Nco Financial Systems, Inc. v. Yari

• Decision Date: 30 March 2006
• Docket Number: No. CIVA06CV00286PSFBNB.,CIVA06CV00286PSFBNB.
• Citation: 422 F.Supp.2d 1237
• Parties: NCO FINANCIAL SYSTEMS, INC., Plaintiff, v. Gholam YARI; and Elzbieta Yari, Defendants and Third-Party Plaintiffs, v. Connecticut General Life Insurance Company, d/b/a Cigna, Defendant.
• Court: U.S. District Court — District of Colorado

422 F.Supp.2d 1237

NCO FINANCIAL SYSTEMS, INC., Plaintiff, v. Gholam YARI; and Elzbieta Yari, Defendants and Third-Party Plaintiffs, v. Connecticut General Life Insurance Company, d/b/a Cigna, Defendant.

No. CIVA06CV00286PSFBNB.

United States District Court, D. Colorado.

March 30, 2006.

Terrell Martin Gaines, Atty. at Law, Englewood, CO, for Plaintiff.

Bill Myers, Bill Myers, P.C., Denver, CO, for Defendants and Third-Party Plaintiffs.

Matthew Y. Biscan, Clisham, Satriana & Biscan, LLC, Denver, CO, for Defendant.

ORDER OF REMAND

FIGA, District Judge.

This matter is before the Court following the Notice of Removal (Dkt.# 1) filed by Third-Party Defendant Connecticut General Life Insurance Company ("CINA") on February 17, 2006 and the Court's subsequent Order to Show Cause as to CIGNA's right to remove this case to federal court (Dkt.# 7). CIGNA filed its response on March 7, 2006 (Dkt.# 8). On March 9, 2006, Plaintiff NCO Financial Systems, Inc. ("NCO") filed its reply (Dkt.# 9) opposing removal.

I. BACKGROUND

Plaintiff NCO, as an assignee of Healthcare Plaza, filed the underlying action on November 29, 2005 in Arapahoe County, Colorado District Court, seeking payment of a debt allegedly owed it by Defendants Gholam and Elzbieta Yari arising out of medical goods and services provided to defendants. Defendants' answer included a third-party complaint asserted against CIGNA, their medical insurance provider, claiming that CIGNA was contractually obligated but failed to pay for the medical expenses giving rise to the debt at issue.

CIGNA filed its answer to the third-party complaint, denying liability and claiming coverage of the claim by the Employee Retirement Income Security Act ("ERISA"), 28 U.S.C. §§ 1001 et seq. According to CIGNA, the entire case is removable to this Court pursuant to 28 U.S.C. § 1441(c), as federal question jurisdiction pursuant to 28 U.S.C. § 1331 is now present following the filing of the third-party complaint allegedly involving an ERISA claim.

II. ANALYSIS

A. Removal by Third-Party Defendants Generally

Courts are divided on the propriety of third-party removal under 28 U.S.C. § 1441(c). Some have found removal by a third-party defendant proper where the third-party complaint states a removable claim that is "separate and independent" from the non-removable claims. See e.g. Carl Heck Eng'rs, Inc. v. Lafourche Parish Police Jury, 622 F.2d 133, 135 (5th Cir.1980); Patient Care, Inc. v. Freeman, 755 F.Supp. 644, 646 (D.N.J.1991). A majority of courts, however, have declined to extend 28 U.S.C. § 1441(c) to encompass removal by third-party defendants. See e.g. Lewis v. Windsor Door Co., 926 F.2d 729, 733-34 (8th Cir.1991); Thomas v. Shelton, 740 F.2d 478, 486 (7th Cir.1984); 14C C. WRIGHT, A. MILLER & E. COOPER, FEDERAL PRACTICE AND PROCEDURE § 3724 at 40 (3d ed.1998).

The various arguments for and against third-party removal are summarized in Monmouth-Ocean Collection Serv., Inc. v. Klor, 46 F.Supp.2d 385 (D.N.J.1999). Turning first to the text of the removal statute, opponents of third-party removal argue that only claims joined by the plaintiff are "joined with . . . [the] non-removable claims" within the meaning of § 1441(c). Id. at 391. Opponents further explain that an appropriately strict construction of § 1441(a), which permits removal only "by the defendant or the defendants," places a third-party defendant outside the ambit of the removal statute. Id. The Supreme Court has long held that where a defendant asserts a counterclaim against a plaintiff the plaintiff is not entitled to remove. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). It would thus seem incongruous and against congressional intent to allow third-party defendants to do so. See e.g. Share v. Sears, Roebuck & Co., 550 F.Supp. 1107, 1109 (E.D.Pa.1982); Klor, 46 F.Supp.2d at 391.

Sound policy justifications also support the opponents' position. If removal could be predicated on a removable claim joined by a third-party defendant, a plaintiff could be forced "to litigate in a federal court that he did not choose and to which his adversary originally could not have removed." Klor, 46 F.Supp.2d at 391. (internal quotation marks omitted). Additionally, allowing removal of an entire suit based on a third-party claim would appear to expand the jurisdiction of federal courts in contravention of the statutory limits on the right of removal. See Am. Fire & Cas. Co. v. Finn, 341 U.S. 6, 10, 71 S.Ct. 534, 95 L.Ed. 702 (1951); Shamrock Oil & Gas Corp., 313 U.S. at 108-09, 61 S.Ct. 868; Thomas, 740 F.2d at 486.

Proponents of third-party removal note that nowhere in § 1441(c) does it explicitly state that only claims joined by the plaintiff can support removal. Klor, 46 F.Supp.2d at 391. Likewise, interpreting "the defendant or defendants" to exclude third-party defendants is not a necessary construction of § 1441(a). On the contrary, a third-party defendant, like any other defendant, has been haled into court involuntarily and has an interest in having the case against it heard in a federal forum. Id. at 392. The third-party defendant's involuntary presence in state court distinguishes it from the Shamrock plaintiff-counterdefendant, a distinction that arguably provides a coherent reason to permit removal by the third-party defendant while denying it to the plaintiff-counterdefendant. Id.

In response to the Court's Order to Show Cause, CIGNA cites no Tenth Circuit authority to support its position that a third-party defendant may remove an entire case pursuant to 28 U.S.C. § 1441(c). Indeed, the Tenth Circuit has not spoken definitively on the propriety of third-party removal, no doubt owing to the statutory limit on appellate review of decisions to remand found in 28 U.S.C. § 1447(d). Until a district court in this circuit denies a motion to remand a case removed by a third-party defendant, the issue is unlikely to be addressed by the circuit. See Resp. to Order to Show Cause at 3, ¶ 3.

The Court does not find that the lack of Tenth Circuit precedent on point creates great difficulty in deciding the issue. Looking to a sister district in this circuit (bound like this Court to interpret how the circuit would resolve the issue), that court has routinely remanded cases removed by third-party defendants. See e.g. Menninger Clinic Inc. v. Schilly, 1992 WL 373927 *2 (D.Kan., Nov. 23, 1992) (remanding case where third-party defendant claimed ERISA preemption, holding that "third-party claims are not removable" and noting state courts' concurrent jurisdiction over ERISA claims); Radio Shack Franchise Dep't v. Williams, 804 F.Supp. 151, 153 (D.Kan.1992) (citing MOORE'S FEDERAL PRACTICE for this being "the sound view"); Elkhart Co-op Equity Exch. v. Day, 716 F.Supp. 1384, 1387 (D.Kan. 1989).

Although CIGNA cites several cases from outside this circuit permitting third-party removal, this Court finds that the better view and the one consistent with related Tenth Court precedent is that third party removal is impermissible under 28 U.S.C. § 1441(c). There is a presumption against removal jurisdiction, Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.), cert. denied, 516 U.S. 863, 116 S.Ct. 174, 133 L.Ed.2d 114 (1995), and removal statutes are to be narrowly construed. Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1094-95 (10th Cir.2005). If there is ambiguity as to whether removal is appropriate, a court must adopt a "reasonable, narrow construction". Id. at 1095. The Court's holding comports with the approach taken by another district court in this circuit and with the majority view nationwide.

B. Whether the Third-Party Complaint is Separate from and Independent of Plaintiffs Complaint

Assuming arguendo that the Tenth Circuit would join with the minority of courts allowing third-party removal under § 1441(c), removal would still be proper here only if Gholam and Elzbieta Yari's claim for indemnification against third-party defendant CIGNA is "separate and independent" from NCO's claim against the Yaris for payment of the underlying debt. See 28 U.S.C. § 1441(c); Am. Fire & Cas. Co., 341 U.S. at 14, 71 S.Ct. 534 ("[W]here there is a single wrong to plaintiff, for which relief is sought, arising from an interlocked series of transactions, there is no separate and independent claim or cause of action under § 1441(c)."). Courts are split on the question of whether a third-party claim for contractual indemnification is "separate and independent" from the main claim for relief. Some courts find in the affirmative, reasoning that the third-party defendant's contractual obligation to indemnify the defendant/third-party plaintiff is separate from any obligation the defendant might have to the plaintiff. See Carl Heck Eng'rs, 622 F.2d at 136. Others hold that because the viability of a third-party claim for indemnification is wholly dependent upon a finding of liability in the main claim, the third-party claim is not "separate and independent." Klor, 46 F.Supp.2d at 394.

CIGNA relies on two cases for the proposition that an indemnity claim is separate and independent from the underlying claim. See Resp. to Order to Show Cause at 5, ¶¶ 8, 8.¹ The first, Duncan v. Schuster-Graham Homes, Inc., 194 Colo. 441, 578 P.2d 637 (Colo.1978), discusses the relationship of an indemnity claim to the underlying claim as it pertains to the statute of limitations. In Duncan, the Colorado Supreme Court held that the statute of limitations on an indemnity claim is tolled until the underlying claim is resolved because only after such resolution does an inchoate indemnity claim ripen into a cognizable claim for relief. Id. at 447, 578 P.2d 637. Yet this holding emphasizes the interdependence of the indemnity claim and the main claim for relief, militating against a finding that a claim for indemnity is separate and independent from the main claim. Though their respective statutes of limitations...