Texas Hosp. Assn. v. National Heritage Ins. Co.

• Decision Date: 04 August 1992
• Docket Number: No. A-91-CA-101.,A-91-CA-101.
• Citation: 802 F. Supp. 1507
• Parties: TEXAS HOSPITAL ASSN., et al., Plaintiffs, v. NATIONAL HERITAGE INSURANCE COMPANY, Texas Department of Human Services, and Burton F. Raiford, Interim Commissioner, Texas Department of Human Services, Defendants.
• Court: U.S. District Court — Western District of Texas

802 F. Supp. 1507

TEXAS HOSPITAL ASSN., et al., Plaintiffs, v. NATIONAL HERITAGE INSURANCE COMPANY, Texas Department of Human Services, and Burton F. Raiford, Interim Commissioner, Texas Department of Human Services, Defendants.

No. A-91-CA-101.

United States District Court, W.D. Texas, Austin Division.

August 4, 1992.

C. Dean Davis, Davis & Davis, P.C., Austin, Tex., David A. Bennett, Darryl S. Vhugen, Sanford E. Pitler, James M. Beaulaurier, Bennett & Bigelow, Seattle, Wash., for plaintiffs.

Edwin N. Horne, Asst. Atty. Gen., H. Robert Powell, Hughes & Luce, Tom Luce, Harold R. Loftin, Jr., Hughes & Luce, Austin, Tex., J. Thomas Scott, Elec. Data Systems Corp., Dallas, Tex., for defendant Nat. Heritage Ins. Co.

Edwin N. Horne, Austin, Tex., Phyllis D. Thompson, Vicki J. Larson, Steven A. Maddox, Jonathan T. Foot, Covington & Burling, Washington, D.C., William T. O'Neil, for defendant Texas Dept. of Human Services.

Edwin N. Horne, Austin Tex., for defendant Burton F. Raiford.

MEMORANDUM OPINION AND ORDER

SPARKS, District Judge.

Before the Court are Plaintiffs' Motion to Remand State Law Claims and Claims For Monetary Damages, brought pursuant to 28 U.S.C. § 1447(c), and the Defendants' Motions for Summary Judgment and to Dismiss. On July 9, 1992, the Court held a motions hearing at which the parties appeared by and through their counsel of record. After listening to counsel's arguments and reviewing the parties' multiple briefs, the Court determines Plaintiffs' claims, except the claim for prospective injunctive relief against Defendant Burton F. Raiford, Interim Commissioner of the Texas Department of Human Services, should be remanded to the 331st District Court of Travis County, Texas.

I. PROCEDURAL HISTORY

On January 24, 1991, Plaintiffs—the Texas Hospital Association ("THA") and several individual Texas hospitals—filed this action in the 331st District Court of Travis County, Texas, against the Texas Department of Human Services ("TDHS") and National Heritage Insurance Company ("NHIC").¹ Plaintiffs challenge the State of Texas' procedures for reimbursing Texas hospitals for the costs of treating Medicaid patients. Primarily, Plaintiffs claim that the reimbursements have not been "reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities," as required by the Boren Amendment to the Medicaid Act. 42 U.S.C. § 1396a(a)(13)(A). Plaintiffs also claim that the State's method of reimbursing violates similar provisions in the Texas Human Resources Code and 42 U.S.C. § 1983. See Tex.Hum.Res. Code Ann. §§ 32.021, 32.024(i), (j), 32.028(d); 42 U.S.C. § 1983. The plaintiffs seek declaratory relief, prospective and retroactive injunctive relief, reasonable costs, and attorneys fees.

On February 6, 1991, Defendant TDHS filed a Notice of Removal pursuant to 28 U.S.C. § 1441(c), based on federal jurisdiction under 28 U.S.C. §§ 1331 and 1343. On January 8, 1992, this Court "inherited" this case along with approximately 300 other pending civil cases. Defendant TDHS filed a Motion to Dismiss and For Partial Summary Judgment on March 16, 1992, seeking dismissal of Plaintiffs' state law claims and claims for monetary damages (retroactive injunctive relief) due to its sovereign immunity under the Eleventh Amendment. Defendant NHIC filed a similar Motion For Summary Judgment or Dismissal on March 31, 1992, arguing that it was entitled to the same immunity as Defendant TDHS because it is an "arm of the state."

On April 3, 1992, Plaintiffs filed a Motion to Remand State Law Claims and Claims for Monetary Damages pursuant to 28 U.S.C. § 1447(c) "and the controlling Fifth Circuit precedent." The plaintiffs also filed a Motion to Stay on April 28, 1992, in an effort to have this Court rule on its Motion to Remand before ruling on any of the defendants' motions. Both sides submitted multiple briefs, memorandums, and responses on the subject of remand in addition to their briefs on the other motions.

In their briefs in support of their Motion to Remand, Plaintiffs assert that partial remand of their state law claims and claims for monetary damages pursuant to 28 U.S.C. § 1447(c) is proper where those claims no longer come under the jurisdiction of this Court by operation of the sovereign immunity of the Eleventh Amendment.² In the alternative, Plaintiffs contend that this entire matter may be remanded under 28 U.S.C. § 1441(c) or 28 U.S.C. § 1367.

The defendants filed numerous responses to Plaintiffs' motion. Defendants TDHS and Interim Commissioner Raiford (the "state defendants") assert that initial removal was proper because this Court has original jurisdiction over at least one of Plaintiffs' claims: the prospective injunctive relief sought against the Commissioner. Though the state defendants now admit that removal pursuant to section 1441(c) was incorrect, they argue that such a "technical" defect is no longer subject to attack and that section 1441(b) provides this Court with proper removal jurisdiction. The state defendants also argue that partial remand is impossible, that sections 1441(c) and 1367 are not applicable to this situation, and that the plaintiffs' state law claims and claims for monetary damages should be dismissed instead of remanded due to the defendants' immunity under the Eleventh Amendment. Defendant NHIC (the "private defendant") joins with the state defendants in asserting that partial remand is improper and that this Court has jurisdiction over Plaintiffs' claims for prospective injunctive relief.

II. REMOVAL

A. Removal Under Section 1441(c)

Defendants initially removed this action pursuant to 28 U.S.C. § 1441(c).³ Section 1441(c) provides for the removal of a claim joined to a non-removable claim if the former is "separate and independent" from the latter. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 354, 108 S.Ct. 614, 621, 98 L.Ed.2d 720 (1988); McKay v. Boyd Construction Co., 769 F.2d 1084, 1087 (5th Cir.1985). Where a plaintiff's multiple claims are not separable, a defendant may not remove the action to federal court under section 1441(c). Cohill, 484 U.S. at 355 n. 11, 108 S.Ct. at 621 n. 11; McKay, 769 F.2d at 1087-1088; Simmons v. State of California, 740 F.Supp. 781, 789 (E.D.Cal. 1990). The crucial determination under section 1441(c) thus becomes whether separate and independent causes of action are stated. See id.

In American Fire & Casualty Insurance Co. v. Finn, 341 U.S. 6, 14, 71 S.Ct. 534, 540, 95 L.Ed. 702 (1951), the Supreme Court stated that "where 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 section 1441(c)." Although Plaintiffs in this case allege violations of both federal and state laws, their claims all arise out of the same basic transaction, the allegedly improper reimbursements, and involve a single wrong, alleged financial hardship to Plaintiffs. Thus, both removal and remand under section 1441(c) are improper in this case. See Cohill, 484 U.S. at 349, 108 S.Ct. at 618; see also Moore v. DeBiase, 766 F.Supp. 1311, 1317 (D.N.J.1991) (where claims were not separate and independent because there was a single wrong arising from an interlocked series of transactions, the case was not removable under Section 1441(c)); Harrison v. Texas Dept. of Corrections, 694 F.Supp. 226, 229 (E.D.Tex. 1988) (in case where conduct forming basis of plaintiff's state law claim also formed basis of plaintiff's federal claims, there were not "separate and independent" claims and remand under Section 1441(c) was not authorized).

B. Removal Under Section 1441(b)

Defendants now admit that section 1441(c) was not the proper statute for removal of this case because the state and federal claims are not separate and independent. See Defendant NHIC's Response to Plaintiffs' Motion to Remand, p. 6, n. 2; State Defendants' Further Response to Plaintiffs' Motion to Remand, pp. 1-4. However, they correctly note that Plaintiffs have waived their right to assert a procedural challenge against Defendants' removal based on that defect and argue that removal was proper under 28 U.S.C. § 1441(b). See 28 U.S.C. § 1447(a), (b), (c) (procedural challenges must be made within thirty days of the filing of the notice of removal); Leininger v. Leininger, 705 F.2d 727, 729 (5th Cir.1983). Simmons v. State of California, 740 F.Supp. at 784; Alexander v. Goldome Credit Corp., 772 F.Supp. at 1219 n. 3. Together with Section 1441(a), Section 1441(b) permits removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction ... founded on a claim or right arising under the Constitution, treaties, or laws of the United States."⁴ 28 U.S.C. § 1441(a), (b) (emphasis added); see also Alexander, 772 F.Supp. at 1219 n. 3. Otherwise nonremovable pendent state claims may then be heard by the federal court under 28 U.S.C. § 1367 ("supplemental" jurisdiction). 28 U.S.C. § 1367 (West 1992 Supp.). Under Section 1441(a) and (b), the key requirement for removal is that the "civil action" be within the federal court's original jurisdiction. Id. at 1220.

C. Eleventh Amendment Immunity

This is where the problems begin. The Eleventh Amendment "deprives federal courts of any jurisdiction to entertain" any claims entitled to immunity thereunder. Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 99 n. 8, 104 S.Ct. 900, 907 n. 8, 79 L.Ed.2d 67. Section 1983 does not override Eleventh Amendment immunity, nor does pendent ("supplemental") jurisdiction. Id. at 119-21, 104 S.Ct. at 918-19. Thus, the fact that Plaintiffs have pled Section 1983 claims and the fact that Plaintiffs' state claims would otherwise come within this Court's jurisdiction via Section 1367 supplemental jurisdiction have no effect on the Defendants' Eleventh Amendment immunity, and this...