Haith ex rel. Accretive Health, Inc. v. Bronfman
928 F. Supp. 2d 964
N.D. Ill.2013Background
- Plaintiffs Haith and Goodwin, Accretive Health shareholders, filed state-law derivative actions in Illinois against the company’s directors and officers.
- Defendants removed the actions to federal court arguing Grable-branch “arising under” jurisdiction, and plaintiffs moved to remand.
- Delaware internal affairs law governs the derivative claims; Haith asserts multiple counts (fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste) and Goodwin asserts one fiduciary-duty count.
- Demands on the board were not made; plaintiffs claim futility, citing Delaware law on demand futility.
- A related case, MAURRAS REVOCABLE TRUST v. BRONFMAN, 12 C 3395, involves the same group and asserts jurisdictional issues; MAURRAS is in diversity, unlike these cases.
- Court addressed whether the claims arise under federal law and, if not, whether to remand; court ultimately remanded and denied fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the state-law claims arise under federal law | Plaintiffs contend Grable/Gunn permit federal review given the federal-law questions embedded in the claims. | Defendants argue Grable applies because HIPAA, HITECH, FDCPA, and securities laws are central and substantial. | No arising-under jurisdiction; federal issues not substantial to the federal system. |
| Whether to decide demand futility before remand (Rule 23.1 threshold issue) | Rule 23.1 pleads demand futility; but remand should proceed prior to threshold merits issues. | Threshold demand-futility issue should be decided first as a barrier to standing. | Remand granted; threshold demand futility not a jurisdictional bar; Grable remand controls. |
| Whether attorney’s fees should be awarded under 28 U.S.C. § 1447(c) | Plaintiffs seek fees for improper removal. | Removal reasonable given unsettled Grable framework at removal time. | Fees denied; removal was objectively reasonable given the then-unclear law. |
Key Cases Cited
- Grable & Sons Metal Prod. v. Darue Eng’g & Mfg., 545 U.S. 308 (Supreme Court, 2005) (establishes standard for arising-under jurisdiction)
- Gunn v. Minton, 133 S. Ct. 1059 (Supreme Court, 2013) (refines Grable's substantiality and federal-law-subjects in state claims)
- Smith v. Kansas City Title & Trust Co., 255 U.S. 180 (Supreme Court, 1921) (classic example of a state claim arising under federal law)