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In Guyant, the court did not award costs against the defendant because the fraudulent joinder issue involved a "fairly close question" so that removal was reasonable.
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CAUSE NO. 1:03-CV-0015-DFH
April 21, 2003
ENTRY ON MOTION TO REMAND
This matter is before the court on the plaintiffs' motion to remand. Plaintiffs Mary Guyant and John Guyant filed a complaint in the Marion Superior Court. The complaint alleged that defendants Johnson Johnson, Inc. and Centocor, Inc. engaged in a fraudulent scheme with defendants Michael T. Stack PhD., M.D. and Indiana Internal Medical Consultant, LLC ("IIMC") with respect to the drug Remicade, which is used to treat rheumatoid arthritis. Plaintiffs alleged that Johnson Johnson provided a "kickback" to Dr. Stack and IILM as an incentive to prescribe Remicade. Plaintiffs allege that the defendants fraudulently misrepresented the actual selling prices of Remicade to defraud plaintiffs and their insurer to pay excessive amounts for the drug. Plaintiffs also allege that this scheme gave Dr. Stack and IILM an improper financial incentive to prescribe Remicade, and that their treatment of plaintiff Mary Guyant with Remicade caused physical injury to her.
Pursuant to 28 U.S.C. § 1441, Johnson Johnson and Centocor removed this action from the state court, arguing that Indiana citizens Dr. Stack and IILM had been fraudulently joined to defeat complete diversity of citizenship. Plaintiffs have moved to remand this action to the state court on grounds of incomplete diversity, arguing that they have viable claims against Dr. Stack and IILM. For the reasons set out below, the motion to remand is granted.
Discussion
"For a case to be within the diversity jurisdiction of the federal courts, diversity of citizenship must be `complete' meaning that no plaintiff may be a citizen of the same state as any defendant." Hoosier Energy Rural Elec. Co-op, Inc. v. Amoco Tax Leasing IV Corp., 34 F.3d 1310, 1315 (7th Cir. 1994), quoting Fidelity Deposit Co. of Md. v. Sheboygan Falls, 713 F.2d 1261, 1264 (7th Cir. 1983). Plaintiffs are citizens of Indiana. Defendant Johnson Johnson is a New Jersey corporation with its principal place of business in New Jersey. Defendant Centocor is a Pennsylvania corporation with its principal place of business in Pennsylvania. But defendants Dr. Stack and the IIMC are Indiana citizens, so their presence as defendants defeats the complete diversity required for diversity jurisdiction under 28 U.S.C. § 1332(a).
Defendants justify the removal on the theory that the Indiana defendants were "fraudulently" joined. Diversity cannot be destroyed by joinder of non-diverse parties if that joinder is fraudulent. Hoosier Energy, 34 F.3d at 1315 (7th Cir. 1994). "Fraudulent" joinder, a legal term of art that does not necessarily cast aspersions on the character of plaintiffs or their counsel, "occurs either when there is no possibility that a plaintiff can state a cause of action against nondiverse defendants in state court, or there has been an outright fraud in plaintiff's pleading of jurisdictional facts." Id., quoting Gottlieb v. Westin Hotel Co., 990 F.2d 323, 327 (7th Cir. 1993). Defendants raise only the issue of fraudulently joined co-defendants. They do not argue that the plaintiffs joined unrelated claims in one case.
The defense bears a "heavy burden" in establishing fraudulent joinder. Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir. 1992). "The defendant must show that, after resolving all issues of fact and law in favor of the plaintiff, the plaintiff cannot establish a cause of action against the co-defendant." Id. (emphasis in original). The court must consider whether there is any reasonable possibility that a state court might rule against either of the Indiana defendants on any theory, when all fairly disputable issues of both fact and law are resolved in plaintiffs' favor. Id.; Hoosier Energy Rural Elec. Co-op, Inc. v. Amoco Tax Leasing IV Corp., 34 F.3d at 1315; Gottlieb v. Westin Hotel Co., 990 F.2d at 327. Joinder is not fraudulent if plaintiffs' claims depend on fairly debatable issues of state law that require substantial analysis. "A claim which can be dismissed only after an intricate analysis of state law is not so wholly insubstantial and frivolous that it may be disregarded for purposes of diversity jurisdiction." Batoff v. State Farm Ins. Co., 977 F.2d 848, 853 (3d Cir. 1992).
Johnson Johnson and Centocor contend that plaintiffs do not yet have a viable fraud claim against Dr. Stack or IIMC because the claim is subject to the Indiana Medical Malpractice Act, Ind. Code § 34-18-2. Under the Act, a plaintiff may not file a medical malpractice action in state court against a covered health care provider until after the claim has been presented to a medical review panel and the panel issues an opinion. Ind. Code § 34-18-8-4. In fact, plaintiffs have begun that process for a malpractice claim based on Mrs. Guyant's treatment with Remicade, but they have not obtained a medical review panel opinion. Defendants contend that the Indiana state courts would hold that the fraud claim pled in the pending complaint is also subject to the Medical Malpractice Act, so that the claim against Dr. Stack and IIMC is not yet viable, meaning that these non-diverse defendants were fraudulently joined. Plaintiffs contend the fraud claim against all defendants, including Dr. Stack and IIMC, falls outside the coverage of the Medical Malpractice Act so that the case must be remanded for lack of complete diversity.
Federal courts hearing diversity medical malpractice cases in Indiana must apply the Indiana Medical Malpractice Act. Hines v. Elkhart General Hospital, 603 F.2d 646 (7th Cir. 1979). In cases where the Act applies, "the Indiana Courts have no jurisdiction until the review panel issues its opinion, and the federal district court is bound by this decision in a diversity suit." Johnson v. Methodist Hospital of Gary, 547 F. Supp. 780, 782 (N.D.Ind. 1982); see also Castelli v. Steele, 700 F. Supp. 449, 455 (S.D.Ind. 1988) ("It is well settled under this provision that any medical malpractice action filed in an Indiana court must be dismissed without prejudice for want of jurisdiction if an opinion has not first been obtained by a medical review panel.").
Not all actions taken by a physician or a health care organization fall under the coverage of the Medical Malpractice Act. Bremer v. Community Hospitals of Indianapolis, Inc., 583 N.E.2d 780, 782 (Ind.App. 1991) (holding that requirements of Act could not be avoided by alleging that health care provider violated deceptive consumer practices law by falsely telling patient that care provided was appropriate). But if the plaintiff's allegations against the defendant "are substantially grounded in malpractice," the plaintiff cannot bypass the Indiana Medical Malpractice Act merely by providing an alternative label for a claim that is in substance a claim for medical malpractice. Id.
The court looks to the substance of the claim to determine whether the Medical Malpractice Act applies. Doe v. Madison Center Hosp., 652 N.E.2d 101, 104 (Ind.App. 1995) (holding that Act did not apply to claim that hospital employee sexually assaulted minor patient and infected her with venereal disease). The Act "does not specifically exclude intentional torts from the definition of malpractice," but the Act primarily pertains to "curative or salutary conduct of a health care provider acting within his or her professional capacity, and is designed to exclude that conduct `unrelated to the promotion of a patient's health or the provider's exercise of professional expertise, skill, or judgment.'" Id., quoting Boruff v. Jesseph, 576 N.E.2d 1297, 1298 (Ind.App. 1991).
The Medical Malpractice Act defines "malpractice" as "a tort or breach of contract based on health care or professional services that were provided, or that should have been provided, by a health care provider, to a patient." Ind. Code § 34-18-2-18. The Act defines a tort as a "a legal wrong, breach of duty, or negligent or unlawful act or omission proximately causing injury or damage to another." Ind. Code § 34-18-2-28. The Indiana Court of Appeals has said that the Act applies to "actions undertaken in the interest of or for the benefit of the patient's health, i.e., conduct engaged in by a physician which is curative or salutary in nature or effect." Collins v. Thakkar, 552 N.E.2d 507, 510 (Ind.App. 1990) (holding that Act did not apply to claims that physician sexually assaulted patient and later performed abortion without patient's consent). "The text of the Act itself thus leads one to conclude that the General Assembly intended to exclude from the legislation's purview conduct of a provider unrelated to the promotion of a patient's health or the provider's exercise of professional expertise, skill or judgment." Id. Because "the sole purpose" of the medical review panel "is to provide an expert determination on the question of whether a provider complied with the appropriate standard of care," that "the scope of the Act is likewise confined to actions premised upon the exercise of professional judgment." Collins, 552 N.E.2d at 510-11.
Defendants argue in this case that the Guyants' fraud claim against Dr. Stack and IIMC is no more than a re-packaged malpractice claim. The fact that a major portion of the damages sought is based on the theory that the alleged fraudulent scheme led Dr. Stack to choose the wrong treatment for Mrs. Guyant's arthritis tends to support that position. Nevertheless, plaintiffs also seek financial relief based on having been charged in inflated price as a result of the alleged fraudulent scheme. Plaintiffs cannot point to controlling Indiana law that authorizes their claim. Defendants may well be correct in predicting the ultimate conclusion of the Indiana courts regarding whether this claim is subject to the Act.
When deciding a diversity case on the merits, where state law provides the rule of decision, the task of the federal court is to predict the state supreme court's most likely decision on questions of law that are presented. E.g., Klunk v. County of St. Joseph, 170 F.3d 772, 777 (7th Cir. 1999). In deciding fraudulent joinder, however, the task of the court is different. As noted, plaintiffs are entitled to the benefit of the doubt on fairly debatable questions of both fact and law. Poulos, 959 F.2d at 73. In other words, if plaintiffs can show that the treatment of their case under state law is fairly debatable, then the debate should take place in the state courts rather than the federal courts.
The Seventh Circuit has often cautioned parties who seek an extension or modification of state law to stay away from federal courts, at least where they have a choice of forum. E.g., Haynes v. Alfred A. Knopf, Inc., 8 F.3d 1222, 1234 (7th Cir. 1993) ("The plaintiffs are asking us to innovate boldly in the name of the Illinois courts, and such a request is better addressed to those courts than to a federal court."); Chang v. Michiana Telecasting Corp., 900 F.2d 1085, 1087-88 (7th Cir. 1991) ("a litigant whose case depends on a change in state law had best start in state court"). The Guyants appear to be trying to accomplish such an extension or modification of state law, and wish to do so in state court. They are entitled to try. The state courts have not drawn sharp lines in this area of the law. They have declined, for example, to define the coverage of the Medical Malpractice Act in terms of covered unintentional torts and excluded intentional torts. Collins, 552 N.E.2d at 511 n. 6. Similarly, plaintiffs can argue that the holding of Bremer, involving alleged fraud in telling a patient that his care was appropriate, is distinguishable because the plaintiffs here are alleging that the defendants' professional judgment was stifled or corrupted by the fraudulent pricing scheme.
The plaintiffs' argument may or may not convince the state courts, but that is not the standard here. This court could agree with defendants on the application of Indiana's Medical Malpractice Act to the alleged fraudulent pricing scheme only by undertaking "an intricate analysis of state law." See Batoff, 977 F.2d at 853 (if "intricate analysis of state law" is needed to dismiss claim, the claim may not be disregarded for purposes of diversity jurisdiction and fraudulent joinder). Although the Indiana state courts may ultimately conclude that the Medical Malpractice Act applies to plaintiffs' fraud claim, plaintiffs have reasonable and good faith arguments available to them. Accordingly, their joinder of Dr. Stack and IIMC as defendants was not "fraudulent." Complete diversity is destroyed by their presence, and plaintiffs' motion for remand to the Marion Superior Court is hereby granted.
In connection with a remand such as this, the court can order the removing parties to pay the plaintiffs' reasonable attorney fees and costs incurred as a result of the removal. 28 U.S.C. § 1447(c). Such an award does not require a finding of bad faith, and plaintiffs are presumptively entitled to such an award. Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 411 (7th Cir. 2000). In this case, however, the court believes the removal was reasonable and presented a fairly close question, so the court exercises its discretion to decline to award fees and costs connected with the remand. See, e.g., Pauley v. Ford Electronics Refrigeration Corp., 941 F. Supp. 794, 804 (S.D.Ind. 1996) (denying fees where removal had been "a reasonable and cautious response" to a problematic complaint and remand was based on difficult jurisdictional issue); Lang v. American Electric Power Co., 785 F. Supp. 1331, 1335 (N.D.Ind. 1992) (denying fees where defendant raised legitimate and substantial grounds for removal and asserted them in good faith).
This action is hereby REMANDED to the Marion Superior Court.
So ordered.