A & C Discount Pharmacy LLC v. Prime Therapeutics LLC

Filing 18

MEMORANDUM OPINION AND ORDER denying 9 Motion to Remand to State Court filed by A & C Discount Pharmacy LLC. (Ordered by Judge Sidney A Fitzwater on 6/9/2016) (Judge Sidney A Fitzwater)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
A & C DISCOUNT PHARMACY L.L.C.,
D/B/A MEDCORE PHARMACY
PARTNERS 10, LP,
Plaintiff,
VS.
PRIME THERAPEUTICS LLC,
Defendant.

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§ Civil Action No. 3:16-CV-0429-D
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MEMORANDUM OPINION
AND ORDER
The instant motion to remand presents the question whether the removing defendant
has demonstrated by a preponderance of the evidence that the amount in controversy exceeds
the sum or value of $75,000, exclusive of interest and costs, and that there is complete
diversity of citizenship. Finding that the defendant has met this burden, the court denies the
motion.
I
This is a removed action in which plaintiff A & C Discount Pharmacy LLC d/b/a
Medcore Pharmacy Partners 10, LP (“A&C”) sues defendant Prime Therapeutics LLC
(“Prime”) for injunctive and declaratory relief and breach of contract. Prime is a pharmacy
benefits manager that administers the pharmacy benefits of its health plan clients, by, among
other things, maintaining a network of retail pharmacies at which health plan members can
fill their prescriptions. A&C is a retail pharmacy in Prime’s pharmacy reimbursement
network. Prime contends that A&C breached its provider agreement by submitting claims

for complex compound pharmaceuticals, and Prime sought to terminate A&C from its
pharmacy network.
A&C filed suit in Texas state court on January 21, 2016, the day before it was to be
terminated from the Prime network, seeking a declaratory judgment that it did not breach its
provider agreement with Prime and a temporary restraining order (“TRO”), as well as
temporary and permanent injunctive relief, to prevent Prime from dropping A&C from the
Prime network and alleging anticipatory breach of contract.1 Prime removed the case on
February 16, 2016 based on diversity jurisdiction under 28 U.S.C. § 1332. A&C now moves
to remand, contending that the court lacks subject matter jurisdiction because Prime has
failed to establish that the amount in controversy exceeds the sum or value of $75,000,
exclusive of interest and costs, and that there is complete diversity of citizenship. Prime
subsequently filed its second amended notice of removal, and it opposes the motion.
II
As the removing party, Prime “has the burden of overcoming an initial presumption
against jurisdiction and establishing that removal is proper.” Carnes v. Data Return, L.L.C.,
2005 WL 265167, at *1 (N.D. Tex. Feb. 1, 2005) (Fitzwater, J.) (citing Howery v. Allstate
Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001)). “In general, defendants may remove a civil
action if a federal court would have had original jurisdiction.” De Aguilar v. Boeing Co., 47

1

On that same day, A&C obtained an ex parte TRO in state court restraining Prime
from terminating A&C’s participation in its network. The TRO has since expired, and Prime
has terminated A&C from its network. A&C’s requests for preliminary and permanent
injunctive relief remain pending.
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F.3d 1404, 1408 (5th Cir. 1995) (citing 28 U.S.C. § 1441(a)). “Due regard for the rightful
independence of state governments, which should actuate federal courts, requires that they
scrupulously confine their own jurisdiction to the precise limits which (a federal) statute has
defined.” Victory Carriers, Inc. v. Law, 404 U.S. 202, 212 (1971) (quoting Healy v. Ratta,
292 U.S. 263, 270 (1934)). “The federal removal statute, 28 U.S.C. § 1441, is subject to
strict construction because a defendant’s use of that statute deprives a state court of a case
properly before it and thereby implicates important federalism concerns.” Frank v. Bear
Stearns & Co., 128 F.3d 919, 922 (5th Cir. 1997) (citing Carpenter v. Wichita Falls Indep.
Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995)). “[D]oubts regarding whether removal
jurisdiction is proper should be resolved against federal jurisdiction.” Acuna v. Brown &
Root Inc., 200 F.3d 335, 339 (5th Cir. 2000). The district courts have original jurisdiction
of all civil actions where the matter in controversy exceeds the sum or value of $75,000,
exclusive of interest and costs, and the parties are completely diverse. See 28 U.S.C. §
1332(a); see also Uglunts v. Americare Servs., Inc., 2013 WL 3809681, at *1 (N.D. Tex. July
23, 2013) (Fitzwater, C.J.).
III
The court considers first whether Prime has met its burden of establishing that the
amount in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.
A
If the plaintiff’s state court petition demands monetary relief of a stated sum, that sum,
if asserted in good faith, is deemed to be the amount in controversy. Dart Cherokee Basin
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Operating Co. v. Owens, ___ U.S. ___, 135 S.Ct. 547, 551 (2014). But when, as here, the
plaintiff’s state court petition does not state the amount in controversy, the defendant’s notice
of removal must make “a plausible allegation that the amount in controversy exceeds the
jurisdictional threshold.” Id. at 553-54. No evidence is required unless and until the plaintiff
contests, or the court questions, the allegation. See id. at 551, 554.
If the plaintiff contests the allegation, then the defendant must prove, by a
preponderance of the evidence, that the amount in controversy requirement has been
satisfied. Id. at 554 (explaining that, if plaintiff contests defendant’s allegation, then “both
sides submit proof and the court decides, by a preponderance of the evidence, whether the
amount-in-controversy requirement has been satisfied”); see also Allee Corp. v. Reynolds &
Reynolds Co., 2015 WL 1914663, at *3 (N.D. Tex. Apr. 28, 2015) (Fitzwater, J.). The
defendant’s burden “is met if (1) it is apparent from the face of the petition that the claims
are likely to exceed $75,000, or, alternatively, (2) the defendant sets forth summary judgment
type evidence of facts in controversy that support a finding of the requisite amount.”
Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (internal
quotation marks omitted). If the defendant can produce evidence sufficient to show by a
preponderance of the evidence that the amount in controversy exceeds the jurisdictional
threshold, the plaintiff can defeat diversity jurisdiction only by showing to a legal certainty
that the amount in controversy does not exceed the sum or value of $75,000, exclusive of
interest and costs. See De Aguilar, 47 F.3d at 1411.

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B
The only issue is whether the court can consider Prime’s second amended notice of
removal, and its attached exhibits, to determine whether Prime has made the necessary
plausible allegation and whether Prime has shown, by a preponderance of the evidence, that
the amount in controversy requirement has been satisfied. In its motion, A&C maintains that
Prime cannot demonstrate that it is facially apparent that the amount in controversy exceeds
the jurisdictional threshold and that Prime failed to attach any evidence to its notice of
removal indicating the amount in controversy. Prime responds that the information in its
second amended notice of removal, filed after A&C filed its motion to remand, shows that
the amount in controversy exceeds the jurisdictional threshold.
Prime’s second amended notice of removal cites authority for the proposition that the
amount in controversy in an action seeking declaratory or injunctive relief is the object of the
litigation, the value of the right to be protected, or the extent of the injury to be prevented.2
Prime points out that A&C’s state court petition seeks injunctive relief to prevent Prime from
terminating A&C from the Prime network and a declaratory judgment that A&C did not
breach the provider agreement with Prime, and thus the object of this litigation is A&C’s
participation in the Prime pharmacy network, which Prime maintains is valued at more than

2

“In actions seeking declaratory or injunctive relief, it is well established that the
amount in controversy is measured by the value of the object of the litigation.” Hunt v.
Wash. State Apple Adver. Comm’n, 432 U.S. 333, 347 (1977); see also Farkas v. GMAC
Mortg., L.L.C., 737 F.3d 338, 341 (5th Cir. 2013) (per curiam); Garcia v. Koch Oil Co. of
Tex. Inc., 351 F.3d 636, 640 (5th Cir. 2003).
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$75,000. And Prime attaches as an exhibit to its second amended notice of removal the
declaration of its Senior Director of Pharmacy Audit, Anne Sayther (“Sayther”), to show the
value of this litigation. According to Sayther, “[b]etween January and December 2015,
[A&C] billed Prime for between $274,027.17 and $1,977,632.26 in prescription
reimbursements each month pursuant to the terms of the operating agreement between the
parties,” and “[b]etween January and December 2015, [A&C] billed a total of
$10,091,693.43 under its contract while a member of the Prime Pharmacy Network.” 2d Am.
Not. of Removal Ex. 1 ¶ 3. And Prime contends that “[A&C] asserts that it will lose these
customers if an injunction is not entered.” Id. at ¶ 15 (citing Pet. ¶ 13). Thus Prime avers
that “[A&C] has asserted that it will lose over $10 million in business if it is terminated and
an injunction does not issue.” Id.
Prime also points out in its second amended notice of removal that A&C seeks
damages for an alleged breach of contract, which Prime asserts is also valued at over
$75,000, and further alleges that
[i]n its First Amended Complaint filed in this Court, [A&C]
specifies that its breach of contract claim is based both on the
termination of the contract and on Prime’s refusal to pay certain
claims submitted. The value of the termination of the contract
is pleaded by [A&C] to represent over $10 million in business
on an annual basis set forth above, which certainly meets the
jurisdictional requirement for diversity jurisdiction. In addition,
[A&C] asserts a claim for breach of contract based on the claims
submitted which Prime has rejected and refuses to pay. [A&C]
asserts that Prime notified [A&C] that it had suspended
payments in the amount of $109,687.84 on January 20, 2016,
$73,527.23 on January 27, 2016, and $135,058.50 on February
10, 2016. (First Amended Complaint ¶¶13-16.) This case was
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removed on February 16, 2016[.]
Id. at ¶ 16. And Prime points to Sayther’s declaration, which avers:
On January 20, 2016, Prime notified [A&C] that it suspended
payment of claims which [A&C] submitted to Prime for
payment during the period of January 9-15, 2016. Upon further
review of these claims, Prime denied payment of claims totaling
$99,624.42. On January 27, 2016, Prime notified [A&C] that it
suspended payment of claims which [A&C] submitted to Prime
for payment during the period of January 16-22, 2016. Upon
further review of these claims, Prime denied payment of claims
totaling $74,766.96. On February 4, 2016, Prime notified
[A&C] that it suspended payment of claims which [A&C]
submitted to Prime for payment during the period of January 2329, 2016; the total amount of claims suspended during this
period was a total of $158,407.88[.]
Id. at Ex. 1 ¶ 4. Prime alleges that “[r]ecovery of these denied claims is part of the damages
which [A&C] seeks in its breach of contract claim.” Id. at ¶ 17.
In its reply, A&C does not challenge that Prime’s second amended notice of removal
makes the necessary plausible allegation or provides competent proof establishing, by a
preponderance of the evidence, that the amount in controversy exceeds the jurisdictional
threshold. Rather, A&C only contends that the court should not accept Prime’s allegations
regarding the amount in controversy in its second amended notice of removal. It maintains
that Prime’s original and first amended notices of removal contained only conclusory
statements, and that Prime should not be allowed to amend its defective allegations and make
completely new allegations regarding the amount in controversy after its statutory right of
removal has expired. A&C also points out that, when the court directed Prime to correct
defects in its notice of removal and first amended notice of removal, the court only ordered
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Prime to amend its pleading of diversity of citizenship, and it did not give Prime permission
to amend its allegations concerning the amount in controversy, nor did Prime seek permission
to amend its allegations concerning the amount in controversy. The court disagrees with
A&C’s position concerning the leeway afforded Prime to amend its notice of removal.
A defendant may freely amend a notice of removal within the 30-day period set out
in 28 U.S.C. § 1446(b). See Wilson v. Int’l Bus. Machs. Corp., 2011 WL 4572019, at *2
(N.D. Tex. Oct. 3, 2011) (Fish, J.) (citing Richardson v. United Steel Workers of Am., 864
F.2d 1162, 1165 (5th Cir. 1989)). Thereafter, a defendant may amend only to set forth more
specifically the jurisdictional grounds for removal that were imperfectly stated in the original
notice. See D.J. McDuffie v. Old Reliable Fire Ins. Co., 608 F.2d 145, 146-47 (5th Cir.
1979) (explaining that faulty allegation of jurisdiction in notice of removal may be cured in
the trial or appellate court); Fireman’s Ins. Co. v. Robbins Coal Co., 288 F.2d 349, 350 (5th
Cir. 1961) (“Defective allegations of jurisdiction may be amended, upon terms, in the trial
or appellate courts.”); see also Wormley v. S. Pac. Transp. Co., 863 F. Supp. 382, 385 (E.D.
Tex. 1994); 14C Charles Alan Wright et al., Federal Practice and Procedure § 3733, at 64951 (4th ed. 2009) (explaining that after the 30-day period for removal, “defendants may
amend the notice only to set out more specifically the grounds for removal that already have
been stated, albeit imperfectly, in the original notice,” and that “an amendment of the
removal notice may seek to accomplish any of several objectives: It may correct an imperfect
statement of citizenship, state the previously articulated grounds more fully, or clarify the
jurisdictional amount” (citing cases)).

Furthermore, A&C cites no authority for the
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proposition that Prime cannot amend its notice of removal without first seeking permission
from the court.
A&C’s notice of removal alleged diversity of citizenship under 28 U.S.C. § 1332. It
asserted that “the amount in controversy requirement of 28 U.S.C. § 1332(a) is met, as
[A&C] seeks an injunction and declaration to prevent the termination of a contract the value
of which exceeds $75,000.00, exclusive of interest and costs, as well as damages for an
alleged breach of contract,” and it alleged that “[b]etween January and December 2015,
[A&C] billed Prime for between $274,027.17 and $1,977,632.26 in prescription
reimbursements each month.” Not. of Removal ¶ 6. Thus Prime was entitled—with or
without leave of court—to file an amended notice of removal outside of the 30-day window
to clarify facts relating to the amount in controversy. See Rigel v. Rosewood Hotels &
Resorts, L.L.C., 2014 WL 6991331, at *1-2 (N.D. Tex. Dec. 11, 2014) (Lynn, J.) (explaining
that defendants filed amended notice of removal to address jurisdictional concerns raised in
plaintiffs’ motion to remand, without discussing whether defendants had sought permission
to do so, and concluding that defendants could file amended notice of removal outside of 30day window “to clarify facts relating to the citizenship of [defendants]”). The court therefore
finds that Prime’s second amended notice of removal and attached exhibits made the
necessary plausible allegation and established by a preponderance of the evidence that the
amount in controversy exceeds the jurisdictional threshold. A&C has presented no evidence
that it will not be able to recover more than the jurisdictional amount. See De Aguilar, 47
F.3d at 1411. Accordingly, the court denies A&C’s motion to remand on this ground.
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IV
The court considers next whether Prime has met its burden of establishing that the
parties are completely diverse.
A
It is settled that diversity jurisdiction requires complete diversity of citizenship
between all plaintiffs and all defendants. See Owen Equip. & Erection Co. v. Kroger, 437
U.S. 365, 373-74 (1978); Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). “This means
that no plaintiff can be a citizen of the same state as even one defendant.” Davis v. Am.
Home Prods., 2005 WL 910601, at *2 (N.D. Tex. Apr. 20, 2005) (Fitzwater, J.). “‘The
burden of pleading diversity of citizenship is upon the party invoking federal jurisdiction.’”
Guerrero v. State Farm Mut. Auto. Ins. Co., 181 F.3d 97, 1999 WL 346977, at *2 (5th Cir.
May 20, 1999) (per curiam) (unpublished table decision) (quoting Ray v. Bird & Son & Asset
Realization Co., 519 F.2d 1081, 1082 (5th Cir. 1975)). Thus when a defendant removes
based on diversity of citizenship, the notice of removal must allege diversity of citizenship
by distinctly and affirmatively alleging the citizenship of each party. See, e.g., Getty Oil
Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1259 (5th Cir. 1988) (“[T]he basis upon which
jurisdiction depends must be alleged affirmatively and distinctly and cannot be established
argumentatively or by mere inference.” (citing Illinois Cent. Gulf R. Co. v. Pargas, Inc., 706
F.2d 633, 636 & n.2 (5th Cir. 1983)); B., Inc. v. Miller Brewing, 663 F.2d 545, 549 (5th Cir.
1981) (“[W]here an out-of-state defendant removes an action from state to federal court, the
burden is upon the removing party to plead a basis for federal jurisdiction.” (citing cases)).
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B
A&C contests the sufficiency of Prime’s allegations of citizenship in its notice of
removal, contending that Prime does not properly allege the citizenship of A&C.
Prime responds that its second amended notice of removal, filed after A&C filed its motion
to remand, properly alleges diversity of citizenship. In its reply, A&C does not challenge the
allegations of citizenship in Prime’s second amended notice of removal. Rather, it only
asserts that Prime’s second amended notice of removal should be disregarded because it
included completely new allegations regarding diversity of citizenship after Prime’s statutory
right of removal had expired. For the reasons explained above, the court disagrees.
A&C’s notice of removal alleges diversity of citizenship under 28 U.S.C. § 1332 and
asserts that “there is complete diversity of citizenship.” Not. of Removal ¶ 2. It avers that
A&C “is a Texas limited liability company with its principal office in Dallas, Texas,” and
“is therefore a citizen of the State of Texas.” Id. at ¶ 3. Additionally, Prime maintains that
it “is a limited liability company organized under the laws of Delaware, with its principal
place of business in Eagan, Minnesota,” “that none of [its] Members are citizens of Texas,”
and therefore it “is not a citizen of the State of Texas.” Id. at ¶ 4. By pleading diversity on
these bases, Prime’s notice of removal failed to properly allege the citizenship of A&C (and
Prime). See infra § IV(C). But because Prime’s notice of removal attempted to allege
diversity of citizenship between A&C and Prime, it was entitled to file an amended notice
of removal outside the 30-day window to clarify facts relating to the citizenship of A&C and
Prime. See, e.g., Howery, 243 F.3d at 919-20 (“[W]hen the record establishes the diversity
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of the parties, but the party asserting federal jurisdiction has failed to specifically plead that
the parties are diverse, [the court of appeals] allow[s] that party to amend its pleadings to
correct for their technical deficiency.”); Rigel, 2014 WL 6991331, at *2. Thus the court
denies A&C’s motion to remand on this ground.
C
Even though A&C does not challenge the specific allegations of citizenship in Prime’s
second amended notice of removal, the court must still determine whether Prime has properly
alleged diversity of citizenship. For diversity jurisdiction purposes, a natural person is
considered a citizen of the state where that person is domiciled—that is, where the person has
a fixed residence with the intent to remain there indefinitely. See Preston v. Tenet
Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 793, 797 (5th Cir. 2007); Freeman v. Nw.
Acceptance Corp., 754 F.2d 553, 555-56 (5th Cir. 1985). The citizenship of a limited
liability company is determined by the citizenship of all of its members. Harvey v. Grey Wolf
Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008). A corporation is considered to be a
citizen both of its state of incorporation and of its principal place of business. See Ill. Cent.
Gulf R.R. Co., 706 F.2d at 637.
Prime distinctly and affirmatively alleges the citizenship of the parties. It alleges that
A&C is a limited liability company and a citizen of Virginia or Texas because its sole
member, Bekim Veseli (“Veseli”), is a citizen of Virginia or Texas. To show Veseli’s
citizenship, A&C points out that A&C was required to disclose its ownership in order to
participate in Prime’s pharmacy network, and it provides A&C’s pharmacy disclosure
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statement that identifies Veseli’s address as being in Reston, Virginia. Prime also provides
the declaration of its counsel, Blake A. Bailey, Esquire, who asserts that the Texas Secretary
of State’s website provides a Texas address for Veseli. Additionally, Prime alleges that it
is a limited liability company with nine members that are all corporations, and Prime alleges
each corporation’s citizenship (i.e., the state of incorporation and principal place of business),
none of which is a citizen of Virginia or Texas. Accordingly, Prime has sufficiently alleged
diversity of citizenship.
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For the reasons explained, A&C’s motion to remand is denied.
SO ORDERED.
June 9, 2016.

_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE

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