Value Health Care Service LLC v. PARCC Health Care Inc et al

Filing 24

RULING granting 9 Motion to Remand to State Court. Signed by Judge Janet C. Hall on 6/13/2011. (Simpson, T.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
:
:
:
:
:
v.
:
:
PARCC HEALTH CARE, INC., ET AL., :
Defendant.
:
VALUE HEALTH CARE SERVICES,
LLC,
Plaintiff,

CIVIL ACTION NO.
3:11-CV-523 (JCH)

JUNE 13, 2011

RULING RE: MOTION TO REMAND [Doc. No. 9]
I.

INTRODUCTION
On March 2, 2011, Value Health Care Services, LLC (“Value Health Care”),

brought this action against PARCC Health Care, Inc. (“PARCC”) and Talmadge Park,
Inc. (“Talmadge”) in the Connecticut Superior Court, Judicial District of New Haven.
See Compl. (Doc. No. 1, Ex. 1). Value Health Care brings claims against both
defendants for breach of contract; breach of the implied covenant of good faith and fair
dealing; unjust enrichment; and violation of the Connecticut Unfair Trade Practices Act
(CUTPA), Conn. Gen. Stat. § 42-110a et seq. On April 1, 2011, defendants removed
this action to federal court, purportedly pursuant to 28 U.S.C. § 1441. Defendants
assert that the diversity requirements of 28 U.S.C. § 1332 have been met, and
defendants state that they intend to raise defenses and counterclaims which involve
questions of federal law, which defendants contend would permit removal under 28
U.S.C. § 1331. See Notice of Filing of Removal (“Notice”) (Doc. No. 1) at 2.
Value Health Care now moves to remand this action to state court, arguing that
the action is not removable on diversity grounds because both defendants are citizens
are the forum state, and the action is not removable on federal question grounds

because the Complaint does not assert any claims arising under federal law. Mot. to
Remand (Doc. No. 9), at 1. Value Health Care also seeks reimbursement of its costs
and expenses related to the removal, including attorney’s fees, pursuant to 28 U.S.C. §
1447(c). Id. at 2. For the reasons set forth below, the court grants Value Health Care’s
Motion to Remand and awards Value Health Care its reasonable costs and expenses.
II.

FACTUAL BACKGROUND
Plaintiff Value Health Care is a Delaware LLC with a principal place of business

in Cheshire, Connecticut. Compl., ¶ 1. PARCC is a Connecticut corporation with its
principal place of business in Bridgeport, Connecticut, and Talmadge is a Connecticut
corporation with its principal place of business in East Haven, CT. See Compl., ¶¶ 2, 3;
Doc. No. 9, Ex. G (Connecticut Secretary of State’s directory listings for Talmadge Park,
Inc. and PARCC Health Care, Inc.).1
PARCC owns and operates a rehabilitation facility in Bridgeport, CT and
Talmadge owns and operates a rehabilitation and nursing facility in East Haven, CT.
Compl., ¶¶ 5, 6. On or about May 12, 2003, Value Health Care and PARCC entered
into a contract in which Value Health Care agreed to provide pharmaceutical products
and consulting services to PARCC. Compl., ¶¶ 8, 9. Value Health Care fully performed
under the contract, but beginning in November 2006, PARCC failed to timely and fully
pay Value Health Care. Compl. ¶¶ 13,15. On January 31, 2000, Value Health Care
and Talmadge entered into a contract in which Value Health Care agreed to provide
pharmaceutical products and services to Talmadge. Compl., Count Five, ¶¶ 8, 9.

1

The District of Connecticut’s Standing Order for Cases Removed from Superior Court
(Doc. No. 6) requires defendants removing an action pursuant to 28 U.S.C. § 1441 to file within
seven days of removal a signed statement indicating whether any of the defendants is a citizen
of Connecticut. Defendants have failed to submit a statement pursuant to that Standing Order.

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Despite Value Health Care’s full compliance with the terms of the contract, starting in
January 2009, Talmadge failed to timely and fully pay Value Health Care. Compl.,
Count Five, ¶ 15.
III.

DISCUSSION
A.

Forum Defendant Rule

Defendants assert that “there is a diversity of citizenship necessary to satisfy the
requirements of 28 U.S.C. § 1332” which would permit the defendants to remove the
case under 28 U.S.C. § 1441. Notice at 2. However, a civil action may be removed to
the district court on diversity grounds “only if none of the parties in interest properly
joined and served as defendants is a citizen of the State in which such action is
brought.” 28 U.S.C. § 1441(b). This is commonly known as the “forum defendant rule.”
See, e.g., In re Repository Technologies, Inc., 601 F.3d 710, 721-22 (7th Cir. 2010).
For the purposes of determining diversity under sections 1332 and 1441, “a
corporation shall be deemed to be a citizen of any State by which it has been
incorporated and of the State where it has its principal place of business.” 28 U.S.C. §
1332(c)(1). PARCC and Talmadge are both incorporated in Connecticut and have their
principal places of business in Connecticut, so they are also Connecticut citizens. See
Compl., ¶¶ 2, 3; Doc. No. 9, Ex. G. Because at least one of the defendants is a citizen
of the state in which the action was brought, the forum defendant rule articulated in
section 1441(b) bars the defendants from removing this case to Federal District Court.
See Handelsman v. Bedford Village Associates Ltd. Partnership, 213 F.3d 48, 50 n.2
(2d Cir. 2000); Four Keys Leasing & Maintenance Corp. v. Simithis, 849 F.2d 770, 773
(2d Cir. 1988).

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Defendants assert that section 1441(b) nevertheless permits removal because
PARCC and Talmadge were improperly joined as co-defendants, and a civil action may
be removed to the district court on diversity grounds “only if none of the parties in
interest properly joined and served as defendants is a citizen of the State in which such
action is brought.” 28 U.S.C. § 1441(b) (emphasis added). Defendants claim that the
Complaint presents “separate and distinct claims or causes of action based upon
separate and distinct contracts against separate and distinct corporations,” Mem. in
Opp. at 8, and therefore one of the defendants was improperly joined in this action.
Assuming, without deciding, that one of the defendants was improperly joined,
the forum defendant rule nevertheless bars removal in this case. Both PARCC and
Talmadge are Connecticut citizens. Regardless of which defendant was improperly
joined to this action, the remaining defendant is a resident of the forum state, and the
forum defendant rule therefore bars removal. This interpretation of section 1441(b) is
particularly sensible in light of the purpose of diversity jurisdiction and the forum
defendant rule. “[D]iversity jurisdiction's basic rationale” is the “opening the federal
courts' doors to those who might otherwise suffer from local prejudice against out-ofstate parties.” Hertz Corp. v. Friend, 130 S.Ct. 1181, 1188 (2010). “Since a defendant
has no risk of suffering even presumptive local prejudice in a state court located in his
or her home state, there is no reason to provide that defendant the option of a federal
forum.” Hawkins v. Cottrell, Inc., ___ F.Supp.2d ___, 2011 WL 1898867, *7 (N.D. Ga.
2011). Here, both defendants are Connecticut citizens, and Value Health Care elected
to bring suit in Connecticut Superior Court. Neither defendant will risk local prejudice in
that forum.

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B.

Well-Pleaded Complaint Rule

Defendants additionally assert that they intend to present defenses and
counterclaims which will invoke the court’s federal question jurisdiction. Notice at 2.
However, a defendant’s proposed defenses and counterclaims do not affect whether a
court possess federal question jurisdiction. See Beneficial Nat’l Bank v. Anderson, 539
U.S. 1, 6 (2003). Instead,
The presence or absence of federal question jurisdiction is governed by the wellpleaded complaint rule. That rule provides that federal question jurisdiction
exists only when the plaintiff’s own cause of action is based on federal law, and
only when plaintiff’s well-pleaded complaint raises issues of federal law.
Marcus v. AT&T Corp., 138 F.3d 46, 52 (2d Cir. 1998) (citations omitted). “To
determine whether the claim arises under federal law, we examine the ‘well pleaded’
allegations of the complaint and ignore potential defenses.” Beneficial Nat’l Bank, 539
U.S. at 6. “[I]f a complaint alleges only state law based causes of action, it cannot be
removed from state court to federal court even if there is a federal defense.” Hernandez
v. Conriv Realty Assoc., 116 F.3d 35, 38 (2d Cir. 1997). “Federal preemption is a
defense, and therefore, the general rule is that even if a state law based cause of action
is preempted by federal law, the case cannot be removed.” Id. at 38.
Only two exceptions exist to well-pleaded complaint rule: (1) when Congress
expressly provides that a state-law claim may be removed to federal court, or (2) “when
a federal statute wholly displaces the state-law cause of action through complete preemption.” Beneficial Nat’l Bank v. Anderson, 539 U.S. at 8. In this case, plaintiffs raise
state statutory claims for violations of CUTPA and state common law claims for breach
of contract, unjust enrichment, and breach of the implied covenant of good faith and fair
dealing. The court is unaware of a federal statute that expressly permits removal of
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these claims to federal court, nor is the court aware of any federal statute that
completely pre-empts these traditional state-law causes of action. Therefore, the court
concludes that section 1441 does not permit the defendants to remove this case to
federal district court.
C.

Award of Costs and Expenses

“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). Value Health Care seeks reimbursement of its costs and expenses related to
the removal, including attorney’s fees, pursuant to section 1447(c). Mot. to Remand
(Doc. No. 9) at 2. “Absent unusual circumstance, courts may award attorney’s fees
under § 1447(c) only where the removing party lacked an objectively reasonable basis
for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).
Both the forum defendant rule and the well-pleaded complaint rule are longestablished rules of federal jurisdiction. The forum defendant rule has been in place
since at least 1948. Pub. L. No. 80-773, § 1441, 62 Stat. 869, 937-38 (1948). Similarly,
more than a hundred years ago, the Supreme Court characterized the well-pleaded
complaint rule as the “settled interpretation” of the statute providing for federal question
jurisdiction. Louisville & Nashville Railroad Co. v. Mottley, 211 U.S. 149, 152 (1908).
Because the defendants’ removal of the case to this court was barred by clearly
established precedent, the court finds that the defendants lacked an objectively
reasonable basis for removal.
Although the court may nevertheless deny fees and costs if unusual
circumstances warrant denial, no such unusual circumstances are present in this case.

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Value Health Care promptly filed its Motion to Remand. “A competent attorney, after
reasonable inquiry into applicable law and the facts and procedural history of this case
would have known that there was no justification whatever for removal of this action.”
Four Keys Leasing & Maintenance Corp., 849 F.2d at 774 (imposing Rule 11 sanctions
where removal petition was improper because (1) the defendant was a citizen of the
forum state, (2) the defendant’s federal claims did not establish federal question
jurisdiction, in light of the well-pleaded complaint rule, and (3) the state court
proceedings had already reached a final judgment). Indeed, Value Health Care
attempted to persuade the defendants to consent to remand in order to avoid timeconsuming and burdensome motion practice before this court. See Mot. to Remand at
Exs. D, E. “The process of removing a case to federal court and then having it
remanded back to state court delays resolution of the case, imposes additional costs on
both parties, and wastes judicial resources.” Martin, 546 U.S. at 140.2 Value Health
Care ought not to bear the burden of those costs where the defendants lacked an
objectively reasonable basis for removing this case.
IV.

CONCLUSION
For the foregoing reasons, Value Health Care’s Motion to Remand [Doc. No. 9]

is GRANTED, and the court awards costs and fees to Value Health Care pursuant to 28
U.S.C. § 1447(c). The Clerk is directed to close the case and to mail a certified copy of
this order to the Clerk of the Connecticut Superior Court, Judicial District of New Haven.

2

Indeed, it bears noting that defendants removed this case at the close of business on
the Friday before the Monday on which a hearing on a prejudgment remedy had been
scheduled. See Mem. in Supp. of Mot. to Remand at 2; Notice of Filing of Removal (filed with
Connecticut Superior Court) (Doc. No. 9, Ex. B); Mem. in Opp. (Doc. No. 20) at 2.

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The court retains jurisdiction over this matter only to the extent necessary to
determine the value of the award of attorney's fees and costs. See Bryant v. Britt, 420
F.3d 161, 162 (2d Cir. 2005) (“[A] district court has jurisdiction to consider a motion for
fees and costs under § 1447(c), even after it has remanded a case to state court.”)
Counsel for Value Health Care shall file a request for specific costs and fees with the
court no later than June 20, 2011.

SO ORDERED.
Dated at Bridgeport, Connecticut this 13th day of June, 2011.

/s/ Janet C. Hall
Janet C. Hall
United States District Judge

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