Roche v. Country Mutual Ins. Co., No. 07-367-GPM, 2007 WL 2003092 (S.D. Ill. July 6, 2007).
Jojo is a loner after all. In this case, the Southern District of Illinois sent Jojo home and remanded a class action removed under CAFA. The remand was based on the theory that mandatory joinder required the addition of an additional defendant, a company whose citizenship would create diversity, but because it lacked subject matter jurisdiction over the matter, the case was sent back to state court (which was not located in Tucson, Arizona.) It was undisputed that both named parties were non-diverse and that the proposed class included only non-diverse members, so the sole issue was whether the diverse party was required to be joined.
The court answered the question of whether mandatory joinder could be used to create minimal diversity with a resounding “no” and sent the defendant packing. As it remanded the case to state court, the Southern District chided the defendant for removing the case, noting it was “strongly inclined” to hold the removal was objectively unreasonable and to award attorneys’ fees and costs. However, because objective unreasonableness is established only by controlling authority and the court could not find any binding decisions on whether mandatory joinder could be used to create minimal diversity for CAFA removal, it reluctantly found it could not so hold.
Why did the court find the removal “fairly frivolous?” In short, because it determined the plaintiff (who was not named Sweet Loretta Martin) clearly restricted the claims and the class to avoid it becoming an interstate action. In this case, Roche, a chiropractor, filed her class action complaint asserting that Country Mutual Insurance Company wrongfully reduced payments to her and other similarly-situated health care providers by engaging in a “silent PPO scheme” through which it would pay discounted rates similar to those negotiated under preferred provider organization agreements, even though no such agreement was in place between Country and the class claimants. She asserted that through its silent PPO scheme, Country accessed the administrator of her PPO network’s list of providers and discount schedules and then used them to discount claims for reimbursement by class members in return for remitting a percentage of those amounts to the plan administrator, Corvel Corporation. Her claims included violation of the Illinois Consumer Fraud & Deceptive Business Practices Act, fraud, unjust enrichment, and civil conspiracy.
Rejecting Country’s argument that minimal diversity existed because Corvel (a citizen of Delaware and California) must be joined as a defendant, the court found that Corvell was neither required to be joined as a real party in interest nor under F.R.C.P. 19. While acknowledging that Corvel would be an appropriate party to the suit, the court found no authority requiring joinder of all real parties in interest to a suit. Similarly, the court determined that, with respect to Rule 19, Corvel was merely a permissive party to the action, not a necessary one.
The court also flatly dismissed Country’s theory that Corvell must be joined because the claims at issue were contractual in nature and, therefore, triggered the rule requiring joinder of contracting parties because no contractual relationship existed between Country and Roche. Country argued that Roche’s claims against it were “bootstrapped” from her contract with Corvel and that, without a contract between Roche and Country, it was under no duty to refrain from using Corvel’s information to discount its payments. It argued that, therefore, absent a showing that Roche’s contract with Corvel established such a duty, she could not prove a claim against Country. However, the court found this argument “disingenuous.” Thus, the court concluded that the case belonged firmly in state court because it involved only citizens of a single state and the case was tailored to avoid minimal diversity of citizenship.