Lax v. APP of New Mexico ED, PLLC
1:20-cv-00264
D.N.M.Oct 5, 2020Background
- Plaintiffs (former Lovelace patients) filed a putative class action in New Mexico state court alleging APP overbilled insured New Mexico residents for emergency services at Lovelace facilities. The class was defined by New Mexico residents billed more than their insurer’s in‑network amount (2016–2020).
- Defendant APP removed under CAFA; Lovelace consented to removal. Plaintiffs moved to remand arguing (1) defendants failed to show >$5,000,000 in controversy and (2) the CAFA local‑controversy exception applies.
- APP submitted an affidavit (McQueen) reporting ~10,900 out‑of‑network accounts sent to collections from 2016–2018 with average balances ~ $1,000, totaling well over $5,000,000. Plaintiffs countered that recoverable damages are only the overbilled portion, and McQueen’s figures include uninsured, out‑of‑network, and non‑New Mexico patients who cannot recover under the class definition.
- Applying Tenth Circuit precedent (Frederick and Hammond), the court concluded it is legally possible a factfinder could award damages for the full group identified by McQueen; the court multiplied a 75.4% overbilling rate (derived from named plaintiffs) by the 10,900 accounts and found compensatory damages likely exceed $8 million, satisfying the $5M CAFA threshold.
- The court found Plaintiffs failed to prove the local‑controversy exception because they defined the class by residence (not citizenship) and submitted no evidence showing >2/3 of class members are New Mexico domiciliaries; however, the court granted Plaintiffs limited discovery on class citizenship and took the remand motion under advisement.
- The court stayed consideration of Lovelace’s pending Rule 12 motions until the remand question is resolved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Amount in controversy under CAFA (> $5M) | McQueen’s totals are overbroad; Plaintiffs seek only overcharges and only for New Mexico residents with in‑network plans, so the $5M threshold is not met. | McQueen’s affidavit shows thousands of out‑of‑network accounts with ~ $1,000 average balances; using the named plaintiffs’ average overcharge percentage yields > $8M in controversy; plaintiff’s complaint estimate is not binding. | Held: Defendant met burden by a preponderance; under Hammond it is legally possible all identified accounts could be class members; compensatory damages plausibly exceed $5M. |
| CAFA local‑controversy exception (two‑thirds domiciliary requirement) | Class limited to New Mexico residents implies New Mexico citizenship; commonsense presumption should satisfy the two‑thirds domiciliary requirement. | Residence does not automatically prove domicile; plaintiffs must present evidence that >2/3 are New Mexico citizens. | Held: Plaintiffs failed to prove >2/3 are New Mexico domiciliaries because the class was defined by residence and no citizenship evidence was supplied; exception not established. |
| Discovery on class citizenship | Plaintiffs asked for limited discovery into class members’ citizenship to meet local‑controversy element. | Defendants implicitly opposed further jurisdictional discovery at this stage. | Held: Court authorized limited discovery on class citizenship and left the remand motion under advisement pending that discovery. |
Key Cases Cited
- Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242 (10th Cir. 2012) (defendant bears preponderance burden on amount in controversy; complaint’s damage statement not dispositive)
- Hammond v. Stamps.com, Inc., 844 F.3d 909 (10th Cir. 2016) (amount in controversy requires what a factfinder might legally conclude; defendants need not disaggregate unlikely class members)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. 2003) (guidance on punitive damages proportionality and due process)
- Dyer v. State Farm Mut. Auto. Ins. Co., 19 F.3d 514 (10th Cir. 1994) (residence as prima facie evidence of domicile is limited in CAFA context)
- In re Sprint Nextel Corp., 593 F.3d 669 (7th Cir. 2010) (court rejected commonsense assumption about citizenship from mailing addresses/phone numbers; suggested representative sampling or class‑by‑citizen definition)
- Lovell v. State Farm Mut. Auto. Ins. Co., 466 F.3d 893 (10th Cir. 2006) (equitable relief and disgorgement may be considered in amount‑in‑controversy analysis)