IMFC Professional Services of Florida, Inc. v. Latin American Home Health, Inc.

• Decision Date: 17 May 1982
• Docket Number: No. 80-5085,80-5085
• Citation: 676 F.2d 152
• Parties: IMFC PROFESSIONAL SERVICES OF FLORIDA, INC., Plaintiff-Appellee, v. LATIN AMERICAN HOME HEALTH, INC., and Osvaldo De La Pedraja, Defendants-Appellants, v. Richard S. SCHWEIKER, Secretary of Health and Human Services, Third-Party Defendant-Appellee. . Unit B *
• Court: U.S. Court of Appeals — Fifth Circuit

Page 152

676 F.2d 152

IMFC PROFESSIONAL SERVICES OF FLORIDA, INC., Plaintiff-Appellee, v. LATIN AMERICAN HOME HEALTH, INC., and Osvaldo De La Pedraja, Defendants-Appellants, v. Richard S. SCHWEIKER, Secretary of Health and Human

Services, Third-Party Defendant-Appellee.

No. 80-5085.

United States Court of Appeals, Fifth Circuit.

Unit B ^*

May 17, 1982.

Greene & Cooper, Marc Cooper, Miami, Fla., for defendants-appellants.

Freidin & Silber, Norman J. Silber, Miami, Fla., for IMFC Professional Services of Fla., Inc.

Richard A. Marshall, Jr., Asst. U. S. Atty., Miami, Fla., for Patricia Roberts Harris.

Appeal from the United States District Court for the Southern District of Florida.

Before GODBOLD, Chief Judge, TJOFLAT and THOMAS A. CLARK, Circuit Judges.

GODBOLD, Chief Judge:

Appellant Latin American provides home health care, and many of its patients are covered by Medicare. Latin American entered into a contract with IMFC under which IMFC would purchase from Latin American, at a discount, receivables of Latin American. These receivables consisted of reimbursements due Latin American under the Medicare program from the Department of Health and Human Services ("HHS") (or its predecessor HEW) through its fiscal intermediary Aetna Life and Casualty Insurance Company. Payments were to be made by Aetna directly to IMFC. Latin American was obligated to repurchase from IMFC at face value all receivables not collected by IMFC within eight months. Pedraja, Latin American's medical director, acted as guarantor of Latin American's obligations under this agreement.

After a few months under this contract Aetna ceased paying IMFC directly, on the asserted ground that the discount on the purchased accounts was improper because it was an implicit interest charge, and began paying Latin American on the purchased accounts instead. IMFC demanded that, pursuant to the repurchase agreement, Latin American repurchase the accounts that it had not collected. Latin American refused. IMFC sued Latin American, Pedraja, and Aetna in Florida state court claiming some $150,000 due it under the agreement with Latin American. HHS intervened as a defendant and removed the case to federal district court. IMFC voluntarily dismissed as to Aetna and HHS, leaving as defendants only Latin American and Pedraja, and moved to remand the case to state court. The motion was granted.

Back in state court, Latin American and Pedraja filed a third-party complaint against Aetna. HHS again intervened, as the real party in interest in the stead of Aetna, and again removed to the federal court.

Back in federal court again, HHS moved to dismiss Latin American's and Pedraja's third-party complaint against HHS, on the ground, inter alia, that the court lacked subject matter jurisdiction because Latin American had failed to exhaust administrative remedies. The court granted this motion. At the same time it considered IMFC's motion for summary judgment against Latin American and Pedraja, supported by affidavits, and, rejecting defenses of Latin American and Pedraja (principally that of usury), granted to IMFC the full amount it claimed.

Defendants contend that, after the second removal, when the district court determined that the third-party complaint of Latin American and Pedraja against HHS (intervening defendant as real party in interest in the stead of Aetna) was not properly before the court because of their failure to exhaust administrative remedies, the only matter remaining before the court was a state law claim between nondiverse parties concerning liability under the purchase agreement and the guaranty; thus the district court lacked jurisdiction to consider summary judgment and was instead required to remand the case a second time to state court.

I. District court jurisdiction

A. The initial jurisdiction to remove

The statute governing remand after removal is 28 U.S.C. § 1447(c). ¹ Under it we look first to whether the case "was removed improvidently and without jurisdiction." We conclude that there was initially jurisdiction for the second HHS removal.

First, that HHS, the removing party, is a third-party defendant does not defeat removal under 28 U.S.C. § 1442(a)(1). ² 1A J. Moore, Federal Practice P 0.164(1), at 303-04. ³

Second, arguably the failure of Latin American and Pedraja to exhaust their administrative remedies is a jurisdictional defect depriving the court of subject matter jurisdiction over the complaint against the government, with the result that removal was initially improper. The only prerequisite to removal of a civil action under § 1442 is that it be brought against a federal officer or agency. There is no indication in § 1442 that the federal court must have subject matter jurisdiction over the claim against the federal officer. ⁴ To the contrary, § 1442 itself grants independent jurisdictional grounds over cases involving federal officers where a district court otherwise would not have jurisdiction. ⁵ S.S. Silberblatt, Inc. v. East Harlem Pilot Block, 608 F.2d 28, 35 (2nd Cir. 1979).

B. Authority to consider post-removal developments

There remains open whether, though the second removal was initially proper, remand was required because of post-removal events. Once the court dismissed defendants' third-party complaint against the federal defendant, was it required to remand?

We reasoned in In re Merrimack Mutual Fire Ins. Co., 587 F.2d 642, 645-46 (5th Cir. 1978), that § 1447(c) permits examination of subsequent developments to determine whether a case should be remanded. In this case we adhere to and amplify that reasoning.

Section 1447(c) was substantially enacted in 1948 when Title 28 was generally revised. Section 1447(c)'s predecessor, § 80, read:

If in any suit commenced in a district court, or removed from a State Court to a district court of the United States, it shall appear to the satisfaction of the said district court, at any time after such suit has been brought or removed thereto, that such suit does not really and substantially involve a dispute or controversy properly within the jurisdiction of said district court, ... the said district court shall proceed no further therein, but shall dismiss the suit or remand it to the court from which it was removed, as justice may require, and shall make such order as to costs as shall be just. (Emphasis added).

28 U.S.C. § 80 (1946). Thus, under the old practice there was a unitary standard concerning a court's loss of jurisdiction: the same statute controlled whether the suit was brought within the court's original jurisdiction or was removed to the court. See, e.g., St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845 (1938) (resolving remand after removal issue by relying on general jurisdictional principles).

In Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 349 & n.15, 96 S.Ct. 584, 592 & n.15, 46 L.Ed.2d 542 (1976), the Supreme Court analyzed extensively the legislative history of § 1447(c) with regard to the issue of reviewability of remand orders. The Court concluded that § 1447(c) was "intended to restate the prior law" and that § 1447(c) and the old § 80 were of "identical substantive content." Id. For these same reasons, we think that § 1447(c) continues in effect the unitary standard of old § 80. Therefore, in deciding whether to remand a removed case, we use the same analysis as in deciding whether to dismiss a case initially filed in the district court. ⁶

Under general jurisdictional principles as well as under removal principles, some subsequent developments in a case do not affect a court's prior-existing jurisdiction. See In re Carter, 618 F.2d 1093, 1101 (5th Cir. 1980) ("It is a fundamental principle of law that whether subject matter jurisdiction exists is a question answered by looking to the complaint as it existed at the time the petition for removal was filed."). For example, amendment of a complaint to reduce the damages claimed below the jurisdictional amount or to eliminate a federal question does not oust a court of jurisdiction (absent sham pleading), nor does destruction of diversity by a party's change in citizenship or in certain instances by intervention of a new party. For collected cases and discussion, see generally, Murphy v. Kodz, 351 F.2d 163, 167 (9th Cir. 1965); Decisions, 41 Colum.L.Rev. 738 (1941); Recent Cases, 19 Geo.Wash.L.Rev. 354 (1954); Wright & Miller, Federal Practice and Procedure § 3608, at 658-59 (1975). On the other hand, other developments in a case will divest the court of jurisdiction. E.g., Merrimack, 587 F.2d at 646, 647 n.8 (addition of a nondiverse party); Wright & Miller, Federal Practice and Procedure § 3608, at 657-58 (1971) (same); Texas Transp. Co. v. Seeligson, 122 U.S. 519, 7 S.Ct. 1261, 30 L.Ed. 1150 (1887) (under old law, elimination of diverse claim in a multi-claim suit results in remand of nondiverse claims).

Because § 1447(c) has the "identical substantive content" as its predecessor § 80 and because under § 80 some subsequent developments in a case were relevant to whether it should be remanded or dismissed, we conclude that § 1447(c) does not preclude examination of post-removal developments to determine whether jurisdiction has been lost. Accord, Comstock v. Morgan, 165 F.Supp. 798, 800 (W.D.Mo.1958). ⁷

Several courts have observed with concern a divergence in results in cases concerning remand after removal, ⁸ e.g. Brown v. Eastern States Corp., 181 F.2d 26, 28 (4th Cir.), cert. denied, 340 U.S. 864, 71 S.Ct. 88, 95 L.Ed. 631 (1950); Jellison v. Krell, 246 F. 509, 511-16 (E.D.Ky.1917). But this divergence does not indicate that there is a conflict of authority over the meaning of § 1447(c). Rather it is caused by the fact that some post-removal developments have jurisdictional impact and others do not. In recognizing a rule that § 1447(c) allows a court to consider post-removal changes we do not mean to say that every change...