Health Care Service Corporation v. Albertsons Companies, LLC

Background

Health Care Service Corporation, Blue Cross and Blue Shield of Minnesota, and HMO Minnesota sued Albertsons Companies, Inc., Safeway, Inc., and SuperValu, Inc. The plaintiffs alleged that the defendants used discount programs to conceal lower prices offered to cash-paying customers while reporting higher “Usual and Customary” prices to health insurance plans, resulting in allegedly inflated prescription-drug reimbursements. The plaintiffs asserted six state-law claims.

The plaintiffs filed the case in Dakota County District Court. The defendants removed it to federal court based on diversity jurisdiction, which permits federal jurisdiction when the amount in controversy exceeds $75,000 and no plaintiff shares state citizenship with any defendant. The plaintiffs moved to remand, meaning to return the case to state court. The defendants moved to dismiss.

Complete Diversity

The court held that complete diversity did not exist because the Minnesota plaintiffs and SuperValu were citizens of Minnesota. The amount-in-controversy requirement was satisfied because the plaintiffs alleged millions of dollars in damages, but the absence of complete diversity meant the federal court lacked subject-matter jurisdiction.

Fraudulent Misjoinder

The defendants argued that the court should disregard SuperValu’s citizenship because SuperValu was fraudulently misjoined. Fraudulent misjoinder is a proposed exception to complete diversity that can apply when parties have no reasonable procedural basis for being joined under Federal Rule of Civil Procedure 20. The court assumed, without deciding, that the doctrine could apply.

The court concluded that the claims against SuperValu, Albertsons, and Safeway were properly joined. The alleged schemes involved similar pharmacy-pricing practices, similar discount programs, and the same pharmacy benefits manager. The court found common questions of fact concerning how the programs concealed prices and how the alleged overcharges occurred. It also found common questions of law because the plaintiffs asserted the same types of claims against each defendant.

The defendants also argued that the claims brought by the two Minnesota plaintiffs were fraudulently misjoined with Health Care Service Corporation’s claims. The court rejected that argument because all three plaintiffs alleged harm from the same series of transactions, asserted the same six counts against each defendant, and presented related legal and factual questions. The court concluded that the plaintiffs were properly joined.

Rule 21 Request

The defendants alternatively asked the court to use Federal Rule of Civil Procedure 21 to sever or dismiss the nondiverse parties and preserve federal jurisdiction. Rule 21 allows a court, on appropriate terms, to add or drop a party or sever a claim. The court declined to do so, finding that the parties and claims were properly joined and that the defendants had not provided a good reason to remove a nondiverse party merely to create federal jurisdiction.

Disposition

The court held that it lacked subject-matter jurisdiction because complete diversity was absent. It granted the plaintiffs’ motion to remand and remanded the case to Dakota County District Court, First Judicial District. In light of that ruling, the court declined to address the defendants’ motions to dismiss.