Stewart v Ruston Louisiana Hosp Co., LLC., 2014 WL 1246139 (W.D. La. Mar. 25, 2014).

A district court in Louisiana refused to entertain a motion to remand based on the local controversy exception finding that plaintiffs’ assertions are insufficient to meet the strict burden to establish that over two-thirds of the prospective plaintiffs were citizens of Louisiana.

The plaintiffs, individually and on behalf of their minor child, brought a putative class action for damages, breach of contract, declaratory judgment, and for injunctive relief against the defendant Northern Medical Center (“NLMC”) in the Third Judicial District Court, Parish of Lincoln, State of Louisiana.

The plaintiffs, who were insured under a Blue Cross Blue Shield of Texas health insurance policy, received medical care at NLMC for injuries sustained in an automobile accident. The plaintiffs contended that NLMC hired third party collection agencies to refuse acceptance of the patients’ health insurance and/or payment by the plaintiffs’ health insurer as full payment, and to collect directly or indirectly from the enrollees or insureds, by filing liens/privileges, which constituted actions at law, against the plaintiffs and members of the class.

The plaintiffs subsequently, amended their original petition to include claims against Community Health Systems Inc. (“CHS”), Professional Account Services Inc. (“PASI”), Women & Children’s Hospital of Delaware LLC (dba Women & Children’s Hospital of Lake Charles) (“W & C”), National Healthcare of Leesville Inc. (dba Byrd Regional Hospital) (“Byrd”), and Community Health Systems Professional Services Corporation (“CHSP”). The plaintiffs alleged that CHS was the parent company of NLMC, W & C, CHSP, and Byrd, and that CHS required those subsidiaries to follow certain policies regarding billing of patient accounts and filing actions at law. PASI, according to plaintiffs, was a CHS subsidiary, and a collection agency for NLMC, W & C, CHSP, and Byrd. The defendants removed the case to federal court pursuant to CAFA, and the plaintiffs sought remand to the state court.

At the very outset, the district court observed that consistent with the Louisiana law prohibiting plaintiffs from pleading specific amounts of monetary damages, the plaintiffs did not set forth damages with any specificity. The plaintiffs, however, contended that defendants failed to show that the amount-in-controversy exceeded the jurisdictional threshold. The petition merely stated that the defendants were liable to the plaintiffs for repayment of the entirety of amounts collected by them for all wrongful payments, for mental anguish, worry and concern etc.

The district court noted that although the defendants did not prove that the un-qualified damages, the unknown number of proposed class members, made it facially apparent that the amount-in-controversy exceeded $5 million. Additionally, the district court noted that the declaration produced by the defendants, and the plaintiffs’ claims for damages and the attorneys’ fees, proved by a preponderance of the evidence that the jurisdictional threshold was met.

The plaintiffs argued that even though the defendants’ proffered declaration stated that the defendants collected over $10 million through third-party liens, the declaration did not delineate how much of that sum was collected from members of the prospective class. The district court observed that even though the exact percentage of the $10 million attributable to the putative class was somewhat ambiguous, it was likely that a significant percentage exceeded $5 million CAFA threshold. Moreover, the sums collected on behalf of NLMC, W & C, and Byrd only dated as way back as to January 2000. Accordingly, the district court concluded that it would be reasonable to conclude the plaintiffs’ claims would far exceed the jurisdictional threshold.

The plaintiffs then invoked the “local controversy” exception in an attempt to thwart the federal jurisdiction. The district court remarked that here, the plaintiffs were required to first prove by a preponderance of the evidence that greater than two-thirds of the prospective class members were citizens of Louisiana at the time the Petition was filed. The plaintiffs argued that the nature of the claims asserted and the location of the defendant hospitals (Ruston, Leesville, and Lake Charles, Louisiana) strongly indicated that more than two thirds of the plaintiffs reside in Louisiana. In fact, the plaintiffs contended that common sense alone lead to the conclusion that two thirds of such patients would be from Louisiana.

The district court noted that the plaintiffs proffered little evidence in support of their common sense argument. They attached an affidavit which attests to the citizenship of a prospective class in a separate class action involving a different defendant hospital and a different proposed class of plaintiffs. The district court noted that in determining diversity jurisdiction, the state where someone establishes his domicile serves a dual function as his state of citizenship.

The district court observed that in Williams v. Homeland Ins. Co. of N.Y., 657 F.3d 287, 290 (5th Cir.2011), a plaintiff brought a class action in a Louisiana district court on behalf of a class of Louisiana medical providers. The Fifth Circuit found that the following evidence sufficed to establish that well over two-thirds of the prospective class were domiciled in Louisiana at the petition’s filing: a list of all the defendants’ contracted-with-providers that fell within the class definition; Federal Tax–ID numbers of a potential class of providers; data from the Louisiana Secretary of State’s public records database; an affidavit showing Louisiana mailing addresses; and a deposition of one defendant averring that all of the defendant’s contracted providers were located in Louisiana.

The district court noted that a number of courts in the Fifth Circuit have held that the two-thirds requirement was met even when presented with arguably less evidence than that presented in Williams. However, the key in those decisions was that the plaintiffs specifically defined the proposed class to include only persons or entities that resided in the local state. Those courts acknowledged that when a proposed class is discretely confined to the local state, courts can utilize a common sense presumption in determining whether the citizenship requirement has been met.

The district court observed that indicators of a person’s citizenship are often a matter of public record easily accessed by attorneys and investigators. As master of the complaint with the creative license for defining the putative class, the plaintiffs are in the best position to establish citizenship and produce probative evidence. Despite the logistical challenges of offering reliable evidence at this preliminary jurisdictional stage, CAFA does not permit the courts to make a citizenship determination based on a record bare of any evidence showing class members’ intent to be domiciled in Louisiana.

Here, the district court observed that the plaintiffs failed to provide sufficient evidence to demonstrate that greater than two-thirds of the prospective class members were citizens of Louisiana when the plaintiffs filed the Petition. Unlike in Williams, Plaintiffs have not submitted a list of the proposed class members, tax identification numbers, data from the Louisiana Secretary of State’s public records database, affidavits showing Louisiana mailing addresses, or any other like evidence that might indicate that over two-thirds of the proposed class were domiciled in Louisiana at the time the Petition was filed.

The district court concluded that the plaintiffs failed to satisfy the preponderance of evidence standard, and therefore, the local controversy exception was not applicable. Accordingly, the district court retained jurisdiction over the action. –JR