DOE v. CUTTER BIOLOGICAL, (E.D.La. 1991)

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Docket Number

Civ. A. No. 91-2466.

Attorney(S)

Wilson C. Krebs, Thomas Wilson Mull, Mull Mull, Covington, La., for plaintiffs. Charles L. Chassaignac, Mary Lynne Friedman, Chaffe, McCall, Phillips, Toler Sarpy, New Orleans, La., Terry O. Tottenham, Fulbright Jaworski, Austin, Tex., for defendant Miles, Inc.

Judges

Martin Leach-Cross Feldman

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Smart Summary

Factual and Procedural Background

On May 21, 1991, the plaintiffs filed suit in Louisiana state court against Cutter Biological (a division of Miles, Inc.), the Administrators of the Tulane Educational Fund, Tulane Medical School, and Dr. Andres. The plaintiff Jane Doe, who has hemophilia, was treated at Tulane Medical School's Louisiana Comprehensive Hemophilia Care Program from 1981 to 1990 under the direction of Dr. Andres. Pursuant to his instructions, Jane Doe was administered Koate, a drug manufactured by Miles, Inc., which allegedly infected her with the HIV virus. Except for Miles, the defendants are Louisiana residents. The plaintiffs did not serve Dr. Andres and Tulane initially because Louisiana law required convening a medical-review panel before filing suit. The plaintiffs requested such a panel on June 11, 1991. Miles removed the case to federal court on July 8, 1991. The plaintiffs subsequently moved to remand or alternatively to stay the federal proceedings.

Legal Issues Presented

Whether the federal court has subject matter jurisdiction over this case, considering the presence of nondiverse defendants who were not served at the time of removal.
Whether the nondiverse defendants, Dr. Andres and Tulane Medical School, were fraudulently joined to defeat federal diversity jurisdiction.
Whether the plaintiffs’ failure to convene a medical-review panel before filing suit bars their claims and thus supports fraudulent joinder.

Arguments of the Parties

Plaintiffs' Arguments

The plaintiffs argue that although they failed to convene a medical-review panel before filing suit, they have stated a viable cause of action against the nondiverse defendants.
The procedural prematurity of their claims does not negate the substantive merit of their allegations against Dr. Andres and Tulane.

Defendant Miles, Inc.'s Arguments

Miles contends that the nondiverse defendants were fraudulently joined because the plaintiffs failed to comply with the procedural prerequisite of convening a medical-review panel before filing suit, thereby barring the claims against those defendants.
This procedural bar, Miles argues, means there is no valid cause of action against the nondiverse defendants at the time of removal, justifying removal to federal court.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Willy v. Coastal Corp., 855 F.2d 1160 (5th Cir. 1988)	Strict construction of removal jurisdiction due to federalism concerns; burden on removing party to prove removal proper.	The court emphasized narrow construction of removal jurisdiction and placed burden on Miles to justify removal.
Aydell v. Sterns, 677 F. Supp. 877 (M.D. La. 1988)	Non-service of a resident defendant does not automatically permit removal by a nonresident defendant.	Supported the conclusion that failure to serve nondiverse defendants does not establish complete diversity.
Schwegmann Bros. Giant Supermarkets, Inc. v. Pharmacy Reports, Inc., 486 F. Supp. 606 (E.D. La. 1980)	Similar principle that non-service of resident defendants does not justify removal.	Reinforced the rule that complete diversity is required for removal.
Wilson v. Republic Iron Steel Co., 257 U.S. 92 (1921)	Fraudulent joinder of a resident defendant without real connection cannot defeat removal.	Referenced to define fraudulent joinder standards.
B., Inc. v. Miller Brewing Co., 663 F.2d 545 (5th Cir. 1981)	Standard for fraudulent joinder: no possibility of a valid claim or outright fraud in pleadings.	Guided the court to analyze whether a valid cause of action existed against nondiverse defendants.
Green v. Amerada Hess Corp., 707 F.2d 201 (5th Cir. 1983)	Affirmed the heavy burden on removing party to prove absolutely no possibility of a claim against nondiverse defendants.	Instructed the court to resolve all factual disputes in favor of the plaintiff when assessing fraudulent joinder.
Carriere v. Sears, Roebuck Co., 893 F.2d 98 (5th Cir. 1990)	Fraudulent joinder only if no possibility of recovery against nondiverse defendant.	Supported cautious approach to fraudulent joinder claims.
Laughlin v. Prudential Ins. Co., 882 F.2d 187 (5th Cir. 1989)	Fraudulent joinder requires no possibility of a valid claim against nondiverse defendant.	Reinforced the standard applied by the court.
In re Carter, 618 F.2d 1093 (5th Cir. 1980)	Subject matter jurisdiction is determined by the complaint at the time of removal.	Used to establish the temporal framework for assessing fraudulent joinder.
Jarrell v. American Medical Int'l Inc., 552 So.2d 756 (La. Ct. App. 1989)	Failure to convene a medical-review panel before filing suit results in dismissal without prejudice for prematurity.	Illustrated the procedural bar under Louisiana law relevant to plaintiffs’ claims.
Fitzgerald v. Hurwitz, 517 So.2d 412 (La. Ct. App. 1987)	Supports that procedural prematurity does not negate substantive viability of claims.	Used to show harmony in Louisiana courts regarding procedural prematurity versus substantive claims.
Miller v. Griffin-Alexander Drilling Co., 685 F. Supp. 960 (W.D. La. 1988)	Dismissing suit without prejudice for failure to state a claim.	Reinforced distinction between procedural dismissal and substantive viability.
Tedder v. F.M.C. Corp., 590 F.2d 115 (5th Cir. 1979)	Consideration of whether facts support substantive claims against nondiverse defendants.	Applied to evaluate the substantive merit of plaintiffs’ claims in fraudulent joinder analysis.

Court's Reasoning and Analysis

The court began by recognizing that removal jurisdiction is to be strictly construed due to federalism concerns, with the burden on the removing party, Miles, to justify removal. Although the plaintiffs failed to serve the nondiverse defendants (Dr. Andres and Tulane) before removal, this does not automatically create complete diversity, as the case still includes nondiverse defendants. The court examined the doctrine of fraudulent joinder, which requires clear and convincing evidence that there is no possibility the plaintiff can establish a cause of action against the nondiverse defendants.

The court referenced Fifth Circuit precedent establishing a heavy burden on the removing party to prove fraudulent joinder and instructed that all factual allegations be viewed in the light most favorable to the plaintiff. The key inquiry was whether the plaintiffs’ claims against the nondiverse defendants had substantive merit, not merely whether they were procedurally premature.

Under Louisiana law, a medical-review panel must be convened before filing a malpractice suit against health-care providers. The plaintiffs failed to convene such a panel before filing suit, which is a procedural requirement. However, procedural prematurity may result in dismissal without prejudice but does not negate the substantive viability of the claims. The court found that the plaintiffs had stated a viable cause of action against Dr. Andres and Tulane, and the procedural defect did not amount to fraudulent joinder.

The court rejected Miles’ argument that the procedural bar equated to fraudulent joinder, emphasizing that procedure should not trump substance. Because there was a possibility of recovery against the nondiverse defendants, fraudulent joinder was not established, and complete diversity was lacking. Consequently, the case was not properly removable to federal court.

Holding and Implications

The court GRANTED the plaintiffs' motion to remand the case to state court.

The direct effect of this decision is that the federal court lacks jurisdiction due to the presence of nondiverse defendants who were not fraudulently joined. The case must proceed in Louisiana state court. The court did not set new precedent but reinforced the principle that procedural defects, such as failure to convene a medical-review panel, do not constitute fraudulent joinder if the plaintiff’s claims have substantive merit.

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John DOE, et al. v. CUTTER BIOLOGICAL, et al.

ORDER AND REASONS

FELDMAN, District Judge.

Before the Court is the plaintiffs' motion to remand or in the alternative to stay these proceedings. For the reasons that follow, the plaintiffs' motion to remand is GRANTED.

On May 21, 1991, the plaintiffs filed suit in state court against Cutter Biological, A Division of Miles, Inc., the Administrators of the Tulane Educational Fund, Tulane Medical School, and Dr. Andres. Jane Doe has hemophilia and from 1981 to 1990 was treated at the Tulane Medical School in a program called the Louisiana Comprehensive Hemophilia Care Program. Dr. Andres was the program's director and was allegedly Jane Doe's treating physician. Pursuant to his instructions, Jane Doe was given the drug Koate, which is manufactured by Miles and is supposed to help increase the blood's clotting ability. The plaintiffs allege that Jane Doe was infected with the HIV virus through her use of Koate. Except for Miles, the defendants are residents of Louisiana. The plaintiffs, however, did not serve Dr. Andres and Tulane with their suite because, under Louisiana law, they should have convened a medical-review panel before filing suit. On June 11, 1991 the plaintiffs requested such a panel. On July 8, 1991 Miles removed the case to federal court.

I. Background

The removing party carries the burden of proof on the issue of remand. Since "removal jurisdication raises significant federalism concerns, [this Court] must . . . strictly construe removal jurisdiction." Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5 Cir. 1988) (citations omitted). Mindful that we are courts of limited jurisdiction, this Court will narrowly construe removal jurisdiction, while placing the burden of proof on Miles to justify removal.

Notwithstanding the obvious procedural lapse, the plaintiffs' failure to serve Dr. Andres and Tulane does not automatically permit Miles to remove the case. In other words, even though the nondiverse defendants have not been served, the case can nevertheless lack complete diversity, and as a result, it cannot be removed. See Aydell v. Sterns, 677 F. Supp. 877, 879 (M.D.La. 1988) ("[T]he simple fact that a resident defendant has not yet been served does not, in and of itself, entitle a nonresident defendant to remove."); see also Schwegmann Bros. Giant Supermarkets, Inc. v. Pharmacy Reports, Inc., 486 F. Supp. 606 (E.D.La. 1980). Thus, because this case implicates both diverse and nondiverse defendants, complete diversity is absent. One exception, however, permits nondiverse parties to remain in federal court: fraudulent joinder. To resolve the issue of remand, the Court must determine whether the nondiverse defendants were fraudulently joined.

II. Fraudulent Joinder A. Standards

A party may not join a party in a suit simply to defeat diversity; the party must have a viable claim against that defendant. Scholars agree that fraudulent joinder must be proved "with particularity and supported by clear and convincing evidence" by the removing party. "A party will be considered fraudulently joined," it is said, "when plaintiff has not stated a claim for relief or does not intend to secure a judgment against that defendant." 14A C. Wright, A. Miller E. Cooper, Federal Practice and Procedure § 3723, at 343, 347-52 (2d ed. 1985) (footnote omitted). Here, plaintiffs claim might well be procedurally premature, but one can hardly imagine that it is not viable under law (likelihood of success is not the test).

See Wilson v. Republic Iron Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 37, 66 L.Ed. 144 (1921) (fraudulent joinder of resident defendant, who had no real connection to the case, could not defeat the right of removal).

In B., Inc. v. Miller Brewing Co., 663 F.2d 545 (5 Cir. 1981), the Fifth Circuit spoke to the standard by which a district court must determine fraudulent joinder:

In order to establish that an in-state defendant has been fraudulently joined, the removing party must show either that there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court; or that there has been outright fraud in the plaintiff's pleadings of jurisdictional facts.

B, Inc., supra at 549 (emphasis in original) (footnote omitted). The burden on the removing party to prove fradulent joinder is often said to be a heavy one. The circuit emphasized that "if there is even a possibility that a state court would find a cause of action stated against any one of the named in-state defendants on the facts alleged by the plaintiff, then the federal court must find that the in-state defendant(s) have been properly joined." Id. at 550. In Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5 Cir. 1983), cert. denied, 464 U.S. 1039, 104 S.Ct. 701, 79 L.Ed.2d 166 (1984), the Fifth Circuit more determinedly repeated the test for fraudulent joinder:

The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court. . . .

To make this determination, the Fifth Circuit instructs district courts to "evaluate all of the factual allegations in the plaintiff's state court pleading in the light most favorable to the plaintiff, resolving all contested issues of substantive fact in favor of the plaintiff." Green, supra at 205. Thus, we are instructed to be cautious about fraudulent joinder claims.

See also Carriere v. Sears, Roebuck Co., 893 F.2d 98, 100 (5 Cir. 1990) ("[a]fter all disputed questions of fact and all ambiguities in the controlling state law are resolved in favor of the nonremoving party, the court determines whether that party has any possibility of recovery against the party whose joinder is questioned"); Laughlin v. Prudential Ins. Co., 882 F.2d 187, 190 (5 Cir. 1989) (court may find fraudulent joinder only if there is no possibility of establishing a valid cause of action against the nondiverse defendant).

B. Application

In deciding jurisdictional issues, the Court examines the petition at the time the removal petition was filed. "It is a fundamental principle of law that whether subject matter jurisdiction exists is a question answered by looking to the complaint as it existed at the time the petition for removal was filed." In re Carter, 618 F.2d 1093, 1101 (5 Cir. 1980), cert. denied, 450 U.S. 949, 101 S.Ct. 1410, 67 L.Ed.2d 378 (1981).

Miles urges that the two nondiverse defendants were fraudulently joined because, at the time of the filing of the petition, the plaintiffs could not state a valid cause of action against them. More specifically, Miles says that since the plaintiffs failed to procedurally convene a medical-review panel before filing suit against the doctor and Tulane, they are barred from suing them, and as a result, the nondiverse defendants were fraudulently joined.

Improperly joined, prematurely joined . . . probably. But fraudulent joinder is composed of more serious stuff.

In Louisiana, before one may file a malpractice suit against a health-care provider, the claims must first be administratively considered by a medical-review panel. La. R.S. § 40:1299.47 B (1)(a)(i) (West 1991) provides: "No action against a health care provider . . . may be commenced in any court before the claimant's proposed complaint has been presented to a medical review panel. . . ." In this case, it is undisputed that Dr. Andres and Tulane are health-care providers under the statute. The plaintiffs, therefore, should have submitted their malpractice claim to a medical-review panel before filing suit in state court.

But the plaintiffs sued first, and then submitted their complaint to a panel. Under Louisiana law, failure to convene a medical-review panel before filing suit, may result in a dismissal, without prejudice, of the plaintiff's case. In Louisiana jargon, the cause of action may be dismissed pursuant to the dilatory exception of prematurity. In Jarrell v. American Medical Int'l Inc., 552 So.2d 756, 759 (La.Ct.App. 1 Cir. 1989), writ denied, 556 So.2d 1282 (La. 1990) the court of appeal affirmed the trial court's grant of the defendant's plea of prematurity. The court explained:

It appears from the record that the medical-review panel has not yet been convened. Whether plaintiffs' procedural moves stem from their unfamiliarity with the correct procedure, or tactical indifference, is not a matter that needs to be resolved at this time, but it is one that has made the Court's task less than easy.

The function of the . . . objection of prematurity is to raise the issue that the judicial cause of action has not come into existence because some prerequisite condition has not been fulfilled.

The court of appeal found that the plaintiff's responsibility in having his malpractice complaint reviewed by a medical-review panel was a precondition to filing suit. Therefore, the exception of prematurity was appropriate. Of course, once the prerequisite was satisfied, the plaintiff could pursue his cause of action. Procedural prematurity is not a conceptually accurate measure of fraudulent joinder if the claim theory asserted can be said to have plausible substantive merit. Prematurity does not trump viability. Other Louisiana courts are in harmony with this thought. See Fitzgerald v. Hurwitz, 517 So.2d 412, 413 (La.Ct.App. 4 Cir. 1987); see also Miller v. Griffin-Alexander Drilling Co., 685 F. Supp. 960, 967 (W.D.La. 1988) (dismissing suit, without prejudice, for failure to state a claim).

As noted earlier, when analyzing a claim of fraudulent joinder, the Court must determine whether there is no possibility that the plaintiff could establish a cause of action against the nondiverse defendants. The key inquiry to a claim of fraudulent joinder is whether the plaintiff made the nondiverse party a defendant under a claim theory that has substantive merit. B., Inc. v. Miller Brewing and Green v. Amerada Hess ask whether the plaintiff has a substantive cause of action against the nondiverse parties. Can the facts support the plaintiffs' substantive claims against the nondiverse defendants? See Tedder v. F.M.C. Corp., 590 F.2d 115, 117 (5 Cir. 1979).

Miles argues that because the suit against Dr. Andres and Tulane, the nondiverse defendants, is procedurally barred by La.R.S. § 40:1299.47 B(1)(a)(i), they were fraudulent joined. The Court disagrees. Miles mistakes procedure for substance. The Court holds that the nondiverse defendants were not fraudulently joined and, consequently, the case must be remanded to state court.

John and Jane Doe have stated a viable cause of action under which the doctor or Tulane could be found liable, if the evidence supports their claims. The plaintiffs may be procedurally barred from suing at this time because they failed to convene a medical-review panel before filing suit, but they certainly have stated a cause of action that could impose liability on Dr. Andres or Tulane. Taking into account the obligation to narrowly construe removal jurisdiction, and recognizing that the burden of proving fraudulent joinder is a heavy one, this Court holds that the plaintiffs did not fraudulently join Dr. Andres and Tulane. The plaintiffs have stated a cause of action under state law. To hold to the contrary on these facts, would exalt procedure over substance. Therefore, fraudulent joinder is not applicable, and complete diversity is lacking in this case.

The plaintiffs' motion to remand is GRANTED.

Although the Court need not address the alternatively argued issue of stay pending completion of the medical-review panel's work, it is useful to note that such a stay would, contrary to the arguments of Miles, avoid piecemeal resolution of these claims and enhance all notions of judicial economy. The arguments Miles makes would have the opposite result.