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McAteer v. DCH Regional Medical Center

United States District Court, N.D. Alabama, Southern Division

February 26, 2018

MITCHELL McATEER, on behalf of himself and all others similarly situated, Plaintiff,
v.
DCH REGIONAL MEDICAL CENTER, et al., Defendants.

          MEMORANDUM OPINION

          MADELINE HUGHES HAIKALA, UNITED STATES DISTRICT JUDGE

         In this putative class action, plaintiff Mitchell McAteer alleges that defendants DCH Regional Medical Center, DCH Health Systems, and Avectus Healthcare Solutions, LLC improperly billed DCH patients and tried to collect payments to which the defendants were not entitled.[1] Mr. McAteer asserts state law claims against DCH and Avectus for tortious interference with a contractual relationship or business expectancy, unjust enrichment, money paid by mistake, civil conspiracy, breach of contract (third party beneficiary), and violations of the Alabama Deceptive Trade Practices Act. (Doc. 1, pp. 10-13).

         Mr. McAteer contends that he may litigate his state law claims in federal court pursuant to the Class Action Fairness Act or CAFA. See 28 U.S.C. § 1332(d). The defendants acknowledge that CAFA provides a basis for federal jurisdiction, but they argue that the local controversy and home state exceptions to CAFA apply, so that the Court must “decline to exercise jurisdiction.” 28 U.S.C. § 1332(d)(4). Pursuant to Federal Rule of Civil Procedure 12(b)(6), the defendants ask the Court to dismiss this action. (Docs. 10, 12).[2]

         For the reasons explained below, the Court agrees that CAFA provides a basis for federal jurisdiction. The Court finds that CAFA's local controversy exception does not apply. Based on the face of the complaint, the Court cannot determine whether it should decline to exercise jurisdiction under CAFA's home state exception. Therefore, the Court gives the parties an opportunity to engage in limited jurisdictional discovery to enable the Court to more fully examine the parties' arguments with respect to the home state exception.

         I. Standard of Review

         Rule 12(b)(6) enables a defendant to move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When evaluating a Rule 12(b)(6) motion to dismiss, a district court accepts as true the allegations in the complaint and construes the allegations in the light most favorable to the plaintiff. See Brophy v. Jiangbo Pharms. Inc., 781 F.3d 1296, 1301 (11th Cir. 2015). The Court reviews Mr. McAteer's factual allegations accordingly.

         II. CAFA Jurisdiction Exists.

         Pursuant to 28 U.S.C. § 1332(d)(2)(A), “CAFA grants subject matter jurisdiction to federal district courts over class actions in which (1) any member of the plaintiff class is a citizen of a state different from the state of citizenship of any defendant, (2) the aggregate amount in controversy exceeds $5 million, and (3) the proposed plaintiff class contains at least 100 members.” S. Fla. Wellness, Inc. v. Allstate Ins. Co., 745 F.3d 1312, 1315 (11th Cir. 2014). Mr. McAteer's putative class action meets the three criteria for federal jurisdiction under § 1332(d).

         With respect to the issue of citizenship, Mr. McAteer is a citizen of Alabama because he is domiciled in Alabama. (Doc. 30-1, ¶ 2). Avectus, a limited liability company, is a citizen of every state of which each of its members is a citizen. Rolling Greens MHP, L.P. v. Comcast SCH Holdings, L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004). Avectus is a citizen of Delaware, Kentucky, and Mississippi. (Doc. 30-2, ¶¶ 4-5; Doc. 35, p. 1).[3] Thus, a member of the plaintiff class is a citizen of a state different from the state of citizenship of one of the defendants. With respect to class size and amount in controversy, Mr. McAteer alleges that the class consists of at least 100 members and that more than $5, 000, 000 is in controversy. (See Doc. 1, ¶¶ 9, 41). The defendants do not challenge these allegations; the Court accepts them as true. Therefore, the Court may exercise jurisdiction over Mr. McAteer's state law claims pursuant to CAFA.

         Although a federal district court may have CAFA jurisdiction, a court may not exercise CAFA jurisdiction “if either the local controversy exception or the home state exception applies.” Hunter v. City of Montgomery, Ala., 859 F.3d 1329, 1335 (11th Cir. 2017). In this case, the defendants contend that both exceptions require the Court to decline to exercise its jurisdiction. As the parties seeking dismissal based on CAFA's exceptions, the defendants “bear the burden of showing that at least one of the exceptions does apply.” Hunter, 859 F.3d at 1335.

         III. CAFA's Local Controversy Exception

         CAFA's local controversy exception provides:

         A district court shall decline to exercise jurisdiction under paragraph (2)-(A)(i) over a class action in which-(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;

(II) at least 1 defendant is a defendant-
(aa) from whom significant relief is sought by members of the plaintiff class;
(bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and
(cc) who is a citizen of the State in which the action was originally filed; and
(III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed; and
(ii) during the 3-year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons;

28 U.S.C. § 1332(d)(4)(A). Thus, the local controversy exception has four elements: (1) citizenship of the plaintiff class; (2) significant defendant; (3) principal injuries; and (4) similar class actions. The defendants can establish all but the fourth element of the local controversy exception.

         It is undisputed that the plaintiffs filed this action in Alabama. (Doc. 1). With respect to the citizenship of the members of the plaintiff class, the defendants argue, and Mr. McAteer does not dispute, that more than two-thirds of the members of the proposed plaintiff class are Alabama residents. (Doc. 10, pp. 3-4; Doc. 19, p. 4, n.3). The Court agrees: by definition, the proposed plaintiff class consists of Alabama residents. (See Doc. 1, ¶ 40(a)) (defining the class as “[a]ll Alabama residents. . .”).[4] But for purposes of subject matter jurisdiction, residency is not synonymous with citizenship. Travaglio v. Am. Exp. Co., 735 F.3d 1266, 1269 (11th Cir. 2013). A private individual is a citizen of the state in which he or she is domiciled. Domicile requires both residence in a state and an intention to remain there indefinitely. Travaglio, 735 F.3d at 1269.

         The proposed plaintiff class may include members who reside in Alabama but are not citizens of Alabama. For example, the proposed class of Alabama residents may include college students who are domiciled in another state but live in Alabama, individuals who have moved to Alabama for a period of time to care for a sick family member or for a job with a finite term and who intend to return to their states of domicile, and members of the armed services who are domiciled in other states but reside in Alabama. Nevertheless, the Court reasonably concludes that the number of individuals who fall into these or similar categories is small. Therefore, the Court finds that more than two-thirds of the members of the plaintiff class are Alabama citizens.

         For purposes of the local controversy exception, the DCH defendants are significant defendants. The DCH defendants are citizens of Alabama. (Doc. 30-2, ¶ 2).[5] Although CAFA does not define “significant relief” or “significant basis, ” in Evans v. Walter Indus., Inc., 449 F.3d 1159 (11th Cir. 2006), the Eleventh Circuit explained that the party seeking to invoke the local controversy exception must show that the relief that the plaintiff seeks from a local defendant is “a significant portion of the entire relief sought by the class.” 499 F.3d at 1167. A straightforward reading of the allegations in the complaint demonstrates that DCH's conduct forms a significant basis for the claims and that the plaintiff class seeks significant relief from DCH. (Doc. 1, ¶¶ 3.a, 3.b; Doc. 1, ¶¶ 10-38).

         According to Mr. McAteer, DCH “wrongfully sent improper collection notices and collected payments for medical services in amounts that violate” various agreements, including the terms of a service provider contract that DCH entered with Blue Cross and Blue Shield of Alabama and the terms of the general consent for treatment that Mr. McAteer and the class members entered with DCH. (Doc. 1, ¶ 3.a.). Mr. McAteer alleges that DCH breached its duty as attorney-in-fact to him “by seeking reimbursement from [him] beyond the contractually agreed amounts due for medical services provided.” (Doc. 1, ¶ 3.b.). To qualify as a class member, an individual must have received treatment at DCH. (Doc. 1, ¶ 40.a.). Mr. McAteer seeks “actual damages, punitive damages, penalties, ” and other remedies from DCH. (Doc. 1, ¶ 100.c.). Mr. McAteer also seeks a declaration that DCH violated Alabama law, and, as a result, has been unjustly enriched. (Doc. 1, ¶¶ 100.b., 100.d.). In addition, Mr. McAteer seeks to enjoin DCH's unlawful billing practices. (Doc. 1, ¶ 100.g.). Thus, DCH is a significant defendant.

         Because more than two-thirds of the members of the plaintiff class are Alabama citizens from whom the defendants allegedly wrongfully sought reimbursement for medical care that the putative class members received at DCH facilities in Alabama, the members of the putative plaintiff class incurred the principal injuries resulting from the defendants' alleged conduct in Alabama.

         Thus, this action satisfies the first three elements of the local controversy exception to CAFA jurisdiction.

         But the Court does not have to decline to exercise jurisdiction over this matter pursuant to the local controversy exception to CAFA jurisdiction because the defendants cannot demonstrate that during the 3-year period before Mr. McAteer filed his complaint, “no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons.” 28 U.S.C. § 1332(d)(4)(A)(ii). The defendants concede that in the three years before Mr. McAteer filed his complaint, plaintiffs filed two class actions concerning DCH's billing practices in Tuscaloosa County, Alabama Circuit Court. (Doc. 10, p. 6) (citing Laura Tucker v. DCH, Case Number 63-CV-2016-900254, and Shalonda King v. DCH, Case Number 64-CV-2016-900377). These two class actions in Tuscaloosa County Circuit Court involve state law claims against DCH. (See Doc. 2 in Case 63-CV-2016-900254; Doc. 2 in Case Number 63-CV-2016-900377).[6]

         With respect to the two Tuscaloosa County class actions, the defendants argue that because there is no basis for federal subject matter jurisdiction in either case, the class actions do not qualify as “other class actions” for purposes of the local controversy exception because the “Judicial Panel on Multidistrict Litigation would not be able to coordinate or consolidate these actions in any way.” (Doc. 10, p. 6). In support of their argument, the defendants rely on the portion of the Senate Judiciary Committee's report on CAFA which explains part of the rationale for the “other class action” element of the local controversy exception. The report states:

The Committee wishes to stress that another purpose of this criterion is to ensure that overlapping or competing class actions or class actions making similar factual allegations against the same defendant that would benefit from coordination are not excluded from federal court by the Local Controversy Exception and thus placed ...

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