Cardinal Health 200, LLC v. Allscripts, LLC et al

Filing 30

REPORT AND RECOMMENDATIONS re 16 MOTION to Dismiss & 25 MOTION for Attorney Fees: The Magistrate Judge RECOMMENDS that this Court REMAND thia action to the Franklin County Court of Common Pleas Civil Division, Ohio; GRANT IN PART AND DENY IN PART Plaintiff's Motion for Attorney Fees; and DENY AS MOOT Defendants' Motion to Dismiss. Objections to R&R due within fourteen (14) days of the date of this Report. Signed by Magistrate Judge Elizabeth Preston Deavers on 8/13/2013. (er1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

CARDINAL HEALTH 200, LLC,
Plaintiff,
Civil Action 2:13-cv-305
Judge Algenon L. Marbley
Magistrate Judge Elizabeth P. Deavers

v.

ALLSCRIPTS, LLC, et al.,
Defendants.

REPORT AND RECOMMENDATION
This matter is before the United States Magistrate Judge for a Report and
Recommendation on Defendants’ Motion to Dismiss or in the Alternative Transfer Venue (ECF
No. 16) and Plaintiff’s Motion for Costs and Fees (ECF No. 25). For the reasons that follow, it
is RECOMMENDED that this Court REMAND this action to the Franklin County Court of
Common Pleas Civil Division, Ohio; GRANT IN PART AND DENY IN PART Plaintiff’s
Motion (ECF No. 25); and DENY AS MOOT Defendants’ Motion to Dismiss (ECF No. 16).
I.
On February 27, 2013, Plaintiff filed this action in state court asserting state-law breachof-contract and declaratory judgment claims against Defendants, Allscripts, LLC, Allscripts
Healthcare, LLC, and Allscripts Healthcare Solutions, Inc. The Complaint identified Plaintiff as
a Delaware limited liability company with its principal place of business in Dublin, Ohio.
(Compl. ¶ 1, ECF No. 5.)
On April 2, 2013, Defendants removed the case to this Court alleging diversity

jurisdiction and accusing Plaintiff of fraudulently joining Allscripts Healthcare Solutions, Inc. as
a party to defeat diversity jurisdiction. (ECF No. 1.) Plaintiff dismissed Allscripts Healthcare
Solutions, Inc. and consented to the jurisdiction of this Court. (ECF No. 15.) In support of
removal, Defendants represented that neither Allscripts, LLC nor Allscripts Healthcare, LLC
were “citizen[s] of the State of Ohio,” such that this Court “has original jurisdiction because of
diversity of citizenship.” (Pet. for Removal 3 at ¶ 11, ECF No. 1.)
Defendants then moved to stay the litigation and twice sought extensions of time to file
their answer. (ECF Nos. 6, 7, 10.) The Court denied Defendants’ motion to stay and ordered
them to answer by May 31, 2013. (ECF No. 14.) On May 31, 2013, Defendants filed a motion
seeking dismissal or transfer to the United States District Court for the Eastern District of North
Carolina. (ECF No. 16.) On June 20, 2013, Plaintiff’s counsel asked Defense counsel to
identify the membership of its entities in an effort to ascertain whether diversity jurisdiction
actually existed. Defense counsel did not respond, prompting Plaintiff to make three additional
inquiries over the course of a month. Because Defense counsel still did not respond, Plaintiff
contacted the Court to schedule a conference call to address the issue. Prior to the scheduled
call, on July 23, 2013, Defense counsel tendered a proposed order stipulating to remand.
During the July 25, 2013 conference call, Defense counsel conceded that complete
diversity between the parties does not exist such that remand is appropriate. The parties agree
that the remaining issue is whether or not the “payment of just costs and any actual expenses,
including attorney fees incurred as a result of the removal” under 42 U.S.C. § 1447(c) is proper.
On this issue, Plaintiff has moved for costs and attorneys fees. (ECF No. 25.)
In the subject Motion for Costs and Fees, Plaintiff asserts that an award of costs in fees
under 28 U.S.C. § 1447(c) is warranted given that Defendants lacked an objectively reasonable
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basis for seeking removal. Plaintiff concedes that jurisdiction cannot be determined from the
face of the Complaint, but posits that Defendants had a duty to investigate whether diversity
jurisdiction existed prior to removal. Citing Defendants’ subsequent motion to stay, their
motions for an extension of time to file an answer, their motion to dismiss and transfer, and their
failure to file an answer to date, Plaintiff maintain that Defendants’ strategy is to delay this
litigation. Plaintiff seeks “all of its fees associated with the removal and from the time of the
removal.” (Pl.’s Reply 6, ECF No. 28.) In the event fees are awarded, Plaintiff seeks seven days
to file its fee petition.
Defendants counter that their removal of the instant action to this Court was objectively
reasonable because diversity jurisdiction could not be determined from the face of the
Complaint. Defendants explain that “Plaintiff could have pled its Complaint in such a manner to
identify its members and their citizenship, but it chose not to do so . . . .” (Pl.’s Mem. In Opp. 3,
ECF No. 27.) Defendants deny that they engaged in delay tactics. They further maintain that
Plaintiff’s consent to this Court’s jurisdiction and their failure to move for remand also weigh
against awarding costs and fees under § 1447(c). Finally, Defendants submit that the Court
should reject Plaintiff’s fee petition because it failed to attach supporting documentation.
Defendants add that at most, Plaintiff could be reimbursed for four emails.
II.
When a court determines that the removal of a state-court case to federal court was
improper, “the action must be remanded, and the order ‘may require payment of just costs and
actual expenses, including attorney fees, incurred as a result of the removal.’” Kent State Univ.
Bd. of Trustees v. Lexington Ins. Co., 512 F. App’x 485, 488–89 (6th Cir. 2013) (quoting 28
U.S.C. § 1447(c)). An award of costs and fees under § 1447(c) is discretionary, “but subject to
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the guidance set forth by the Supreme Court in Martin v. Franklin Capital Corp., 546 U.S. 132,
136–37 (2005).” Id. (citing Warthman v. Genoa Twp. Bd. of Trs., 549 F.3d 1055, 1059 (6th Cir.
2008). In Martin, the Supreme Court imposed an objective reasonableness standard, limiting a
court’s discretion to award fees to those cases in which “the removing party lacked an
objectively reasonable basis for seeking removal.” 546 U.S. at 141. The United States Court of
Appeals has similarly held that an award of costs and fees under § 1447(c) “is inappropriate
where the defendant’s attempt to remove the action was fairly supportable, or where there has
not been at least some finding of fault with the defendant’s decision to remove.” Wartham, 549
F.3d at 1059–60 (internal quotation marks and citation omitted).
III.
It is clear that Defendants lacked an objectively reasonable basis for removal of this case
to federal court. Defendants removed this action alleging diversity jurisdiction. Prior to
removal, however, Defendants failed to do any investigation of the citizenship of the parties even
though they concede that jurisdiction could not be determined from the face of the Complaint. In
fact, even though Plaintiff commenced this action in February 2013, Defendants apparently
failed to conduct any such investigation until June 2013, and only then because of Plaintiff’s
inquiries. Moreover, instead of promptly responding to Plaintiff’s inquiries or seeking
clarification of its citizenship,1 Defendants purportedly spent more than a month to ascertain
Plaintiff’s citizenship. Defendants’ contention that “Plaintiff could have pled its Complaint in
such a manner to identify its members and their citizenship, but it chose not to do so . . . .” (Pl.’s

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In connection with its response to Defendants’ Motion to Dismiss, Plaintiff submits the
affidavit of Ms. Tami Cates, a corporate representative, in which she represents that Plaintiff’s
sole member is Allegiance Corporation, a Delaware corporation with its principal place of
business in Ohio. (Cates. Decl. ¶ 2, ECF No. 17-3.)
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Mem. In Opp. 3, ECF No. 27), fails to persuade. Plaintiff filed this action in state court and
therefore had no duty to plead facts demonstrating federal jurisdiction. Indeed, Defendants, as
the removing party, must demonstrate federal jurisdiction. See Paul v. Kaiser Found. Health
Plan, 701 F.3d 514, 523 (6th Cir. 2012) (party removing the action to federal court has “the
burden of establishing federal subject matter jurisdiction”). Plaintiff’s subsequent actions of
consenting to this Court’s jurisdiction and failing to move for remand do not bear on whether
Defendants had an objectively reasonable basis for seeking removal.
Plaintiff’s subsequent actions are, however, relevant to the determination of the fees to be
awarded. Most courts interpreting the meaning of “incurred as a result of the removal” have
limited the award to those fees and costs incurred “researching and briefing a motion to remand.”
Marel, P.M., S.A. v. LKS Acquisitions, Inc., No. 3:06-cv-366, 2010 WL 1372412, at *2 (S.D.
Ohio Mar. 31, 2010) (collecting cases). In 3W International, Inc. v. Scottdel, Inc., 722
F.Supp.2d 934 (N.D. Ohio 2010), the court declined to award the fees and costs the defense
counsel incurred in drafting a motion for remand even though the court had determined that the
plaintiff lacked an objectively reasonable basis for removal. The court explained that the
plaintiff’s agreement to remand immediately upon becoming aware of the issue through the
defendant’s motion suggested that it would have just have readily agreed to remand after a
simple phone call. Id. at 936. The court concluded that “[g]ranting [the defendant] full
recompense would be both inequitable and unwise” because it could encourage lawyers to incur
fees that could have been avoided. Id. at 937. Ultimately, the court awarded fees under § 1447
for what it would have cost to call or email the plaintiff to alert him of the jurisdictional issue
and to warn him a motion of remand would be filed absent an agreement. (Id. at 936–37.)
Under the circumstances presented here, the Undersigned recommends that Plaintiff be
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awarded its reasonable fees and costs incurred after it sent the June 20, 2013 email to Defense
counsel alerting Defendants of the jurisdictional issue. Costs and fees incurred prior to the June
20, 2013 email may have been avoidable had Plaintiff not consented to this Court’s jurisdiction
or raised the jurisdictional issue sooner. Costs and fees incurred after the June 20, 2013 email
are clearly attributable to Defendants’ improper removal and refusal to respond to Plaintiff’s
jurisdictional inquiries. Upon receipt of the June 20, 2013 email, Defense counsel could have
communicated with Plaintiff’s counsel in an attempt to determine whether their removal was
proper. Instead, Defendants failed to respond to Plaintiff’s initial and subsequent inquiries,
waiting until July 23, 2013, to stipulate to remand. Significantly, during this timeframe, Plaintiff
continued to pursue its motion seeking a venue transfer to another federal court. (See Pl.’s July
11, 2013 Reply, ECF No. 18.) Finally, the Undersigned rejects Defendants’ assertion that the
Court should deny Plaintiff’s request for fees because it failed to attach a fee petition to its
Motion. In the event the Court determines that an award of fees is appropriate, Plaintiff may file
a fee petition within seven (7) days.
In sum, the Undersigned finds that Defendants lacked an objectively reasonable basis for
removal of this case to federal court. It is RECOMMENDED that the Court REMAND this
action to state court and AWARD reasonable attorneys’ fees and costs incurred as a result of the
improper removal, further limiting the fees and costs to those incurred after June 20, 2013.
Plaintiff’s forthcoming costs and fee petition may include costs for pro hac vice motions and
attorneys’ fees incurred in connection with the following: time expended opposing Defendants’
motion seeking transfer; time expended corresponding with Defendants’ counsel in an effort to
ascertain their citizenship; and time expended in connection with the July 25, 2013 telephonic
conference with the Court. In the event the Court awards the recommended costs and fees,
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Plaintiff may file its fee petition within seven (7) days of any order adopting this Report and
Recommendation. The parties are encouraged to reach an agreement regarding the appropriate
amount of fees to be awarded.
IV.
For the reasons set forth above, it is RECOMMENDED that the Court REMAND this
action to the Franklin County Court of Common Pleas Civil Division, Ohio; GRANT IN PART
AND DENY IN PART Plaintiff’s Motion for Costs and Fees (ECF No. 25) consistent with the
foregoing; and DENY AS MOOT Defendants’ Motion to Dismiss or in the Alternative Transfer
Venue (ECF No. 16).
PROCEDURE ON OBJECTIONS
If any party seeks review by the District Judge of this Report and Recommendation, it
may, within fourteen (14) days, file and serve on all parties objections to the Report and
Recommendation, specifically designating this Report and Recommendation, and the part in
question, as well as the basis for objection. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).
Response to objections must be filed within fourteen (14) days after being served with a copy.
Fed. R. Civ. P. 72(b).
The parties are specifically advised that the failure to object to the Report and
Recommendation will result in a waiver of the right to de novo review by the District Judge and
waiver of the right to appeal the judgment of the District Court. See, e.g., Pfahler v. Nat’l Latex
Prod. Co., 517 F.3d 816, 829 (6th Cir. 2007) (holding that “failure to object to the magistrate
judge’s recommendations constituted a waiver of [the defendant’s] ability to appeal the district
court’s ruling”); United States v. Sullivan, 431 F.3d 976, 984 (6th Cir. 2005) (holding that

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defendant waived appeal of district court’s denial of pretrial motion by failing to timely object to
magistrate judge’s report and recommendation). Even when timely objections are filed,
appellate review of issues not raised in those objections is waived. Robert v. Tesson, 507 F.3d
981, 994 (6th Cir. 2007) (“[A] general objection to a magistrate judge’s report, which fails to
specify the issues of contention, does not suffice to preserve an issue for appeal . . . .”) (citation
omitted)).

Date: August 13, 2013

/s/ Elizabeth A. Preston Deavers
Elizabeth A. Preston Deavers
United States Magistrate Judge

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