Schutte v. Ciox Health, LLC

28 F.4th 850

Donna SCHUTTE, Plaintiff-Appellant,

v.CIOX HEALTH, LLC and ProHealth Care, Inc., Defendants-Appellees.

No. 22-1087

United States Court of Appeals, Seventh Circuit.

Argued March 1, 2022

Decided March 16, 2022

Brett A. Eckstein, Jay M. McDivitt, Attorneys, Cannon & Dunphy, Brookfield, WI, for Plaintiff-Appellant.

Jay P. Lefkowitz, Attorney, Kirkland & Ellis LLP, New York, NY, Daniel A. Manna, Attorney, Gass Turek LLC, Milwaukee, WI, for Defendant-Appellee Ciox Health, LLC.

Patrick S. Coffey, Robert M. Romashko, Attorneys, Husch Blackwell LLP, Chicago, IL, for Defendant-Appellee ProHealth Care, Inc.

Before Hamilton, Scudder, and Jackson-Akiwumi, Circuit Judges.

Hamilton, Circuit Judge.

This is an interlocutory appeal under the Class Action Fairness Act (CAFA) from a district court's denial of a motion to remand a putative class action to state court. See 28 U.S.C. § 1453(c). Plaintiff Donna Schutte asks us to order remand of the case to state court for two reasons. First, she argues that the defendants have failed to provide a good-faith estimate that the amount in controversy exceeds $5 million. Second, she asserts that CAFA's local controversy exception required the district court to decline jurisdiction. Our court has not yet construed the relevant provision of that exception, so we accepted this interlocutory appeal. See, e.g., Tri-State Water Treatment, Inc. v. Bauer , 845 F.3d 350, 352 (7th Cir. 2017) (noting that we accepted the appeal to resolve an unsettled CAFA removal question). To comply with the 60-day deadline for decision under § 1453(c)(2), we ordered expedited briefing and argument. We affirm the district court's order denying remand.

I. Facts and Procedural History

Plaintiff Schutte was injured in a car accident in May 2016. After retaining a law firm to seek compensation, she authorized the firm to obtain her health care records. The firm requested electronic—not paper—copies of Schutte's records from defendant ProHealth Care, Inc., a Wisconsin health care provider. ProHealth responded to the request through its agent, defendant Ciox Health, LLC. Ciox produced the electronic copies, but it charged Schutte and her lawyers "Per Page Copy (Paper)" charges of $59.23 and an "Electronic Data Archive Fee" of $2.00.

A Wisconsin statute regulates the fees that providers may charge for the release of medical records. As relevant here, the statute provides that

a health care provider may charge no more than the total of all of the following that apply for providing the copies requested under par. (a):

1. For paper copies: $1 per page for the first 25 pages; 75 cents per page for pages 26 to 50; 50 cents per page for pages 51 to 100; and 30 cents per page for pages 101 and above.

2. For microfiche or microfilm copies, $1.50 per page.

3. For a print of an X–ray, $10 per image.

4. If the requester is not the patient or a person authorized by the patient, for certification of copies, a single $8 charge.

5. If the requester is not the patient or a person authorized by the patient, a single retrieval fee of $20 for all copies requested.

6. Actual shipping costs and any applicable taxes.

Wis. Stat. § 146.83(3f)(b).

The statute is silent regarding charges for electronic copies of medical records. The Wisconsin Court of Appeals has inferred from that silence that health care providers may not charge any fees for electronic copies of medical records. Banuelos v. University of Wisconsin Hospitals & Clinics Authority , 399 Wis.2d 568, 966 N.W.2d 78, 87 (Wis. App. 2021) (fees for electronic copies are not permitted because they are not enumerated in the statute).¹

Alleging that she should not have been charged fees for electronic copies, Schutte filed this putative class action against Ciox and ProHealth in Wisconsin state court. She proposes to represent a class of patients and others acting for patients who sought medical records from a Wisconsin health care provider and were charged and paid " ‘paper copies’ fees for electronic copies, electronic archive data fees, and other similar impermissible fees." Schutte alleges that the class includes "several thousand persons and entities, who likely possess multiple separate claims." In addition to compensatory damages, her complaint seeks exemplary damages up to $25,000 per claimant, as authorized by Wis. Stat. § 146.84(1)(b) for "knowing and willful" violations.

Ciox removed the action to federal court. The notice of removal asserted that all three of CAFA's jurisdictional requirements are satisfied: (1) Schutte's proposed class has at least 100 members; (2) there is at least minimal diversity of citizenship between Schutte and the defendants; and (3) based on the complaint's allegations, the amount in controversy exceeds $5 million. See 28 U.S.C. § 1332(d). Ciox's notice of removal also asserted that CAFA's local controversy exception—which would require the district court to decline jurisdiction—does not apply because several class actions involving similar factual allegations had been filed against both defendants in the preceding three years. Schutte moved to remand to state court on two grounds. First, she argued that Ciox failed to establish that the amount in controversy exceeds $5 million. Second, she asserted that the local controversy exception applies.

The district court rejected both of Schutte's arguments. Judge Adelman concluded that Ciox had put forth a "plausible good faith estimate" that the amount in controversy exceeds $5 million. Schutte v. Ciox Health, LLC , ––– F. Supp.3d ––––, ––––, 2021 WL 5754515, at *2 (E.D. Wis. Dec. 3, 2021). He also found that the local controversy exception does not apply because the factual allegations in a recent Montana class action against Ciox were "identical" to Schutte's. Id. at ––––, 2021 WL 5754515 at *3, citing Deming v. Ciox Health, LLC , 475 F. Supp. 3d 1160 (D. Mont. 2020), aff'd mem., No. 20-35744, 2022 WL 605691 (9th Cir. Mar. 1, 2022). The judge denied Schutte's motion to remand.

Schutte then petitioned this court for permission to appeal under 28 U.S.C. § 1453(c), which allows interlocutory review of most orders granting or denying remand in class actions. We granted the petition and now affirm the denial of remand. This putative class action is properly in federal court.

II. Amount in Controversy

We begin with CAFA's amount-in-controversy requirement. We review de novo legal questions of subject matter jurisdiction. Roppo v. Travelers Commercial Insurance Co. , 869 F.3d 568, 578 (7th Cir. 2017). The party asserting federal jurisdiction has the burden of showing that CAFA's requirements are satisfied. Id. Here, the parties agree that the class exceeds 100 members and that there is minimal diversity. See 28 U.S.C. § 1332(d). The disputed question is whether the amount in controversy exceeds $5 million.

Where the amount in controversy is contested, "removal is proper ‘if the district court finds, by the preponderance of the evidence, that the amount in controversy exceeds’ the jurisdictional threshold." Roppo , 869 F.3d at 579, quoting Dart Cherokee Basin Operating Co. v. Owens , 574 U.S. 81, 88, 135 S.Ct. 547, 190 L.Ed.2d 495 (2014). The removing party needs to provide only a "good-faith estimate" that is "plausible and adequately supported by the evidence." Blomberg v. Service Corp. International , 639 F.3d 761, 763 (7th Cir. 2011).

To satisfy the amount-in-controversy requirement, a removing defendant may rely on the complaint's allegations, the plaintiff's informal estimates, affidavits from employees or experts, or other sources. Roppo , 869 F.3d at 579–80. Once the removing party meets its burden, "the case belongs in federal court unless it is legally impossible for the plaintiff to recover that much." Spivey v. Vertrue, Inc. , 528 F.3d 982, 986 (7th Cir. 2008).

In addressing such issues about amounts in controversy, it is critical for courts to focus on the phrase "in controversy" and to remember the difference between even highly unlikely results and truly impossible results, and to avoid prematurely trying the merits of the case in deciding jurisdiction. See id. , citing Saint Paul Mercury Indemnity Co. v. Red Cab Co. , 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845 (1938) (adopting "legal certainty" standard). Ciox has satisfied the amount-in-controversy requirement through at least two routes: the allegations in the complaint itself and an affidavit from a Ciox executive.

A. Schutte's Complaint

First, the allegations in the complaint alone are enough to show plausibly that more than $5 million is in controversy. Ciox was entitled to take at face value the complaint's allegation of "several thousand" class members, each with "multiple separate claims." See Roppo , 869 F.3d at 581 (defendant attempting to satisfy jurisdictional requirements "may rely on the estimate of the class number set forth in the complaint"). Also, it is well-settled that punitive damages, which could be up to $25,000 per claimant here, "factor into the amount-in-controversy calculation." Id. at 582 ; see also Back Doctors Ltd. v. Metropolitan Property & Casualty Insurance Co. , 637 F.3d 827, 831 (7th Cir. 2011) (relying on potential punitive damages to calculate amount in controversy even where plaintiff "did not expressly ask for a punitive award").

Putting these numbers together, 2,000 class members would need to recover an average of only around $2,501 in exemplary damages—to say nothing of compensatory damages—to surpass the $5 million threshold. Or looking at it another way, if each class member's exemplary damages averaged $1,000, a class with only 5,001 members would reach the required total. Many other permutations would push the class over the line, but the point is the same: the complaint's allegations suffice to show that " ‘a fact-finder might conceivably lawfully award’ in excess of $5 million dollars." Roppo , 869 F.3d at 583, quoting Hammond v. Stamps.com, Inc. , 844 F.3d 909, 912 (10th Cir. 2016).

Schutte's arguments to...