Integranet Physician Resource v. Texas Independent ( 2019 )

Case: 18-20659 Document: 00515231867 Page: 1 Date Filed: 12/11/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 11, 2019
No. 18-20659
Lyle W. Cayce
Clerk
INTEGRANET PHYSICIAN RESOURCE, INCORPORATED, doing business
as IntegraNet Health,
Plaintiff–Appellant
v.
TEXAS INDEPENDENT PROVIDERS, L.L.C.; ROBERT VINCENT ROTH;
CARLOS J. PALACIOS, Medical Doctor,
Defendants–Appellees
********************************************************
INTEGRANET PHYSICIAN RESOURCE, INCORPORATED,
Plaintiff–Appellant
v.
ROBERT VINCENT ROTH,
Defendant–Appellee
Appeal from the United States District Court
for the Southern District of Texas
Before SOUTHWICK, WILLETT, and OLDHAM, Circuit Judges.
DON R. WILLETT, Circuit Judge:
IntegraNet sued a competitor and its two owners (one of whom was a
former IntegraNet employee) in state court. They removed to federal court.
Then IntegraNet sued the former-employee owner in state court for another
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No. 18-20659
claim. And the owner again removed. The district court consolidated the cases.
The so-called consolidation order sua sponte barred IntegraNet from filing
another case against Appellees without the judge’s permission. On appeal,
IntegraNet argues that the district court lacked jurisdiction and that
consolidation was improper, as was the sua sponte pre-filing injunction.
We agree with IntegraNet. We reverse the consolidation order, vacate
the injunction, and remand both claims with instructions to the district court
to remand the Texas state law claims to the Texas state court from which the
cases were removed.
I. BACKGROUND
IntegraNet is a Texas independent physician association (IPA), a
network of independent physicians who’ve banded together to reduce overhead
costs and negotiate contracts with payers. IntegraNet employed Robert
Vincent Roth as Vice President of Contracting and Director of Financial
Analytics. A big part of Roth’s job was to collect money owed to IntegraNet
from insurers. Roth allegedly dropped the ball. In 2014 he sought recovery of
only $337,784 of roughly $4.3 million owed to IntegraNet by an insurer.
IntegraNet asserts that Roth knew about the underreporting prior to the claim
deadline and failed to correct it. Roth quit IntegraNet that same year. About
three years later, IntegraNet supposedly caught the mistake, but managed to
collect only around $550,000 of the roughly $4.3 million. So IntegraNet is
coming after Roth for the rest.
After Roth quit IntegraNet in 2014, he started a competitor IPA called
Texas Independent Providers (TIP). TIP serves patients through Medicare
Advantage plans. Roth and his partner, Dr. Carlos Palacios, are the principal
owners. IntegraNet says that Roth, Palacios, and TIP conspired to harm
IntegraNet’s business, improperly prying physicians and insurers away from
IntegraNet. For example, IntegraNet points to the insurer WellCare (a now-
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dismissed defendant). WellCare was an IntegraNet insurer, but withdrew in
2018. 1 WellCare notified its members of the termination with IntegraNet. The
parties agree that federal regulations and the contract between IntegraNet
and WellCare required IntegraNet to abstain from interfering with patient
enrollment upon WellCare’s termination of the contract. 2 Put differently,
IntegraNet was not supposed to pressure WellCare enrollees to switch
insurance plans. IntegraNet insists it didn’t.
But in April 2018, WellCare sent cease-and-desist letters to IntegraNet
and some of its providers. The letters state that WellCare received “a complaint
relating to unsolicited contacts with one or more of [the doctors’] patients who
are Medicare-eligible beneficiaries.” IntegraNet says these letters were
“thinly-veiled threats” to its doctor-members motivated by the desire for them
to leave IntegraNet for another IPA—like TIP—or to contract directly with
WellCare. IntegraNet also alleges that, around the same time, many of its
doctor-members received marketing materials from TIP touting the benefits of
their membership. These materials supposedly contain mischaracterizations
about IntegraNet “that only Roth would have the knowledge to make.”
Appellees Roth and Palacios co-own TIP. Palacios is also a Medical Director at
WellCare. IntegraNet believes that WellCare acted in concert with TIP, Roth,
and Palacios.
1 In this situation, if IntegraNet-affiliated doctors wanted the continued opportunity
to treat their patients with WellCare insurance, they could (1) terminate their relationship
with IntegraNet and join a different IPA that contracts with WellCare, or (2) contract directly
with WellCare without the negotiating advantages of an IPA.
2 See 42 C.F.R. §§ 422.2268(e), (j), and (k), 423.2268(e), (j), and (k). These regulations
were updated effective June 15, 2018, but these citations refer to the previous version that
was in effect during the time period at issue in this case. See also CTR. FOR MEDICARE &
MEDICAID SERVS., MEDICARE MKTG. GUIDELINES § 70.5.1 (2017), available at
https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/Downloads/CY-2018-
Medicare-Marketing-Guidelines_Final072017.pdf (citing the previously listed federal
regulations).
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IntegraNet filed two suits in state court. Suit #1 was against TIP, Roth,
Palacios, and WellCare for interfering with IntegraNet’s business (TIP
lawsuit). Suit #2 was against Roth alone for breach of fiduciary duty and
negligence (Roth lawsuit). But WellCare and Roth removed to federal court.
Here’s the timeline:
April 18, 2018—IntegraNet files TIP lawsuit in state court.
IntegraNet petitions for, and is granted, a temporary restraining
order against defendants.
April 29, 2018—WellCare removes TIP lawsuit to federal court
under 28 U.S.C. §§ 1441 (removal), 1442 (federal officer), and 1446.
May 10, 2018—After WellCare had been dismissed from the TIP
lawsuit, IntegraNet moves for remand.
June 18, 2018—IntegraNet files Roth lawsuit in state court.
August 30, 2018—Roth removes the Roth lawsuit to federal court
based on supplemental jurisdiction and 28 U.S.C. § 1446(b)(3), and
he moves to consolidate with the TIP lawsuit.
September 17, 2018—IntegraNet moves for remand of the Roth
lawsuit.
September 18, 2018—The district court consolidates the TIP and
Roth lawsuits. The consolidation order forbids IntegraNet from
“fil[ing] another case against the defendants on the facts in this
action without [the district] court’s permission.”
September 24, 2018—IntegraNet appeals the consolidation order
under 28 U.S.C. § 1292.
June 5, 2019—The district court denies remand of the Roth
lawsuit.
In this appeal, we review the interlocutory order consolidating the two cases
and the denial of the motions to remand.
II. JURISDICTION AND STANDARD OF REVIEW
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A. Statement of Jurisdiction
The preliminary issue is whether we have jurisdiction to hear the appeal
of this interlocutory order consolidating the two cases. Appellees argue that we
lack jurisdiction. They are mistaken. Under 28 U.S.C. § 1292(a)(1), we may
review interlocutory orders “granting, continuing, modifying, refusing or
dissolving injunctions, or refusing to dissolve or modify injunctions, except
where a direct review may be had in the Supreme Court . . . .” The relevant
question is whether the district court’s order amounted to an injunction. The
order forbade IntegraNet from “fil[ing] another case against the defendants on
the facts in this action without [the district] court’s permission.”
We have previously held that restrictions similar to those imposed by the
district court’s order constitute an order granting an injunction under
§ 1292(a)(1). 3 Baum, for example, had to do with a similar command from the
same district judge as here: The plaintiff couldn’t “fil[e] claims, directly or
indirectly, in courts or with agencies in the state of Texas without the express
written permission of Judge Lynn N. Hughes.” 4 We determined that the
command was an injunction, and thus jurisdiction existed under § 1292(a)(1). 5
And in our 2010 Qureshi decision, we considered a similarly worded
dismissal order from the same judge: “Because of his persistent abuse of the
judicial process, [plaintiff] may not file papers in Texas federal courts without
See, e.g., Baum v. Blue Moon Ventures, LLC, 513 F.3d 181, 184 (5th Cir. 2008) (appeal
3
from Hughes, J.).
4 Id.
5 Id. at 186–87. Right after Baum, and in an unpublished opinion, we similarly
characterized a “sanction barring further pleadings by [plaintiff] or any of his associates
concerning various civil actions.” Nat’l Bus. Consultants, Inc. v. Lightfoot, 292 F. App’x 298,
300–01 (5th Cir. 2008) (citing Baum for the standard for reviewing an injunction, which the
per curiam panel characterized as a sanction).
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written permission of Judge Lynn N. Hughes.” 6 We did not explain why the
order constituted an injunction. But for taxonomical purposes, the bottom line
is that the court cited Baum and called the order a “pre-filing injunction.” 7
Returning to this case, the “Order of Consolidation” bars IntegraNet
from filing “another case against the defendants on the facts in this action
without [the district] court’s permission.” Under Baum, this command not to
sue qualifies as an injunction, which is immediately appealable. So we have
jurisdiction to review the order.
Appellees contend the order isn’t an injunction because the district court
merely ordered the consolidation of two cases, as its title—“Order of
Consolidation”—suggests. But the order’s title is not dispositive. 8 Rather, “[i]n
determining what is an appealable order under 28 U.S.C. § 1292(a)(1), courts
look not to terminology, but to the substantial effect of the order made.” 9 Here,
like in Baum and Qureshi, the district court’s order prevents a party from filing
future lawsuits without that judge’s permission—meaning it’s a pre-filing
injunction. Thus, we have jurisdiction under § 1292(a)(1) to review the order.
As such, we also have jurisdiction to review the district court’s denial of
IntegraNet’s motion to remand to state court. An order denying a motion to
remand standing alone would not be appealable. 10 But, where there’s an
independent basis for jurisdiction, we must review the district court’s subject-
6 Qureshi v. United States, 600 F.3d 523, 524 (5th Cir. 2010).
7 Id.
8See McCoy v. La. State Bd. of Ed., 345 F.2d 720, 720 (5th Cir. 1954) (internal
quotation marks omitted).
9 Id. See also 11A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FED. PRAC. & PROC.
CIV. § 2962 (3d ed. 2019) (“[T]he court will look at the actual effect of the order that is issued
by the district court when determining whether an appeal should be allowed. . . .[A] district
court may not avoid immediate review of its determination simply by failing to characterize
or label its decision as one denying or granting injunctive relief.”).
10 Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 578 (1954).
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matter jurisdiction over the lawsuits. 11 Here, the district court’s pre-filing
injunction provides the requisite, independent basis for review under
§ 1292(a)(1).
B. Standard of Review
When a district court remands (or denies remand) based on
supplemental jurisdiction, we review for abuse of discretion. 12 And when a
district court grants or denies an injunction, we review that for abuse of
discretion too—though we review underlying questions of law de novo. 13
III. DISCUSSION
A. Appellees Failed to Satisfy the Federal Officer Removal Statute.
A court must have jurisdiction to decide a case. 14 So we turn to the
threshold inquiry of whether the district court had jurisdiction over the TIP
and Roth lawsuits. 15 By statute, federal courts have original jurisdiction over
11 See id; Sykes v. Tex. Air Corp., 834 F.2d 488, 492 n.16 (5th Cir. 1987) (“When the
district court decides to retain a case in the face of arguments that it lacks jurisdiction, the
decision itself is technically unreviewable; but of course the appellate court reviewing any
other aspect of the case must remand for dismissal if the refusal to remand was wrong, i.e.,
if there is no federal jurisdiction over the case.”).
12 Priester v. Lowndes County, 354 F.3d 414, 425 (5th Cir. 2004); Sibley v. Lemaire,
184 F.3d 481, 490 (5th Cir. 1999) (“A district court may decline to exercise supplemental
jurisdiction if the court has dismissed all claims over which it had pendent
jurisdiction. . . . We review such decisions for abuse of discretion.”).
13Newby v. Enron Corp., 302 F.3d 295, 301 (5th Cir. 2002) (citing Women’s Med. Ctr.
of Nw. Hous. v. Bell, 248 F.3d 411, 418–19 (5th Cir. 2001)); Hoover v. Morales, 164 F.3d 221,
224 (5th Cir. 1998) (citing Sunbeam Prods., Inc. v. W. Bend Co., 123 F.3d 246, 250 (5th Cir.
1997)).
14Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982)
(“Subject-matter jurisdiction . . . is an Art. III as well as statutory requirement; it functions
as a restriction on federal power[] and contributes to the characterization of the federal
sovereign.”)
15 Enochs v. Lampasas County, 641 F.3d 155, 161 (5th Cir. 2011) (“Courts are
instructed to examine their jurisdiction at every stage of the litigation.”) (internal quotation
marks omitted).
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federal-question and diversity cases. 16 They can also exercise supplemental
jurisdiction over “all other claims that are so related to claims within [federal-
question or diversity cases] that they form part of the same case or controversy
under Article III of the United States Constitution.” 17
By statute, federal courts also have removal jurisdiction in some cases
originally filed in state court. For example, the federal officer removal statute,
28 U.S.C. § 1442(a)(1), allows a defendant to remove a state-court action
against “any officer (or any person acting under that officer) of the United
States.” We have held that to satisfy § 1442, a defendant must show “(1) that
it is a person within the meaning of the statute, (2) that it has ‘a colorable
federal defense,’ (3) that it ‘acted pursuant to a federal officer’s directions,’ and
(4) ‘that a causal nexus exists between its actions under color of federal office
and the plaintiff’s claims.’ ” 18 Importantly, the defendant bears the burden of
showing that it meets § 1442’s requirements. 19
TIP asserts that WellCare satisfied the criteria for removal under
§ 1442(a)(1), 20 thus creating jurisdiction. We disagree. Appellees didn’t show
16 28 U.S.C. §§ 1331 (federal question), 1332 (diversity of citizenship).
17 28 U.S.C. § 1367(a).
18 Zeringue v. Crane Co., 846 F.3d 785, 789 (5th Cir. 2017) (brackets omitted) (quoting
Bartel v. Alcoa S.S. Co., 805 F.3d 169, 172 (5th Cir. 2015)). We are reviewing the fourth prong
en banc in Latiolas v. Huntington Ingalls, Inc., 918 F.3d 406, 411 (2019), reh’g en banc
granted, 923 F.3d 427 (5th Cir. 2019), but that prong is not outcome determinative in this
case.
19Legendre v. Huntington Ingalls, Inc., 885 F.3d 398, 400 (5th Cir. 2018) (“[I]t remains
the defendant’s burden to establish the existence of federal jurisdiction over the controversy.”
(internal quotations omitted)).
20Curiously, TIP asserts—in one paragraph only—that its claims (independent of
WellCare being party to the suit) are federal. “[T]he primary if not sole existence of
IntegraNet and TIP is concerned with marketing, sales and utilization of Medicare
Advantage insurance plans through its physician members. . . . All of these involve federal
rules and regulations . . . .” TIP thus concludes that “pendant jurisdiction is proper and
appropriate.” This appears to be an unsupported argument for supplemental jurisdiction, not
independent federal-question jurisdiction.
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that WellCare acted under federal-officer directions. The Supreme Court has
noted that the words “acting under” are “broad . . . but broad language is not
limitless.” 21 The Court’s 2007 Watson 22 decision demonstrates one of those
limits. The Watson plaintiffs sued cigarette manufacturer Philip Morris,
alleging it manipulated test results to show lower nicotine and “tar” content in
cigarettes marketed as “light.” 23 The Eighth Circuit held that Philip Morris
was “acting under” a federal officer and could remove pursuant to § 1442
because the Federal Trade Commission mandated that Philip Morris adopt the
specific testing method plaintiffs challenged and enforced that mandate with
“ongoing monitoring,” laboratory inspections, independent verification of
results, publication of nicotine ratings, and enforcement actions against
manufacturers. 24 The Supreme Court reversed, holding that “the fact that a
federal regulatory agency directs, supervises, and monitors a company’s
activities in considerable detail” is not sufficient to satisfy the “acting under”
requirement. 25 The Court further explained that:
[A] highly regulated firm cannot find a statutory basis
for removal in the fact of federal regulation alone. A
private firm’s compliance (or noncompliance) with
federal laws, rules, and regulations does not by itself
fall within the scope of the statutory phrase “acting
under” a federal “official.” And that is so even if the
regulation is highly detailed and even if the private
21 Watson v. Philip Morris Cos., Inc., 551 U.S. 142, 147 (2007). In the context of the
federal officer removal statute, “the word ‘under’ must refer to what has been described as a
relationship that involves ‘acting in a certain capacity, considered in relation to one holding
a superior position or office.’ 18 Oxford English Dictionary 948 (2d ed.1989). That relationship
typically involves ‘subjection, guidance, or control.’ Webster’s New International Dictionary
2765 (2d ed.1953).” Id. at 152.
22 See id.
23 Id. at 146.
24 Watson v. Philip Morris Cos., Inc., 420 F.3d 852, 858 (8th Cir. 2005).
25 Watson, 551 U.S. at 145.
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firm’s activities are highly supervised and monitored.
A contrary determination would expand the scope of
the statute considerably, potentially bringing within
its scope state-court actions filed against private firms
in many highly regulated industries. 26
Citing Watson, we recently addressed a similar issue in City of Walker. 27
There, appellants asserted that a construction company was “acting under” a
federal officer because its work—including the hydraulic design that allegedly
exacerbated the flooding damage at issue—was “subject to inspection and
approval by the federal government,” which “retained ‘oversight
responsibility’ ” for and contributed funding to the contracting job. 28 But we
said even if that were true, that didn’t amount to being a government
contractor “acting under” a federal officer when it designed and built the
project. 29
26 Id. at 153. But the Court distinguished cases where a private contractor “help[s] the
Government to produce an item that it needs”—like in Winters, where “Dow Chemical
fulfilled the terms of a contractual agreement by providing the Government with a product
that it used to help conduct a war.” Id. at 153–54 (citing Winters v. Diamond Shamrock
Chemical Co., 149 F.3d 387 (5th Cir. 1998)).
27City of Walker v. Louisiana through Dep’t of Transp. & Dev., 877 F.3d 563, 570 (5th
Cir. 2017).
28 Id. at 569, 571.
29 Id. at 570–71. Like the Supreme Court, the City of Walker court distinguished its
case from previous Fifth Circuit cases where removal was granted under the federal officer
removal statute: “This monitoring arrangement is not the procurement relationship that in
previous cases has allowed a private firm to enjoy the benefit of federal officer removal.” Id.
at 571. Cf. Zeringue, 846 F.3d at 788 (finding that contractor’s “provision of parts in an effort
to assist the Navy’s construction of vessels satisfies the ‘acting under’ requirement”); Savoie
v. Huntington Ingalls, Inc., 817 F.3d 457, 465 (5th Cir. 2016) (holding that strict liability
claims qualify for federal officer removal where the federal government obligated a shipyard
via a detailed contract and supervision to use asbestos to refurbish U.S. Navy and Coast
Guard vessels, and a former shipyard worker on one such vessel subsequently developed
mesothelioma); Miller v. Diamond Shamrock Co., 275 F.3d 414, 418 (5th Cir. 2001) (where
the federal government contracted with chemical companies to create a specific mixture of
chemicals (now known as Agent Orange) for use in the Vietnam War, we held that “the
defendants produced Agent Orange at the behest of the federal government,” so they were
“acting under color of federal authority”); Winters v. Diamond Shamrock Chem. Co., 149 F.3d
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Likewise, WellCare wasn’t acting pursuant to a federal officer’s
directions. First, Appellees’ assertion that federal regulations required
WellCare to notify its members of the termination with IntegraNet is simply
beside the point. 30 It’s a strawman argument. IntegraNet takes issue with the
cease-and-desist letters, not the notification letters.
After the notification letters, WellCare sent cease-and-desist letters to
IntegraNet and some of its providers. The letters state that WellCare received
“a complaint relating to unsolicited contacts with one or more of [the doctors’]
patients who are Medicare-eligible beneficiaries.” Appellees argue that
WellCare acted “at the direction of [the federal government] when it sent
letters to IntegraNet and its physicians demanding that they stop violating
federal rules in their efforts to coerce their patients into switching Medicare
Advantage plans.” The parties disagree about whether any such interference
occurred. But that’s irrelevant to this jurisdictional question. What matters is
that Appellees cite no evidence showing that the government told WellCare to
send those cease-and-desist letters. Appellees merely argue that WellCare’s
letters urged compliance with applicable regulations. 31 But that’s not acting
under officer direction.
387, 398–99 (5th Cir. 1998) (similar to Miller, where the government “contracted with
chemical companies for a specific mixture of herbicides, which eventually became known as
Agent Orange,” “compelled [the companies] to deliver Agent Orange . . . under threat of
criminal sanctions,” and “maintained strict control over the development and subsequent
production of Agent Orange,” we held that federal officer removal was proper. Here, WellCare
was not “procur[ing]” or “producing an item that the government needs” like chemicals for
warfare or Navy ships).
30 See 42 C.F.R. § 422.111(e).
31 The parties agree that, under federal regulations, IntegraNet was required not to
interfere with any patient enrollment upon WellCare’s termination. See §§ 422.2268(e), (j),
and (k), 423.2268(e), (j), and (k). See also MEDICARE MKTG. GUIDELINES § 70.5.1 (citing the
previously listed federal regulations).
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Appellees quote an unreported Western District of Texas case for their
insistence that “Medicare insurance carriers act under federal direction for
purposes of 28 U.S.C. § 1442(a)(1).” 32 That case cites a published Fifth Circuit
opinion from 1975 called Peterson. 33 Again, Appellees misapply caselaw.
Peterson dealt with a doctor who sought damages for supposed “wrongful
suspension under the Medicare program.” 34 In Peterson, the federal
government received a complaint that “questioned the payment to Dr. Peterson
for physical therapy services not rendered by him.” 35 The government
investigated, and uncovered possible fraud. 36 So the government “issued a
letter to Blue Cross/Blue Shield ordering suspension of further payments to
Dr. Peterson under the Medicare program.” 37 Without analysis, the district
court concluded that “it is indisputable” that the insurance carrier acted under
federal direction. 38
This case is different. The federal government did not order WellCare to
send the cease-and-desist letters to IntegraNet and its providers. WellCare
wasn’t acting under federal direction. So the district court should have
remanded to state court.
B. The District Court Abused its Discretion in Exercising
Jurisdiction.
Gen. Surgical Assocs., P.A. v. Humana Health Plan of Tex., Inc., No. SA-14-CA-31-
32
OLG HJB, 2014 WL 12496771, at*4 (W.D. Tex. Apr. 21, 2014).
33 Peterson v. Blue Cross/Blue Shield of Tex., 508 F.2d 55 (5th Cir. 1975).
34 Id. at 56.
35 Peterson v. Weinberger, 508 F.2d 45, 48 (5th Cir. 1975). We decided both Peterson
cases on the same day, with opinions written by the same judge. The cases include the same
claims. Instead of reciting the facts again, the Peterson v. Blue Cross/Blue Shield of Texas
opinion refers readers to this case.
36 Id. at 49.
37 Id.
38 Blue Cross/Blue Shield of Tex., 508 F.2d at 57.
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Let’s assume, for the sake of argument, that WellCare satisfied the
federal officer removal statute. 39 Even with that assumption, IntegraNet
dismissed WellCare from the suit. Taking our cues from the Supreme Court,
we have long applied the “general rule” that “a court should decline to exercise
jurisdiction over remaining state-law claims when all federal-law claims are
eliminated before trial.” 40 That said, district courts may decide remaining
state-law claims if the relevant statutory and common-law factors favor
retaining jurisdiction. 41
These statutory factors come from 28 U.S.C. § 1367(c). 42 As we stated in
Enochs, the factors are: “(1) whether the state claims raise novel or complex
issues of state law; (2) whether the state claims substantially predominate over
the federal claims; (3) whether the federal claims have been dismissed; and (4)
whether there are exceptional circumstances or other compelling reasons for
declining jurisdiction.” 43 The Supreme Court articulated the common-law
factors—judicial economy, convenience, fairness, and comity—in its 1988
Carnegie-Mellon University decision. 44
39 Contra discussion supra Section III.A.
40 Brookshire Bros. Holding, Inc. v. Dayco Prods., Inc., 554 F.3d 595, 602 (5th Cir.
2009). See also Parker & Parsley Petroleum Co. v. Dresser Indus., 972 F.2d 580, 585 (5th Cir.
1992) (discussing and quoting United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726
(1966)); Wong v. Stripling, 881 F.2d 200, 204 (5th Cir. 1989) (also citing Gibbs, 383 U.S. at
726).
41 E.g., Enochs, 641 F.3d at 158–59; Brookshire Bros., 554 F.3d at 602.
42 “The district courts may decline to exercise supplemental jurisdiction over a claim
under subsection (a) if—(1) the claim raises a novel or complex issue of State law, (2) the
claim substantially predominates over the claim or claims over which the district court has
original jurisdiction, (3) the district court has dismissed all claims over which it has original
jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for
declining jurisdiction.” 28 U.S.C. § 1367(c).
43 Enochs, 641 F.3d at 159.
44 See generally Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988).
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We applied these factors in Enochs and held that the district court
abused its discretion by refusing to remand the case to state court following
the dismissal of all federal claims. 45 Today’s case has numerous similarities
with Enochs. And Enochs governs this appeal. 46
Here, as in Enochs, the statutory and common-law factors weigh against
supplemental jurisdiction. First, we analyze whether the state claims raise
complex or novel state-law issues. No party has argued that the cases present
novel state-law issues. But, we agree with IntegraNet that there are complex
state-law issues—particularly in the TIP lawsuit and considering Appellees’
desire to consolidate the Roth lawsuit, which involves different facts and
subject matter than the TIP lawsuit. Together, these lawsuits involve claims
for breach of fiduciary duty, unfair competition, theft of trade secrets (under
the Texas trade secret statute), and negligence. There are also complex facts
arising out of the relationship between myriad entities, including multiple
IPAs, an insurance company, a doctor, and a former executive. This complexity
weighs in favor of remand. A Texas state court is best positioned to address a
complex array of issues relating to Texas law—especially under complex
factual circumstances.
Regarding the second and third factors, IntegraNet never brought any
federal claims. Plus, the party invoking federal jurisdiction was dismissed
45 Enochs, 641 F.3d at 163.
46 The Fifth Circuit has already applied Enochs multiple times: Powers v. United
States, 783 F.3d 570, 577 (5th Cir. 2015) (“In determining the propriety of a district court’s
exercise of supplemental jurisdiction, ‘we look to the statutory factors set forth by 28 U.S.C.
§ 1367(c), and to the common[-]law factors of judicial economy, convenience, fairness, and
comity.’ ” (quoting Enochs, 641 F.3d at 158–59)); Wilson v. Tregre, 787 F.3d 322, 326 (5th Cir.
2015) (quoting Enochs like in Powers, and then balancing the factors); Heggemeier v. Caldwell
County, 826 F.3d 861, 872−73 (5th Cir. 2016) (again quoting Enochs). See also Moon v. City
of El Paso, 906 F.3d 352, 360–61 (5th Cir. 2018) (quoting Enochs for how it would review an
appeal regarding whether the district court abused its discretion by exercising—or declining
to exercise—supplemental jurisdiction).
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before filing its answer. This of course means that, as in Enochs, “the Texas
state law claims predominate over the non-existent federal claims.” 47 Again
tracking Enochs, “[t]he fourth factor also favors remand, as the heavy balance
of the common[-]law factors in favor of remand constitutes another compelling
reason to decline jurisdiction.” 48
Let’s turn to the common-law factors: judicial economy, convenience,
fairness, and comity. The suits are in their infancy. No discovery. No Rule 26(f)
conference. No scheduling order. Like Enochs, “hardly any federal judicial
resources, let alone a significant amount of resources, ha[ve] been devoted to
the district court’s consideration of the Texas state law claims.” 49 So remand
wouldn’t harm judicial economy. And remand would be convenient. The Enochs
court’s reasoning applies here as well: There would be little—if any—need for
any party to duplicate work. 50 Plus, it would be convenient for the case to be
47 Enochs, 641 F.3d at 159.
48 Id.
49 Id. Compare Parker & Parsley Petroleum Co., 972 F.2d at 587, 590 (finding that the
district court abused its discretion in retaining jurisdiction over state-law claims following
the dismissal of all federal-law claims because—among other factors—the proceedings were
at a relatively early stage when the district court opted to retain jurisdiction—the case had
been pending for merely nine months, discovery was incomplete, and there was no indication
that the district judge had appreciable familiarity with the merits of the case), with Powers
v. United States, 783 F.3d 570, 577 (5th Cir. 2015) (concluding that judicial economy and
convenience favored exercising supplemental jurisdiction because the “district court had
presided over the entry and implementation of the judicial settlement for more than a year”
and had “substantial familiarity with the factual background”); Newport Ltd. v. Sears,
Roebuck and Co., 941 F.2d 302, 307–8 (5th Cir. 1991) (finding that “after four years of
litigation produced 23 volumes and thousands of pages of record, the preparation of a pretrial
order exceeding 200 pages, over a hundred depositions, and according to counsel nearly two
hundred thousand pages of discovery production, the declining to hear this case on the eve of
trial constituted an abuse of the trial court's discretion” because—among other factors—
“judicial economy and convenience . . . counsel strongly in favor of the retention of
jurisdiction.”).
50 Enochs, 641 F.3d at 159 (finding that remand would be convenient because there
was “no need for either party to duplicate any research, discovery, briefing, hearings, or other
trial preparation work.”). See also Parker & Parsley Petroleum Co., 972 F.2d at 588, 590
(finding that the district court abused its discretion in retaining jurisdiction over state-law
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heard in Harris County state court where the parties, witnesses, and evidence
are located. 51
Next, remand is fair. Again paralleling Enochs, this case deals with
“purely Texas state law claims,” making it “certainly fair” to hear them in
Texas state court. 52 And nothing indicates that any party would be prejudiced
by remanding to state court.
Finally, comity favors remand here. Federal courts have limited
jurisdiction and must respect the “important interests of federalism and
comity.” 53 As the Supreme Court has emphasized, “[n]eedless decisions of state
law should be avoided both as a matter of comity and to promote justice
between the parties, by procuring for them a surer-footed reading of applicable
law.” 54 Federal courts are “not as well equipped for determinations of state law
as are state courts.” 55 As in Enochs, “Texas state courts have superior
familiarity with, and heightened interests in developing, Texas state law”
related to these claims. 56 Because all of the remaining claims concern only
state law, comity weighs in favor of remand. In sum, statutory law and
claims following the dismissal of all federal-law claims because—among other factors—
parties would not be subjected to any notable, additional burdens like duplicating the
discovery process).
Enochs, 641 F.3d at 160 (finding that remand would be convenient because the
51
parties are in the same county).
52 Id.
53 Id. (quoting Parker & Parsley Petroleum Co., 972 F.2d at 588).
54 Parker & Parsley Petroleum Co., 972 F.2d at 585 (quoting Gibbs, 383 U.S. at 726).
55 Enochs, 641 F.3d at 160 (quoting Parker & Parsley Petroleum Co., 972 F.2d at 588–
89).
Id. at 167 (Prado, J., dissenting) (agreeing with the majority that the common-law
56
factors—including comity—favor remand). See also id. at 160 (finding that because federal
courts are courts of limited jurisdiction, comity favors remand).
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common-law interests suggest that the district court abused its discretion in
denying IntegraNet’s motion to remand.
Yet Appellees argue that federal jurisdiction is “proper and
appropriate”—even after WellCare’s dismissal from the lawsuit. Appellees
seem to rest their argument on the “purely discretionary” nature of a district
court’s decision to exercise supplemental jurisdiction “after dismissing every
claim over which it had original jurisdiction.” 57 IntegraNet does not dispute
that district courts have this discretion. They do. 58 The question is whether the
district court abused its discretion.
Appellees appear to misunderstand the Supreme Court’s holding in
Carlsbad. Despite Appellees’ representations, Carlsbad was about whether
28 U.S.C. § 1447 bars appellate review when a district court declines
supplemental jurisdiction over state-law claims. 59 The Supreme Court
considered “whether a federal court of appeals has jurisdiction” to review a
57 Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 639 (2009).
58 See 28 U.S.C. § 1367(c) (“The district courts may decline to exercise supplemental
jurisdiction over a claim . . . if [any of the following four factors apply]”) (emphasis added). In
some cases, we have weighed the factors and concluded that retaining jurisdiction over the
remaining state law claims was not an abuse of discretion. See e.g., Wilson, 787 F.3d at 326
(holding that the district court did not abuse its discretion in retaining supplemental
jurisdiction over former deputy’s state law claims following dismissal of his only federal
claim, where deputy’s state-law claims were neither novel nor complex, the case had been
pending in district court for a full year, discovery had closed, and the case was scheduled for
trial less than one month after district court’s order); Mendoza v. Murphy, 532 F.3d 342, 346–
47 (5th Cir. 2008) (holding that the district court did not abuse its discretion by retaining
jurisdiction over a patient’s state law claims after it had dismissed the patient’s federal
claims because the state law issues were neither novel nor complex, the case had been
pending for well over a year when the court decided to maintain jurisdiction, the discovery
deadline had passed, and the parties had fully briefed defendants’ motion for summary
judgment, making the claims ripe for disposition). But this is not one of those cases.
59 Carlsbad Tech., Inc., 556 U.S. at 636; see also Big Country Vein Relief, L.P. v.
Directory Assistants, Inc., 425 F. App’x 287, 289 (5th Cir. 2011).
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district court’s remand. 60 The remand “was not based on a jurisdictional defect
but on [the district court’s] discretionary choice not to hear the claims.” 61 Thus,
the Court reasoned, appellate review was possible. 62 But Carlsbad didn’t affect
the standard by which appellate courts review remand decisions.
Appellees also cite our 2016 decision in Heggemeier to support their
argument that “[d]istrict courts enjoy wide discretion in determining whether
to retain supplemental jurisdiction over a state claim once all federal claims
are dismissed.” 63 Heggemeier does acknowledge a district court’s “wide
discretion.” 64 But that is not a blank check, as Appellees seem to suggest.
Rather, we explained that this “wide discretion” required it to “review a district
court’s refusal to exercise supplemental jurisdiction [over remaining state law
claims] . . . for abuse of discretion.” 65 In fact, we quoted Enochs and applied the
common-law factors (albeit briefly). 66 Appellees failed to apply any of these
factors. And nothing suggests that the district court considered them either.
“[W]e are bound to consider and weigh all the factors.” 67 As explained,
the relevant statutory and common-law factors disfavor the district court’s
maintaining jurisdiction over the state-law claims at issue in this case. The
60 Carlsbad Tech., Inc., 556 U.S. at 636 (“In this case, we decide whether a federal
court of appeals has jurisdiction to review a district court’s order that remands a case to state
court after declining to exercise supplemental jurisdiction over state-law claims under 28
U.S.C. § 1367(c).”).
61 Id. at 640.
62 Id. at 641.
63 Heggemeier, 826 F.3d at 872.
64 Id.
65 Id.
66 Id.
67 Enochs, 641 F.3d at 160.
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district court’s refusal to remand these claims was an abuse of discretion under
Enochs.
C. Consolidation was Inappropriate.
Under Federal Rule of Civil Procedure 42(a), courts may consolidate
actions if they “involve a common question of law or fact.” According to the
Supreme Court’s decision in Peacock, this language means that “[a]ncillary
jurisdiction may extend to claims having a factual and logical dependence on
the primary lawsuit.” 68 So long as “that primary lawsuit . . . contain[s] an
independent basis for federal jurisdiction.” 69 Generally, “[d]istrict courts enjoy
substantial discretion in deciding whether and to what extent to consolidate
cases.” 70 But, because the primary lawsuit here lacks a basis for federal
jurisdiction, 71 consolidation was not appropriate.
D. The Pre-filing Injunction Was Improper.
Similarly, the lack of federal jurisdiction 72 also renders the pre-filing
injunction improper. Plus, in Baum, we held that “[n]otice and a hearing are
required if the district court sua sponte imposes a pre-filing injunction or sua
sponte modifies an existing injunction to deter vexatious filings.” 73 We
reaffirmed this holding two years later in Qureshi. 74 Here, there was no basis
for federal jurisdiction, no notice, and no hearing—any one of which is
sufficient to makes the district court’s injunction improper.
IV. CONCLUSION
68 Peacock v. Thomas, 516 U.S. 349, 355 (1996) (internal quotations omitted).
69 Id. (emphasis added).
70 Hall v. Hall, 138 S. Ct. 1118, 1131 (2018).
71 See supra Parts III.A and III.B.
72 Id.
73 Baum, 513 F.3d at 189.
74 Qureshi, 600 F.3d at 526.
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We REVERSE the district court’s denial of remand and hold that it
abused its discretion when denying IntegraNet’s motion to remand. We
REVERSE the Order of Consolidation and VACATE the district court’s pre-
filing injunction. Finally, we REMAND both cases with instructions to the
district court to remand the Texas state law claims to the Texas state court
from which the cases were removed.
20