Chan Healthcare Grp., PS v. Liberty Mut. Fire Ins. Co.

• Decision Date: 03 January 2017
• Docket Number: No. 16-80019,No. 16-35210,16-35210
• Parties: 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
• Court: U.S. Court of Appeals — Ninth Circuit

844 F.3d 1133

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

No. 16-35210

No. 16-80019

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 6, 2016 Seattle, Washington

Filed January 3, 2017

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.

Before: M. Margaret McKeown, Richard C. Tallman, and Morgan B. Christen, Circuit Judges.

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. 28 U.S.C. § 1447(d). Nonetheless, as part of the Class Action Fairness Act of 2005 ("CAFA"), Congress created an exception under 28 U.S.C. § 1453(c)(1) that permits courts of appeals to accept appeals from remand orders in cases that are removed "under this section." Joining our sister circuits, we conclude that this interlocutory review provision is limited to orders granting or denying remand of diversity class actions brought and removed under CAFA.

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 proposed settlement conflicted with the Kerbs settlement in the earlier Washington case (as well as that the proposed settlement was generally unfair to Washington providers and the Illinois court did not have jurisdiction). Simultaneously, Breskin unsuccessfully petitioned the Washington state court to reopen the Kerbs case and enjoin the proposed settlement in Illinois. Id. at *4. Although the Illinois court concluded that there was no conflict between the proposed settlement and the earlier Kerbs settlement, it ordered that the proposed settlement "include[ ] specific language that the Lebanon settlement would not conflict in any way with the Kerbs settlement." Id. at *5. Dr. Kerbs did not prevail in his appeal regarding the Illinois settlement. See id. at *15.

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 28 U.S.C. § 1331. Because Liberty contended that Chan first raised the federal question in the litigation in its reply brief, Liberty argued that its removal fell "within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable." 28 U.S.C. § 1446(b)(3).

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."

Liberty petitions for review of the district court's remand order and appeals the fee award.

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." 28 U.S.C. § 1447(d) ; see Kircher v. Putnam Funds Trust , 547 U.S. 633, 641, 126 S.Ct. 2145, 165 L.Ed.2d 92 (2006) (explaining that § 1447(d) usually "stands in the way" of reviewing a district court's remand order); Watkins v. Vital Pharm., Inc. , 720 F.3d 1179, 1181 (9th Cir. 2013) (per curiam) ("District court remand orders generally are not reviewable on appeal.").

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." 28 U.S.C. § 1453(c)(1). The question we consider is whether we have jurisdiction to review the district court's order remanding this class action when the asserted basis for jurisdiction is a federal question rather than traditional diversity or CAFA minimal diversity jurisdiction. Chan argues that § 1453(c)(1) is limited to diversity actions under CAFA. Liberty takes a more expansive view, claiming that there is no CAFA-based limitation and that all class actions are covered by this grant of jurisdiction.

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