Opinion
No. 396cv1491 (JBA).
October 8, 1996
RULING ON PLAINTIFF'S MOTION TO REMAND [Doc. #18]
Plaintiff State of Connecticut filed the present action against defendant tobacco companies in state court. Plaintiff's seven-count complaint alleges violations of the Connecticut Unfair Trade Practices Act, the Connecticut Antitrust Act, and Connecticut common law. Defendants filed a joint Notice of Removal under 28 U.S.C. § 1441, contending that this Court has original jurisdiction over the action under 28 U.S.C. § 1331 (federal-question jurisdiction). Plaintiff disputes jurisdiction and moves to remand to state court.
ANALYSIS
Congress has provided for original federal jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The standards for assessing whether an action "arises under" federal law are well established:
To bring a case within the [jurisdiction] statute, 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. The right or immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another. A genuine and present controversy, not merely a possible or conjectural one, must exist with reference thereto, and the controversy must be disclosed upon the face of the complaint, unaided by the answer or the petition for removal.Gully v. First Nat'l Bank, 299 U.S. 109, 112-13 (1936) (citations omitted); see also Inter-American University of Puerto Rico, Inc. v. Concepcion, 716 F.2d 933, 934 (1st Cir. 1983). In determining whether federal-question jurisdiction exists over a given action, the plaintiff is "master of the claim." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) (footnote omitted). "The presence or absence of federal-question jurisdiction is governed by the `well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Id.
In the present case, plaintiff has ostensibly presented only state-law claims; under the well-pleaded complaint rule, plaintiff would thus be entitled to litigate the matter in state court. However, defendants rely on an exception to the well-pleaded complaint rule, claiming that plaintiff's complaint is subject to the "artful pleading" doctrine. The nature of this doctrine has been characterized as follows:
[O]ccasionally the removal court will seek to determine whether the real nature of the claim is federal, regardless of plaintiff's characterization. For instance, in many contexts plaintiff's claim may be one that is exclusively governed by federal law, so that the plaintiff necessarily is stating a federal cause of action, whether he chooses to articulate it that way or not. If the only remedy available to plaintiff is federal, because of preemption or otherwise, and the state courts necessarily must look to federal law in passing on the claim, the case is removable regardless of what is in the pleading.Travelers Indem. Co. v. Sarkisian, 794 F.2d 754, 758 (2d Cir. 1986) (quoting 14A C. Wright et al., Federal Practice and Procedure § 3722 (2d ed. 1985)). "The classic application of the artful pleading doctrine occurs in the context of federal preemption of state law." Id. However, "[b]ecause state and federal laws have many overlapping or even identical remedies and because generally we respect a plaintiff's choice between state and federal forums," the artful pleading "exception to well-pleaded complaint rule is necessarily a narrow one." In re Agent Orange Product Liability Litigation, 996 F.2d 1425, 1430-31 (2d Cir. 1993).
Defendants point to two distinct aspects of the complaint whose "real nature" they find to be federal: 1) plaintiff's request for reimbursement of tobacco-related Medicaid expenses, and 2) plaintiff's allegations of antitrust violations. These claims are discussed separately below. A. Medicaid Reimbursement
Defendants' argument that a claim for reimbursement of Medicaid expenses necessarily "arises under" federal law has been squarely rejected by all four federal courts to have considered it. See Maryland v. Philip Morris, Inc., CV No. CCB-96-1691 (D. Md. July 31, 1996); Ieyoub v. American Tobacco Co., CV96-0908 (W.D. La. July 16, 1996); Massachusetts v. Philip Morris, Inc., 1996 U.S. Dist. LEXIS 6895 (D. Mass. May 20, 1996); Moore v. American Tobacco Co., 94cv293GR (S.D. Miss. August 16, 1994). The argument merits little additional attention by this Court, and, in fact, borders on the frivolous.
Briefly, defendants assert that plaintiff's claim "arises under" 42 U.S.C. § 1396a (a) (25) (B), which requires state Medicaid plans to provide
that in any case where such legal liability is found to exist after medical assistance has been made available on behalf of the individual and where the amount of reimbursement the state can reasonably expect to recover exceeds the costs of such recovery, the State or local agency will seek reimbursement for such assistance to the extent of such legal liability.
The Court finds no hint in this provision of an intent to establish any "rights or immunities"; indeed, the provision seems to presuppose other bases of liability. Therefore, the Court cannot discern how a suit brought to recover Medicaid payments can be characterized such that an "essential" element of the suit is a "right or immunity created" by § 1396a (a) (25) (B). See Gully, 299 U.S. at 112. Much less can the Court perceive how this provision indicates that "the only remedy available to plaintiff is federal . . . [and] courts necessarily must look to federal law in passing on [a Medicaid reimbursement] claim." See Travelers Indem. Co., 794 F.2d at 758.
Indeed, defendants have raised no serious argument that § 1396a (a) (25) (B) preempts state-law remedies; rather, defendants argue that preemption is not an absolute prerequisite to application of the artful pleading doctrine. While this may be so, defendants must nonetheless offer some other basis for concluding that "the only remedy available to plaintiff is federal" or that the artful pleading doctrine is somehow otherwise applicable. Defendants have simply failed to do so. If anything, the provision defendants rely on suggests that preexisting state-law causes of action must provide the essential elements of a Medicaid reimbursement claim. Nor is the Court persuaded otherwise by the ambiguous dicta concerning § 1396a (a) (25) (B) found in James Square Nursing Home, Inc. v. Wing, 897 F.Supp. 682, 687 (N.D.N.Y. 1995) (citing § 1396a (a) (25) for proposition that states "are empowered to seek reimbursement from third parties who are liable for care and services paid for by Medicaid").
Defendants reliance on Hollander v. Brezenoff, 787 F.2d 834 (2d Cir. 1986), is similarly misplaced. Hollander concerns an entirely different provision of the Medicaid statute, § 1396a (a) (37), which sets forth requirements for the payment of Medicaid providers by state Medicaid agencies. Hollander held that a provider's claim for full payment arose under § 1396a (a) (37), rather than state contract law; however, § 1396a (a) (37) plainly does what § 1396a (a) (25) does not: create substantive rights on behalf of specified parties. While a suit by a provider to vindicate those rights may arise under federal law, no such conclusion follows with respect to claims by a state to recover expenditures already made. The Medicaid statute merely sets forth vague procedural requirements pertaining to such actions, in contrast to the substantive requirements set forth with respect to Hollander-type actions; therefore, Hollander is easily distinguishable from the present case. The cases from other circuits on which defendants rely are similarly distinguishable. In sum, the Court cannot conclude that the present action "arises under" the Medicaid statute within the meaning of 28 U.S.C. § 1331.
B. Antitrust Violations
Defendants argue that the national scope of the alleged antitrust violations, including many allegations of various acts committed outside the state of Connecticut, compels a conclusion that the state antitrust claims are truly federal antitrust claims. Like their Medicaid argument, this argument has been unsuccessfully advanced by the same defendants in similar litigation elsewhere. Maryland v. Philip Morris, Civ. No. CCB-96-1691 (D. Md. July 31, 1996). Again, this Court need add little to the persuasive opinion of the previous court.
Federal antitrust law plainly does not preempt state antitrust law; "Congress intended the federal antitrust laws to supplement, not displace, state antitrust remedies." California v. ARC America Corp., 490 U.S. 93, 102 (1988) (citations omitted). Moreover, the Connecticut Antitrust Act, by its own terms, "applies to every contract, combination, or conspiracy in restraint of any part of trade or commerce . . . when any part thereof was entered into or effectuated in whole or in part in this state." Conn. Gen. Stat. § 35-30. Thus, the Court cannot see how the plaintiff's antitrust claims fall within the ambit of the artful pleading doctrine. See Travelers Indem. Co., 794 F.2d at 758 ("If the only remedy available to plaintiff is federal, because of preemption or otherwise, and the state courts necessarily must look to federal law in passing on the claim, the case is removable, regardless of what is in the pleadings.").
Defendants rely primarily on In re NASDAO Market Makers Antitrust Litigation, 929 F.Supp. 174 (S.D.N.Y. 1996), and In re Wiring Device Antitrust Litigation, 498 F.Supp. 79 (E.D.N.Y. 1980). In both cases, the artful pleading doctrine was found to support the removal to federal court of state antitrust claims involving interstate conduct. However, in both cases, nearly identical factual allegations had been presented in federal suits filed prior to the state suits. Moreover, in both cases, the federal suits had been consolidated pursuant to multidistrict litigation procedures; thus, "the court to which the case had been removed was overseeing a multi-district litigation involving very nearly the same set of facts, the same allegedly illegal actions, nearly identical federal and state law claims, and a proposed federal class that included the plaintiffs in the state law action." 929 F.Supp. at 180. In finding these facts to warrant application of the artful pleading doctrine, the NASDAO court cited Travelers Indemnity Co., in which the Second Circuit established that the artful pleading doctrine encompassed situations in which a plaintiff initially raised a federal claim in federal court; "[h]aving done so and foregone the opportunity to plead a pendent state law claim, he was not free to abuse the dual court system by filing in state court a second law suit and resubmitting his claim as one based solely on state law."Travelers Indem. Co., 794 F.2d at 760-61. In light ofTravelers Indemnity, and the reliance of NASDAO on Travelers Indemnity, the Court finds that the better reading of NASDAO and Wiring Device is not that all antitrust claims involving interstate elements necessarily "arise under" federal law, as defendants urge, but rather that the artful pleading doctrine extends beyond the preemption context to encompass state-court suits that attempt to "abuse the dual court system" by allowing the plaintiff to avoid consolidation with a pending federal suit. See also Maryland v. Phillip Morris, slip op. at 6 (distinguishing Wiring Device case).
The Court notes that NASDAO and Wiring Device are further distinguishable in that the state antitrust laws at issue in both cases only regulated intrastate commerce. Wiring Device, 929 F.Supp. at 179. The difference between these laws and the Connecticut law, which apparently may encompass conduct that is not wholly intrastate, seems germane to the artful pleading analysis: simply put, the NASDAO and Wiring Device, courts could much more easily find that "the only remedy available to plaintiff is federal" than can the present Court.
Like the Connecticut antitrust law, the California antitrust law applies to transactions in interstate commerce. In a case similar to the present one, the Ninth Circuit remanded to state court a suit alleging only violations of California's antitrust law, notwithstanding the fact that the defendants were primarily engaged in interstate commerce. Redwood Theatres v. Festival Enterprises, 908 F.2d 477, 480 (9th Cir. 1990). Defendants seek to distinguish Redwood Theatres on the basis of plaintiff's request for "unprecedented nationwide relief" and attempt to impose liability based on out-of-state conduct. However, the relief sought for plaintiff's antitrust claim does not appear particularly national in character; indeed, of the elements of "national relief" defendants enumerate, only one, disclosure of tobacco research, is actually requested in plaintiff's antitrust count. (See Defs.'s Mem. Opp. Remand, at 31.) As to defendants' argument that plaintiff seeks to impose liability based in part on out-of-state conduct, this assertion is little different than observing that liability is premised on interstate transactions. Yet, Redwood Theatres indicates that the interstate nature of a transaction alone does not require application of the artful pleading doctrine to a state antitrust claim. 908 F.2d at 480. Thus, the Court is not persuaded by defendants' efforts to distinguish Redwood Theatres, and cannot conclude that the real nature of plaintiff's claim is federal such that the suit is not subject to the well-pleaded complaint rule.
CONCLUSION
For the foregoing reasons, plaintiff's Motion to Remand (Doc.#18) is GRANTED. The action is remanded to the Connecticut Superior Court, Judicial District of Stamford/Norwalk.
IT IS SO ORDERED.