Simon v. Blue Cross and Blue Shield of Kansas City

Filing 18

ORDER granting 10 motion to remand. Signed on 9/9/14 by District Judge Ortrie D. Smith. (Matthes, Renea)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
DEBRA SIMON, et al.,
Plaintiffs,
vs.
BLUE CROSS AND BLUE SHIELD
OF KANSAS CITY,
Defendant.

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Case No. 14-0587-CV-W-ODS

ORDER AND OPINION GRANTING PLAINTIFF’S MOTION TO REMAND
Pending is Plaintiff’s Motion to Remand. The Court has considered the parties’
arguments, and the motion (Doc. # 10) is granted.

I. BACKGROUND

Plaintiff Debra Simon filed this suit in Jackson County Circuit Court on behalf of
herself and on behalf of the putative class. She alleges Defendant offered health
insurance plans on the Federal Exchange created pursuant to the Affordable Care Act
(“the Exchange”). Petition, ¶¶ 6-7. Consumers were able to search the Exchange for
insurers and policies via the internet. A consumer could gain more information about
Defendant’s plan(s) by clicking on links on the Exchange’s website; the link would take
the consumer to the insurer’s site. Petition, ¶ 8. Defendant’s website (but not the
Exchange) included a “Provider Directory,” which purported to “list[ ] all of the in-network
physicians associated with that plan.” Petition, ¶ 9. Unfortunately, Defendant’s
Provider Directory for the “Blue Select Plan” included physicians who were not in the
network for that plan. Petition, ¶ 10. Plaintiff alleges this error caused consumers to
“receive[ ] an inferior plan lacking the network providers previously listed,” which caused
them to incur out-of-network charges or pay additional sums to get the plan they
actually expected. Petition, ¶¶ 11-13.

Plaintiff asserts two claims. Count I asserts violations of the Missouri
Merchandising Practices Act (“MMPA”) and Count II asserts a claim for unjust
enrichment. She seeks to represent a class consisting of
All Blue . . . Cross Blue Shield of Kansas City policyholders who
purchased a plan via the Exchange, and who received a plan with less innetwork healthcare providers than what Blue Cross promoted in its
website.
Petition, ¶ 21.
Plaintiff is a citizen of Kansas. Defendant is incorporated in the State of Missouri
and has its principal place of business in that state as well. The Notice of Removal
includes affidavits confirming that the Blue Select Plan has a smaller physician network
– and is cheaper than – the “Preferred Care Blue Plan.” 5,394 people enrolled in the
Blue Select Plan: 3,504 (or 64.96%) live in Missouri, and the remaining 1,890 (35.04%)
live in Kansas. Kincaid Declaration, ¶ 3. The Blue Select Plan has “a term of one year
and consumers are generally not permitted to change plans mid-year, except when a
special enrollment event occurs.” McCabe Declaration, ¶ 5.

II. DISCUSSION

Defendant removed this case to federal court, alleging federal jurisdiction exists
under 28 U.S.C. § 1332(d)(2), which codifies portions of the Class Action Fairness Act
(“CAFA”). This statute (when combined with section 1332(d)(5)(B)) provides that district
courts have original jurisdiction over cases in which a claim is asserted on behalf of a
class and where (1) there are more than 100 class members, (2) more than $5 million is
in controversy, and (3) at least one member of the class is a citizen of a state different
from that of at least one defendant. Plaintiff and other members of the class are citizens
of Kansas and Defendant is a citizen of Missouri, so the minimal diversity requirement is
satisfied.1 Defendant’s affidavits establish, and Plaintiff does not dispute, that the class

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Defendant did not invoke the “regular” diversity provision, 28 U.S.C. § 1332(a),
probably because removal on this basis is barred by 28 U.S.C. § 1441(b). Cf. Horton v.
Conklin, 431 F.3d 602, 605 (8th Cir. 2005) (holding that the forum defendant rule is a
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consists of more than 100 members. Plaintiff challenges Defendant’s assertion that
more than $5 million is in controversy. Alternatively, Plaintiff contends the “interests of
justice” exception applies and the Court should exercise its discretion to remand the
case. The Court concludes that more than $5 million is in controversy. However, the
Court also concludes it should exercise its discretion to decline jurisdiction pursuant to
the “interests of justice” exception codified at 28 U.S.C. § 1332(d)(4).

A. Amount in Controversy

The party invoking federal jurisdiction bears the burden of demonstrating it exists,
so Defendant – as the party removing the case to federal court – bears the burden in
this case. E.g., Bell v. Hershey Co., 557 F.3d 953, 956 (8th Cir. 2009). Factual matters
(such as the amount in controversy) must be established by the preponderance of the
evidence. E.g., id. at 957 & n.5. When removal is based on section 1332, “the sum
demanded in good faith in the initial pleading shall be deemed to be the amount in
controversy” unless “the State practice either does not permit demand for a specific sum
or permits recovery of damages in excess of the amount demanded.” 28 U.S.C. §
1446(c)(2)(A). In that case, “the notice of removal may assert the amount in
controversy.” Id. Missouri does not permit the plaintiff to demand a specific sum, so the
Court looks to the Notice of Removal to ascertain the amount in controversy. In so
doing, the Court must keep in mind that Defendant’s burden is a pleading requirement
and not a demand for proof. E.g., Raksas v. Johnson & Johnson, 719 F.3d 884, 888
(8th Cir. 2013).
The Declarations attached to the Notice of Removal establish that the difference
in premiums for the Blue Select Plan and the Preferred Care Blue Plan (multiplied by
the number of people who purchased the Blue Select Plan), estimated for a year,
comes to approximately $3.8 million. Plaintiff quarrels with the extrapolation to a year’s
worth of premiums, reasoning that Defendant would not continue to display false

jurisdictional defect and cannot be waived). By its terms, the prohibition on removal by
defendants who are citizens of the forum applies only when jurisdiction is predicated on
section 1332(a), so it does not apply when jurisdiction is predicated on section 1332(d).
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information on its website for that long. However, Plaintiff fails to account for the fact
that the insurance contracts are valid for one year, and the consumer cannot change
coverage (absent the occurrence of certain life events) before the year has passed.
“Once the proponent of federal jurisdiction has explained plausibly how the stakes
exceed [the requisite amount], then the case belongs in federal court unless it is legally
impossible for the plaintiff to recover that much. Even if it is highly improbable that the
Plaintiffs will recover the amounts Defendant[ ] [has] put into controversy, this does not
meet the legally impossible standard.” Raskas, 719 F.3d at 888 (quotation omitted).
Put another way, the question is whether the class might recover actual damages of
approximately $3.8 million, not whether it really will. E.g., Hartis v. Chicago Title Ins.
Co., 694 F.3d 935, 944 (8th Cir. 2012) (citing Kopp v. Kopp, 280 F.3d 883, 885 (8th Cir.
2002)). Defendant’s extrapolation seems reasonable.
Obviously, $3.8 million does not exceed $5 million. However, in addition to
actual damages, Plaintiff seeks punitive damages and attorney fees pursuant to the
MMPA. The value of these recoveries is included when assessing the amount in
controversy. E.g. Hartis v. Chciago Title Ins. Co., 656 F.3d 778, 781-82 (8th Cir. 2009)
(statutory attorney fees included in amount in controversy); OnePoint Solutions, LLC v.
Borchert, 486 F.3d 342, 348 (8th Cir. 2007) (punitive damages included). The Court has
little difficulty concluding that a jury might legally award punitive damages in an amount
that brings the amount in controversy to over $5 million. And even if not, any attorney
fees awarded – when added to punitive damages – would definitely place the amount in
controversy over that figure.

B. The “Interests of Justice Exception”

The parties address two exceptions to CAFA jurisdiction. They agree one of
them does not apply, but the Court believes it appropriate to address them both.
The one that does not apply is the “local controversy” exception and is codified at
28 U.S.C. § 1332(d)(4)(B). This exception requires the district court to decline
jurisdiction if more than two-thirds of the class members and the defendant are both
citizens of the state in which it was filed. As noted earlier Defendant is a citizen of
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Missouri – but only 64.96% of the class members are citizens of Missouri, so the local
controversy exception does not apply. The Court makes this observation to
demonstrate how close this case is to triggering a nondiscretionary obligation to refuse
jurisdiction and remand the case.
The exception at issue is the “interests of justice” exception set forth in section
1332(d)(3). The statute provides that a court “may in the interests of justice and looking
at the totality of the circumstances decline to exercise jurisdiction” over a class action if
“greater than one-third but less than two-thirds 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 . . . .” The statute then sets forth six factors the district
court must consider when determining whether jurisdiction should be declined:
A. Whether the claims involve matters of national or interstate interest,
B. Whether the claims will be governed by the laws of the state in which the
action was originally filed,
C. Whether the case has been pleaded in a manner designed to avoid
federal jurisdiction,
D. Whether the forum where the suit was brought has a “distinct nexus with
the class members, the alleged harm, or the defendants,”
E. “[W]hether the number of citizens of the State in which the action was
originally filed . . . is substantially larger than the number of citizens from
any other State” and whether “the citizenship of the other members is
dispersed among a substantial number of States,” and
F. Whether another class action asserting these or similar claims was filed in
the preceding three years.
The interests of justice exception explicitly states the district court “may . . . decline to
exercise jurisdiction” over the case, and it is generally accepted that the district court’s
decision is one of discretion. “Under the discretionary jurisdiction provision, however,
Congress permitted the district court greater latitude to remand class actions to state
court. . . . [T]he district court does not wield unfettered discretion over whether to
remand a case; instead Congress provided a list of factors to guide the district court’s
consideration.” Preston v. Tenet Healthsystem Memorial Med. Ctr, Inc., 485 F.3d 804,
810 (5th Cir. 2007); see also Knepper v. Right Aid Corp., 675 F.3d 249, 260 (3d Cir.
2012) (dicta).
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Defendant’s suggestion that Preston holds the interests of justice exception
should be construed narrowly in favor of preserving federal jurisdiction is incorrect. The
Fifth Circuit intimated “that the local controversy and home state exceptions and home
state exceptions should be construed narrowly and resolved in favor of federal
jurisdiction.” This was contrasted with the discretionary power bestowed by the
interests of justice exception, which the Fifth Circuit interpreted to mean that “Congress
permitted the district court greater latitude to remand class actions to state court.” 485
F.3d at 810. There is no indication in Preston (or any other case cited by the parties or
discovered by the Court) that remand under section 1332(d)(3) is not a discretionary
decision to be guided by the six factors Congress enumerated, nor is there any
indication that the Court must apply a presumption in favor of retaining jurisdiction.
Defendant also cites a passage from Preston (which itself relied on a passage
from the Eleventh Circuit’s decision in Evans v. Walter Indus., Inc., 449 F.3d 1159, 1164
(11th Cir. 2006)) to the effect that the interests of justice exception applies “to a
controversy that uniquely affects a particular locality to the exclusion of all others.”
Placing extreme weight on the latter portion of this excerpt, Defendant repeatedly
contends that the presence of Kansas class members means the case should not be
remanded because this dispute does not involve Missouri citizens “to the exclusion of”
all citizens from other jurisdictions. The Court concludes Defendant places undue
weight on this phrase (which is not binding on the Court in any event). There is never a
reason to discuss the interests of justice exception when the case applies exclusively to
citizens of the forum state. The only reason to discuss the interests of justice exception
is because between one-third and two-thirds of the class members are from the forum
state – which necessarily means that between one-third and two-thirds of the class
members are from outside the forum state. Thus, to discuss the interests of justice
exception inevitably means there are class members from outside the forum state – so,
under Defendant’s theory, the interests of justice exception will never be applied.2 The
Court rejects Defendant’s categorical argument.

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It should be pointed out that Preston affirmed the district court’s remand under
section 1332(d)(3), even though the only determination with regard to citizenship of
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1. National or Interstate Interest

The first factor is whether the case presents issues of national or interstate
interest. The Court concludes it does not. The case presents alleged violations of
Missouri law by a Missouri citizen. Those allegedly harmed are citizens of one of two
states (Kansas or Missouri), and most of those allegedly harmed are Missouri citizens.
The case does not involve citizens from many jurisdictions. The case does not involve
a nationwide marketing effort, as the parties agree the two insurance programs at issue
were offered only to citizens of the five counties comprising the Kansas City
metropolitan area.
Defendant emphasizes that slightly more than one-third of the class members
are from Kansas, and further points out that the Kansas City metropolitan area is not the
relevant geographic unit; instead, the question is whether the dispute relates to a single
state. While slightly more than one-third of the class members are Kansas citizens, this
fact does not defeat the Court’s conclusion that the case does not implicate national or
interstate concerns. As noted earlier, if this fact could defeat the first factor, then
section 1332(d)(3) would be a dead letter. These are factors to be weighed, not
elements to be satisfied. Given the universe of class actions, this one presents minimal
national or interstate interest.
Defendant also argues there is a national interest because of the Exchange’s
involvement in this case. It contends that one of its defenses places legal responsibility
for any of Plaintiff’s damages on the Exchange. This argument is apparently a
reference to Affirmative Defense # 12, which alleges “Plaintiff’s claims are barred, in
whole or in part because Plaintiff’s alleged damages . . . were caused by acts or
omissions of other parties, and not by any act or omission of Blue Cross.” However, the
federal government is not a party to the suit, and Plaintiff’s claims do not implicate the
federal government generally or the Exchange specifically. It is a specific form of
denial. The Petition mentions the Exchange for background purposes, but it also makes

class members was “that at least one-third of the class were citizens of Louisiana at the
time of filing suit.” 485 F.3d at 822.
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clear that the case is about the content of Defendant’s website. The Court views the
Exchange’s alleged importance as a red herring.

2. Governing Law

As stated earlier, Plaintiff asserts claims for violation of the MMPA and for unjust
enrichment. The MMPA is a Missouri statute. Plaintiff reasons that the unjust
enrichment claims are also governed by Missouri law because the recipient of the unjust
enrichment is a Missouri citizen, the enrichment occurred in Missouri, and the events
giving rise to that unjust enrichment occurred in Missouri. Defendant counters that the
MMPA may not apply if it turns out the Plaintiff’s allegations are wrong and the
misleading information came from the Exchange (i.e., from outside Missouri) and not
from Defendant (i.e., from within Missouri). Of course, if the misleading information
came from the Exchange and not from Defendant itself, then Defendant wins because it
did nothing wrong. More importantly, there is no claim based on any Kansas
counterpart to the MMPA; either the MMPA applies or it does not, and this
determination will be based on the merits and Missouri’s choice of law rules – so either
way, Missouri law will govern the entirety of Count I.
Defendant contends the unjust enrichment claim “may well be governed by
Kansas law, not Missouri law.” Defendant’s Suggestions in Opposition at 12. Of
course, it also may not be governed by Kansas law – and it is certainly governed by
Missouri law with respect to almost 65% of the class. Whether the other 35% of the
unjust enrichment claims are governed by Missouri law or Kansas law will depend on
Missouri’s choice of law rules. Under these circumstances, the Court concludes
Missouri law will control the majority – if not the entirety – of the issues in this case, and
under these circumstances it makes more sense to permit a Missouri state court to
resolve these issues. The second statutory factor weighs in favor of declining
jurisdiction.

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3. Pleading to Thwart Federal Jurisdiction

Defendant does not contend Plaintiff has crafted its pleadings in a manner
designed to avoid federal jurisdiction. This factor does not augur in favor of maintaining
suit in federal court.

4. Forum’s Nexus to Class Members, Harm, and Defendant

Defendant is a citizen of Missouri and is headquartered in Jackson County, so
there is a nexus between Defendant and Jackson County, Missouri. Plaintiff argues
there is also a nexus between (1) the Kansas City Metropolitan area and (2) the class
members and the harm. Defendant correctly points out that the statute speaks in terms
of a connection with the forum and not a multi-state metropolitan area: here, the Kansas
City metropolitan area – and the class members’ citizenships – extends outside
Missouri into Kansas. However, Defendant’s observation does not end the inquiry.
There is a connection between Missouri and approximately 65% of the class members
(and, correspondingly, 65% of the harm). Defendant argues this is insufficient because
the entirety of the class (and, correspondingly, the entirety of the harm) does not have a
nexus to Missouri. The Court rejects this interpretation for the reasons previously
expressed: accepting this view would preclude section 1332(d)(3)’s in any application
where the entirety of the class was not from the same state, but section 1332(d)(3)
clearly is intended to apply in circumstances when less than two-thirds (but more than
one-third) of the class members are citizens of the forum state. The Court adheres to
its view that this is a factor and not an element, and under the circumstances of this
case Missouri has a significant nexus to the class members, the harm, and the
Defendant.

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5. Comparison of the Number of Citizens Inside and Outside the Forum
and Dispersal of Class Members
Plaintiff compares the percentages of Missouri citizens to non-Missouri citizens
and notes the percentages are quite disparate. Defendant focuses on the statute’s
reference to “the number of citizens” to insist that the proper comparison is not the
percentage of Missourians to Kansans, but the numbers in each group. Under
Defendant’s view, then, the Court should compare the 5,394 Missouri citizens to the
3,504 Kansas citizens and conclude the difference – 1,890 – is not substantial.
The Court disagrees with Defendant’s analysis. First, the Court deems it
appropriate to consider the razor thin margin that precludes the outright rejection of
federal jurisdiction under section 1332(d)(4)(B). Second, if undue weight is given to the
raw numbers, a relatively small class actions would never be left with state courts –
even though smaller class actions are less likely than larger (e.g., nationwide) class
actions to burden interstate commerce in the manner CAFA was designed to combat.
Cf. Hart v. FedEx Ground Package Sys. Inc., 457 F.3d 675, 681 (7th Cir. 2006)
(discussing Congress’s findings); see also West Virginia ex rel. McGraw v. CVS
Pharmacy, Inc., 646 F.3d 169, 178 (4th Cir. 2011). Third, this factor’s purpose (like the
preceding one) is to further insure that Missouri’s connection is substantially greater
than that of any other state’s connection. At worst this factor is not as strong as it might
be in other cases, but by any measure Missouri’s connection and interest is significantly
greater than any other state’s. This is not a situation where several or many states can
claim to have a significant connection to the suit. The Court concludes the number of
Missouri class members is substantially greater than the number of Kansas class
members, and a significant number of class members are concentrated in Missouri.

F. Previous Suits

The parties have not indicated that any similar class actions have been filed in
the previous three years. This factor does not favor retaining jurisdiction over the suit.

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G. Final Consideration

Having considered the six statutory factors individually, the Court now considers
them collectively. Keeping in mind CAFA’s purposes and the factors prescribed by
Congress, the Court concludes the case should be remanded. This suit does not
involve matters of national or interstate interest. Whatever minimal weight is carried by
the suit’s connection to the Exchange is outweighed by tangential nature (and tangential
importance) of that connection and the other factors the Court must consider. Missouri
law will dictate the outcome for all of the class members on Count I and at least 65% of
the class members on Count II. Whether Missouri law governs for the remaining 35% of
the class members on Count II will involve yet another determination of Missouri law.
Missouri has a strong nexus to the Defendant. It also has a strong nexus to the
class and the harm (or, at worst, 65% of the class and 65% of the harm). The portion of
the class comprised of Missouri citizens is substantially greater than the portion from
any other state, and the class members are not dispersed throughout the country.
Plaintiff has not crafted its Petition in a manner designed to thwart federal jurisdiction,
and there have not been any class actions raising these claims in the last three years.
In the final analysis, this is not the sort of suit the Court believes CAFA was concerned
about. The interests of justice are best served by remanding the case to state court and
allowing the state courts to apply Missouri law to the Missouri defendant and the class
comprised largely of Missouri citizens. The Missouri courts are also better situated to
apply Missouri’s choice of law rules and decide whether Missouri law applies to the
Kansas citizens in the class. The Court declines to exercise jurisdiction over this case.

III. CONCLUSION

The Court concludes federal jurisdiction exists pursuant to 28 U.S.C. §
1332(d)(2). However, the Court exercises its discretion to decline jurisdiction over the

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case pursuant to 28 U.S.C. § 1332(d)(3). The case is remanded to the Circuit Court for
Jackson County, Missouri.
IT IS SO ORDERED.

/s/ Ortrie D. Smith
ORTRIE D. SMITH, SENIOR JUDGE
UNITED STATES DISTRICT COURT

DATE: September 9, 2014

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