Veneruso v. Mount Vernon Neighborhood Health Center
933 F. Supp. 2d 613
S.D.N.Y.2013Background
- CCHP is a New York not-for-profit corporation formed for charitable purposes; it underwent dissolution under NPCL Article 11 with a temporary receiver appointed by the NY Attorney General.
- CCHP directors and funds allegedly distributed $1,976,000 to Mount Vernon and Sound Shore (the Surplus Distributions) between 2003 and 2005; the AG views these distributions as improper under NPCL § 515 and seeks repayment.
- Plaintiff filed suit in NY Supreme Court seeking to recover the Surplus Distributions, asserting three NY law claims: declaratory judgment that distributions were unlawful under § 515(a), unjust enrichment, and money had and received.
- Mount Vernon removed the case to federal court, arguing federal jurisdiction based on complete preemption, substantial federal questions, federal funds, and federal corporate status.
- Plaintiff moved to remand; the NY AG joined as amicus; the court granted remand and denied attorneys’ fees.
- The court analyzes removal standards, artful pleading limits, complete preemption, substantial federal question doctrine, and federal versus state interests before remanding to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Complete preemption applies? | Plaintiff argues NPCL § 515(a) is not completely preempted by federal law. | Mount Vernon contends federal Medicaid framework completely preempts state claims. | Not completely preempted; remand proper. |
| Grable substantial federal question present? | Grable basis not necessary since state claims arise under NY law with no federal question. | Plaintiff’s claim necessarily raises federal Medicaid issues that are substantial. | No substantial federal question; Grable does not apply. |
| Removal grounded on federal funds or federal corporation status? | State claims involve funds governed by federal program; potential federal control justifies removal. | Mount Vernon is not a federal corporation and federal funds do not automatically confer jurisdiction. | Mount Vernon is not a federal corporation; §1349/§1442 jurisdiction not established. |
| Attorney’s fees on remand warranted? | Removal was improper; fees should be awarded. | Removal arguable but not frivolous; fees not compelled. | Attorneys’ fees denied; discretionary remand costs only. |
Key Cases Cited
- Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983) (well-pleaded complaint rule and limits on federal-question jurisdiction)
- Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005) (three-part test for federal-question jurisdiction in state-law claims)
- Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804 (1986) (limitations on federal-question jurisdiction requiring substantial federal issues)
- Sullivan v. Am. Airlines, Inc., 424 F.3d 267 (2d Cir.2005) (complete preemption doctrine governs removal in extraordinary cases)
- City of New York v. Verizon Commc’ns, Inc., 331 F. Supp. 2d 222 (S.D.N.Y. 2004) (declaratory-judgment context does not create federal jurisdiction over preemption defenses)
- In re Oxycontin Antitrust Litig., 821 F. Supp. 2d 591 (S.D.N.Y. 2011) (Grable’s slim category and limits in antitrust/state-law contexts)