Court Opinion

ID: 2719060
Source: CourtListenerOpinion
Date Created: 2014-08-19 21:00:34.690697+00
Date Added: 2024-06-11T12:39:23.051768
License: Public Domain

In the

         United States Court of Appeals
                        For the Seventh Circuit
                             ____________________  

Nos.  12-­‐‑3882  &  13-­‐‑2230  
BOB  MYRICK  and  CHARLOTTE  PHILLIPS,  
                                                                 Plaintiffs-­‐‑Appellants,  
                                              v.  

WELLPOINT,  INC.,  et  al.,  
                                                                Defendants-­‐‑Appellees.  
                             ____________________  

                Appeals  from  the  United  States  District  Court  
                          for  the  Southern  District  of  Illinois.  
              No.  10-­‐‑cv-­‐‑00357-­‐‑JPG-­‐‑SCW  —  J.  Phil  Gilbert,  Judge.  
                             ____________________  

        ARGUED  JANUARY  24,  2014  —  DECIDED  AUGUST  19,  2014  
                      ____________________  

        Before  BAUER,  EASTERBROOK,  and  WILLIAMS,  Circuit  Judg-­‐‑
es.  
    EASTERBROOK,   Circuit   Judge.   During   2001   the   insurance  
regulators  of  Illinois  permitted  WellPoint  (through  a  subsid-­‐‑
iary)   to   acquire   RightCHOICE   Managed   Care,   Inc.,   which  
offered   health   insurance   through   its   subsidiary   Right-­‐‑
CHOICE   Insurance   Company.   WellPoint   caused   Right-­‐‑
CHOICE   Insurance   to   withdraw   from   the   Illinois   market   in  
2002;  this  cancelled  all  RightCHOICE  policies.  WellPoint  of-­‐‑
2                                                  Nos.  12-­‐‑3882  &  13-­‐‑2230  

fered   the   policyholders   costlier   UniCare   policies   as   substi-­‐‑
tutes.   Persons   who   elected   not   to   pay   the   higher   premiums  
had  to  shop  for  policies  from  different  insurers,  which  usual-­‐‑
ly  declined  to  cover  pre-­‐‑existing  conditions.  Contending  that  
the   cancellation   of   RightCHOICE   policies   violated   Illinois  
law,   Greg   Cima   and   several   others   filed   suit   and   asked   the  
district   court   to   certify   a   class   of   all   former   RightCHOICE  
policyholders.   The   district   court   declined,   Cima   v.   WellPoint  
Health  Networks,  Inc.,  250  F.R.D.  374  (S.D.  Ill.  2008),  and  later  
entered   judgment   against   plaintiffs   on   the   merits,   Cima   v.  
WellPoint   Health   Networks,   Inc.,   2008   U.S.   Dist.   LEXIS   84882  
(S.D.  Ill.  Oct.  22,  2008).  No  one  appealed.  
     Because  Cima  had  not  been  certified  as  a  class  action,  the  
judgment  bound  only  the  named  plaintiffs.  The  law  firm  be-­‐‑
hind   Cima   found   another   set   of   former   policyholders   and  
filed   a   new   suit,   this   time   in   state   court,   making   the   same  
substantive  contentions  and  again  proposing  certification  as  
a  class  action.  The  federal  decision  not  to  certify  a  class  did  
not   prevent   state   courts   from   reaching   a   contrary   decision,  
see  Smith  v.  Bayer  Corp.,  131  S.  Ct.  2368  (2011),  but  the  federal  
decision   on   the   merits   remained.   Defendants   removed   the  
suit  under  28  U.S.C.  §1453,  part  of  the  Class  Action  Fairness  
Act.  Section  1453  incorporates  the  requirements  of  28  U.S.C.  
§1332(d),  which  makes  this  suit  removable  because  the  pro-­‐‑
posed  class  has  at  least  100  members,  the  amount  in  contro-­‐‑
versy  exceeds  $5  million,  and  at  least  one  class  member  has  a  
citizenship  different  from  at  least  one  defendant.  
   Plaintiffs  asked  the  district  judge  to  remand  the  suit  un-­‐‑
der   §1332(d)(4),   which   says   that   the   court   shall   “decline   to  
exercise”  the  jurisdiction  created  under  §1332(d)(2)  if  at  least  
two-­‐‑thirds  of  the  class’s  members  are  citizens  of  the  state  in  
Nos.  12-­‐‑3882  &  13-­‐‑2230                                                    3  

which  the  suit  began  and  at  least  one  defendant  from  which  
“significant  relief”  is  sought  is  a  citizen  of  the  same  state.  It  
is   agreed   that   the   complaint   seeks   “significant   relief”   from  
an   Illinois   defendant.   Plaintiffs   observed   that   the   Right-­‐‑
CHOICE  policy  was  offered  only  to  persons  who  represent-­‐‑
ed  that  they  live  in  Illinois  (or,  for  group  policies,  to  employ-­‐‑
ers   who   represented   that   most   beneficiaries   live   in   Illinois).  
The   policies   were   cancelled   in   2002,   and   plaintiffs   main-­‐‑
tained  that,  if  their  former  holders  left  Illinois  at  the  normal  
rate  (the  Census  Bureau  estimates  that  roughly  2%  of  the  na-­‐‑
tion’s  population  changes  states  each  year),  about  87%  of  the  
class   would   have   been   Illinois   residents   when   the   suit   was  
removed.   But   the   district   judge   denied   the   motion   to   re-­‐‑
mand.  Phillips  v.  WellPoint,  Inc.,  2010  U.S.  Dist.  LEXIS  123844  
(S.D.   Ill.   Nov.   23,   2010).   It   then   again   declined   to   certify   a  
class,   Phillips   v.   WellPoint,   Inc.,   2012   U.S.   Dist.   LEXIS   147736  
(S.D.  Ill.  Oct.  15,  2012),  and  again  ruled  in  defendants’  favor  
on  the  merits,  Phillips  v.  WellPoint,  Inc.,  2012  U.S.  Dist.  LEXIS  
175405  (S.D.  Ill.  Dec.  10,  2012).  This  time  appeals  have  been  
taken:   by   plaintiff   Bob   Myrick   concerning   all   issues   and   by  
plaintiff   Charlotte   Phillips   concerning   the   district   court’s  
award  of  costs.  
    When  deciding  that  the  suit  belongs  in  federal  court,  the  
district  judge  noted  that  the  policies  were  issued  to  persons  
who   represented   that   they   “reside”   in   Illinois,   while  
§1332(d)(4)  deals  with  the  class  members’  “citizenship”.  For  
purposes   of   the   diversity   jurisdiction,   citizenship   differs  
from   residence.   Citizenship   means   domicile   (the   person’s  
long-­‐‑term  plan  for  a  state  of  habitation)  rather  than  just  cur-­‐‑
rent  residence.  See  In  re  Sprint  Nextel  Corp.,  593  F.3d  669  (7th  
Cir.   2010)   (distinguishing   residence   from   citizenship   for   the  
purpose  of  §1332(d)(4)).  What’s  more,  people  who  said  they  
4                                                  Nos.  12-­‐‑3882  &  13-­‐‑2230  

resided  in  Illinois  might  have  meant  something  else;  perhaps  
some   who   lived   in   Indiana   but   worked   in   Illinois   bought  
RightCHOICE   policies.   And   for   the   purpose   of   §1332(d)(4)  
employers   that   purchased   group   plans   have   their   own   citi-­‐‑
zenships,   which   may   be   distinct   from   the   residence   of   the  
policies’   beneficiaries.   Group   policies   also   covered   persons  
who   lived   outside   of   Illinois,   if   employers   represented   that  
most   workers   lived   inside.   The   district   judge   thought   that  
plaintiffs   had   failed   to   establish   the   exception   to   federal   ju-­‐‑
risdiction  under  §1332(d)(2).  
     It  is  not  clear  from  the  statute  which  side  has  the  burden  
of   persuasion   under   §1332(d)(4),   but   Hart   v.   FedEx   Ground  
Package  System,  Inc.,  457  F.3d  675  (7th  Cir.  2006),  holds  that  it  
belongs   to   the   party   relying   on   the   home-­‐‑state   exception.   It  
follows   that   the   party   proposing   that   the   district   court   “de-­‐‑
cline   to   exercise”   jurisdiction   that   was   properly   invoked   at  
the  time  of  removal  also  has  the  burden  of  production.  The  
jurisdictional   rules   are   those   in   §1332(d)(2);   the   “decline   to  
exercise”   clause   of   §1332(d)(4),   like   the   local-­‐‑law-­‐‑remand  
provision   in   28   U.S.C.   §1367(c),   concerns   whether   the   court  
exercises  jurisdiction  to  the  full,  not  whether  jurisdiction  ex-­‐‑
ists.  See  Morrison  v.  YTB  International,  Inc.,  649  F.3d  533  (7th  
Cir.  2011).  This  makes  it  a  party-­‐‑driven  rather  than  a  court-­‐‑
driven  rule.  Judges  must  enforce  limits  on  subject-­‐‑matter  ju-­‐‑
risdiction   no   matter   what   the   litigants   do   or   concede,   but  
other  case-­‐‑processing  rules  may  be  waived  or  forfeited,  and  
judges   may   wait   for   issues   to   be   properly   presented.   See,  
e.g.,  Gonzalez  v.  Thaler,  132  S.  Ct.  641  (2012);  Reed  Elsevier,  Inc.  
v.  Muchnick,  559  U.S.  154  (2010).  So  plaintiffs  needed  to  pro-­‐‑
duce  some  evidence  that  would  allow  the  court  to  determine  
the  class  members’  citizenships  on  the  date  the  case  was  re-­‐‑
moved.  Yet  they  produced  none.  
Nos.  12-­‐‑3882  &  13-­‐‑2230                                                   5  

     Instead   plaintiffs   pointed   to   the   policies’   language   and  
asked   the   court   to   infer   that   (a)   because   coverage   under   in-­‐‑
dividual   policies   was   supposed   to   be   restricted   to   residents  
of  Illinois,  it  was  so  restricted  in  fact;  (b)  all  residents  of  Illi-­‐‑
nois  also  are  citizens  of  Illinois;  (c)  holders  of  RightCHOICE  
policies  were  no  more  likely  to  move  than  average  citizens  of  
every  state;  and  (d)  employers  purchasing  group  policies  all  
are   citizens   of   Illinois,   even   though   the   policies   do   not   re-­‐‑
strict   the   location   of   employers   (that   is,   California   or   Wis-­‐‑
consin   firms   could   purchase   RightCHOICE   policies   for  
workers  at  their  facilities  in  Illinois).  These  propositions  may  
or  may  not  be  right,  but  plaintiffs  did  not  offer  any  evidence  
to  support  them.  
     In   a   supplemental   memorandum   filed   after   oral   argu-­‐‑
ment,  plaintiffs  contended  that  proving  the  citizenship  of  all  
class   members   is   simply   too   expensive,   so   proof   should   be  
excused.  Lawyers  who  launch  class  actions  are  not  in  a  good  
position   to   complain   about   the   expenses   they   entail;   plain-­‐‑
tiffs  and  their  counsel  must  be  prepared  to  meet  them  or  be  
deemed   inadequate   representatives.   Cf.   Eisen   v.   Carlisle   &  
Jacquelin,   417   U.S.   156   (1974)   (the   cost   of   notifying   all   class  
members  does  not  justify  foregoing  notice  or  shifting  the  ex-­‐‑
pense  to  the  defendants).  
    Not  that  it  would  have  been  prohibitively  costly  to  offer  
evidence.  Counsel  for  the  proposed  class  assumed  that  there  
were   only   two   options:   determine   the   citizenship   of   every  
policyholder  (expensive)  or  rely  on  assumptions  (cheap).  But  
there’s   at   least   one   more   option:   take   a   random   sample   of  
policyholders   (100,   say),   ascertain   the   citizenship   of   each   of  
these   on   the   date   the   case   was   removed,   and   extrapolate   to  
the   class   as   a   whole.   If   the   sample   yields   a   lopsided   result  
6                                                     Nos.  12-­‐‑3882  &  13-­‐‑2230  

(say,   90%   Illinois   citizens   or   only   50%   Illinois   citizens)   then  
the   outcome   is   clear   without   the   need   for   more   evidence.  
(The  more  lopsided  the  result,  the  smaller  the  sample  need-­‐‑
ed  to  achieve  statistical  significance.)  If  the  result  is  close  to  
the   statutory   two-­‐‑thirds   line,   then   do   more   sampling   and  
hire  a  statistician  to  ensure  that  the  larger  sample  produces  a  
reliable  result.  Nothing  of  the  kind  was  done,  however,  and  
on   an   empty   record   the   district   court   was   entitled   to   con-­‐‑
clude  that  §1332(d)(4)  has  not  been  satisfied.  
      We   skip   over   the   question   whether   the   plaintiffs   could  
have  met  the  requirements  for  class  certification  under  Fed.  
R.  Civ.  P.  23,  because  counsel’s  insouciance  toward  the  need  
for  proof  of  the  class  members’  citizenship  is  only  one  illus-­‐‑
tration  of  plaintiffs’  (and  counsel’s)  inadequacy  as  represent-­‐‑
atives.  The  very  fact  that  counsel  have  asked  us  to  direct  the  
district   court   to   certify   this   suit   as   a   class   action   is   another.  
Plaintiffs  have  already  lost  on  the  merits;  that  counsel  want  
to   take   the   rest   of   the   putative   class   down   in   flames   with  
them  shows  what  a  slapdash  approach  they  have  adopted  to  
this  litigation.  
    We  could  understand  a  contention  that,  if  we  first  reverse  
on  the  merits  (or  at  least  remand  for  a  trial),  then  we  should  
direct  the  district  judge  to  certify  a  class.  But  class  counsel’s  
brief   maintains   that   a   class   should   be   certified   no   matter  
what  happens  on  the  merits.  (Counsel  receded  from  this  po-­‐‑
sition  at  oral  argument,  but  only  after  initially  defending  it.)  
When  writing  the  brief,  counsel  seems  to  have  forgotten  that,  
had  a  class  been  certified  in  Cima,  this  suit  could  never  have  
been   filed.   Now   that   the   district   court   has   (again)   ruled   for  
WellPoint   on   the   merits,   we   would   have   expected   defend-­‐‑
ants   to   become   the   proponents   of   class   certification,   which  
Nos.  12-­‐‑3882  &  13-­‐‑2230                                                   7  

would   make   a   third   suit   impossible.   Defendants   appear   to  
be   content   with   the   precedential   effect   of   an   appellate   deci-­‐‑
sion,  however,  and  it  is  unclear  why  that  wouldn’t  do  nicely  
for  the  putative  class  as  well  if  plaintiffs  prevail  in  this  court.  
No  more  need  be  said  about  Rule  23.  
    As   for   the   merits:   the   district   court   has   covered   them   in  
detail,   more   than   twice.   (Both   Cima   and   this   suit   produced  
multiple   opinions   on   different   substantive   issues,   each   time  
followed  by  opinions  dealing  with  requests  for  reconsidera-­‐‑
tion.)  We  have  nothing  to  add  to  what  the  district  judge  has  
written  and  affirm  substantially  for  the  reasons  he  gave.  
     In   brief:   (1)   A   claim   that   WellPoint   misrepresented   its  
plans   to   state   insurance   regulators   when   acquiring   Right-­‐‑
CHOICE  may  entitle  the  regulators  to  seek  redress,  but  they  
have  not  expressed  any  dissatisfaction;  private  litigants  can-­‐‑
not  enforce  state  regulators’  entitlements.  (2)  Because  Right-­‐‑
CHOICE  was  losing  money  in  2001,  it  is  unlikely  that  the  ac-­‐‑
quisition   (or   a   statement   made   to   an   agency)   was   the   cause  
of  the  policy’s  discontinuation  or  its  replacement  by  a  differ-­‐‑
ent  policy  with  a  higher  premium.  (3)  The  Illinois  Health  In-­‐‑
surance   Portability   and   Accountability   Act   (HIPAA)   cannot  
be  enforced  by  a  private  suit  when  there  are  other  public  or  
private   means   to   implement   its   terms.   Abbasi   v.   Paraskevou-­‐‑
lakos,   187   Ill.   2d   386   (1999);   Fisher   v.   Lexington   Health   Care,  
Inc.,   188   Ill.   2d   455   (1999).   Since   the   RightCHOICE   policies  
contained   HIPAA’s   substantive   terms   almost   verbatim,   en-­‐‑
forcing   the   contract   suffices.   (4)   Plaintiffs   now   concede   that  
as  a  matter  of  contract  RightCHOICE  Insurance  was  entitled  
to  withdraw  from  the  Illinois  market  and  cancel  existing  pol-­‐‑
icies.  HIPAA’s  language  about  withdrawal  and  cancellation,  
8                                                   Nos.  12-­‐‑3882  &  13-­‐‑2230  

215   ILCS   97/50(B)(3),   (C),   is   materially   identical   to   the   poli-­‐‑
cies  in  this  respect,  so  HIPAA  has  not  been  violated.  
    The  only  remaining  question  concerns  costs.  Defendants  
submitted  a  bill  of  costs  running  to  about  $96,000;  the  district  
court  awarded  about  $39,000.  Phillips  v.  WellPoint,  Inc.,  2013  
U.S.  Dist.  LEXIS  69830  (S.D.  Ill.  May  16,  2013).  Appellants  do  
not   contend   that   any   of   the   awarded   costs   was   improper  
under   28   U.S.C.   §1920   or   that   defendants   needlessly   ran   up  
the  costs  in  this  suit.  Instead  they  maintain  that,  because  de-­‐‑
fendants’  conduct  in  replacing  the  RightCHOICE  policy  with  
the  more  expensive  UniCare  policy  was  “reprehensible”,  the  
losing  side  should  not  have  to  pay  costs.  Yet  Fed.  R.  Civ.  P.  
54(d)(1)  creates  a  presumption  in  favor  of  awarding  costs  to  
the  prevailing  party.  The  district  court  did  not  abuse  its  dis-­‐‑
cretion  in  implementing  that  presumption.  
     Plaintiffs   demanded   many   million   dollars;   a   high-­‐‑stakes  
suit  does  not  come  cheap  to  either  side.  Despite  losing  Cima,  
the   law   firm   tried   again   in   the   hope   that   a   different   forum  
would   produce   a   different   answer.   After   finding   itself   back  
in  the  original  forum  and  before  the  judge  who  had  decided  
Cima,   the   law   firm   did   not   economize.   It   could   have   asked  
the  district  court  to  enter  the  same  opinion  as  in  Cima  in  or-­‐‑
der  to  set  up  an  appeal;  instead  it  launched  a  new  round  of  
discovery  and  proceeded  to  litigate  as  if  Cima  did  not  exist.  
No  wonder  the  defendants  incurred  substantial  costs.  
     Law   firms   representing   would-­‐‑be   class   representatives  
have  portfolios  of  suits.  Some  will  be  settled  for  considerable  
sums;   others   will   fail.   Paying   the   costs   of   failure   is   part   of  
being  in  this  business.  See  Rand  v.  Monsanto  Co.,  926  F.2d  596  
(7th   Cir.   1991)   (observing   that   class   counsel   properly   agree  
to   bear   the   costs   of   suit,   rather   than   leaving   them   with   the  
Nos.  12-­‐‑3882  &  13-­‐‑2230                                              9  

figurehead   representatives);   see   also   White   v.   Sundstrand  
Corp.,  256  F.3d  580,  586  (7th  Cir.  2001).  Counsel  should  thank  
their  lucky  stars  that  the  district  court  did  not  sanction  them  
under   28   U.S.C.   §1927   for   filing   a   second   suit   rather   than  
pursuing  the  first  through  appeal.  
                                                                  AFFIRMED