George Raymond Williams M D Orthopaedic Surgery v. Executive Risk Specialty Insurance Co et al

Filing 37

MEMORANDUM RULING re 15 MOTION to Remand and Request for Expedited Hearing filed by George Raymond Williams M D Orthopaedic Surgery and 20 MOTION to Remand filed by Corvel Corp. The Court will grant plaintiffs' and defendant CorVel's Motions To Remand. (crt,Dauterive, C)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
George Raymond Williams MD
Orthopaedic Surgery

Civil Action No. 11-0686

versus

Judge Tucker L. Melançon

Executive Risk Specialty Ins. Co.,
et al

Magistrate Judge Patrick J. Hanna

MEMORANDUM RULING
Before the Court is a Motion To Remand filed by George Raymond Williams MD
Orthopaedic Surgery, individually and as a representative of the Class of persons similarly
situated, (hereinafter collectively known as “plaintiffs”) [Rec. Doc. 15], and a Motion To
Remand adopting plaintiffs’ memorandum filed by defendant CorVel Corporation
(“CorVel”) [Rec. Doc.20], defendants, Executive Risk Specialty Insurance Company
(“Executive Risk”) and Homeland Insurance Company of New York’s (“Homeland”),
opposition thereto [Rec. Doc. 25], intervening defendant, BestComp, Inc.’s opposition [Rec.
Doc 26] and plaintiffs’ Reply [Rec. Doc. 29]. For the reasons that follow, the Court will
grant plaintiffs’ and CorVel’s motions to remand.
I. Background
Plaintiffs, George Raymond Williams MD Orthopaedic Surgery, on behalf of itself
and as a representative of similarly situated health care providers in the State of Louisiana
(“putative plaintiffs”), commenced this action in the twenty-seventh Judicial District Court,
St. Landry Parish, Louisiana, under the Louisiana Preferred Provider Act, La. R.S. 40:2203.1

(“PPOA”), for alleged statutory violations regarding the processing and payment of medical
bills in the context of workers compensation insurance. Original Petition. Plaintiffs initially
named as defendants three Louisiana companies - SIF Consultants of Louisiana Inc. (“SIF”),
Risk Management Services, LLC (“RMS) and Med-Comp USA, Inc. (“Med-Comp”). On
March 24, 2011, plaintiffs filed a First Amended and Re-Stated Petition for Damages and
Class Certification naming CorVel, a California corporation, and CorVel’s insurers,
Homeland and Executive Risk, under Louisiana’s Direct Action Statute.
Executive Risk filed a Notice of Removal in this Court on May 2, 2011 on the basis
of jurisdiction under 28 U.S.C. § 1332 and the Class Action Fairness Act of 2005 (“CAFA),
28 U.S.C.§ 1332(d). R. 1. On May 19, 2011, plaintiffs filed their Motion to Remand and
requested an expedited hearing based on the State Court having scheduled a fairness hearing
to be conducted on May 27, 2011. R. 15. On May 23, 2011, defendant CorVel filed its
motion to remand, adopting plaintiffs’ memorandum in support as its own. R. 20.
In response to plaintiffs’ motion for expedited hearing, the Court conducted a
telephone conference on May 23, 2011 and set an accelerated briefing schedule for
defendants’ opposition to the motion to remand and plaintiffs reply brief. R. 21. Subsequent
to the telephone conference, after giving the parties’ filings due consideration, the Court
indicated that a written ruling on plaintiffs’ Motion to Remand would be issued in due
course. R. 30.
II. Analysis
Plaintiffs assert that removal under 28 USC 1332(a), diversity jurisdiction, is improper
2

as defendants SIF, RMS and Med-Comp are all Louisiana companies. Plaintiffs also argue
that of the six defendants named in plaintiffs’ original and amended petitions, only Homeland
has consented to Executive Risk’s removal. Plaintiffs further assert that Executive Risk
improperly relied on CAFA in removing the state court proceedings because the local
controversy exception to CAFA, § 1332(d)(4)(A), requires a remand of these proceedings.
Executive Risk and Homeland contend that diversity jurisdiction exists under 28
U.S.C. § 1332. Executive Risk and Homeland base their contention on the following: (1)
plaintiffs “have begun proceedings to confect a settlement with CorVel”; (2) SIR and RMS
have “settled with the plaintiff;” and, (3) the non-diverse citizenship of Med-Comp should
not be considered because plaintiffs have “improperly joined claims” against Med-Comp
with their claims against Executive Risk and Homeland. R. 25. Because of the alleged
agreements to settle with plaintiffs, Executive Risk and Homeland maintain that consent
among those defendants is not required. Executive Risk and Homeland further contend that
removal is proper under CAFA because plaintiffs undoubtedly meet the threshold
requirements to extend federal jurisdiction under 28 U.S.C. § 1332(d)(2) and plaintiff can
not establish the local controversy exception. The Court will address each of these issues in
turn.
A. Motion to Remand For Improper Removal
The federal removal statute, 28 U.S.C. § 1441(a), allows for the removal of “any civil
action brought in a State court of which the district courts of the United States have original
jurisdiction.” Subsection (b) specifies that suits arising under federal law are removable
3

without regard to the citizenship of the parties; all other suits are removable “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). The Court is
prohibited by statute from exercising jurisdiction over a suit in which any party, by
assignment or otherwise, has been improperly or collusively joined to manufacture federal
diversity jurisdiction. See 28 U.S.C. § 1359.
The removing defendant bears the burden of demonstrating that federal jurisdiction
exists, and therefore that removal was proper. See Jernigan v. Ashland Oil, Inc., 989 F.2d
812, 815 (5 th Cir.1993). As a general matter, the removal statute is to be construed narrowly
and in favor of remand to state court. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100
(1941). Indeed, “doubts regarding whether removal jurisdiction is proper should be resolved
against federal jurisdiction.” Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5 th Cir.2000).
Accordingly, all disputed questions of fact must be resolved in favor of the non-moving
party. See Burden v. Gen. Dynamics Corp., 60 F.3d 213, 216 (5 th Cir.1995).
1. Diversity Jurisdiction
Executive Risk and Homeland assert that diversity jurisdiction exists under 28 U.S.C.
§ 1332 and removal was therefore proper. Their reasoning begins with the contention that
two of the non-diverse Louisiana defendants, SIR and RMS, have “settled with the plaintiffs”
and plaintiffs “have begun proceedings to confect a settlement with CorVel.” R. 15. Thus,
they contend, only defendant Med-Comp remains to be considered in determining diversity
jurisdiction.

Although Med-Comp is a Louisiana company and a non-diverse party,
4

Executive Risk and Homeland further assert that plaintiffs have improperly joined them, as
the insurers of CorVel, with plaintiffs’ claims against Med-Comp, a Louisiana company
which neither of them insured. Hence, they contend that the Court should ignore MedComp’s citizenship, find that removal is proper and deny plaintiffs’ motion to remand.
A case that is not originally removable under “diversity jurisdiction because of the
presence of a nondiverse defendant may be removed only after it is clear under applicable
state law that the nondiverse defendant has been taken out of the case, leaving a controversy
wholly between the plaintiff and the diverse defendant.” Vasquez v. Alto Bonito Gravel
Plant Corp., 56 F.3d 689, 694 (5 th Cir.1995). Federal courts must look to state law to
determine whether the nondiverse defendant is no longer effectively a party to the case.
Estate of Martineau v. ARCO Chem. Co., 203 F.3d 904, 910 (5 th Cir.2000). “A case may be
removed based on any voluntary act of the plaintiff that eliminates that nondiverse defendant
from the case.” Id.
Here, Executive Risk and Homeland assert that plaintiffs have settled their claims
against SIR, RMS and CorVel. Under Louisiana law, for a compromise to be enforceable,
it “shall be made in writing or recited in open court, in which case the recitation shall be
susceptible of being transcribed from the record of the proceedings.” La. Civ.Code Ann. art.
3072. The Louisiana Supreme Court “has held several times that although Article 3071 does
not expressly require a signed writing, there is an implied requirement for signatures of both
parties.” Lavan v. Nowell, 708 So.2d 1052, 1052 n.3 (La. 1998).
Plaintiffs represent in their opposition that defendants RMS and SIF “are in the
5

process of attempting to settle but have not yet settled any claims” and “are still parties to the
action as no settlement has been confected.” R. 29, p. 2. Executive Risk and Homeland have
provided no evidence to support their assertion to the Court that RMS and SIR are no longer
parties in this action. To the contrary, the record indicates that on March 30, 2011, the state
court entered a Class Notice of a hearing to be conducted on June 30, 2011 to determine
whether the proposed settlement with SIF and RMS is fair, reasonable, and adequate
(“fairness hearing”). R. 1-1; 1-2. As to Executive Risk and Homeland’s assertion regarding
CorVel’s settlement, while plaintiffs acknowledge that they began settlement proceedings
with CorVel, the settlement has not been approved by the court. Id. at p.1. Pursuant to the
record, CorVel and plaintiffs entered into a memorandum of understanding dated March 31,
2011, agreeing to a settlement on a class wide basis, and a fairness hearing was scheduled
to be conducted in state court on May 27, 2011. R. 31-1; 31-2, State Court Order. Because
Executive Risk and Homeland removed the state court action on May 2, 2011, the settlements
have not been approved and judgments have not been entered.
As Executive Risk and Homeland have provided no evidence what so ever that RMS,
SIF and/or CorVel have reached enforceable settlements with plaintiffs under Louisiana law,
their argument that Med-Comp is the sole remaining non-diverse defendant is dispelled.1

1

Executive Risk and Homeland contend that in the event a settlement with CorVel is
consummated, “plaintiffs likely will pursue coverage under the respective insurance
policies pursuant to an assignment of rights from CorVel,” and “[s]uch assignment has
nothing to do with Med-Comp.” While Executive Risk and Homeland fail to cite any
support for their contention that such action would constitute misjoinder, under Louisiana
law, “rights in an ‘already-filed personal injury suit’ are not ‘strictly personal’ and thus
6

Even assuming arguendo that Med-Comp was the only remaining defendant other than
Executive Risk and Homeland, the Court finds, for the following reasons, that Med-Comp
was not improperly or fraudulently joined.
I. Improper or Fraudulent Joinder
Executive Risk and Homeland argue that the Court should find diversity under the
type of improper joinder identified in Tapscott v. MS Dealer Service Corp., 77 F.3d 1353,
1360 (11th Cir.1996), abrogated on other grounds by Cohen v. Office Depot, Inc., 204 F.3d
1069 (11th Cir.2000), because plaintiffs improperly joined their claims against Executive
Risk and Homeland with Med-Comp. In Tapscott, the Eleventh Circuit recognized that
fraudulent joinder can exist when a diverse defendant is joined with a nondiverse defendant
as to whom there is no joint, several or alternative liability, and when the claim against the
diverse defendant has no real connection to the claim against the nondiverse defendant. Id.
at 1360. This scenario was identified by the Tapscott court as a third type of fraudulent
joinder which exists in addition to the two types traditionally identified.2 Id. at 461.
Although the Eleventh Circuit is the only federal appellate court to adopt this third
type of fraudulent misjoinder, the Fifth Circuit has appeared to recognize the principle,

are ‘freely assignable.’” Woodfield v. Bowman, 193 F.3d 354, 359 fn. 8-9 (5 th Cir. 1999).
2

In Ross v. Citifinancial, Inc., 344 F.3d 458, 461 (5 th Cir.2003), the Fifth Circuit stated
that fraudulent joinder may be established by showing: (1) actual fraud in pleading jurisdictional
facts; or (2) the inability of the plaintiff to establish a cause of action against the nondiverse
defendant. 344 F .3d at 461. Executive Risk and Homeland do not allege improper joinder on
either of these grounds.
7

although not expressly adopted it. In re Benjamin Moore & Co., 318 F.3d 626, 630-31 (5 th
Cir.2002) (“without detracting from the force of the Tapscott principle that fraudulent
misjoinder of plaintiffs is no more permissible than fraudulent misjoinder of defendants to
circumvent diversity jurisdiction.”); see, Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d
529, 533 (5 th Cir.2006) (stating that if the requirements for joinder prescribed by Rule 20(a)
are not met, “joinder is improper even if there is no fraud in the pleadings and the plaintiff
does have the ability to recover against each of the defendants.”).
The Court recognizes that most district courts within this circuit have taken the
position that the Fifth Circuit has at least implicitly adopted Tapscott and therefore assume
that the Tapscott analysis is an acceptable method of establishing improper joinder. See e.g.,
Hospitality Enterprises, Inc. v. Westchester Surplus Lines Ins. Co., 2011 WL 1303954,
(E.D.La.,2011) (J. Fallon); Bienemy v. Continental Casualty Co., 2010 WL 375213, at 6
(E.D.La. Jan. 26, 2010) (J. Lemelle); Akshar 6, L.L.C. v. Travelers Cas. & Sur. Co. of
America, 2010 WL 3025018, 3 (W.D.La.,2010) (J. Hicks); Accardo v. Lafayette Ins. Co.,
2007 WL 325368, 3 (E.D.La.,2007) (J. Vance). The Court notes, however, in Smallwood v.
Illinois Central Railroad Co., 385 F.3d 568, 573 (5 th Cir.2004), an en banc Fifth Circuit
decision that post-dates Benjamin Moore, the Fifth Circuit identified only two methods of
establishing improper joinder, actual fraud in the pleading of jurisdictional facts and the
inability of the plaintiffs to plead a cause of action against the non-diverse defendants in state
court. There is no mention of Tapscott-type improper joinder as an acceptable method of
establishing improper joinder in Smallwood. Thus, Tapscott-type fraudulent misjoinder may
8

not be recognized in the Fifth Circuit. See Bienemy at 6 (and cases cited therein). The Court
need not resolve this issue, however, because it finds Executive Risk and Homeland’s
reliance on Tapscott to support their position is misplaced. See Tapscott at 1360.
Under the analysis set forth in Tapscott, “fraudulent misjoinder” is said to exist when:
(1) a defendant has been misjoined with other defendants in violation of applicable joinder
rules; and (2) the misjoinder is so egregious as to constitute fraudulent joinder. Tapscott, 77
F.3d at 1360. “Under Tapscott, the Court must first determine if joinder of all of the claims
against the [] defendants is so egregious as to constitute improper joinder. As a predicate to
that decision, the Court must decide whether federal or state rules of joinder apply in a
Tapscott analysis. District courts in this circuit are not of one mind on the issue. The
majority of the district courts that have applied Tapscott have held that the misjoinder issue
should be determined under state joinder law rather than federal joinder law.” Accardo, 2007
WL at 3 (E.D.La.,2007) (J. Vance); see also, Ngo v. Essex Ins. Co. 2008 WL 4544352, 3
(E.D.La.,2008) (J. Fallon); Turner v. Murphy Oil USA, Inc., 2007 WL 2407310, 6 (E.D.La.,
2007) (J. Fallon); Touro Infirmary v. American Maritime Officer, 2007 WL 4181506, 7
(E.D.La.,2007) (J. Fallon).

“[B]ecause plaintiffs brought their actions in state court and

were required to follow state joinder rules when they did so, state joinder rules are the
relevant ones to determine the propriety of the joinder of plaintiffs and/or defendants after
removal to federal court.” Accardo, at 4. This Court agrees.
In this case, the relevant state joinder rule is Article 463 of the Louisiana Code of

9

Civil Procedure. That article states, in relevant part:
Two or more parties may be joined in the same suit, either as plaintiffs or as
defendants, if:
(1) There is a community of interest between the parties joined;
(2) Each of the actions cumulated is within the jurisdiction of the court and is
brought in the proper venue; and
(3) All of the actions cumulated are mutually consistent and employ the same
form of procedure.
La.Code Civ. P. article 463. 3 The Louisiana Supreme Court has defined “community of
interest” as “the parties’ causes of actions (or defenses) arising out of the same facts, or
presenting the same factual and legal issues.” Stevens v. Bd. of Trustees of Police Pension
Fund of City of Shreveport, 309 So.2d 144, 147 (La.1975) (quoting Official Revision
Comment (c), Article 463).
A “community of interest is present between different actions or parties, where
enough factual overlap is present between the cases to make it commonsensical to litigate
them together.” Turner, 2007 WL at 6 (quoting Mauberret-Lavie v. Lavie, 850 So.2d 1, 2
(La. App. 4 Cir, 2003)). Even where plaintiffs have filed distinct claims involving different
legal theories against joined defendants, so long as the claims arise out of the same set of
facts and will involve similar evidence, the court has found that Tapscott fraudulent
misjoinder does not exist. See id. (citing Miller v. Commercial Union Cos., 305 So.2d 560,

3

Executive Risk and Homeland allege only that “there is no community of interest” between
them and Med-Comp.
10

562-63 (La. App. 1 Cir., 1974); see also Dufrene v. Hanover Ins. Co., 2007 WL 4180584 1
(E.D.La. Nov. 21, 2007) (J. Fallon).
In their Original Petition, plaintiffs joined SIF, RMS and Med-Comp as defendants
under alleged violations of the PPOA. Plaintiffs joined CorVel in their Amended Petition
under the same allegations and also properly joined CorVel’s insurers, Executive Risk and
Homeland, as defendants under Louisiana’s Direct Action Statute. Plaintiffs alleged that
defendants, SIF, RMS, Med-Comp and CorVel entered into contracts with plaintiffs pursuant
to the PPOA which allowed defendants’ clients to pay a discounted rate for health care
services. R. 1-3. Plaintiffs further alleged that defendants reimbursed them in workers’
compensation cases at the lower PPOA contracted rates, rather than at the higher mandated
workers’ compensation rates. Id. In doing so, plaintiffs claim that SIF, RMS, Med-Comp and
CorVel violated the provisions of La.R.S. 40:2203.1, and that Executive Risk and Homeland
provided insurance coverage for damages plaintiffs sustained by the violations
The Court finds there is sufficient factual overlap between the claims against the
defendants and a “community of interest” is present between the different parties at issue.
As such, all parties were properly joined under Louisiana’s joinder law at the time of removal
of this action. Under Louisiana law, Executive Risk and Homeland have not sustained their
burden of showing that the joinder of all defendants, in particular Med-Comp, arises to
“egregious misjoinder” rather than “mere misjoinder” as required for fraudulent misjoinder

11

under Tapscott.4
2. The Class Action Fairness Act - CAFA
Executive Risk and Homeland also assert that removal is proper under CAFA, the
Class Action Fairness Act. CAFA grants federal courts original jurisdiction to hear interstate
class actions where: (1) the proposed class contains more than 100 members; (2) minimal
diversity exits between the parties ( i.e., at least one plaintiff and one defendant are from
different states); (3) the amount in controversy exceeds $5,000,000; and (4) the primary
defendants are not states, state officials, or other governmental entities. 28 U.S.C. §
1332(d)(2) and (d)(5). Additionally, CAFA facilitates removal of actions originally filed in
state court by eliminating both the need for unanimous consent among all defendants and the
one-year removal deadline. See 28 U.S.C. § 1453(b); Preston v. Tenet Healthsystem Mem'l
Med. Ctr., Inc., 485 F.3d 804, 810 (5th Cir.2007) (Preston II).
Nonetheless, federal courts must decline jurisdiction over a proposed class action if
either of the following narrow exceptions is proven by a preponderance of the evidence: (1)
the local controversy exception, 28 U.S.C. § 1332(d)(4)(A); or (2) the home state exception,
28 U.S.C. § 1332(d)(4)(B). Preston II at 810. The local controversy exception states
a district court shall decline to exercise jurisdiction:
(A)(i) over a class action in which --

4

Courts which have applied Tapscott’s “fraudulent misjoinder” principle have consistently
observed that “mere misjoinder” does not constitute “fraudulent misjoinder”. See e.g., Bright v.
No Cuts, Inc., 2003 WL 22434232, *4 (E.D.La.2003) (J. Africk) (and cases cited therein).
12

(I) greater than two-thirds of the members of all proposed plaintiff classes in
the aggregate are citizens of the state in which the action was originally filed;
(II) at least 1 defendant is a defendant(aa) from whom significant relief is sought by members of the
plaintiff class;
(bb) whose alleged conduct forms a significant basis for the
claims asserted by the proposed plaintiff class; and
(cc) who is a citizen of the State in which the action was
originally filed; and
(III) principal injuries resulting from the alleged conduct or any related
conduct of each defendant were incurred in the State in which the action was
originally filed; and
(ii) during the 3-year period preceding the filing of that class action, no other class action
has been filed asserting the same or similar factual allegations against any of the defendants
on behalf of the same or other persons....
28 U.S.C. § 1332(d)(4)(A); Preston v. Tenet Healthsys. Mem'l Med. Ctr., Inc., 485 F.3d 793,
797 (5th Cir.2007)(“Preston I”). Similarly, the home state exception prevents a federal
district court from exercising subject matter jurisdiction when “two-thirds or more of the
members of all proposed plaintiff classes in the aggregate, and the primary defendants, are
citizens of the State in which the action was originally filed.” Id., § 1332(d)(4)(B).5
Although conceding that defendants have demonstrated the general requirements necessary
to remove this potential class action to federal court under CAFA, plaintiffs contend that the
local controversy exception directs the Court to decline subject matter jurisdiction and

5

In a recent ruling from this court, in a case similar to this action, George Raymond Williams
MD Orthopaedic Surgery v. Mor-Tem Risk Management, 11-cv- 0026, The Honorable Elizabeth
E. Foote, United Stated District Judge, held that plaintiffs met the elements of the home state
exception under 28 U.S.C. § 1332(d)(4)(B).
13

remand this action.
While CAFA does not change the traditional rule that the party seeking to remove the
case to federal court bears the burden of establishing federal jurisdiction, once jurisdiction
has been established under CAFA, the objecting party bears the burden of proving by a
preponderance of the evidence the applicability of any claimed jurisdictional exceptions.
Preston I at 797. “The court has wide, but not unfettered, discretion to determine what
evidence to use in making its determination of jurisdiction.” Preston II, 485 F.3d at 817
(internal citations omitted). The court may rely on the facts alleged in the complaint or
request further evidence from either party when determining if a plaintiff has established the
applicability of a CAFA jurisdictional exception. See, e.g., Preston v. Tenet Healthsys. Mem'l
Med. Ctr., Inc., 463 F.Supp.2d 583, 592-93 (E.D.La.2006) (J. Fallon) (court ordered the
defendants to produce additional evidence regarding the citizenship of the putative class).
Executive Risk and Homeland contend that plaintiffs have failed to establish sufficient
evidence to establish that (1) two-thirds of the putative class are Louisiana “citizens” at the
time the Amended Petition was filed; (2) Med-Comp is a “significant defendant”; (3)
plaintiffs’ principal injuries were incurred in Louisiana; and, (4) a similar class action has not
been filed in three years preceding this action.
I. Whether or not 2/3 of the plaintiffs are citizens of Louisiana
In Preston I and Preston II, the Fifth Circuit examined the plaintiffs’ burden under the
CAFA exceptions to show that greater than two-thirds of the putative class members were
citizens of the state in which the suit was filed. The Preston II court articulated the standard
14

as follows:
[T]he parties moving to remand the class action must prove that the CAFA
exceptions to federal jurisdiction divest the district court of subject matter
jurisdiction. We also held [in Preston I] that the party moving for remand must
prove the statutory citizenship requirement by a preponderance of the
evidence. We reasoned that Congress explicitly enumerated and envisioned
deviations from the general removal statute, and nothing in CAFA’s text
suggests that Congress meant to impose a heightened burden of proof on
parties attempting to remand a class action lawsuit to state court.
Preston II, 485 F.3d at 797 (citations omitted).
The court applied this standard in Preston I and held that greater than two-thirds of
the putative class members were in-state domiciliaries by relying upon primary billing
addresses provided in the medical records, emergency contact information for the deceased
patients, the current addresses for some of the potential class members, eight affidavits
stating an intent of returning to New Orleans, and the fact that suit occurred less than two
months after Hurricane Katrina. Preston I, 485 F.3d at 816-818. In its decision, the Fifth
Circuit specifically acknowledged that there is a common-sense presumption that can be
applied to a closed-end class. Id. at 819.
Plaintiffs’ Petition defines the purported class as:
All Louisiana health care providers who have provided services to workers’
compensation patients, as contemplated in LA R.S. 23:1021 et seq. and whose
bills have been discounted after January 1, 2000 pursuant to a Preferred
Provider Organization agreement, as defined in LA R.S. 40:2202, by or
through SIR, Risk Management, Med-Comp, and CorVel.
R. 1, Amended Petition, ¶ XI. Thus, the putative class allegedly includes only Louisiana
health care providers who have rendered services in Louisiana in violation of Louisiana law.

15

In support of their assertions that at least two-thirds of the putative plaintiffs are Louisiana
citizens, plaintiffs cite evidence in the record which establishes that of the 1388 putative class
members with distinct Federal Tax-ID numbers, at least 1055 of them, or 76%, are business
entities organized or incorporated under Louisiana law. R. 15-5 - 15-10, Exh. C-H, Secretary
of State Certificates. Plaintiffs’ evidence consists of a list of the tax identification numbers
from health care providers with whom each of the defendants has contracted, R. 15-4, Exh.
C; tax id numbers from CorVel; 15-7, Exh. E, tax id numbers from SIF & Risk Management;
15-11, Exh. I, tax id numbers from Med-Comp, as well as the related information on the
individual health care providers from the Louisiana Secretary of State. R. 15-5 & 15-6, Exh.
D1 & Ds, Corvel Data; 15-8, Exh. F & 15-9, Exh. G, SIF & Risk Management Data.
Plaintiffs include the summary of all data received from CorVel, SIF, RMS and MedComp indicating their Health Care providers’ names, tax identification numbers, addresses
and Secretary of State domiciliary information as well as the computations which provide as
follows: (1) 751 out of 1004, 75%, of the health care providers contracting with CorVel were
domiciled in Louisiana; (2) 9 out of 10, 90%, of the health care providers contracting with
SIF were domiciled in Louisiana; (3) 295 out of 374, 79%, of the health care providers
contracting with RMS were domiciled in Louisiana; (4) 603 out of 752, 80%, of the health
care providers contracting with Med-Comp by or through CorVel were domiciled in
Louisiana. R. 15-10, Exh. H; 15-12, Exh. J.
In addition to the foregoing, plaintiffs cite the affidavit of Cameron Azari, an
employee of Epiq Class Action And Claims Solutions (“ECA”), who supervised the class
16

notice efforts in connection with the state court class litigation and the proposed settlement.
R. 15-13, Exh. K, Azari Aff. Azari states that of the 1,388 Louisiana provider federal tax
identification numbers furnished to plaintiffs by CorVel, ECA mailed class notices to 1,165
of those Louisiana providers between 2008 and 2010; 1,113 of the 1,165, or 95.5%, were
mailed to a Louisiana address. Plaintiffs also cite the March 4, 2009 deposition testimony
of Med-Comp, through its representative Michael P. McCrossen, which states that all of the
providers with whom Med-Comp has contracted are “in Louisiana.” R. 15-3, Exh. B, MedComp Depo., p. 44.
Executive Risk and Homeland argue that this evidence “does not include providers
who have not formally established a ‘business organization’ or those Tax-ID numbers which
Plaintiffs’ Class counsel has not yet identified by name.” The summary, however, establishes
that those providers constitute less than 25% of the identified putative plaintiffs. R. 15-10,
Exh. H; 15-12, Exh. J.
Based on the foregoing, the Court finds that at least two-thirds of the putative
plaintiffs in this action are citizens of Louisiana. See, Teal Energy USA, Inc. v. GT, Inc., 369
F.3d 873, 875 (5th Cir.2004) (“Section 1332(a) provides that a corporation is a citizen of
both its state of incorporation and the state of its principal place of business for purposes of
diversity jurisdiction.”); see also, 28 USC 1332(d)(10) (Under CAFA an unincorporated
association 6 is deemed to be a citizen of the state where it has its principal place of business

6

The citizenship of an unincorporated entity or association, such as a partnership, is based
upon the citizenship of each of its members. Carden v. Arkoma Assocs., 494 U.S. 185, 195-96
17

and the state under whose laws it is organized.)
ii. Whether or not there is at least one “significant” defendant
The local controversy exception also requires plaintiffs to demonstrate that the
putative class seeks “significant relief” from at least one in-state defendant, and that the
alleged conduct of the same defendant “forms a significant basis for the claims asserted by
the proposed class.” 28 U.S.C. § 1332(d)(4)(A) The court in Caruso v. Allstate Ins. Co., 469
F.Supp.2d 364, 368 (E.D.La. Jan. 8, 2007)(J. Vance) examined the term “significant relief”
under CAFA and stated, “CAFA does not specifically provide a definition of ‘significant.’
The Eleventh Circuit, however, recently held that whether a class seeks ‘significant relief’
against a defendant is determined by whether the relief sought against that defendant is
significant relative to the relief sought against the other codefendants. See Evans v. Walter
Industries, Inc., 449 F.3d 1159, 1167 (11th Cir.2006). Other courts likewise have compared
the relief sought against the in-state defendant to the entire relief sought against all of the
defendants to determine whether the ‘significant relief’ prong has been met. See Robinson
v. Cheetah Transportation, 2006 WL 468820, *3 (W.D.La. Feb.27, 2006)(M.J. Hayes)
(stating ‘whether a putative class seeks significant relief from an in-state defendant includes
not only an assessment of how many members of the class were harmed by the defendant's
actions, but also a comparison of the relief sought between all defendants and each
defendant’s ability to pay a potential judgment’). ”

(1990).
18

In support of their position, plaintiffs cite their Original Petition which states in part,
(1) The Plaintiff Class is seeking “significant relief” from Med-Comp: i.e.
statutory damages under La. R.S. 40:2203.1 for its alleged failure to comply
therewith in conjunction with thousands of discounts, and
(2) Med-Comp’s alleged conduct forms a significant basis for the claims by
the Plaintiff class: i.e. Med-Comp’s role as an alleged “group purchaser” in
facilitating PPO discounting through its own network and/or through CorVel
without compliance with La. R.S. 40:2203.1.
R. 15, citing Petition, R. 1-3. Plaintiffs further allege that “the Plaintiff Class is seeking
statutory damages against Med-Comp awardable under La. R.S. 40:2203.1 based on MedComp’s failure to comply with La R.S. 40:2203.1 when (1) its discounts are applied via the
Med-Comp PPO network through Med-Comp’s own clients and (2) when Med-Comp’s
discounts are applied via CorVel by CorVel’s clients.” Id.
Executive Risk and Homeland assert that “from the allegations cited by the plaintiff,
there is no way of getting any sense of whether Med-Comp is a “significant” defendant. R.
25. The Court disagrees. As previously noted, it is undisputed that Med-Comp is a
Louisiana citizen. Plaintiffs named six defendants in this case - SIF, RMS, Med-Comp,
CorVel and CorVel’s alleged insurers, Homeland and Executive Risk. Plaintiffs’ Amended
Petition alleges that defendants SIR, RMS, Med-Comp and CorVel are providers of PPO
discounts to their clients whose duties include providing access to PPO discounted rates in
conjunction with Louisiana workers’ compensation payments. Plaintiffs’ further allege that
these defendants have “failed to comply with the provisions of La. R.S. 40:2203.1 when
applying PPO discounts to workers’ compensation medical bills for services rendered within

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the state of Louisiana.” R. 1-3, Original Petition, ¶ VI - VII.
As to Med-Comp, specifically, plaintiffs allege statutory damages for failure to
comply with La. R.S. 40:2203.1 when discounts are applied via the Med-Comp PPO network
through Med-Comp’s own clients and when Med-Comp’s discounts are applied via CorVel
by CorVel’s clients. In their motions to remand, plaintiffs and CorVel represent that MedComp is connected to Corvel, R. 15; 20. As alleged by plaintiffs, “not only is Med-Comp
connected to CorVel, but a large percentage of the CorVel PPO discounts at issue in this case
were actually taken through the Med-Comp USA PPO network which had contracted with
CorVel to accomplish the very PPO discounts complained of in this lawsuit.” R. 29, p. 4.
Moreover, in the deposition of Med-Comp, its representative McCrossen confirms that MedComp contracted with CorVel and provided CorVel with access to the Med-Comp PPO
Network. R. 15-3, Exh. B, pp. 84-86; R. 20.
Based on the foregoing, specifically that the purported class includes Louisiana
healthcare providers whose workers’ compensation related medical bills were improperly
discounted in violation of Louisiana law, that Med-Comp is one of four named defendants
and that Med-Comp’s discounts were applied to its own clients as well as co-defendant
CorVel’s clients, the Court finds that Med-Comp is a significant defendant as required under
the Local Controversy exception of CAFA.
iii. Whether or not the principal injuries were incurred in Louisiana
Executive Risk and Homeland contend that “there is no firm idea of the location of
the alleged victims.” As the Court has previously held, the record establishes that over 2/3
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of the putative plaintiffs are Louisiana citizens, who rendered services in Louisiana and who
allege that defendants violated the Louisiana PPO Act, La. R.S. 40:2203.1. The Court finds
that the principal injuries were incurred in Louisiana.
iii. Whether or not other class actions were filed within three years
Executive Risk and Homeland also contend that “at least one similar class action has
been filed in the three years preceding the lawsuit.” R. 25. They represent that “[i]n
December 2006, one of the putative class members (Lake Charles Memorial Hospital) filed
a demand for class action arbitration against CorVel that makes the same claims as does the
plaintiff’s Amended Petition here.” Id. Plaintiffs argue that: (1) an arbitration proceeding
is not included within CAFA’s definition of “class action” under 28 U.S.C. § 1332(d)(1);
and, (2) CorVel was named as a defendant in their Amended Petition on March 24, 2011,
over four years after the arbitration action was filed.
“Arbitration” is a form of dispute resolution used to resolve disputes outside the court
and is unlike a “class action” which is a form of lawsuit within the court. See, e.g., Black's
Law Dictionary, 119; 284 (9 th ed. 2009). Because the local controversy exception, 28 U.S.C.
§ 1332(d)(4)(A), specifically provides for a “class action,” an arbitration proceeding is not
a factor in this analysis. Additionaly, while the relevant date for determining whether a prior
class action was filed is not addressed by 28 U.S.C. § 1332, section 1332(d)(7) provides
some guidance. Section 1332(d)(7) states that the citizenship of the members of the proposed
class is determined as of the date of filing of the initial pleading or the date of service of an

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amended pleading. Even assuming arguendo that the Court were to consider the arbitration
proceeding as a previously filed “class action,” CorVel was named as a defendant in the state
court action on March 24, 2011, more than three years after the arbitration proceeding was
filed.
Accordingly, the Court finds that plaintiffs’ have met the requirements of the Local
Controversy Exception under CAFA, 28 U.S.C. § 1332(d)(4)(A), and therefore, this Court
does not have jurisdiction under CAFA.
Conclusion
For the foregoing reasons, the Court finds that defendants, Executive Risk and
Homeland, have failed to meet their burden to establish that this action was properly removed
to this Court under either 28 U.S.C. § 1332 or CAFA, 28 U.S.C.§ 1332(d). The Court will
therefore grant plaintiffs’ and defendant CorVel’s Motions To Remand.

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