Liberty Mutual Insur v. Knudsen, Kirsten ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-8010
KIRSTEN KNUDSEN, CHRIS BAKER,
and VIKKI BAKER,
Plaintiffs-Respondents,
v.
LIBERTY MUTUAL INSURANCE
COMPANY,
Defendant-Petitioner.
____________
Petition for Leave to Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 05 C 1489—Ruben Castillo, Judge.
____________
SUBMITTED APRIL 29, 2005—DECIDED JUNE 7, 2005
____________
Before COFFEY, EASTERBROOK, and WILLIAMS, Circuit
Judges.
EASTERBROOK, Circuit Judge. The Class Action Fairness
Act of 2005, Pub. L. 109-2, 119 Stat. 4 (2005), permits
defendants to remove certain class actions to federal court
if minimal diversity of citizenship exists. Section 9 tells us
that it applies only to suits “commenced on or after the date
of enactment of this Act.” That date is February 18, 2005.
Invoking the removal authority under §5, codified at 28
2 No. 05-8010
U.S.C. §1453, Liberty Mutual Insurance Company removed
this class action, which had been pending in state court
since March 2000. The district judge promptly sent it back,
observing that March 2000 precedes February 2005. Now
Liberty Mutual asks us to entertain an appeal, a step that
§1453(c)(1) allows notwithstanding the norm in 28 U.S.C.
§1447(d) that remand orders are not reviewable.
We deny this petition, for we agree with Pritchett v. Office
Depot, Inc., 2005 U.S. App. LEXIS 5896 (10th Cir. Apr. 11,
2005), that §9 of the new Act must be taken seriously.
Deconstructionist tactics do not permit its evasion. The
defendant in Pritchett contended that the notice of removal
itself commenced a new case (the one in federal court).
Rebuffing that effort to sidestep the legislative decision,
Pritchett concluded that a civil action is “commenced” for
purposes of §9 when it is filed in state court and not when
some later step occurs in its prosecution. Equating filing
with commencement is the norm in civil practice. See Fed.
R. Civ. P. 3. Although there are a few exceptions—for
example, a litigant who seeks to proceed in forma pauperis
may be unable to get the suit under way until the judge ac-
cepts the complaint and authorizes service on the defendants,
see Williams-Guice v. Chicago Board of Education, 45 F.3d
161 (7th Cir. 1995)—none applies here. This suit against
Liberty Mutual has been ongoing for years.
Instead of arguing that removal equals “commencement,”
Liberty Mutual contends that any substantial change to the
class definition “commences” a new case. Now as a matter
of normal language (and normal legal practice) a new
development in a pending suit no more commences a new
suit than does its removal. Plaintiffs routinely amend their
complaints, and proposed class definitions, without any
suggestion that they have restarted the suit—for a restart
(like a genuinely new claim) would enable the defendant to
assert the statute of limitations. Liberty Mutual concedes
that routine changes do not allow removal but insists that
No. 05-8010 3
a “substantial” or “significant” change must do so. Yet
significance is not the measure of a new claim; a plaintiff
may assert an entirely novel legal theory in mid- suit
without creating a “new” claim in the sense that the
defendant could block it by asserting that it had been pro-
pounded after the period of limitations expired. Moreover,
“significance” often lies in the eye of the beholder; it is not
a rule of law so much as it is a cast of mind or an assess-
ment of likely consequences, which may be difficult if not
impossible to foresee. A doctrine of “significant change” thus
would go against the principle that the first virtue of any
jurisdictional rule is clarity and ease of implementation.
See, e.g., Budinich v. Becton Dickinson & Co., 486 U.S. 196,
202-03 (1988); Hoagland v. Sandberg, Phoenix & von
Gontard, P.C., 385 F.3d 737, 740 (7th Cir. 2004) (collecting
authority).
Liberty Mutual paints a picture of crafty lawyers tending
a garden of pre-2005 class actions, in which they plant new
claims by amendment so that the 2005 Act never comes into
play. As we have already hinted, however, a new claim for
relief (a new “cause of action” in state practice), the addition
of a new defendant, or any other step sufficiently distinct
that courts would treat it as independent for limitations
purposes, could well commence a new piece of litigation for
federal purposes even if it bears an old docket number for
state purposes. Removal practice recognizes this point: an
amendment to the pleadings that adds a claim under federal
law (where only state claims had been framed before), or
adds a new defendant, opens a new window of removal. 28
U.S.C. §1446(b). See Charles Alan Wright, Arthur R. Miller
& Edward H. Cooper, 14C Federal Practice & Procedure
§3732 at 311-48 (3d ed. 1998). We imagine, though we need
not hold, that a similar approach will apply under the 2005
Act, perhaps modeled on Fed. R. Civ. P. 15(c), which
specifies when a claim relates back to the original com-
plaint (and hence is treated as part of the original suit) and
4 No. 05-8010
when it is sufficiently independent of the original conten-
tions that it must be treated as fresh litigation. See also
Schiavone v. Fortune, 477 U.S. 21 (1986); Arendt v. Vetta
Sports, Inc., 99 F.3d 231 (7th Cir. 1996). This possibility
does Liberty Mutual no good, however, because the change
in class definition does not present a novel claim for relief
or add a new party.
Maybe that lies in store. The suit charges Liberty Mutual
with failing to live up to promises made in its policies.
Plaintiffs proposed this class:
[A]ll LIBERTY insureds, their third party beneficia-
ries and their assignees who are entitled to pay-
ment of medical bills under any medical payments
coverages pursuant to a LIBERTY insurance policy,
and who have received a payment from LIBERTY
for less than the medical charge, based upon the
application of LIBERTY’s medical cost and utiliza-
tion database.
The complaint defined “LIBERTY” as Liberty Mutual
Insurance Company—which is only natural, as it is the sole
defendant. Liberty Mutual responded that plaintiffs could
not represent this class, for they don’t belong to it. All three
plaintiffs’ claims derive from policies issued by Liberty
Mutual Fire Insurance Company, an insurer with its own
policies and reserves. So on February 25, 2005, plaintiffs
proposed to amend the class definition in a way that would
make them members, and hence eligible to be representa-
tives:
All Liberty Mutual Insurance Company and Liberty
Fire Insurance Company insureds, their third party
beneficiaries and their assignees who submitted
medical bills under any medical payments coverages
pursuant to a Liberty Mutual or Liberty Fire in-
surance policy, and whose claims were paid for less
than the medical charge, based upon the applica-
tion of a medical cost and utilization database.
No. 05-8010 5
This is an odd revision—and not simply because “Liberty
Fire Insurance Company” does not exist. The fatal problem
is that Liberty Mutual Fire Insurance Company is not a
party to the suit, so no relief could be entered against it.
(Plaintiffs do not contend that Liberty Mutual Fire Insurance
Company and Liberty Mutual Insurance Company are alter
egos. If these were just two names for one business, then no
change in the class definition would have been necessary.)
Before the state judge could address the plaintiffs’ latest
proposal, however, Liberty Mutual Insurance removed the
case. That’s unavailing, for reasons we have covered. If in
the future Liberty Mutual Fire Insurance Company should
be added as a defendant, it could enjoy a right to remove
under the 2005 Act, for suit against it would have been
commenced after February 18, 2005. But Liberty Mutual
Insurance Company cannot remove five years after this suit
was commenced just because a non- party corporate sibling
has been mentioned in plaintiffs’ latest papers.
The petition for leave to appeal is denied. This makes it
unnecessary to act on Knudsen’s motion to strike the
petition for leave to appeal—though we hope that in the
future potential appellees will address the issues directly
rather than move to strike the appellants’ papers. The
motion to strike supposes that the Class Action Fairness
Act does not apply (and, since it does not, that 28 U.S.C.
§1447(d) forecloses appellate review). Yet whether the 2005
Act does apply is the very issue to be determined, and “a
federal court always has jurisdiction to determine its own
jurisdiction.” United States v. Ruiz, 536 U.S 622, 628 (2002).
A motion to strike begs the principal question.
6 No. 05-8010
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-7-05