Patient Care, Inc. v. Freeman

• Decision Date: 31 January 1991
• Docket Number: Civ. No. 89-4592.
• Citation: 755 F. Supp. 644
• Parties: PATIENT CARE, INC., Plaintiff, v. Martin FREEMAN and Esther Fried, Defendants/Third-Party Plaintiffs, v. EMPLOYEE BENEFIT MANAGEMENT CORPORATION, Third-Party Defendant.
• Court: U.S. District Court — District of New Jersey

755 F. Supp. 644

PATIENT CARE, INC., Plaintiff, v. Martin FREEMAN and Esther Fried, Defendants/Third-Party Plaintiffs, v. EMPLOYEE BENEFIT MANAGEMENT CORPORATION, Third-Party Defendant.

Civ. No. 89-4592.

United States District Court, D. New Jersey.

January 31, 1991.

Daniel P. Simpson, Hirsch, Newman, Simpson & Baer, Hackensack, N.J., for Patient Care, Inc., plaintiff.

Russell G. Cheek, Toms River, N.J., for Martin Freeman and Esther Fried, defendants/third-party plaintiffs.

Irving L. Hurwitz, Carpenter, Bennett & Morrissey, Newark, N.J., for Employee Benefit Management Corp., third-party defendant.

OPINION

DEBEVOISE, District Judge.

This matter comes before the Court on the third-party defendant's motion for summary judgment. The defendants/third-party plaintiffs, however, have raised a substantial objection to this Court's jurisdiction to hear this case. I have concluded, after careful consideration, that while a third-party defendant is not precluded from removing the claim against it to federal court, in this case removal was improper because the third-party claim for indemnification is not "separate and independent" from the main cause of action against the defendants. Therefore, this Court lacks jurisdiction over the case and the matter must be remanded to state court, from where it was improvidently removed.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Patient Care, Inc. ("Patient Care") initiated this lawsuit in the New Jersey Superior Court. In its complaint, plaintiff sued defendants Martin Freeman and Esther Fried for a sum of money allegedly owed for certain medical services provided for Mr. Freeman. The amount in controversy did not exceed $50,000, and there was no allegation that the citizenship of the parties was diverse. All of the claims in the complaint were based on ordinary state law causes of action. In short, as originally filed, there was no conceivable basis for federal subject matter jurisdiction over the case.

In response to the complaint, defendants filed an answer which denied the allegations in the complaint and raised certain defenses. In addition, as part of the same pleading, defendants brought a third-party complaint against third-party defendant Employee Benefit Management Corporation ("EBMC"). In their third-party complaint, defendants alleged that they were entitled to benefits under a group medical benefits plan, operated by EBMC, which would have covered the costs of the services for which they were being sued by Patient Care. Defendants sought indemnification from EBMC for any judgment plaintiff might obtain against them, and they brought separate claims against EBMC for the latter's alleged failure to provide benefits. All of defendants' claims against EBMC were framed as state law causes of action.

EBMC responded to the third-party complaint by filing a notice of removal with this Court.¹ The purported basis for removal was that defendants' claims, although framed as state law causes of action, were in fact preempted by the provisions of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. and were displaced by ERISA's civil enforcement provisions. Therefore, EBMC reasoned, defendants' claims arose under federal law, and removal was proper under 28 U.S.C. § 1441(a).²

EBMC thereafter moved for summary judgment on the third-party complaint, arguing that the insurance plan did not cover the services for which payment was sought. Defendants opposed the summary judgment motion on the merits, but also argued that this Court lacks jurisdiction because the case was improperly removed from state court.³

The central issue raised by defendants' attack on this Court's jurisdiction, to which I now turn,⁴ is whether, and if so, under what circumstances, a third-party defendant such as EBMC may remove a case to federal court.

DISCUSSION

More than thirty years ago a federal judge faced with the question of whether a third-party defendant could remove an action to federal court described the case law as a "field luxuriating in a riotous uncertainty." Harper v. Sonnabend, 182 F.Supp. 594, 595 (S.D.N.Y.1960). It is truly lamentable that this description remains accurate today. Despite the issuance of dozens of decisions during several decades, no uniform rule has developed. Indeed, a review of the cases reveals that even where two courts reach the same outcome, they rarely share a common rationale. Not only are there conflicts within several circuits, including the Third Circuit, there are even, as the decisions of this Court indicate, conflicts within individual judicial districts. Compare White v. Baltic Conveyor Co., 209 F.Supp. 716 (D.N.J.1962) (holding that a third-party defendant may not remove case to federal court) with Columbia Casualty Co. v. Statewide Hi-Way Safety, Inc., 94 F.R.D. 182, 184 (D.N.J.1982); Bond v. Doig, 433 F.Supp. 243 (D.N.J.1977) and Industrial Lithographic Co. v. Mendelsohn, 119 F.Supp. 284 (D.N.J.1954) (holding that third-party defendant may remove "separate and independent" claim). No doubt part of the confusion is due to the silence of the appellate courts. Only the Fifth and Seventh Circuits have addressed the issue, reaching opposite conclusions in opinions that are themselves somewhat equivocal. The Third Circuit has yet to address the question, so I am left to sort through the competing authorities, each of which is more or less persuasive, but none of which is binding.

While I have not attempted a comprehensive review of the case law,⁵ it is apparently generally accepted that the majority view holds that third-party defendants may not remove a case to federal court.⁶ This is no doubt due to the fact that the two leading commentators on federal procedure decided early on that only the original defendants to an action, and not the defendants to any cross-claim, counterclaim or third-party complaint, could remove the action to federal court. See 1A Moore's Federal Practice ¶ 0.16710 (2d ed. 1989); 14A C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure § 3724 (1985). The arguments for this view are various, but they typically begin with the language of the removal statute, which provides in relevant part:

(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending....

. . . . .

(c) Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise nonremovable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.

28 U.S.C. § 1441(a), (c).⁷

For those courts which would deny the right of removal to third party defendants, the point of departure for interpreting § 1441 is the "Congressional purpose to restrict the jurisdiction of the federal courts on removal...." Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941).⁸ From this premise of strict construction, the opponents of removal make two arguments regarding the text of § 1441, and two arguments regarding policy considerations.

The first textual argument is that whereas § 1441(c) speaks of the removable claim as being "joined" with a nonremovable claim, a third party claim is typically "not joined with, but rather ... antagonistic to" the plaintiff's claim. Thomas v. Shelton, 740 F.2d 478, 486 (7th Cir.1984). Reasoning that "Section 1441(c) is applicable only to claims joined by the plaintiff," Lowe's of Montgomery, Inc. v. Smith, 432 F.Supp. 1008, 1010 (M.D.Ala.1977) (emphasis added), the argument concludes that only claims brought by the plaintiff against the original defendant, and not third-party claims, may be removed under that section.

The second, and somewhat weightier, textual argument is that § 1441(a) refers only to removal "by the defendant or the defendants," and thus, based on strict construction, removal may not be had under § 1441(a) by third-party defendants. See, e.g., Chase v. North American Systems, Inc., 523 F.Supp. 378, 382 (W.D.Pa.1981); Lowe's of Montgomery, 432 F.Supp. at 1010; Greater New York Mutual Ins. Co. v. Anchor Construction Co., 326 F.Supp. 245, 248 (E.D.Pa.1971). This argument is somewhat aided by reference to legislative history. Thus, Judge Pollak of the Eastern District of Pennsylvania has pointed out that while the removal statute had once expressly provided that either plaintiffs or defendants could remove actions to federal court, in 1887 the statute was amended to limit the right of removal to defendants. Based on this amendment the Supreme Court in Shamrock, supra, found that where a defendant files a counterclaim against a plaintiff, the plaintiff may not remove. Thus, Judge Pollak reasoned, there is no coherent reason "for denying the privilege of removal to a Shamrock plaintiff but granting it to a third-party defendant," and "there is no evidence that Congress ... has adopted such a theory." Share v. Sears, Roebuck & Co., 550 F.Supp. 1107, 1109 (E.D.Pa.1982).

Perhaps more important than these textual arguments,⁹ however, are the policy arguments against removal by third-party defendants. First, it is contended that it would be "rather drastic to force the plaintiff, whose choice of forum normally should be honored, to litigate in a federal court that he did not choose and one to which his adversary originally could not have removed." Lowe's of Montgomery, 432 F.Supp. at 1010. See also Chase v. North American Systems, 523 F.Supp. at 382; Fiblenski v. Hirschback Motor Lines, Inc., 304 F.Supp. 283, 285 (E.D.Ark.1969). As the Southern...