Hale v. Tennessee
| Decision Date | 15 September 2021 |
| Docket Number | 3:14-cv-2194 |
| Parties | DR. DAN E. HALE, individually, and for Cardinal Revocable Trust, DON HALE, individually, and as Trustee for the HRC MEDICAL DEFINED BENEFIT PLAN, Plaintiffs. v. STATE OF TENNESSEE, et al., Defendants. |
| Court | U.S. District Court — Middle District of Tennessee |
Pending before the Court are two motions. Defendants have filed a Second Motion to Dismiss (Doc. No. 72, “Motion”). Plaintiffs have responded. (Doc. No. 76 “Response”). Defendants have replied. (Doc. No 77). Also pending before the Court is Plaintiffs' Motion for a Hearing regarding Defendants' Motion (Doc. No. 79 “Motion for a Hearing”). Defendants have responded. (Doc. No. 80). Plaintiffs did not reply. Both motions are ripe for review.
For the reasons discussed herein, the Court will grant Defendants' Motion. The Court will deny Plaintiffs' Motion for a Hearing.
Plaintiffs Dan Hale and Don Hale are brothers and the sole shareholders in HRC Medical Centers, Inc. (“HRC”), a Tennessee corporation that offers bio-identical hormone replacement therapy.[2] . HRC allegedly maintains an ERISA-governed defined benefit plan (the “Plan”). . In October 2012, Defendant Commissioner of Commerce and Insurance, through the office of the Attorney General of the State of Tennessee (“the State”), instituted an action in state court against HRC asserting that the company violated the Tennessee Consumer Protection Act through various misrepresentations in its clinical marketing practices. (Id.). Pursuant to that state-court action, the State sought an order to appoint a pendente lite Receiver for the purpose of marshalling and controlling all assets of HRC and its subsidiaries. . The Davidson County Circuit Court appointed John McLemore as receiver for HRC's assets. . In the course of his duties as receiver, McLemore attempted to pursue and close Account Number 7361749166 at Fifth Third Bank, HRC's account for the allegedly ERISA-governed defined benefits Plan. . On July 23, 2013, McLemore withdrew $646, 027.24 from this account, and the State has declined demands to have these funds returned. .
On April 30, 2014, Plaintiffs Dan Hale and Don Hale (in their individual capacities) and several companies (HRC Medical Center Holdings, LLC; HRC Management, LLC; and HRC Medical Centers, Inc.) filed complaints in the Tennessee Claims Commission seeking damages based on the unlawful taking of Plaintiffs' private property and assets by McLemore. (Doc. No. 24-7). Then, Plaintiffs[3] filed the Complaint in the instant case on November 12, 2014. (Doc. No. 1).
On May 15, 2015, three dispositive motions were filed in this case: (then Defendant) McLemore filed a motion to dismiss, (Doc. No. 19); the State Defendants[4] filed a motion to dismiss, (Doc. No. 22); and Plaintiffs filed a motion for judgment on the pleadings, (Doc. No. 21). On February 9, 2016, the Court, invoking the Younger abstention doctrine, denied the motions without prejudice and administratively closed the case without prejudice pending exhaustion of state remedies. (Doc. No. 47).
On May 6, 2020, Plaintiffs filed a status report with the Court informing it that “the resolution of the state court issues now preempts and concludes most of the issues that could have remained viable in the above-captioned matter if there had been a contrary result in the state appellate proceedings.” (Doc. No. 61 at 1). As Plaintiffs explained, without referring to the TCC proceedings at all, the state-court case (in which Plaintiffs were the defendants) had been finally resolved, through the entirety of the state appellate process. In this filing, Plaintiffs also moved that the case before the Court be reinstated to address the one remaining issue: Plaintiffs' ERISA-based claim for declaratory relief. (Id.). The Court granted Plaintiffs' motion and reinstated the case on the Court's active docket. (Doc. No. 62). On June 3, 2020, Plaintiffs filed an amended partial motion to dismiss with prejudice their claims now barred by res judicata following final state court rulings arising from the same facts. (Doc. No. 68).[5] The Court granted Plaintiffs' motion to dismiss the same day. (Doc. No. 70). Specifically, the Court dismissed with prejudice: (1) all claims against Defendant McLemore; (2) all claims against Defendant McPeak, [6] Commissioner of Commerce and Insurance; (3) all claims for injunctive relief and attorneys' fees and costs, as set forth in Paragraph III. B. of the Complaint; and (4) all claims for damages, as set forth in Paragraph III. C. of the Complaint. (Id.). After this order, the single issue remaining before the Court is Plaintiffs' petition for declaratory relief related to the allegedly ERISA-governed Plan. (Id.).
Therefore, the sum result of all of these filings is that currently before the Court is one issue, declaratory relief related to the ERISA claim, against remaining State Defendants: the State of Tennessee, Herbert H. Slatery, III (attorney general and reporter), and Hogden Mainda (in his official capacity as Commissioner of Commerce and Insurance). This declaratory relief makes up Count A of the Complaint, and is phrased as thus:
Enforcement of Applicable ERISA Statutes. Plaintiffs seek from the Court a finding that the HRC Medical Defined Benefit Plan remains a viable defined benefit plan, which must be governed by the provisions of 29 U.S.C. § 1144, et seq. In furtherance of that finding, Plaintiffs seek entry of an order compelling that the state court Receiver deposit with the Trustee of the plan the entirety of the fund of $646, 027.74, to be placed in a FDIC insured bank so that it may be administered for the benefit of the plan beneficiaries. Plaintiffs further seek a finding from the Court that the removal of the ERISA-governed funds by the Receiver, in contravention of the applicable federal statutes and regulations, constitute a breach of fiduciary duty, and that the damages, penalties and sanctions set forth in 29 U.S.C. § 1132(c) may be assessed to the Commissioner and her Receiver, including the $100.00 per day penalty.
On July 7, 2020, State Defendants filed the instant Motion. (Doc. No. 72). In addition to filing a Response to the Motion (Doc. No. 76), Plaintiffs also requested a hearing regarding Defendants' Motion. (Doc. No. 79).
Defendants move to have this matter dismissed pursuant to Rule 12(b)(1) and Rule 12(b)(6), on the sole basis that Plaintiffs have waived their remaining federal claim via their filing of the TCC action. Defendants seem to argue primarily for dismissal under Rule 12(b)(1) on the grounds that this Court lacks subject-matter jurisdiction. (Doc. No. 73 at 5). Rule 12(b)(1) “provides for the dismissal of an action for lack of subject matter jurisdiction.” Cartwright v Garner, 751 F.3d 752, 759 (6th Cir. 2014). “Subject matter jurisdiction is always a threshold determination.” Am. Telecom Co. v. Republic of Lebanon, 501 F.3d 534, 537 (6th Cir. 2007).
As the Court should resolve a challenge to subject-matter jurisdiction before it makes any decisions on the merits-which could include, for example, granting dismissal under Rule 12(b)(6)-the Court proceeds first with an analysis under Rule 12(b)(1).[7] The Court is not entirely convinced of the validity of the proposition that a plaintiff's waiver of a federal claim operates to deprive the Court of subject-matter jurisdiction (as opposed to dooming the claim on some merits-based or other non-jurisdictional basis). But Plaintiffs do not contest this proposition, arguing instead that there was no waiver without asserting that the consequences of waiver would not include evisceration of subject-matter jurisdiction in particular. And some, albeit not all, cases finding waiver of federal claims based on the prior filing of a TCC claim have indeed treated the waiver as grounds for dismissal based on lack of subject-matter jurisdiction. See Waddle v. Comm'r, Tennessee Dep't of Correction, No. 3:15-01309, 2017 WL 6442143, at *3 (M.D. Tenn. Dec. 15, 2017); Eachus v. Haslam, No. 3:15-CV-944, 2016 WL 323675, at *4 (M.D. Tenn. Jan. 27, 2016); Mirabella v. Univ. of Tennessee, 915 F.Supp. 925, 926 (E.D. Tenn. 1994).
There are two types of motions to dismiss for lack of subject-matter jurisdiction: facial attacks and factual attacks. Gentek Bldg. Products, Inc. v. Sherman-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007). A facial attack questions merely the sufficiency of the pleading. When reviewing a facial attack, a district court takes the allegations in the complaint as true. Id. If those allegations establish federally-cognizable claims, jurisdiction exists. Id. A factual attack instead raises a factual controversy concerning whether subject-matter jurisdiction exists. Id. Defendants here lodge a factual attack on subject matter jurisdiction, as they are asserting that Plaintiffs have waived the remaining claim in the Complaint and that therefore the Court lacks subject-matter jurisdiction. Eachus, 2016 WL 323675, at *4. Notably, the factual disputes relevant to the attack are not regarding the veracity of the allegations of the Complaint, but rather are regarding extra-Complaint facts concerning whether Plaintiffs have waived the remaining claim.
Where there is a factual attack on the subject-matter jurisdiction of the Court under Fed.R.Civ.P. 12(b)(1), no presumptive truthfulness applies to the complaint's allegations instead, the Court must weigh the conflicting evidence to arrive at the factual predicate that subject-matter...
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