Zhang v. United Healthcare Insurance Company

Filing 16

ORDER signed by Judge J P Stadtmueller on 4/22/11 granting 9 plaintiff's Motion to Remand to the Wisconsin Circuit Court for Milwaukee County, and denying 12 defendant's Motion to Seal Document. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
____________________________________________
JIA LE ZHANG,
Plaintiff,
v.

Case No. 11-CV-72

UNITED HEALTHCARE INSURANCE COMPANY,
Defendant.
____________________________________________

ORDER
The plaintiff, Jia Le Zhang (“Zhang”), a citizen of W isconsin, filed this action
in state court against the defendant, United Healthcare Insurance Company (“United
Healthcare”), alleging that the defendant refused to process and pay health
insurance claims submitted by the plaintiff under one of the defendant’s policies
unless the plaintiff first agreed to sign a subrogation agreement that is allegedly
contrary to W isconsin state law. See Compl. ¶¶ 1-3, 14-23.

The plaintiff further

contends that his claim for medical benefits was wrongfully denied by the defendant
because of the plaintiff’s refusal to sign that subrogation agreement. Id. ¶¶ 18-22.
Accordingly, the plaintiff’s complaint contains two counts: a state common law claim
for bad faith conduct by the defendant; and declaratory relief under W is. Stat.
§ 806.04.

Id. ¶¶ 24-37.

The plaintiff asks for relief in the form of “general

damages,” “punitive damages,” an “award of costs and expenses incurred in this
action,” “reasonable attorneys’ fees as provided by law,” and “pre- and postjudgment interest as provided by law.” Id. at 10. Mr. Zhang sues United Healthcare

“individually and on behalf of all others similarly situated” – a class of “all students
who purchased” a certain health insurance policy from the defendants while they
were attending colleges or universities in W isconsin and who were asked to sign a
subrogation agreement “purporting to give [the defendant] a right to first-dollar
recovery on subrogation claims.” Id. ¶ 7. The plaintiff asserts in the complaint that
the members of the class number is “at least in the thousands” and that the plaintiff’s
claim is typical of claims of the class. Id. ¶¶ 9, 11. On January 24, 2011, United
Healthcare removed the case from state court to this court. (Docket #1). Less than
a month later, the plaintiff moved to remand this case back to state court. (Docket
#9). W ith the benefit of the parties’ briefs, the court resolves the pending motion.
A defendant is allowed to remove a case filed in state court if the federal court
would have had original jurisdiction to hear the case when the plaintiff originally filed
it. 28 U.S.C. § 1441(a). “The party seeking removal has the burden of establishing
federal jurisdiction, and federal courts should interpret the removal statute narrowly,
resolving any doubt in favor of the plaintiff’s choice of forum in state court.” Schur
v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 758 (7th Cir. 2009). Here, United
Healthcare relies on the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d),
“an extension of diversity jurisdiction,” In re Burlington N. Santa Fe Ry. Co., 606 F.3d
379, 381 (7th Cir. 2010), as the source for this court having original jurisdiction.
Under the CAFA, federal courts have jurisdiction over cases in which the amount in
controversy exceeds $5 million, the class contains at least 100 members, and any

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member of a class of plaintiffs is a citizen of a state different from any defendant.
28 U.S.C. § 1332(d)(2)(A), (d)(5)(B). The plaintiff does not take issue with whether
CAFA’s minimal diversity and class size requirements are satisfied, and the
complaint, on its face, does not appear to raise other issues regarding the court’s
subject matter jurisdiction. Instead, the plaintiff makes two arguments related to the
amount in controversy in this matter.
First, Mr. Zhang argues that United Healthcare has not met its burden of
establishing federal jurisdiction because it has made “no effort” to “prove
jurisdictional facts showing the amount in controversy exceeds $5 million” (Pl.’s Br.
at 3), arguing that the defendant needed to provide evidence of the amount in
controversy at the time of removal. However, there is no legal basis for the assertion
that the notice of removal itself has to contain evidence of the jurisdictional amount
in controversy. The removal statute states that the notice of removal need only
“contain . . . a short and plain statement of the grounds for removal.” 28 U.S.C.
§ 1446(a). This language mirrors the pleading standard set forth in Federal Rule of
Civil Procedure 8(a), and courts accordingly apply the same liberal notice pleading
standard to notices of removal. See Charter Sch. of Pine Grove, Inc. v. St. Helena
Parish Sch. Bd., 417 F.3d 444, 447 (5th Cir. 2005) (“notice of removal was sufficient
. . . if it provided the district court with facts from which removal jurisdiction . . . could
be determined.”). Under that standard, so long as the Court is provided with factual
allegations from which removal jurisdiction is plausible, the notice is sufficient. 14C

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Charles Alan W right, Arthur R. Miller, & Edward H. Cooper, F EDERAL P RACTICE AND
P ROCEDURE, § 3733 (3d ed. 2006) (“[T]he better rule is that detailed grounds for
removal need not be set forth in the notice.”). The Seventh Circuit has envisioned
the proponent of federal jurisdiction providing evidence supporting the jurisdictional
facts after the notice of removal has been filed. See Harmon v. OKI Sys., 115 F.3d
477, 479 (7th Cir. 1997) (“It would not be prudent to strictly limit a district court [to the
evidence in the record when removal is sought] . . . [t]he test should simply be
whether the evidence sheds light on the situation which existed when the case was
removed”); see also Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 541-42 (7th
Cir. 2006) (providing a non-exhaustive list of ways a proponent of federal jurisdiction
can estimate the potential amount in controversy, including introducing evidence in
a hearing under Rule 12(b)(1)). Here, the notice of removal has alleged facts from
which it is plausible that more than five million dollars is in controversy (Notice of
Removal ¶¶ 13-18), and the defendant needed to do no more until the allegations
related to jurisdictional facts were contested. McMillian v. Sheraton Chi. Hotel &
Towers, 567 F.3d 839, 844 (7th Cir. 2009) (“W hen the jurisdictional threshold is
uncontested, we generally “will accept the [proponent’s] good faith allegation of the
amount in controversy unless it ‘appear[s] to a legal certainty that the claim is really
for less than the jurisdictional amount.’”) (internal citations omitted).
However, where the opponent of federal jurisdiction challenges the “allegation
of the amount in controversy,” the proponent of federal jurisdiction “must support its

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assertion with competent proof.” Id. (internal citations omitted). In this case, Mr.
Zhang has challenged United Healthcare’s allegation of the amount in controversy
through the motion to remand, see, e.g., No. 09-CV-0777, Spears v. United States
Steel Corp., 2009 U.S. Dist. LEXIS 105369, at *3 (S.D. Ill. Nov. 8, 2009) (noting that
a remand motion functions as a “challenge” to federal jurisdiction), and now the
burden is on the defendant to prove the “jurisdictional facts by a preponderance of
the evidence.” Meridian, 441 F.3d at 543. To satisfy this burden, a party must do
more than “point to the theoretical availability of certain categories of damages.”
Am. Bankers Life Assur. of Florida v. Evans, 319 F.3d 907, 909 (7th Cir. 2003).
However, a “good-faith estimate is acceptable if it is plausible and adequately
supported by the evidence.” Blomberg v. Serv. Corp. Int'l, No. 11-8009, 2011 U.S.
App. LEXIS 7681, at *2 (7th Cir. Ill. Apr. 14, 2011). “The party seeking removal does
not need to establish what damages the plaintiff will recover, but only how much is
in controversy between the parties.” Id. at *3 (emphasis added); Brill v. Countrywide
Home Loans, Inc., 427 F.3d 446 (7th Cir. 2005) (“[T]he removing party’s burden is
to show not only what the stakes of the litigation could be, but also what they are
given the plaintiff's actual demands. . . . [t]he demonstration concerns what the
plaintiff is claiming (and thus the amount in controversy between the parties), not
whether plaintiff is likely to win or be awarded everything he seeks.”). If that party
is thereafter able to establish the jurisdictional facts, remand upon the basis of lack
of subject matter jurisdiction is appropriate only if the district court finds it “legally

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certain” that either “the recovery (from plaintiff's perspective) or cost of complying
with the judgment (from defendant's) will be less than the jurisdictional floor.” LM
Ins. Corp. v. Spaulding Enter., Inc., 533 F.3d 542, 547 (7th Cir. 2008); Back Doctors
Ltd. v. Metro. Prop. & Cas. Ins. Co., No. 11-8003, 2011 U.S. App. LEXIS 6760, at
*10 (7th Cir. Ill. Apr. 1, 2011) (“If [the proponent of federal jurisdiction’s] estimate
exceeds the jurisdictional minimum, it controls and allows removal unless recovery
exceeding the jurisdictional minimum would be legally impossible.”)
Here, the court concludes that the defendant has not met its burden of
providing an estimate supported by the preponderance of the evidence that the
stakes of this litigation exceed five million dollars. In fact, the only evidence the
defendant has provided is an affidavit that indicates the named-plaintiff’s benefits
claim amounted to approximately $6,950. There has been no evidentiary showing
that others who were “forced” to sign the subrogation agreement had even the
slightest potential to sustain similar damages.

The court cannot simply multiply

what the plaintiff’s denied claims are by a thousand, as such a sum would not be
“reliable.” See Amoche v. Guar. Trust Life Ins. Co., 556 F.3d 41, 52 (1st Cir. 2009)
(refusing to multiple the amount in controversy for the named plaintiffs’ claims by the
potential plaintiffs alluded to in the complaint). In fact, in order to receive damages
equal to the benefit claims of Mr. Zhang, the other potential class members would
have had to have been similarly denied insurance claims because those plaintiffs all
decided to “take a stand” and refused to sign a subrogation agreement, a brave task

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for a college student facing thousands of dollars in medical bills. United Healthcare’s
potential exposure with regard to the plaintiffs who merely signed the subrogation
agreement is far more unclear. Moreover, there is no evidence that the class
members – college students, a relatively healthy populace – will have medical bills
even rivaling those of Mr. Zhang. In short, based on the evidence provided to the
court, the court finds that it strains credulity to conclude that this case is a five million
dollar case. All United Healthcare estimated with its affidavit is that the amount in
controversy between Mr. Zhang and the defendant is approximately $6,950, far short
of the jurisdictional minimum under the CAFA.

As the proponent of federal

jurisdiction has not “explained plausibly how the stakes” of this case exceed five
million dollars, Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008), the court
must remand this case to state court.
The defendant cites several cases for the proposition that the defendant can
rely on the allegations in the plaintiff’s complaint and assume such allegations are
true for proving that jurisdiction under the CAFA exists.

The problem for the

defendant is that the plaintiff’s estimate of the class size being in the “thousands” is
not an allegation that the class of thousands will have damages identical to that of
Mr. Zhang.

Instead, the complaint merely makes an allegation that there are

thousands of people who were asked to sign the supposedly illegal subrogation
agreement. (Compl. ¶¶ 9, 11). W hat damages are at stake remain a question mark
until the defendant proffers some estimate supported by any evidence. Id. ¶ 11

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(“The only difference may be the amount of damages sustained . . .”) (emphasis
added). In a situation like this one, where a case has been removed from state court
and the plaintiff has not provided any information about the value of his or her claims
in the complaint, the burden is on the defendant to provide a good-faith estimate of
the stakes that is “supported by a preponderance of the evidence.” Oshana v.
Coca-Cola Co., 472 F.3d 506, 511 (7th Cir. 2006). Here, the court finds that the
defendant has simply not met that rather minimal burden.
There remains an outstanding motion to seal the affidavit and its
accompanying exhibits the defendant provided with its opposition brief. (Docket
#12). United Healthcare argues that “[g]ood cause exists to file under seal because
the documents attached as Exhibit A are Explanation of Benefit forms containing
plaintiff’s protected health information.” (Docket #12 at 1). The defendant does not
cite any reason for sealing the record with regard to the affidavit, and, accordingly,
the court will allow the affidavit to be a part of the public record. Moreover, the court,
having reviewed the exhibits attached to the affidavit, finds no reason to seal the
Exhibit A.

Merely noting that a document contains medical information does not

mean that the information needs to be removed from the public record. Haas v. City
of Milwaukee, No. 05-CV-785, 2009 U.S. Dist. LEXIS 105075, at *1 (E.D. Wis. Oct.
23, 2009). Here, none of the “Explanation of Benefit” forms contain a social security
number or divulge any sort of sensitive information that was not found in the
complaint, which is already within the public’s access. The Seventh Circuit has been

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quite clear in defining the role that the district judge assumes in adjudicating whether
a part of the court record may be sealed or not. A judge cannot merely leave it up
to the parties to “seal whatever you want.” Citizens First Nat'l Bank v. Cincinnati Ins.
Co., 178 F.3d 943, 945 (7th Cir. 1999). Instead, because the judiciary can only
claim its legitimacy through the reasoning of its decisions and the evidence that
supports a given decision, any act that attempts to withdraw “an element of the
judicial process from public view makes the ensuing decision look more like fiat,”
and, as such, requires “rigorous justification.” Hicklin Eng'g, L.C. v. Bartell, 439 F.3d
346, 348 (7th Cir. 2006).

Accordingly, “what happens in the federal courts is

presumptively open to public scrutiny,” id., and the privacy interests of the individual
litigants can only override the public’s interest if the litigants’ interests “predominate”
– that is, “only if there is good cause for sealing a part or the whole of the record in
that case.” Citizens First Nat’l Bank, 178 F.3d at 945. Given the defendant’s failure
to warrant its argument for sealing the record, and given the centrality of the
document in question to this order, the court will deny the motion to seal.1
Accordingly,
IT IS ORDERED that the plaintiff’s motion to remand to the W isconsin Circuit
Court for Milwaukee County pursuant to 28 U.S.C. § 1447(c) (Docket #9) be and the
same is hereby GRANTED;

1

For whatever reason, the affidavit was not filed on CM/ECF. This was in error and will be
rectified shortly, with the full affidavit and record appearing on the electronic docket. In the future,
the parties need to comply with the procedure set out in General L.R. 79 for sealing of court
documents.

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IT IS FURTHER ORDERED that the defendant’s motion to seal (Docket #12)
be and the same is hereby DENIED.
The clerk of the court is directed to take all necessary steps to effectuate this
remand.
Dated at Milwaukee, W isconsin, this 22nd day of April, 2011.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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