Spine Care Delaware, LLC v. State Farm Mutual Automobile Insurance Company et al

Filing 20

MEMORANDUM. Signed by Judge Mark A. Kearney on 1/26/2018. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

SPINE CARE DELAWARE, LLC

CIVIL ACTION

v.

NO. 17-1816

STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY, et al.

KEARNEY,J.

January 26, 2018

MEMORANDUM

A medical provider moving today to bar federal courts' jurisdiction over putative class
actions unless all of the possible class members are of diverse citizenship from the defendant
insurer meets the first condition of Aaron Burr's reported cynical observation "Law is whatever
is boldly asserted and plausibly maintained." But today's bold assertion falls woefully sho1i of
Mr. Burr's second condition and will not define the Law. The medical provider's argument for
requiring each possible potential class member to be diverse from the defendant insurer to invoke
our subject matter jurisdiction is contrary to the Law.
The medical provider is a Delaware entity suing an Illinois insurer for violating Delaware
Law for damages in excess of $75,000 initially in state court. The insurer removed this case
from the state court asserting diversity jurisdiction based on the Delaware plaintiff and Illinois
defendant.

For subject matter jurisdiction purposes, we do not consider the possibility the

Delawarean may someday be afforded the fiduciary obligation of protecting non-party citizens of
other states in a class action. We deny the medical provider's motion for us to reconsider its
request to remand its case to the state court. 1

I.

Background
Spine Care Delaware LLC, a Delaware medical treatment facility, sued State Farm

insurance company in state court claiming the insurer fails to pay personal injury protection
claims to its insureds under its automobile policies. The parties agree State Farm is an Illinois
citizen. Spine Care seeks in excess of $75,000 and, if it can state a claim, hopes to recover
damages as a class representative for non-parties similarly situated.2
State Farm timely removed based solely on diversity jurisdiction. State Farm then moved
to dismiss Spine Care's case. 3 Spine Care moved to remand this case back to state court arguing
we lack subject matter jurisdiction because absent, unnamed class members "almost certainly"
include Illinois citizens and their possible non-diverse presence in the possible class would
extinguish our ability to exercise diversity jurisdiction. We denied remand because we have
original jurisdiction based on Spine Care's and State Farm's diverse citizenship and the
citizenship of unnamed possible class members who are not, and will not be, parties does not
affect our jurisdiction analysis. 4

II.

Analysis
Spine Care today asks us to reconsider our denial of its remand motion because of a

manifest error of law. 5 Spine Care asks us to consider the citizenship of unknown class members
a month after the removal and months before a class may be certified. It asks us to hold, for
apparently the first time, the possibility we may later certify a class which may include an
Illinois insured or claimant "contaminates" our exercise of diversity jurisdiction upon removal.
Spine Care argues 28 U.S.C. § 1367 (enacted in 1990) and the Supreme Court's 2005 decision in

Exxon Mobil Corp. v. Allapatah Serv., Inc. abrogates or supersedes the caselaw relied upon by us

2

in denying remand. 6 Studying the facts underlying Spine Care's arguments readily confirms the
lack of merit in applying these principles to today's issue.
When cases are removed, we determine our subject matter jurisdiction based on the
allegations in the Notice of Removal. 7 When we analyze our jurisdiction over a Rule 23 class
for purely state law claims, we have original jurisdiction under § 1332 over the named plaintiffs
and defendants and we then exercise supplemental jurisdiction under 28 U.S.C. § 1367 over the
additional class members. Our court of appeals relying on Snyder v. Harris held where the
court's jurisdiction is based on diversity we only consider the named plaintiff and defendants for
complete diversity. 8

The Supreme Court, in Devlin v. Scardelletti, held "nonnamed class

members cannot defeat complete diversity" because they are not considered a "party" when
assessing jurisdiction. 9

A.

Congress' codification of our supplemental jurisdiction in 28 U.S.C. § 1367.

Where we have original jurisdiction, Congress authorizes us to exercise supplemental
jurisdiction "over all other claims that are so related to claims" to the civil action "they form part

°

of the same case or controversy." 1 From this broad grant of supplemental jurisdiction, Congress
slices out and prohibits supplemental jurisdiction "over claims by plaintiffs against persons made
parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or over claims by
persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as
plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such
claims would be inconsistent with the jurisdictional requirements of section 1332." 11 Section
1367(b) does not reference Rule 23 which governs class actions involving, by definition, persons
who are not parties.

3

B.

Exx.on Mobil does not deprive us of subject matter jurisdiction.

Spine Care argues ExxonMobil forecloses our jurisdiction. In ExxonMobil, the Supreme
Court consolidated two cases. We focus on one of the consolidated cases where the federal court
sat in diversity over a state law class action, as in our case. The case is Allapattah Serv., Inc. v.
Exxon Mobil Corp., filed in the Southern District of Florida.
Twelve plaintiffs, citizens of Florida, Maryland, Virginia, and West Virginia, sued Exxon
Mobil, a New Jersey corporation with a principal place of business in Texas, New York, or New
Jersey, alleging state law breach of contract claims on behalf of themselves and others similarly
situated.

12

At the time of filing the civil action, the district court had original jurisdiction based

on diversity. Defendant challenged the district court's subject matter jurisdiction over named
plaintiffs' and unnamed class members' claims which did not individual meet the amount-incontroversy. The district court held it had supplemental jurisdiction over claims not meeting the
amount in controversy because it had original jurisdiction other plaintiffs' related claims. The
class included 10,000 members from 35 states.13 It is unclear from the docket the domicile of
unnamed class members but the Defendant did not raise the possibility of the nondiverse
citizenship of an unnamed class member as a challenge to subject matter jurisdiction.
Defendant appealed to the Court of Appeals for the Eleventh Circuit and then the
Supreme Court. In Exxon Mobil, the Supreme Court reviewed "the single question before" it
whether the district court sitting in diversity properly exercised supplemental jurisdiction under §
1367 over class members claims which did not meet the amount-in-controversy requirement. 14
The court held § 1367(a) "confers supplemental jurisdiction over all claims, including those that
do not independently satisfy the amount-in-controversy requirement, if the claims are part of the
same Article III case or controversy." 15

4

The Supreme Court explained its reasoning using a "contamination theory" of
jurisdiction which is a theory "the inclusion of a claim or party falling outside the district court's
original jurisdiction somehow contaminates every other claim on the complaint, depriving the
court of originaljurisdiction." 16 The court held the contamination theory "can make some sense"
for the complete diversity requirement because "the presence of a single nondiverse party may
eliminate the fear of bias with respect to all claims, but the presence of a claim that falls short of
the minimum amount in controversy does nothing to reduce the importance of the claims that do
meet this requirement." 17
While the Supreme Court ruled only on the amount in controversy issue, it discussed §
1367 supplemental jurisdiction at length in the context of the amount in controversy. The Court
reviewed the statutory text of § 1367(b) and found Congress did not withhold supplemental
jurisdiction over persons certified as class-action members under Rule 23 as in the Exxon Mobil
class. 18 The Supreme Court addresses the anomaly in § 1367(b) which seemingly allows a
district court to exercise supplemental jurisdiction over non-diverse plaintiffs joined under Rule
20 but prohibits supplemental jurisdiction over non-diverse plaintiffs joined under Rule 19. 19
The Supreme Court concluded a "well-pleaded complaint" which includes claims outside
our original jurisdiction permits supplemental jurisdiction over a claim "for which there is no
jurisdictional defect," i.e., which do not meet the amount-in-controversy requirement.

20

Still

referencing the well-pleaded complaint, the Supreme Court directed "[t]hough the special nature
and purpose of the diversity requirement mean that a single nondiverse party can contaminate
every other claim in the lawsuit," the theory does not apply to plaintiffs whose claims fail to
meet the amount-in-controversy requirement when at least one plaintiffs claim does. 21 In its
lengthy discussion, the Supreme Court never addressed the import citizenship of parties not

5

named in the complaint, and specifically never discusses the citizenship of unnamed class
members and its effect on complete diversity.
C.

The citizenship of possible unnamed class members does not affect our
exercise of jurisdiction over Spine Care's claims.

We do not read Exxon Mobil to require us to dismiss a complaint which at the time of
removal (the proper point to assess our subject matter jurisdiction) we have original jurisdiction
because complete diversity exists between the parties and the amount in controversy is met even
where there is possibility a class member may be domiciled in Illinois. Spine Care does not cite
a single case supporting this argument.
We note two factors about the Supreme Court's opinion in Exxon Mobil which
undermine Spine Care's interpretation.

The opinion never addresses its earlier holdings in

Snyder and Devlin. We find it particularly difficult to hold the Supreme Court intended to sub
silentio overrule Devlin, where it held "nonnamed class members cannot defeat complete

diversity" because they are not considered a "party" when assessing jurisdiction just three years
before Exxon Mobil. 22 Since Exxon Mobil, the Supreme Court has revisited its discussion of
class member as "parties" noting "as the dissent in Devlin noted, no one in that was 'willing to
advance the novel and surely erroneous argument that a nonnamed class member is a party to the
class-action litigation before the class is certified. "'23

This is exactly what Spine Care is

requesting we do. Second, the Supreme Court never paused to question if there is complete
diversity between the 10,000 class members and the defendant, which if we read the case as
Spine Care asks, the Court would address if the existence of a single nondiverse plaintiff among
those 10,000 contaminates the entire class action and causes the district court to dismiss for lack
of jurisdiction. 24

6

Spine Care argues its interpretation of Exxon Mobil is supported by two decisions in the
Court of Appeals from the Second Circuit. Neither case is on point as to whether the presence of
a nondiverse class member destroys original jurisdiction, let alone holds the mere possibility of
the existence of a nondiverse class member destroys it.
The first case Spine Care cites, Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc.,
involved joinder of a nondiverse necessary party under Rule 19 and the court of appeals
dismissed the nondiverse named party to cure the jurisdiction defect under Exxon Mobil. 25 The
court of appeals only discusses named plaintiffs and there is no Rule 23 class.
In the second, Pennsylvania Public School Employees' Retirement System v. Morgan
Stanley & Co., Inc., the district court had complete diversity between several plaintiffs and
defendants. 26 At some point in the district court proceedings it came to light a named plaintiff
Pennsylvania Public School Employees' Retirement System ("PSERS") is actually an arm of the
state and not a citizen of a state for diversity purposes. 27 The district court dismissed and the
court of appeals affirmed the dismissal of PSERS to preserve its subject matter, holding § 1367
prohibited the exercise of supplemental jurisdiction over a nondiverse named plaintiff because it
destroyed complete diversity under§ 1332. 28
The holding in Exxon Mobil and the Second Circuit cases relied on by Spine Care stand
for the settled proposition named parties must have complete diversity under§ 1332 for original
jurisdiction. Here, the named parties Spine Care and the State Farm are completely diverse. We
are not exercising supplemental jurisdiction over a nondiverse named party which
"contaminates" our original jurisdiction under the Supreme Court's holding in Exxon Mobil. We
are not deprived of original jurisdiction if we certify Spine Care's class and it includes class

7

members domiciled in Illinois because, under Supreme Court precedent, "nonnamed class
members cannot defeat complete diversity." 29

III.

Conclusion

We have original jurisdiction over the named parties based on diversity because Spine
Care is a Delaware limited liability company and maintains its principal place of business in
Delaware.

30

Both State Farm entities are Illinois corporations and both their principal places of

business are in Illinois and the parties do not dispute the amount in controversy requirement is
satisfied. 31
We deny Spine Care's motion for reconsideration because it fails to identify a manifest
error in law in our denial of its motion to remand.

1

We do not suggest Spine Care's motion lacks a good faith basis for extending existing law
under Fed. R. Civ. P. 11. We only find its interpretation of existing law in other contexts lacks
merit today.
2

ECF Doc. No. 1-1 at 7.

3

ECF Doc. No. 7. This motion remains pending awaiting Spine Care's response.

4

ECF Doc. No. 15.

5

A motion for reconsideration may only be granted where the moving party shows: "(1) an
intervening change in the controlling law; (2) the availability of new evidence that was not
available when the court granted the motion for summary judgment; or (3) the need to correct a
clear error of law or fact or to prevent manifest injustice." Max's Seafood Cafe ex rel. Lou-Ann,
Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999).
6

545 U.S. 546 (2005).

7

See Steel Valley Authority v. Union Switch and Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987)
(internal citations omitted).

8

8

See In re School Asb. Litig., 921 F.2d 1310, 1317 (3d Cir. 1990) (citing Snyder v. Harris, 394
U.S. 332 (1969)).
9

536 U.S. 1, 10 (2002).

10

§ 1367(a).

11

Id.(emphasis added).

12

Allapattah Serv., Inc. v. Exxon Mobil Corp., No. 91-986, Complaint, Doc. No. iii! 3-16. The
plaintiffs filed an amended complaint but the same twelve plaintiffs are listed as filing the
amended complaint and there are no docket entries for summons for new plaintiffs or defendant
so we find the named plaintiffs and defendant remain the same.
13

See Allapattah Services. Inc. v. Exxon Corp., 333 F.3d 1248, 1251-52 (11th Cir. 2003).

14

Exxon Mobil, 545 U.S. at 551.

15

Id. at 559.

16

Id. at 561.

17

Id. at 562.

18

Id. at 560.

19

Id. at 566.

20

Id.

21

Id.

22

536 U.S. at 10; see also MP.G. Tent Rentals, Inc. v. Wasatch Tees of Atlanta, Inc., No. 082218, 2009 WL 10688841, at *2 (N.D. Ala. Feb. 26, 2009) (citing Devlin for the holding
"unnamed class members do not defeat complete diversity); Cicero-Berwyn Elks Lodge No. 1510
v. Philadelphia Ins. Co., No. 12-10257, 2013 WL 1385675, at *1 (N.D. Ill. April 4, 2013) (citing
Devlin for the holding "unnamed class members do not defeat complete diversity).
23

Smith v. Bayer Corp., 564 U.S. 299, 313 (2011) (citing Devlin, 536 U.S. at 16 n.1 (Scalia, J.,
dissenting)).
24

While neither party challenged complete diversity on appeal, all federal courts have a
"continuing obligation to assess its subject matter jurisdiction, we can dismiss a suit sua sponte
for lack of subject matter jurisdiction at any stage in the proceeding" including on appeal.
Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 421 (3d Cir. 2010).
9

25

500 F.3d 171, 179 (2d Cir. 2007).

26

772 F.3d 111, 116 (2d Cir. 2014); see Abu Dhabi Commercial Bank v. Morgan Stanley & Co.
Inc., No. 08-7508, Doc. No. 354, ~ 29 (Jan. 10, 2012); see Morgan Stanley, 772 F.3d at 116 ("In
January 2012, appellants filed the complaint operative for purposes of this appeal").
27

Id. at 117.

28

Id. at 119.

29

Devlin, 536 U.S. at 10.

30

ECF Doc. No. 1 at 4, ~ ~ 13-14.

31

Id.

10