Patient Care, Inc. v. FreemanPatient Care, Inc. v. Freeman
OPINION
This matter comes before the Court on the third-party defendant’s motion for summary judgment. The defendants/third-party plaintiffs, however, have raised a substantial objection to this Court’s jurisdiction to hear this case. I have concluded, after careful consideration, that while a third-party defendant is not precluded from removing the claim against it to federal court, in this case removal was improper because the third-party claim for indemnification is not “separate and independent” from the main cause of action against the defendants. Therefore, this Court lacks jurisdiction over the case and the matter must be remanded to state court, from where it was improvidently removed.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Patient Care, Inc. (“Patient Care”) initiated this lawsuit in the New Jersey Superior Court. In its complaint, plaintiff sued defendants Martin Freeman and Esther Fried for a sum of money allegedly owed for certain medical services provided for Mr. Freeman. The amount in controversy did not exceed $50,000, and there was no allegation that the citizenship of the parties was diverse. All of the claims in the complaint were based on ordinary state law causes of action. In short, as originally filed, there was no conceivable basis for federal subject matter jurisdiction over the case.
In response to the complaint, defendants filed an answer which denied the allegations in the complaint and raised certain defenses. In addition, as part of the same pleading, defendants brought a third-party complaint against third-party defendant Employee Benefit Management Corporation (“EBMC”). In their third-party complaint, defendants alleged that they were entitled to benefits under a group medical benefits plan, operated by EBMC, which would have covered the costs of the services for which they were being sued by Patient Care. Defendants sought indemnification from EBMC for any judgment plaintiff might obtain against them, and they brought separate claims against EBMC for the latter’s alleged failure to provide benefits. All of defendants’ claims against EBMC were framed as state law causes of action.
EBMC responded to the third-party complaint by filing a notice of removal with this Court.
1
The purported basis for removal was that defendants’ claims, although framed as state law causes of action, were in fact preempted by the provi
EBMC thereafter moved for summary judgment on the third-party complaint, arguing that the insurance plan did not cover the services for which payment was sought. Defendants opposed the summary judgment motion on the merits, but also argued that this Court lacks jurisdiction because the case was improperly removed from state court. 3
The central issue raised by defendants’ attack on this Court’s jurisdiction, to which I now turn, 4 is whether, and if so, under what circumstances, a third-party defendant such as EBMC may remove a case to federal court.
DISCUSSION
More than thirty years ago a federal judge faced with the question of whether a third-party defendant could remove an action to federal court described the case law as a “field luxuriat[ing] in a riotous uncertainty.”
Harper v. Sonnabend,
While I have not attempted a comprehensive review of the case law,
5
it is apparently generally accepted that the majority
(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending....
(c) Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.
For those courts which would deny the right of removal to third party defendants, the point of departure for interpreting
The first textual argument is that whereas
The second, and somewhat weightier, textual argument is that
Perhaps more important than these textual arguments,
9
however, are the policy arguments against removal by third-party defendants. First, it is contended that it would be “rather drastic to force the plaintiff, whose choice of forum normally should be honored, to litigate in a federal court that he did not choose and one to which his adversary originally could not have removed.”
Lowe’s of Montgomery,
It seems anomalous to allow a party, whose jurisdictional attributes are irrelevant to the main claim, to remove the entire suit to another court. Removal on such a basis is too much akin to the tail wagging the dog.
Burlingham, Underwood, Barron, Wright & White v. Luckenbach Steamship Co.,
More importantly, it is argued, allowing removal by third-party defendants fails to show proper “respect for the limits of the federal judicial power.”
Lowe’s of Montgomery,
[N]ot only the language ofsection 1441(c) , but also considerations of federalism, militate against removal. To allow removal of an entire suit on the basis of a third-party claim is to bring into the federal court an action the main part of which is not within that court’s original jurisdiction, and is thus to enlarge federal at the expense of state jurisdiction in rather a dramatic way.
Thomas v. Shelton,
As noted, these various textual and policy arguments against removal by third-party defendants have commanded the support of a majority of the courts. Nonetheless, there is a substantial, and I think persuasive, counterattack by a significant minority of courts which have found removal
Next, the proponents of removal meet head on the argument, elaborated by Judge Poliak, that the reference to “defendants” in
ha[s] never voluntarily submitted itself to the jurisdiction of the state court. It was dragged into state court by service of process the same way that any other “defendant” is brought into court.... [It] is as much a defendant as if the case had been originally brought against it. [It] has been sued in the only meaningful sense of the word — it has been haled into court involuntarily and must defend an action for relief against it.
Ford Motor Credit,
Turning to policy considerations, proponents of removal first point out that denying removal to protect the plaintiffs choice of forum simply overlooks the third-party defendant’s equally important interest in having the federal claim against it heard in federal court.
See Thomas v. Shelton,
Likewise, where the third-party claim is one within the federal court’s subject matter jurisdiction, jurisdictional considerations would seem to militate in favor of allowing the claim to be removed. In a diversity case, removal is necessary to “give effect to the federal policy of protecting out-of-state litigants against local prejudice in the state courts.”
Ford Motor Credit,
Moreover, there is no reason why the plaintiffs choice of forum and the interest in avoiding an unwarranted expansion of federal jurisdiction cannot be protected by the district court’s exercise of its discretion to “remand all matters not otherwise within its original jurisdiction.”
Having said that, however, it should be noted that remanding non-removable claims is not unproblematic, which brings us to our final point. As mentioned earlier,
see supra
at 648 n. 9, the one common ground between proponents and opponents of third-party removal is that removal should only be allowed for claims that are, in the language of
Thus, for the foregoing reasons, I conclude that a third-party defendant may remove the claim against it to federal court, so long as that claim is “separate and independent” from the main cause of action. In this case, therefore, I conclude that the third-party defendant, EBMC, may remove the third-party claim against it if and only if that claim is “separate and independent” from Patient Care’s main cause of action against the defendants.
Defendants’ claim against EBMC is essentially one for indemnification for any judgment plaintiff might obtain against them. As on the question of third-party removal generally, so also on the question of whether a third-party claim for indemnification is “separate and independent,” the courts are split. Several courts have held that
no
claim for indemnification is “separate and independent” and therefore removal is always improper in such circumstances.
See, e.g., Thomas v. Shelton,
Even those courts which support third-party removal agree that a claim for indemnification is not “separate and independent” (and therefore not removable) if it is based on a claim that the third-party defendant caused the plaintiff’s injuries, e.g., as where the third-party defendant is alleged to be a joint tortfeasor.
See Marsh Investment Corp. v. Langford,
Despite the existence of some authority for this position, however, I find the distinction between the two types of indemnification claims to be untenable. In describing the “separate and independent” language of
More fundamentally, to allow removal of an indemnification claim based on a contractual obligation would defeat the entire purpose of the requirement that the claim be “separate and independent.” As explained above, this insures that the main action may be remanded to state court without subjecting the defendant/third-party plaintiff to potentially inconsistent judgments. However, that is precisely what would happen if the indemnification claim were severed and removed to federal court, because the third-party defendant would not be bound by any judgment in the state court finding the defendant/third-party plaintiff liable to the plaintiff for an indem-nifiable injury.
Consequently, I decline to follow the holding of the Fifth Circuit and conclude instead that any third-party claim for indemnification is not a claim “separate and independent” from the main action, and therefore is not removable by the third-party defendant under
CONCLUSION
For the foregoing reasons, I conclude that while a third-party defendant may remove a claim against it to federal court if it
Notes
. EBMC apparently purported to file its notice of removal within thirty (30) days after receipt of the third-party complaint. According to the notice of removal, EBMC was served with a copy of the third-party complaint on October 2, 1989. According to EBMC's certification of filing and service, the notice of removal was filed with this Court on November 1, 1989, just within the thirty (30) day time limit for removal prescribed by statute.
See
.Ordinarily, of course, under the well-pleaded complaint rule, a complaint raising only state law causes of action would not be held to "arise under” federal law, and thus would not be within the original jurisdiction of the federal district courts.
See Franchise Tax Board v. Construction Laborers Vacation Trust,
. Because defendants' objection to removal is based on an alleged jurisdictional defect, they have not waived their objections by failing to seek remand earlier in the proceedings.
See Gruber v. Hubbard Bert Karle Weber, Inc.,
. In their reply brief, EBMC suggests that "the removal issue be held in abeyance pending resolution of the summary judgment motion.” EBMC Reply Br. at 1 n. 1. This is inappropriate. If this Court lacks jurisdiction, any decision on EBMC’s summary judgment motion would be a nullity.
. For an extensive though by no means complete catalogue of cases on both sides of the issue,
see Ford Motor Credit Co. v. Aaron-Lincoln Mercury, Inc.,
. This fact obviously contributes to the dearth of appellate decisions on this issue. Where a district court determines that a case was improvidently removed and remands the matter to state court, that decision is virtually unreviewable by the court of appeals.
See
I should also emphasize that in describing the majority view of removal by third-party defendants, and in the discussion which follows, I am referring to cases involving only private litigants. Entirely different questions may be presented where the third-party defendant is a federal official.
See
.
(c) Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.
Federal Courts Study Committee Implementation Act of 1990, Pub.L. No. 101-650, § 312, 104 Stat. 5089, 5114 (emphasis added). The obvious import of this amendment is to eliminate
.See, e.g., Morris v. Marshall County Board of Education,
. Courts arguing against removal typically make a further textual argument as well, namely, that
. As one court has noted, disallowing removal for all but original defendants can produce anomalous results.
See Soper v. Kahn,
.
Thompson v. Wheeler
dealt
not
with removal under
. I should note, however, that this is
not
such a case. The third-party ERISA claim here is one over which state and federal courts have concurrent jurisdiction.
See
. It may well be, therefore, that as a practical matter the Seventh Circuit was correct in stating that "in the broad run of third-party cases,”
Thomas v. Shelton,