Matter of Medical Laboratory Management Consultants

• Decision Date: 25 April 1996
• Docket Number: CIV-95-2494-PHX-ROS. (B-95-6436-PHX-CGC).
• Citation: 931 F. Supp. 1487
• Parties: In the Matter of MEDICAL LABORATORY MANAGEMENT CONSULTANTS, Debtor. MEDICAL LABORATORY CONSULTANTS d/b/a Consultants Medical Lab, a corporation, John Devaraj, an individual, Carolyn Devaraj, an individual, Plaintiffs, v. AMERICAN BROADCASTING COMPANIES, INC., The Delbert Lewis Family d/b/a KTVK-TV, Diane Sawyer, an individual, Ira Rosen, an individual, Robbie Gordon, an individual, Mark Lukazsiewicz, an individual, and DOES 1-10, Defendants.
• Court: U.S. District Court — District of Arizona

931 F. Supp. 1487

In the Matter of MEDICAL LABORATORY MANAGEMENT CONSULTANTS, DebtorMEDICAL LABORATORY CONSULTANTS d/b/a Consultants Medical Lab, a corporation, John Devaraj, an individual, Carolyn Devaraj, an individual, Plaintiffs, v.AMERICAN BROADCASTING COMPANIES, INC., TheDelbert Lewis Family d/b/a KTVK-TV, Diane Sawyer, an individual, Ira Rosen, an individual, Robbie Gordon, an individual, Mark Lukazsiewicz, an individual, and DOES 1-10, Defendants.

CIV-95-2494-PHX-ROS. (B-95-6436-PHX-CGC).

United States District Court, D. Arizona.

April 25, 1996.

COPYRIGHT MATERIAL OMITTED

Neville L. Johnson, Neville L. Johnson & Associates, Los Angeles, CA, for plaintiffs.

Andrew D. Hurwitz, Diane M. Johnsen, C. Taylor Ashworth, Osborn Maledon PA, Phoenix, AZ, for defendants.

ORDER

SILVER, District Judge.

This action arises from a broadcast on ABC's television news program "Prime Time Live" about faulty pap smear testing.PlaintiffJohn Devaraj, a co-owner of Medical Laboratory Consultants (d/b/a Consultants Medical Lab)(hereinafter "Medical Lab"), was interviewed "by" ABC reporters posing as persons interested in setting up their own laboratory.While being filmed by a hidden camera, Mr. Devaraj commented on the fatigue of his lab workers and the volume of pap smear slides reviewed by them each day.ABC featured his comments on the broadcast.

ABC also sent pre-tested pap smear slides to Medical Lab for testing and reported that the lab mistakenly failed to spot cervical cancer indications on several of the slides.The broadcast did not identify Mr. Devaraj and Medical Lab by name.

John and Carolyn Devaraj and Medical Lab ("Plaintiffs") sued American Broadcasting Companies ("ABC"), KTVK-TV (ABC's then-affiliate in Phoenix) and other individuals ("Defendants") after the broadcast aired.The Complaint contains the following counts: Count I — intrusion of privacy; Count II — fraud; Count III — intentional infliction of emotional distress; Count IV — negligent infliction of emotional distress; Count V — public disclosure of private facts; Count VI — trade libel; Count VII — interference with contractual relations and prospective business advantage; Count VIII — unfair business practices; Count IX — trespass; Count X — defamation; and Count XI — false light.

Four motions are pending before the Court: Plaintiffs' Motion for Abstention or, in the Alternative, for Remand; Defendant KTVK's Motion to Dismiss; Defendants' Motion to Dismiss Re: Privacy Claims; and Defendants' Motion to Dismiss and to Strike certain other counts and allegations.Having reviewed the parties' briefs and arguments, the Court rules as follows.

I.Plaintiffs' Motion for Abstention or, in the Alternative, for Remand

This lawsuit was originally filed in Arizona state court.After Medical Lab filed a Chapter 11 bankruptcy petition, Defendants removed to this Court pursuant to 28 U.S.C. § 1452(a), which provides for removal if federal jurisdiction exists under 28 U.S.C. § 1334. 28 U.S.C. 1334(b), in turn, confers original but not exclusive jurisdiction upon federal courts over civil actions "related to cases under title 11."

In their Motion Plaintiffs seek to return the lawsuit to state court.They argue that the Court must abstain from hearing this action pursuant to 28 U.S.C. § 1334(c)(2).Alternatively, they contend that the Court should exercise its discretion to abstain and/or remand the case pursuant to 28 U.S.C. § 1334(c)(1)and28U.S.C. § 1452(b).

A.Mandatory Abstention

As noted, 28 U.S.C. § 1334(b) confers federal jurisdiction over actions relating to Chapter 11 bankruptcy proceedings.However, this jurisdictional grant is limited by 28 U.S.C. § 1334(c)(2), which provides that federal courts must abstain if the "action could not have been commenced in a court of the United States absent jurisdiction under this section ..."

Plaintiffs argue that mandatory abstention is warranted because the sole basis for federal jurisdiction over this removed action is 28 U.S.C. § 1334(b).

In response, Defendants argue that Plaintiffs have sued KTVK, the only nondiverse Defendant, solely to prevent removal based on diversity of citizenship.Defendants claim that Plaintiffs have not stated a viable cause of action against KTVK.Under these circumstances, Defendants contend, the Court should find that KTVK was "fraudulently joined" and retain jurisdiction based on the independent jurisdictional ground of diversity of citizenship.A finding of fraudulent joinder would, moreover, render inapplicable the mandatory abstention provision of 28 U.S.C. 1334, because federal jurisdiction would not depend on the related bankruptcy.

1.Fraudulent Joinder

Defendants' opposition requires a finding that KTVK was fraudulently joined.In Lewis v. Time Inc.,83 F.R.D. 455(E.D.Cal.1979), aff'd,710 F.2d 549(9th Cir.1983), the court observed:

The joinder of a nondiverse defendant, although fair on its face, may be shown by a petition for removal to be only a fraudulent device to prevent removal.Under such circumstances, the court may disregard joinder and retain jurisdiction."Fraudulent joinder" is a term of art, it does not reflect on the integrity of plaintiff or counsel ... but is merely the rubric applied when a court finds either that no cause of action is stated against the nondiverse defendant, or in fact no cause of action exists.

Id. at 460(emphasis in original)(internal citations omitted).AccordSpence v. Flynt,647 F.Supp. 1266, 1271(D.Wyo.1986).

In determining whether a party has been fraudulently joined, the Court may pierce the pleadings and determine the basis of joinder "by any means available."Lewis,83 F.R.D. at 460;Spence,647 F.Supp. at 1271.In addition, a fraudulent joinder claim must be capable of summary determination — if the claims against the nondiverse party are capable of summary judgment, the Court cannot remand the case.Spence,647 F.Supp. at 1271.

Three interrelated considerations warrant a considered application of these principles here.First, the Court notes that this defamation case has significant First Amendment ramifications.A national television network and its local affiliate are being sued for producing and broadcasting a program exposing widespread laboratory carelessness in the testing of pap smear slides — an issue of undeniable public concern.Because "federal courts have long been especially sensitive when First Amendment rights are implicated,"the Court will carefully scrutinize the basis for Plaintiffs' joinder of KTVK.Lewis,83 F.R.D. at 461.

Second, First Amendment considerations have special relevance when examined in light of the purposes of diversity and removal jurisdiction.Such jurisdiction is based on the dual goals of avoiding local prejudice and guaranteeing the vindication of federal rights.Id.(citing 13, 14 Wright & Miller, Federal Practice & Procedure§§ 3601, 3721).First Amendmentcases involve the application of federal constitutional principles designed to resolve the inherent tension between free speech and privacy rights.See, e.g., New York Times Co. v. Sullivan,376 U.S. 254, 270-71, 84 S.Ct. 710, 720-21, 11 L.Ed.2d 686(1964).In addition, defamation cases often concern media criticism of local citizens, necessitating a forum free of local prejudice.Lewis,83 F.R.D. at 462.Therefore, the underlying goals of diversity and removal jurisdiction strongly support the retention of jurisdiction in cases involving the First Amendment.

Third, the Court's analysis is influenced by the "voluntary-involuntary" rule, which bars removal after dismissal of a nondiverse defendant unless the dismissal resulted from a voluntary act of the Plaintiff.People of the State of California v. Keating,986 F.2d 346, 348(9th Cir.1993).If after remand the state court determines that the allegedly fraudulent claims against KTVK are in fact without merit, the case could not again be removed, resulting in an irrevocable loss of federal jurisdiction.SeeLewis,83 F.R.D. at 462;Spence,647 F.Supp. at 1271-72.

With these considerations in mind, the Court now turns to an analysis of Plaintiffs' claims against KTVK.This analysis is based on Defendant KTVK's Motion to Dismiss.SeeLewis,83 F.R.D. at 460(court may determine whether a party has been fraudulently joined "by any means available").If the claims against KTVK are capable of summary judgment, then the Court may find fraudulent joinder.Spence,647 F.Supp. at 1271.

2.Defendant KTVK's Motion to Dismiss

Attached to KTVK's motion are the affidavit of Mr. Phil Alvidrez, KTVK's then-news director, and videotape copies of the "Prime Time Live" broadcast at issue.Because the motion is accompanied by matters outside the pleadings, it has been converted into a Motion for Summary Judgment.SeeFed.R.Civ.P. 12(b).

According to Mr. Alvidrez's uncontroverted affidavit, KTVK played no part in the planning, reporting, production or editing of the broadcast at issue.Instead, KTVK acted merely as a "conduit" for the program, which it received via satellite from ABC approximately two hours prior to broadcast.

Based on these facts, Defendants argue that KTVK is insulated from liability by the "wire service defense."This defense was originally developed for newspapers who served as conduits for national wire service reports.See, e.g., Nelson v. Associated Press, Inc.,667 F.Supp. 1468, 1476-77(S.D.Fla.1987).It has been applied to shield network television affiliates from liability for allegedly defamatory material contained in a national network news broadcast, where the affiliates merely acted as conduits for the broadcast and played no role in its reporting, production or editing.SeeAuvil v. CBS "60 Minutes",800 F.Supp. 928, 931(E.D.Wash.1992).¹

The wire service defense is consistent with modern First Amendment jurisprudence.In a defamation action brought by an ostensibly private plaintiff and involving a matter of public...