WILLIAM D. QUARLES, JR., District Judge.
Feldman's Medical Center Pharmacy, Inc. ("Feldman's") and Pharmacy Management Associates, LLC ("PMA") (collectively, the "Plaintiffs") sued CareFirst, Inc. ("CareFirst") and others (collectively, the "Defendants")
The Defendants are health insurers. See Am. Compl. ¶¶ 3-6, 76. The Association is a national federation that licenses 39 locally operated Blue Cross and Blue Shield companies, including CareFirst, a Maryland corporation, and Independence, a Pennsylvania corporation. Id. ¶¶ 4-6, 76.
Feldman's is a Maryland corporation. Am. Compl. ¶ 1. In the 1970s, it began operating a retail pharmacy that dispensed specialty drugs. Id. ¶¶ 1, 35, 69.
Before dispensing factor drugs to CareFirst patients, Feldman's "checked the patients' benefits" and "received [an oral] pre-certification for the prescription from CareFirst." Am. Compl. ¶ 315. Feldman's began "submitting [reimbursement] claims for relatively large numbers of hemophilia patients" as its "business grew substantially in a short ... time." Id. ¶ 71, 128.
Sometime after PMA acquired Feldman's, CareFirst stopped paying the pharmacy's reimbursement claims.
On February 6, 2008, Sneed coordinated a conference call for medical directors of the Association's licensees. Am. Compl. ¶ 154. Before the conference call, Sneed distributed a memorandum about "whether it was possible to establish coverage and/or payment restrictions on [f]actor drugs due to the high cost of such drugs." Id. On February 12, 2008, Sneed asked all Association licensees for "data relating to the amount of payments made to pharmacies dispensing [synthetic factor]." Id. ¶ 157. The request "specifically excluded patients who received factor[s] from large, national[,] or institutional providers." Id.
CareFirst "regularly" told other Association licensees and law enforcement officials that Feldman's was committing fraud. Am. Compl. ¶ 186. The Food and Drug Administration (the "FDA") investigated allegations by the Association and its licensees that Feldman's was "dispensing more [f]actor medicine than a patient needed" and diverting it to a gray market
On February 20, 2008, the FDA closed its investigation after finding "no evidence
On March 13, 2008, CareFirst's pharmacy director, Winston Wong, told CareFirst's antifraud investigators that the company "had not found any real problems with Feldman's." Am. Compl. ¶ 160.
In April 2008, the National Health Care Antifraud Association hosted its annual pharmacy conference, where an agent with the Federal Bureau of Investigation ("FBI") asked anyone "dealing with hemophiliacs to contact him." Am. Compl. ¶ 162. Hanson, CareFirst's investigator, attended the conference and contacted the FBI agent. Id. "[T]he FBI was not impressed with [Hanson's] information," and "never pursued a formal investigation of Feldman's." Id. ¶ 163.
On June 2, 2008, Independence asked Feldman's for "information and documents," and thereafter stopped paying Feldman's claims. Am. Compl. ¶ 108.
On June 19, 2008, CareFirst "officially" opened an investigation of Feldman's. Am. Compl. ¶ 164. CareFirst, Independence, and the Association interviewed "numerous" Feldman's employees and patients, and advised patients to "consider a switch" to pharmacy services operated by CareFirst's pharmacy benefit managers. Id. ¶¶ 261, 263.
On June 26, 2008, CareFirst investigators conducted an on-site audit of Feldman's. Am. Compl. ¶ 169. Although the audit revealed no wrongdoing, CareFirst put a "hold" on all claims for reimbursement. Id. ¶ 170. CareFirst did not inform Feldman's of the hold, but advised other Association licensees not to pay Feldman's. Id. ¶¶ 177, 319. On "numerous occasions," CareFirst told Independence that it was denying claims because Feldman's had "improper licensure." Id. ¶ 178.
On August 21, 2008, CareFirst refused to renew its contract with Feldman's because it lacked a Residential Service Agency license (an "RSA license"). Am. Compl. ¶ 233. An RSA license is required under Maryland law to provide health care services in a patient's home. See id. ¶ 219. On August 22, 2008, a PMA employee emailed CareFirst to explain that Feldman's did not provide services in patients' homes and, thus, did not require an RSA license. Id. ¶ 234. CareFirst continued to give Feldman's precertification for factor medicine claims, but denied reimbursement claims. See id. ¶¶ 240, 317-18.
On October 6, 2008, Hanson sent an email to CareFirst colleagues about Sneed "talking to FDA and FBI agents in Texas [about] a possible diversion case." Am. Compl. ¶ 198. On October 29, 2008, representatives of Sneed, CareFirst, and Independence attended a strike force meeting in Pennsylvania. Id. ¶ 82.
On December 11, 2008, Feldman's obtained an RSA license because of "CareFirst's insistence," but CareFirst continued to deny reimbursement claims. Am. Compl. ¶¶ 236-37, 240.
On March 25, 2009, Hanson wrote a memo to Stacy Breiden-stein, CareFirst's associate director of network management, requesting that CareFirst investigators "be included in the decision whether to extend a new contract to Feldman's." Am. Compl. ¶ 214. Hanson cited "`possible diversion' as the reason for the scrutiny." Id.
On April 30, 2009, Hanson told Sneed in an email that "CareFirst had decided not to offer Feldman's a new contract and ... was just looking for the strongest ex post justification for its denial." Am. Compl. ¶ 215.
After PMA acquired Feldman's, accounts receivable "ballooned" from $430,000 to more than $3 million. Am. Compl. ¶ 252. In March 2009, Feldman's "began to wind down its business." Am. Compl. ¶ 72. On April 16, 2009, Hanson told other Association licensees during a conference call that Feldman's was "a problem company." Am. Compl. ¶¶ 304-05.
By July 2009, accounts receivable at Feldman's had grown to $3.95 million, and Feldman's defaulted on its bank loans. Am. Compl. ¶ 252. On August 7, 2009, Hanson told an investigator with the Association's Louisiana licensee that Feldman's had filed for bankruptcy. Am. Compl. ¶¶ 187, 188, 302. It had not. Am. Compl. ¶ 302.
On December 17, 2009, PMA sold Feldman's assets "at fire sale prices." Am. Compl. ¶¶ 55, 145, 253.
On June 1, 2009, Feldman's sued CareFirst in the Circuit Court for Baltimore County
On June 29, 2010, the Court found that any "assignment-based claims [were] completely preempted by ERISA," and denied Feldman's motion to remand. 723 F.Supp.2d at 815, 821. Specifically, the Court held that a healthcare provider "may acquire derivative standing under ERISA by obtaining a written assignment from a participant or beneficiary of his right to payment of medical benefits." Id. at 819. The Court further found that the "only theory of recovery under the assignments" — the wrongful denial of benefits — "directly implicate[d] ERISA," and would require the Court to interpret ERISA plans. Id. at 820-21.
After the motion to remand was denied, the parties consented to proceed before U.S. Magistrate Judge Susan K. Gauvey. Feldman's Med. Ctr. Pharmacy, Inc. v. CareFirst, Inc., 823 F.Supp.2d 307, 309-10 (D.Md.2011). On March 4, 2011, Feldman's moved for summary judgment, seeking: (1) judgment on Counts One through Three for non-payment of invoices, in the amount of $109,989.32; (2) interest on the unpaid contributions, in the amount of $886,483.93; and (3) attorneys' fees and costs. Id. at 310. Feldman's asserted entitlement to prejudgment interest under Md.Code Ann., Insur. § 15-1005 (the "Maryland Prompt Pay Statute") or, alternatively, under ERISA § 502. Id. CareFirst opposed Feldman's motion for summary judgment and moved for partial summary judgment on Feldman's claims for reimbursement and prejudgment interest under the Maryland Prompt Pay Statute. Id.
Judge Gauvey resolved the summary judgment motions in a November 9, 2011 memorandum opinion and order. Because CareFirst had already paid $1,547,054.87 in satisfaction of Feldman's claims for reimbursement, as well as $23,017 in interest,
On December 12, 2011, Feldman's moved for more than $1 million in attorneys' fees under 29 U.S.C. § 1132(g)(1).
Assuming that the catalyst theory did apply, and that Feldman's could meet the threshold Hardt standard, Judge Gauvey concluded that fees were inappropriate under Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017 (4th Cir.1993) (en banc). See 898 F.Supp.2d at 899, 907.
After considering the remaining four Quesinberry factors, others of which "weighted] on the side of CareFirst," Judge Gauvey concluded that the case was not so "unusual" as to compel an award under ERISA. See 898 F.Supp.2d at 910-11.
On December 29, 2011 — after the motions for summary judgment were resolved in Feldman's I, but before Feldman's motion for attorneys' fees and costs in that case had been fully briefed — the Plaintiffs filed suit against the Defendants in the Circuit Court for Baltimore City. Feldman's Med. Ctr. Pharmacy, Inc. v. CareFirst, Inc., No. 24-C-11-008977, 2011 WL 6936973 (Cir.Ct. for Bait. City, filed Dec. 29, 2011). On January 18, 2012, the Plaintiffs filed an amended complaint, alleging that the Defendants had "participated in a scheme" to
Am. Compl. 2.
On February 24, 2012, Independence and QCC removed the lawsuit to this Court, arguing that "all or part of the purported state law claims" were preempted by ERISA. Feldman's Med. Ctr. Pharmacy, Inc. v. CareFirst, Inc., 902 F.Supp.2d 771, 779 (D.Md.2012). On October 5, 2012, the Court granted the Plaintiffs' motion to remand. Id. at 783. The Court held, inter alia, that because the Plaintiffs were not suing as assignees or participants of an ERISA plan, or to enforce a remedy under ERISA § 502, ERISA complete preemption did not apply. Id. at 783.
On October 31, 2012, the Association removed the lawsuit — again — to this Court. ECF No. 1, Notice of Removal.
On November 7, 2012, the Defendants moved to dismiss. ECF Nos. 7, 12, 13. On January 4, 2013, the Plaintiffs timely opposed the motions to dismiss. ECF No. 37. Also on January 4, the Plaintiffs moved to remand and for attorneys' fees and costs. ECF No. 38. On February 1, 2013, the Plaintiffs moved for sanctions.
The Plaintiffs argue that the Court lacks subject matter jurisdiction — and must remand the case — because the parties are not diverse. See generally ECF No. 38 ¶¶ 13-14.
Under 28 U.S.C. § 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant ... to the district court of the United States for the district and division embracing the place where such action is pending." The district courts have original jurisdiction of, inter alia, "all civil actions where the matter in controversy exceeds ... $75,000, exclusive of interest and costs, and is between ... citizens of different States." § 1332(a)(1).
To remove a case, the defendant must file a notice of removal in the district court within 30 days after receiving the initial pleading, or within 30 days after the defendant receives a copy of a paper from which it is first evident that the case is removable. 28 U.S.C. § 1446(a)-(b). All defendants must join in or consent to the removal. Id. § 1446(b)(2)(A). The removing party has the burden of proving subject matter jurisdiction. Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 260 (4th Cir.2005). Because removal raises "significant federalism concerns," the removal statutes must be strictly construed, and all doubts must be resolved in favor of remanding the case to state court. Id. (internal quotation marks omitted).
The fraudulent joinder doctrine is an exception to the complete diversity requirement.
That a complaint would not survive a defendant's motion to dismiss under Fed.R.Civ.P. 12(b)(6) does not mean that that defendant has been fraudulently joined: the standard is more favorable than the 12(b)(6) standard. Id. at 424. If there is any possibility of recovery, the defendant has not been fraudulently joined. Id. The Court may "consider the entire record," not only the complaint, to "determine the basis of joinder by any means available." AIDS Counseling & Testing Ctrs. v. Grp. W Television, Inc., 903 F.2d 1000, 1004 (4th Cir.1990) (internal quotation marks omitted). But, it may not act as a factfinder or "delv[e] too far into the merits in deciding a jurisdictional question." Hartley, 187 F.3d at 425.
The Defendants argue that the Plaintiffs are collaterally estopped from asserting their claims against CareFirst because, in denying Feldman's request for attorneys' fees in Feldman's I, Judge Gauvey's September 28 order "found" that CareFirst had not acted culpably or in bad faith in its business dealings with Feldman's, and CareFirst's culpability is the "predicate factual issue underlying CareFirst's alleged liability to [the] Plaintiffs" in this case. ECF No. 45 at 1, 8-14. The Defendants conclude that CareFirst was fraudulently joined as a defendant, and, accordingly, its Maryland citizenship does not defeat diversity jurisdiction. See id. at 1, 14, 10-11. The Plaintiffs object that the Defendants "cannot establish" the "most basic requirement of collateral estoppel — that the issues that act as a bar to this action were already litigated and determined in a prior proceeding." ECF No. 38-1 at 7.
As an initial matter, the Defendants cite no authority for the proposition that collateral estoppel may be asserted as a basis for fraudulent joinder. Because a court may not act as a factfinder in deciding a jurisdictional question, Hartley, 187 F.3d at 425, "affirmative defenses reaching the merits of a case should generally not provide the basis for a finding of fraudulent joinder." Vincent v. First Republic Bank Inc., No. C 10-01212 WHA, 2010 WL 1980223, at *4 (N.D.Cal. May 17, 2010). Application of the doctrine seems particularly inapt here, given that the purportedly preclusive decision in Feldman's I was rendered months after the plaintiff filed suit in the present action. Indeed, of the few cases in which a defendant asserted improper joinder based on estoppel issues, the potentially preclusive decision appeared long before — not during — litigation of the federal case.
Assuming that their collateral estoppel defense is properly before the Court, the Defendants have failed to establish that the defense bars the Plaintiffs' claims against CareFirst. Under Maryland law,
Wash. Suburban Sanitary Comm'n v. TKU Assocs., 281 Md. 1, 376 A.2d 505, 514 (1977). To establish the second element, the estoppel proponent must show that the relevant issue was "actually litigated and determined by a valid and final judgment," and that the determination was "essential to the judgment." Colandrea v. Wilde Lake Community Ass'n, Inc., 361 Md. 371, 761 A.2d 899, 907 (2000) (emphasis added) (internal quotation marks omitted).
Assuming that CareFirst's bad faith and culpability in Feldman's I is identical to the issues presented in this case, Judge Gauvey's determination that CareFirst was not culpable was not essential to her decision to deny Feldman's attorneys' fees. Rather, the decision was guided by her examination of four additional factors, including, inter alia, that the case did not resolve any significant legal question, but rather was brought by Feldman's for its own benefit. 898 F.Supp.2d at 910. She concluded, "[f]or all the reasons stated," that the case was not so "unusual" as to "compel[] an award under the governing law." Id. at 911 (emphasis added).
Finally, even if the collateral estoppel doctrine were properly before the Court — which it is not — and applied to the Plaintiffs' claims against CareFirst — which it does not — the Defendants' argument would fail for the additional reason that it is — according to the Defendants — equally applicable to Independence, QCC, and the Association, under the theory of non-mutual defensive collateral estoppel. ECF No. 12 at 12; ECF No. 13-1 at 7.
Under the "common defenses" rule, which was established by the Fifth Circuit
Id. at 574.
As explained above, a decision is preclusive if: (1) the issue decided is identical to the one presented in the action in question; (2) the prior adjudication was a final judgment on the merits; (3) the party against whom the plea is asserted is a party or in privity with a party to the prior adjudication; and (4) the party against whom the plea is asserted had a fair opportunity
According to the Defendants, Judge Gauvey's September 28 order in Feldman's I collaterally estops the Plaintiffs from succeeding on their claims against CareFirst in this case: intentional interference with economic relations; defamation; fraud and fraudulent misrepresentation; unfair competition; conspiracy; and violation of the Maryland Antitrust Act, Md.Code Ann., Com. Law § 11-204(a)(1). Am. Compl. ¶¶ 275-354. With the exception of the claim for fraud and fraudulent misrepresentation, which is asserted against CareFirst alone, each of the claims is asserted against CareFirst and one or more co-defendants. See generally Am. Compl. The Association licenses CareFirst and Independence; Independence owns QCC. Am. Compl. ¶¶ 4-6, 76. All the Defendants participated in the alleged pattern of fraud and defamation. See generally id. Thus, assuming that CareFirst's culpability is the "predicate factual issue underlying CareFirst's alleged liability to [the] Plaintiffs,"
In the absence of outright fraud by the Plaintiffs, CareFirst bears the burden of demonstrating that there is no possibility of recovery against it. Hartley, 187 F.3d at 424 (4th Cir.1999). For the reasons stated above, the Defendants have failed to carry this burden.
CareFirst — like Feldman's — is a Maryland corporation. Am. Compl. ¶¶ 1, 3. Because there is not complete diversity, this Court lacks diversity jurisdiction. See Cent. W. Va. Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir.2011). For the reasons stated in this Court's October 5, 2012 remand opinion, no other basis for federal jurisdiction is present. 902 F.Supp.2d at 783. Thus, the motion to remand will be granted.
Under 28 U.S.C. § 1447(c), the Court may require "payment of just costs and any actual expenses, including attorney[s'] fees, incurred as a result of the removal." The Court should award attorneys' fees and costs "only whe[n] the removing party lacked an objectively reasonable basis for seeking removal." Martin v. Franklin Capital Corp., 546 U.S. 132, 141, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005). 28 U.S.C. § 1927 permits sanctions against attorneys who "multipl[y] the proceedings... unreasonably and vexatiously."
The Plaintiffs seek attorneys' fees and costs incurred in opposing removal and the Defendants' motions to dismiss. ECF No. 38 at 1, 7. The Defendants argue that the complexity of the issues raised by their attempted removal counsel against granting attorneys' fees. ECF No. 45 at 16-17.
The Plaintiffs seek sanctions against the Defendants on the basis that removal was improper, the Defendants assert "frivolous" arguments in their motions to dismiss,
Under Federal Rule of Civil Procedure 11(b), an attorney certifies to the court that to the best of his "knowledge, information, and belief" formed after a reasonable inquiry: (1) the action is not being presented for an improper purpose, (2) the legal contentions are warranted, (3) the facts alleged have or will have evidentiary support, and (4) denials of facts are based on evidence or lack of knowledge. See Fed.R.Civ.P. 11(b). "[I]mproper purpose may be inferred from a claim's lack of factual or legal foundation or other factors such as the timing of filing of the complaint." Giganti v. Gen-X Strategies, Inc., 222 F.R.D. 299, 313 (E.D.Va.2004) (citing In re Kunstler, 914 F.2d 505, 518 (4th Cir.1990)). Rule 11(c) allows attorneys and parties to be sanctioned for Part (b) violations.
As discussed above, the Defendants' second removal of this action — although ultimately unsuccessful — does not appear to have been frivolous or undertaken in bad faith. See supra Part II.A.3. The Plaintiffs' motion for sanctions will be denied.
For the reasons stated above, the Plaintiffs' motion to remand will be granted, their motion for sanctions will be denied, and the action — and all other pending motions — will be remanded to the Circuit Court for Baltimore City.
For the reasons discussed in the accompanying Memorandum Opinion, it is, this 6th day of August, 2013, ORDERED that:
1. The Plaintiffs' motion to remand (ECF No. 38) BE, and HEREBY IS, GRANTED;
2. The Plaintiffs' motion for sanctions (ECF No. 42) BE, and HEREBY IS, DENIED;
3. This case, including all unresolved motions, BE, and HEREBY IS, REMANDED TO THE CIRCUIT COURT FOR BALTIMORE CITY;
4. The Clerk of the Court shall CLOSE this case; and
Although the Fourth Circuit has not had occasion to address the common defenses rule, another judge in this District has recognized its sense. See McGinty v. Player, 396 F.Supp.2d 593, 601 (D.Md.2005); Riverdale Baptist Church v. Certainteed Corp., 349 F.Supp.2d 943, 951-952 (D.Md.2004).
