Curtis et al v. Providence Health & Services et al

WO IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
WILLIAM CURTIS, M.D., and PEDRO )
VALDES, M.D., )
)
Plaintiffs, )
)
vs. )
)
PROVIDENCE HEALTH & SERVICES, )
PROVIDENCE HEALTH & SERVICES- )
WASHINGTON, and BRUCE LAMOUREUX, )
) No. 3:18-cv-0281-HRH
Defendants. )
_______________________________________)
O R D E R
Motion to Remand
Plaintiffs move to remand this matter to state court.1 This motion is opposed.2 Oral
argument was not requested and is not deemed necessary.
Background
Plaintiffs are William Curtis, M.D., and Pedro Valdes, M.D., both of whom are
alleged to be citizens of Alaska.3 Defendants are Providence Health & Services (PH&S),
1Docket No. 13.
2Docket No. 14.
3Amended Complaint at 1, ¶¶ 1-2, Exhibit A, Notice of Removal, Docket No. 1.
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Providence Health & Services - Washington (PH&S-Washington), and Bruce Lamoureux.
PH&S is alleged to be “a Washington non-profit corporation whose principal place of
business is Anchorage, Alaska.”4 PH&S-Washington is alleged to be “a Washington non-
profit corporation whose principal place of business is Anchorage, Alaska.”5 Lamoureux is
alleged to be “the Alaska Regional Chief Executive of” PH&S-Washington and “a citizen
of Alaska[.]”6
Plaintiffs are cardiothoracic surgeons who had medical staff privileges at Providence
Alaska Medical Center (PAMC).7 Plaintiffs allege that PAMC is owned and operated by
PH&S-Washington and that PH&S is PH&S-Washington’s “principal or sole ‘member.’”8
Plaintiffs allege that in August 2016, PAMC completed a review of its cardiothoracic
program, which revealed some coverage issues due to the small number of cardiothoracic
surgeons with privileges at PAMC.9 In response, plaintiffs proposed hiring a third
cardiothoracic surgeon “if PAMC would guarantee a salary for the third surgeon, making up
4Id. at ¶ 3.
5Id. at 2, ¶ 4.
6Id. at ¶ 5.
7Id. at 3, ¶¶ 13-14, 16.
8Id. at 2, ¶ 7. “PH&S is a holding company. . . .” Declaration of John D. Whipple
[etc.] at 2, ¶ 3, Exhibit C at 2, Notice of Removal, Docket No. 1.
9Amended Complaint at 4-5, ¶¶ 24-25, Exhibit A, Notice of Removal, Docket No. 1.
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any shortfall in revenue between collections and $1.5 million, if such a shortfall occurred.”10
Plaintiffs allege that “PAMC did not respond to [their] proposal.”11
Instead, plaintiffs allege that PAMC was pursuing an exclusive contract with Starr-
Wood Cardiac Group of Portland, P.C.12 Plaintiffs allege that “Starr-Wood sought to affiliate
with [them], but the arrangement proposed by Starr-Wood would have made them
subordinate to Starr-Wood and given Starr-Wood the power to exclude them from PAMC
at any time.”13 Plaintiffs allege that they “rejected Starr-Wood’s proposal.”14
Plaintiffs allege that on May 22, 2017,
Lamoureux wrote that he was disappointed to learn that [they]
had not been able to reach mutually acceptable terms under
which they would join with Starr-Wood. The letter stated:
“[s]hould PAMC’s negotiations with Starr-Wood or a Starr-
Wood-affiliated entity end successfully, only surgeons affiliated
with the contracting entity will have related privileges at
PAMC.”15
Plaintiffs allege that
[o]n June 1, 2018, PAMC wrote to [them] that PAMC had
entered into an exclusive agreement for CT services and notified
10Id. at 5, ¶ 25.
11Id.
12Id. at ¶ 27.
13Id. at ¶ 29.
14Id.
15Id. at 5-6, ¶ 30.
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them that their clinical privileges to perform cardiac and
thoracic surgery services at [PAMC] would automatically
terminate on the ‘CT Start Date’ unless they became employees
of NorthStar Cardiothoracic Surgery, LLC, Starr-Wood’s
contracting subsidiary.[16]
Plaintiffs allege that PAMC later informed them that their privileges would terminate on
September 4, 2018.17
Plaintiffs commenced this action on September 4, 2018. In their original complaint,
plaintiffs only asserted claims against PH&S. On October 4, 2018, PH&S-Washington
removed the matter to this court.18 Plaintiffs moved to remand, and on November 8, 2017,
this court granted plaintiffs’ motion to remand because the case had been improperly
removed by a non-party.19 Upon remand, plaintiffs filed an amended complaint. In their
amended complaint, they assert an antitrust claim against PH&S, a breach of contract claim
that appears to be asserted against PH&S-Washington, a breach of implied covenant of good
faith and fair dealing claim against PH&S-Washington, a breach of the Alaska Unfair Trade
Practices Act claim against PH&S-Washington, an intentional interference with prospective
economic advantage claim against PH&S-Washington and Lamoureux, and a piercing the
corporate veil claim.
16Id. at 6, ¶ 31.
17Id. at ¶ 33.
18Exhibit B at 18, Notice of Removal, Docket No. 1.
19Order re Motion to Remand at 6, Docket No. 16, Case No. 3:18-cv-0233-HRH.
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On December 6, 2018, PH&S-Washington again removed the action to this court on
the basis of diversity jurisdiction. PH&S and Lamoureux consent to and join in the
removal.20
Pursuant to 28 U.S.C. § 1447(c), plaintiffs now move to remand this matter to state
court on the grounds that diversity jurisdiction does not exist because Lamoureux and PH&S-
Washington are both citizens of Alaska.21
Discussion
Section 1447(c) provides, in relevant part, that “[i]f at any time before final judgment
it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”
“A federal court has [diversity] jurisdiction over the underlying dispute if the suit is between
citizens of different states, and the amount in controversy exceeds $75,000 exclusive of
interest and costs. . . .” Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. Lhotka, 599
F.3d 1102, 1106 (9th Cir. 2010). Here, there is no dispute that the amount in controversy has
been met. The dispute here is whether “the suit is between citizens of different states[.]” Id.
“[I]n a case that has been removed from state court to federal court under 28 U.S.C.
§ 1441 on the basis of diversity jurisdiction,” such as this one, “the proponent of federal
jurisdiction—typically the defendant in the substantive dispute—has the burden to prove, by
a preponderance of the evidence, that removal is proper.” Id. at 1106-07. “The preponder-
20Docket Nos. 5 and 6.
21Although plaintiffs have alleged that PH&S’s principal place of business is in
Alaska, plaintiffs do not argue in the instant motion that PH&S is a citizen of Alaska.
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ance of the evidence standard applies because removal jurisdiction ousts state-court
jurisdiction and ‘must be rejected if there is any doubt as to the right of removal in the first
instance.’” Id. at 1107 (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992)).
“This gives rise to a ‘strong presumption against removal jurisdiction [which] means that the
defendant always has the burden of establishing that removal is proper.’” Id. (quoting Gaus,
980 F.2d at 566). “For these reasons, ‘[the court] strictly construe[s] the removal statute
against removal jurisdiction.’” Id. (quoting Gaus, 980 F.2d at 566). Although “a plaintiff
seeking remand has the burden to prove that an express exception to removal exists[,]”
Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008), “any
doubt about the right of removal requires resolution in favor of remand.” Moore-Thomas v.
Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009).
“Diversity removal requires complete diversity, meaning that each plaintiff must be
of a different citizenship from each defendant.” Grancare, LLC v. Thrower by and through
Mills, 889 F.3d 543, 548 (9th Cir. 2018). There is no dispute that plaintiffs and Lamoureux
are all citizens of Alaska. But “[i]n determining whether there is complete diversity, district
courts may disregard the citizenship of a non-diverse defendant who has been fraudulently
joined.” Id. PH&S-Washington contends that Lamoureux has been fraudulently joined.
“There are two ways to establish fraudulent joinder: ‘(1) actual fraud in the pleading
of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the
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non-diverse party in state court.’” Id. (quoting Hunter v. Philip Morris USA, 582 F.3d 1039,
1044 (9th Cir. 2009)). PH&S-Washington relies on the second way here.
“Fraudulent joinder is established the second way if a defendant shows that an
‘individual[] joined in the action cannot be liable on any theory.’” Id. (quoting Ritchey v.
Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998)). “But ‘if there is a possibility that
a state court would find that the complaint states a cause of action against any of the resident
defendants, the federal court must find that the joinder was proper and remand the case to the
state court.’” Id. (quoting Hunter, 582 F.3d at 1046). “A defendant invoking federal court
diversity jurisdiction on the basis of fraudulent joinder bears a ‘heavy burden’ since there is
a ‘general presumption against [finding] fraudulent joinder.’” Id. (quoting Hunter, 582 F.3d
at 1046).
“[T]he test for fraudulent joinder and for failure to state a claim under Rule 12(b)(6)
are not equivalent.” Id. at 549. “A claim against a defendant may fail under Rule 12(b)(6),
but that defendant has not necessarily been fraudulently joined.” Id. “[A] federal court must
find that a defendant was properly joined and remand the case to state court if there is a
‘possibility that a state court would find that the complaint states a cause of action against
any of the [non-diverse] defendants.’” Id. (quoting Hunter, 582 F.3d at 1046). “If a
plaintiff’s complaint can withstand a Rule 12(b)(6) motion with respect to a particular
defendant, it necessarily follows that the defendant has not been fraudulently joined.” Id. at
550. “But the reverse is not true. If [a plaintiff’s complaint] cannot withstand a Rule
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12(b)(6) motion, the fraudulent [joinder] inquiry does not end there.” Id. “[T]he district
court must consider . . . whether a deficiency in the complaint can possibly be cured by
granting the plaintiff leave to amend.” Id.
PH&S Washington first argues that plaintiffs’ claim against Lamoureux cannot
withstand a Rule 12(b)(6) motion, and contrary to plaintiffs’ contention, the Rule 12(b)(6)
standard is not irrelevant to the fraudulent joinder analysis. The court may consider whether
plaintiffs have stated a plausible intentional interference with prospective economic
advantage claim against Lamoureux. If they have, then “it necessarily follows that”
Lamoureux “has not been fraudulently joined.” Id. If they have not, then the court must
consider whether they could “possibly” cure this deficiency by amending their complaint.
Id.
“‘To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its face.’”
Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)). “A claim is facially plausible ‘when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.’” Id. (quoting Iqbal, 556 U.S. at 678).
To establish a claim for tortious interference with a prospective
business opportunity, a plaintiff must show: (1) an existing
prospective business relationship between it and a third party;
(2) defendant’s knowledge of the relationship and intent to
prevent its fruition; (3) failure of the prospective relationship to
culminate in pecuniary benefit to the plaintiff; (4) conduct of the
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defendant interfering with the prospective relationship; (5)
damages caused by the defendant; and (6) absence of privilege
or justification for the defendant’s conduct.
K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 717 (Alaska 2003). PH&S-
Washington does not dispute that plaintiffs have plausibly alleged that they had a prospective
business relationship with PAMC, that Lamoureux knew about their prospective business
relationship with PAMC, that their prospective business relationship with PAMC did not
culminate in pecuniary benefit to them, and that they suffered damages. PH&S-Washington
does, however, dispute that plaintiffs have plausibly alleged that Lamoureux interfered with
plaintiffs’ prospective business relationship with PAMC and that they have plausibly alleged
that Lamoureux’s interference was not privileged or justified.
As to Lamoureux’s interference, plaintiffs argue that they have alleged that
Lamoureux interfered with their prospective business relationship with PAMC in the form
of the May 22, 2017 letter. But, the May 22, 2017 letter did not interfere with plaintiffs’
prospective business relationship with PAMC, primarily because Lamoureux did not actually
terminate plaintiffs’ privileges in the May 22, 2017 letter. Rather, plaintiffs allege that it was
not until June 2018, almost one year later, that PAMC informed them that their privileges
would be terminated as of September 4, 2018.22
Plaintiffs argue that it is of no import that it was not Lamoureux who terminated their
staff privileges. This is so, according to plaintiffs, because in the May 22, 2017 letter
22Amended Complaint at 6, ¶¶ 31-33, Exhibit A, Notice of Removal, Docket No. 10.
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Lamoureux stated that their privileges would be terminated if they did not enter into an
agreement with Starr-Wood, and that is exactly what happened when they declined to enter
into such an agreement.
But all Lamoureux did in the May 22, 2017 letter was express his disappointment that
plaintiffs were unable to “reach mutually-acceptable terms and conditions for provision of
cardiothoracic professional services” at PAMC with Starr-Wood and explain that if PAMC
were to reach an agreement with Starr-Wood “only surgeons affiliated with” Starr-Wood or
an affiliated entity would “have related privileges at PAMC.”23 The May 22, 2017 letter
could not plausibly be viewed as interfering conduct because the PAMC Medical Staff
Credentials Policy provides that PAMC “may enter into contracts or arrangements with
practitioners and/or groups of practitioners for the performance of clinical and administrative
services at” PAMC.24 The Policy further provides that if such a “contract or arrangement
confers the exclusive right to perform specified services to one or more practitioners or
groups of practitioners” then “no other practitioner except those authorized by or pursuant
to the contract or arrangement may exercise clinical privileges to perform the specified
services while the contract . . . is in effect.”25 In the May 22, 2017 letter, Lamoureux was
23May 22, 2017 Letter, Exhibit A, Plaintiffs’ Second Motion to Remand, Docket No.
13.
24Exhibit B at 24, Declaration of Sheri Kelly in Support of Motion to Dismiss, Docket
No. 10.
25Id.
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merely reminding plaintiffs of these provisions, to which they may have been subject as
members of the medical staff.26
But even if plaintiffs have plausibly alleged that Lamoureux interfered with their
prospective business relationship with PAMC, which they have not, plaintiffs still have not
stated a plausible intentional interference claim against Lamoureux because his alleged
interference was privileged or justified. “[T]he essential question in determining if
interference is justified is whether the person’s conduct is motivated by a desire to protect
his economic interest, or whether it is motivated by spite, malice, or some other improper
objective.’” Kinzel v. Discovery Drilling, Inc., 93 P.3d 427, 444 (Alaska 2004) (quoting
RAN Corp. v. Hudesman, 823 P.2d 646, 649 (Alaska 1991)). An agent is “privileged to
interfere . . . only if [he] acted to protect [the principal’s] best interests.” Geolar, Inc. v.
Gilbert/Common-wealth Inc. of Mich, 874 P.2d 937, 941 (Alaska 1994); see also, St.
Joseph’s Regional Health Center v. Munos, 934 S.W.2d 192, 196 (Ark. 1996) (“[i]t is well
settled that a party to a contract, and its agents acting in the scope of their authority, cannot
be held liable for interfering with the party’s own contract”).
Plaintiffs have not alleged that Lamoureux was acting outside the scope of his
employment. Rather, plaintiffs allege that Lamoureux was “the Alaska Regional Chief
26Plaintiffs allege that they were not subject to these provisions of the Credentials
Policy because these provisions were added to the policy after they obtained their medical
privileges at PAMC. Amended Complaint at 4, ¶¶ 19-20, Exhibit A, Notice of Removal,
Docket No. 1. However, the Medical Staff bylaws provide for amendment of the Credentials
Policy. Medical Staff Bylaws at § 8.B, Exhibit A at 30, Kelly Declaration, Docket No. 10.
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Executive of” PH&S-Washington27 and that he wrote the May 22, 2017 letter, in which he
indicated that “he was disappointed to learn that Drs. Valdes and Curtis had not been able
to reach mutually acceptable terms under which they would join Starr-Wood” and reminded
them that only surgeons affiliated with Starr-Wood would have privileges if PAMC signed
a contract with Starr-Wood.28 These allegations, coupled with the fact that the May 22, 2017
letter was written on PAMC letterhead, establish that Lamoureux was acting within the scope
of his employment, that he was acting on behalf of PAMC. It would not be reasonable to
infer from plaintiffs’ allegations and the May 22, 2017 letter that Lamoureux was acting
outside the scope of his employment. The only reasonable inference that can be drawn is that
Lamoureux was working to protect PAMC’s interests, which would mean that his conduct
was privileged or justified.
Plaintiffs, however, argue that it is of no import that Lamoureux may have been acting
within the scope of his employment because under Alaska law, in some instances “the breach
of contract is also a tort. . . .” Restatement (Second) of Contracts § 355 (1981). Plaintiffs
argue that this means that Lamoureux could be held liable for intentional interference even
though he was working at PAMC when the interference took place. But, this argument makes
no sense because plaintiffs have not alleged a breach of contract claim against Lamoureux
27Amended Complaint at 2, ¶ 5, Exhibit A, Notice of Removal, Docket No. 10.
28Id. at 5-6, ¶ 30.
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nor do they explain how the alleged breach of contract claim they assert against PH&S-
Washington could give rise to separate tort liability for Lamoureux.
Plaintiffs next argue that a court could infer that Lamoureux had an improper motive
because he was pressuring plaintiffs to sign an agreement with Starr-Wood, an agreement
which plaintiffs allege would have violated antitrust laws. They argue that it is plausible that
Lamoureux was working to strengthen the competitive position of Starr-Wood, PAMC’s
exclusive contractor, and thus exert more control over cardiothoracic surgery in the
Anchorage hospital market. But, it would not be reasonable to infer that Lamoureux was
working on Starr-Wood’s behalf. There are no allegations in plaintiffs’ amended complaint
to support such an inference.
Plaintiffs also seem to be suggesting that because Lamoureux had no direct financial
interest in their prospective business relationship with PAMC, it is plausible that he was
acting for an improper purpose. See RAN Corp., 823 P.2d at 648 (“where an actor has a
direct financial interest, he is privileged to interfere with a contract for economic reasons, but
not where he is motivated by spite, malice, or some other improper objective”). But, this
argument misses the mark because while a direct financial interest will give rise to a
privilege, an agent need not have a personal economic interest in order for the agent’s
conduct on behalf of the principal to be privileged.
Plaintiffs’ intentional interference claim also seems to be based on allegations that
Lamoureux interfered with their prospective business relationship with future patients. But
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such a claim is not plausible because as discussed above, the May 22, 2017 letter cannot be
viewed as conduct that would constitute interference and this is the only conduct plaintiffs
allege by Lamoureux.
Plaintiffs have not stated a plausible claim for intentional interference with
prospective economic advantage against Lamoureux. This claim would not withstand a Rule
12(b)(6) motion to dismiss. But, does not necessarily mean that Lamoureux has been
fraudulently joined. The court must consider whether plaintiffs could amend their complaint
to state such a claim against Lamoureux. If there is any possibility that they could, then
Lamoureux has not been fraudulently joined. But, if the deficiency cannot “possibly be
cured”, then Lamoureux has been fraudulently joined. Grancare, 889 F.3d at 550.
There is no possibility that plaintiffs could amend their complaint to state a viable
claim against Lamoureux. In order to state a viable intentional interference with prospective
economic advantage claim against Lamoureux, plaintiffs would have to plead that
Lamoureux did something other than write the May 22, 2017 letter. If plaintiffs were aware
of other conduct by Lamoureux that could constitute interference, then surely they would
have included it in their amended state court complaint or argued in the instant motion that
they had additional factual support for their claim against Lamoureux. Similarly, if they had
facts to support an allegation that Lamoureux was acting with an improper objective or that
he was acting for some entity other than PAMC, surely they would have included those facts
in their amended state court complaint or argued in the instant motion that they had
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additional factual support for their claim against Lamoureux. It is not sufficient for plaintiffs
to argue that there is a possibility that they could amend their complaint to state a plausible
intentional interference claim against Lamoureux or that it is possible that a state court might
find they could state such a claim against Lamoureux. If a plaintiff could simply assert that
it is possible that he might be able to state a viable claim against a non-diverse defendant, no
defendant would ever be found to be fraudulently joined. There must be some basis for
finding that there is a possibility that plaintiffs could amend their complaint to state a viable
claim against Lamoureux. Here, there is no such basis. Thus, Lamoureux has been
fraudulently joined and his citizenship may be disregarded for purposes of determining
whether the court has diversity jurisdiction.
Plaintiffs next argue that this matter should be remanded because PH&S-Washington
is a citizen of Alaska. “For purposes of determining diversity jurisdiction, ‘a corporation
shall be deemed to be a citizen of every State . . . by which it has been incorporated and of
the State . . . where it has its principal place of business.’” 3123 SMB LLC v. Horn, 880
F.3d 461, 462–63 (9th Cir. 2018) (quoting 28 U.S.C. § 1332(c)(1)). Plaintiffs allege that
PH&S-Washington’s “principal place of business is Anchorage, Alaska.”29 PH&S-
Washington, however, argues that its principal place of business is in Washington.
“[T]he Supreme Court has defined ‘principal place of business’ to mean ‘the place
29Amended Complaint at 2, ¶ 4, Exhibit A, Notice of Removal, Docket No. 1.
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where the corporation’s high level officers direct, control, and coordinate the corporation’s
activities.’” Id. at 463 (quoting Hertz Corp. v. Friend, 559 U.S. 77, 80 (2010)).
Under th[is] “nerve center” test, a corporation’s principal place
of business “should normally be the place where the corporation
maintains its headquarters – provided that the headquarters is the
actual center of direction, control, and coordination . . . and not
simply an office where the corporation holds its board meetings
(for example, attended by directors and officers who have
traveled there for the occasion).”
Id. at 465 (quoting Hertz, 559 U.S. at 93).
PH&S-Washington offers the declaration of John D. Whipple, who is Deputy General
Counsel for PH&S-Washington,30 in support of its contention that its nerve center is in
Washington. Whipple avers that PH&S-Washington’s “principal place of business [is]
located at 1801 Lind Avenue, SW, Renton, Washington.”31 Whipple avers that PH&S-
Washington’s
leadership provide[s] direction, control and coordination of
corporate activities, including activities for Providence Alaska
Medical Center. The officers of PH&S-WA, including Presi-
dent Mike Butler, Treasurer Venkat Bhamidipati, Assistant
Treasurer Jo Ann Escasa-Haigh, and Chief Legal Officer Cindy
Strauss, are based in Renton, Washington. PH&S-WA’s legal
and financial, and administrative offices, which are responsible
for, among other things, human resources, management, and
communications, are located in Washington.[32]
30Whipple Declaration at 1, ¶ 1, Exhibit C, Notice of Removal, Docket No. 1.
31Id. at 2, ¶ 4.
32Id. at 3, ¶ 5.
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Plaintiffs argue that Whipple’s averments are conclusory and thus are insufficient to
establish that PH&S-Washington’s nerve center is in Washington. Plaintiffs argue that
Whipple has provided no details as to how decisions are made, what role is played by the
management structure in Alaska, or the level of control that the Washington officers have as
to functions in Alaska.
Whipple’s declaration is sufficient to establish that PH&S-Washington’s nerve center
is in Washington. Whipple’s declaration establishes that PH&S-Washington’s corporate
headquarters are in Renton, Washington; that its corporate leadership is in Washington; and
that its legal, financial, and administrative offices are in Washington. And, Whipple’s
declaration establishes that PH&S-Washington’s operations in Washington are substantially
greater than its operations in Alaska, in that it owns and operates eight hospitals in
Washington, as opposed to two in Alaska.33 Because its nerve center is in Washington,
PH&S-Washington cannot be a citizen of Alaska.
Conclusion
Based on the foregoing, plaintiffs’ motion to remand is denied.34
DATED at Anchorage, Alaska, this 12th day of February, 2019.
/s/ H. Russel Holland
United States District Judge
33Id. at 3-4, ¶¶ 6, 9.
34Because the motion to remand is denied, the court need not consider plaintiffs’
request for fees and costs pursuant to 28 U.S.C. § 1447(c).
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