S J ASSOCIATED PATHOLOGISTS, P.L.L.C., Plаintiff - Appellant v. CIGNA HEALTHCARE OF TEXAS, INCORPORATED; CONNECTICUT GENERAL LIFE INSURANCE COMPANY; CIGNA HEALTH AND LIFE INSURANCE COMPANY, Defendants - Appellees
No. 20-20188
United States Court of Appeals, Fifth Circuit
July 6, 2020
Before DENNIS, SOUTHWICK, and HO, Circuit Judges.
Appeal from the United States District Court for the Southern District of Texas
This case involves state-law claims between a health insurance company and a medical services provider. Although the parties dispute the propriety of various actions taken by the federal district court after the case was removed from Texas state court, we do not reach these points. Because the claims between thе plaintiff-appellant and defendant-appellee do not derive from the same “nucleus of fact” as the federal claim that was the sole source of the district court‘s original jurisdiction, United Mine Workers of America v. Gibbs, 383 U.S. 715, 725 (1966), the district court lacked supplemental jurisdiction over these state-law claims. We therefore VACATE the district court‘s final judgment compelling arbitration and dismissing the case and REMAND the case with instructions that the case be remanded back to the state court.
A.
S J Associated Pathоlogists (“SJAP“) is a Houston-area anatomic and clinical pathology group that provides diagnostic lab testing at a number of local hospitals. On May 1, 2002, SJAP and Cigna Healthcare of Texas (“Cigna“) entered into a “Group Practice Manаged Care Agreement” (“the In-Network Agreement“) under which SJAP became an in-network provider for Cigna‘s customers.1
In 2019, Cigna requested documentation of fifty randomly selected claims that it had paid to SJAP on behalf of its customers as part of an аudit of its billing practices. Cigna sent its initial request to St. Joseph‘s Medical Center, a hospital out of which SJAP had operated at the time it entered into the In-Network Agreement. SJAP had ended its relationship with St. Joseph‘s in 2012, and, based on St. Joseph‘s resрonse to the audit inquiry, Cigna placed a “flag” on SJAP‘s account that caused all future claims filed by SJAP to be automatically denied.2 SJAP eventually received notice of the audit and provided Cigna with documentation of thirty-five of the identified claims, stating that the records of the remaining fifteen were in the hands of a third-party hospital and that it was unable to obtain them in time for the audit.
Cigna claims that the audit revealed that SJAP had been engaging in “pass-through” billing, or billing Cigna for services that werе rendered by third parties, which Cigna asserts is prohibited by the In-Network Agreement. Because 100% of the audited transactions used this billing structure, Cigna demanded repayment of all claims that it had paid to SJAP between January 1, 2015 and April 3, 2019, totaling $4,628,601.07. The letter noted that the auto-denial flag would be maintained until SJAP refunded the full amount demanded. SJAP continued to provide services to Cigna customers and submit claims that were automatically denied during the coming months. When negotiations ultimately proved fruitless, Cigna sеnt SJAP notice that it was terminating the In-Network Agreement pursuant to the “without cause” termination clause, effective January 29, 2020.
B.
1.
In response to the termination letter, SJAP filed suit against Cigna in Texas state court, asserting a range of state statutory аnd common law claims. After the state trial court denied SJAP‘s initial application for a temporary restraining order, Cigna sent SJAP a letter formally invoking the allegedly mandatory arbitration clause in the In-Network Agreement. SJAP declined to voluntаrily dismiss its case, and Cigna proceeded to file a motion to compel arbitration.
While the motion to compel arbitration was pending, SJAP amended its petition to add Connecticut General Life Insurance Company and Cigna Heаlth and Life Insurance Company (collectively, the “Cigna Affiliates“), along with Insight Labs, LLC (“Insight“), Sim-Meds, Inc.,
Following the amendment of SJAP‘s complaint, Cigna amended its motion to compel arbitration to add a request that the state trial court sever SJAP‘s claims against it from those asserted against the Insight Defendants. The state trial court denied Cigna‘s motion to compel arbitration without explaining its reasoning. Cigna perfected an interlocutory appeal of the denial to the Texas First Court of Appeals, which dеnied Cigna‘s emergency motion for a stay of proceedings in the trial court.
Thereafter, the state trial court held an evidentiary hearing on SJAP‘s application for a temporary injunction and granted the application. Concluding that SJAP was likely to prevail on its claims against Cigna because credible evidence indicated SJAP had never engaged in pass-through billing, the court ordered Cigna to, inter alia, continue the In-Network Agreement, pay SJAP for all automatically rejected claims, and adjudicate SJAP‘s future claims based on their individual merits. Cigna perfected a second interlocutory appeal to the Texas First Court of Appeals, this time challenging the trial court‘s temporary injunction.
2.
While the two statе appeals remained pending, Cigna consented to the Insight Defendants’ removal of the case to the United States District Court for the Southern District of Texas. The Insight Defendants asserted federal question jurisdiction as the basis for removal, citing the federal securities claims SJAP had raised against them.
Once in federal court, Cigna filed a motion to vacate or modify the temporary injunction granted by the state trial court. At a hearing on the motion, the district court sua sponte stayed operation of the temporary injunction and ordered briefing on its jurisdiction and on the In-Network Agreement‘s arbitration provision. Thereafter, Cigna again filed a motion to compel arbitration.
Meanwhile, SJAP voluntarily dismissed all claims against the Insight Defеndants—including the federal securities claims that were the basis for removal—and then moved to remand the case to state court. The district court held a hearing on all three pending motions on February 28, 2020. The district court concluded that it was free to reconsider the state court‘s orders and orally granted Cigna‘s motion to compel arbitration. The district court denied Cigna‘s motion to vacate the temporary injunction and SJAP‘s motion to remand as moot and dismissed the case without prejudice. SJAP timely appealed.
This court reviews a district court‘s subject matter jurisdiction de novo, applying the same standards as the district court. See Nat‘l Football League Players Ass‘n v. Nat‘l Football League, 874 F.3d 222, 225 (5th Cir. 2017).
III.
In their briefing, the parties raise at least three distinct issues, including whether the district cоurt should have remanded the case to state court after all federal claims were voluntarily dismissed, whether the district court had jurisdiction to reconsider the state court‘s interlocutory orders that were the subject of pending appeals prior to removal, and whether the In-Network Agreement‘s arbitration clause was mandatory. But a threshold jurisdictional issue not raised by the parties is dispositive.3
Subject to limited exceptions not here applicable, any civil аction brought in state court “that originally could have been filed in federal court may be removed to federal court by the defendant.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing
All of SJAP‘s claims against Cigna arise from or concern the In-Network Agreement and the resulting business relationship. SJAP‘s federal claim against the Insight Defendants, by contrast, was based on SJAP‘s purchase of securities from Insight as part of the Lab Operating Agreement, a completely separate contract that had nothing to do with Cigna that was consummated several years before the events giving rise to SJAP‘s claims against Cigna. Other than SJAP‘s vague assertion that Insight and the Cigna
When the requirements of original or supplemental jurisdiction are not satisfied,
Thus, because SJAP‘s state-law claims against Cigna did not fall within the district court‘s supplemental jurisdiction, the district court had no discretion to retain the claims in federal court and was required to immediately remand them. See Prolite Bldg. Supply, LLC v. MW Manufacturers, Inc., 891 F.3d 256, 259 (7th Cir. 2018) (“The federal claim would make the whole suit removable, and
* * *
Based on the foregoing, we VACATE the district court‘s final judgment compelling arbitration and dismissing the case and REMAND to the district court with instructions that the case be remanded to state court.