United States District Court, E.D. Kentucky, Central Division, Frankfort
H. BRIAN MAYNARD, LIQUIDATOR OF KENTUCKY HEALTH COOPERATIVE, INC., Plaintiff,
CGI TECHNOLOGIES AND SOLUTIONS, INC., Defendant.
MEMORANDUM OPINION & ORDER
Gregory F. Van Tatenhove United States District Judge.
case begins where all must, with a review of the Court's
power to decide the dispute presented. All agree that the
prerequisites for diversity jurisdiction exist. That
typically would settle the matter unless, as urged by the
Plaintiff, this is a case in which the Commonwealth of
Kentucky has enacted statutory language that voids federal
diversity jurisdiction. No federal court of appeals has
concluded that is possible in this context and, for the
reasons set out below, neither will this district court.
the power to decide a case courts have the responsibility to
do just that. In rare circumstances federal courts may
abstain from exercising that power, but this is not one of
them. So, as explained below, this is a contract case. The
contract is clear and the parties agreed to arbitrate when
faced with such a dispute as this, but the law that is to be
used is unclear. Consequently, Plaintiff Maynard's Motion
to Remand [R. 18] is DENIED and the parties are ordered to
provide additional briefing on the issues described below.
February of 2013, CGI Technologies and Solutions, Inc. and
Kentucky Health Cooperative, Inc. (KYHC) entered into an
Administrative Services Agreement (ASA) where CGI agreed to
fulfill administrative and management services for KYHC. [R.
1-1 at 9.] Liquidator Maynard alleges that the KYHC became
insolvent by October 2015 due to acts of negligence and gross
negligence that constituted a breach of the ASA on behalf of
CGI. [R. 19-1 at 4.] The KYHC was placed into liquidation
pursuant to Kentucky's Insurers Rehabilitation and
Liquidation Law (Kentucky's IRLL) and H. Brian Maynard
was appointed Liquidator of the KYHC due to his role as
Commissioner of the Kentucky Department of Insurance.
Court Action was then filed by Plaintiff Maynard in Franklin
Circuit Court. [R. 1-1 at 3.] The Liquidator's State
Court Action was removed by CGI to this Court and a separate
action was brought by CGI in federal court to compel
arbitration. [R. 19-1 at 4.] These are the two actions that
were consolidated earlier this year. [R. 8.] Since the
pending motions have been taken under advisement, yet another
related case was filed and removed. See Jeff Gaither,
Deputy Liquidator of Kentucky Health Cooperative, Inc. v.
Beam Partners, LLC, et al., 3:16-cv-00094-GFVT, filed
December 1, 2016. CGI Technologies and Solutions, Inc. states
that this is a “copycat state action” that has
been filed by the Liquidator. [R. 1 at 2 in
3:16-cv-094-GFVT.] Full briefing in that case remains
Liquidator challenges the Court's power to decide this
case with a motion to remand. [R. 18.] A defendant may remove
a civil action brought in state court to federal court only
if the action is one over which the federal court could have
exercised original jurisdiction. See 28 U.S.C.
§§ 1441, 1446. This court has original federal
question jurisdiction over civil actions which arise under
the “Constitution, laws, or treaties” of the
United States, 28 U.S.C. § 1331. This Court also has
original “diversity” jurisdiction over all civil
actions when “the matter in controversy exceeds the sum
or value of $75, 000, exclusive of interest and costs, and
the dispute is between” parties who are “citizens
of different states.” See 28 U.S.C. §
federal courts are courts of limited jurisdiction, any doubts
regarding federal jurisdiction should be construed in favor
of remanding the case to state court. Shamrock Oil &
Gas Corp. v. Sheets, 313 U.S. 100, 108-109 (1941);
Cole v. Great Atlantic & Pacific Tea Co., 728
F.Supp. 1305, 1307 (E.D. Ky. 1990) (citations omitted). In
determining the appropriateness of remand, a court must
consider whether federal jurisdiction existed at the time the
removing party filed the notice of removal. Ahearn v.
Charter Twp. of Bloomfield, 100 F.3d 451, 453 (6th Cir.
1996). Furthermore, the removing defendant bears the burden
of showing that removal was proper. Gafford v. Gen. Elec.
Co., 997 F.2d 150, 158 (6th Cir. 1993), rev'd on
other grounds by Hertz Corp. v. Friend, 559 U.S. 77
(2010); Fenger v. Idexx Laboratories, 194 F.Supp.2d
601, 602 (E.D. Ky. 2002) (citations omitted).
Maynard's motion to remand attacks CGI's removal of
this case on two specific grounds that heavily rely on
persuasive, not mandatory, jurisprudence. Specifically,
Liquidator Maynard contests CGI's claims that this Court
has diversity jurisdiction. In support, Maynard claims that
Kentucky's Insurers Rehabilitation and Liquidation Law
vests exclusive jurisdiction for this liquidation in Franklin
Circuit Court “reverse preempting” federal
diversity jurisdiction. See Ernst & Young, LLP v.
Clark, 323 S.W.3d 682, 684 (Ky. 2010); see also
McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015.
Alternatively, the Liquidator argues that this Court should
abstain from exercising jurisdiction.
parties agree that the “fundamental tenets of diversity
jurisdiction” are present. [R. 30 at 10.] As required
by 28 U.S.C. § 1332(a)(1), there is complete diversity
amongst the parties. CGI Technologies and Solutions Inc. is a
business incorporated in Delaware with a principal place of
business in Virginia. [R. 1 at 1.] Brian Maynard is the
court-appointed liquidator of the KYHC which is a Kentucky
non-profit corporation that has its principal place of
business in Kentucky. [Id.] The amount in
controversy, as evidenced by the complaint and administrative
services agreement, [See R.1] far exceeds $75, 000.
28 U.S.C. § 1332(b). Therefore, under a traditional
analysis of diversity jurisdiction, this court has the
requisite authority and subject-matter jurisdiction to
adjudicate this dispute.
these uncontested facts, the question presented is whether
federal law has opened the door for state law to
“reverse preempt” the diversity jurisdiction
statute. It is certainly conceivable that Congress could act
through the McCarran-Ferguson Act to to ...