Riley v. F A Richard & Assoc

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
________________
No. 01-60337
________________
JOE ELLIS RILEY
Plaintiff - Appellant
v.
F A RICHARD & ASSOCIATES INC; INGALLS SHIPBUILDING;
AND ALEXIS HYLAND, An Individual
Defendants - Appellees
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Mississippi
_________________________________________________________________
August 1, 2002
Before KING, Chief Judge, and REAVLEY and WIENER, Circuit Judges.
PER CURIAM:*
Plaintiff–Appellant Joe Ellis Riley asserted various state
law claims against Defendants–Appellees in Mississippi state
court. Defendants–Appellees removed the case to federal district
court. Riley filed a motion to remand the case, and
*
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
Defendants–Appellees filed a motion to dismiss Riley’s claims.
The district court granted Defendants–Appellees’ motion and
dismissed all of Riley’s claims with prejudice. The court denied
Riley’s motion to remand as moot. Riley appeals the dismissal of
his claims. Because we find no basis for federal removal
jurisdiction, we VACATE the district court’s dismissal of Riley’s
claims and REMAND the case to the district court with
instructions to remand the case to state court.
I. Factual and Procedural History
In October 1997, Plaintiff–Appellant Joe Ellis Riley
sustained injuries to his left foot and ankle in an industrial
accident while employed by Defendant–Appellee Ingalls
Shipbuilding, Inc. (“Ingalls”). Pursuant to the Longshore and
Harbor Workers’ Compensation Act (“LHWCA”), 33 U.S.C. § 901, et
seq. (1994), Ingalls, as Riley’s employer, and Defendant–Appellee
F.A. Richard & Associates, Inc. (“F.A. Richard”), as Ingalls’s
self-insured administrator, provided some compensation and
medical coverage for the injuries to Riley’s foot and ankle. Dr.
Chris E. Wiggins, a physician with the Mississippi Coast
Orthopaedic Group, P.A. (the “Orthopaedic Group”), treated Riley
for his injuries. During the course of Riley’s treatment, Dr.
Wiggins diagnosed Riley with congenital spondylolisthesis at the
L-4 vertebrae of the lumbar spine. In April 1999, Dr. Wiggins
concluded that Riley’s increasing back pain was reasonably
2
related to the October 1997 industrial accident, rather than the
congenital spondylolisthesis.
Riley asserts that in June 1999, Alexis Hyland, an employee
and agent of F.A. Richard, posed as Riley’s medical case manager,
and that Hyland, while purporting to assist Riley in obtaining
appropriate medical care, engaged in ex parte communications with
Dr. Wiggins. According to Riley, these communications caused Dr.
Wiggins to reverse his opinion regarding the nature and causation
of Riley’s back condition. After contact with Hyland, Dr.
Wiggins concluded that a natural progression of Riley’s
congenital spondylolisthesis caused Riley’s back pain rather than
the accident.1
In June 2000, Riley filed suit in Mississippi state court
against Ingalls, F.A. Richard, and Alexis Hyland in her capacity
as an agent for F.A. Richard. Riley alleged that Ingalls and
F.A. Richard established a close working relationship with the
Orthopaedic Group, where numerous injured Ingalls employees are
sent for treatment. According to Riley, this close relationship
allows Ingalls and F.A. Richard to exert inappropriate influence
over the Orthopaedic Group’s physicians so as to interfere with
the medical treatment of injured Ingalls employees.
1
Riley asserts that Dr. Wiggins has since “re-reversed”
his opinion regarding the causation of Riley’s back pain.
However, as Riley correctly notes, evidence of this re-reversal
is not part of the record in this action, and we need not
consider it.
3
Specifically, Riley asserts the following nine state law claims:
(1) intentional interference with contract, (2) breach of
fiduciary duty, (3) intentional interference with prospective
advantage, (4) medical malpractice (against Hyland, a registered
nurse), (5) fraud and misrepresentation, (6) negligence,
(7) intentional infliction of emotional distress, (8) intentional
interference with medical care and/or breach of confidentiality
of doctor/patient privilege, and (9) intentional interference
with medical care by ex parte communication. Riley’s complaint
claims $82,673.18 in special damages in compensation for his
claim for permanent disability under the LHWCA, $500,000 in total
actual damages, and $25,000,000 in punitive damages.2
In July 2000, Ingalls, F.A. Richard, and Hyland
(collectively, the “Defendants”) removed the case to federal
district court on the ground that Ingalls, the only non-diverse
defendant, was fraudulently joined to defeat diversity
jurisdiction. Riley filed a motion to remand in August 2000. In
September 2000, the Defendants filed a motion to dismiss
asserting that: (1) because the LHWCA provides the exclusive
remedy for Riley’s claims, the Defendants are immune from suit in
tort and Riley’s state law claims are preempted by the LHWCA; (2)
Riley failed to exhaust the administrative remedies provided by
2
Riley has since indicated, both to this court and to the
district court, that his claim for special damages has
“evaporated” and that he is no longer pursuing those damages.
4
the LHWCA as required; and (3) the Defendants did not violate the
patient/physician privilege because this case is governed by
federal law, and federal common law does not recognize such a
privilege.
At a hearing before the district court on Riley’s motion to
remand on March 21, 2001, the parties presented their arguments
relating to the propriety of removal. The district court
ultimately concluded that “this suit shall be dismissed for lack
of subject matter jurisdiction.” The court appears to have based
this conclusion on its belief that the LHWCA provides the
exclusive remedy for Riley. The district court then denied
Riley’s motion to remand as moot. Riley timely appealed the
district court’s final judgment dismissing the case with
prejudice.
II. Analysis
A. The District Court’s Ruling
Riley’s primary argument on appeal is that the district
court erred by failing to remand the case to state court. We
review de novo the district court’s denial of Riley’s motion to
remand. See Rodriguez v. Sabatino, 120 F.3d 589, 591 (5th Cir.
1997).3
3
Generally, a district court’s denial of a motion to
remand is not appealable because it is not a final order. Aaron
v. Nat’l Fire Ins. Co. of Pittsburgh, 876 F.2d 1157, 1160 (5th
Cir. 1989). However, when the denial of the motion to remand is
coupled with a final order, we have jurisdiction to review the
denial of remand. Id. In this case, the district court
5
When faced with a motion to remand, a federal court must
first determine whether it may properly exercise removal
jurisdiction before ruling on a motion to dismiss the plaintiff’s
complaint. 14C CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE
AND PROCEDURE § 3739, at 419-23 (1998). Defendants have a limited
right, set forth in 28 U.S.C. § 1441(b) (1994), to remove cases
from state court to federal court as follows:
Any civil action of which the district courts
have original jurisdiction founded on a claim
or right arising under the Constitution,
treaties or laws of the United States shall
be removable without regard to the
citizenship or residence of the parties. Any
other such action shall be removable only if
none of the parties in interest properly
joined and served as defendants is a citizen
of the State in which such action is brought.
Thus, removal jurisdiction can be premised on either the
existence of a federal question or diversity of the parties. The
removing party bears the burden of establishing removal
jurisdiction. Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42
(5th Cir. 1992). In this case, the Defendants’ notice of removal
asserts diversity jurisdiction (based on the fraudulent joinder
of Ingalls) and does not mention the existence of a federal
question. Riley argues that, even though the issue of federal
question jurisdiction was never before the district court, the
simultaneously denied Riley’s motion to remand and granted the
Defendants’ motion to dismiss. Because the dismissal constitutes
a final order, we have jurisdiction to review the district
court’s denial of remand. See id.
6
court improperly considered federal question jurisdiction at the
March 2001 hearing.
Although the district court denied Riley’s motion to remand
as moot, a review of the transcript of the March 2001 hearing
suggests that the court may have concluded that it had removal
jurisdiction before dismissing the case.4 However, the
transcript does not reveal whether the district court based its
exercise of removal jurisdiction on the presence of a federal
question or on diversity of the properly joined parties. We need
not determine the basis of the district court’s ruling because we
conclude that the district court lacked both federal question
jurisdiction and diversity jurisdiction over this case. Thus,
the district court erred in denying Riley’s motion to remand the
case to state court.
B. Lack of Federal Question Jurisdiction
A defendant may remove a case to federal court based on the
presence of a federal question when a plaintiff asserts “a claim
or right arising under the Constitution, treaties or laws of the
United States.” 28 U.S.C. § 1441(b). Generally, we resolve
issues of federal question jurisdiction by applying the “well-
pleaded complaint rule.” Hart v. Bayer Corp., 199 F.3d 239, 243
4
Even if the district court did not properly consider
Riley’s motion to remand, for the purpose of this appeal, we give
the district court the benefit of the doubt and assume that the
court found a basis for removal jurisdiction before dismissing
Riley’s claims.
7
(5th Cir. 2000). According to the well-pleaded complaint rule,
if a plaintiff’s complaint raises no issue of federal law,
federal question jurisdiction is lacking, and removal is
improper. Id. at 244. Thus, ordinarily, “[t]he fact that a
federal defense may be raised to the plaintiff’s action – even if
both sides concede that the only real question at issue is
created by a federal defense – will not suffice to create federal
question jurisdiction.” Aaron v. Nat’l Fire Ins. Co. of
Pittsburgh, 876 F.2d 1157, 1161 (5th Cir. 1989). However, there
are exceptions to the well-pleaded complaint rule. For example,
in Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557 (1968), the
Supreme Court held that, even if the plaintiff’s complaint
asserts only state law claims, removal jurisdiction is proper if
federal law “so completely preempt[s] a field of state law that
the plaintiff’s complaint must be recharacterized as stating a
federal cause of action.” Aaron, 876 F.2d at 1161 (discussing
the Avco exception to the well-pleaded complaint rule). Thus, a
defense based on federal law creates federal question
jurisdiction where the plaintiff’s state law claims are
completely preempted by federal law. See id.
In this case, the district court may have asserted removal
jurisdiction based on the Defendants’ federal law defense that
the LHWCA provides the exclusive remedy for Riley. Riley
correctly argues that the exercise of removal jurisdiction on
8
this basis is improper. Section 905(a) of the LHWCA provides, in
part, that:
The liability of an employer prescribed in
section 904 of [the LHWCA] shall be exclusive
and in place of all other liability of such
employer to the employee . . . at law or in
admiralty on account of such injury or death
. . . .
33 U.S.C. § 905(a). In Aaron, this court considered whether
federal question jurisdiction may arise where a defendant asserts
that § 905(a) of the LHWCA bars a plaintiff’s state law claims.
876 F.2d at 1164-66. After thorough analysis of Supreme Court
precedent, this court concluded in Aaron that, because the LHWCA
does not completely preempt state law claims, “[t]he LHWCA is, in
this case, nothing more than a statutory defense to a state-court
cause of action – the classic circumstance of non-removability.”
Id. at 1166. Thus, according to the clear rule of Aaron, the
Defendants’ LHWCA defense to Riley’s state law claims is
insufficient to create federal question jurisdiction. Id.; see
also Garcia v. Amfels, Inc., 254 F.3d 585, 588 (5th Cir. 2001)
(stating that “there is no question that the LHWCA does not
create federal subject matter jurisdiction supporting removal”).
Accordingly, the district court’s exercise of removal
jurisdiction over this case was improper to the extent the court
based its jurisdiction on the presence of a federal question.
9
C. Lack of Diversity Jurisdiction
A defendant may remove a case to federal court based on the
diversity of the parties “only if none of the parties in interest
properly joined and served as defendants is a citizen of the
State in which such action is brought.” 28 U.S.C. § 1441(b).
For the purposes of this jurisdictional inquiry, the citizenship
of a fraudulently joined defendant must be disregarded. Badon v.
R.J.R. Nabisco Inc., 224 F.3d 382, 389 (5th Cir. 2000). Thus, a
plaintiff cannot keep the case in state court by fraudulently
joining an in-state defendant.
We assume, as the parties implicitly assume, that Hyland and
F.A. Richard are not residents or citizens of Mississippi.5
Ingalls, as a corporate resident of Mississippi, is the only in-
state defendant, and Ingalls’s presence in this case destroys the
diversity of the Defendants. The Defendants argue that Riley
fraudulently joined Ingalls and, thus, that the citizenship of
Ingalls should be disregarded for jurisdictional purposes. The
Defendants maintain that the district court did not err in
exercising diversity jurisdiction over this case. Riley counters
that the district court lacked diversity jurisdiction over this
case because Ingalls is not fraudulently joined.
5
Hyland is a citizen and resident of Alabama. The
Defendants assert that F.A. Richard is a corporate resident of
Louisiana. Although Riley argued before the district court that
F.A. Richard was a non-diverse party because of its “very
substantial business activity in Mississippi,” Riley does not
raise this argument on appeal, and it is, therefore, abandoned.
10
“The burden of persuasion placed upon those who cry
‘fraudulent joinder’ is indeed a heavy one.” Hart, 199 F.3d at
246 (internal citations and quotations omitted). To establish
fraudulent joinder of a non-diverse defendant, the removing party
must show that there is no possibility that the plaintiff would
be able to establish a claim against the non-diverse defendant in
state court. In re Rodriguez, 79 F.3d 467, 469 (5th Cir. 1996).6
In making this determination, a court must resolve all disputed
questions of fact and all ambiguities in the law in favor of the
non-removing party. Id. “In essence, the district court, or
this court on review, should conclude there is no federal
jurisdiction and remand the case to the state court if either
federal court cannot predict with absolute certainty that [the
state] court would summarily dismiss the causes of action
asserted against [the] defendant . . . .” Id. (second alteration
in original) (internal citations and quotations omitted). In
order to avoid “pretrying a case to determine removal
jurisdiction,” fraudulent joinder claims are generally resolved
by “piercing the pleadings and considering summary judgment-type
evidence such as affidavits and deposition testimony.” Hart, 199
F.3d at 246-47 (internal citations and quotations omitted).
However, because the record in this case does not include such
6
An allegation of fraudulent joinder may also be based
on outright fraud in the plaintiff’s pleading of jurisdictional
facts. In re Rodriguez, 79 F.3d at 469. The Defendants do not
assert this ground for fraudulent joinder.
11
evidence, we are limited to a review of the allegations in the
complaint in determining whether any possibility exists for Riley
to establish a claim against Ingalls in state court. Id. at 247.
As noted above, § 905(a) of the LHWCA provides that:
The liability of an employer prescribed in
section 904 of [the LHWCA] shall be exclusive
and in place of all other liability of such
employer to the employee . . . at law or in
admiralty on account of such injury or death
. . . .
33 U.S.C. § 905(a). Pointing to the language of § 905(a), the
Defendants argue that, because the LHWCA provides the exclusive
remedy for Riley’s claims against Ingalls, there is no
possibility that Riley could establish a claim against Ingalls in
state court. In support of their argument, the Defendants rely
heavily on this court’s decision in Atkinson v. Gates, McDonald &
Co., 838 F.2d 808 (5th Cir. 1988). In Atkinson, this court
affirmed a district court’s dismissal of a plaintiff’s state law
claims asserted against her previous employer for that employer’s
termination of the plaintiff’s LHWCA-based benefits. Id. at 815.
This court stated that “the LHWCA is plainly preemptive of any
state law claim for intentional or bad faith wrongful refusal to
pay benefits due under the [LHWCA], and this is true even in the
absence of any expressly preemptive language.” Id. at 812. Even
though the plaintiff in that case was no longer employed by the
defendant, the Atkinson court noted that the plaintiff’s claim
“necessarily presupposes an obligation to pay LHWCA benefits, and
12
hence necessarily arises out of her on-the-job injury.” Id. at
811.
The plaintiff in Atkinson argued that an LHWCA-exclusivity
rationale “is defective because it inevitably leads to the
conclusion that there could be no common-law tort claim against
an insurance company if, for example, its employee, in the course
of investigating the plaintiff’s claim for LHWCA compensation
benefits, were to illegally enter plaintiff’s residence to get
needed evidence.” Id. at 814. This court rejected this argument
by explaining the scope of the LHWCA’s preemption:
[T]he obvious difference between the
example[] posed by [plaintiff] . . ., and the
case of bad faith refusal to pay compensation
benefits, is that in the former class of case
plaintiff’s entitlement to recover in the
tort action is in no way dependent on [her]
having been entitled to compensation benefits
or to the defendant’s having violated the
compensation statute. By contrast, in order
to recover for bad faith or malicious failure
to pay compensation benefits[,] there must
have been an entitlement to such benefits or
a violation of the compensation statute in
the failure to pay them.
Id.
In the instant case, Riley argues that, because his state
law claims are not dependent on his entitlement to compensation
benefits, they fall within the former category described by the
Atkinson court and are not preempted by the LHWCA. Riley does
not allege that the Defendants violated the LHWCA or failed to
pay LHWCA benefits. Rather, the essence of Riley’s complaint is
13
that the close relationship between the Defendants and the
Orthopaedic Group, along with the Defendants’ ex parte
communications with Riley’s physician, improperly interfered with
Riley’s medical treatment. According to Riley, the fact that his
claims are asserted against his employer and his employer’s self-
insured administrator is a mere coincidence.7 Thus, Riley argues
that he, like the injured person in the Atkinson plaintiff’s
hypothetical, has an “entitlement to recover in the tort action”
that is “in no way dependent on his having been entitled to
compensation benefits or to the defendant’s having violated the
compensation statute.” Id.
This court has never determined whether state law claims
alleging tortious conduct arguably unconnected with an
entitlement to LHWCA benefits fall within the scope of LHWCA
preemption, and we need not do so here. In the context of the
fraudulent joinder inquiry, “[w]e do not decide whether the
plaintiff will actually or even probably prevail on the merits,
but look only for a possibility that he may do so.” Dodson, 951
F.2d at 42-43. Moreover, we resolve all factual and legal
ambiguities in favor of the non-removing party. Id. at 42.
7
In his brief to this court, Riley states that his claim
“is not for wages and it is not for compensation benefits; it is
not for bad faith refusal to pay benefits as in Atkinson; it is
for damages that are completely independent of the
employer/employee relationship.”
14
As our opinion in Atkinson makes clear, certain claims
brought by an employee against his or her employer independent
from the employee’s entitlement to LHWCA benefits and not based
on an alleged violation of the LHWCA by the employer are not
preempted by the LHWCA. 838 F.2d at 814.8 Riley’s state law
claims are based on the Defendants’ close relationship with the
Orthopaedic Group and the Defendants’ alleged interference with
Riley’s medical treatment. At least one of those claims, which
we discuss below, appears to be independent from Riley’s
entitlement to LHWCA benefits. Thus, our opinion in Atkinson
suggests some possibility that at least one of Riley’s claims is
not preempted by the LHWCA.
As an example, we consider Riley’s state law claim for
intentional interference with contract. In support of this
claim, Riley’s petition asserts that “he had a contract for
8
The First Circuit’s decision in Martin v. Travelers
Insurance Co., 497 F.2d 329 (1st Cir. 1974), is consistent with
our reasoning in Atkinson. In Martin, the plaintiff received
compensation, in the form of three drafts, from the insurer of
his former employer pursuant to the LHWCA. Id. at 330. Two
weeks after the drafts were deposited and substantially drawn
upon by the plaintiff, the insurer stopped payment on the drafts.
Id. The plaintiff sued the insurer for infliction of mental and
emotional suffering because of his “financial embarrassment due
to the fact that he had written checks which had become
worthless.” Id. at 330, 331 n.1. The Martin court held that the
plaintiff was not precluded under the LHWCA from pursuing his
state law claim because the plaintiff’s complaint was not based
on the insurer’s failure to pay LHWCA benefits. Id. at 330.
Rather, the court emphasized that “the crux of the complaint here
is the insurer’s callous stopping of payment without warning when
it should have realized that acute harm might follow.” Id. at
331.
15
provision of medical care services with [Dr. Wiggins] and that
the actions of the [Defendants] constituted an intentional
interference with his contract for receipt of medical attention
and are therefore actionable.” Under Mississippi law, “[a]n
action for tortious interference with contract ordinarily lies
when a party maliciously interferes with a valid and enforceable
contract, causing one party not to perform and resulting in
injury to the other contracting party.” Hollywood Cemetery Ass’n
v. Bd. of Mayor and Selectmen of the City of McComb City, 760 So.
2d 715, 719 (Miss. 2000). To establish this tort, Riley must
show: (1) that the actions of the Defendants were intentional and
willful, (2) that the actions were calculated to cause injury to
Riley, (3) that the actions were without right or justifiable
cause on the part of the Defendants, and (4) that Riley suffered
actual injury or loss. Id.
Assuming that Riley can demonstrate that he had an
enforceable contract with Dr. Wiggins for medical care, we can
imagine facts which, if proven, would establish tortious
interference with a contract in this case. Riley may be able to
show that the Defendants intentionally and willfully interfered
with Riley’s medical treatment in order to cause injury to Riley
without right or justifiable cause. Furthermore, such an
interference raises the possibility of actual damages which are
independent from Riley’s entitlement to LHWCA benefits. For
example, a mis-diagnosis caused by tortious interference could
16
lead to inadequate medical care. Inadequate care may precipitate
additional injuries, both physical and mental, which are
unrelated to the original injury suffered on the job. A mis-
diagnosis also may potentially cause a patient to suffer more
pain than is necessary and to expend extra time and resources in
seeking additional medical care. Moreover, if Riley can
establish a claim for tortious interference, he may be entitled
to punitive damages in addition to the actual damages caused by
the interference. In this way, Riley’s claim for tortious
interference with a contract raises the possibility of damages
that are independent from his entitlement to LHWCA benefits and
thus raises the possibility that at least one of Riley’s claims
is not preempted by the LHWCA.9
Additionally, we cannot find any provisions of the LHWCA
which appear to penalize the kind of conduct alleged here. As
the Defendants correctly note, § 914 of the LHWCA provides the
exclusive remedy for bad faith wrongful refusal to pay benefits
due under the LHWCA. See 33 U.S.C. § 914; Atkinson, 838 F.2d at
812. However, at least one of Riley’s claims may not be based on
Ingalls’s refusal to pay LHWCA benefits. The LHWCA also provides
a remedy for employees when an employer knowingly and willfully
makes a false statement or misrepresentation for the purpose of
9
We recognize that some of Riley’s other claims may be
preempted, but we need not consider them. The possibility that
one claim is not preempted by the LHWCA is enough to establish a
chance of recovery against Ingalls in state court.
17
reducing, denying, or terminating compensation benefits. See 33
U.S.C. § 931(c); Atkinson, 838 at 811. Like § 914, this
provision encompassing false statements and misrepresentations
does not clearly cover the conduct which forms the basis of
Riley’s claims. Because at least one of Riley’s claims may be
unconnected with compensation benefits, we cannot say that no
possibility exists for Riley to show that any such claim is not
preempted by these LHWCA provisions.
For these reasons, taking all allegations set forth in
Riley’s complaint as true and resolving all legal ambiguities in
Riley’s favor, we conclude that Riley’s complaint raises the
possibility that Riley could succeed in establishing at least one
claim against Ingalls in state court. Thus, there is no
fraudulent joinder, and we cannot disregard Ingalls’s citizenship
for the purposes of our jurisdictional inquiry.10 Accordingly,
the district court’s exercise of removal jurisdiction over this
case was improper to the extent the court based its jurisdiction
on the diversity of the parties. This conclusion, coupled with
our conclusion that federal question jurisdiction is lacking,
leaves no possible basis for removal jurisdiction in this case.
10
This conclusion is consistent with our holding in Aaron
that the LHWCA does not create federal question jurisdiction
supporting removal. If the Defendants’ LHWCA defense is
insufficient to raise federal question jurisdiction, such a
defense should not be sufficient to raise diversity jurisdiction
by way of fraudulent joinder. We will not allow the Defendants
to make an end run around the clear rule of Aaron.
18
Thus, the district court erred by not remanding the case to state
court.11
III. Conclusion
For the foregoing reasons, we find no basis for removal
jurisdiction in this case. Accordingly, we VACATE the district
court’s dismissal of Riley’s claims and REMAND the case to the
district court with instructions to remand the case to state
court. Costs shall be borne by the Defendants.
11
Because we find in Riley’s favor on this issue, we need
not address Riley’s additional claims that the district court
deprived Riley of due process at the March 2001 hearing and that
there was a defect in the removal procedure.
19