Prime Care of Northeast Kansas, LLC v. Humana Ins. Co., No. 06-3024, (10th Cir. May 12, 2006).

When we last left Dorothy and Toto, the couple had just suffered a critical defeat in the form of a remand order at the hands of the Wizard, Judge Kathryn H. Vratil of the U. S. District Court of Kansas. (Editors’ Note:  See the CAFA Law Blog analysis of Prime Care of Northeast Kansas, LLC v. Blue Cross and Blue Shield of Kansas City, Inc. posted on April 27, 2006). Claiming federal jurisdiction under CAFA, the various insurance companies (to which we, using our poetic license, collectively referred as “Dorothy and Toto”) had attempted to remove this class action filed against them by physicians in Kansas state court, alleging price fixing and conspiracy to monopolize. However, Judge Vratil determined that the post-CAFA amendments to the complaint did not commence a new case and the defendants could not remove the action under CAFA.  But Dorothy, unsatisfied, shipped Toto back to Kansas and decided to appeal the Wizard’s conclusion to yet a higher authority – the Tenth Circuit Court of Appeals.

In an attempt to shed the negative aura of the remand loss, Dorothy had recently applied a bottle of hair bleach to her brunette curls to chase away the bad luck and memories of her struggles with the Wizard.  As everyone knows, blondes do have more fun – and perhaps a better track record in front of Circuit Courts of Appeals. (We have no empirical evidence to back that up, just life experience). Ready to fight a new battle, the now Marilyn Monroe-esque Dorothy skipped down the yellow brick road of the appeals process towards the Tenth Circuit.  However, she grew tired and began to look around for a nice place to catch a nap, and just then, she noticed a little log cabin nestled in a patch of woods. She approached the door, and after knocking and knocking, and receiving no answer, she found the door unlocked, and pushed her way inside.  Discovering that no one was at home, she noticed a document laying on a table, and sat down in one of three chairs neatly lined up, and began to read.

The document the flaxen-haired Dorothy, who some may refer to as Goldilocks, stumbled upon was drafted by none other than “The Three Bears” (Circuit Judges Briscoe, McKay, and Brorby), in which they addressed the issue of “whether CAFA permits the removal of a class action filed before the Act’s effective date if the removing defendant was first added by amendment after the effective date.” After reviewing the facts and noting that Humana was added to the complaint for the first time on April 22, 2005, Judge Briscoe began his analysis with a review of the cases addressing this issue, stating: “In the short time since CAFA’s passage, courts have adopted at least three distinct positions on the issue of commencement-by-amendment for purposes of removal under the Act.”  Judge Briscoe broke the positions down into what one might characterize as “too hot,” “too cold,” and “just right.”

Too Hot: Judge Briscoe noted that a few courts, “like the district court here, insist that a ‘civil action’ can ‘commence’ only once and, thus, take the absolute position that if an action was commenced prior to CAFA’s effective date, no post-CAFA amendment of the pleadings can bring the Act into play.” The court cited the Eastern District of Arkansas’s approach in Weekley as an example of this position which generally relies on the lack of text in CAFA saying the statute would apply to cases amended after the action commenced. Judge Briscoe discounted this position by referencing the Fifth Circuit’s opinion in Braud, in which the Fifth Circuit stated, “[p]recisely because CAFA does not define ‘commencement’ of an action, it is obvious that CAFA is not intended to replace case law deciding when a lawsuit is considered ‘commenced’ as to a new defendant.” (Editors’ Note:  See the CAFA Law Blog analysis of Weekley posted on October 6, 2005 and the CAFA Law Blog analysis of Braud posted on May 24, 2006).

Too Cold: Judge Briscoe then observed that other courts hold that “whether an amendment is distinct enough to give rise to a new commencement date” under a state’s relation back of pleadings laws is the proper test to perform, but does not apply the relation back analysis to the addition of new defendants. These courts hold that the addition of a defendant after CAFA became law automatically commences a new case under the U.S. Supreme Court case of U.S. v. Martinez, 195 U.S. 469, 473 (1904). The Fifth Circuit’s opinion in Braud and the Seventh Circuit’s opinions in Schillinger and Knudsen are cited as examples of this approach. (Editors’ Note:  See the CAFA Law Blog analysis of Schillinger posted on October 24, 2005 and the CAFA Law Blog analysis of Knudsen posted on January 30, 2006).

After using language from Braud to attack the “too hot” position, Judge Briscoe attempted to demonstrate why the conclusion by the Braud court missed the mark. Agreeing that Congress is presumed to enact legislation with knowledge of the law in its current state, Judge Briscoe argued that Braud failed to acknowledge the development of the law in the pleading amendment context. Under this current law, and more importantly, under Kansas state law, “an amendment adding a defendant does not necessarily commence a new action as to that defendant.” The court also addressed another justification for this approach by drawing a careful distinction between a substantive right to remove, as provided if CAFA’s requisites are satisfied, and a procedural opportunity to remove provided by 28 U.S.C. §1446(b). Judge Briscoe explained that just because a defendant is provided 30 days to remove after being added to a case, this “merely raises the question of whether CAFA is applicable to the case at that time, it does not answer it.”

Just Right: This court decided that the middle view was the approach that was “just right.”  Siding with the Eighth Circuit in Plubell v. Merck & Co., the 10th Circuit decided a relation-back analysis according to state law should be conducted for all amendments, “no distinction being made for amendments adding new defendants.” (Editors’ Note:  See the CAFA Law Blog analysis of Plubell posted on January 25, 2006). The court declined to apply its chosen analysis, instead deciding to remand the case back to the district court with instructions to follow the “just right” approach.  Looks like we may see Goldilocks/Dorothy again.