Cooper Clinic, P.A. v. Mercy Clinic Fort Smith Communities et al

Filing 38

OPINION AND ORDER REMANDING CASE TO STATE COURT. Signed by Honorable P. K. Holmes, III on February 3, 2015. (hnc)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
COOPER CLINIC, P.A.
v.

PLAINTIFF
Case No. 2:14-CV-02233

MERCY CLINIC FORT SMITH COMMUNITIES;
MERCY HEALTH FORT SMITH COMMUNITIES;
DONALD SHOWS, M.D.; JOHN WERNER, DPM;
WILLIAM KNUBLEY, M.D.; JENNIFER ELAINE
BURKS, M.D.; and SISTERS OF MERCY HEALTH
SYSTEM SAINT LOUIS

DEFENDANTS

OPINION AND ORDER
Before the Court are Plaintiff Cooper Clinic, P.A.’s (“Cooper”) motion to remand (Doc. 30)
and brief in support (Doc. 31); Defendants Mercy Clinic Fort Smith Communities, Mercy Health
Fort Smith Communities, and Sisters of Mercy Health System Saint Louis’s (collectively “the Mercy
Defendants”) response in opposition (Doc. 32); and Cooper’s reply (Doc. 34). For the reasons set
forth below, the Court finds the motion to remand should be granted.
Cooper’s complaint (1-2, p.2) was originally filed on August 2, 2013, in the Circuit Court
of Sebastian County, Arkansas. The complaint alleged state-law causes of action for breach of
contract, tortious interference with contractual relationships and business expectancies, violation of
the Arkansas Deceptive Trade Practices Act (“ADTPA”), unjust enrichment, and civil conspiracy.
On September 27, 2013, Cooper filed a first amended complaint (Doc. 1-3, p. 120) in response to
a motion to dismiss and a motion for more definite statement filed by the Mercy Defendants in state
court. The first amended complaint alleged the same causes of action, but added factual information
in support of Cooper’s allegations. Cooper filed a second amended complaint on January 17, 2014

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adding Dr. William Knubley as a defendant, but again listing the same causes of action. On October
6, 2014, Cooper filed a third amended complaint (Doc. 10), again asserting the same causes of
action, but adding as a theory of liability that the Mercy Defendants’ actions were wrongful1 in that
they violated provisions of federal law, namely 42 U.S.C. § 1395nn (“Stark Law”)2 and 42 U.S.C.
1320a-7b (“Anti-Kickback Statute”).3 Cooper did not, however, assert any independent federal
causes of action.
Following Cooper’s filing of the third amended complaint, the Mercy Defendants filed a
motion to dismiss Cooper’s “federal stark and anti-kickback claims.” (Doc. 21, p.1). In that motion,
the Mercy Defendants recognized “Cooper does not state new causes of action against Mercy, but
instead attempts to rely on these alleged federal statutory violations in support of its existing claims

1

“Improper” action is an element of tortious interference with contract under Arkansas law;
“unconscionable” action is an element of a claim made pursuant to the ADTPA. See, e.g., Baptist
Health v. Murphy, 365 Ark. 115, 125 (2006) (violation of state and federal anti-kickback statutes
could be considered as evidence of impropriety). Unjust enrichment encompasses the notion that
a person or entity “has received money or its equivalent that, in equity and good conscience, he or
she ought not to retain.” Hatchell v. Wren, 363 Ark. 107, 117 (2005) (emphasis added).
2

“Enacted as amendments to the Social Security Act, the Stark Statute, 42 U.S.C. § 1395nn
prohibits, inter alia, a hospital from submitting Medicare claims for payment based on patient
referrals from physicians having a prohibited ‘financial relationship’ (as defined in the statute) with
the hospital. The Stark Statute establishes the clear rule that the United States will not pay for items
or services ordered by physicians who have improper financial relationships with a hospital.
Violation of the Stark Statute may also subject the billing entity to exclusion from participation in
federal healthcare programs and various financial penalties.” United States v. Rogan, 459 F. Supp.
2d 692, 711 (N.D. Ill. 2006).
3

“The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), prohibits any person or entity from
offering, making, or accepting payment to induce or reward any person for referring, recommending,
or arranging for federally funded medical services, including services provided under the Medicare
and Medicaid programs.” Rogan, 459 F.Supp.2d at 714. “Compliance with the Anti-Kickback
Statute is a condition of payment by the Medicare and Medicaid programs. Violations of the statute
can also subject the perpetrator to exclusion from participation in federal healthcare programs and
. . . civil monetary penalties . . . .” Id. (citing 42 U.S.C. §§ 1320a-7(b)(7) and 1320a-7a(a)(7)).
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against Mercy . . . .” Id. On November 3, 2014, the Mercy Defendants removed the case to this
Court, with the consent (Doc. 1-1) of the remaining defendants, based on the assertion that Cooper’s
state-law claims necessarily raise a federal issue. (Doc. 1). In support of their notice of removal,
the Mercy Defendants argue that “Cooper’s ostensible state-law claims now hinge on the
interpretation of two federal statutes” as they are “based on alleged violations of the federal Stark
law and the Anti-Kickback Statute.” (Doc. 3, p.2).
“Defendants may remove civil actions to federal court only if the claims could have been
originally filed in federal court.” Cent. Iowa Power Co-op v. Midwest Indep. Transmission Sys.
Operator, Inc., 561 F.3d 904, 912 (8th Cir. 2009). “Critically, the party seeking removal has the
burden to establish federal subject matter jurisdiction; all doubts about federal jurisdiction must be
resolved in favor of remand.” Id. (internal citation omitted). “As relevant here, Congress has
authorized the federal district courts to exercise original jurisdiction in ‘all civil actions arising under
the Constitution, laws, or treaties of the United States . . . .” Gunn v. Minton, 133 S. Ct. 1059, 1064
(2013) (quoting 28 U.S.C. § 1331). Generally, a case will “arise under” federal law “when federal
law creates the cause of action asserted.” Id. “But even where a claim finds its origins in state rather
than federal law . . . [the Supreme Court has] identified a ‘special and small category’ of cases in
which arising under jurisdiction still lies.” Id. (quoting Empire Healthchoice Assurance, Inc. v.
McVeigh, 547 U.S. 677, 699 (2006)). Although the Supreme Court has recognized that case law on
this “slim category” of federal jurisdiction is “unruly,” the Court has clarified the inquiry that a
district court should conduct when determining if a case contains an embedded federal question
sufficient to confer jurisdiction:
[F]ederal jurisdiction over a state law claim will lie if a federal issue is: (1)
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necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution
in federal court without disrupting the federal-state balance approved by Congress.
Where all four of these requirements are met, we held, jurisdiction is proper because
there is a ‘serious federal interest in claiming the advantages thought to be inherent
in a federal forum,’ which can be vindicated without disrupting Congress’s intended
division of labor between state and federal courts.
Id. (quoting Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005)).
Applying the requisite inquiry to this case, it is clear that Cooper’s claims do not arise under federal
law.
First, Cooper’s third amended complaint does not necessarily raise a federal issue, as Cooper
can prevail on each of its state-law claims without proving a violation of either the Stark Law or the
Anti-Kickback Statute. Violation of those federal statutes is simply one theory of liability on which
Cooper could potentially prevail.4 Cooper did not add any new causes of action in its third amended
complaint. Cooper added reference to the federal Stark Law and Anti-Kickback Statute in support
of the alternate and additional theory that the previously-pleaded facts also constituted violations of
federal law, which could be used as evidence supporting a finding of wrongful conduct. There is no
federal jurisdiction where a plaintiff can succeed on its state-law claims regardless of a finding on
any implicated federal issue. See Central Iowa Power Coop. v. Midwest Ind. Transmission Sys.
Operator, Inc., 561 F.3d 904, 913-14 n.2 (8th Cir. 2009) (finding no federal jurisdiction where
plaintiff could succeed on its state-law claims regardless of whether the defendants violated a
contract having “the same legal force as a federal regulation”); Broder v. Cablevision Sys. Corp., 418
F.3d 187, 194-95 (2d Cir. 2005) (“Where a federal issue is present as only one of multiple theories
4

The Mercy Defendants argue that Cooper cannot prevail on any alternate theory. Whether
or not Cooper may ultimately prevail on any alternate theory is of no import to the Court’s analysis
of whether remand is appropriate. Absent federal jurisdiction, issues of state law should be left to
the states. And issues of fact must be left to the trier of fact.
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that could support a particular claim, however, this is insufficient to create federal jurisdiction.”);
Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816-17 (4th Cir. 2004) (“A plaintiff’s right to relief for
a given claim necessarily depends on a question of federal law only when every legal theory
supporting the claim requires the resolution of a federal issue.”).
Looking at the second and third Gunn requirements together, there is no actual dispute
concerning a substantial question of federal law in this case, as there is no dispute as to the validity,
construction, or effect of the Stark Law or Anti-Kickback Statute.5 The Supreme Court has “sh[ied]
away from the expansive view that mere need to apply federal law in a state-law claim will suffice
to open the ‘arising under’ door.” Grable, 545 U.S. at 313. In order for a claim to present a
substantial federal issue for purposes of invoking embedded-federal-question jurisdiction, a state-law
claim must “‘really and substantially involve a dispute or controversy respecting the validity,
construction or effect of federal law.’” Id. (quoting Shulthis v. McDougal, 225 U.S. 561, 569 (1912)).
Cooper has raised no controversy in regard to the validity, construction, or effect of either the Stark
Law or the Anti-Kickback Statute. Rather, the federal issue raised by Cooper in this case is a factdependent determination of whether Defendants may have generally violated those federal statutes,
which violations could be used as evidence in determining whether Defendants’ conduct was
sufficiently wrongful to establish one element of various state-law claims. Therefore, the dispute
in this case is one of fact, and the potential for application of federal law to those facts does not
5

The Mercy Defendants argue that there is a substantial federal issue in that Cooper is using
the Stark and Anti-Kickback Statutes in novel ways that are contrary to law. The Court cannot find,
however, that Cooper’s reliance on the Stark and Anti-Kickback Statutes is either novel or
prohibited. See, e.g., Baptist Health, 365 Ark. at 126 n.5 (“The circuit court correctly noted that
while [the Anti-Kickback Statutes] create no private right of action, a violation may be considered
evidence of impropriety” in determining whether an entity improperly interfered with a contractual
relationship.).
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implicate a substantial federal controversy sufficient to merit “claiming the advantages thought to
be inherent in a federal forum.” Id.; see, e.g., Bennett v. Southwest Airlines Co., 484 F.3d 907, 90811 (7th Cir. 2007) (holding no federal question jurisdiction over plaintiffs’ state-law, negligence
claims founded upon federal aviation laws where the case did not involve any particular disputed
issue of federal law or challenge any federal agency or employee action, but instead involved a “factspecific application of rules that come from both federal and state law rather than a context-free
inquiry into the meaning of a federal law”).
Finally, the exercise of federal jurisdiction over this case would be disruptive of the federalstate balance approved by Congress. There is no private cause of action under either the federal
Stark Law or the Anti-Kickback Statute. It is unlikely that Congress would make no provision for
a federal cause of action but nonetheless intend for federal courts to adjudicate state-law claims that
raise federal laws or standards solely as a referential measuring stick for wrongful conduct. Merrell
Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 814 (1987) (“Given the significance of the assumed
congressional determination to preclude federal private remedies, the presence of the federal issue
as an element of the state tort is not the kind of adjudication for which jurisdiction would serve
congressional purpose and the federal system.”). While the Court recognizes that a federal cause of
action is not “a necessary condition for federal-question jurisdiction,” the absence of such cause is
nonetheless relevant to considerations of congressional intent. Grable, 545 U.S. at 2365. In this
case, the consequences to the federal system of allowing jurisdiction would cause a disruption in the
federal-state balance more akin to that considered by the Supreme Court in Merrell Dow (finding
no jurisdiction over state-law claim implicating federal labeling standard) than to that considered by
the Supreme Court in Grable (finding jurisdiction over a rare state quiet-title action involving
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contested federal-law issues). To allow for federal jurisdiction in cases such as this one would open
the gates of the federal courts to any number of garden-variety, state-law claims and allow a plaintiff
to get into federal court by mere citation to a federal statute or regulation. The Court cannot find that
such an exercise of jurisdiction would be in line with congressional intent.
For the reasons set forth above, the Court finds that Cooper’s claims do not necessarily raise
a federal issue that is actually disputed, substantial, or would be capable of resolution in federal court
without disrupting the federal-state balance approved by Congress. In short, the Mercy Defendants
have failed to show that Cooper’s claims satisfy any one of the four criteria required by the Supreme
Court in Gunn to be met in order to properly exercise federal jurisdiction over state-law claims.
Cooper requests that it be awarded its costs and attorneys’ fees accrued due to unwarranted
removal. “An order remanding the case may require payment of just costs and any actual expenses,
including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). “[A]bsent unusual
circumstances, attorney’s fees should not be awarded when the removing party has an objectively
reasonable basis for removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 136 (2005). The
Court finds that the Mercy Defendants in this case did not have an objectively reasonable basis for
removal. The Mercy Defendants’ arguments in support of removal were all foreclosed by available
case law. Even if certain of the Mercy Defendants’ arguments could be viewed as objectively
reasonable, the arguments cannot be said to be objectively reasonably when viewed in their totality,
as the Mercy Defendants failed to satisfy any one of the four requisite criteria listed in Gunn. The
removal of this case has unnecessarily delayed this litigation and expended the resources of the
parties, counsel, and the Court. The Court therefore awards Plaintiff its reasonable costs and
attorneys’ fees associated with the removal and remand of the action to be paid by the Mercy
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Defendants as the removing defendants.
IT IS THEREFORE ORDERED that Plaintiff’s motion to remand (Doc. 30) is GRANTED,
and this case is REMANDED to the Circuit Court of Sebastian County, Arkansas.
Cooper is directed to submit to the Court a detailed and itemized statement of reasonable
costs and attorneys’ fees incurred as a result of the removal and remand proceedings. This itemized
statement must be filed on or before Monday, February 16, 2015. The Mercy Defendants will have
until Friday, February 20, 2015 to file any response. The parties are, however, strongly encouraged
to confer with each other in an attempt to mutually resolve the issue of costs and fees to be awarded.
IT IS SO ORDERED this 3rd day of February, 2015.

/s/P. K. Holmes, III
P.K. HOLMES, III
CHIEF U.S. DISTRICT JUDGE

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