Flagg v. Stryker Corp.

¶4HAYNES, Circuit Judge:

¶5In this case, which was removed from state court, Kale Flagg (“Flagg”) appeals the dismissal of his complaint against Stryker Corporation (“Stryker”) and Memometal Incorporated (“Memome-tal”) (collectively, the “Manufacturing Defendants”), and five fictitious insurance companies.1 We conclude that the district court lacked jurisdiction to decide this case and, therefore, without regard to its merits, we VACATE the district court’s judgment and REMAND this case to the district court to remand to state court.

¶6I.

¶7Although we do not review the merits of the decision below, some background facts are helpful for understanding the jurisdictional determination. Flagg had surgery on his foot, utilizing the services of Dr. Denise Elliot, West Jefferson Medical Center, and the Foot and Ankle Center (collectively, “Medical Defendants”) to implant a device manufactured by the Manufacturing Defendants.2 He contends that the actions of both sets of defendants combined to cause him pain and necessitated further surgeries to correct problems caused by the Medical Defendants’ alleged negligence and the Manufacturing Defendants’ allegedly faulty device. Consistent with La.Rev.Stat. Ann. § 40:1299.47(B)(l)(a)(i), Flagg filed a medical malpractice complaint before a medical review panel. Despite the provisions in that statute requiring review as a prerequisite to suit, one week later, Flagg sued the Medical Defendants and the Manufacturing Defendants in Louisiana state court.

¶8Although all of the Medical Defendants and Flagg as plaintiff were citizens of Louisiana, the Manufacturing Defendants removed the case on the basis of diversity jurisdiction. The Manufacturing Defendants alleged that they were citizens of other states and that the Medical Defendants were improperly joined such that their non-diverse citizenship could be dis*458counted.3 The district court implicitly agreed when it assumed jurisdiction over the case. It dismissed the Medical Defendants due to prematurity of the case against them and as improperly joined due to that prematurity. It ultimately resolved the case against Flagg on the merits, granting the defendants’ motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).

¶9Flagg appealed, but failed to challenge the district court’s jurisdiction. Nonetheless, subject-matter jurisdiction cannot be waived, so we requested supplemental briefing on this issue. We now conclude that the district court should not have discounted the citizenship of the Medical Defendants and that the court lacked diversity jurisdiction.

¶10II.

¶11Under 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^].” Badon v. R J R Nabisco Inc., 224 F.3d 382, 390 (5th Cir.2000). The Manufacturing Defendants argue that the case against the Medical Defendants is premature in light of the still-pending medical review panel proceeding and, therefore, there is “no reasonable basis” to predict liability against the Medical Defendants. Flagg argues unconvincingly that his case against the Medical Defendants is not a medical malpractice case at all. In the district court, he argued that the case should be stayed until the medical review panel is concluded, at which time it should be remanded.

¶12We begin with an examination of the Louisiana Medical Malpractice Act (“LMMA”). The LMMA governs claims for “any unintentional tort or breach of contract” brought against a qualified “health care provider.” La.Rev.Stat. Ann. §§ 40:1299.41, 40:1299.47. The Act requires a plaintiff to submit a claim to a medical review panel before bringing suit. Id.§ 40:1299.47(B)(l)(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.”). The Supreme Court of Louisiana has interpreted this provision to mean that a malpractice complaint against a covered health care provider should be dismissed without prejudice if it is filed “prior to submission of the complaint to a medical review panel and [before] the panel has rendered its expert opinion on the merits of the complaint, unless this requirement is waived by the parties’ agreement.” Delcambre v. Blood Sys., Inc., 893 So.2d 23, 27 (La.2005); see also Gele v. Binder, 904 So.2d 836, 838 (La.Ct.App.2005); Brister v. Sw. La. Hosp. Ass’n, 624 So.2d 970, 971-72 (La.Ct.App.1993).

¶13Medical review panels “consist of three health care providers who hold unlimited licenses to practice their profession in Louisiana and one attorney.” La.Rev.Stat. Ann. § 40:1299.47(0). The attorney serves as an advisory chairperson of the panel and has no voting power. Id.§ 40:1299.47(C)(l)(b)(2). The parties submit written evidence to the panel and, with the consent of two members of the panel, may subpoena documentary evidence or deposition testimony for submission. Id.§ 40:1299.47(D). The panel may solicit its own evidence, and the parties have the right to convene the panel for questioning at an informal meeting before any report *459is issued. Id.§ 40:1299.47(E)-(F). 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 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.

¶14Id.§ 40:1299.47(G).

¶15The LMMA also contains some provisions meant to regulate the timeliness of the process. First, an attorney chairman for the medical review panel is supposed to be appointed within one year from the date on which a request for review is filed. Id.§ 40:1299.47(A)(2)(c). If this does not happen within nine months of the initial filing, the board charged with overseeing this process is supposed to “send notice to the parties by certified or registered mail that the claim will be dismissed in ninety days unless an attorney chairman is appointed within one year from the date the request for review of the claim was filed.” Id.Following that notice, if an attorney chairperson is not appointed and noticed within that first year, the claim is dismissed and the parties are deemed to have waived the use of the medical review panel. Id.After an attorney chairman is selected, an opinion should be rendered within one year, or else “suit may be instituted”; “[h]owever, either party may petition a court of competent jurisdiction for an order extending the twelve month period ... for good cause shown.” Id.§ 40:1299.47(B)(l)(b). If the parties obtain an extension and no opinion is rendered within that time, “the medical review panel established to review the claimant’s complaint shall be dissolved.” Id.Finally, “[t]he filing of a request for a medical review panel shall suspend the time within which suit must be filed until ninety days after the claim has been dismissed” or the panel has been dissolved. Id.§§ 40:1299.47(A)(2)(c), (B)(3).

¶16We have not previously addressed the interaction of the LMMA with diversity jurisdiction. In the past, district courts have diverged in their views. Some of those courts have found that the LMMA requires the presentation or exhaustion of administrative remedies before an LMMA claim is ripe to be heard in federal court. These cases dismiss non-diverse defendants as improperly joined and allow plaintiffs’ claims against diverse defendants to proceed in federal court. See, e.g., Silvestrini v. Intuitive Surgical, Inc., No. 11-2704, 2012 WL 380283, at *5 (E.D.La. Feb. 6, 2012) (collecting cases for the proposition that federal courts “have denied remand when a plaintiff has failed to present malpractice claims against a non-diverse defendant to a medical review panel because the courts have found that such non-diverse defendants were improperly joined”).4

¶17*460Not all federal district courts have followed this logic. Some courts have reasoned that just because a claim is procedurally premature under Louisiana law does not mean “there is no reasonable basis for predicting that plaintiffs might establish liability ... against the in-state defendants.” Badon, 224 F.3d at 393 (emphasis added) (stating the standard for improper joinder); Erdey v. Am. Honda Co., 96 F.R.D. 593, 596-97 (M.D.La.1988) (“The court therefore concludes that the original petition, although premature, nevertheless stated a cause of action against the medical defendants. Thus they were not fraudulently joined....”). On this side of the issue, many courts found no improper joinder of non-diverse defendants when a plaintiffs claims were premature under La.Rev.Stat. ANN. § 40:1299.47. See, e.g., Erdey, 96 F.R.D. at 596-97;5see also Doe v. Cutter Biological, 774 F.Supp. 1001, 1004-05 (E.D.La.1991) (reasoning that “[t]he key inquiry to a claim of fraudulent joinder is whether the plaintiff made the nondiverse party a defendant under a claim theory that has substantive merit,” and holding the medical defendants “mist[ook] procedure for substance” in arguing that medical defendants were improperly joined because Louisiana law barred a state suit against them).

¶18After our decisions in Melder v. Allstate Corp., 404 F.3d 328, 331-32 (5th Cir.2005) and Holder v. Abbott Laboratories, Inc., 444 F.3d 383, 387-89 (5th Cir.2006), district courts began to conclude that LMMA defendants should be treated as improperly joined when the review board has not yet issued its opinion. See, e.g., Fontenot v. Johnson & Johnson, No. 10-162, 2010 WL 2541187, at *6-10 (W.D.La. Apr. 30, 2010), report and recommendation adopted, No. 10-162, 2010 WL 2541178 (W.D.La. June 17, 2010). We conclude, however, that these cases do not reach as broadly as the Manufacturing Defendants contend.

¶19In Melder v. Allstate Corp., we found plaintiffs bringing claims related to insurance rate-making could not “seek judicial relief until after they ha[d] exhausted their administrative remedies” with the Louisiana Insurance Rate Commission (“LIRC”). 404 F.3d at 332. The plaintiffs sued LIRC, a non-diverse defendant, but this court affirmed the district court’s dismissal of LIRC as improperly joined. Id. at 330, 332. Since plaintiffs had comprehensive administrative remedies to challenge rates before LIRC and LIRC closely controlled and approved all insurance rates, this court enforced Louisiana’s requirement that plaintiffs exhaust administrative remedies before bringing suit.6Id. 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.7 In *461Holder v. Abbott Laboratories, Inc.,' we found that a non-diverse defendant physician was properly dismissed as improperly joined because the plaintiffs had not exhausted remedies under the National Childhood Vaccine Injury Act. 444 F.3d at 387-89 (quoting 42 U.S.C. §§ 300aa-33(5) & -33(ll)(a)(l)). The plaintiffs conceded that they had riot filed a petition with the United States Court of Federal Claims, as the statute explicitly required, before bringing suit in state or federal court. Id. at 388. Again, that case involved a comprehensive (federal) statute that provided for adjudication of the plaintiffs’ claim.

¶20By contrast, the LMMA is not a comprehensive administrative scheme designed to adjudicate a plaintiffs malpractice claims. The net result of the process is an expert opinion admissible in a subsequent lawsuit, but not a decision in and of itself. See _ La.Rev.Stat. Ann. § 40:1299.47(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). Thus, a plaintiff who obtains a positive opinion from the medical review board must still file suit and have the claim adjudicated; it is the same for the defendants who have not received anything akin to a final administrative decision and therefore are not “finished,” subject only to appeal, once the review ig complete.8 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. § 40:1299.47(H).

¶21Further, the completion of the process is not always a prerequisite to filing suit. The parties can waive the medical review process in several ways. Most simply, “[b]y agreement of all parties, the use of *462the medical review panel may be waived.” Id.§ 40:1299.47(B)(1)(c); see also Delcambre, 893 So.2d at 27. Parties may also bypass the panel review process if they have “validly agreed” to submit the claims “to a lawfully binding arbitration procedure.” Id.§ 40:1299.47(A)(l)(a). 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.§ 40:1299.47(A)(2)(e). As we have noted, 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.§ 40:1299.47(B)(l)(b). 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.§ 40:1299.47(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). Thus, this procedure is quite different from the comprehensive administrative adjudicatory schemes examined in our prior cases.

¶22Far from demonstrating that there is “no reasonable basis” on which the Medical Defendants could be held liable ultimately in this case, the Manufacturing Defendants indirectly pointed the finger at the Medical Defendants in their arguments about res ipsa loquitur. Indeed, based on the Manufacturing Defendants’ arguments, the district court rejected Flagg’s attempt to invoke “res ipsa loquitur,” observing that the doctrine is not applicable “[w]hen reasonable hypotheses as to other causes of the plaintiffs injuries remain.” Flagg v. Elliot, No. 2:14-CV-852, 2014 WL 3715127, at *6 (E.D.La. June 16, 2014) (citation omitted).

¶23This situation highlights another problem with concluding the Medical Defendants are improperly joined in this case: it could lead to piecemeal litigation and potentially inconsistent results. The Medical Defendants and the Manufacturing Defendants are clearly properly joined parties in this case under Federal Rule of Civil Procedure 20. All of these defendants are alleged to have combined to cause a single harm to Flagg — pain and further surgeries. The two groups are thus properly tried in the same lawsuit, as Flagg sought to do.

¶24III.

¶25The 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. We conclude that the fact that the medical review panel apparently still has yet to issue its opinion9 does not negate any “reasonable basis for predicting that plaintiffs might establish liability ... against the in-state defendants.” Badon, 224 F.3d at 393. Thus, while the case against the Medical Defendants may be premature, they are not “improperly joined” within the meaning of the case law.10 Accordingly, we VACATE the judg*463ment of the district court and REMAND the ease to the federal district court to remand the case to state court.

¶36W. EUGENE DAVIS, Circuit Judge,

¶37dissenting:

¶38The majority holds that this case should be remanded to state court even though the non-diverse party cannot be sued under the state statute creating the cause of action. I disagree and dissent.

¶39As the majority opinion reflects, Mr. Flagg brought suit in state court against both the manufacturer of a toe implant and the medical providers who performed the implant. The manufacturing defendants were diverse' while the medical provider defendants were not diverse. Flagg sued the manufacturers for products liability and the medical provider defendants for malpractice.

¶40Under Louisiana Revised Statute § 40:1299.47 (LMMA), which provides a cause of action against health care providers for malpractice, a patient cannot sue that provider until his case is presented to an administrative panel.1 Louisiana courts consistently support the plain language of the LMMA and hold no suit is available on plaintiffs claim until it is exhausted by the medical review panel.2

¶41The primary question here is whether a plaintiffs unexhausted claim against a non-diverse defendant should be disregarded as improperly joined for purposes of determining diversity jurisdiction. The majority refused to dismiss this suit against the medical providers and retain the action against the manufacturing defendants.

¶42Smallwood v. Illinois Central Railroad Co. formulated the standard for improper joinder. Improper joinder applies when a plaintiff is unable to maintain a cause of action against the non-diverse party.3 If there is no possibility of recovery against the non-diverse party, the plaintiff cannot maintain an action against it.4

¶43In Melder v. Allstate, 404 F.3d 328 (5th Cir.2005), and Holder v. Abbott Labs., 444 F.3d 383 (5th Cir.2006), we held that plaintiffs’ unexhausted claims under statutes other than the LMMA had no possibility of recovery, and therefore, they were improperly joined. Furthermore we dismissed the suits against defendants who were the subject of unexhausted claims.5Melder *464and Holder also demonstrate that determination of whether a cause of action exists is made at the time of removal.6 Following our decisions in Melder and Holder, all of the federal district courts in Louisiana presented with the question applied a bright line, rule to medical malpractice suits: if the claim is not exhausted, that action is improperly joined and the medical provider is dismissed and disregarded for purposes of diversity jurisdiction.7

¶44The majority takes the position that these cases are distinguishable because the administrative bodies in Melder and Holder were authorized to resolve the disputes presented by litigants, whereas the LMMA panel hears evidence and arguments and then issues an opinion on whether malpractice occurred. The LMMA opinion, while not binding, is admissible at a later trial as highly probative evidence.8

¶45' The majority does not explain why this distinction is significant for determining whether a plaintiff can bring suit under the LMMA. We did not condition our holding in Melder and Holder on such a consideration; and, we have never considered such a distinction relevant under Title VII.9

¶46Under Title VII, an employee asserting a claim of employment discrimination against an employer must file a charge with the EEOC.10 The EEOC then must be given an opportunity to investigate the charge and, if reasonable cause exists, mediate the dispute.11 Employees cannot sue until this process is exhausted and the EEOC issues a right-to-sue letter.12

¶47The EEOC has no authority to resolve disputes by rendering a binding decision.13 Instead it can only determine whether reasonable cause exists and conciliate the dispute, issue a right to sue letter, or file suit itself.14 But even though the EEOC has no authority to resolve disputes, our courts require employees to exhaust their claim.15 Critically, a plaintiff suing without exhaustion of the claim with the EEOC suffers dismissal of his suit as required by Title VII.16

¶48I cannot endorse a rule 'that enforces the requirement imposed by a federal statute *465requiring dismissal of an unexhausted claim, yet refuse to enforce the same requirement in a state statute.

¶49The majority also distinguishes Melder and Holder arguing that those administrative bodies acted under a much more comprehensive scheme. In my view, this difference is insignificant for our purposes. The sole issue is whether a plaintiff can demonstrate that he has a viable action against a non-diverse defendant at the time the action is removed. We should have a bright line rule: when the statute creating a cause of action requires exhaustion with an administrative agency before suit can be filed, a plaintiff cannot maintain an action in court on the unexhausted claim. Such an action should be dismissed, and the defendants disregarded for diversity jurisdiction purposes.17

¶50Under the majority’s rule, courts would be required to evaluate the comprehensiveness of the administrative scheme in each new statute along with the adjudicative authority of the administrative body. District courts would be required to determine on which side of the line the administrative scheme falls. This is not a sensible approach. To the contrary, we should respect the judgement of the state on how it chooses to structure its administrative scheme. So long as the state determines that no suit may be filed on a cause of action until exhaustion, we should follow that directive.

¶51Finally, the majority’s concern based on judicial efficiency considerations for split-, ting the products liability and medical malpractice cases is overblown. If the district court in this case dismisses the non-diverse medical provider parties as improperly joined, nothing prevents it from staying the products action pending the medical review panel’s opinion. Then, if the plaintiff decides to forgo his malpractice claim, the district court can resolve the products case. However, if the plaintiff joins the malpractice case with the pending products case, then the district court will remand the entire case for a single trial.

¶52For these reasons, I respectfully dissent.