Opinion
CIVIL NO. 03-00271 DAE-LEK
September 9, 2003
FINDINGS AND RECOMMENDATIONS GRANTING MOTION TO REMAND COMPLAINT
On May 30, 2003, Defendant Hawaii Medical Service Association ("Defendant" or "HMSA") filed a Notice of Removal in the United States District Court for the District of Hawaii. On June 6, 2003, Plaintiff Norman Goldstein, M.D. ("Plaintiff") filed the instant Motion to Remand and For Costs On Ground of Lack of Jurisdiction ("Motion to Remand"). Defendant filed a Memorandum in Opposition on July 7, 2003. Plaintiff filed a Reply on July 21, 2003.
On June 9, 2003, Chief United States District Judge David Alan Ezra referred the motion to this Court pursuant to 28 U.S.C. § 636 (b)(1)(B) and Local Rules ("LR") 72.4. Further, pursuant to LR 7.2(d), the Court finds this matter suitable for disposition without a hearing. Upon due consideration, this Court FINDS and RECOMMENDS that Plaintiff's Motion to Remand be GRANTED IN PART and DENIED IN PART.
BACKGROUND
Plaintiff is a "participating physician" with Defendant and their relationship has and continues to be governed by a Participating Physician Agreement ("PPA"). Plaintiff and Defendant renewed their contractual agreement with an amended PPA, which became effective on February 1, 2003. The PPA requires arbitration to be conducted according to the Federal Arbitration Act, 9 U.S.C. § 1 et seq., ("FAA"). (PPA ¶ 8.3.) The PPA also states that if the parties are unable to reach an accord when choosing an arbitrator then "either party may apply to the United States District Court for the District of Hawaii for appointment of an arbitrator." (Id.)
On March 29, 2002 Defendant demanded a refund of $178, 181.60 from Plaintiff for alleged false claims for services rendered to HMSA members between 1997 and 2001. Plaintiff objected to the refund demand and requested a review by a committee of his peers as provided for under section 8.1 of the PPA. While Defendant agreed to select a Review Committee, Plaintiff was precluded from participating in the selection of that committee. On May 8, 2003, a hearing on Plaintiff's appeals was held before the Review Committee, over Plaintiff's objections. Plaintiff did not attend the proceeding. The Review Committee issued a decision determining Defendant's entitlement to reimbursement on May 15, 2003. (Ex. 4 to Pl.'s Mot.)
On May 8, 2003, Plaintiff filed a Motion to Compel Arbitration ("Motion to Compel") against Defendant in the First Circuit Court for the State of Hawaii. The Motion to Compel seeks to compel arbitration pursuant to Chapter 658A, Hawaii Revised Statutes, Rules 1 and 81, Hawaii Rules of Civil Procedure, and Rule 32, Rules of the Circuit Court of Hawaii.
On May 30, 2003, Defendant removed the action to this Court. Defendant claims removal is appropriate because the PPA, which is "subject to Hawai'i State arbitration law raises issues of Federal preemption and Federal supremacy under the United States Constitution." (Def.'s Opp'n at 6.) In addition, Defendant asserts that federal law "creates the cause of action,' because the case concerns funds which are governed by the Employee Retirement Income Security Act ("ERISA") and Federal Employees Health Benefits Act ("FEHBA"). (Id. at 12.)
By the instant motion, Plaintiff seeks remand of the action, arguing lack of subject matter jurisdiction. Plaintiff contends that the FAA alone does not provide federal question jurisdiction, and further asserts that "the underlying dispute concerns the state law issues of interpretation and enforcement of a contract, and nothing more." (Pl.'s Mot. at 9.) Plaintiff seeks attorneys' fees and costs associated with bringing the instant motion.
STANDARD OF REVIEW
A plaintiff may challenge the removal of an action from state to federal court with a motion to remand. See 28 U.S.C. § 1447(c)). A removal by a state court defendant is proper in "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). Original jurisdiction may arise because of federal law or because of diversity of citizenship of the parties. See 28 U.S.C. § 1441 (b). In the instant case, diversity jurisdiction is not alleged nor is it an apparent issue; therefore, this Court's jurisdiction, if any, must be based on a claim or right arising out of federal law. In the Ninth Circuit, the removal statute is strictly construed against removal. See, e.g., Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992); Duncan v. Struetzle, 76 F.3d 1480, 1485 (9th Cir. 1996). Further, the burden of establishing the validity of removal rests with the party seeking to remove the case. See Westinghouse Elec. Corp: v. Newman Holzinger, P.C., 992 F.2d 932, 934 (9th Cir. 1993); see also Nishimoto v. Federman-Bachrach Assocs., 903 F.2d 709, 712 n. 3 (9th Cir. 1990)); Trenton v. Infinity Broad. Corp., 865 F. Supp. 1416, 1421 (C.D. Cal 1994).
Well-settled law holds that federal jurisdiction must be apparent from the face of a properly pleaded complaint. See Sparta Surgical Corp. v. NASD, 159 F.3d 1209, 1211-12 (9th Cir. 1998). An exception to the "well pleaded complaint rule" exists in situations of complete preemption, when federal law is so dominant in a specific field that is transforms ordinary state law claims into federal claims for purposes of removal jurisdiction. See Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 27-28 (1983); see also Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987).
In the present case, Defendant asserts that federal subject matter jurisdiction, while not apparent from the face of Plaintiff's Motion to Compel, can be invoked based on the following grounds: 1) the FAA preempts Plaintiff's state law action; and 2) federal law governs the underlying dispute.
DISCUSSION
I. The FAA
Defendant cites to the FAA and states that "[t]here is no question that the FAA preempts State Law." (Def.'s Opp'n at 11-12.) Defendant's argument is misplaced.
Contrary to Defendant's assertions, the FAA does not provide an independent basis for federal jurisdiction. Rather, the United States Supreme Court has explicitly held that there must be other independent grounds for federal subject matter jurisdiction in order to invoke the FAA. The Court stated:
The [FAA] is something of an anomaly in the field of federal-court jurisdiction. It creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal-question jurisdiction under 28 U.S.C. § 1331 . . . or otherwise.Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26 n. 32 (1983). Thus, "Moses Cone establishes definitively that the [FAA] does not provide an independent basis for federal jurisdiction."Prudential-Bache Sec., Inc. v. Fitch, 966 F.2d 981, 981 (5th Cir. 1992);see also Blue Cross v. Anesthesia Care Assocs. Med. Group, Inc., 187 F.3d 1045, 1050 (9th Cir. 1999). It is clear, therefore, that the FAA does not, for removal purposes, preempt the State arbitration laws involved here, nor does it in and of itself establish federal subject matter jurisdiction. Accordingly, this Court concludes that, contrary to Defendant's jurisdictional allegations, the FAA does not provide a basis for removal.
II. ERISA and FEHBA
Alternatively, Defendant contends that this action is removable because the underlying dispute concerns funds governed by ERISA and the FEHBA. The Court is not permitted, however, to inquire into the substantive nature of the underlying dispute in determining federal question jurisdiction.
Under the well-pleaded complaint rule, a suit does not come within the federal question jurisdiction unless a proper statement of the relief sought would necessarily include reference to federally created rights. . . . The nature of the underlying dispute . . . is not part of a well pleaded complaint asking the court to order arbitration.Drexel Burnham Lambert, Inc. v. Bock, 696 F. Supp. 957, 963 (S.D.N.Y. 1988). The only issue raised in Plaintiff's Motion to Compel and Defendant's opposition thereto appears to be the arbitrability of Plaintiff's appeals. Actually deciding the merits of the underlying dispute is unnecessary to affording complete relief to the parties. Accordingly, the Court will not look to the underlying merits of this case and finds this to be an inappropriate method of asserting federal question jurisdiction. For the foregoing reasons, the Court finds and concludes there is no federal question jurisdiction to support removal.
III. Attorneys' Fees
Plaintiff contends that they are entitled to an award of attorneys' fees and costs, "because the removal has needlessly complicated this case; and because the impropriety of removal should have been clear to Respondent's counsel." (Reply Mem. at 7-8.) 28 U.S.C. § 1447(c)) states that "[a]n order remanding [a] case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." The decision to order a defendant to pay attorneys' fees and costs incurred as a result of an improper removal is within the sound discretion of the court.
This Court finds that no circumstances exist to justify an award of attorneys' fees. While Defendant's bases for invoking federal jurisdiction were unsuccessful, the arguments raised were not frivolous or "sufficiently weak" to warrant an assessment of fees and costs. See Bucary v. Rothrock, 883 F.2d 447 (6th Cir. 1989).
CONCLUSION
For the foregoing reasons, this Court FINDS and RECOMMENDS that Plaintiff's Motion to Remand and For Costs On Grounds of Lack of Jurisdiction be GRANTED IN PART and DENIED IN PART. Specifically, the Court RECOMMENDS that Plaintiff's Motion be DENIED as to Plaintiff's request for attorneys' fees and costs, and be GRANTED in all other respects.