THOMAS F. HOGAN, District Judge.
These proceedings arise from the D.C. Circuit's remand of this action on jurisdictional grounds. On appeal, Defendants challenged, for the first time, the only basis for subject matter jurisdiction over the action — diversity jurisdiction. Defendants were able to demonstrate that at least one plaintiff was not diverse to all of the defendants. Because the pleadings lacked jurisdictional allegations for most of the plaintiffs in this case, the D.C. Circuit remanded the matter for a determination of: (1) the citizenship of plaintiffs for whom the pleadings lacked citizenship allegations and (2) whether — in order to preserve
This Court has already answered the latter question in the affirmative. See Order, June 1, 2012 [Dkt. No. 1028]. Heretofore unresolved is the citizenship inquiry. Following the remand Plaintiffs submitted jurisdictional allegations for the allegedly diverse plaintiffs whose citizenship had not yet been plead and moved to dismiss nondiverse plaintiffs. After carefully considering Plaintiffs' motion and the oppositions and replies thereto; the oral arguments before the Court; and the entire record of this case, the Court denies Plaintiffs' motion without prejudice.
The Court assumes familiarity with this case's long and complex factual background and procedural history and so here will dispense with a detailed recounting.
Prior to trial, a dispute arose over the propriety of permitting the named plaintiffs to sue on behalf of their self-funded customers. In an order dated March 2, 2005, 2005 WL 6202342, this Court concluded the named plaintiffs "lack[ed] authority to bring claims on behalf of their self-funded customers." Id. However, the Court permitted the name plaintiffs to proceed under Fed.R.Civ.P. 17(a)(3) by seeking ratification from the self-funded customers to prosecute the claims in their name. Five of the approximately 1,400 self-funded customers opted out of ratification. The remaining claims proceeded to trial. Following a jury trial, judgment was entered for Plaintiffs in the amount of $76,823,943. Defendants appealed.
Days prior to oral argument on Defendants' appeal, Defendants alleged jurisdictional infirmities. They argued that the Court lacked subject matter jurisdiction because at least one self-funded customer shared a state of citizenship with a defendant. The Circuit rejected Plaintiffs' argument that the Court had supplemental jurisdiction over the self-funded customers' claims. As the real parties of interest to the ratified claims, the Circuit further concluded, the "self-funded customers must be counted as parties for diversity of citizenship purposes." In re Lorazepam, 631 F.3d 537, 540 (D.C.Cir.2011). Because the pleadings in this matter lacked citizenship allegations for the self-funded customers, the case was remanded to this Court for an inquiry into the citizenship of the self-funded customers and a determination of
Through an order dated June 1, 2012, this Court concluded nondiverse self-funded customers could be dismissed under Rule 21 and denied Defendants' motion to dismiss this case for lack of subject matter jurisdiction.
The D.C. Circuit remanded this case, in part, for a determination of whether the nondiverse self-funded customers could be dismissed from the action under Rule 21. Defendants argue the self-funded customers are "necessary" and "indispensable" parties to this action under Federal Rule of Civil Procedure 19 ("Rule 19") and, therefore, no self-funded customer may be dismissed under Rule 21. The Court disagrees.
Rule 21 provides, inter alia, "[o]n motion or on its own, the court may at any time, on just terms, add or drop a party..." FED.R.CIV.P. 21. "This Rule allows the district court to dismiss so called `jurisdictional spoilers' — parties whose presence in the litigation destroys jurisdiction — if those parties are not indispensable and there would be no prejudice to the parties." In re Lorazepam, 631 F.3d at 542 (citing Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830-32, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989)). "[I]t is well settled that Rule 21 invests district courts with authority to allow a dispensable nondiverse party to be dropped at any time, even after judgment has been rendered." Newman-Green, 490 U.S. at 832, 109 S.Ct. 2218.
However, a court may not dismiss under Rule 21 an otherwise indispensable party under Rule 19. See In re Lorazepam, 631 F.3d at 542; CP Solutions PTE, Ltd. v. GE, 553 F.3d 156, 159 (2d Cir.2009) ("Federal Rule of Civil Procedure 21 allows a court to drop a nondiverse party at any time to preserve diversity jurisdiction, provided the nondiverse party is not `indispensable' under Rule 19(b)"). Before the court determines whether a party is "indispensable" under Rule 19(b), it must first determine under Rule 19(a) whether the party is "necessary" to the action. See Kickapoo Tribe of Indians v. Babbitt, 43 F.3d 1491, 1494-95 (D.C.Cir.1995).
Fed.R.Civ.P. 19(a).
If joinder of a "necessary" party is infeasible, "the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." Fed. R.Civ.P. 19(b); see also Kickapoo, 43 F.3d at 1494. Factors to consider include: (1) "the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties;" (2) "the extent to which any prejudice could be lessened by protective provisions in the judgment, shaping relief, or other means;" (3) "whether a judgment rendered in the person's absence would be adequate; and" (4) "whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder." FED.R.CIV.P. 19(b); see also Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 109-13, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968). "This is a fact-specific inquiry that `can only be determined in the context of particular litigation.'" Primax Recoveries, Inc. v. Lee, 260 F.Supp.2d 43, 51 (D.D.C. 2003) (citing and quoting in part Provident, 390 U.S. at 118, 88 S.Ct. 733); Kickapoo, 43 F.3d at 1495 ("[t]he rule calls for a pragmatic decision based on practical considerations in the context of particular litigation"). With these principles in mind, the Court turns to the parties' arguments.
Before reaching the indispensability analysis under Rule 19(b), the Court seriously doubts the self-funded customers are necessary parties to the litigation under Rule 19(a). To begin with, complete relief can be accorded in the absence of the self-funded customers. See FED.R.CIV.P. 19(a)(1)(A). Each of the plaintiff health insurance companies and the self-funded customers suffered discrete, particularized, damages to the extent that they paid artificially inflated prices as a result of exclusive licensing agreements entered into by Defendants. In the words of Defendants, "[t]he losses in this case are strictly economic and were calculated by reference to thousands of specific identifiable pharmaceutical reimbursement transactions." Defs.' Reply in Support of Defs.' Mot. for Remittitur at 4 [Dkt. No. 905]. Were any or all of the self-funded customers excluded from this action, the Court would still be in a position to afford complete relief to the remaining parties.
Next, assuming arguendo each self-funded customer has an interest relating to the subject of this action, disposition of the case in their absence neither impedes their ability to protect that interest nor "leave[s] an existing party subject to substantial risk of incurring double, multiple or otherwise
Moreover, it is inaccurate for Defendants to argue disposing of this action in the absence of any or all of the self-funded customers would subject Defendants to the risk of incongruous obligations. "`Inconsistent obligations' are not ... the same as inconsistent adjudications or results." Delgado v. Plaza Las Ams., 139 F.3d 1, 3 (1st Cir.1998) (citations omitted); see also Cachil Dehe Band of Wintun Indians v. California, 547 F.3d 962, 976 (9th Cir.2008). The mere possibility dismissed self-funded customers may choose to sue Defendants for distinct damages they have suffered does not implicate the concerns associated with inconsistent obligations. See Delgado, 139 F.3d at 3 ("... inconsistent obligations occur when a party is unable to comply with one court's order without breaching another court's order concerning the same incident ... [i]nconsistent adjudications or results, by contrast, occur when a defendant successfully defends a claim in one forum, yet loses on another claim arising from the same incident in another forum."); see also 4 James Wm. Moore et al., MOORE'S FEDERAL PRACTICE-CIVIL § 19.03[4][d] (3d. ed.2012) (distinguishing between inconsistent adjudications and inconsistent obligations). Inconsistent adjudications do not implicate the prejudice concerns subsection (a)(b)(ii) endeavors to protect. See Delgado, 139 F.3d at 3.
Assuming the self-funded customers are "necessary" parties, they are not indispensable. Joinder of nondiverse self-funded customers is not feasible as their presence would strip this Court of subject matter jurisdiction. See Provident, 390 U.S. at 108-109, 88 S.Ct. 733. Considerations of "equity and good conscience" dictate this action proceed to a resolution on the merits in the absence of the nondiverse self-funded customers.
To begin with, no compelling argument has been presented to show that either the dismissed self-funded customers or Defendants would suffer meaningful prejudice were this action to proceed in the absence of any or all of the self-funded customers. The Court has already concluded the exclusion of non-diverse self-funded customers from this action would not "impair or impede" their interest in claims they may have against Defendants. See Provident, 390 U.S. at 110, 88 S.Ct. 733 (likening prejudice inquiry under Rule 19(b) to 19(a) inquiry). Defendants, argue the characterization of the self-funded customers as the "real parties of interest" in this case makes them inherently indispensable. This argument misses the point. The self-funded customers are the "real parties of interest" with respect to their own damages claims against Defendants and not with respect to the named plaintiff insurance companies or other self-funded customers' claims. Thus, this is not a case where a party to the action is asking the Court to rule on the rights of an absent party. See Kickapoo Tribe of Okla. v.
Defendants' conduct prior to this remand undermines their present position that equity and good conscience counsel dismissal. Certainly, Defendants do not here seek to protect excluded self-funded customers from the prejudice of judgment in their absence; indeed, Defendants sought and were granted dismissal of the self-funded customers prior to trial. See Defs.' Mot. in Limine to Preclude Claims on Behalf of Self-Funded Customers [Dkt. No. 680].
Finally, the Court considers efficiency — a particularly forceful consideration at this stage of litigation. See Caterpillar Inc. v. Lewis, 519 U.S. 61, 76, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996) (noting after a final judgment, "considerations of finality, efficiency, and economy become overwhelming"). Efficiency concerns would be different were this litigation in an earlier phase. However, after over a decade of litigation culminating in a trial and judgment, Plaintiffs have "a strong additional interest in preserving [their] judgment." Provident, 390 U.S. at 110, 88 S.Ct. 733. Likewise, from the court and public's perspective, "the fact that time and expense of a trial have already been spent" heavily weigh in favor of proceeding in the absence of nondiverse self-funded customers. See id. at 111, 88 S.Ct. 733.
The Court concludes the self-funded customers are not indispensable parties to this action under Rule 19 and, therefore, may be dismissed pursuant to Rule 21. Moreover, the Court rejects Defendants' argument that the contours of Rule 21 itself preclude the dismissal of what ultimately amounts to hundreds of nondiverse self-funded customers. Nothing in Rule 21 supports such a limitation nor do Defendants offer legal precedent in support of the proposition.
The Court rejects as fatally belated Defendants' assertions that the Circuit's remand necessitates further choice of law analysis. See CSX Transp. v. Commercial Union Ins. Co., 82 F.3d 478, 482-83 (D.C.Cir.1996) (noting choice of law argument may be waived). Defendants effectively concede this argument was raised for the first time on appeal. See Defs.' Reply at 10 n. 5. They cite In re Air Crash Disaster at Washington, DC, 559 F.Supp. 333 (D.D.C.1983), for the appreciable proposition that a choice of law argument cannot be waived prior to the particular
Regardless of the parties' perceived basis for the court's jurisdiction over the self-funded customers at trial — whether diversity or supplemental jurisdiction — the choice of law question was firmly implicated well before the appeals proceedings. See Mastro v. Potomac Elec. Power Co., 447 F.3d 843, 857 (D.C.Cir.2006) (noting choice of law analysis implicated "when [federal court] deciding state-law claims under diversity or supplemental jurisdiction..."). Defendants may not use the Circuit's remand as a chance to advance an argument they could have, but chose not to make.
Following the Circuit's remand of this matter, Plaintiffs undertook an investigation into the citizenship — for diversity jurisdiction purposes — of the approximately 1,400 self-funded customers in this case. At the conclusion of their investigation Plaintiffs requested the dismissal of both nondiverse self-funded customers and those whose citizenship could not be determined. Pls.' Mot. to Dismiss at 22.
"Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute..." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (citations omitted). 28 U.S.C. § 1332 confers original jurisdiction to district courts over civil actions in which the amount in controversy exceeds $75,000 and diversity of citizenship exits. See id. Diversity of citizenship requires no two parties on opposing sides of an action share states of citizenship. See Caterpillar Inc., 519 U.S. at 68, 117 S.Ct. 467; Saadeh v. Farouki, 107 F.3d 52, 55 (D.C.Cir.1997).
"[T]he party seeking the exercise of diversity jurisdiction bears the burden of pleading the citizenship of each and every party to the action." Loughlin v. United States, 393 F.3d 155, 171 (D.C.Cir. 2004) (quoting Naartex Consulting Corp. v. Watt, 722 F.2d 779, 792 (D.C.Cir.1983)). "When challenged on allegations of jurisdictional facts, [the party asserting jurisdiction] must support their allegations by competent proof." Hertz Corp. v. Friend, 559 U.S. 77, 130 S.Ct. 1181, 1194-1195, 175 L.Ed.2d 1029 (2010) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135
Here, rather than factually contravening Plaintiffs' jurisdictional allegations or raising an issue of fact, Defendants simply argue Plaintiffs have not met their burden of establishing jurisdiction with competent proof. See Defs.' Mot. to Dismiss at 8.
The Court's obligation to ensure jurisdiction becomes particularly manifest where, as here, Plaintiffs have altered their jurisdictional allegations no less than three times in a year. For example, Plaintiffs originally moved to dismiss self-funded customers Pilgrim's Pride Corporation and Occidental Petroleum Corporation as nondiverse parties. See Zimmerman Decl., Ex. HC-C. Plaintiffs subsequently alleged those two self-funded customers were in fact diverse. See Pls.' Reply at 30. Then, in a final brief on the issue, Plaintiffs reversed course once again asserting Pilgrim's Pride and Occidental were nondiverse. See Pls.' Mot. to Dismiss Claims and for Remittitur at 6. In other words, Plaintiffs altered the jurisdictional allegations for these particular self-funded customers with almost every subsequent brief on the issue.
The Court appreciates Plaintiffs' good faith efforts to resolve this jurisdictional question. Were the inquiry limited to the facial sufficiency of Plaintiffs' jurisdictional allegations the Court could find no fault. See Macharia v. United States, 238 F.Supp.2d 13, 19 (D.D.C.2002) (noting that upon a "facial challenge" "a court must accept all of the complaint's well-pleaded allegations as true and draw all reasonable inferences from those allegations in the plaintiffs' favor"). Plaintiffs have adequately alleged the necessary underlying facts to establish. But the concern here is jurisdiction in fact, which requires proof of those alleged facts. The presumption against jurisdiction, see Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673, combined with the peculiar procedural history of this action and Plaintiffs' equivocal post-remand briefing on this issue dictate the Court
Ordinarily, analysis of the Court's subject matter jurisdiction would begin with allegations contained in the pleadings. Here however the pleadings are devoid of jurisdictional allegations for the self-funded customers. Therefore the Court turns to the parties' post-remand briefs on the issue. See District of Columbia ex rel. Am. Combustion v. Transamerica, 797 F.2d 1041, 1044 (D.C.Cir.1986) ("[28 U.S.C. § ] 1653's liberal amendment rule permits a party who has not proved, or even alleged, that diversity exists to amend his pleadings even as late as appeal"). The self-funded customers for whom Plaintiffs allege diversity jurisdiction fall into one of two general categories: corporate self-funded customers and municipal self-funded customers. The Court assesses the proof tendered to support the jurisdictional allegations for self-funded customers falling into each of these categories in turn.
For diversity jurisdiction purposes, corporations are citizens of the state or states in which they are incorporated and the state of its principal place of business. See Novak v. Capital Mgmt. & Dev. Corp., 452 F.3d 902, 906-907 (D.C.Cir.2006); 28 U.S.C. § 1332(c). In order to establish the state of incorporation — at the time the original complaint was filed — for corporate self-funded customers, Plaintiffs rely on corporate filings stored online in public records maintained by state Secretaries of State. See Krein Decl. ¶¶ 3-5, 7-9; Zimmerman Decl. ¶ 8.
The proffer by Plaintiffs to establish the principal place of business for the self-funded customers is another matter altogether. The "principal place of business" is the place where "a corporation's officers direct, control, and coordinate the corporation's activities." Hertz, 130 S.Ct. at 1192. To support the alleged principal place of business for most
The Court finds the records to be insufficient proof of the principal place of business. See Hertz, 130 S.Ct. at 1195 ("the mere filing of a form ... listing a corporation's "principal executive offices" would,
To establish the principal place of business for BCBS-MN, HCSC and some BCBS-MA corporate self-funded customers, Plaintiffs rely on affirmations from the self-funded customers. See Gilde Decl. ¶¶ 4-5; Zimmerman Decl. ¶ 8; Walker Decl. ¶ 3. Each affirmation consists of a boilerplate paragraph which asks "an appropriate individual" to designate:
See, e.g., Zimmerman Decl., Ex. A. The Court cannot accept these affirmations as competent proof of the principal place of business. First, the unsworn affirmations establish no basis of knowledge for the attesters. See, e.g., Schira v. Sit, 2010 U.S. Dist. LEXIS 40987, *4 (W.D.Wis. Apr. 27, 2010) (rejecting affidavit supporting jurisdictional allegations, in part, because affidavit failed to establish affiant had "personal knowledge" of the matter); Martinez v. Morgan Stanley & Co., 2010 WL 3123175, at *3, 2010 U.S. Dist. LEXIS 80797, at *7-8 (Aug. 9, 2010) ("because ... [the] declaration regarding Morgan Stanley & Co. Incorporated's principal place of business lacks foundation, it is insufficient..."). Furthermore, the affirmations offer conclusory allegations which recite the "nerve center" test without providing predicate facts to support those allegations. See Heck Yea! Quarter Horses, LLC v. Renfrow Supply, 2012 WL 1556310, *4, 2012 U.S. Dist. LEXIS 61224, *11-12 (S.D.Miss. May 2, 2012) (requiring more proof when principal place of business allegation relied on "affidavit stating that the corporation's `high level officers direct, control and coordinate the corporation's activities from within the State of Florida' and its `principal place of business is the State of Florida'").
Next, a number of the self-funded customers are characterized as "cities, towns, school districts or organizations of these political subdivisions".
Under the terms set forth below, the Court will permit a brief period of discovery on this issue alone. See Diamond Chem. Co. v. Atofina Chems., Inc., 268 F.Supp.2d 1, 15 (D.D.C.2003) (noting Circuit's liberal standard for permitting jurisdictional discovery); Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C.Cir.2000) ("[t]he district court retains considerable latitude in devising the procedures it will follow to ferret out the facts pertinent to jurisdiction ..." (internal quotations and citation omitted)).
The Court issues the following briefing and discovery schedule pertaining to Plaintiffs' jurisdictional allegations and Defendants' challenges thereto:
The Court appreciates the fact that this additional phase of litigation may be time consuming and costly. However, it was
An appropriate order accompanies this memorandum opinion.
Pending before the Court are Plaintiffs' Motion to Dismiss Claims and for Remittitur [Dkt. No. 1006]; Plaintiffs' Supplemental Motion to Dismiss Claims and for Remittitur [Dkt. No. 1014]; Plaintiffs' Second Supplemental Motion to Dismiss Claims and for Remittitur [Dkt. No. 1016] and Plaintiffs' Motion to Dismiss Claims and for Remittitur [Dkt. No. 1030] ("collectively Plaintiffs' motions to dismiss claims").
After carefully considering the motions and the oppositions and replies thereto, the oral arguments before the Court and the entire record of this case and for the reasons set forth in the accompanying Memorandum Opinion it hereby is