Curtis v. Providence Health & Services

          ORDER MOTION TO REMAND

          H. RUSSEL HOLLAND UNITED STATES DISTRICT JUDGE

         Plaintiffs move to remand this matter to state court.^[1] This motion is opposed.^[2] Oral argument was not requested and is not deemed necessary.

         Background

         Plaintiffs are William Curtis, M.D., and Pedro Valdes, M.D., both of whom are alleged to be citizens of Alaska.^[3] Defendants are Providence Health & Services (PH&S), Providence Health & Services - Washington (PH&S-Washington), and Bruce Lamoureux. PH&S is alleged to be “a Washington non-profit corporation whose principal place of business is Anchorage, Alaska.”^[4] PH&S-Washington is alleged to be “a Washington nonprofit corporation whose principal place of business is Anchorage, Alaska.”^[5] Lamoureux is alleged to be “the Alaska Regional Chief Executive of” PH&S-Washington and “a citizen of Alaska[.]”^[6]

         Plaintiffs are cardiothoracic surgeons who had medical staff privileges at Providence Alaska Medical Center (PAMC).^[7] Plaintiffs allege that PAMC is owned and operated by PH&S-Washington and that PH&S is PH&S-Washington's “principal or sole ‘member.'”^[8]

         Plaintiffs allege that in August 2016, PAMC completed a review of its cardiothoracic program, which revealed some coverage issues due to the small number of cardiothoracic surgeons with privileges at PAMC.^[9] In response, plaintiffs proposed hiring a third cardiothoracic surgeon “if PAMC would guarantee a salary for the third surgeon, making up any shortfall in revenue between collections and $1.5 million, if such a shortfall occurred.”^[10]Plaintiffs allege that “PAMC did not respond to [their] proposal.”^[11]

         Instead, plaintiffs allege that PAMC was pursuing an exclusive contract with Starr-Wood Cardiac Group of Portland, P.C.^[12] Plaintiffs allege that “Starr-Wood sought to affiliate with [them], but the arrangement proposed by Starr-Wood would have made them subordinate to Starr-Wood and given Starr-Wood the power to exclude them from PAMC at any time.”^[13] Plaintiffs allege that they “rejected Starr-Wood's proposal.”^[14]

         Plaintiffs allege that on May 22, 2017,

Lamoureux wrote that he was disappointed to learn that [they] had not been able to reach mutually acceptable terms under which they would join with Starr-Wood. The letter stated: “[s]hould PAMC's negotiations with Starr-Wood or a Starr-Wood-affiliated entity end successfully, only surgeons affiliated with the contracting entity will have related privileges at PAMC.”^[15]

Plaintiffs allege that

[o]n June 1, 2018, PAMC wrote to [them] that PAMC had entered into an exclusive agreement for CT services and notified them that their clinical privileges to perform cardiac and thoracic surgery services at [PAMC] would automatically terminate on the ‘CT Start Date' unless they became employees of NorthStar Cardiothoracic Surgery, LLC, Starr-Wood's contracting subsidiary.^[16]

Plaintiffs allege that PAMC later informed them that their privileges would terminate on September 4, 2018.^[17]

         Plaintiffs commenced this action on September 4, 2018. In their original complaint, plaintiffs only asserted claims against PH&S. On October 4, 2018, PH&S-Washington removed the matter to this court.^[18] Plaintiffs moved to remand, and on November 8, 2017, this court granted plaintiffs' motion to remand because the case had been improperly removed by a non-party.^[19] Upon remand, plaintiffs filed an amended complaint. In their amended complaint, they assert an antitrust claim against PH&S, a breach of contract claim that appears to be asserted against PH&S-Washington, a breach of implied covenant of good faith and fair dealing claim against PH&S-Washington, a breach of the Alaska Unfair Trade Practices Act claim against PH&S-Washington, an intentional interference with prospective economic advantage claim against PH&S-Washington and Lamoureux, and a piercing the corporate veil claim.

         On December 6, 2018, PH&S-Washington again removed the action to this court on the basis of diversity jurisdiction. PH&S and Lamoureux consent to and join in the removal.^[20]

         Pursuant to 28 U.S.C. § 1447(c), plaintiffs now move to remand this matter to state court on the grounds that diversity jurisdiction does not exist because Lamoureux and PH&S-Washington are both citizens of Alaska.^[21]

         Discussion

         Section 1447(c) provides, in relevant part, that “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” “A federal court has [diversity] jurisdiction over the underlying dispute if the suit is between citizens of different states, and the amount in controversy exceeds $75, 000 exclusive of interest and costs. . . .” Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. Lhotka, 599 F.3d 1102, 1106 (9th Cir. 2010). Here, there is no dispute that the amount in controversy has been met. The dispute here is whether “the suit is between citizens of different states[.]” Id.

         “[I]n a case that has been removed from state court to federal court under 28 U.S.C. § 1441 on the basis of diversity jurisdiction, ” such as this one, “the proponent of federal jurisdiction-typically the defendant in the substantive dispute-has the burden to prove, by a preponderance of the evidence, that removal is proper.” Id. at 1106-07. “The preponder- ance of the evidence standard applies because removal jurisdiction ousts state-court jurisdiction and ‘must be rejected if there is any doubt as to the right of removal in the first instance.'” Id. at 1107 (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992)). “This gives rise to a ‘strong presumption against removal jurisdiction [which] means that the defendant always has the burden of establishing that removal is proper.'” Id. (quoting Gaus, 980 F.2d at 566). “For these reasons, ‘[the court] strictly construe[s] the removal statute against removal jurisdiction.'” Id. (quoting Gaus, 980 F.2d at 566). Although “a plaintiff seeking remand has the burden to prove that an express exception to removal exists[, ]” Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008), “any doubt about the right of removal requires resolution in favor of remand.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009).

         “Diversity removal requires complete diversity, meaning that each plaintiff must be of a different citizenship from each defendant.” Grancare, LLC v. Thrower by and through Mills, 889 F.3d 543, 548 (9th Cir. 2018). There is no dispute that plaintiffs and Lamoureux are all citizens of Alaska. But “[i]n determining whether there is complete diversity, district courts may disregard the citizenship of a non-diverse defendant who has been fraudulently joined.” Id. PH&S-Washington contends that Lamoureux has been fraudulently joined.

         “There are two ways to establish fraudulent joinder: ‘(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.'” Id. (quoting Hunter v. Philip Morris USA, 582 F.3d 1039, 1044 (9th Cir. 2009)). PH&S-Washington relies on the second way here.

         “Fraudulent joinder is established the second way if a defendant shows that an ‘individual[] joined in the action cannot be liable on any theory.'” Id. (quoting Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998)). “But ‘if there is a possibility that a state court would find that the complaint states a cause of action against any of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court.'” Id. (quoting Hunter, 582 F.3d at 1046). “A defendant invoking federal court diversity jurisdiction on the basis of fraudulent joinder bears a ‘heavy burden' since there is a ‘general presumption against [finding] fraudulent joinder.'” Id. (quoting Hunter, 582 F.3d at 1046).

         “[T]he test for fraudulent joinder and for failure to state a claim under Rule 12(b)(6) are not equivalent.” Id. at 549. “A claim against a defendant may fail under Rule 12(b)(6), but that defendant has not necessarily been fraudulently joined.” Id. “[A] federal court must find that a defendant was properly joined and remand the case to state court if there is a ‘possibility that a state court would find that the complaint states a cause of action against any of the [non-diverse] defendants.'” Id. (quoting Hunter, 582 F.3d at 1046). “If a plaintiff's complaint can withstand a Rule 12(b)(6) motion with respect to a particular defendant, it necessarily follows that the defendant has not been fraudulently joined.” Id. at 550. “But the reverse is not true. If [a plaintiff's complaint] cannot withstand a Rule 12(b)(6) motion, the fraudulent [joinder] inquiry does not end there.” Id. “[T]he district court must consider . . . whether a deficiency in the complaint can possibly be cured by granting the plaintiff leave to amend.” Id.

         PH&S Washington first argues that plaintiffs' claim against Lamoureux cannot withstand a Rule 12(b)(6) motion, and contrary to plaintiffs' contention, the Rule 12(b)(6) standard is not irrelevant to the fraudulent joinder analysis. The court may consider whether plaintiffs have stated a plausible intentional interference with prospective economic advantage claim against Lamoureux. If they have, then “it necessarily follows that” Lamoureux “has not been fraudulently joined.” Id. If they have not, then the court must consider whether they could “possibly” cure this deficiency by amending their complaint. Id.

         “‘To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim is facially plausible ‘when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Iqbal, 556 U.S. at 678).

To establish a claim for tortious interference with a prospective business opportunity, a plaintiff must show: (1) an existing prospective business relationship between it and a third party; (2) defendant's knowledge of the relationship and intent to prevent its fruition; (3) failure of the prospective relationship to culminate in pecuniary benefit to the plaintiff; (4) conduct of the defendant interfering with the prospective relationship; (5) ...