Opinion
Civil Action No. 04-2635, Section "F".
December 6, 2004
ORDER AND REASONS
Before the Court is the plaintiffs' motion to remand. For the reasons that follow, the motion is DENIED.
Background
The plaintiffs are uninsured patients who received medical care from the Ochsner Clinic Foundation and were then billed for the care provided to them. They were unable to pay their bills.
The plaintiffs filed suit in state court alleging a variety of breach of contract theories, fair dealing, violations of Louisiana's consumer protection laws, unjust enrichment/constructive trust, civil conspiracy/concert of action, and aiding and abetting. Their principal grievance is that Ochsner charges uninsured plaintiffs highly inflated rates, while providing discounts to health plan members, private insurance companies, Medicare, and Medicaid, and then, they add, Ochsner engages in abusive collection practices. The plaintiffs claim that these things violate, among other practices, an agreement between Ochsner and the State of Louisiana that was created when Ochsner accepted tax exemptions as a charitable organization under LSA-R.S. 47:287.501, LSA-R.S. 47:608, and Article VII, Section 21 of the Louisiana Constitution.
The defendants removed the lawsuit to this Court, claiming federal question jurisdiction, and the plaintiffs want to return to state court.
I.
Although the plaintiffs challenge removal in this case, the removing defendants carry the burden of showing the propriety of this Court's removal jurisdiction. See Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th Cir.), cert. denied, 510 U.S. 868, 114 S. Ct. 192, 126 L.Ed.2d 150 (1993); Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). In addition, any ambiguities are construed against removal, Butler v. Polk, 592 F.2d 1293, 1296 (5th Cir. 1979), as the removal statute should be strictly construed in favor of remand. York v. Horizon Fed. Sav. and Loan Ass'n, 712 F. Supp. 85, 87 (E.D. La. 1989); see also Shamrock Oil Gas Corp. v. Sheets, 313 U.S. 100 (1941).
II.
This case requires the resolution of a substantial question of federal law. For this reason, subject matter jurisdiction does exist.
Although plaintiffs' complaint facially articulates only state law causes of action, that is not the end of the inquiry. While a case "cannot be made removable by any statement in the petition for removal or in subsequent pleadings by the defendant,"Sanchez v. Trs. of the Pension Plan, Health Welfare Plan, and Educ. Fund of the United Ass'n of Journeymen Carpenters of the Plumbing Pipefitting Indus. of the United States and Can., Local Union 198, AFL-CIO, 419 F. Supp. 909, 911 (M.D. La. 1976) (quoting Great N.R.R. Co. v. Alexander, 246 U.S. 276, 281 (1918)), a complaint that contains only state law claims may still be removable if it will be necessary to resolve "a substantial question of federal law." Ren-Dan Farms, Inc. v. Monsanto Co., 952 F. Supp. 370, 374 (W.D. La. 1997).
Howery v. All State Insurance Co. sets out a three-part test to determine if a question of federal law is so intertwined with state law that it merits federal question jurisdiction: (1) A federal right must be "an essential element of the state claim;" (2) It must be necessary to intepret the federal right to resolve the case; and (3) The "question of federal law [must be] substantial." Howery v. All State Ins. Co., 243 F.3d 912, 917 (5th Cir. 2001).
In this case, the plaintiffs assert a cause of action based on an agreement that relies upon an interpretation of LSA-R.S. 47:287.501, LSA-R.S. 47:607, and Article VII, Section 21 of the Louisiana Constitution. Every one of these provisions of state law is closely and intimately related to federal law. Article VII, Section 21 of the Louisiana Constitution exempts from property taxation property owned by nonprofit corporations that are exempted from state and federal income tax. LSA-R.S. 47:607 is substantially identical to portions of 26 U.S.C. § 501. Most importantly, LSA-R.S. 47:287.501 describes the state income tax exemption thus: "An organization described in I.R.C. Sections 401(a) or 501 shall be exempt from income taxation under this Part to the extent such organization is exempt from income taxation at federal law, unless the contrary is expressly provided."
It is the close interrelationship between LSA-R.S. 47:287.501 and I.R.C. Sections 401(a) and 501 that chiefly concerns the Court. The right to receive an exemption under state law necessarily involves entitlement to an exemption under federal law. Any judgment based upon an interpretation of LSA-R.S. 47:287.501 will necessarily require an interpretation of I.R.C. Sections 401(a) and 501.
If the plaintiffs were merely asserting that Ochsner was exempt from state income taxes, the statute's reference to federal law would not be sufficient to allow this Court to exercise jurisdiction. But the plaintiffs assert that acceptance of the tax exemption created by LSA-R.S. 47:287.501 infers an agreement between Louisiana and the tax-exempt entity. They maintain that their right as third-party beneficiaries to enforce the agreement arises from this statute. Because the Louisiana statute does nothing more than state that it is granting the same tax exemption allowed by federal law, there is no right to enforce any agreement that may exist between Ochsner and Louisiana unless this right arises under I.R.C. Sections 401(a) and 501. Indeed, an agreement is not created by LSA-R.S. 47:287.501 unless one is created by I.R.C. Sections 401(a) and 501. These issues provoke substantial questions of federal law.
"[T]he presence of a federal issue," the Fifth Circuit warns, "however much it may dominate the case, is insufficient to confer federal-question jurisdiction." Oliver v. Trunkline Gas Co., 789 F.2d 341, 343 (5th Cir. 1986). The situation in this case, however, involves intricate questions regarding the pleading of rights that are informed by the Internal Revenue Code. The fact that the plaintiffs have artfully referred only to Louisiana statutes in seeking to determine these rights does not negate the fact that resolution of their allegations will necessarily engage an interpretation of the rights granted by federal law. "Ultimately, whether a federal issue embedded in the matrix of a state law claim will support federal question jurisdiction entails a pragmatic assessment of the nature of the federal interest at stake." Howery, 243 F.3d at 917. A pragmatic examination of the issues in this case convinces the Court that federal question jurisdiction does exist. See In re Estate of Novotny, 446 F. Supp. 1027, 1031 (S.D.N.Y. 1978) ("[T]he central question at issue here involves not an interpretation of state law but of federal law, a task to which the federal court is well suited.").
Accordingly, the plaintiffs' motion to remand is DENIED.
Because the plaintiffs' motion to remand is denied on the LSA-R.S. 47:287.501 issue, the Court does not address the alternative arguments raised.