc. 1-1 at 50).
2 Section 17.5 states: “This Lease shall be fully assignable by Lessee, provided that Lessee (and any guarantor of
Lessee’s obligations) shall remain fully obligated under all provisions of this Lease.” (Doc. 1-1 at 50).
3 Section 17.6 states: “In the event Lessee seeks to assign its duties and obligations under this Lease in accordance
with Section 17.4 and Lessor refuses to consent t assignment, Lessor and Lessee agree to submit the question of the
assignability of this Lease to binding arbitration.” (Doc. 1-1 at 50).

2

relief. Barely over half an hour before the hearing, the Foundation filed a motion to remand. (Doc.
4). Because the Foundation challenged the court’s subject matter jurisdiction, the court
acknowledged at the hearing that its jurisdiction had to be resolved before it could address the
Foundation’s request for emergency relief. Thus, the court set a briefing schedule on the motion to
remand, which is now under submission.
The next day, AHMA and HMA offered the Foundation $75,001 for consent to assign the
lease. The offer expired on May 8 without the Foundation accepting it.
II.

STANDARD OF REVIEW
Consistent with the limited nature of federal jurisdiction, the party seeking a federal venue

must establish the federal venue’s jurisdictional requirements. See Lujan v. Defenders of Wildlife,
504 U.S. 555, 561 (1992). In the removal context, the removing defendant must establish the
court’s jurisdiction. Miedema v. Maytag Corp., 450 F.3d 1322, 1328 (11th Cir. 2006). When the
plaintiff has not specified the amount of damages in the complaint, the removing defendant must
establish the jurisdictional amount by a preponderance of the evidence. See Dart Cherokee Basin
Operating Co., LLC v. Owens, 135 S. Ct. 547, 554 (2014).
The Foundation cites authority that a removing party must prove the amount in controversy
to “a legal certainty.” See (Doc. 4 at 3). However, the 2012 amendment to the removal procedure
statute lowers that standard, even if the complaint contains a sum demanded in good faith. See 28
U.S.C. 1446(c)(2)(B) (“[R]emoval of the action is proper on the basis of an amount in controversy
asserted under subparagraph (A) if the district court finds, by the preponderance of the evidence,
that the amount in controversy exceeds the amount specified in section 1332(a)”); see also Dart
Cherokee, 135 S. Ct. at 554 (“This provision, added to § 1446 as part of the Federal Courts
Jurisdiction and Venue Clarification Act of 2011 (JVCA), clarifies the procedure in order when a
3

defendant's assertion of the amount in controversy is challenged. In such a case, both sides submit
proof and the court decides, by a preponderance of the evidence, whether the
amount-in-controversy requirement has been satisfied.”). And even prior to the amendment, when
a sum was not requested in the complaint, the defendant bore the burden of demonstrating by a
preponderance of evidence that the amount in controversy was met. See Tapscott v. MS Dealer
Serv. Corp., 77 F.3d 1353, 1356–57 (11th Cir. 1996).
III.

DISCUSSION
AHMA and HMA removed this case on the basis of diversity jurisdiction. The sole

question before the court is whether the value of the declaratory and injunctive relief the
Foundation seeks exceeds $75,000, the jurisdictional threshold under 28 U.S.C. 1332(a).
In assessing the amount at issue, “the value of injunctive or declaratory relief is the value of
the object of the litigation measured from the plaintiff's perspective.” S. Florida Wellness, Inc. v.
Allstate Ins. Co., 745 F.3d 1312, 1315–16 (11th Cir. 2014) (quoting Morrison v. Allstate Indem.
Co., 228 F.3d 1255, 1268 (11th Cir. 2000)). Put differently, “the value of declaratory relief is the
monetary value of the benefit that would flow to the plaintiff if the [relief it is seeking] were
granted.” Id. at 1316 (quotations omitted).
The first question the court must consider is what is being valued (i.e., what would be the
effect of the relief the Foundation seeks). If the court awards the Foundation the relief it is seeking,
AHMA and HMA would remain obligated under the lease despite its assignment to RMC. The
Foundation would have two guarantors on the lease as opposed to none. If RMC defaulted on its
obligations under the lease, the Foundation could make itself whole by recovering from AHMA
and HMA. A judgment in the Foundation’s favor would provide it with additional security
throughout the remaining 31 years of the lease.
4

The court must now discern how to value the relief sought. Valuing a guaranty on a lease is
not a simple proposition, as its worth depends on how likely the assignee is to default. The
Foundation makes two arguments against the value of relief meeting the amount in controversy.
The Foundation argues that the relief it seeks is “invaluable” and so does not satisfy the amount in
controversy. (Doc. 8 at 3). If the court awards the Foundation the relief it seeks, the Foundation
says it will not receive a “‘measurable and certain’ monetary value.” Id.
The crack in the Foundation’s reasoning is that it assumes that the Guaranty only has
discernable value if a default occurs. See (Doc. 8 at 5) (“It could be worth millions; it could be
worth zero. Or some amount in between, all depending on whether, when, and what stage of the
Lease the assignee may default.”). But the security itself has value as insurance against the
assignee’s default. Having two additional parties obligated under the lease increases its value to
the lessor.
This difference distinguishes this case from Alabama Power Co. v. Calhoun Power Co.,
LLC, No. 2:12-CV-3798-WMA, 2012 WL 6755061 (N.D. Ala. Dec. 28, 2012), which the
Foundation cites. In Alabama Power Co., the relief conferred did not directly increase the value of
the plaintiff’s asset. Further, to the extent Alabama Power Co. requires an actual monetary benefit
to be realized (instead of merely conferred), the court finds it unpersuasive. The amount in
controversy for declaratory and injunctive relief is assessed by the value of the monetary benefit of
the relief, not merely the cash consequences to the plaintiff. See Florida Wellness, Inc., 745 F.3d at
315–16.
Granted, the value of the provided security cannot be calculated with decimal-level
precision with the information before the court. But actuarial rigor is not required. See S. Florida
Wellness, Inc., 745 F.3d at 1316 (“While absolute certainty is neither attainable nor required, the
5

value of declaratory or injunctive relief must be sufficiently measurable and certain to satisfy the
amount-in-controversy requirement.”) (citations omitted); Pretka v. Kolter City Plaza II, Inc., 608
F.3d 744, 754 (11th Cir. 2010) (“[A] removing defendant is not required to prove the amount in
controversy beyond all doubt or to banish all uncertainty about it.”). The burden is on the removing
defendant to demonstrate that amount in controversy is more likely than not to exceed the
jurisdiction threshold. See Pretka, 608 F.3d at 754.
The preponderance of the evidence before the court shows that the value of the relief the
Foundation seeks exceeds $75,000. Over thirty years and thirteen million dollars remain on the
lease. The final payment due under the lease will be $108,000; a surety on the lease would seem to
be worth more $75,000. If the Foundation succeeds and the assignee defaults on the very last
payment under the lease, AHMA or HMA would have to pay the Foundation more than $75,000
Even if the amount in controversy were not established by the lease itself, the Foundation’s
own actions confirm that the amount in controversy exceeds $75,000. The Foundation rejected an
offer to settle this case for more than the required amount in controversy. True, because “[t]here
are several reasons why a plaintiff” would not stipulate to seeking $75,000 or less, “refusal to
stipulate standing alone does not satisfy [the defendant's] burden of proof on the jurisdictional
issue.” Williams, 269 F.3d at 1320 (emphasis added). But the court is not basing its decision solely
on the Foundation’s refusal of AHMA and HMA’s proposed settlement. The Foundation’s
decision only confirms what the terms of the lease suggest—the value for the Foundation of having
AHMA and HMA’s guaranty exceeds $75,000.
A settlement offer may not settle a dispute over the amount in controversy, but “it counts
for something.” Burns v. Windsor Ins. Co., 31 F.3d 1092, 1097 (11th Cir. 1994). Here, the offer is
illuminating. The Foundation has merely cited Williams’ observation that a plaintiff could have its
6

reasons for refusing to stipulate, but it has not enlightened the court what those reasons might be
here. After examining the record, the only possible inference that can be drawn from the
Foundation’s decision is that it values the relief it seeks at more than $75,000.
Simple logic compels this conclusion. The Foundation does not seriously argue that the
relief it seeks lacks a monetary value. Rather, the Foundation argues that the relief is “invaluable”
in the sense that the relief is incapable of having a certain sum ascribed to it. So the relief is not
invaluable because it is unique and not susceptible to having a price tag fixed to it; the relief is
invaluable because it is difficult to value. The court notes that in its reply brief, AHMA does
mention it “specially contracted” for the particular assignment provisions, but the purpose of the
bargaining was a financial one—“to provide a safety net to protect the revenue flow from the
lease.” (Doc 8 at 3).
The court is not persuaded that Keach v. Poole, 2013 WL 441082, (S.D. Ala. Feb. 5, 2013),
provides instructive guidance to valuing the amount in controversy in this case. In Keach, “the
plaintiff ha[d] not requested a declaration that he is not required to satisfy the debt.” Id. at *2 n.2.
But here, the effect of the declaratory judgment would be that AHMA would be obligated to secure
the debt. Granted, an obligation to satisfy a debt is different from being called upon to do so. But
that factual difference renders Keach inapposite.
As previously mentioned, what the court is valuing is AHMA and HMA’s guaranty on the
lease. The value of the guaranty is measured by the terms of the lease and the risk of the assignee’s
default. After considering both of those components, the Foundation declined to consent to
assignment of the lease. Notably, the Foundation cited RMC’s ability to perform its obligations
under the lease as the reason for withholding its consent after having reviewed the pertinent
financial information. See (Doc. 1-1 at 123).
7

The Foundation is correct that the eventual benefit conferred upon it by AHMA and
HMA’s guaranty is unknown. But the current value must exceed $75,000. Otherwise, the
Foundation would have expeditiously accepted AHMA and HMA’s offer to settle. Put differently,
while the Foundation argues that the eventual value of the guaranty might be zero, it must consider
that an unlikely outcome, or at least sufficiently unlikely as to justify declining $75,001 for its
consent to assignment without recourse against AHMA and HMA. And that confirms the current
value to the Foundation of the guaranty exceeds the amount in controversy.
The Foundation claims this settlement offer is an improper attempt by AHMA and HMA to
manufacture evidence to correct a facially deficient removal. However, evidence attached to an
opposition to a motion to remand is properly considered in deciding whether a court has subject
matter jurisdiction after a removal. See Pretka, 608 F.3d at 774 (“For these reasons, the
jurisdictional evidence . . . attached to its opposition to remand should not have been excluded
merely because it was submitted in response to the plaintiffs' motion to remand.”). And the
evidence AHMA and HMA submitted is probative of the amount in controversy at the time of
removal, making it proper for this court to consider the additional evidence. Although the offer
came two days after the case was removed, nothing suggests that the value of the relief sought
increased from under the threshold to over it in those forty-eight hours.
IV.

CONCLUSION
Because the court finds AHMA and HMA have demonstrated by a preponderance of the

evidence that the amount in controversy exceeds $75,000, the court DENIES the Foundation’s
motion to remand. (Doc. 4).

DONE and ORDERED this the 10th day of May, 2017.
8

___________________________________
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE

9