Law

Similarly unsatisfying is the apparently definitive resolution of the decades-long, back-and-forth removal/remand issue concerning Louisiana’s peculiar statutory scheme for medical malpractice actions (called the “LMMA”) and whether non-diverse medical malpractice defendants:  (1) are “fraudulently joined” or (2) are properly joined and thus defeat diversity.  The recent Fifth Circuit opinion in Flagg v. Stryker Corp., ­___ F.3d ___, 2015 WL 5193378 (5th Cir. Sept. 4, 2015), chose door number two.  No fraudulent joinder, and thus remand for lack of federal jurisdiction.

Some of our readers may remember the comprehensive post we did on the (then) state of Louisiana law on this issue in May of last year.  That post described the issue at some length, with more citations than you can shake a stick at, so we’ll only sketch the outlines of the issue here.  The LMMA (§40:1299.47(B)(1)(a)(I)) outright forbids suing health care providers before a malpractice claim is evaluated by a medical review panel.  Some plaintiffs do anyway, in violation of the statute, and defendants have argued, with considerable success, that such joinder of in-state defendants should be ignored precisely because it violated the statutory prohibition.

Although, the LMMA had been around for decades, the Fifth Circuit had never – until last week – ruled directly on the question.  In Flagg a 2-1 majority found for the other side, despite acknowledging that the joinder violated state procedural law.  2015 WL 5193378, at *1 (“[d]espite the provisions in that statute requiring review as a prerequisite to suit, [plaintiff] sued the Medical Defendants and the Manufacturing Defendants in Louisiana state court”) (citation and quotation marks omitted).

Plaintiff’s litigation strategy didn’t exactly didn’t exactly cover itself in glory.  According to the Fifth Circuit’s description, plaintiff didn’t challenge the removal, and after losing on the merits, didn’t raise the issue on appeal either.  Nonetheless, “subject-matter jurisdiction cannot be waived, so [the court of appeals] requested supplemental briefing on this issue.”  Id.  That’s important, because after Flagg other similarly situated plaintiffs are free to mount similarly belated jurisdictional challenges.

The Fifth Circuit applied this fraudulent joinder standard:  “a court should disregard the citizenship of non-diverse defendants where there is no reasonable basis for predicting that the plaintiff might establish liability.”  Id.  Examining the LMMA, Flagg recognized the split in opinion that we discussed in our 2014 post.  On the one hand:

As we discussed in 2014, Flagg observed that the pro-removal side began getting the better of the argument “[a]fter our decisions in Melder v. Allstate Corp., 404 F.3d 328, 331–32 (5th Cir. 2005), and Holder v. Abbott Laboratories, Co., 444 F.3d 383, 387–89 (5th Cir. 2006).”  Flagg, 2015 WL 5193378, at *3.  However, the majority in Flagg “conclude[d] . . . that these cases do not reach as broadly as the Manufacturing Defendants contend.”  Id.  Those cases both involved “comprehensive” administrative schemes that would result in “adjudication of the plaintiffs’ claim.”  Id.

The Louisiana statute, by contrast, didn’t measure up to the comprehensiveness” of those in Melder and Holder:

The moral of the story is that, by violating the Louisiana statute and improperly joining the defendant under state law, under Flagg, the plaintiff is nonetheless rewarded with a substantial federal procedural advantage requiring remand of the case.  Perhaps the result would be different if future defendants obtained dismissals in state court before removing (one of the scenarios covered in our 2014 post), but given the rationale Flagg employed, we can’t be sure of that, either.

That’s pretty much the point that the dissent made – that federal courts should not let plaintiffs get away with ignoring and violating state law:

As much as we might agree with the dissent that the majority engaged in hair-splitting and employed retroactive distinctions without differences, the majority result in Flagg is what it is.  Henceforth, improperly joined Louisiana medical malpractice defendants nevertheless defeat diversity, so any removal on that basis is now asking for trouble – both immediately and down the line.

Finally, what’s worse is that “henceforth” isn’t all that’s at issue.  Subject matter jurisdiction can’t be waived, or else the plaintiff in Flagg would have done so.  That means that any case currently in federal court that was originally removed on the basis of prematurity under the Louisiana malpractice statute is a zombie – as in “walking dead.”  Because they are jurisdictionally infirm after Flagg, they are subject to remand at any time, with the resultant loss of most (if not all) of the legal time and effort invested in the federal litigation.  That means, after Flagg plaintiffs in such cases can take a second bite at any litigation-related apple with which they might be dissatisfied, simply by torching subject matter juristidiction.  Defendants in Louisiana, be forewarned.