Bemis v. Allied Property & Cas. Ins. Co., No.: 05-cv-751, 2006 WL 1064067 (S.D. Ill. Apr. 20, 2006).

Defendants in this case were hoping CAFA would deliver them from the defendant-engulfing fires of the Circuit Court of Madison County, Illinois, where they faced a class action filed in 2004, alleging improper reduction of medical bills for services provided by licensed medical providers. Allied and the other defendant insurance companies (none of which were known by the acronym of “AC/DC”) made a break for higher ground when the plaintiffs amended their complaint to add a new plaintiff/class representative in September 2005, prompting Allied to remove the action to the federal district court for the Southern District of Illinois. Apparently, penitence had not been paid as David, District Judge David R. Herndon that is, stopped them at the gates, and sent them down the infamous highway.

Beginning a rigid adherence to Seventh Circuit precedent, (as was the theme of the case) the district court only briefly mentioned the burden of proof issue surrounding CAFA, and cited Brill v. Countrywide (Editors’ Note: See the CAFA Law Blog summary of Brill posted on November 2, 2005), for the proposition that the removing party bears the burden of establishing federal jurisdiction, at least in the Seventh Circuit. Judge Herndon did not address whether a complete diversity burden of proof analysis may be altered under a minimal diversity analysis. Thus, the defendants were the beasts of burden in this instance.

After the plaintiffs filed their motion for remand and the defendants replied, the Seventh Circuit issued two rulings that drastically affected Judge Herndon’s commencement analysis: Knudsen v. Liberty Mutual Ins. Co., 435 F.3d 755 (7th Cir. 2006) (Knudsen II) (Editors’ Note: See the CAFA Law Blog summary on Knudsen II posted on January 30, 2006) and Phillips v. Ford Motor Co., 435 F.3d 785 (7th Cir. 2006) (Editors’ Note: See the CAFA Law Blog summary on Phillips posted on February 6, 2006).

Representing opposite sides of the highway, the Seventh Circuit’s cases provided a sort of “commencement Bible” for the district court to follow. In Knudsen II, the plaintiffs were trying to condemn the sole defendant by amending their complaint with a wider class definition and a host of new claims the defendant had not faced the first time around. Phillips (where the Seventh Circuit considered two cases on appeal) dealt with more or less routine amendments that did not trigger a new action, such as naming new class members to replace those whose claims were time-barred. Thus, attempting to discern the straight and narrow, the district court compared the present facts with the controlling precedent. The court reasoned that here, unlike the amendment in Knudsen II, the added plaintiff fit squarely within the pre-CAFA class definition. Moreover, the addition of the plaintiff did not broaden the defendants’ scope of liability similar to the facts of Phillips. Therefore, the amendment was determined to be nothing more than a routine amendment simply naming a previously unnamed defendant – insufficient to commence a new action. (Editors’ Note: Don’t forget to bring a coin to tip Charon so that he will take you across the river Styx.)

Sending this case back to a warmer locale, Judge Herndon reasoned the new plaintiff riding shotgun did not trigger a new action under CAFA since the new party’s claims were originally asserted against the defendants. Even though the plaintiffs’ post-CAFA amendment added a new party, the crux of the claims centered on improperly reduced medical bills, which was the real issue in dispute, the court concluded. Further, the new plaintiff “fit within the original class definition,” so the defendant could not claim they were facing an assault on a new front. The plaintiffs also argued defendant Nationwide was traveling light, as there was no way it was hauling CAFA’s requisite $5 million amount-in-controversy. However, the $5 million dollar question was tossed aside once the court decided the amended complaint did not commence a new action for CAFA purposes.

As one last gasp, Nationwide pleaded with the court that it was not the parent company of one of the other named defendants during a key period at issue in the case, and that the new plaintiff was covered under policies issued by a different entity. The court did not see things that way, saying that Nationwide could see these claims coming, and that adding this previously unnamed party was simply a “routine amendment.” Thus, Allied and friends will likely be sweating it out in Illinois state court for the remainder of the case.