Opinion
No. 1:01CV489-D-A
August 8, 2002
OPINION DENYING DEFENDANT'S MOTION TO DISMISS OR TRANSFER
Presently before the court is the Defendant's motion to dismiss, or in the alternative, to transfer venue. Upon due consideration, the court finds the motion shall be denied.
A. Factual Background
Plaintiff Home Health Care Affiliates of Mississippi, Inc. ("HHCA") is a Mississippi corporation that maintains its principal place of business in Mississippi. Plaintiff Gilbert's Home Health Agency, Inc. ("Gilbert's") is also a Mississippi corporation that maintains its principal place of business in Mississippi. Plaintiffs are both in the business of providing home health services. Curtis Bray is the Director of Operations at Gilbert's. Plaintiffs are affiliated entities and share management. Bray also stated that he also provides management services to HHCA and that he works in the Mississippi offices of these companies. Bray stated in his affidavit that he was personally involved in the negotiations which led Gilbert's and HHCA to enter into business relationships with the Defendants in this lawsuit.
Prior to 2000, Plaintiffs provided healthcare benefits to their employees under a group health insurance policy. Sometime around the fall of 1999 — spring of 2000, Plaintiffs began reevaluating their group healthcare policy. Bray dealt with insurance agent Alan Nunnelee of Tupelo, Mississippi, who apparently told Bray he would get a quote from Defendant American Heartland Health Administrators, ("American Heartland") through Defendant Andy Andrews, an insurance agent in Georgia. Plaintiffs assert that the "agent and other representatives of American Heartland explained to Plaintiffs" that they could enter into an arrangement which would involve (1) Plaintiffs treating their benefit plan for their employees as a "self-insured plan," (2) Plaintiffs hiring American Heartland to act as a third party administrator ("TPA") to determine whether employee claims were covered by the Plan, and (3) Plaintiffs entering into a so-called "reinsurance agreement" with a company to be recommended by American Heartland.
Both of the Plaintiffs executed an "Administrative Contract" with American Heartland that went into effect on April 1, 2000. Plaintiffs were to pay premiums to American Heartland, which received approximately 30% for its administrative fee, and paid the remaining 70% of those premiums over to an insurance company. The insurance company was to assume responsibility for 100% of the covered claims. Also, Plaintiffs executed "Reinsurance Agreements" with United Fidelity, the insurance company or carrier, responsible for paying claims.
Sometime in the fall of 2000, United Fidelity ceased to be the insurance company and Defendant North American Indemnity ("North American") became the insurance carrier. Plaintiffs state that only recently did they discover that United Fidelity's "book of business" was acquired by North American, an undercapitalized Belgium company. In any event, apparently things went relatively smoothly for a while as the Defendant insurance carriers (United Fidelity, and then later, North American) were paying the claims that American Healthcare determined were covered and submitted to them.
Defendants repeatedly refer to North American as a "reinsurer" and/or "not an insurance company." For purposes of this opinion, the court will simply use the term insurer."
Around July of 2001, North American began delaying paying claims submitted to them by American Heartland, the TPA. Thereafter, finger pointing began between North American and American Heartland. North American alleged that American Heartland failed to properly administer and adjudicate claims. North American reevaluated or re-audited several claims submitted to them. American Heartland has stated that they only submitted claims that were covered, and that North American is merely stalling due to cash flow problems. In September of 2002, North American sent a letter stating that they were going to withhold all of the August claims and do an audit. American Heartland sent letters in September to the employers voicing concern about North American's desire to fund legitimate claims.
The consequence of this is that many claims went unpaid. Also, this led to a falling out between North American and American Heartland. North American wanted a new company to work with them as the TPA to administer the claims. North American selected Managed Healthcare, Inc., ("MHI") as the new TPA. Employers such as Plaintiffs were given the option of remaining with North American and switching to MHI as the TPA or keeping the same TPA (American Heartland), and finding another insurance company. On or about September 28, Bray wrote to American Heartland and informed Jack Ferguson, the CEO, of the Plaintiffs' decision to remain with North American. Bray instructed American Heartland to forward all premiums to North American. Since then, Plaintiffs submitted premiums to MHI. Plaintiffs assert that they fear that their premiums are being wired out of the country and that North American does not intend to pay over $300,000.00 in due claims.
Between April 1, 2000 and November 2001, Plaintiffs sent Defendants $979,402.72. This sum represents both employee and employer contributions for the health coverage. Plaintiffs assert (as of April of 2002) that according to calculations of two of the Defendants, the amount of payable claims is at least as high as $341,413.49. and by Plaintiffs' calculations, it could be as high as $600,000 or more.
On December 26, 2001, Plaintiffs filed this suit naming as Defendants: (1) American Heartland Health Administrators, Inc., (2) North American Indemnity N.V., (3) Managed Healthcare, Inc., and (4) United Fidelity Corporation. All of the Defendants are foreign corporations and none of them are certified to do business in Mississippi. Plaintiffs' complaint asserts causes of action for, inter alia, breach of contract; negligence; misrepresentation and/or fraud; restitution/unjust enrichment/implied contract; and violation of Mississippi laws on insurance. Plaintiffs subsequently voluntarily dismissed United Fidelity Corp. Plaintiffs then filed a motion to deposit funds with the court, rather than continuing to pay premiums to the Defendants, which has been granted. Subsequently, MHI filed the present motion to dismiss, or in the alternative, to transfer venue. Recently this case was consolidated with a similar case involving the same Plaintiffs against the agent from Georgia, Andy Andrews.
Plaintiffs have also filed a consolidated motion for summary judgment and preliminary injunction. That matter has not been fully briefed as the time for discovery has just recently begun. American Heartland has not yet responded to the substantive merits of the summary judgment motion but has requested time and the need for discovery. Counsel for North American has failed to follow the local rules and has not associated any local counsel.
B. Discussion
Defendant MHI makes the following alternative arguments: that the case should be dismissed pursuant to Rule 12(b)(6); that the case should be dismissed for lack of subject matter jurisdiction pursuant to Rule 12(b)(1); that the case should be dismissed because venue is improper, or in the alternative, to transfer this action to the Southern District of Texas pursuant to 28 U.S.C. § 1406 (a); or that the case should be transferred for the convenience of parties and witnesses pursuant to 28 U.S.C. § 1404 (a).
1. Dismissal pursuant to Rule 12(b)(6)
As noted above, Plaintiffs have filed a motion for summary judgment as to liability against Defendants American Heartland and North American. This summary judgment motion is based primarily on certain Mississippi insurance statutes. Miss. Code § 83-17-3 is titled "Personal liability of agents" and states "[a]n insurance agent shall be personally liable on all contracts of insurance unlawfully made by or through him, directly or indirectly, for or in behalf of any company not authorized to do business in the state." Plaintiffs argue that American Heartland was an agent for North American and as such, these Defendants are jointly and severally liable. Plaintiffs summary judgment motion did not include MHI as the contracts "of insurance [were not] unlawfully made by or through [them]." Miss. Code § 83-17-3.
Plaintiffs also rely on Miss. Code § 83-17-103, which is a somewhat similar statute titled "Acting on behalf of unauthorized insurer." This statute was Repealed on January 1, 2002, but was in effect at the relevant time.
However, part of the Amended Complaint requests that the court enjoin MHI from forwarding premiums to North American and an accounting from North American as to whether MHI forwarded premiums to North American. The Amended Complaint also requests restitution. Plaintiffs assert that MHI (as a latecomer) may not be the most culpable of these three defendants, but they belong in this suit as they are potentially liable. MHI argues that they had no obligation to pay claims and that Plaintiffs have failed to state any violation of a fiduciary duty. MHI also asserts that they are only mentioned by name in 12 of the 73 numbered paragraphs of the Amended Complaint. The court finds MHI's argument is not well taken.
Dismissal is never warranted because the court believes the plaintiff is unlikely to prevail on the merits. Myers v. Guardian Life Ins. Co., 5 F. Supp.2d 423, 427 (N.D.Miss. 1998) (citation omitted). Even if it appears almost a certainty that the facts alleged cannot be proved to support the claim, the complaint cannot be dismissed so long as it states a claim. Myers, 5 F. Supp.2d at 427. Considering only the pleadings in this action, and taking the facts alleged in the complaint as true, the court finds that the Defendant has failed to show that "it appears certain that the plaintiff cannot prove any set of facts that would entitle it to the relief it seeks." See CC. Port, Ltd. v. Davis-Penn Mortgage Co., 61 F.3d 288, 289 (5th Cir. 1995). Therefore, MHI's motion to dismiss under Rule 12(b)(6) shall be denied.
2. Dismissal pursuant to Rule 12(b)(1)
The Amended Complaint states that this court has jurisdiction based on diversity of citizenship jurisdiction pursuant to 28 U.S.C. § 1332. The Amended Complaint also states "[f]urther, to the extent some portion of Plaintiffs' claims are or may be governed by ERISA, this Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331."
As is discussed in the next section dealing with venue, the basis for subject matter jurisdiction also affects which venue provision governs the case sub judice.
Defendants seem merely to reargue the same points of their 12(b)(6) motion. MHI stated that they "should be dismissed from this suit as there is no allegation against MHI that would provide subject matter jurisdiction in this Court with respect to any claim alleged against MHI nor has any claim been alleged against MHI upon which relief may be granted." MHI does not argue that diversity jurisdiction is not present. Furthermore, it appears possible that this court also has subject matter jurisdiction pursuant to 28 U.S.C. § 1331, provided that the claims "relate to" an ERISA qualified employee benefit plan. The ERISA preemption argument is usually raised as a defense, and it is not clear to the court whether Plaintiffs are actually asserting claims under ERISA in the present case, or merely anticipating a possible defense. Some of the contracts drafted by Defendants refer to being covered by ERISA. Furthermore, Defendants repeatedly make conclusory statements about being exempt from state insurance laws (without citing any authority for the proposition). In any event, MHI's motion to dismiss for lack of subject matter jurisdiction is denied.
3. Improper Venue pursuant to 28 U.S.C. § 1406 (a)
28 U.S.C. § 1406 (a) is titled "Cure or waiver of defects" and states that: "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." Thus, the court must examine whether venue is proper in this court. 28 U.S.C. § 1391 states in pertinent part:
(a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of the property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.
MHI makes the conclusory assertion that "the court should dismiss this case because both 28 U.S.C. § 1391 (a)(1) . . . and 29 U.S.C. § 1132 (e)(2) (ERISA) provide that venue is proper in the Southern District of Texas." MHI does not appear to argue that venue is improper in this district. Plaintiffs argue that venue is also proper under 29 U.S.C. § 1132 (e)(2), which states "[w]here an action under this subchapter is brought in a district court of the United States, it may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found . . . ." There is no agreement as to which venue provision should be used in the instant case, probably because it is not clear whether ERISA is implicated in this case. Howvever, it is clear that there is diversity jurisdiction in the present case.
Plaintiffs argue that the plan is administered in this district as the Plaintiffs are the named Plan Administrators of their respective plans. MHI does not address this.
The court is of the opinion that venue is proper in the Northern District of Mississippi as this is "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." 28 U.S.C. § 1391(a)(2). The Plaintiff/Employers' business is in the Northern District of Mississippi. Bray dealt with insurance agent Alan Nunnelee of Tupelo, Mississippi, who originally got a quote from Defendant American Heartland. There would be no claims or lawsuit today if the various employees, who predominately live and work in the Northern District of Mississippi, were not having problems with their health insurance, resulting in money due to their medical providers in Mississippi. As such, the court finds that MHI's arguments about venue in the Southern District of Texas are better addressed in the next section. MHI's motion to dismiss or transfer under 28 U.S.C. § 1406 is denied.
It appears that if ERISA does in fact preempt some of the claims, and thus the court has both diversity and federal subject matter jurisdiction, then 28 U.S.C. § 1391 (b)(2) would apply. That section states: "[a] civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought only in . . . (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred . . . ."
4. Motion for Transfer of Venue Pursuant to 28 U.S.C. § 1404 (a)
"For the convenience of the parties and witnesses, in the interests of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404 (a). The purpose of the venue transfer statute is to "prevent the waste of time, energy, and money and to protect litigants, witnesses, and the public against unnecessary inconvenience and expense."Gundle Lining Const. v. Fireman's Fund Ins., 844 F. Supp. 1163, 1165 (S.D.Tex. 1994) (citing Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964)).
Decisions to effect 1404(a) transfers are committed to the sound discretion of the trial judge. Mills v. Beech Aircraft Corp., Inc., 886 F.2d 758, 761 (5th Cir. 1989) (citation omitted). In order to establish that transfer is appropriate, the defendant must demonstrate that the balance of convenience and justice weighs heavily in favor of the transfer. Gundle, 844 F. Supp. at 1165. In other words, there must be a convincing showing of the right to have the case transferred since § 1404(a) provides for transfer to a more convenient forum, not to a forum likely to prove equally convenient or inconvenient. Mizell v. Prism Computer Corp., 27 F. Supp.2d 708, 712 (S.D.Miss. 1998) (citations omitted).
There are several factors this court may consider in making a § 1404(a) determination, which include:
(1) the relative ease of access to sources of proof;
(2) the availability of compulsory process, where necessary, over witnesses;
(3) the cost of obtaining witnesses for attendance at trial;
(4) the possibility of a view of the premises, if appropriate;
(5) the enforceability of a judgment;
(6) administrative difficulties of the court;
(7) the local interest of the controversy, and the imposition of jury duty on citizens residing in the community having no relation to the litigation;
(8) the propriety of having the action tried in a forum "at home" with the state law governing the case;
(9) the plaintiff's choice of forum;
(10) the possibility that trial in the original forum will result in inconvenience, vexation, oppression, or harassment of the defendant; and
(11) "all other practical problems that make the trial of a case easy, expeditious, and inexpensive."Mizell, 27 F. Supp.2d at 713. See also Apache Products Co. v. Employers Ins. of Wausau, 154 F.R.D. 650, 653 (S.D.Miss. 1994); Fullman v. AAA Cooper Transp. Co., 732 F. Supp. 54, 55 (N.D. Miss. 1990) (same).
Normally, in determining the propriety of a transfer, the plaintiff's choice of forum is entitled to great weight. Willowbrook Foundation, Inc. v. Visiting Nurse Ass'n., Inc., 87 F. Supp.2d 629, 635 (N.D.Miss. 2000) (citing Time, Inc. v. Manning, 366 F.2d 690, 698 (5th Cir. 1966)). This is particularly true when the plaintiff's choice of forum is his own state. Willowbrook Foundation, Inc., 87 F. Supp.2d at 635. While not all of the above mentioned factors apply in the present case, factors seven, the local interest of the controversy; eight, the propriety of having the action tried in a forum "at home" with the state law governing the case; and nine, the plaintiffs choice of forum; all favor venue in the Northern District of Mississippi.
MHI mentions that there has been a class certification against Defendant North American in the United States District Court for the Southern District of Texas. Civil Action H-01-4477. North American originally filed that suit against American Heartland. Those claims were dismissed, but several parties intervened to assert claims against North American. MHI asserted that since Defendant NAI is the Plaintiff in the Texas lawsuit, service, jurisdiction and venue are not problems. Plaintiffs counter this by noting that the only claims in the Texas class action are against North American. Neither MHI nor Andy Andrews is involved in that suit and the claims against American Heartland have been dismissed as well.
The court does have some concern about properly obtaining process over the Belgian Company, North American. However, based on the summary judgment motion and Plaintiffs response to MHI's motion to transfer, it appears that Plaintiffs prefer to litigate in Mississippi, primarily under Mississippi statutes which, in certain situations, make agents fully liable for losses incurred.
As for the convenience of the witnesses and parties, Nunnelee lives and works in this judicial district. Nunnelee is the insurance agent who originally put Bray in touch with Andrews, an agent in Georgia. Plaintiffs state that Nunnelee is the agent who solicited Plaintiffs' business and helped put into place the entire program that is the subject of this lawsuit. Nunnelee was involved at all times in negotiations, first with American Heartland and later with MHI, as problems arose regarding the non-payment of claims.
Curtis Bray works at Plaintiffs' offices in North Mississippi, although he lives just across the border in Alabama. Plaintiffs also mention Tammy Johnson and John Simmons of the Human Resources Department. They are knowledgeable about employees whose claims have not been paid. Plaintiffs also state that David Negrie is a former employee of Plaintiffs who currently lives in Memphis, Tennessee. Negrie was involved in the original negotiation with American Heartland over the insurance program at issue and how it was designed to operate. The Plaintiffs also mention the employees whose claims remain unpaid, as well as their providers, as potential witnesses in this case.
MHI states that they are a Texas corporation with their principal place of business in Houston. Edwin Horn is the CEO of MHI, and he notes that all of the records are maintained in Houston. Even though none of the other defendants joined in this motion to transfer, it appears that American Heartland's principal place of business is also in Houston. The court is aware of one agent named Wilkinson who had contact with Nunnelee and North American. Wilkinson originally worked for American Heartland and then switched to MHI.
It appears that there is a similar number of important witnesses both in Mississippi and Texas. This court is now somewhat familiar with the parties and facts alleged in the case, as it has been pending here for approximately seven months. Thus, a transfer to Texas would likely result in at least some delay. The court is of the opinion that MHI has not met their burden of demonstrating "that the balance of convenience and justice weighs heavily in favor of the transfer." Gundle, 844 F. Supp. at 1165. See also St. Luke's Episcopal Hospital Corp. v. Stevens Transport, Inc., 172 F. Supp.2d 837, 846 n. 12 (S.D.Tex. 2001) ("Conclusory allegations that `all measures weigh heavily in favor of transfer to Dallas' are insufficient."). Furthermore, the Plaintiffs' choice of forum is entitled to great weight, "particularly . . . when the plaintiff's choice of forum is his own state." Willowbrook Foundation, Inc., 87 F. Supp.2d at 635. As such, MHI's motion to transfer is denied.
C. Conclusion
In sum, Defendant MHI's motion to dismiss, or in the alternative, to transfer venue, is denied.
A separate order in accordance with this opinion shall issue this day.
ORDER DENYING DEFENDANT'S MOTION TO DISMISS OR TRANSFER
Pursuant to an opinion issued this day, it is hereby ORDERED that
(1) the Defendant's motion to dismiss, or in the alternative, transfer venue (docket entries 23, 33 and 56) is DENIED.