108 F. Supp. 3d 632
S.D. Ind.2015Background
- In 2006 FSSA contracted with IBM to administer Indiana Medicaid; Seth Land received Medicaid but had benefits terminated in 2009 and subsequently injured his mother.
- Plaintiff (Sharon Land) sued in federal court in 2011 naming IBM and Anne Murphy (individually and as FSSA Secretary); §1983 claims were dismissed and the court declined supplemental jurisdiction over state-law claims; the Seventh Circuit affirmed.
- In 2014 Land refiled in Marion Superior Court naming IBM, the FSSA, and the State of Indiana; IBM removed to federal court asserting federal-question and diversity jurisdiction and claiming FSSA/State were fraudulently joined.
- Land moved to remand; the Magistrate Judge recommended remand, concluding the FSSA was properly joined because Indiana’s Journey’s Account Statute (JAS) likely preserved Land’s timely claim.
- The district court adopted the R&R, held it lacked both federal-question and diversity jurisdiction (FSSA’s citizenship defeats diversity), and remanded the case to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state-law negligence claims present a substantial federal question | Land: claims are state-law negligence and do not require federal-law interpretation | IBM: Medicaid is governed by federal law and the claims implicate substantial federal issues under Grable | Court: No — claims do not necessarily require interpreting federal law; Grable does not apply |
| Whether the prior federal-court dismissal/declination bars relitigation of jurisdiction (law of the case / waiver) | Land: prior dismissal and refusal to exercise supplemental jurisdiction establish no federal jurisdiction; IBM should have cross-appealed | IBM: issue was not litigated before; court may decide subject-matter jurisdiction now | Court: Law-of-the-case and waiver arguments fail; court may reassess jurisdictional issues now |
| Whether the FSSA (and State) were fraudulently joined for removal purposes (diversity) | Land: FSSA was effectively sued earlier via official-capacity claims; JAS saves her timely claim so FSSA was properly joined | IBM: claims against FSSA/State are time-barred, so their joinder is fraudulent and diversity exists | Court: FSSA was not fraudulently joined because JAS likely preserves the claim and FSSA had notice/opportunity to respond; diversity destroyed |
| Whether Indiana’s Journey’s Account Statute (JAS) preserves Land’s claims after dismissal without prejudice | Land: original federal complaint was timely and dismissal without prejudice is a "failure in the action," so JAS permits refiling within 3 years | IBM: JAS does not apply where parties/defendants change on refiling | Court: JAS likely applies — official-capacity suit against Murphy is treated as suit against FSSA (entity had notice and defended) — so JAS plausibly saves the claims |
Key Cases Cited
- Morris v. Nuzzo, 718 F.3d 660 (7th Cir. 2013) (fraudulent-joinder doctrine protects defendants’ removal right)
- Poulos v. Naas Foods, Inc., 959 F.2d 69 (7th Cir. 1992) (heavy burden on removing defendant to show no reasonable possibility of recovery against in-state defendant)
- Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d 752 (7th Cir. 2009) (removal statute construed narrowly; doubts resolved for remand)
- Grable & Sons Metal Prods. v. Darue Eng’g & Mfg., 545 U.S. 308 (U.S. 2005) (federal-question jurisdiction when state claim necessarily raises substantial federal issue)
- Banks v. Secretary of Ind. Family & Soc. Servs. Admin., 997 F.2d 231 (7th Cir. 1993) (federal courts may consider wrongful denial of Medicaid benefits where federal rights are implicated)
- Crawford v. City of Muncie, 655 N.E.2d 614 (Ind. Ct. App. 1995) (official-capacity claims are effectively suits against the entity)
- Guzorek v. Porter County Sheriff Dept., 857 N.E.2d 363 (Ind. 2006) (notice to governmental entity may be imputed when entity provides counsel and opportunity to defend)
- Eads v. Community Hosp., 932 N.E.2d 1239 (Ind. 2010) (application of JAS depends on whether parties, facts, and causes of action remain the same)