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State ex rel. Harmeyer v. Kroger Co.

United States District Court, S.D. Indiana, Indianapolis Division

June 13, 2017

The State of Indiana, ex rel. Harmeyer, Plaintiffs and Qui Tam Relator,
v.
The Kroger Co., Kroger Limited Partnership I, KRGP, Inc., Pay Less Super Markets, Inc., and Ralphs Grocery Company, Defendants.

          ORDER

          Hon. Jane Magntts-Stinson, Chief Judge

         On February 21, 2017, Defendants The Kroger Co., Kroger Limited Partnership I, KRGP, Inc., Pay Less Super Markets, Inc., and Ralphs Grocery Company filed a Notice of Removal in which they claimed that this case could be removed to this Court on the basis of diversity jurisdiction. [Filing N o. 1.] In a February 23, 2017 Order, the Court identified several deficiencies with the Notice of Removal and ordered Defendants to either file an Amended Notice of Removal addressing the deficiencies, or to file a Motion to Remand this action to state court. [Filing No. 11.] Defendants filed an Amended Notice of Removal on March 3, 2017, [Filing No. 14], and Relator Michael Harmeyer filed his response to the Amended Notice of Removal pursuant to S.D. Ind. Local Rule 81-1 on March 20, 2017, [Filing No. 20].

         In his Local Rule 81-1 Statement, Relator Harmeyer set forth his position that the State of Indiana is a real party in interest to this litigation, such that diversity jurisdiction does not exist. [Filing No. 20 at 2-4.] The Court determined that Relator Harmeyer's 81-1 Statement should be treated as a Motion to Remand, [Filing No. 27], and that motion has now been fully briefed and is ripe for the Court's decision.

         I.

         Standard of Review

         “[S]ubject matter jurisdiction is a fundamental limitation on the power of a federal court to act.” Del Vecchio v. Conseco, Inc., 230 F.3d 974, 980 (7th Cir. 2000) (collecting cases). Thus, it cannot be waived and “always comes ahead of the merits.” Leguizamo-Medina v. Gonzales, 493 F.3d 772, 774 (7th Cir. 2007).

         A party that removes a state court case to federal court has the burden of establishing federal jurisdiction. Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d 752, 758 (7th Cir. 2009); see also Walker v. Trailer Transit, Inc., 727 F.3d 819, 824-25 (7th Cir. 2013) (“The removing defendant has the burden of proving the jurisdictional predicates for removal”). “[F]ederal courts should interpret the removal statute narrowly, resolving any doubt in favor of the plaintiff's choice of forum in state court.” Schur, 577 F.3d at 758. “If at any time…it appears that the district court lacks subject matter jurisdiction, the case shall be remanded” to state court. 28 U.S.C. § 1447.

         II.

         Discussion

         Relator Harmeyer argues that diversity jurisdiction does not exist when a state is a party, because states are “jurisdiction spoilers.” [Filing No. 20 at 2-3.] He asserts that the Indiana False Claims and Whistleblower Protection Act (“IFCWPA”) specifically provides that a Relator who brings an action under the IFCWPA does so “‘on behalf of the State.'” [Filing No. 20 at 3 (quoting Ind. Code § 5-11-5.5-4(a)).] Relator Harmeyer notes that the IFCWPA entitles the State of Indiana to recover the majority of money damages awarded, so it is a “real party in interest.” [Filing No. 20 at 3-4.] He concludes that he “has no objection to litigating this action in the Southern District of Indiana, [but] it appears that this case must be remanded to the Superior Court of Marion County, Indiana, as a matter of law.” [Filing No. 20 at 4.]

         In response, Defendants argue that “States do not have citizenship, so if the Attorney General or Inspector General for Indiana had intervened in this case, their presence would defeat diversity.” [Filing No. 25 at 3 (emphasis omitted).] They contend that in this case, because the Attorney General and Inspector General specifically elected not to intervene, the State of Indiana is not a party to the action, “despite the presence of its name in the caption.” [Filing No. 25 at 4.] Defendants note that the IFCWPA mirrors the federal False Claims Act and acknowledge that “[a]t least a couple of courts have remanded state qui tam actions” finding that the State was a real party in interest, but argue that those cases “have not considered the issue in any depth, however, and have overlooked Supreme Court case law that demonstrates that this Court has jurisdiction to hear this case, and that removal was proper.” [Filing No. 25 at 4.] Defendants point to cases outside of the qui tam context, where courts found that other parties - such as a trustee in one case - were the real parties in interest where they brought claims on behalf of others. [Filing No. 25 at 5-6.] Defendants also argue that an analysis under the Eleventh Amendment indicates that there is diversity jurisdiction here, stating “[a]lthough the federal government can sue a state under the federal FCA, a relator cannot because he is not the equivalent of the government on whose behalf he brings the suit. Similarly, in this action under the IFCWPA, the relator is not the equivalent of the state government on whose behalf he brings the suit, so his citizenship, not the state's lack of citizenship, controls the issue of diversity.” [Filing No. 25 at 13.] Additionally, Defendants argue that a state is deemed a real party in interest sufficient to defeat diversity only if the relief sought enures to the State's benefit alone, and that here the Relator is entitled to a recovery so is also a real party in interest. [Filing No. 25 at 14-16.] Finally, Defendants contend that Relator Harmeyer is not merely the State's alter ego. [Filing No. 25 at 16-19.]

         On reply, Relator Harmeyer argues that Defendants' Eleventh Amendment argument is not relevant because “[t]he State's status as a real party in interest is distinct from the relationship between a qui tam relator and the sovereign on whose behalf the False Claims Act action is brought.” [Filing No. 29 at 3.] Relator Harmeyer reiterates his arguments that the State of Indiana is a real party in interest, and also contends that the State need not be the sole party in interest to defeat jurisdiction. [Filing No. 29 at 4-9.]

         The Court notes at the outset that although Relator Harmeyer states that he has no objection to litigating this case in this Court, parties cannot stipulate to the existence of jurisdiction. See Leguizamo-Medina, 493 F.3d at 774 (subject matter jurisdiction cannot be waived and “always comes ahead of the merits”). Rather, the Court has a responsibility to ensure that it has jurisdiction, regardless of the parties' positions. Hukic v. Aurora Loan Servs., 588 F.3d 420, 427 (7th Cir. 2009).

         When determining whether there is diversity jurisdiction, courts look not just to the citizenship of the parties named in the caption of the Complaint, but rather also to the citizenship of the real parties in interest. CCC Info. Servs. v. Am. Salvage Pool Ass'n, 230 F.3d 342, 346 (7th Cir. 2000). For example, in determining the citizenship of a limited liability company, the Court must look to “the citizenship of all the limited partners, as well as of the general partner.” Hart v. Terminix Int'l, 336 F.3d 541, 542 (7th Cir. 2003) (quotation and citation omitted). Although the limited ...


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