Calingo v. Meridian Resources Co., LLC, 7:11-cv-628 (VB), 2011 WL 3611319 (S.D.N.Y. Aug. 16, 2011).
In this case, a District Court New York held that the local controversy exception is not jurisdictional, and the application of the exception is waived by a failure to be raised in a timely manner.
The plaintiffs, Rogelio Calingo and Georgiana Calingo, brought this class action alleging that the defendants, Empire HealthChoice Assurance and Meridian Resource Company, improperly asked them to reimburse Empire or another benefit provider from the proceeds of their recovery for their personal injuries.
The plaintiff, Rogelio, was a federal employee and participant in Federal Employee Health Benefit Plan. Accordingly, both Rogelio and the plaintiff, Georgiana — a dependant of Rogelio, were insured with defendant, Empire.
In February 2009, Georgiana fell in the Palisades Mall in West Nyack, New York, and as a result of her fall, she suffered injuries that were paid for by Empire. Georgiana recovered $382,000 as part of a settlement for the injuries that she suffered.
The defendant, Meridian, is a subroger of Empire and has asserted subrogation claims seeking reimbursement for the cost of health care services that Empire provided to its New York insureds who suffered personal injury and settled actions for personal injuries, etc. Meridian and Empire asserted a lien against Georgiana for $143,378.60 based on her recovery, but have not collected on it.
This action arises because of a change in New York law that affects plaintiffs and the class members. N.Y. Gen. Oblig. Law § 5-335 states that “except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider.”
In this action, the plaintiffs challenged how this provision is affected by the Federal Employees Health Benefits Act, 5 U.S.C. §§ 8901-8914, which provides health benefits for federal employees and their dependants. FEHBA provides that the terms of any contract under 5 U.S.C. §§ 8901-8914, which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any state or local law, or any regulation issued thereunder, which relates to health insurance or plans.
The defendants removed this action from the state court, and the plaintiffs moved to remand.
The District Court denied the plaintiffs’ motion.
The plaintiffs argued that the Court lacked jurisdiction under CAFA’s local controversy exception, 28 U.S.C. § 1332(d)(4)(A). The Court, thus, noted that the success of the plaintiffs’ argument turned on whether CAFA’s exceptions were jurisdictional as plaintiffs’ motion was filed more than 30 days after the notice of removal was filed.
The Court noted that under 28 U.S.C. § 1447(c), a party seeking remand of an action for any reason except subject matter jurisdiction must move to remand within 30 days of the filing of the notice of removal. A motion seeking remand for lack of subject matter jurisdiction, on the other hand, may be asserted at any time. The plaintiffs filed their motion to remand 87 days after removal. Therefore, the Court stated that the plaintiffs’ motion was only timely if CAFA’s exceptions divested the Court of subject matter jurisdiction.
The Court observed that the courts that have addressed this issue have concluded the local controversy exception to CAFA jurisdiction does not deprive the district court of subject matter jurisdiction over the case. Specifically, the introductory language to the local controversy exception states the court “shall decline to exercise jurisdiction” when the factors are met. It follows that even where the local controversy exceptions are present, subject matter jurisdiction is present, but the district court may not hear the matter, assuming a timely motion to remand is filed.
The Court noted that the Eighth Circuit, in Graphic Communs. Local 1B Health & Welfare Fund “A” v. CVS Caremark Corp., 636 F.3d 971, 973 (8th Cir. 2011) has previously found that the local controversy exception does not deprive the district court of subject matter jurisdiction in light of the fact that the exception is set apart from the grant of jurisdiction under CAFA. The local controversy exception operates akin to an abstention principle, which is not a matter of subject matter jurisdiction. (Editors’ Note: See the CAFA Law Blog analysis of Graphic Communs posted on May 2, 2011.)
Further, the Court observed that if the local controversy exception was jurisdictional, courts would be required to consider it no matter when asserted and would be required to address it sua sponte if appropriate. Courts, however, have not done so, disregarding it when not properly asserted. “Because the dog did not bark in these cases, the courts possessed subject matter jurisdiction even if the factors under § 1332(d)(4) were present,” the Court remarked.
The Eighth Circuit in Graphic Communs. found that § 1447(c)’s 30 day deadline did not apply to remand under CAFA because it did not read the local controversy provision as a “defect” under § 1447(c). Instead, the Eighth Circuit held a motion to remand must be filed within a “reasonable” time period after removal. Nonetheless, it recognized that the reasonable time could be as short as 30 days. Here, the plaintiffs filed their motion to remand 87 days after removal, which the Court believed unreasonable in absence of an argument regarding the reason for the delay.
Because the motion was untimely, the Court denied the plaintiffs’ motion to remand.