Excel Pharmacy Services LLC v. Liberty Mutual Insurance Co

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 19-3399
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EXCEL PHARMACY SERVICES, LLC.,
Appellant
v.
LIBERTY MUTUAL INSURANCE COMPANY; LIBERTY MUTUAL GROUP, INC.;
AMERICAN STATES INSURANCE COMPANY; COLORADO CASUALTY
COMPANY; EMPLOYERS INSURANCE COMPANY OF WAUSAU; EXCELSIOR
INSURANCE COMPANY; LIBERTY INSURANCE CORPORATION; LIBERTY
MUTUAL FIRE INSURANCE COMPANY; LIBERTY MUTUAL INSURANCE
COMPANY CONSOLIDATED INSURANCE COMPANY; LIBERTY NORTHWEST
INSURANCE CORPORATION; LM INSURANCE CORPORATION; PEERLESS
INDEMNITY INSURANCE COMPANY; PEERLESS INSURANCE; SAFECO
INSURANCE COMPANY OF ILLINOIS, Appellees
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On Appeal from the District Court
for the Eastern District of Pennsylvania
No.2:18-CV-04804
District Judge: Honorable Cynthia M. Rufe
_________________
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
On April 17, 2020
Before: CHAGARES, SCIRICA, and ROTH, Circuit Judges
(Filed: August 20, 2020)
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OPINION *
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SCIRICA, Circuit Judge
This case concerns the jurisdictional requirements of the Class Action Fairness Act,
28 U.S.C. §§ 1453 and 1332(d). Excel Pharmacy Services appeals the trial court’s order
refusing to remand its putative class action to the Pennsylvania Court of Common Pleas,
as well as its order dismissing its complaint for failure to state a claim. We will affirm.
I.
Excel contends that Appellees, Liberty Mutual Insurance Company and several
other insurance companies, “engaged in [a] systemic, years-long pattern of conduct”
violating the Pennsylvania Worker’s Compensation Act (WCA) and the Pennsylvania
Unfair Insurance Practices Act (UIPA). J.A. 50. In substance, Excel’s complaint asserts
Appellees improperly refused to reimburse them for pharmaceutical products properly
dispensed to injured workers.
Excel filed a putative class action in the Pennsylvania Court of Common Pleas. It
sought to represent a class of “[a]ll pharmacies that are citizens of . . . Pennsylvania . . .
and, from January 1, 2016 through to the date of entry of any class certification order, . . .
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
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were denied proper reimbursement in whole or in part by Defendants, contrary to the
WCA and/or its applicable regulations.” J.A. 56. The class complaint contains two
counts. Count I seeks a declaration that Appellees’ failure to reimburse Excel and the
class members violates the WCA. Count II seeks a declaration that the same failure
violates the UIPA. Both counts also seek injunctive relief against the acts alleged in the
complaint.
Appellees removed the case to federal court pursuant to the Class Action Fairness
Act (CAFA), 28 U.S.C. §§ 1453 and 1332(d). Excel moved to remand, arguing that its
request for “declaratory judgment . . . is restricted to state law and the same issues are
pending in state court.” J.A. 545. Responding to the remand motion, Appellees submitted
certifications and exhibits showing they had declined to reimburse Excel and twenty-
seven other Pennsylvania pharmacies within the putative class more than $3.2 million
within a three-year period. Appellees also argued that the allegedly related case to which
Excel referred, Liberty Mutual Group v. 700 Pharmacy, LLC, No. 3357 EDA 2019 (Pa.
Super. Ct., Appeal filed Oct. 11, 2019) (hereinafter the “Fraud Lawsuit”), is not similar to
this case.
The trial court denied Excel’s remand motion. Based on Appellees’ factual
submissions, it concluded there was approximately $120 million in controversy. The trial
court also rejected Excel’s request that it exercise its discretion under the Declaratory
Judgement Act to refuse to hear the case. Finally, the trial court found there was no
pending state-court case that was substantially similar, and that Excel had not established
any other reasons to justify remand.
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Subsequently, Appellees moved to dismiss the complaint for failure to state a
claim. First, Appellees argued that Excel could only pursue administrative remedies for
their alleged violations of the WCA, because the WCA bars civil actions to obtain relief.
Second, they argued that there is no private right of action under the UIPA.
The trial court granted Appellees’ motion and dismissed Excel’s claims. As to
Count I, the trial court held the only remedies available to Excel are the administrative
ones provided by the WCA. Further, the trial court held Count II must be dismissed
because there is no private right of action under the UIPA. Excel timely appealed.
II.
On appeal, Excel argues the trial court erred in refusing to remand this case back
to the Pennsylvania Court of Common Pleas and in dismissing Excel’s complaint for
failure to state a claim. We will affirm.
We reject Excel’s argument that the trial court lacked jurisdiction over the case.
We review a jurisdictional ruling by the trial court de novo, but we review underlying
factual findings for clear error. See Johnson v. SmithKline Beecham Corp., 724 F.3d 337,
345 (3d Cir. 2013). The Class Action Fairness Act allows any defendant in a class action
to remove the case to federal court so long as the federal court would have had
jurisdiction had the case originally been filed there. 28 U.S.C. § 1453(b); Home Depot
U.S.A., Inc. v. Jackson, 139 S. Ct. 1743, 1746–47 (2019). To establish jurisdiction over
this class action, the parties must be minimally diverse, there must be one hundred or
more class members, and the amount in controversy in the case must be at least five
million dollars. Id.4
Here, Appellees submitted evidence establishing that the jurisdictional
requirements were satisfied. First, no one disputes that the parties were minimally
diverse. Second, there are two thousand class members, well over the one hundred
required.
As for the amount in controversy, we agree with the trial court that Appellees
proved that far more than five million dollars is at stake in this lawsuit. Appellees
introduced evidence that they had declined to reimburse twenty-eight of the potential
class members more than three million dollars over a three-year period, and they
introduced evidence that they had refused to reimburse Excel $60,000 dollars. If $60,000
were the average amount owed to each of the two thousand potential class members, then
$120 million dollars would be in controversy. This evidence, not persuasively
controverted by Excel, is sufficient to satisfy Appellees’ burden of proving the
jurisdictional amount in controversy. See Judon v. Travelers Prop. Cas. Co. of Am., 773
F.3d 495, 507 (3d Cir. 2014) (explaining that, because of Federal Rule of Civil Procedure
23’s requirement that a class plaintiff’s claim be typical of the class members’ claims, it
is reasonable to assume that a plaintiff’s damages are representative of the class
members’ damages).
In response, Excel argues that there is no amount of money in controversy because
it is merely seeking declaratory and injunctive relief, not damages for past violations. But
courts must put a value on the relief sought when deciding whether the $5 million
amount-in-controversy requirement is satisfied. See Columbia Gas Transmission Corp. v.
Tarbuck, 62 F.3d 538, 539 (3d Cir. 1995) (explaining that in lawsuits seeking injunctive
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or declaratory relief, courts “measure the amount in controversy by the value of the rights
which the plaintiff seeks to protect”). In determining the value of an injunction or
declaration, “the court may look not only at past losses but also at potential harm.” A.F.A.
Tours, Inc. v. Whitchurch, 937 F.2d 82, 88 (2d Cir. 1991); see also 14B Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure § 3708 at 243 (3d ed. 1998)
(“Potential, as well as past, harm to the company may be considered by the court.”). As
the trial court recognized, a declaration and injunction in the class’s favor could compel
Appellees to pay out considerably more in reimbursements. If Excel’s legal theory is
correct, just twenty-eight of the two thousand class members would be cumulatively
owed $3 million for a three-year period. A declaration or injunction entitling two
thousand plaintiffs to be reimbursed as Excel demands would presumably, in the coming
years, entitle them to relief worth far more than $120 million. The amount-in-controversy
requirement was satisfied.
Further, we conclude the trial court did not abuse its discretion in deciding to
retain jurisdiction over this declaratory judgment case. A district court may decline
jurisdiction when there is a parallel state proceeding with “substantial similarity in issues
and parties.” Kelly v. Maxum Specialty Ins. Grp., 868 F.3d 274, 282 (3d Cir. 2017). We
review the trial court’s ruling for abuse of discretion. Id. at 281. Excel argues a
substantially similar case exists, the Fraud Lawsuit, which was filed by Liberty Mutual in
the Philadelphia Court of Common Pleas against pharmacies, pharmacists, and doctors
alleging a conspiracy to defraud Liberty Mutual out of almost four million dollars.
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We agree with the trial court that the Fraud Lawsuit is not substantially similar to
this one. That case involved allegations of fraudulent kickback schemes whereas this case
involves a dispute over reimbursements. Excel is not a defendant in that other lawsuit.
Excel argues that some of the Appellees could potentially assert fraud as an affirmative
defense in this case based on the outcome of that other case, but the trial court was
required to “compar[e] the state and federal action as they contemporaneously exist[ed],
not as they might eventually be.” Kelly, 868 F.3d at 284. Because the impact of the Fraud
Lawsuit on this case was, at best, speculative, we agree with the trial court’s conclusion
that the Fraud Lawsuit was not substantially similar, and thus conclude the trial court did
not abuse its discretion in retaining jurisdiction.
III.
Finally, Excel argues the trial court erred in dismissing its complaint for failure to
state a claim. We review the trial court’s dismissal for failure to state a claim de novo.
Fleisher v. Standard Ins. Co., 679 F.3d 116, 120 (3d Cir. 2012). We conclude the trial
court was correct in dismissing both counts of the complaint. 1
1
Excel argues that the trial court voided its order refusing to remand the case to state court by
dismissing for failure to state a claim. It relies on 28 U.S.C. § 1445(c), which states a “civil
action in any State court arising under the workmen’s compensation laws of such State may not
be removed to any district court of the United States.” We agree with the overwhelming weight
of authority from the other courts of appeals that have considered this issue: any error under
Section 1445 is procedural, not jurisdictional, and therefore can be waived. See, e.g., In re
Norfolk S. Ry. Co., 592 F.3d 907, 911–12 (8th Cir. 2010); Vasquez v. N. Cty. Transit Dist., 292
F.3d 1049, 1062 (9th Cir. 2002); Feichko v. Denver & Rio Grande W. R. Co., 213 F.3d 586, 589
(10th Cir. 2000); Williams v. AC Spark Plugs Div. of Gen. Motors Corp., 985 F.2d 783, 786–88
(5th Cir. 1993). Excel waived its argument on this point by failing to comply with the
requirement in 28 U.S.C. § 1447(c) that it raise this issue within thirty days of the notice of
removal. Indeed, Excel acknowledges its tardiness. Appellant Br. 41 n.12.
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First, Excel cannot earn relief under the WCA because it can only seek
administrative remedies as laid out in the statute. The Pennsylvania Supreme Court has
been clear:
The Workmen’s Compensation Act establishes the exclusive forum for resolving
disputes regarding the employee’s right to compensation and the delay or
discontinuance of benefits. The workmen’s compensation system encompasses all
disputes over coverage and the payment of benefits, whether they arise from
actions taken by the employer, the employer’s insurance carrier, or the insurance
carrier’s employees or agents.
Alston v. St. Paul Ins. Cos., 612 A.2d 421, 424 (Pa. 1992). “When the allegations of a
claim have as their ultimate basis an injury compensable under the [WCA], the claim
must be considered within the framework of the statute.” Kuney v. PMA Ins. Co., 578
A.2d 1285, 1287 (Pa. 1990).
The WCA establishes the rights and obligations of insurers and medical providers
(including pharmacies) with respect to billing and reimbursement for pharmaceuticals
dispensed to injured workers. 77 Pa. Cons. Stat. §§ 531(3)(vi)(A)–(I), 531(5). The WCA
also establishes an administrative procedure for a provider that “disputes the amount or
timeliness of the payment from the . . . insurer.” 77 Pa. Cons. Stat. § 531(5). That
procedure requires the Pennsylvania Bureau of Workers’ Compensation to render an
administrative decision, 34 Pa. Code § 127.256, which can then be appealed de novo to a
hearing officer. 34 Pa. Code § 127.259(a). From there, a provider can appeal to the
Pennsylvania Commonwealth Court. 34 Pa. Code § 127.261.
A provider cannot institute proceedings under the WCA unless it has exhausted its
administrative remedies. See Chubb Grp. of Ins. Cos. v. Dep’t of Labor & Indus., Bureau
8
of Worker’s Comp., 655 A.2d 205, 206 (Pa. Commw. Ct. 1995). “The doctrine of
exhaustion of administrative remedies is intended to prevent the premature interruption of
the administrative process, which would restrict the agency’s opportunity to develop an
adequate factual record, limit the agency in the exercise of its expertise, and impede the
development of a cohesive body of law in that area.” Keystone ReLeaf LLC v. Pa. Dep’t
of Health, 186 A.3d 505, 513 (Pa. Commw. Ct. 2018) (citations omitted). Because Excel
did not exhaust its administrative remedies, the trial court correctly dismissed Count I.
Second, Excel cannot bring a declaratory judgement action under the UIPA. The
UIPA prohibits any unfair methods of competition or unfair or deceptive acts or practices
in the business of insurance. 40 Pa. Cons. Stat. § 1171.2. The UIPA does not create a
private right of action, but it instead relies on the Pennsylvania Insurance Commission to
investigate alleged violations, hold hearings, and impose sanctions as warranted. See
Jones v. Nationwide Prop. & Cas. Ins., 995 A.2d 1233, 1236 (Pa. Super. Ct. 2010).
Although Excel acknowledges that “there is no private right of action under the UIPA,”
J.A. 863, it then argues that Count II should proceed because it is seeking a declaratory
judgment rather than a “direct” action. Appellant Br. 38. But it is well settled that parties
cannot bring a declaratory judgment action under a statute when there is no private right
of action under that statute. See, e.g., Schilling v. Rogers, 363 U.S. 666, 677 (1960);
Malhan v. Sec’y U.S. Dep’t of State, 938 F.3d 453, 457 n.3 (3d Cir. 2019). Therefore we
conclude the trial court properly dismissed Count II.
IV.
For the foregoing reasons, we will affirm the judgment of the trial court.
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