CHAN HEALTHCARE GROUP, PS, a Washington professional services corporation, Plaintiff-Appellee/Respondent, v. LIBERTY MUTUAL FIRE INSURANCE CO.; LIBERTY MUTUAL INSURANCE COMPANY, foreign insurance companies, Defendants-Appellants/Petitioners.
Nos. 16-35210, 16-80019
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
Filed January 3, 2017
Before: M. Margaret McKeown, Richard C. Tallman, and Morgan B. Christen, Circuit Judges. Opinion by Judge McKeown
D.C. No. 2:15-cv-01705-RSM.
SUMMARY*
Removal / Remand
The panel (1) dismissed a petition for permission to appeal the district court‘s remand order in a class action case founded on federal question jurisdiction and (2) vacated the district court‘s order granting attorneys’ fees.
Joining the Fifth, Sixth, and Eighth Circuits, the panel held that the interlocutory review provision set forth in the Class Action Fairness Act,
The panel vacated the district court‘s award of attorneys’ fees to the plaintiff under
COUNSEL
Joshua S. Lipshutz (argued) and Joseph C. Hansen, Gibson Dunn & Crutcher LLP, San Francisco, California; Russell R. Yager, Vinson & Elkins LLP, Dallas, Texas; John M. Silk, Wilson Smith Cochran Dickerson, Seattle, Washington; for Defendants-Appellants/Petitioners.
David Elliott Breskin (argued) and Cynthia J. Heidelberg, Breskin Johnson & Townsend PLLC, Seattle, Washington, for Plaintiff-Appellee/Respondent.
OPINION
McKEOWN, Circuit Judge:
This consolidated appeal presents an issue of first impression in our circuit, namely the scope of appellate jurisdiction to review a district court‘s remand order in a class action case founded on federal question jurisdiction. Remand orders are not appealable as a matter of course.
Background
This case has a long and tortured procedural history that spans a series of interrelated lawsuits. One player is central to the action: attorney David Breskin, who represented plaintiff Dr. David Kerbs in previous rounds of litigation and who represents Chan Healthcare Group, PS (“Chan“) in two ongoing disputes, including this one.
Breskin got things going in 2010. On May 13 of that year, he filed a putative class action on behalf of Dr. Kerbs in Washington state court against defendants Safeco Insurance Company of Illinois, Inc. and Safeco Insurance Company of America (collectively “Safeco“). Dr. Kerbs alleged that Safeco violated Washington law by using a computerized bill-review system that automatically reduced the amounts paid to medical providers pursuant to Personal Injury Protection coverage in automobile insurance contracts. The superior court certified a class of “Washington health care providers who, from May 13, 2006, through March 31, 2011, submitted [claims] to Safeco for payment” under their patients’ Personal Injury Protection policies and received “less than the amount billed based solely on a [computerized] reduction.”
In May 2012, Dr. Kerbs and Safeco reached a class-wide settlement agreement in which Safeco agreed to pay the class members for Safeco‘s past conduct. As to future claims, Safeco agreed, among other things, to stop using the computerized bill-review system and start using the “FAIR Health database” to determine the proper amount of reimbursement. In approving the settlement, the superior court explained that the use of the FAIR Health database “does not, in and of itself, breach any duty or obligation under any applicable law or contract requiring Safeco to pay or reimburse ‘usual and customary’ or ‘reasonable’ charges for Covered Treatments.”1
In 2014, the drama continued in another state: Lebanon Chiropractic Clinic, P.C. (“Lebanon“) commenced a separate class action lawsuit—based on the same allegedly improper reductions of reimbursements to medical providers—in Illinois state court against Safeco and its parent, Liberty Mutual Fire Insurance Company and Liberty Mutual Insurance Company (collectively, “Liberty“). Lebanon Chiropractic Clinic, P.C. v. Liberty Mut. Ins. Co., No. 5-15-0111, 2016 WL 546909, at *1 (Ill. App. Ct. Feb. 9, 2016). This new case—filed without Breskin‘s involvement—was not limited to one state, but instead challenged Safeco‘s and Liberty‘s review and payment practices in multiple states, including both Illinois and Washington. See id. at *2.
In October 2014, Lebanon, Safeco, and Liberty reached a settlement agreement eerily similar to the one reached in the earlier Washington state case. Like the settlement in the Kerbs case, “with regard to future claims, Liberty agreed to implement certain measures, such as the continued use of the FAIR Health database.” Id. at *3. After preliminary approval of the settlement agreement, Breskin reentered the scene.
Breskin, on behalf of Dr. Kerbs, objected to the settlement, contending that the
This history provides the necessary backdrop to understanding the appeal before us. While the Lebanon appeal in Illinois was still pending, Breskin filed two new offensive class action lawsuits in Washington state court. The first, filed in August 2015, was filed on behalf of Chan against Safeco (the Safeco case). The second, filed in early September 2015, was filed on behalf of Chan against Liberty and is the case on appeal to us (the Liberty case). The complaints make similar allegations that Safeco‘s and Liberty‘s use of the FAIR Health database to set reimbursement amounts violates various Washington statutes. All parties agree that, on the face of the complaint in the Liberty case, there was no basis for federal jurisdiction.
Liberty asserts that things changed when Chan filed its reply brief on its motion for declaratory relief. In the initial motion, filed on October 2, 2015, Chan sought a declaratory judgment that the Illinois settlement was unenforceable in Washington. After Liberty responded that it “might elect simply to forego raising Lebanon as a defense in this case,” Chan argued in its October 26, 2015 reply that “the Lebanon agreement could not be applied to bar Chan‘s Washington [state law] claim against [Liberty] consistent with Chan‘s due process rights.”
On the basis of Chan‘s reply brief, Liberty removed the case to federal court two days later, on October 28, 2015. Liberty explained that Chan‘s reply brief revealed that Chan was raising a standalone federal due process claim, thus creating federal question jurisdiction under
Based on various papers received and filings made in this case and other cases more than thirty days before Liberty removed, Chan challenged the timeliness of Liberty‘s removal. Chan also argued that there was no federal question jurisdiction because its federal due process claim was not raised as an affirmative claim, but instead in response to Liberty‘s assertion of the Illinois settlement as a defense.
The district court granted Chan‘s motion to remand the case to state court based solely on the ground that removal was untimely. The court explicitly declined to reach whether federal question jurisdiction was present. The court also awarded fees to Chan, in the amount of $18,330.00, after finding that Liberty “had no objectively reasonable basis for removal, particularly given defense counsel‘s involvement with the related cases and their acknowledgments about the Chan motions made to the court in the Illinois appeal.”
Analysis
I. Jurisdiction to Review the Merits of the Remand Order
The default rule on remand orders is that “[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.”
At issue here is a congressional carve-out of appellate jurisdiction that was adopted for class action cases as part of CAFA. Section 1453(c)(1), entitled Review of Remand Orders, provides that, when a case is removed “under this section,” “a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action.”
To understand the genesis of the appeal provision and its place in the statutory structure, it is important to review the multiple provisions adopted as part of CAFA, particularly
To pave the way for class action cases to get into federal court, Congress also enacted a new removal provision,
Section 1453(c) is designed to provide a limited means, subject to strict timing controls on
In examining the scope of appellate jurisdiction under
We start with
Subsection (b) of
A class action may be removed to a district court of the United States in accordance with section 1446 (except that the 1-year limitation under section 1446(c)(1) shall not apply), without regard to whether any defendant is a citizen of the State in which this action is brought, except that such action
may be removed by any defendant without the consent of all defendants.3
Finally, in subsection (c), the statute spells out particularized requirements for appellate review:
Section 1447 shall apply to any removal of a case under this section, except that notwithstanding section 1447(d), a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not more than 10 days after entry of the order.
Notably, this subsection circumscribes its applicability to a case removed “under this section,” presumably meaning
In our view,
Construing “under this section” as a reference to
An even stronger textual basis for reading
In particular,
That the final proviso in
Finally,
CAFA‘s legislative history supports our conclusion that the limited grant of appellate review is tied to CAFA‘s minimal diversity provisions. See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 568 (2005) (explaining that the potential for unreliability of legislative history means that it cannot override statutory text, but noting that it may still inform the analysis). The Senate Report indicates that “[t]he purpose of [§ 1453(c)] is to develop a body of appellate law interpreting the legislation without unduly delaying the litigation of class actions.” S. Rep. No. 109-14, at 49 (2005); see also id. (encouraging appellate courts to “create a . . . body of clear and consistent guidance for district courts that will be interpreting this legislation” by “review[ing] cases that raise jurisdictional issues likely to arise in future cases“). References to “this legislation” are clearly directed to the CAFA legislation, whose additions relate almost entirely to the minimal diversity class actions. Our reading accords with what the Supreme Court has characterized as CAFA‘s “primary objective“: “[f]ederal court consideration of interstate cases of national importance.” Knowles, 133 S. Ct. at 1350 (emphasis added) (citation omitted). Indeed, the particular concerns motivating CAFA were not attendant to class actions pleading a federal question because those cases could already be removed to federal court under
Although our court has not previously addressed the precise issue here, we have confronted the question whether there is appellate jurisdiction over a non-CAFA issue that was decided in an order independently appealable under
In reaching our conclusion, we are in good company. The Fifth, Sixth, and Eighth Circuits have all concluded that the review provisions of
Because we lack jurisdiction to review the district court‘s remand order in this class action predicated on federal question jurisdiction, we dismiss Liberty‘s petition for permission to appeal.
II. District Court‘s Fee Award
We next turn to the district court‘s award of fees to Chan, which we have jurisdiction to review under
It is undisputed that the initial pleading did not provide a basis for removal (there being no basis for federal question jurisdiction under
Chan‘s October 26, 2015 reply brief was the first filing in the present case that referenced a due process claim. Chan relies on three earlier events (all of which occurred more than thirty days before Liberty filed its notice of removal) which Chan says started the clock by putting Liberty on notice that Chan would raise a federal due process claim. First, Chan points to a similar motion that was filed on September 8, 2015, in the Safeco case, in which Safeco has the same counsel as Liberty. Second, Chan points to an email exchange on September 17, 2015 between its counsel and Liberty‘s counsel agreeing to hear the declaratory judgment motion in the Liberty case together with the similar motion in the Safeco case. Finally, Chan points to Dr. Kerbs‘s September 25, 2015 request for an extension of time in the pending Illinois appellate court case, where he referred to the motions made in the Safeco and Liberty cases. The district court agreed with Chan and explained that “the September 8th, 17th and 25th documents, collectively, constitute ‘other’ papers from which it could be ascertained that the case was removable on the basis of a federal question.” We reject this approach to notice because it runs afoul of our precedent and would place a burden on defendants to read the tea leaves and anticipate claims where none have been asserted.
The September 17 email exchange from Chan to Liberty‘s counsel discussed having a consolidated hearing on the nearly identical declaratory judgment motions against Safeco and Liberty. This communication about combining proceedings did not somehow import into the Liberty case the federal claim that was actually raised in the Safeco case.
More fundamentally, all of the documents fail to trigger the time limit because they are not “other paper[s] from which it may first be ascertained that the case is one which is or has become removable.”
Section 1446(b) is triggered upon “the receipt by the defendants of a paper in the action from which removability may be ascertained.” Eyak Native Vill. v. Exxon Corp., 25 F.3d 773, 779 (9th Cir. 1994) (emphasis omitted). For obvious reasons, “we don‘t charge defendants with notice of removability until they‘ve received a paper that gives them enough information to remove.” Durham, 445 F.3d at 1251. Because the focus remains on whether the case “is or has become removable,” counsel‘s clairvoyant sense of what actions a plaintiff might take plays no role in the analysis. See Kuxhausen v. BMW Fin. Servs. NA LLC, 707 F.3d 1136, 1141–42 (9th Cir. 2013). Under this approach, a defendant is not put to the impossible choice of subjecting itself to fees and sanctions by filing a premature (and baseless) notice of removal or losing its right to remove the case by waiting too long. See Durham, 445 F.3d at 1251.
In contrast to the documents referenced by the district court, Chan‘s reply brief—which explicitly referenced due process—was filed in this litigation on October 26, 2015. We have explicitly held that a reply brief can constitute an “other paper” for purposes of
Because Liberty‘s notice of removal was not untimely, Liberty‘s arguments on that score were objectively reasonable. Untimeliness was the sole basis for the district court‘s fee award—the court did not reach the question whether federal question jurisdiction exists or whether Liberty‘s arguments on that ground were objectively reasonable, nor do we take a position on these issues. We vacate the district court‘s fee award and remand the case for proceedings consistent with this opinion.
PETITION FOR PERMISSION TO APPEAL DISMISSED; ORDER GRANTING FEES VACATED AND REMANDED.