Kale Flagg v. Denise Elliot

Case: 14-31169 Document: 00513437796 Page: 1 Date Filed: 03/24/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-31169 United States Court of Appeals
Fifth Circuit
FILED
KALE FLAGG, March 24, 2016
Lyle W. Cayce
Plaintiff - Appellant Clerk
v.
STRYKER CORPORATION; MEMOMETAL INCORPORATED, USA,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Louisiana
Before STEWART, Chief Judge, and JOLLY, DAVIS, JONES, SMITH,
DENNIS, CLEMENT, PRADO, OWEN, ELROD, SOUTHWICK, HAYNES,
GRAVES, HIGGINSON, and COSTA, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
We took this case en banc to decide whether the district court erred by
dismissing the non-diverse defendants as improperly joined and exercising
diversity jurisdiction over the remaining diverse defendants. We conclude that
the district court did not err by concluding that the plaintiff had improperly
joined the non-diverse defendants because the plaintiff had not exhausted his
claims against those parties as required by statute. Therefore, the district
court properly exercised jurisdiction over the diverse defendants which
remained in the case.
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I.
Defendants Dr. Denise Elliot, West Jefferson Medical Center, and the
Foot and Ankle Center (collectively the “Medical Defendants”) performed
surgery and cared for Plaintiff-Appellant Kale Flagg in connection with
implanting a toe joint in Flagg’s foot. The toe implant that the Medical
Defendants implanted was manufactured by Defendants-Appellees Stryker
Corporation and Memometal Incorporated, USA (collectively the
“Manufacturing Defendants”).
Flagg claims that the surgery was unsuccessful. He alleges that the toe
implant has caused him undue pain, and that he required further surgeries to
correct the problem. He therefore alleges that the Medical Defendants
committed malpractice by negligently performing the surgery. He further
alleges that the toe implant manufactured by the Manufacturing Defendants
was defective and unreasonably dangerous.
Flagg filed a lawsuit in Louisiana state court asserting state law medical
malpractice claims against the Medical Defendants and state law products
liability claims against the Manufacturing Defendants. All parties agreed that
Flagg failed to exhaust his claims against the Medical Defendants in the
manner required by the Louisiana Medical Malpractice Act before filing this
suit.
The Manufacturing Defendants removed the case to federal court on the
basis of diversity jurisdiction. Flagg is a citizen of Louisiana, and the
Manufacturing Defendants are citizens of states other than Louisiana.
Therefore, Flagg and the Manufacturing Defendants are completely diverse.
However, the Medical Defendants, like Flagg, are all Louisiana citizens.
In their Notice of Removal, the Manufacturing Defendants argued that
Flagg was prohibited from filing suit against the Medical Defendants because
he failed to administratively exhaust his medical malpractice claims before
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filing this lawsuit as required by Louisiana law. The Manufacturing
Defendants therefore argued that Flagg improperly joined the Medical
Defendants, such that the district court could exercise diversity jurisdiction
over the case.
Shortly after the Manufacturing Defendants removed the case, Flagg
moved to stay the case to allow him to exhaust his claims against the Medical
Defendants as required by Louisiana law. The district court denied the motion.
The Manufacturing Defendants then argued that, because Flagg failed
to exhaust his claims against the Medical Defendants before filing suit, the
district court should dismiss the Medical Defendants as improperly joined and
disregard their citizenship for the purposes of diversity jurisdiction.
The district court, relying on our decisions in Melder v. Allstate Corp.,
404 F.3d 328 (5th Cir. 2005) and Holder v. Abbott Laboratories, Inc., 444 F.3d
383 (5th Cir. 2006), agreed that Flagg had improperly joined the Medical
Defendants. The court therefore dismissed the Medical Defendants from the
case without prejudice. The district court then exercised diversity jurisdiction
over the remaining defendants and dismissed Flagg’s action against the
Manufacturing Defendants with prejudice pursuant to Federal Rule of Civil
Procedure 12(b)(6).
Flagg appealed the district court’s judgment. Although Flagg did not
challenge the district court’s subject matter jurisdiction on appeal, the panel
considered sua sponte whether the district court properly exercised diversity
jurisdiction over the case. The panel majority concluded that the Medical
Defendants were not improperly joined and directed the district court to
remand the case to state court. 1 For that reason, the panel did not reach the
1 Flagg v. Stryker Corp., 801 F.3d 456 (5th Cir. 2015), vacated, 805 F.3d 610 (2015).
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propriety of the district court’s Rule 12(b)(6) dismissal of the Manufacturing
Defendants.
We took this case en banc to decide whether the district court correctly
dismissed the action against the Medical Defendants as improperly joined and
exercised jurisdiction over the Manufacturing Defendants.
II.
The federal courts may exercise diversity jurisdiction over a civil action
between citizens of different States if the amount in controversy exceeds
$75,000. 2 An out-of-state defendant may generally remove a case filed in state
court to a federal district court if the parties are diverse, the amount in
controversy requirement is met, and none “of the parties in interest properly
joined and served as defendants is a citizen of the State in which such action
is brought.” 3
Ordinarily, diversity jurisdiction requires complete diversity – if any
plaintiff is a citizen of the same State as any defendant, then diversity
jurisdiction does not exist. 4 However, if the plaintiff improperly joins a non-
diverse defendant, then the court may disregard the citizenship of that
defendant, dismiss the non-diverse defendant from the case, and exercise
subject matter jurisdiction over the remaining diverse defendant. 5
228 U.S.C. § 1332(a)(1).
3Id. § 1441(a)-(b).
4 E.g., Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806).
5 E.g., Wecker v. Nat’l Enameling & Stamping Co., 204 U.S. 176, 185-86 (1907);
Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 572-73 (5th Cir. 2004) (en banc), cert. denied,
544 U.S. 992 (2005).
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Federal courts have jurisdiction to determine their own subject matter
jurisdiction. 6 In this context, the court has the obligation to determine whether
a plaintiff has improperly joined a party that defeats federal diversity
jurisdiction. 7
This Court articulated its standard for improper joinder in its recent en
banc decision in Smallwood v. Illinois Central Railroad Co. In Smallwood, we
explained that a non-diverse party is improperly joined if the plaintiff is unable
“to establish a cause of action against the non-diverse party in state court.” 8
Thus, the test for improper joinder “is whether the defendant has
demonstrated that there is no possibility of recovery by the plaintiff against an
in-state defendant.” 9 “In this inquiry the motive or purpose of the joinder of in-
state defendants is not relevant.” 10
In most cases, to determine whether the plaintiff has any possibility of
recovery against the non-diverse defendant, the court should “conduct a Rule
12(b)(6)-type analysis, looking initially at the allegations of the complaint to
determine whether the complaint states a claim under state law against the
in-state defendant. Ordinarily, if a plaintiff can survive a Rule 12(b)(6)
challenge, there is no improper joinder.” 11
6 E.g., In re Transtexas Gas Corp., 303 F.3d 571, 576-77 (5th Cir. 2002) (citing
Scherbatskoy v. Halliburton Co., 125 F.3d 288, 290 (5th Cir. 1997)).
7 E.g., Wecker, 204 U.S. at 185-86; Smallwood, 385 F.3d at 572-73.
8 Smallwood, 385 F.3d at 573 (quoting Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir.
2003)).
A federal court may also find improper joinder where the plaintiff has committed
“actual fraud in the pleading of jurisdictional facts.” Id. (quoting Travis, 326 F.3d at 646-47).
This case does not implicate that aspect of the improper joinder doctrine.
9 Id.
The Smallwood standard is consistent with longstanding Supreme Court precedent.
See Wecker, 204 U.S. at 183-86.
10 Smallwood, 385 F.3d at 574.
11 Id. at 573 (citing McKee v. Kan. City S. Ry. Co., 358 F.3d 329, 334 (5th Cir. 2004);
Parks v. New York Times, Co., 308 F.2d 474, 478 (5th Cir. 1962)).
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However, where the plaintiff’s complaint has “misstated or omitted
discrete facts that would determine the propriety of joinder,” the court may
instead “pierce the pleadings and conduct a summary inquiry.” 12 Such a
summary inquiry “is appropriate only to identify the presence of discrete and
undisputed facts that would preclude [the] plaintiff’s recovery against the in-
state defendant.” 13 The decision to pierce the pleadings “lie[s] within the
discretion of the trial court.” 14
Crucially, “[j]urisdictional facts are determined at the time of removal,
not by subsequent events.” 15 Thus, to determine whether a plaintiff has
improperly joined a non-diverse defendant, the district court must examine the
plaintiff’s possibility of recovery against that defendant at the time of removal.
This inquiry must be made regardless of whether the court examines the
plaintiff’s chance of surviving a Rule 12(b)(6) challenge or, instead, conducts a
summary inquiry by piercing the pleadings.
III.
Flagg filed a motion in the district court asking to stay the case so he
could exhaust his claims against the Medical Defendants. By doing so, Flagg
conceded that he failed to exhaust his medical malpractice claims before filing
suit. This concession was the only fact outside the complaint that the district
court considered to determine whether Flagg improperly joined the Medical
12 Id. (citing Badon v. R J R Nabisco Inc., 224 F.3d 382, 389 n.10 (5th Cir. 2002)).
Conducting a summary inquiry is also consistent with longstanding Supreme Court
precedent. See Wecker, 204 U.S. at 183-86 (holding that the district court did not err by
considering affidavit testimony when determining whether the plaintiff improperly joined a
non-diverse defendant).
13 Smallwood, 385 F.3d at 573-74 (citing Travis, 326 F.3d at 648-49).
14 Id. at 573.
15 Louisiana v. Am. Nat’l Prop. & Cas. Co., 746 F.3d 633, 635 (5th Cir. 2014).
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Defendants. Considering this fact was entirely consistent with Smallwood’s
authorization to conduct a “Rule 12(b)(6)-type analysis” 16 to “identify the
presence of discrete and undisputed facts that would preclude [the] plaintiff’s
recovery against the in-state defendant.” 17
For the reasons set forth below, the district court correctly concluded
that Flagg could not “establish a cause of action against [the Medical
Defendants] in state court” at the time the Manufacturing Defendants removed
the case because he had not exhausted his claims before filing suit. 18 It follows
that Flagg improperly joined the Medical Defendants, and the district court
properly exercised diversity jurisdiction over the Manufacturing Defendants.
A.
The Louisiana Medical Malpractice Act (“LMMA”) provides in relevant
part that “[n]o action against a health care provider . . . may be commenced in
any court before the claimant's proposed complaint has been presented to a
medical review panel.” 19 The Supreme Court of Louisiana has interpreted this
provision to not only require the plaintiff to present the claim to a medical
review panel, but also to wait until “the panel has rendered its expert opinion
on the merits of the complaint” before filing suit. 20 With exceptions
16 Smallwood, 385 F.3d at 573.
Even when “deciding a 12(b)(6) motion to dismiss, a court may permissibly refer to
matters of public record.” Cinel v. Connick, 15 F.3d 1338, 1343 n.6 (5th Cir. 1994). By filing
his motion to stay, Flagg admitted in a public court record that he failed to exhaust his claims.
Thus, this is not one of those “cases, hopefully few in number,” in which a district court must
“conduct a summary inquiry” to determine that the plaintiff improperly joined the non-
diverse defendant. Smallwood, 385 F.3d at 573. Rather, this is a mine-run improper joinder
case that can be resolved by a “Rule 12(b)(6)-type analysis.” Id.
17 See Smallwood, 385 F.3d at 573-74 (citing Travis, 326 F.3d at 648-49).
18 See id. at 573 (quoting Travis, 326 F.3d at 646-47).
19 LA. REV. STAT. ANN. § 40.1231.8(B)(1)(a)(i).
20 Delcambre v. Blood Sys., Inc., 893 So. 2d 23, 27 (La. 2005) (emphasis added).
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inapplicable to the facts of this case, 21 “the plaintiff's suit must be dismissed”
without prejudice if the plaintiff fails to satisfy this exhaustion requirement
before filing suit. 22
On appeal, Flagg does not seriously dispute that the Medical Defendants
qualify as “health care provider[s]” within the meaning of the LMMA. Although
Flagg presented his malpractice claims against the Medical Defendants to a
medical review panel before filing suit in state court, the medical panel had
not rendered its expert opinion before Flagg filed this suit. Nor had the medical
panel rendered its opinion before the Manufacturing Defendants removed this
case to federal court. Therefore, Flagg had not complied with the LMMA’s
exhaustion requirement at the time of removal.
Consequently, if the Manufacturing Defendants had not removed this
case to federal court, there is no doubt that the state court would have been
required to dismiss the Medical Defendants from the case. It follows that, at
the time of removal, Flagg was unable to “establish a cause of action against
the [Medical Defendants] in state court.” 23 Thus, the district court properly
discounted the citizenship of the Medical Defendants.
B.
Our conclusion is bolstered by our prior decisions in Melder v. Allstate
Corp., 404 F.3d 328 (5th Cir. 2005) and Holder v. Abbott Laboratories, Inc., 444
F.3d 383 (5th Cir. 2006), in which two different panels of this Court held that
21 The dissent repeatedly emphasizes that “the parties can waive the medical review
process in several ways.” That is irrelevant because the parties have not waived the medical
review process in this case. Thus, Flagg was required to complete the medical review process
before filing suit.
22 E.g., Gele v. Binder, 904 So. 2d 836, 837 (La. Ct. App. 2005) (citing Bennett v.
Krupkin, 814 So. 2d 681, 685 (La. Ct. App. 2002)).
23 See Smallwood, 385 F.3d at 573 (quoting Travis, 326 F.3d at 646-47).
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a non-diverse defendant is improperly joined if the plaintiff fails to exhaust his
claims before filing suit.
The plaintiffs in Melder claimed that the defendants unlawfully set
discriminatory insurance rates. 24 Most of the defendants were insurance
companies who were diverse from the plaintiffs. However, one of the
defendants, the Louisiana Insurance Rating Commission (“LIRC”), was not
diverse. Nevertheless, because the plaintiffs “ha[d] not exhausted the adequate
administrative remedies provided by Louisiana law” with respect to their
claims against LIRC, we concluded that there was “no reasonable basis
Plaintiffs might be able to recover . . . against the sole non-diverse defendant,
LIRC.” 25 Thus, the plaintiffs had improperly joined LIRC, and the district court
properly exercised diversity jurisdiction over the case. 26
Likewise, the plaintiffs in Holder sued a combination of diverse and non-
diverse defendants for injuries resulting from childhood vaccines. 27 “The
Vaccine Act requires that claims ‘for a vaccine-related injury or death’ must
first be brought in the United States Court of Federal Claims. Suit in state and
federal courts is barred unless and until there has been compliance” with this
exhaustion requirement. 28 Because the plaintiffs in Holder had failed to
initially file their claims against the non-diverse defendants in the Court of
Claims, “the Vaccine Act foreclose[d] the . . . suit against the non-diverse
defendants.” 29 We therefore held that the plaintiffs’ “joinder of the non-diverse
defendants was improper and remand to state court was not warranted.” 30
24 404 F.3d at 330.
25 Id. at 332.
26 Id.
27 444 F.3d at 385-86.
28 Id. at 387-88 (citing 42 U.S.C. § 300aa-11).
29 Id.
30 Id. at 387.
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The logic of Melder and Holder applies equally here. Because Flagg did
not complete the medical panel review process before filing suit, the LMMA
explicitly prohibited him from suing the Medical Defendants in any court.
Thus, Flagg had no possibility of recovery against the Medical Defendants, and
the district court correctly dismissed the Medical Defendants as improperly
joined.
Flagg argues – and the dissent agrees – that this case is distinguishable
from Melder and Holder because the administrative procedure under the
LMMA is not a “comprehensive” scheme designed to finally adjudicate a
plaintiff’s malpractice claim. We are not persuaded. Flagg has cited no
authority to support this argument. Indeed, with the exception of the panel
majority in this case, no court has ever adopted such a distinction, and for good
reason; a rule that requires courts to individually examine each state statutory
scheme to determine whether it is “comprehensive” and “adjudicative” is
neither administrable nor sensible. 31 Melder and Holder establish a bright-line
rule: if a statute requires the plaintiff to exhaust his administrative remedies
before filing suit, we enforce that statutory mandate as written. 32
31 See Hertz Corp. v. Friend, 559 U.S. 77, 79 (2010) (“[A]dministrative simplicity is a
major virtue in a jurisdictional statute.” (citing Sisson v. Ruby, 497 U.S. 358, 375 (1990)
(Scalia, J., concurring in the judgment))).
32 Indeed, when a federal statute requires exhaustion, the federal courts consistently
require plaintiffs to exhaust their claims before filing suit, and dismiss those claims that the
plaintiff has not exhausted. See, e.g., Jones v. Bock, 549 U.S. 199, 212 (2007) (holding that
unexhausted claims under the Prison Litigation Reform Act “cannot be brought in court”);
M.L. v. Indep. Sch. Dist., 451 F. App’x 424, 428 (5th Cir. 2011) (“Exhaustion is required so
long as a plaintiff is seeking some remedy under the IDEA.”); Harris v. Trustmark Nat’l Bank,
287 F. App’x 283, 288 (5th Cir. 2008) (explaining that “[a]n ERISA plaintiff must exhaust his
remedies before pursuing a claim in federal court”). Respect for state legislatures counsels in
favor of enforcing state exhaustion statutes just as we enforce federal exhaustion statutes.
The dissent argues that the above-cited cases are irrelevant because, under these
federal exhaustion schemes, failure to exhaust is an affirmative merits defense, not a
jurisdictional bar. The dissent suggests that district courts should not find improper joinder
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C.
Flagg also argues that the exhaustion issue is now moot because a
medical review panel issued an expert opinion regarding his claims on
September 17, 2015, over a year after Flagg initially sued the Medical
Defendants. This argument is meritless. As noted above, “[j]urisdictional facts
are determined at the time of removal, not by subsequent events.” 33 Flagg had
not completed the medical panel review process at the time the Manufacturing
Defendants removed the case. Thus, measuring the jurisdictional facts as they
existed at the time of removal, Flagg’s unexhausted claims against the Medical
Defendants were doomed to dismissal, and Flagg therefore had no possibility
of recovery against the Medical Defendants.
Furthermore, the Louisiana courts have squarely held that a plaintiff
must exhaust the medical panel review process before filing suit; even if the
plaintiff obtains an expert opinion after filing suit, the suit nevertheless
remains premature and the court must dismiss the suit without prejudice. 34
Thus, even though Flagg has now completed the medical review process, that
does not cure his failure to exhaust before filing this suit. The state court still
on the basis of an affirmative defense, even where, as here, the plaintiff concedes he failed to
exhaust his claims before filing suit.
This Court, following Smallwood’s direction, has consistently found improper joinder
where a non-jurisdictional affirmative defense (such as statute of limitations) conclusively
bars the plaintiff’s claims against the non-diverse defendant. See Boone v. Citigroup, Inc.,
416 F.3d 382, 391 (5th Cir. 2005) (holding that the “joinder of the non-diverse appellees was
improper” because plaintiff’s claims “against the non-diverse appellees [we]re conclusively
barred by the residual statute of limitations”); Bell v. Texaco, Inc., 493 F. App’x 587, 592 (5th
Cir. 2012) (holding that estate “was improperly joined” because “any potential claims against
the [e]state [we]re time-barred under the Mississippi statute of limitations applying to
trusts”).
Thus, it is irrelevant that LMMA’s exhaustion requirement does not create a
jurisdictional bar. The critical fact is that, under state law, Flagg had no reasonable
possibility of recovery on an unexhausted claim.
33 Am. Nat’l Prop. & Cas. Co., 746 F.3d at 635.
34 Brister v. S.W. La. Hosp. Ass’n, 624 So. 2d 970, 971 (La. Ct. App. 1993).
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would have been required to dismiss Flagg’s claims against the Medical
Defendants, so the Medical Defendants are improper defendants in this case.
IV.
In sum, the district court correctly concluded that Flagg improperly
joined the Medical Defendants because Flagg did not exhaust his claims as
required by statute against those parties. The district court therefore properly
dismissed the Medical Defendants from the case and exercised diversity
jurisdiction over Flagg’s remaining claims against the Manufacturing
Defendants. We therefore affirm that portion of the district court’s order.
Because the panel majority ordered the district court to remand this case
to state court, the panel did not address the district court’s ruling on the merits
of the Manufacturing Defendants’ Rule 12(b)(6) motion. We therefore return
the case back to the panel to review the district court’s order dismissing Flagg’s
claims against those defendants.
AFFIRMED in part and RETURNED to the panel for further
proceedings.
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HAYNES, Circuit Judge, joined by DENNIS, ELROD and GRAVES, Circuit
Judges, concurring and dissenting:
Our prior decision in Smallwood v. Illinois Central Railroad Co., 385
F.3d 568 (5th Cir. 2004) (en banc), has garnered much confusion and criticism. 1
Instead of clarity, the majority opinion unnecessarily adds yet another layer to
the already expansive view of Smallwood. Properly applied, the Smallwood
test would result in a conclusion that the federal courts lack jurisdiction over
this case. From the majority opinion’s determination that we have jurisdiction,
I respectfully dissent.
Under the improper joinder doctrine, a court should disregard the
citizenship of non-diverse defendants where “there is no reasonable basis for
predicting that the plaintiff might establish liability . . . against the in-state
defendant[s].” Badon v. R J R Nabisco Inc., 224 F.3d 382, 390 (5th Cir. 2000);
see Smallwood, 385 F.3d at 573. In other words, a defendant must
“demonstrate[] that there is no possibility of recovery by the plaintiff against
an in-state defendant.” Smallwood, 385 F.3d at 573. The Manufacturing
Defendants argue and the majority opinion agrees that the case against the
Medical Defendants is premature in light of what was then a still-pending
1 See, e.g., Walton v. Tower Loan of Miss., 338 F. Supp. 2d 691, 694 & n.2 (N.D. Miss.
2004) (criticizing Smallwood’s standard and stating that the division between the majority
opinion and dissenting opinions in Smallwood “puts district judges in a difficult position”
regarding the proper standards to apply); James M. Underwood, From Proxy to Principle:
Fraudulent Joinder Reconsidered, 69 ALB. L. REV. 1013, 1086, 1092–94 (2006) (criticizing our
approach as a “flawed” proxy that “fails to implement any underlying purpose behind federal
diversity jurisdiction” and which is “tantamount to authorizing federal courts to adjudicate
the merits of state law claims between nondiverse citizens”); Matthew J. Richardson,
Clarifying and Limiting Fraudulent Joinder, 58 FLA. L. REV. 119, 150–54, 165 (2006)
(criticizing our approach and arguing that “[f]raudulent joinder review should be more
limited in scope than it is in the Fifth Circuit, [which] applies the doctrine most expansively”).
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(since resolved) medical review panel proceeding and, therefore, there is “no
reasonable basis” to predict liability against the Medical Defendants.
The majority opinion correctly states that Louisiana has an
administrative scheme governing medical malpractice claims: the Louisiana
Medical Malpractice Act (“LMMA”). The LMMA governs claims for “any
unintentional tort or any breach of contract” brought against a qualified
“health care provider.” LA. REV. STAT. ANN. §§ 1231.1, 1231.8. The majority
opinion notes that the LMMA requires a plaintiff to submit a claim to a medical
review panel before bringing suit. Id. § 1231.8(B)(1)(a)(i) (“No action against a
health care provider covered by this Part . . . may be commenced in any court
before the claimant’s proposed complaint has been presented to a medical
review panel established pursuant to this Section.”).
Importantly, for our purposes, the panel’s “sole duty” is “to express its
expert opinion as to whether or not the evidence supports the conclusion that
the defendant or defendants acted or failed to act within the appropriate
standards of care,” by rendering one or more of three “expert opinions”:
(1) The evidence supports the conclusion that the defendant or
defendants failed to comply with the appropriate standard of care
as charged in the complaint.
(2) The evidence does not support the conclusion that the
defendant or defendants failed to meet the applicable standard of
care as charged in the complaint.
(3) That there is a material issue of fact, not requiring expert
opinion, bearing on liability for consideration by the court.
Id. § 1231.8(G).
Further, the parties can waive the medical review process in several
ways:
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1. Most simply, “[b]y agreement of all parties, the use of the medical
review panel may be waived.” Id. § 1231.8(B)(1)(c); see also
Delcambre v. Blood Sys., Inc., 893 So. 2d 23, 27 (La. 2005).
2. Parties may also bypass the panel review process if they have “validly
agreed” to submit the claims “to a lawfully binding arbitration
procedure.” LA. REV. STAT. ANN. § 1231.8(A)(1)(a).
3. If the parties or the medical review panel fail to appoint an attorney
chairperson and notify the medical review board within one year from
when the claim was filed, they have waived the use of the panel. Id.
§ 1231.8(A)(2)(c).
4. A lawsuit may proceed despite any claim before a medical review
panel if the panel fails to render a decision within one year of the
selection of the attorney chairperson, unless the parties receive a
court-ordered extension for good cause. Id. § 1231.8(B)(1)(b).
5. Additionally, a health care provider can circumvent the medical
review process by filing a lawsuit and challenging the claimant’s
malpractice claim as prescribed or for failure to state a claim under
Louisiana law. Id. § 1231.8(B)(2)(a)–(b) (noting defendants may
claim “no right of action” under Louisiana’s Code of Civil Procedure,
Article 927(6), or as prescribed by the statute of limitations for
medical malpractice in LA. REV. STAT. ANN. § 9:5628).
Against this backdrop, we examine whether Plaintiff Flagg had “no
possibility of recovery” against the Medical Defendants when he filed his
complaint in state court. Smallwood, 385 F.3d at 573. First, the face of the
complaint did not evidence any “failure to exhaust.” Absent a jurisdictional
nature to “failure to exhaust,” we treat such failures to exhaust as affirmative
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defenses, not jurisdictional prerequisites. 2 See, e.g., Young v. City of Houston,
906 F.2d 177, 180 (5th Cir. 1990) (holding that the plaintiff’s failure to first
exhaust remedies before the EEOC was not a jurisdictional prerequisite to suit
in federal court). 3 For example, in the context of the Prison Litigation Reform
Act, we have followed the Supreme Court’s guidance in Jones v. Bock, 549 U.S.
199, 212, 216 (2007), and held that exhaustion is an affirmative defense. See,
e.g., Cantwell v. Sterling, 788 F.3d 507, 508–09 (5th Cir. 2015); Coleman v.
Sweetin, 745 F.3d 756, 763 (5th Cir. 2014).
Similarly, Louisiana treats failure to comply with the LMMA as a
defensive issue, not a jurisdictional prerequisite. See Delcambre, 893 So. 2d at
27; Gele v. Binder, 904 So. 2d 836, 837–38 (La. Ct. App. 2005). This makes
particular sense here since the parties can waive the LMMA requirements. On
the face of the plaintiff’s pleading, then, there was nothing indicating “no
possibility of recovery” against the Manufacturing Defendants who were
alleged to have manufactured defective toe implants that the in-state Medical
2 The majority opinion suggests that its solution respects state legislatures by
treating federal and state exhaustion requirements similarly. See Majority Opinion at 10 &
n.29. However, the key question in a diversity case is whether exhaustion is a merits-based
affirmative defense or a jurisdictional prerequisite. In one of the cases cited by the majority
opinion, we recognized the difference between the affirmative defense of exhaustion and a
jurisdictional prerequisite and declined to dismiss the case for lack of jurisdiction. See M.L.
v. Frisco Indep. Sch. Dist., 451 F. App’x 424, 427 (5th Cir. 2011). The other case cited
dismissed an ERISA plaintiff’s suit for failure to exhaust remedies, without discussing
jurisdiction. See Harris v. Trustmark Nat’l Bank, 287 F. App’x 283, 288 (5th Cir. 2008). We
have refused to treat other statutory requirements as jurisdictional in the ERISA context
and would likely treat the failure to exhaust in the same way. See, e.g., Smith v. Reg’l Transit
Auth., 756 F.3d 340, 345–47 (5th Cir. 2014); ACS Recovery Servs., Inc. v. Griffin, 723 F.3d
518, 523 (5th Cir. 2013) (en banc).
3 Our court has sometimes inconsistently applied the rule that a failure to exhaust
under Title VII is not a jurisdictional issue, but under our rule of orderliness we are bound
to follow Young’s standard. See United States v. Alcantar, 733 F.3d 143, 145–46 (5th Cir.
2013). Recent Supreme Court precedent instructing us not to conflate the merits and
jurisdiction supports this approach. See, e.g., Arbaugh v. Y & H Corp., 546 U.S. 500, 513–16
(2006); see also Shapiro v. McManus, 136 S. Ct. 450, 455–56 (2015).
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Defendants improperly implanted. In other words, the pleadings showed a
garden-variety case against in-state and out-of-state defendants whose
separate allegedly tortious acts combined to cause a single harm to the
plaintiff.
Unusually for an en banc case, the majority opinion engages in a factual
analysis of the circumstances presented here and concludes that the district
court properly relied on Flagg’s concession in his motion to stay that he failed
to exhaust his medical malpractice claims before filing suit. In turn, the
majority opinion concludes that this case falls within the Rule 12(b)(6)-type
analysis approved by Smallwood. First, Smallwood described the “Rule
12(b)(6)-type analysis” as permitting courts to look “at the allegations of the
complaint to determine whether the complaint states a claim . . . .” Id. at 573
(emphasis added). Second, allowing courts to rely on concessions included in
motions filed in the federal district court poses more questions than it resolves.
Left unanswered is the future LMMA case when a plaintiff does not concede
anything by moving to remand. Thus, this en banc opinion really only answers
one question in one case.
The majority opinion also contends that it is appropriate to find improper
joinder based on a non-jurisdictional affirmative defense, like one involving the
statute of limitations. See Boone v. Citigroup, Inc., 416 F.3d 382, 392 (5th Cir.
2005). Certainly, since Smallwood allowed a “Rule 12(b)(6)-type analysis” and
piercing the pleadings, our court has allowed delving into such non-
jurisdictional affirmative defenses as part of the improper joinder inquiry. See
id.; Smallwood, 385 F.3d at 573. That does not mean this approach is correct
or easily administrable. In fact, the Supreme Court recently clarified that even
mandatory rules under state law are not jurisdictional unless those statutes
explicitly “speak in jurisdictional terms.” See V.L. v. E.L., 577 U.S. ___, ___ S.
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Ct. ____, No. 15-648, 2016 WL 854160, at *3 (Mar. 7, 2016) (per curiam). The
exhaustion requirement under the LMMA is not explicitly jurisdictional (to the
contrary it is not jurisdictional), just like the mandatory requirement the Court
rejected as non-jurisdictional in V.L. As an en banc court, we should clarify
the improper joinder doctrine and hew it more closely to the Supreme Court’s
instruction to avoid treating merits issues as jurisdictional. See, e.g., id.;
Arbaugh v. Y & H Corp., 546 U.S. 500, 513–16 (2006). Instead, the majority
opinion muddies the waters with numerous qualifiers and expands a standard
that does not fully respect our role as courts of limited jurisdiction.
Because nothing on the face of the complaint and nothing in the LMMA
show that there is “no possibility of recovery” against the in-state Medical
Defendants, the panel opinion properly found federal diversity jurisdiction
lacking. See Flagg v. Stryker Corp., 801 F.3d 456, 462–63 (5th Cir. 2015);
Smallwood, 385 F.3d at 573. The en banc majority opinion contends that the
panel opinion was not faithful to our decisions in Melder v. Allstate Corp., 404
F.3d 328 (5th Cir. 2005), and Holder v. Abbott Laboratories, Co., 444 F.3d 383
(5th Cir. 2006). Of course, the en banc court has the right to overrule prior
precedents of this court and should do so to the extent those precedents support
exercising jurisdiction here. But, as the panel opinion explained, it is not
necessary to overrule Melder and Holder to conclude that jurisdiction is lacking
here. See Flagg, 801 F.3d at 460–62.
Melder involved a comprehensive, adjudicative administrative process
to challenge rates before the Louisiana Insurance Rate Commission (“LIRC”),
which evaluates and pre-clears insurance rates after determining whether the
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rates are reasonable and not unfairly discriminatory. 4 404 F.3d at 330–32. We
repeatedly emphasized the comprehensiveness of the administrative scheme
that, in that case, would actually result in an adjudication of the plaintiffs’
claim. Id. Holder also involved a comprehensive adjudicatory scheme under
the National Childhood Vaccine Injury Act, which requires full judgment on
the merits by the United States Court of Federal Claims with appeal to the
Court of Appeals for the Federal Circuit. 444 F.3d at 387–89 (quoting 42 U.S.C.
§§ 300aa–33(5) & –11(a)(1)); see also 42 U.S.C. § 300aa–12(f).
All agree that the LMMA is not such a comprehensive administrative
scheme designed to adjudicate a plaintiff’s malpractice claims. It results only
in an expert opinion that is admissible in the subsequent lawsuit but not
binding on the parties or the court and not self-effectuating. See LA. REV.
STAT. ANN. § 1231.8(G), (H) (noting the “report of the expert opinion reached
by the medical review panel shall be admissible as evidence” in any subsequent
lawsuit, but “shall not be conclusive,” and that the panel has the “sole duty to
express its expert opinion” as to whether the applicable standards of care were
met). In other words, the medical review panel will not adjudicate Flagg’s
claim at all; it will simply provide evidentiary support for one side or the other.
See LA. REV. STAT. ANN. § 1231.8(H). The majority opinion finds this
distinction unpersuasive because no court has ever relied on it. 5 See Majority
Opinion at 9–10.
4 Additionally, the record did not show that the plaintiffs in Melder filed for
administrative remedies with LIRC at all, and the plaintiffs did not respond to the exhaustion
issue in their briefing, except to claim this court could not decide it. 404 F.3d at 332.
5 The majority opinion also claims this distinction is not easily administrable. Yet, it
is easy enough to see that the LMMA is not a comprehensive, adjudicative scheme.
Furthermore, if a bright-line, easily administrable standard is the goal, the majority opinion
does not approach it. It creates new exception-riddled rules based on the particular facts of
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The reason no other circuit has relied on this distinction is that no other
circuit has gone as far as the majority opinion here. 6 The trend is quite
different. The Supreme Court has instructed us not to conflate the merits of a
case and jurisdiction. See Arbaugh, 546 U.S. at 513–16; V.L., 2016 WL 854160,
at *3. Following that instruction, other circuits facing exhaustion defenses
have properly dealt with those defenses on the merits, rather than as a matter
of jurisdiction. See, e.g., Vazquez-Rivera v. Figueroa, 759 F.3d 44, 46–49 (1st
Cir. 2014); Hildebrand v. Allegheny Cty., 757 F.3d 99, 103–04, 111–13 (3d Cir.
2014), cert. denied, 135 S. Ct. 1398 (2015); Richter v. Advance Auto Parts, Inc.,
686 F.3d 847, 850–51 (8th Cir. 2012) 7; cf. Hunter v. Philip Morris USA, 582
F.3d 1039, 1045 (9th Cir. 2009) 8 (concluding no improper joinder occurred and
that it was error to maintain jurisdiction and dismiss the case based on a
this case, allows courts to use a Rule 12(b)(6)-type analysis that looks beyond the complaint
and may sometimes delve into the merits through a piercing of the pleadings—although we
have not clarified when such piercing is appropriate—and ignores the Supreme Court’s
recent guidance about clearly and cleanly separating jurisdictional issues from merits
defenses like exhaustion. See V.L., 2016 WL 854160, at *3; Arbaugh, 546 U.S. at 513–16. As
an en banc court, we have the authority and duty to clarify, even if it is necessary to overrule
prior precedent to the extent of any inconsistency.
6 See also Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 160–62 (2010); Steel Co. v.
Citizens for a Better Env’t, 523 U.S. 83, 89–90 (1998).
7 See also Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 393–95 (1982) (holding
deadlines for timely filing claims with the EEOC were not jurisdictional); Irwin v. Dep’t of
Veterans Affairs, 498 U.S. 89, 92–96 (1990) (holding a Title VII filing deadline was not
jurisdictional); Coke v. Gen. Adjustment Bureau, 640 F.2d 584, 588–89, 595 (5th Cir. 1981)
(en banc) (following a trend in Supreme Court decisions holding that the Title VII EEOC
filing deadline was not jurisdictional and holding that a 180-day notice requirement under
the Age Discrimination in Employment Act, 29 U.S.C. § 626(d)(1), was likewise not
jurisdictional).
8 The Ninth Circuit relied, in part, on Smallwood in arriving at this result, noting
language in Smallwood that distinguished between “an attack on the merits” of a plaintiff’s
case and other situations involving no possibility of recovery under state law. See 582 F.3d
at 1044–45 (quoting Smallwood, 385 F.3d at 574).
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“merits” defense of preemption). A few courts have stated this more plainly:
“[T]o determine the absence of jurisdiction is error when the ruling is based
upon an affirmative defense.” Holley Equip. Co. v. Credit All. Corp., 821 F.2d
1531, 1535 (11th Cir. 1987); Salis v. Am. Exp. Lines, 331 F. App’x 811, 814 (2d
Cir. 2009) (“The district court’s reliance on an affirmative defense to determine
that the amount in controversy was insufficient to support diversity
jurisdiction was improper.”). The decision to adjudicate an affirmative defense
that will (and did) evaporate over time under the guise of a jurisdictional
analysis is the result of our own court’s unnecessary expansion of Smallwood. 9
Nothing about the plaintiff’s pleadings or the LMMA shows that Flagg
has no possibility of recovery against the Medical Defendants. Indeed, we are
now at the point where the LMMA proceedings have concluded and Flagg has
sued the Medical Defendants in state court. While this reality might not
technically moot the argument regarding jurisdiction, it underscores that even
viewed at the time of removal, the “possibility of recovery” was very real and
has now come to the point where “recovery” will be judged on its merits. Thus,
even using the Smallwood approach of piercing the pleadings to peek at the
facts, see 385 F.3d at 573–74, we find no facts that negate recovery—only a
temporary hurdle, since cleared.
The LMMA scheme is not the kind of comprehensive administrative
scheme we have cited in allowing a district court to discount the citizenship of
non-diverse parties. The majority opinion greatly expands Smallwood and
9 We have struggled, in Smallwood and otherwise, to formulate a test to determine
whether any basis for relief exists on a non-diverse state-law claim. Formulating the proper
test is problematic, since the “judicially created doctrine” of improper joinder can involve
peeking into the merits of state-law claims in cases where the parties facially are not
completely diverse. See Murriel-Don Coal Co. v. Aspen Ins. UK Ltd., 790 F. Supp. 2d 590,
594–97 (E.D. Ky. 2011) (citation omitted).
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unnecessarily extends Melder and Holder beyond their stated reach to
encompass a non-adjudicative, non-comprehensive, waivable process since
concluded in this case. I respectfully dissent from the en banc court’s decision
that federal diversity jurisdiction exists here.
However, given that conclusion, I concur in the majority opinion’s
determination to remand the merits of the appeal from the Rule 12(b)(6)
dismissal to the original panel for determination.
22