MySpine PS v. USAA Casualty Insurance Company et al, No. 2:2013cv02179 - Document 43 (W.D. Wash. 2014)
Court Description: ORDER granting pltf's 24 Motion to Remand to King County Superior Court; granting in part and denying in part pltf's 31 Motion for Sanctions; Court retains jurisdiction to finalize its award of atty fees and expenses and to confirm dfts' payment of sanctions; That payment, along with the parties joint statement or MySpines motion for fees and expenses, is due no later than July 3, 2014 by Judge Richard A Jones.(RS)
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MySpine PS v. USAA Casualty Insurance Company et al Doc. 43 HONORABLE RICHARD A. JONES 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 MYSPINE, PS, 10 11 12 CASE NO. C13-2179 Plaintiff, ORDER v. USAA CASUALTY INSURANCE COMPANY, et al., 13 Defendants. 14 I. INTRODUCTION 15 16 17 18 19 20 21 22 23 This matter comes before the court on two motions from Plaintiff MySpine, PS: a motion to remand this action to King County Superior Court and a motion to sanction Defendants for removing it. Although Defendants requested oral argument, oral argument is not necessary. For the reasons stated below, the court GRANTS the motion for remand (Dkt. # 24) and orders Defendants to pay MySpine’s attorney fees as detailed in this order. The court GRANTS the motion for sanctions (Dkt. # 31) in part, but instead of the sanction MySpine proposed, the court imposes a sanction of $5,000 payable to this court. The court imposes a July 3 deadline for the sanction payment and for the parties’ first submission with respect to attorney fees. 24 25 26 II. BACKGROUND Defendants have already removed this putative class action once. The court remanded it after Defendants conceded that the court did not have subject matter 27 28 ORDER – 1 Dockets.Justia.com 1 jurisdiction because Defendants could not demonstrate that the amount in controversy 2 exceeded the $5 million jurisdictional threshold of the Class Action Fairness Act. See 28 3 U.S.C. § 1332(d)(2) (granting subject matter jurisdictions in certain class actions “in 4 which the matter in controversy exceeds the sum or value of $5,000,000”); see also Case 5 No. C12-1973RAJ, Jul. 10, 2013 order (Dkt. # 59) at 3 (“[E]veryone finally agrees that 6 the amount in controversy falls below the jurisdictional minimum.”). After about five 7 months of litigation in state court, Defendants removed the action again. This time, they 8 contended that MySpine had announced an expansion of its claimed damages that put 9 more than $5 million in controversy. That contention was frivolous and the court 10 11 concludes that Defendants made it for an improper purpose. To understand the circumstances of this second removal, the court again 12 summarizes the substantive dispute, a dispute it has not considered on its merits. Briefly, 13 MySpine contends that Defendants, who issue car insurance policies to thousands of 14 Washingtonians, fail to make full personal injury protection (“PIP”) payments to medical 15 providers who treat their insureds. MySpine, a chiropractic clinic, is one of those 16 providers. According to MySpine, Defendants rely on a third party to compile prices 17 charged for various medical procedures, and they deny payments to providers serving 18 their PIP insureds to the extent that the amount billed for a procedure exceeds the 80th 19 percentile of those prices. MySpine not only contends that it has been damaged by this 20 practice, but that thousands of providers across Washington have been damaged as well. 21 MySpine sued only two Defendants: USAA Casualty Insurance Company and 22 USAA General Indemnity Company. The court will refer to these Defendants as “USAA 23 Casualty” and “USAA General.” That nomenclature is important, because both 24 Defendants are subsidiaries of United Services Automobile Association, whom the court 25 will call “USAA.” USAA issues its own insurance policies to Washington motorists. 26 27 28 ORDER – 2 1 In August 2013, MySpine propounded discovery that included an interrogatory 2 asking for information about reductions like the reductions at issue in this case, but made 3 by any USAA employee. The court has no idea what language the interrogatory used, 4 because despite the glut of evidence in the record, MySpine never cited or submitted the 5 interrogatory itself. Instead, it cited its description of that interrogatory in a motion to 6 compel that it filed in state court on November 19, 2013. Mot. to Remand at 6 & n.16. 7 That description is as follows: 8 11 Interrogatory no. 1 seeks information on all RF or RF_1 reductions made by an employee of USAA (i.e. United Services Automobile Association) because discovery shows that all adjusters who reduced Washington provider bills were employees of USAA and that the adjusters used the same practices at issue when reducing bills submitted under a USAA Casualty, USAA General, Garrison Property & Indemnity, or USAA auto policy in Washington. 12 Mot. to Compel at 4. The motion to compel then explained that the “reductions at issue 13 were taken by employees of USAA and the existence of a general, common practice, 14 applied to all Washington provider bills is clearly at issue in this class action. Equally, 15 the issue of whether the practice affects the public interest by affecting a substantial 16 number of providers is relevant to establishing an unfair CPA practice.” Id. at 4-5. 17 When Defendants received the motion to compel, they knew that MySpine’s 9 10 18 argument was that because everyone who adjusted claims for USAA General or USAA 19 Casualty was an employee of USAA, the actions of those employees on any claim – even 20 claims submitted on USAA policies – were relevant to the claims in this action. 21 Defendants insist, however, that the motion to compel did more than advise them 22 of a theory by which USAA’s conduct was relevant to proving MySpine’s claims against 23 USAA General and USAA Casualty – it expanded MySpine’s damage claims to include 24 every claim that a USAA employee reduced, including claims on USAA policies. 25 Defendants’ interpretation is exceedingly difficult to comprehend on its face, because the 26 court is aware of no means by which MySpine could obtain damages flowing from 27 28 ORDER – 3 1 USAA’s reductions of payments on USAA policy claims without suing USAA. But 2 Defendants would have the court believe that they believed exactly that. To demonstrate 3 why, they point to this paragraph from earlier in MySpine’s motion to compel: 4 Plaintiff alleges that all USAA auto companies in Washington use this same practice [(the 80th percentile reductions)] and that all companies use adjusters who are employees of United Services Automobile Association (“USAA”) to reduce the bills submitted by all Washington health care providers. Plaintiff filed this action as a class action on behalf of all Washington providers whose bills were reduced by USAA using an RF or RF_1 reason code. 5 6 7 8 Mot. to Compel at 2. As the language suggests, the paragraph was part of MySpine’s 9 summary of its case. Defendants contend that their receipt of that paragraph was a 10 crucial moment, because it announced for the first time that MySpine would seek 11 damages not just from reduced payments on USAA General and USAA Casualty claims, 12 but on USAA claims. In Defendants’ view, adding damages from USAA claims to 13 damages from USAA General and USAA Casualty claims, plus other elements of the 14 “amount in controversy,” (including attorney fees and the costs of complying with an 15 injunction against the adjustment practices) pushed the amount in controversy above $5 16 million. Defendants filed a second notice of removal on December 5, 2013. 17 MySpine’s motion to remand followed, and MySpine followed that motion with a 18 motion to sanction Defendants $35,000 in addition to MySpine’s attorney fees for 19 fighting for remand. 20 21 22 23 24 25 26 III. ANALYSIS A. Removal & Remand: Burden of Proof, Amount in Controversy, and Timeliness Requirement Defendants, as the parties seeking a federal forum, bear the burden of proving that this court has jurisdiction. Rodriguez v. AT&T Mobility Servs., LLC, 728 F.3d 975, 978 (9th Cir. 2013). The Class Action Fairness Act’s $5 million minimum amount in controversy is the only jurisdictional requirement in dispute. Defendants must therefore 27 28 ORDER – 4 1 prove by a preponderance of the evidence that the amount in controversy in this dispute 2 exceeds that threshold. Id. at 981. Moreover, Defendants must prove that they did not know more than 30 days 3 4 before they removed the case that the amount in controversy exceeded $5 million. 5 MySpine challenges the timeliness of Defendants’ removal, noting that 28 U.S.C. § 1446 6 mandates removal either within 30 days of the initial pleading that states a controversy 7 worth more than the jurisdictional amount (§ 1446(b)(1)) or, if the initial pleading does 8 not state a controversy worth that much, within 30 days of “receipt . . . through service or 9 otherwise” of an amended pleading or “other paper” that contains that information. 28 10 U.S.C. § 1446(b)(3). 28 U.S.C. § 1446(c)(3)(A) clarifies that when “the case stated by 11 the initial pleading is not removable solely because the amount in controversy does not 12 exceed the amount specified in section 1332(a), information relating to the amount in 13 controversy in the record of the State proceeding, or in responses to discovery, shall be 14 treated as an ‘other paper’ under subsection (b)(3).” 15 B. 16 The Court Will Not Decide if Defendants Timely Removed. In Defendants’ view, MySpine’s motion to compel was the “other paper” that first 17 informed them that the amount in controversy exceeded $5 million. That motion came 18 fewer than 30 days before Defendants removed, but MySpine claims that it was not the 19 first time Defendants learned of the alleged new damages, because the interrogatory at 20 issue in the relevant portion of the motion to compel came nearly three months sooner, in 21 August. Ultimately, the court will not resolve that contention. As noted, MySpine failed 22 to cite the actual interrogatory, and the court will not sift through the several-thousand- 23 page record of the state court litigation (Dkt. # 4) in search of its text. MySpine also cites 24 an email it sent (more than 30 days before removal) to Defendants’ counsel requesting 25 responses to its discovery requests, but that email contained no specific information about 26 the interrogatory at issue. Breskin Decl. (Dkt. # 25), Ex. 4. The court bypasses 27 28 ORDER – 5 1 MySpine’s evidentiary shortcomings as to the timeliness of removal, because 2 Defendants’ removal was invalid even if it was timely. To explain why, the court returns 3 again to the motion to compel. 4 C. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 There Is No Colorable Argument that MySpine’s Motion to Compel Announced a New Category of Damages. No reasonable attorney could have believed that MySpine’s motion to compel announced a new category of damages based on claims that USAA (as opposed to USAA General and USAA Casualty) had unlawfully reduced on claims from providers serving its insureds (as opposed to the insureds of USAA General and USAA Casualty). To begin, as the court has already noted, Defendants have not even attempted to explain how MySpine could recover damages flowing from USAA’s unlawful reductions without suing USAA. Defendants, who have strenuously resisted essentially every contention in the motion now before the court, would have the court believe that they accepted uncritically that MySpine could somehow recover damages based on USAA’s payments of claims arising from its own policies even though USAA is not a party to this suit. Defendants would also have the court believe that they formed that belief based on a single sentence from MySpine’s motion to compel. That sentence, stripped of every shred of context, states as follows: “Plaintiff filed this action as a class action on behalf of all Washington providers whose bills were reduced by USAA using an RF or RF_1 reason code.” A person reading that sentence alone might believe MySpine was seeking damages arising from payments made on claims under USAA polices. Of course, a person reading that sentence alone might also believe that USAA General and USAA Casualty policies were not at issue in this case. Attorneys are charged with reading sentences in context, and however imprecisely MySpine described its lawsuit in that sentence, Defendants knew that there was no support elsewhere for the notion that MySpine was seeking damages flowing from improper reductions on USAA PIP claims. MySpine’s complaint does not seek those damages, and Defendants do not contend 27 28 ORDER – 6 1 otherwise. Indeed, Defendants point to nothing beyond that single sentence (and 2 MySpine’s failure to expressly disavow, without any prompting from Defendants, the 3 meaning that Defendants purportedly ascribed to it) to support their theory that they 4 learned of a new theory of damages when MySpine filed its motion to compel. 5 Defendants do not address the remainder of the motion to compel, wherein MySpine 6 explained its theory that reductions made on USAA policies (as well as “Garrison 7 Property & Indemnity” policies) were relevant because they were made by the same 8 group of adjusters who made the reductions at issue in this case, which helped prove not 9 only the existence of the reduction practice, but helped demonstrate the public interest 10 impact that the Washington Consumer Protection Act requires. 1 They do not explain 11 why they never, so far as the record reveals, inquired of MySpine whether it or the 12 putative class intended to seek damages based on damages flowing from USAA policies. 13 Even if the court were to strain mightily to assume, for the sake of argument, that 14 Defendants genuinely believed that MySpine’s motion to compel announced a new 15 category of damages, Defendants would have no more legitimate basis for removal. By 16 relying on the motion to compel as the “other paper” that first announced that basis for 17 removal, they admit that the new category of damages was not previously part of the 18 case. To make the new damages category part of the case, MySpine would have to 19 amend its complaint. Virtually every court to consider the issue has held that a case is 20 not removable based on the new portions of an amended complaint until the state court 21 issues an order allowing that complaint to be filed. Sullivan v. Conway, 157 F.3d 1092, 22 1 27 The removability of a case is judged at the time of removal, Allen v. FDIC, 710 F.3d 978, 984 (9th Cir. 2013), so the court has not considered MySpine’s express disavowal of any damages based on USAA’s improper reductions on claims involving its insureds. E.g., Pltf.’s Reply (Dkt. # 34) at 3 (noting that the complaint “limited the class claims to Casualty and General PIP claims”). Defendants complain repeatedly, as they did when they removed the first time, that MySpine’s counsel’s practice is to minimize damages while seeking remand only to attempt to expand damages once a case has returned to state court. As the court stated the first time, there is nothing this court can do about that. Jul. 10, 2013 ord. at 2. The court, unlike Defendants, has faith that the state court (prompted by Defendants’ tireless advocacy) will ensure that MySpine does not succeed by making inconsistent representations to different courts. 28 ORDER – 7 23 24 25 26 1 1094 (7th Cir. 1998); Freeman v. Blue Ridge Paper Prods, Inc., 551 F.3d 405, 410 (6th 2 Cir. 2008); Lion Raisins, Inc. v. Fanucchi, 788 F. Supp. 2d 1167, 1172-73 (E.D. Cal. 3 2011) (noting absence of Ninth Circuit authority, adopting view that order permitting 4 amended pleading, not the request to amend, is the trigger for removal); Svoboda v. Smith 5 & Nephew, Inc., 943 F. Supp. 2d 1018, 1020-22 (E.D. Mo. 2013) (surveying courts 6 nationwide, noting majority and minority views). Surely Defendants, who have opposed 7 MySpine vigorously throughout this litigation, would have insisted that a “new” category 8 of damages worth millions of dollars required an amended pleading. Defendants had no valid reason to remove this action a second time. The court 9 10 reaches that conclusion solely by rejecting Defendant’s contention that MySpine’s 11 motion to compel announced a new category of damages based on USAA’s improper 12 actions with respect to claims under its insurance policies. That makes it unnecessary to 13 consider MySpine’s numerous other attacks on Defendants’ notice of removal, including 14 its contentions that even with the new USAA-based damages, the amount in controversy 15 does not exceed $5,000,000. 16 D. 17 18 19 20 21 22 23 24 25 26 The Court Awards MySpine Its Reasonable Attorney Fees and Expenses For Obtaining Remand and Imposes Sanctions Payable to the Court. When a court remands an improperly removed action, it “may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). In general, a court should make an award under this provision “only where the removing party lacked an objectively reasonable basis for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). This is just such a case. The court accordingly orders Defendants to pay the reasonable attorney fees and reasonable expenses MySpine incurred in obtaining a remand of this case. The parties shall meet and confer to determine if they can agree on a payment. If they do so, they shall file a statement in this court (which will retain jurisdiction for purposes of finalizing a fee and expense award) no later than July 3, 2014. If they are unable to 27 28 ORDER – 8 1 agree, MySpine may file a motion for attorney fees and expenses by the same deadline. 2 The court will sanction any party who takes an unreasonable position in support of or in 3 opposition to that motion. 4 What remains is MySpine’s separate motion for sanctions, which invokes Federal 5 Rule of Civil Procedure 11, 28 U.S.C. § 1927, and the court’s inherent power as bases for 6 the court to impose a “fine[] [of] $35,000 in fees, costs and sanctions.” Mot. for 7 Sanctions at 12. MySpine does not explain what fees and costs are at issue beyond those 8 that it will already recover via 28 U.S.C. § 1447(c), nor does it explain why it chose 9 $35,000, as opposed to another figure, as the amount of the award. The court assumes, 10 therefore, that MySpine seeks a $35,000 award purely as a sanction for Defendants’ 11 improper removal and as a deterrent to similar future conduct. MySpine’s motion relies 12 not only on the lack of a legal basis for removal, but on a blow-by-blow description of 13 Defendants’ conduct in seeking removal the first time and its misconduct in state court, 14 including an allegation that Defendants removed this case to avoid producing discovery 15 that the state court had ordered just before removal and to avoid a string of losses on 16 motions in state court. Defendants respond with their own account of events, wherein it 17 is MySpine who was on a losing streak in state court (a losing streak that would suggest 18 that Defendants would want to remain in state court), and MySpine who engaged in 19 litigation misconduct. The court dislikes refereeing such squabbles in disputes in its own 20 court; it will not do so for dispute in another court. The court is confident that the state 21 court will impose sanctions on remand if they are appropriate. 22 Each of the bases for sanctions that MySpine announces requires an exercise of 23 the court’s discretion. Pacific Harbor Capital, Inc. v. Carnival Air Lines, Inc., 210 F.3d 24 1112, 1117 (9th Cir. 2000) (reviewing sanctions imposed under § 1927 and court’s 25 inherent power); Sneller v. City of Bainbridge Island, 606 F.3d 636, 638 (reviewing Rule 26 11 sanctions). In exercising that discretion, the court starts with Defendants’ objectively 27 28 ORDER – 9 1 baseless removal. Although sanctions are an extraordinary measure, the court agrees 2 with MySpine to the extent it notes that the court ought to discourage Defendants and any 3 similarly-situated defendant from derailing a state court action on a frivolous basis. The 4 court also notes the strong possibility that Defendants removed not because they 5 legitimately believed they had a right to federal forum, but simply for the purpose of 6 delay or other tactical gain. The court does not believe Defendants’ counsel to be 7 incompetent, and therefore concludes that counsel knowingly filed a frivolous notice of 8 removal for reasons other than ultimately having this dispute decided in federal court. 9 That is egregious. Mitigating against sanctions is that the only specific finding of 10 misconduct the court will make is that Defendants knowingly filed a legally and factually 11 unsupported notice of removal for an improper purpose, and continued that misconduct in 12 opposing MySpine’s motion for remand. Beyond that specific finding, court does not 13 believe that combing through the parties’ competing assertions of bad conduct and bad 14 motives is likely to reveal a picture of anything except a litigation in which the parties’ 15 relationship has deteriorated well beneath the standards of civility that this court imposes 16 on the parties who appear before it. The court’s prior orders already expressed its 17 disappointment in both parties for their approach to litigating this matter after 18 Defendants’ first removal. Jul. 10, 2013 ord. at 2 (“Were the court’s resources infinite, it 19 might engage in its own inquiry, to determine how to apportion fault among Plaintiff and 20 Defendants for this eight-month detour. It is hard to imagine that anybody, the parties, 21 the putative class, this court, or the state court, has benefitted from that detour.”). In 22 addition, the court will not impose a sanction award based on Defendants’ choice to 23 remove this litigation the first time. MySpine could have requested sanctions at that time, 24 and the court will not consider a belated request for conduct that previously went 25 unmentioned. 26 27 28 ORDER – 10 1 Considering all of these factors, the court imposes a sanction of $5,000, payable 2 into the registry of this court. It does so because it concludes that Defendants violated at 3 least three of Rule 11’s prohibitions, which include prohibitions on filing documents that 4 raise claims for an improper purpose or based on unsupported legal or factual 5 contentions. Fed. R. Civ. P. 11(b)(1)-(4) (listing sanctionable conduct); see also Fed. R. 6 Civ. P. 11(c)(1) (permitting imposition of sanctions on “any attorney, law firm, or party 7 that violated the rule”). The court imposes that sanction both to punish Defendants’ 8 egregious conduct and to acknowledge that Defendants have made demands on this 9 court’s limited resources for no legitimate purpose. The court orders the payment into 10 the court’s registry, rather than to MySpine, because MySpine will already be 11 compensated for its efforts in obtaining remand, and because the court believes that 12 making the award payable to MySpine would be an unjustified windfall. The court notes 13 that it is the state court who likely suffers the greatest damage from Defendants’ 14 shenanigans, and the court’s decision not to impose a greater sanction acknowledges that 15 a sanctions award in this court cannot remedy the harm done to the state court. 16 The court imposes the sanction on “Defendants” generically. The court expects 17 that the Defendants and their counsel will be able to decide amongst themselves who was 18 responsible for the decision to remove this case this time. 19 Defendants shall make their sanctions payment into the registry of this court, they 20 shall do so no later than July 3, 2014, and they shall file proof of their payment by the 21 same deadline. IV. CONCLUSION 22 23 For the reasons stated above, the court GRANTS MySpine’s motion to compel 24 (Dkt. # 24), and directs the clerk to REMAND this action to King County Superior Court. 25 The court GRANTS MySpine’s motion for sanctions (Dkt. # 31) solely to the extent 26 described above. The court retains jurisdiction to finalize its award of attorney fees and 27 28 ORDER – 11 1 expenses and to confirm Defendants’ payment of sanctions. That payment, along with 2 the parties’ joint statement or MySpine’s motion for fees and expenses, is due no later 3 than July 3, 2014. 4 DATED this 23rd day of June, 2014. 5 7 A 8 The Honorable Richard A. Jones United States District Court Judge 6 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER – 12
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