Argent Healthcare Financial Services Inc v. Crawley et al
Filing
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OPINION AND ORDER granting 24 Motion to Remand to State Court; denying 26 Motion for Attorney Fees and costs. Signed by Chief Judge Philip P Simon on 6/30/11. (mc)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
ARGENT HEALTHCARE FINANCIAL
SERVICES, INC., n/k/a FIRSTSOURCE
HEALTHCARE ADVANTAGE, INC.,
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Plaintiff,
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v.
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DOUGLAS CRAWLEY and
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PATRICIA CRAWLEY,
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Defendants,
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____________________________________)
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DOUGLAS CRAWLEY and
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PATRICIA CRAWLEY,
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Third-Party Plaintiffs,
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v.
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THE CATHOLIC DIOCESE OF GARY, )
ST. JOSEPH CATHOLIC SCHOOL,
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DYER, INDIANA and ANTHEM
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INSURANCE COMPANIES, INC.,
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Third-Party Defendants,
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____________________________________)
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THE CATHOLIC DIOCESE OF GARY
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and ST. JOSEPH CATHOLIC SCHOOL
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Third-Party Plaintiffs,
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v.
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COMMUNITY HEALTHCARE
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SYSTEM GROUP HEALTH PLAN FOR )
EMPLOYEES OF ST. CATHERINE
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HOSPITAL AND ST. MARY MEDICAL )
CENTER and PRAIRIE STATES
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2:10-CV-499-PPS-APR
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ENTERPRISES, INC.,
Third-Party Defendants.
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OPINION AND ORDER
Before the Court is a motion to remand this case for lack of subject matter jurisdiction
under 28 U.S.C. § 1331, filed by third-party plaintiffs the Catholic Diocese of Gary (the
“Diocese”) and St. Joseph Catholic School (the “School”) [DE 24]. Those parties have also
moved for an award of attorneys’ fees and costs, pursuant to 28 U.S.C. § 1447(c), on the ground
of improper removal [DE 26]. For the reasons discussed below, the motion to remand is
GRANTED, but the motion for fees and costs is DENIED
BACKGROUND
Plaintiff Argent Healthcare filed this action in Lake Superior Court in Crown Point,
Indiana, on March 11, 2009, alleging that defendants Douglas and Patricia Crawley owed Argent
for unpaid medical bills [DE 1]. Argent’s complaint did not invoke the federal Constitution or
any federal statute; nor did it contain any allegations establishing diversity jurisdiction [Id.].
The Crawleys answered and filed a third-party complaint against the Diocese, the School
and third-party defendant Anthem Insurance Company, seeking indemnity from those parties for
the unpaid medical bills that are the subject of Argent’s original complaint [DE 2]. Specifically,
the Crawleys allege that Mr. Crawley, an employee of the School and the Diocese, was entitled
to health insurance coverage from Anthem, the healthcare plan administrator for the Diocese,
and that the Diocese and the School failed to timely inform him of his eligibility [Id.]. The
Crawleys further allege that, because of the failure of the School and the Diocese to disclose, Mr.
Crawley lost coverage under his wife’s, Patricia Crawley’s, insurance plan [Id.]. In Count V of
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their third-party complaint, the Crawleys assert that the Diocese, the School and Anthem
violated the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et
seq. [Id.].
On September 2, 2010, the Diocese and the School answered the Crawleys’ third-party
complaint [DE 3]. They also filed a third-party complaint against third-party defendants
Community Healthcare System Group Health Plan for Employees of St. Catherine Hospital and
St. Mary Medical Center (“Community”) and Prairie States Enterprises, alleging that those
entities provided health insurance to Patricia Crawley and were therefore responsible for Mr.
Crawley’s unpaid medical bills [DE 4].
On December 22, 2010, Community removed, pursuant to 28 U.S.C. § 1441(b) [DE 5].
In its removal notice, Community contends that this Court has original jurisdiction, pursuant to
28 U.S.C. § 1331, based on the ERISA claim in the Crawleys’ third-party complaint [Id.].
On May 10, 2011, more than four months later, the Diocese and the School filed the
pending motion to remand [DE 24]. These parties argue that removal was improper,
notwithstanding the Crawleys’ ERISA claim, because no federal question arose in Argent’s
original complaint [DE 25]. Accordingly, they seek to remand the case based on a lack of
subject matter jurisdiction [DE 24]; they also seek fees and costs for improper removal, pursuant
to 28 U.S.C. § 1447(c) [DE 26].
In its response, Community maintains that the case was properly removed under Section
1441(c) because the removable ERISA claim is “separate and independent” from the non-
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removable state law claims in Argent’s original complaint against the Crawleys [DE 27].1
Community also argues that the motion to remand is untimely [Id.].
DISCUSSION
The party seeking removal bears the burden of establishing federal jurisdiction. Boyd v.
Phoenix Funding Corp., 366 F.3d 524, 529 (7th Cir. 2004). The Court must interpret the
removal statute narrowly, and any doubts regarding jurisdiction are resolved in favor of remand.
Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993). If the Court finds removal proper
under Section 1441(c), it may either determine all the issues in the removed case, or, in its
discretion, remand all matters in which state law predominates. 28 U.S.C. § 1441(c).
A defendant may remove a case to federal court under Section 1441(c) whenever a
“separate and independent” claim conferring federal question jurisdiction under 28 U.S.C. §
1331 is joined with an otherwise non-removable claim:
Whenever a separate and independent claim or cause of action within the
jurisdiction conferred by section 1331 of this title is joined with one or more
otherwise non-removable claims or causes of action, the entire case may be removed
and the district court may determine all issues therein, or, in its discretion, may
remand all matters in which State law predominates.
28 U.S.C. § 1441(c) (emphasis added). A federal claim is not “separate and independent” if it
“arises from the same loss or actionable wrong” as the nonremovable claim. Lewis v. Louisville
& Nashville R.R. Co., 758 F.2d 219, 221 (7th Cir. 1985).
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Community’s notice of removal states that removal proper is pursuant to 28 U.S.C. §
1441(b) [DE 5]. But Community’s response brief shows that it believes removal is instead
warranted under Section 1441(c). The moving parties do not take issue with this discrepancy,
and argue, on reply, that removal is improper under Section 1441(c). I will, likewise, address the
removal issue here in terms of Section 1441(c).
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I.
Removal by Third-Party Defendant Under Section 1441(c)
Generally, a third-party defendant cannot remove a case pursuant to 28 U.S.C. § 1441(c).
In Thomas v. Shelton, 740 F.2d 478 (7th Cir. 1984), the Seventh Circuit observed that “in the
broad run of third-party cases . . . the third-party defendant cannot remove the case under Section
1441(c).” Id., at 487; accord Palisades Collections LLC v. Shorts, 552 F.3d 327, 332-35 (4th
Cir. 2008); First Nat. Bank of Pulaski v. Curry, 301 F.3d 456, 463 (6th Cir. 2002); Lewis v.
Windsor Door Co., a Div. of Ceco Corp., 926 F.2d 729, 733 (8th Cir. 1991) (“We do not . . .
believe § 1441(c) was intended to effect removal of a suit, not otherwise within federal
jurisdiction, because of the introduction of a third-party claim. Removal on such basis is too
much akin to the tail wagging the dog.”); 14B Charles Alan Wright, Arthur R. Miller & Edward
H. Cooper, Fed. Prac. & Proc. Juris. § 3722.3 (4th ed.) (“Analysis of the decisions that have
permitted removal on the basis of third-party claims, . . . makes clear that Section 1441(c)
generally should not be interpreted to authorize removal in these contexts.”).
Thomas declined to adopt “a universal and absolute rule” that a third-party defendant
cannot remove under Section 1441(c),” acknowledging the possibility that exceptions might
exist, particularly in cases involving the United States as a third-party defendant. Thomas, at
487.
Community, however, provides no reason to conclude that this case presents one of the
exceptions that Thomas envisioned. Indeed, Thomas specifically observed that third-party
claims for indemnity, like the ERISA claim that grounds Community’s removal notice, are
usually dependent on the claim in the original action:
A third-party complaint is usually conditional on the success of the main claim. The most
common third-party claim is a claim for indemnity, that is, a claim that should the defendant
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(third-party plaintiff) be held liable to the plaintiff, the third-party defendant must reimburse
the defendant for the cost of satisfying the plaintiff's judgment.
Id., at 486. According to this reasoning, the Crawleys’ indemnity claim under ERISA will not
satisfy Section 1441(c)’s “separate and independent” requirement.
Moreover, following Thomas, district courts in the Seventh Circuit have remanded cases
removed by third-party defendants pursuant to § 1441(c), where, as here, the third-party claim
supporting removal is for indemnity. For example, in Univ. of Chicago Hosp. & Med. Ctr. v.
Rivers, 701 F. Supp. 647 (N.D. Ill. 1988), the plaintiff had provided medical services to the
defendant employee’s husband. Id., at 648. Plaintiff sued the employee’s widow, Rivers, for the
unpaid medical bills. Id. Rivers then filed a third-party complaint against her employer, her
insurer, and her benefit plan, contending they were obligated to pay for her husband’s medical
treatment under ERISA. Id. The third-party defendants removed the case, under Section
1441(c), based on the ERISA claims in the third-party complaint. Id. The court, applying
Thomas, found that the ERISA claim was not “separate and independent” of the original claim,
as required by Section 1441(c), reasoning that whether the third-party defendants were liable
depended on Rivers’ liability on the primary claim. Id. at 649; see also Phillips v. Kladis, No. 97
C 2346, 1997 WL 428506, at *3 (N.D. Ill. Jul. 25, 1997) (applying Thomas and finding that
third-party action for indemnity was not removable by third-party defendant insurer because its
liability was based on the outcome of the original suit); Assocs. in Psychcare v. Ament, No. 95 C
3732, 1995 WL 410982, at *1 (N.D. Ill. July 11, 1995) (same).
Applying the reasoning in Thomas, I likewise find that removal under Section 1441(c)
was inappropriate in this case. The Crawleys’ ERISA claim against the Diocese and the School
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is dependent on Argent’s primary claim because the liability of the Diocese and the School is
based on the outcome of Argent’s suit against the Crawleys. Accordingly, the Crawleys’ ERISA
claim is not separate and independent as required for removal under Section 1441(c), and the
case must therefore be remanded.
Community objects that the motion to remand is untimely, based on Section 1447(c)’s
30-day time limit for motions to remand based on a procedural defect. This deadline, however,
does not apply where remand is based on a determination that the court lacks subject matter
jurisdiction. See Baker v. Kingsley, 387 F.3d 649, 654 (7th Cir. 2004) ( district court may
remand a case for lack of subject matter jurisdiction at any time, but it can only remand for
procedural defects if plaintiff raises the defect in a motion to remand filed within 30 days of
removal).
The Court lacks subject matter jurisdiction here. Following the general rule in Thomas,
Community did not have statutory authority to remove this action under Section 1441(c).
Thomas, at 487; see also First Nat. Bank of Pulaski, 301 F.3d at 463; Lewis, 926 F.2d at 733.
And, as the Eighth Circuit found in an analogous Section 1441(c) removal case, “[i]f
[Community] did not have the power to remove, then the district court could not have gained
subject-matter jurisdiction over the case.” Lewis, 926 F.2d at 732 (emphasis added); see also
Adkins, 326 F.3d at 835-836 (“”[W]e must consider whether the existence of a third-party
complaint affects the court’s subject matter jurisdiction over the original action. We conclude
that it does not.”).
Because remand here is based on the determination that this Court lacks subject matter
jurisdiction, Section 1447(c)’s 30-day time limit is inapplicable. Accordingly, Community’s
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timeliness objection fails.
II.
Fees and Costs Under Section 1447(c)
Although I find that removal was improper, I decline to award the moving parties
attorneys’ fees and costs under 28 U.S.C. § 1447(c). In Martin v. Franklin Capital Corp., 546
U.S. 132 (2005), the Supreme Court articulated “the proper standard for awarding attorney's fees
when remanding a case to state court.” Id., at 134. Specifically, Martin held that “[a]bsent
unusual circumstances, courts may award attorney’s fees under § 1447(c) only where the
removing party lacked an objectively reasonable basis for seeking removal.” Id. at 141. Martin
added that “[i]n applying this rule, district courts retain discretion to consider whether unusual
circumstances warrant a departure from the rule in a given case.” Id.
As the Seventh Circuit has observed, “[i]n Martin, the Supreme Court did not have
occasion to define ‘objectively reasonable’ because the parties agreed that the defendant's basis
for removal was reasonable.” Lott v. Pfizer, Inc., 492 F.3d 789, 792 (7th Cir. 2007). However,
the Seventh Circuit also has observed that, “[a]s a general rule, if at the time the defendant filed
his notice in federal court, clearly established law demonstrated that he had no basis for removal,
then a district court should award a plaintiff his attorneys' fees. By contrast, if clearly established
law did not foreclose a defendant's basis for removal, then a district court should not award
attorneys’ fees.” Id.
I find that, while the moving parties’ request for fees and costs presents a close call, no
clearly established law foreclosed Community’s basis for removal. As I noted, Thomas declined
to adopt “a universal and absolute rule” that third-party defendants cannot remove under Section
1441(c). Id., at 487.
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And the moving parties have not cited any other Seventh Circuit authority that would
foreclose Community’s basis for removal. In their opening brief, these parties rely on Adkins for
the proposition that a third-party defendant may not remove based on a third-party claim. But
the issue the Seventh Circuit confronted in Adkins is distinguishable from the issue presented
here, and thus does not provide clearly established authority that forecloses Community’s basis
for removal here.
Specifically, the complaint in Adkins was originally filed in state court, asserting state
law claims against a set of defendants. Adkins, 326 F.3d at 830. One of those defendants, GE,
removed under Sections 1441(a) and (b), on the ground that a federal statute preempted the state
law claims against it. Id. Another defendant later filed a third-party complaint against Amtrak, a
federal instrumentality. Id. The district court subsequently dismissed GE, and, finding that none
of the other defendants had argued that federal jurisdiction existed, remanded the case to state
court. Id. On an appeal of the remand order, the Seventh Circuit addressed the question of
whether “jurisdiction over the case as a whole was somehow created when [the third-party
defendant] filed its third-party complaint against Amtrak.” Id., at 835. Adkins found that
jurisdiction was not thereby created. Id., at 836. But it had no occasion to undertake the Section
1441(c) analysis on which removal here is based.
Moreover, although I have referenced district court cases that apply Thomas in finding
that, on facts similar to those presented here, removal is improper, those cases do not render the
law clearly established. See Lott, 492 F.3d at 793; Anderson v. Romero, 72 F.3d 518, 525 (7th
Cir.1995) (district court cases are “evidence of the state of the law. . . . But by themselves they
cannot clearly establish the law”).
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Accordingly, because clearly established law did not foreclose Community’s basis for
removal, I decline to award fees and costs under Section 1447(c).
CONCLUSION
For the foregoing reasons, the Court GRANTS the motion to remand for lack of subject
matter jurisdiction [DE 24]. Accordingly, the Court ORDERS that this case is REMANDED to
the Lake Superior Court in Crown Point, Indiana on the ground that this Court lacks jurisdiction
to hear it. Moreover, the Court DENIES the motion for attorneys’ fees and costs [DE 26].
SO ORDERED.
ENTERED: June 30, 2011
s/ Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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