Cardinal Health, Inc. v. National Union Fire Insurance Co. of Pittsburgh

CARDINAL HEALTH, INC., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant.

No. 20-cv-05854

United States District Court, S.D. Ohio, Eastern Division

July 28, 2021

Chelsey M. Vascura, Magistrate Judge

OPINION AND ORDER

EDMUND A. SARGUS, JR. UNITED STATES DISTRICT JUDGE

On December 10, 2020, Plaintiff filed a Motion to Remand (ECF No. 17), to which Defendant responded in opposition (ECF No 24), and Plaintiff replied (ECF No. 25). On June 7, 2021, the Magistrate Judge issued a Report and Recommendation in which she recommended that Plaintiff's Motion to Remand be granted. (ECF No. 27.) On June 21, 2021, Defendant timely filed an Objection (ECF No. 28) and on July 6, 2021 Plaintiff filed a Response to the Objection (ECF No. 29). Defendant then filed a Motion for Leave to File a Limited Reply in Support if its Objection to the Magistrate Judge's Report and Recommendation to Remand to State Court Instanter. For the reasons that follow, the Court GRANTS Defendant's Request to File a Reply Instanter and OVERRULES Defendant's Objection.

I.

This case arises from an insurance coverage dispute. Plaintiff, Cardinal Health, Inc., on behalf of itself and its insured subsidiaries and affiliates named in underlying lawsuits stemming from the national opioid epidemic, including Cardinal Health 110, LLC (collectively “Cardinal Health”), filed a declaratory judgment action in an Ohio state court against its insurer, Defendant National Union Fire Insurance Company of Pittsburgh, PA (“National Union”). Cardinal Health seeks contract determinations and declarations concerning the insurance obligations of National Union for the defense and/or defense costs of underlying opioid lawsuits. National Union removed this state declaratory action to this Court (ECF No. 1) pursuant to 28 U.S.C. § 1441, on the basis of diversity jurisdiction, thereby asking the Court to proceed under the Declaratory Judgment Act, 28 U.S.C. § 2201.

A. Background

The Magistrate Judge accurately set forth the background of this dispute, which the Court reiterates here. Cardinal Health, Inc. is a publicly-traded Ohio corporation headquartered in Franklin County, Ohio. Plaintiff's wholly-owned subsidiary, Cardinal Health 110, LLC, distributes wholesale pharmaceutical products, including prescription opioid medications, to licensed and registered pharmacies. National Union is a Pennsylvania corporation with its principal place of business in New York. National Union issued multiple commercial umbrella insurance policies to Cardinal Health covering the period of June 30, 1999, through June 30, 2004 (the “Policies”).

At present, more than 3, 000 lawsuits have been filed in federal and state courts across the country against companies, including Cardinal Health, that manufacture, distribute, and/or dispense prescription opioids (the “Opioid Litigation” or “Underlying Lawsuits”). The Opioid Litigation plaintiffs include governmental entities, Native American tribes, individuals, hospitals, unions, and other third-party healthcare payors (the “Opioid Plaintiffs”). Most federal cases have been consolidated into a coordinated, multi-district case pending in the United States District Court for the Northern District of Ohio, captioned In re National Prescription Opiate Litigation, Case No. 1:17-MD-284 (the “MDL”).

In general, the Opioid Plaintiffs allege, among other things, that Cardinal Health, as a distributor, caused, or contributed to, the nation's opioid crisis by failing to detect or report suspicious or excessive orders of prescription opioids, failing to take appropriate steps to stop fulfillment of such orders, and failing to oppose allegedly improper conduct of other entities named as defendants in the Underlying Lawsuits. The Opioid Plaintiffs further allege that they expended substantial amounts of money to remedy or mitigate the harms attributable to Cardinal Health's conduct. They assert a wide variety of federal and state causes of action, many seeking to recover for increased payments, services, treatment, and/or care allegedly necessitated by the opiate-related addictions, overdoses, hospitalizations, and deaths of those they serve (i.e., residents, members, and patients).

Since 2018, Cardinal Health has sought coverage for the Opioid Litigation pursuant to the parties' Policies, and National Union has continually reserved the right to deny coverage. Dissatisfied with National Union's response, on October 7, 2020, Cardinal Health filed this declaratory action in the Ohio Court of Common Pleas for Franklin County, Ohio, seeking determinations of the parties' rights and obligations under the Policies, especially as to their disputed coverage and defense provisions. (See Compl. for Declaratory J., ECF No. 7.) Cardinal Health identifies seventeen cases selected from the voluminous Opioid Litigation (called “Exemplar Lawsuits”) for which it specifically seeks defense and/or defense costs. (Id. at ¶¶ 15 59.)

B. Remand Request

On November 10, 2020, National Union removed this declaratory-judgment action to this

Court in accordance with 28 U.S.C. §§ 1332 and 1441. (ECF Nos. 1, 1-1.) On December 10, 2020, Cardinal Health filed its Motion to Remand, asking this Court to decline to exercise jurisdiction and remand this action.

The Magistrate Judge introduced the arguments made in the remand briefing as follows:

Cardinal Heath does not dispute that this action falls within the Court's original jurisdiction, and the parties agree that the requirements of diversity jurisdiction are satisfied-the amount in controversy exceeds $75, 000, and the disputing parties have complete diversity of citizenship. See 28 U.S.C. § 1332. Nor does Cardinal Health allege a defect in the removal process. Rather, Cardinal Health asks this Court to refrain from exercising its otherwise valid subject-matter jurisdiction in favor of state jurisdiction over this case. National Union opposes remand, characterizing Plaintiff's filing of this action in state court as “forum shopping, ” and asserting that application of the relevant considerations to the facts of this case makes clear that this Court should exercise its discretion to retain this case.

(R&R at 3-4, ECF No. 27.)

After a thorough analysis of the appropriate standard and the facts presented, the Magistrate Judge recommended granting Cardinal Health's Motion to Remand. Defendant timely filed its Objection, which is ripe for review.

II.

A. Dispositive Report and Recommendations

When a party objects to a magistrate judge's report and recommendation on a dispositive matter, the district judge “must determine de novo any part of the magistrate judge's disposition that has been properly objected to.” Fed.R.Civ.P. 72(b)(3); see also 28 U.S.C. § 636(b)(1). A motion to remand is considered a dispositive motion. See Vogel v. U.S. Office Prods. Co., 258 F.3d 509, 517 (6th Cir. 2001). After review, the district judge “may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Fed.R.Civ.P. 72(b)(3).

B. Declaratory Judgement Actions

A federal declaratory judgment claim is governed by the Declaratory Judgment Act, 28 U.S.C. § 2201. In relevant part, the Act provides that “[i]n a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). “The Supreme Court has repeatedly emphasized the discretionary nature of the Act.” Allstate Ins. Co. v. Mercier, 913 F.2d 273, 276 (6th Cir. 1990) (citing, inter alia, Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942)); Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 554 (6th Cir. 2008) (“The Supreme Court has indicated that this act ‘confer[s] on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants[.'] In passing the act, Congress ‘created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants.'”) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 286-89 (1995)). Of course, this Court may not “decline to entertain [this] action as a matter of whim or personal disinclination, ” but must exercise its judicial discretion under the Act “in the public interest.” Mercier, 913 F.2d at 277.

“[D]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites.” Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). The Declaratory Judgment Act is “an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.” Id., 515 U.S. at 287 (quoting Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 241 (1952)). Ultimately, “the propriety of declaratory relief in a particular case will depend upon a circumspect sense of its fitness informed by the teachings and experience concerning the functions and extent of federal judicial power.” Id. (quoting Wycoff, 344 U.S. at 243).

The United States Court of Appeals for the Sixth Circuit has delineated parameters to consider when determining whether to exercise this discretion (the “Grand Trunk factors”):

(1) [W]hether the declaratory action would settle the controversy; (2) whether the declaratory action would serve a useful purpose in clarifying the legal relations in issue; (3) whether the declaratory remedy is being used merely for the purpose of ‘procedural fencing' or ‘to provide an arena for a race for res judicata;' (4) whether the

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