Myrick v. Wellpoint, Inc.

• Decision Date: 19 August 2014
• Docket Number: 13–2230.,Nos. 12–3882,s. 12–3882
• Parties: Bob MYRICK and Charlotte Phillips, Plaintiffs–Appellants, v. WELLPOINT, INC., et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

764 F.3d 662

Bob MYRICK and Charlotte Phillips, Plaintiffs–Appellants,

v.WELLPOINT, INC., et al., Defendants–Appellees.

Nos. 12–3882, 13–2230.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 24, 2014.

Decided Aug. 19, 2014.

Kenneth T. Goldstein, Attorney, Clinton A. Krislov, Attorney, Krislov & Associates, Chicago, IL, for Plaintiffs–Appellants.

Jerome McDonald, Attorney, Black, Hedin, Ballard, McDonald, P.C., Mt. Vernon, IL, Margo Weinstein, Attorney, Miller, Shakman & Beem LLP, Chicago, IL, for Defendants–Appellees.

Before BAUER, EASTERBROOK, and WILLIAMS, Circuit Judges.

EASTERBROOK, Circuit Judge.

During 2001 the insurance regulators of Illinois permitted WellPoint (through a subsidiary) to acquire RightCHOICE Managed Care, Inc., which offered health insurance through its subsidiary RightCHOICE Insurance Company. WellPoint caused RightCHOICE Insurance to withdraw from the Illinois market in 2002; this cancelled all RightCHOICE policies. WellPoint offered the policyholders costlier UniCare policies as substitutes. Persons who elected not to pay the higher premiums had to shop for policies from different insurers, which usually declined to cover pre-existing conditions. Contending that the cancellation of RightCHOICE policies violated Illinois law, Greg Cima and several others filed suit and asked the district court to certify a class of all former RightCHOICE policyholders. The district court declined, Cima v. WellPoint Health Networks, Inc., 250 F.R.D. 374 (S.D.Ill.2008), and later entered judgment against plaintiffs on the merits, Cima v. WellPoint Health Networks, Inc., 2008 WL 4671707, 2008 U.S. Dist. LEXIS 84882 (S.D.Ill. Oct. 22, 2008). No one appealed.

Because Cima had not been certified as a class action, the judgment bound only the named plaintiffs. The law firm behind Cima found another set of former policyholders and filed a new suit, this time in state court, making the same substantive contentions and again proposing certification as a class action. The federal decision not to certify a class did not prevent state courts from reaching a contrary decision, see Smith v. Bayer Corp., ––– U.S. ––––, 131 S.Ct. 2368, 180 L.Ed.2d 341 (2011), but the federal decision on the merits remained. Defendants removed the suit under 28 U.S.C. § 1453, part of the Class Action Fairness Act. Section 1453 incorporates the requirements of 28 U.S.C. § 1332(d), which makes this suit removable because the proposed class has at least 100 members, the amount in controversy exceeds $5 million, and at least one class member has a citizenship different from at least one defendant.

Plaintiffs asked the district judge to remand the suit under § 1332(d)(4), which says that the court shall “decline to exercise” the jurisdiction created under § 1332(d)(2) if at least two-thirds of the class's members are citizens of the state in which the suit began and at least one defendant from which “significant relief” is sought is a citizen of the same state. It is agreed that the complaint seeks “significant relief” from an Illinois defendant. Plaintiffs observed that the RightCHOICE policy was offered only to persons who represented that they live in Illinois (or, for group policies, to employers who represented that most beneficiaries live in Illinois). The policies were cancelled in 2002, and plaintiffs maintained that, if their former holders left Illinois at the normal rate (the Census Bureau estimates that roughly 2% of the nation's population changes states each year), about 87% of the class would have been Illinois residents when the suit was removed. But the district judge denied the motion to remand. Phillips v. WellPoint, Inc., 2010 WL 4877718, 2010 U.S. Dist. LEXIS 123844 (S.D.Ill. Nov. 23, 2010). It then again declined to certify a class, Phillips v. WellPoint, Inc., 2012 WL 4904523, 2012 U.S. Dist. LEXIS 147736 (S.D.Ill. Oct. 15, 2012), and again ruled in defendants' favor on the merits, Phillips v. WellPoint, Inc., 2012 WL 6111405, 2012 U.S. Dist. LEXIS 175405 (S.D.Ill. Dec. 10, 2012). This time appeals have been taken: by plaintiff Bob Myrick concerning all issues and by plaintiff Charlotte Phillips concerning the district court's award of costs.

When deciding that the suit belongs in federal court, the district judge noted that the policies were issued to persons who represented that they “reside” in Illinois, while § 1332(d)(4) deals with the class members' “citizenship”. For purposes of the diversity jurisdiction, citizenship differs from residence. Citizenship means domicile (the person's long-term plan for a state of habitation) rather than just current residence. See In re Sprint Nextel Corp., 593 F.3d 669 (7th Cir.2010) (distinguishing residence from citizenship for the purpose of § 1332(d)(4)). What's more, people who said they resided in Illinois might have meant something else; perhaps some who lived in Indiana but worked in Illinois bought RightCHOICE policies. And for the purpose of § 1332(d)(4) employers that purchased group plans have their own citizenships, which may be distinct from the residence of the policies' beneficiaries. Group policies also covered persons who lived outside of Illinois, if employers represented that most workers lived inside. The district judge thought that plaintiffs had failed to establish the exception to federal jurisdiction under § 1332(d)(2).

It is not clear from the statute which side has the burden of persuasion under § 1332(d)(4), but Hart v. FedEx Ground Package System, Inc., 457 F.3d 675 (7th Cir.2006), holds that it belongs to the party relying on the home-state exception. It follows that the party proposing that the district court “decline to exercise” jurisdiction that was properly invoked at the time of removal also has the burden of production. The jurisdictional rules are those in § 1332(d)(2); the “decline to exercise” clause of § 1332(d)(4), like the local-law-remand provision in 28 U.S.C. § 1367(c), concerns whether the court exercises jurisdiction to the full, not whether jurisdiction exists. See Morrison v. YTB International, Inc., 649 F.3d 533 (7th Cir.2011). This makes it a party-driven rather than a court-driven rule. Judges must enforce limits on subject-matter jurisdiction no matter what the litigants do or concede, but other case-processing rules may be waived or forfeited, and judges may wait for issues to be properly presented. See, e.g., Gonzalez v. Thaler, ––– U.S. ––––, 132 S.Ct. 641, 181 L.Ed.2d 619 (2012); Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 130 S.Ct. 1237, 176 L.Ed.2d 18 (2010). So plaintiffs needed to produce some evidence that would allow the court to determine the class members' citizenships on the date the case was removed. Yet they produced none.

Instead plaintiffs pointed to the policies' language and asked the court to infer that (a) because coverage under individual policies was supposed to be restricted to residents of Illinois, it was so restricted in fact; (b) all residents of Illinois also are citizens of Illinois; (c) holders of RightCHOICE policies were no more likely to move than average citizens of every state; and (d) employers purchasing group policies all are citizens of Illinois, even though the policies do not restrict the location of employers (that is, California or Wisconsin firms could purchase RightCHOICE policies for workers at their facilities in Illinois). These propositions may or may not be right, but plaintiffs did not offer any evidence to support them.

In a supplemental memorandum filed after oral argument, plaintiffs contended that proving the citizenship of all class members is simply too expensive, so proof should be excused. Lawyers who launch class actions are not in a good position to complain about the expenses they entail; plaintiffs and their counsel must be prepared to meet them or be deemed inadequate representatives. Cf. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) (the cost of notifying all class members does not justify foregoing notice or shifting the expense to the defendants).

Not that it would have been prohibitively costly to offer evidence. Counsel for the proposed class assumed that there were only two options: determine the citizenship of every policyholder (expensive) or rely on assumptions (cheap). But there's at least one more option: take a random sample of policyholders (100, say), ascertain the citizenship of each of these on the date the case was removed, and extrapolate to the class as a whole. If the sample yields a lopsided result (say, 90% Illinois citizens or only 50% Illinois citizens) then the outcome is clear without the need for more evidence. (The more lopsided the result, the smaller the sample needed to achieve statistical significance.) If the result is close to the...