Veneruso v. Mount Vernon Neighborhood Health Ctr.

• Decision Date: 22 March 2013
• Docket Number: Case No. 09–CV–8703 (KMK).
• Citation: 933 F.Supp.2d 613
• Parties: James J. VENERUSO as Temporary Receiver for Community Choice Health Plan of Westchester Inc., Plaintiff, v. MOUNT VERNON NEIGHBORHOOD HEALTH CENTER, Defendant.
• Court: U.S. District Court — Southern District of New York

933 F.Supp.2d 613

James J. VENERUSO as Temporary Receiver for Community Choice Health Plan of Westchester Inc., Plaintiff,

v.MOUNT VERNON NEIGHBORHOOD HEALTH CENTER, Defendant.

Case No. 09–CV–8703 (KMK).

United States District Court, S.D. New York.

March 22, 2013.

Michael G. Berger, Esq., Law Offices of Michael G. Berger, David John Clark, Esq., Epstein Becker & Green P.C., New York, NY, for Plaintiff.

David A. Koenigsberg, Esq., Menz Bonner & Komar Koenigsberg L.L.P., New York, NY, James L. Feldesman, Esq., Matthew S. Freedus, Esq., Feldesman Tucker Leifer Fidell L.L.P., Washington, DC, for Defendant.

Judith C. McCarthy, Esq., State of New York Office of the Attorney General, White Plains, NY, for Amicus Curiae.

OPINION AND ORDER

KENNETH M. KARAS, District Judge.

Defendant Mount Vernon Neighborhood Health Center (“Mount Vernon” or “Defendant”) removed the present action from state court. Plaintiff James J. Veneruso (“Veneruso” or “Plaintiff”), acting on behalf of Community Choice Health Plan of Westchester Inc. (“CCHP”), moves to remand this case back to state court and for attorneys' fees. With leave of the Court, the New York State Office of the Attorney General (the “AG”) joins Plaintiff's Motion for Remand and his Motion for Attorneys' Fees as amicus curiae. For the reasons stated herein, Plaintiff's Motion to Remand is granted, but his Motion for Attorneys' Fees is denied.

I. Background

A. Factual Background

CCHP is a not-for-profit corporation (“NFPC”) organized under New York's Not–for–Profit Corporation Law (“NPCL”). (Notice of Removal (“Notice”) Ex. B (“Compl.”) ¶ 2.) The NPCL provides for different types of NFPCs. N.Y. Not–for–Profit Corp. Law § 201. CCHP is a “Type B” NFPC, which is an NFPC formed to “prevent[ ][ ] cruelty to children or animals,” or for other “charitable, educational, religious, scientific, literary, [or] cultural” “non-business purposes.” Id. § 201(b); see also (Compl. ¶ 2). “Prior to December 31, 2007, CCHP operated a pre-paid health services plan,” providing health services primarily to Medicaid patients. (Compl. ¶ 4.) On December 31, 2007, the New York State Department of Health directed CCHP “to terminate all of its operations as a comprehensive health services plan” and to “commence dissolution proceedings.” ( Id.) CCHP commenced a judicial dissolution proceeding under Article 11 of NPCL, which is a proceeding overseen by the New York State Supreme Court. (Letter from Judith C. McCarthy, Assistant Attorney General, New York Office of the Attorney General, to the Court (Jan. 8, 2010) (“AG Mem.”) 1.) Plaintiff was appointed temporary receiver of CCHP by the New York Supreme Court upon the application of the Attorney General. (Compl. ¶ 1.)

“CCHP was established without formal members by Mount Vernon” and The New Rochelle Hospital Medical Center, which is now known as Sound Shore Medical Center of Westchester (“Sound Shore”). ( Id. ¶ 7; Def. Mount Vernon Neighborhood Health Center's Answer, Affirmative Defenses & Countercls. (“Answer”) ¶ 7.) “Mount Vernon and Sound Shore have both been significant providers of health care services to enrollees of CCHP and are both significant creditors of CCHP.” (Compl. ¶ 9; Answer ¶ 9.)

Between April 10, 2003 and February 10, 2005, CCHP's Board of Directors authorized payments to Mount Vernon and Sound Shore totaling $1,976,000 (the “Surplus Distributions”). (Compl. ¶¶ 16–18; Answer ¶¶ 16–18.) The Attorney General has taken the position that the Surplus Distributions were improper under NPCL § 515 and has “asked CCHP to procure the return of this money.” (AG Mem. 2.) Sound Shore apparently has “agreed not to challenge or otherwise contest the position of the [Attorney General] or CCHP regarding its obligation to repay the Surplus Distributions” and has entered into a settlement agreement with CCHP. ( Id. Ex. B, at 1–2.) However, Mount Vernon believes that the payments were lawful and has rejected CCHP's demand for repayment. (Answer ¶ 23.)

B. Procedural History

Plaintiff filed this lawsuit in New York State Supreme Court seeking to recover the Surplus Distributions from Mount Vernon. (Notice ¶ 1.) Plaintiff's Complaint contains three causes of action. The first cause of action seeks a declaratory judgment that the Surplus Distributions were unlawful under Section 515(a) of the NPCL in that they were ultra vires distributions of CCPH's income and/or profits. (Compl. ¶¶ 24–28.) The second cause of action is one for unjust enrichment, also on the theory that the Surplus Distributions were ultra vires under § 515(a), ( id. ¶¶ 29–34), while the third cause of action is for money had and received, ( id. ¶¶ 35–39).

Defendant timely removed the action, and Plaintiff has timely moved for remand.

II. Discussion

A. Standard of Review

1. Removal

In evaluating the propriety of a removal, courts start with the baseline principle that federal courts are courts of limited jurisdiction. See Keene Corp. v. United States, 508 U.S. 200, 207, 113 S.Ct. 2035, 124 L.Ed.2d 118 (1993). Accordingly, “removal jurisdiction exists in a given case only when that jurisdiction is expressly conferred on the courts by Congress.” Fed. Ins. Co. v. Tyco Int'l Ltd., 422 F.Supp.2d 357, 367 (S.D.N.Y.2006) (internal quotation marks omitted); see also Irving Trust Co. v. Century Exp. & Imp., S.A., 464 F.Supp. 1232, 1234 (S.D.N.Y.1979) (noting that the right of removal is “a matter of legislative grace” (citing Great N. Ry. Co. v. Alexander, 246 U.S. 276, 280, 38 S.Ct. 237, 62 L.Ed. 713 (1918))). Judicial scrutiny is especially important “in the context of removal, where considerations of comity play an important role.” Johnston v. St. Paul Fire & Marine Ins. Co., 134 F.Supp.2d 879, 880 (E.D.Mich.2001). Indeed, “[o]ut of respect for the independence of state courts, and in order to control the federal docket, federal courts construe the removal statute narrowly, resolving any doubts against removability.” Stan Winston Creatures, Inc. v. Toys “R” Us, Inc., 314 F.Supp.2d 177, 179 (S.D.N.Y.2003) (internal quotation marks omitted); see also Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941) (noting that federalism concerns call for “the strict construction” of the removal statute); Lupo v. Human Affairs Int'l, Inc., 28 F.3d 269, 274 (2d Cir.1994) (“In light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of state governments, federal courts construe the removal statute narrowly, resolving any doubts against removability.” (internal citation omitted)); Zerafa v. Montefiore Hosp. Hous. Co., 403 F.Supp.2d 320, 324 (S.D.N.Y.2005) (“Removal jurisdiction is strictly construed inasmuch as it implicates significant federalism concerns and abridges the deference courts generally give to a plaintiff's choice of forum.”).

As a general matter, the party asserting federal jurisdiction bears the burden of proving that the case is properly in federal court. See McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936). “Where, as here, jurisdiction is asserted by a defendant in a removal petition, it follows that the defendant has the burden of establishing that removal is proper.” United Food & Commercial Workers Union v. CenterMark Props. Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir.1994); see also Qader v. Citibank, 927 F.Supp.2d 86, 87, No. 12–CV–7770, 2013 WL 628 337, at *1 (S.D.N.Y. Feb. 20, 2013) (“The removing defendant has the burden of establishing that removal is proper.”).

2. Well–Pleaded Complaint Rule

“Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable ....” 28 U.S.C. § 1441(b); see also id. § 1331 (granting original jurisdiction to district courts for federal questions). A claim falls within the district courts' jurisdiction “only [in] those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.” Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27–28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); see also Gully v. First Nat'l Bank, 299 U.S. 109, 112, 57 S.Ct. 96, 81 L.Ed. 70 (1936) (noting that under the well-pleaded complaint rule, a court must determine whether “a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action”). “Under the well-pleaded complaint rule, the plaintiff is the master of the complaint, free to avoid jurisdiction by pleading only state claims even where a federal claim is also available.” Marcus v. AT & T Corp., 138 F.3d 46, 52 (2d Cir.1998); see also In re Facebook, Inc., IPO Sec. and Derivative Litig., 922 F.Supp.2d 475, 480–81, No. 12–CV–6439, 2013 WL 525191, at *5 (S.D.N.Y. Feb. 13, 2013) (same).

“However, a plaintiff is not completely free to limit the complaint as he wishes. The doctrine of artful pleading, an ‘independent corollary’ of the well-pleaded complaint rule, holds that ‘a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint.’ ” Fin. and Trading, Ltd. v. Rhodia S.A., No. 04–CV–6083, 2004 WL 2754862, at *4 (S.D.N.Y. Nov. 30, 2004) (quoting Franchise Tax Bd., 463 U.S. at 22, 103 S.Ct. 2841). Put more succinctly, there are two limited exceptions to the well-pleaded complaint rule: the complete preemption doctrine and the substantial federal question doctrine. See id. (noting that removal can be justified in the face of a well-pleaded complaint “where federal law completely preempts state law in the field,” or “where the plaintiff's state law claim necessarily turns on the resolution of a substantial federal question”) (citing Marcus, 138 F.3d...