No. 10-1500

FILED

JUL ! 5 20llOFFICE OF THE CLERK

Dupreme ;ourt of tl e iEtniteb Dtate

MYLAN LABORATORIES, INC., et al.,

Petitioners,VS.

BLUE CROSS BLUE SHIELDOF MASSACHUSETTS, et al.,

Respondents.

On Petition For A Writ Of CertiorariTo The United States Court Of AppealsFor The District Of Columbia Circuit

BRIEF IN OPPOSITION

MARTIN R. LUECK

Counsel of RecordSARA A. POULOSJAMES R. SAFELYSARAH E. HUDLESTONROBINS, KAPLAN, MILLER

~ CIRESI L.L.P.

2800 LaSalle Plaza800 LaSalle AvenueMinneapolis, MN 55402-2015(612) 349-8500mrlueck@rkmc.com

Attorneys for RespondentsBlue Cross Blue Shieldof Minnesota, Blue CrossBlue Shield of Massachusetts,and Federated MutualInsurance Company

ROBERT T. RHOADRYAN C. TISCHCROWELL & MORING LLP1001 Pennsylvania Ave. N.W.Washington, DC 20004-2595(202) 624-2545

Attorneys for RespondentHealth CareService Corporation

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964OR CALL COLLECT (402) 342-2831

Blank Page

QUESTION PRESENTED

Whether Petitioners have presented compellingreasons for review by this Court where the D.C.Circuit followed established Supreme Court prece-dent by remanding the case to the district court todetermine if any non-diverse parties may be dis-missed to preserve diversity jurisdiction.

ii

CORPORATE DISCLOSURE STATEMENTPURSUANT TO SUPREME COURT RULE 29.6

Res:pondent Blue Cross Blue Shield of Minnesota,Inc., through its counsel, states that it is a Minnesotanot-for-profit health services corporation, a subsidiaryof Aware Integrated, Inc., and that no publicly heldcorporation owns 10% or more of its stock.

Respondent Blue Cross and Blue Shield of Mas-sachuse~Lts, Inc., through its counsel, states that it isa Massachusetts non-profit hospital and medicalservices corporation, and that it has no parent corpo-ration and that no publicly held corporation owns10% or ~nore of its stock.

Respondent Federated Mutual Insurance Com-pany, through its counsel, states that it is a Minnesotacorporation, has no parent company, and that nopublicly held corporation owns 10% or more of itsstock.

Respondent Health Care Service Corporation,through its counsel, states that it is an Illinois Mutu-al Legal Reserve Company incorporated under thelaws of ]Illinois and has its principal place of businessin Chicago, Illinois. Health Care Service Corporationis an independent licensee of the Blue Cross and BlueShield Association, which operates through its BlueCross and Blue Shield plans in Illinois, New Mexico,Oklahoma, and Texas, and several subsidiaries.Health Care Service Corporation is not a publiclyheld corporation. It is customer owned by its policyholders. It is has no parent corporation and hasissued no stock.

oooIII

TABLE OF CONTENTS

Page

iQUESTION PRESENTED ...................................

CORPORATE DISCLOSURE STATEMENT PUR-SUANT TO SUPREME COURT RULE 29.6 .....ii

TABLE OF AUTHORITIES .................................v

STATEMENT OF THE CASE ..............................1

1. Petitioners’ conspiracy ...............................3

2. The self-funded customers’ claims ...............4

3. Proceedings in the district court follow-ing remand .................................................7

REASONS FOR DENYING THE PETITION .....8

I. The January 18, 2011 Opinion of the D.C.Circuit follows well-established law da-ting back to the early 19th Century ..........

A. The D.C.

Bo

9

Circuit’s Opinion conformsprecisely to Newman-Green .................13

The D.C. Circuit’s straightforwardapplication of established law will notencourage a "flood" of state-law caseslacking diversity ..................................18

II. The D.C. Circuit’s Opinion does notconflict with decisions of the Seventh orEighth Circuits ..........................................21

A. The Seventh Circuit analyzed Rule 21in an entirely different factual sce-nario .....................................................21

iv

TABLE OF CONTENTS - Continued

Page

B~ Respondents’ Eighth Circuit case like-wise presents no conflict with the D.C.Circuit ..................................................24

CONCLUSION .....................................................26

V

TABLE OF AUTHORITIES

Page

CASES

Abel v. Am. Art Analog, Inc., 838 F.2d 691 (3dCir. 1988) .................................................................23

Associated Insurance Management Corp. v.Arkansas General Agency, 149 F.3d 794 (SthCir. 1998) ...........................................................24, 25

Bailey v. Bayer CropScience L.P., 563 F.3d 302(8th Cir. 2009) .........................................................25

Carneal v. Banks, 23 U.S. (10 Wheat.) 181(1825) ................................................. 9, 10, 11, 15, 16

Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996) .....12, 20, 25

Dexia Credit Local v. Rogan, 602 F.3d 879 (7thCir. 2010) .................................................................23

Dexia Credit Local v. Rogan, 629 F.3d 612 (7thCir. 2010) .................................................................24

E.R. Squibb & Sons, Inc. v. Accident & CasualtyIns. Co., 241 F.3d 154 (2d Cir. 1999) ......................15

E.R. Squibb & Sons, Inc. v. Accident & CasualtyIns. Co., 160 F.3d 925 (2d Cir. 1998) .......................15

Exxon-Mobil Corp. v. Allapattah Servs., Inc.,545 U.S. 546 (2005) .................................................20

Fetzer v. Cities Serv. Oil Co., 572 F.2d 1250 (SthCir. 1978) .................................................................26

Grupo Dataflux v. Atlas Global Group, L.P.,541 U.S. 567 (2004) .............................................9, 11

Hamilton Brown Shoe Co. v. Wolf Bros. & Co.,240 U.S. 251 (1916) .................................................17

vi

TABLE OF AUTHORITIES - Continued

Page

Herrick Co. v. SCS Comms., Inc., 251 F.3d 315(2d Cir. 2001) .....................................................15, 19

Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010) ............17

Horn v. Lockhart, 84 U.S. 570 (1873) ............10, 15, 16

LeBlanc v. Cleveland, 248 F.3d 95 (2d Cir.2001) ........................................................................15

Moor v. County of Alameda, 411 U.S. 693(1973) .......................................................................17

Mr. Healthy City Sch. Dist. Bd. of Educ. v.Doyle, 429 U.S. 274 (1977) ......................................17

Mullaney v. Anderson, 342 U.S. 415 (1952) .........12, 18

Newman-Green, Inc. v. Alfonzo-Larrain, 490U.S. 826 (1989) ................................................ passim

Provident Tradesmens Bank & Trust Co. v.Patterson, 390 U.S. 102 (1968) ...............................19

Publicker Indus., Inc. v. Roman CeramicsCorp., 603 F.2d 1065 (3d Cir. 1979) ........................14

Rice v. Sunrise Express, 209 F.3d 1008 (7th Cir.2000) ........................................................................20

Seaeeianoee v. Hixon Mfg. & Supply Co., 57F.3d 582 (7th Cir. 1995) ..........................................23

St. Paul Fire & Marine Ins. Co. v. UniversalBuilders Supply, 409 E3d 73 (2d Cir. 2005) ..........15

Sta-Rite Industries v. Allstate Insurance Co., 96E3d 281 (7th Cir. 1996) .............................. 21, 22, 23

vii

TABLE OF AUTHORITIES - Continued

Page

Sweeney v. Westvaco Co., 926 F.2d 29 (1st Cir.1990) ........................................................................19

Va. Military Inst. v. United States, 508 U.S. 946(1993) .......................................................................17

Wild v. Subscription Plus, Inc., 292 F.3d 526(7th Cir. 2002) .........................................................24

STATUTES ~

28 U.S.C. § 1332(a)(3) .................................................12

28 U.S.C. § 1332(c)(1) .................................................17

28 U.S.C. § 1367 .................................................1, 5, 11

RULES

Fed. R. Civ. P. 17(a) .................................................5, 24

Fed. R. Civ. P. 19 .................................................passim

Fed. R. Civ. P. 21 .................................................passim

Supreme Court Rule 10 ................................................8

Blank Page

1

STATEMENT OF THE CASE

Respondents are four health insurance providerswho filed complaints in 2001 and 2002 to recovertheir own damages resulting from Petitioners’ con-spiracy to eliminate competition and charge exorbi-tant prices for two older generic drugs, Clorazepateand Lorazepam. There is no dispute that there iscomplete diversity of citizenship between the Respon-dents and the Petitioners. Three of the Respondents,BCBS-MA, BCBS-MN, and HCSC, also acted as third-party administrators to self-funded customers, andasserted in their complaints supplemental jurisdic-tion over the separate claims of these customersunder 28 U.S.C. § 1367.

This case was actively litigated for almost adecade before Petitioners challenged jurisdiction. Af-ter several years of discovery and numerous pretrialmotions this matter proceeded to trial in the districtcourt in May 2005. On June 1, 2005, Petitionersrecovered a substantial verdict that was the subject ofpost-trial motions that were not finally concludeduntil July 16, 2009. Throughout this lengthy period,Petitioners never questioned the jurisdiction of thedistrict court to consider the claims of the self-fundedcustomers. It was not until the week of oral argumentin the D.C. Circuit in October 2010 that Petitionersmoved to dismiss the case for lack of subject matterjurisdiction or, alternatively, to dismiss the claims ofall self-funded customers.

2

The D.C. Circuit rejected Respondents’ supple-mental jurisdiction argument, and concluded that theself-funded customers’ citizenship must be consideredfor diversity of citizenship purposes. However, theD.C. Circuit did not dismiss, but instead remandedthe case to the district court to decide (1) whether theself-funded customers are indispensable parties, and(2) which, if any, of the self-funded customers’ claimsmay be dismissed in order to preserve completediversity. The D.C. Circuit reasoned that Rule 21 ofthe Federal Rules of Civil Procedure allows thedistrict court to dismiss parties whose presence in thelitigation destroys jurisdiction if those parties are notindispensible and if there would be no prejudice tothe parties. By issuing its remand, the D.C. Circuitfollowed this Court’s instruction to allow a jurisdic-tional defect to be cured under Rule 21 "when requir-ing dismissal after years of litigation would imposeunnecessary and wasteful burdens on the parties,judges, and other litigants waiting for judicial at-tention." Newman-Green, Inc. v. Alfonzo-Larrain,490 U.S. 826, 836 (1989). The appeals court mostcertainly did not, as Petitioners assert, treat Peti-tioners’ jurisdictional objection as "waived." Pet. 17n.4; see Pet. App. 4a-11a (analyzing motion to dismissfor lack of jurisdiction).

On remand, the district court held an initialhearing on May 9, 2011, and set a schedule for theparties to brief the indispensability issue. The districtcourt has also allowed Respondents to make a factualshowing to permit a determination as to which of the

3

self-funded customers may be dismissed in order topreserve complete diversity.

1. Petitioners’ conspiracy

Clorazepate and Lorazepam are widely-usedgeneric antianxiety drugs that became available inthe 1970s. For many years, Mylan and several com-petitors manufactured and sold these generic drugs inthe United States. In late 1997, Petitioners devisedan exclusive dealing scheme to cut off Mylan’s com-petitors from the raw material needed to producethese drugs. The avowed purpose of the scheme wasto destroy competition and allow Mylan to chargesupracompetitive prices. The scheme was so blatantlyanticompetitive that Mylan had to agree to indemnifythe other Petitioners from any lawsuit arising fromthe exclusivity arrangement.

The conspiracy immediately achieved its objec-tive. Mylan’s principal competitors could no longerprocure raw material to produce Clorazepate andLorazepam, and Mylan raised its wholesale prices forthese older generic drugs by as much as 3200%. Inspite of these huge price increases, Mylan gainedmarket share due to the monopoly it had achieved.Consumers and their health plans spent more thanone billion additional dollars to purchase Lorazepamand Clorazepate as a result of the exclusive dealingscheme and suppression of competition.

The conspiracy caused Respondents and theirself-funded customers to pay much higher prices for

4

Clorazepate and Lorazepam. Although the Federal

Trade Commission forced Petitioners to abandon theexclusive dealing scheme a year later, Respondentsestablished at trim that the impact of the conspiracycaused prices for the two drugs to remain artificiallyhigh for many years. Respondents’ expert calculateddamages sustained by each Respondent and self-funded customer from 1998 through various monthsin 2003. Petitioners failed to present any alternativedamage calculation, and on June 1, 2005, the juryreturned a verdict for the damages in precisely theamount calculated by Respondents’ expert.

Petitioners challenged the verdict through sev-eral post-trial motions, all of which were rejected bythe district court after extensive briefing. On January1, 2008, the district court found Petitioners’ conductwillful and granted Respondents’ motion to trebletheir damages under the laws of Massachusetts,Minnesota, and Illinois. On July 16, 2009, the districtcourt adopted the recommendation of the magistratejudge to award prejudgment interest, bringing theresulting award to $76,823,943.

2. The self-funded customers’ claims

As noted above, the four Respondents, as healthinsurers, filed suit to recover damages they individu-ally sustained as a result of the conspiracy. In addi-tion, Respondents BCBS-MA, BCBS-MN, and HCSC,sued as third-party administrators for their self-funded customers who also paid inflated prices for

5

Clorazepate and Lorazepam. The complaints did notallege the citizenship of the self-funded customers,but instead Respondents brought these claims pur-suant to their contracts with the self-funded cus-tomers and their role as third-party administrators.The complaints invoked supplemental jurisdictionunder 28 U.S.C. § 1367. Despite the absence of sepa-rate diversity of citizenship allegations in the com-plaints for the self-funded customers, Petitioners neverraised a jurisdictional issue or concern at any timewhile the case was pending in district court. Further,Petitioners never moved to dismiss on jurisdictionalgrounds in the D.C. Circuit until the week of oralargument.

Shortly before the trial, Petitioners filed a motionin limine seeking to strike evidence of the damagessustained by the self-funded customers on the basisthat Respondents lacked contractual authority to pur-sue these claims. At that time, Petitioners did notassert that the self-funded customers were "indispen-sable parties." To the contrary, Petitioners soughtonly to remove the damage claims of the self-fundedcustomers from the lawsuit. The district court initial-ly agreed with Petitioners and granted the motion inlimine to exclude evidence~ of the damages of the self-funded customers. However, on a motion for leave toproceed under Rule 17 the district court allowed Re-spondents to pursue the claims of these customersthrough a ratification process under Rule 17(a). Re-futing Petitioners’ assertions that Respondents some-how hid these claims or otherwise acted in bad faith

6

(Pet. 5), in authorizing the ratification the districtcourt rejected these same arguments, finding "no evi-dence that Plaintiffs’ failure to earlier join their self-funded customers or obtain authorization to sue ontheir behalf was deliberate or tactical, nor is there anyevidence that Plaintiffs undertook these claims in badfaith." F’et. App. 19a. The district court further foundthat:

Defendants would not be prejudiced by theapplication of Rule 17(a) here. The claims ofthe self-funded customers were sufficientlyasserted in the complaints, and Plaintiffshave always been clear that they were pur-suirLg claims on behalf of their self-fundedplans.

Id. 19a-20a. In response to Petitioners’ eleventh hourprotestations regarding the self-funded customerclaims, the district court continued:

[N]o additional discovery is needed, and De-fendants are well aware of the nature of theclaims and damages sought. The addition ofthe self-funded customers ... would notchange the substance of the issues to be liti-gated at trial.

Id. 19a-20a. Although Petitioners objected to theratificati[on process, they never contended in districtcourt that the inclusion of the ratified claims of theself-funded customers defeated diversity jurisdiction.

At trial, Respondents’ expert presented aggregatedamages for each Respondent and its self-funded cus-tomers and the jury awarded the amount of damages

presented. For a consensual remittitur after trial,Respondents’ expert isolated the damages awarded tofive self-funded customers who had opted out of theratification process but for which damages wereinadvertently included in the aggregate amountspresented (and awarded) at trial.

3. Proceedings in the district court followingremand

On January 18, 2011, the D.C. Circuit orderedthat this matter be remanded to the district court toproceed under Rule 21. The D.C. Circuit deniedPetitioners’ request for a panel rehearing on March14, 2011. Petitioners did not petition the D.C. Circuitfor en banc reconsideration of the remand decision.On May 2, 2011, the parties each submitted reports tothe district court, and, on May 9, 2011, the districtcourt held a status conference. At that conference, thecourt directed that by June 29, 2011, Respondents(1) submit a brief addressing whether the self-fundedcustomers are indispensable parties under Rule 19;and (2) provide information regarding the citizenshipof the self-funded customers together with a motionto dismiss and for a remittitur for those self-fundedcustomers for which Respondents were unable toestablish diversity of citizenship. Petitioners did notask the district court to stay proceedings while theirPetition to this Court was considered.

Accordingly, on June 29, 2011, Respondentssubmitted to the district court a brief demonstrating

that the self-funded customers are not indispensableparties under Rule 19. In addition, Respondents’ June29 submissions have established diverse citizenshipfor hundreds of the self-funded customers, includingmunicipalities, counties, and school districts thatwere citizens of Minnesota, Massachusetts, and Texasand were therefore diverse from Respondents (whosestates of citizenship are New York, New Jersey,Pennsylvania, Delaware, and West Virginia). Formany of the corporate self-funded customers, Re-spondents have already submitted information show-ing that the state of incorporation and principal placeof business at the time the complaint was filed werediverse to all Petitioners. For certain other corpora-tions, Respondents have informed the district courtthat they will make a supplemental submission withrespect to the principal place of business of these self-funded customers. Respondents have also provided alist of self-funded customers for which they wereunable to prove complete diversity, have moved todismiss those claims and asked for a remittitur of thedamage award attributed to those claims.

REASONS FOR DENYING THE PETITION

Petitioners have presented no "compelling rea-sons" for the Court to grant their petition for a writof certiorari ("Petition"). See Sup. Ct. R. 10. TheJanuary 18, 2011 D.C. Circuit Opinion ("Opinion")follows nearly two centuries of Supreme Court prece-dent recognizing that nondiverse parties who are not

9

indispensable to an action may be dismissed to pre-serve diversity jurisdiction. The Opinion raises nofederal question undecided by this Court, nor (contraryto Petitioners’ strained analysis) is there any splitamong the other courts of appeals. The D.C. Circuit’s

remand to the district court to determine whether theself-funded customers are indispensable parties, andif not, to proceed under Rule 21, does not raise anyissue that merits review by this Court.

I. The January 18, 2011 Opinion of the D.C.Circuit follows well-established law datingback to the early 19th Century

The Opinion remanding this matter to the dis-

trict court to proceed under Rule 21 was in accor-dance with more than a century of jurisprudencerecognizing that the dismissal of parties that destroydiversity is a curing method that "had long been anexception to the time of filing rule." Grupo Dataflux v.Atlas Global Group, L.P., 541 U.S. 567, 572 (2004).

For nearly two centuries, long before the advent

of Federal Rule of Civil Procedure 21, this Court haspermitted the dismissal of nondiverse parties whowould otherwise defeat diversity jurisdiction, so longas those nondiverse parties are not indispensableparties. Indeed, as early as 1825, the Supreme Courtrecognized that dispensable, nondiverse parties maybe dismissed to preserve the Court’s jurisdiction overparties that are properly before it. See Carneal v.

Banks, 23 U.S. (10 Wheat.) 181, 188 (1825) (cited in

10

Newman-Green, 490 U.S. at 834-35). In Carneal, theplaintiff, Banks, a citizen of Virginia, sued the heirsof Carneal, citizens of Kentucky, and the heirs ofHarvie, citizens of Virginia. Finding that the non-diverse defendants were not indispensable, the Courtheld that the claim against the Harvie heirs could bedismissed without affecting the claims against theother diverse defendants: "The bill, therefore, as toHarvie’s heirs, may be dismissed without in anymanner affecting the suit against Carneal’s heirs.That they have been improperly made defendants inhis bill cannot affect the jurisdiction of the court asbetween those parties who are properly before it." Id.

Similarly, in an 1873 opinion, this Court notedthat the appellants’ objection to federal jurisdictionhad been obviated by the lower court’s dismissal ofthe claims against the two nondiverse defendants,whom the Court held were not indispensable parties.See Horn v. Lockhart, 84 U.S. 570, 579 (1873). "[T]hequestion always is, or should be, when objection istaken to the jurisdiction of the court by reason of thecitizenship of some of the parties, whether ... theyare indispensable parties, for if their interests areseverable and a decree without prejudice to theirrights may be made, the jurisdiction of the courtshould be retained and the suit dismissed as tothem." Id.

Today, under Rule 21, "[o]n motion or on itsown, the court may at any time, on just terms, add ordrop a party. The court may also sever any claimagainst a party." Fed R. Civ. P. 21. Modern courts

11

have universally recognized that Rule 21 "investsdistrict courts with authority to allow a dispensablenondiverse party to be dropped at any time, evenafter judgment has been rendered." Grupo Dataflux,541 U.S. at 572 (quoting Newman-Green, 490 U.S. at832). And in Newman-Green, this Court held thatcourts of appeals - like district courts - also have theauthority to cure jurisdictional defects by droppingnondiverse parties. Newman-Green, 490 U.S. at 832-33,837.

Petitioners misleadingly claim that Respondents"did not even attempt" to meet their burden of plead-ing and proving diversity jurisdiction, and that such afailure means the entire case must be dismissed. Pet.15. This is both factually untrue and a misstatementof the law. As noted above, Respondents pled thatthey are each diverse to all Petitioners, pled that theywere third-party administrators who had the contrac-tual authority to bring claims on behalf of theirself-funded customers and invoked supplementaljurisdiction pursuant to 28 U.S.C. § 1367. Moreover,Petitioners’ sweeping contention that the failure toproperly plead or prove diversity jurisdiction is fatal(Pet. 12-16) is an obvious misreading of the case law.Indeed, whenever a court allows the dismissal of anondiverse party or claim in order to preserve diver-sity, there has been a failure either to properly pleadand/or to prove diversity, otherwise the "curing method"- employed at least since Carneal and as recognizedin Grupo Dataflux - would not be necessary. Forexample, in Newman-Green, the jurisdictional spoiler

12

(Bettison), was a United States citizen domiciled inCaracas, Venezuela. Newman-Green, 490 U.S. at 828.The complaint had invoked jurisdiction under 28U.S.C. § 1332(a)(3), which confers federal jurisdic-tion when a citizen of a state sues both aliens andcitizens of a state different from the plaintiff’s state. Id.Bettison, however, was neither an alien nor a citizenof a state and thus the plaintiff in Newman-Greenfailed to both properly plead and prove diversity, ld.

In allowing even federal appellate courts to curejurisdictional defects, the Court in Newman-Greenacknowledged that while this may not be "the mostintellectually satisfying approach" to jurisdictionalproblems, it was a practical solution preferable to "re-quiring dismissal after years of litigation," an alter-native that "would impose unnecessary and wastefulburdens on the parties, judges, and other litigantswaiting fbr judicial attention." Id. at 836. Such prac-tical considerations have long guided this Court. SeeMullaney v. Anderson, 342 U.S. 415, 417 (1952) (per-mitting the addition of two plaintiffs to ensure court’sjurisdiction: "To dismiss the present petition and re-quire the new plaintiffs to start over in the districtcourt would entail needless waste and runs counter toeffective .judicial administration"); Caterpillar Inc. v.Lewis, 51.9 U.S. 61, 75 (1996) (holding that jurisdic-tional defect arising from improper removal wascured once nondiverse defendant was dismissed dueto settlement: "Once a diversity case has been tried infederal court ... considerations of finality, efficiency,and economy become overwhelming.").

13

Here, in its January 18, 2011 Opinion, the D.C.Circuit simply followed the well-established, long-standing precedent of this Court and remanded thiscase to the district court to determine whether, underRule 19, any of the nondiverse self-funded customerswere indispensable and to then "proceed under Rule21." Pet. App. 10a. Indeed, the posture of this case -with its long litigation history, multitude of courtopinions and a three-week jury trial - makes a re-mand for dismissal of nondiverse claims the only justand practical disposition. By refusing to dismiss thisaction and instead remanding it to the district courtto determine which claims may be dismissed in orderto preserve complete diversity jurisdiction, the D.C.Circuit followed an efficient, practical course, therebyavoiding "unnecessary and wasteful burdens on theparties, judges, and other litigants waiting for judi-cial attention." Newman-Green, 490 U.S. at 836.

A. The D.C. Circuit’s Opinion conformsprecisely to Newman-Green

In their effort to convince this Court that thereare compelling reasons to grant a writ of certiorari,Petitioners unsuccessfully try to distinguish the D.C.Circuit’s ruling from the scores of other cases over thedecades in which federal courts have dismissed dis-pensable nondiverse parties to preserve jurisdiction.

Preliminarily, the D.C. Circuit did not- as Peti-tioners misleadingly assert - invoke the "narrowexception" of Newman-Green. Pet. 16. The "narrow

14

question" the Court addressed in Newman-Green waswhether the courts of appeals could do what districtcourts could indisputably do - that is, dismiss dispen-sable non-diverse parties on their own accord - orwhether a court of appeals must remand the case tothe district court, thus leaving the matter to the

district court’s discretion. See Newman-Green, 490U.S. at 832-33. In holding that courts of appeals didhave this authority, the Court in Newman-Green,cautioned, however, that appellate courts (not districtcourts) should exercise this discretion sparingly,noting that if factual disputes arise, it might be moreappropriate to remand to the district court. Id. at837-38./~d that is exactly what the D.C. Circuit did

in this instance; it did not decide this issue itself, butrather remanded to the district court to address theindispensable party issue and then "to determine,which, if any, of the self-funded customers may bedismissed in order to restore complete diversity." Pet.App. 10a..

In trying to manufacture a "narrow" Newman-Green exception, Petitioners assert that Newman-Green should be limited to situations in which it is adefendant that should be dismissed to preservediversity. Pet. 17. But the language of Rule 21 beliessuch a reading and neither Newman-Green nor anyother Supreme Court decision has ever made thisdistincti~,n. And of course courts have dismisseddispensable plaintiffs, in the same manner as defen-dants, to preserve jurisdiction. See, e.g., PublickerIndus., Inc. v. Roman Ceramics Corp., 603 F.2d 1065,

15

1068-69 (3d Cir. 1979) (cited in Newman-Green, 490U.S. at 832 n.6); see also St. Paul Fire & Marine Ins.Co. v. Universal Builders Supply, 409 F.3d 73, 81-82

(2d Cir. 2005); LeBlanc v. Cleveland, 248 F.3d 95, 98-99 (2d Cir. 2001).

Petitioners also incorrectly claim that Newman-Green sanctioned only the dismissal of a single partythat was "otherwise irrelevant" to the case. Pet. 18.But again, nothing in the text of Rule 21 or any of thepertinent decisions of this Court restricts the abilityof a court to dismiss so-called jurisdictional spoilers toonly a single party or claim. In fact, this Court haspreviously acknowledged the dismissal of multipleparties to preserve jurisdiction. See Carneal, 23 U.S.at 188; Horn, 84 U.S. at 579. When appropriate,modern courts have examined the citizenship of largenumbers of persons for purposes of ascertainingwhether parties can be dismissed to preserve diversi-ty. See, e.g., Herrick Co. v. SCS Comms., Inc., 251 F.3d315, 334 (2d Cir. 2001) (remanding to district courtfor determination of citizenship of Skadden, Arps,Slate, Meagher & Flom partners); E.R. Squibb &Sons, Inc. v. Accident & Casualty Ins. Co., 160 F.3d925, 938-39 (2d Cir. 1998) (enumerating considera-tions the district court must address on remand todetermine diversity issues involving numerous un-identified Lloyd’s of London underwriters and whetherRule 21 dismissal was appropriate); E.R. Squibb &Sons, Inc. v. Accident & Casualty Ins. Co., 241 F.3d154, 161, 164 (2d Cir. 1999) (affirming district courtjurisdictional rulings as to this "large number ofunspecified individuals").

16

Moreover, Petitioners’ attempt to distinguish thenondiverse party in Newman-Green because he was"otherwise irrelevant" is a not a distinction found inany case law. Rather, long-established precedentprovides that nondiverse parties may be dismissedwhen they are not indispensable to the case. See, e.g.,Carneal, 23 U.S. (10 Wheat.) at 188; Horn, 848 U.S.at 579; Newman-Green, 490 U.S. at 832-33, 838.Here, in accordance with this principle, the D.C.Circuit directed the district court to determinewhether the self-funded customers were indispensa-ble to th~.s action. Pet. App. 10a. As noted above, thisinquiry is already well underway: on June 29, 2011,Respondents submitted to the district court briefingas to why the self-funded customers are not indispen-sable parties; Petitioners’ responsive brief is due July18, 2011.

Finally, Petitioners try to distinguish Newman-Green because the defect was "easily curable." Pet.18. The fact that the jurisdictional defect in Newman-Green could be easily cured was indeed a point thataugured in favor of the court of appeals deciding theissue without remand to the district court. Here,however, the D.C. Circuit did not follow Newman-Green and decide the jurisdictional issue itself, butinstead remanded the matter to the district court forfurther proceedings under Rule 21.

Petitioners claim that because the jurisdictionalissues are "numerous and complex" this mattershould have been dismissed rather than remanded.Id. They cite no law for this proposition, and indeed

17

there is none. Further, since this case has only re-cently been remanded to the district court, it is purespeculation for Petitioners to argue that there will bewide-ranging post-triM inquiries regarding citizen-ship. Judge Hogan is an experienced trial judge fullycapable of addressing whatever proceedings may benecessary. As this Court has noted, such an interlocu-tory posture is itself "sufficient ground" for denial ofcertiorari review. Hamilton Brown Shoe Co. v. WolfBros. & Co., 240 U.S. 251, 258 (1916); see also Va.Military Inst. v. United States, 508 U.S. 946 (1993)(Scalia, J., concurring).

While there are numerous claims asserted onbehalf of self-funded customers, this does not meanthe jurisdictional issues are "complex." As shown inRespondents’ June 29, 2011 submission to the districtcourt, hundreds of these self-funded customers aretowns, counties, and school districts - entities forwhich the citizenship determination is simple andcannot be contested. See Mt. Healthy City Sch. Dist.Bd. of Educ. v. Doyle, 429 U.S. 274, 280-81 (1977);Moor v. County of Alameda, 411 U.S. 693, 717, 721(1973). Hundreds more are corporations, for whichthe citizenship determination is also clear-cut. See 28U.S.C. § 1332(c)(1); Hertz Corp. v. Friend, 130 S. Ct.1181, 1192 (2010). To the extent there were entitiesfor which a determination of diverse citizenship couldnot be made, Respondents have already sought adismissal and remittitur of the damages awarded forthese self-funded customer claims, and will seek anyadditional remittitur necessary when they provide

18

supplementation to the district court later thismonth. See supra pp. 7-8.

Petitioners also assert that because there areclaims by a large number of parties, there may becomplicated issues of state law determination. Peti-tioners have vastly overstated this purported concern,which they never raised previously in the district court.Even, however, if Petitioners were correct, issuesregarding applicable state law have nothing to dowith federal court jurisdiction, which is the only issueproperly before this Court.

Justice Marshall noted in Newman-Green that ifthe entire case were dismissed, the plaintiff wouldsimply refile the action in district court. See Newman-Green, 490 U.S. at 837. The same is true here. If thislawsuit were completely dismissed, a near-identicalsuit could be refiled in federal court by Respondentsand hundreds of their customers that are diverse. Thefiling of a new lawsuit would cause the parties andthe federal court system to redo a decade of litigationand "would entail needless waste and run[ ] counterto effective judicial administration." See Mullaney,

342 U.S. at 417.

B. The D.C. Circuit’s straightforward ap-plication of established law will notencourage a "flood" of state-law caseslacking diversity

The Opinion - which initially directs the districtcourt to apply Rule 19 to determine whether parties

19

are indispensable and then to "proceed under Rule21" - does not open the floodgates to unwarranteddiversity litigation. Rules 19 and 21 give courts thediscretion to address a given case based on its uniquefacts and circumstances. See Fed R. Civ. P. 19(b) ("thecourt must determine whether, in equity and goodconscience, the action should proceed among theexisting parties or should be dismissed"); ProvidentTradesmens Bank & Trust Co. v. Patterson, 390 U.S.102, 106-07, 109, 116-20 (1968) (Rule 19 analysis iscase-specific and designed to reach most equitableresult); Fed. R. Civ. P. 21 ("the court may at any time,on just terms, add or drop a party" or "sever anyclaim against a party"); e.g., Sweeney v. Westvaco Co.,926 F.2d 29, 41 (1st Cir. 1990) ("We believe that thisis an appropriate case for exercise of the power todismiss a nondiverse party."); Herrick, 251 F.3d at330-34 (remanding for district court to determinecitizenship and, if parties are nondiverse, whetherthe facts appropriately call for application of Rule 21to drop nondiverse party).

Thus, under Rules 19 and 21, district courtsare able to apply "equity and good conscience" anddetermine what terms are "just" and therefore havethe ability to dismiss actions in which one or bothparties have fraudulently attempted to create diversi-ty jurisdiction where none exists. Here, the D.C.Circuit made no new law or even suggested an expan-sive interpretation of the law. As such, its unremark-able application of a long-standing legal rule to avoidthe waste of judicial time and litigant expense does

20

nothing to encourage a flood of spurious diversityfilings in the federal court system.

As shown, the very nature of Rule 21 itself coun-ters Petitioners’ argument that litigants will suddenlyperceive a carte blanche invitation to institute casesinvolving nondiverse parties. Rule 21 is permissiverather tihan mandatory, specifically empowering, butnot compelling, courts to dismiss parties or claims atany time on terms the court deems just. See, e.g., Ricev. Sunrise Express, 209 F.3d 1008, 1016 (7th Cir.2000). The careful application of Rule 21 to eliminatenondiverse parties from this case will not encourageothers to file spurious lawsuits in federal court. SeeCaterpillar, 519 U.S. at 77 (defendants’ argumentregarding invitation to inappropriate diversity asser-tions depends on mistaken premise that the districtcourt wit~l not apply the law).

Moreover, the crux of the Opinion holds thatthere was no supplemental jurisdiction over theclaims of the self-funded customers, relying on thisCourt’s holding in Exxon-Mobil Corp. v. AllapattahServs., Inc., 545 U.S. 546 (2005). Thus, if anything,the Opinion will discourage, rather than encourage,federal court filings by those who seek to bring claimson behalf of others who are not diverse from alldefendants.

21

II. The D.C. Circuit’s Opinion does not conflictwith decisions of the Seventh or EighthCircuits

There is no circuit split among the courts ofappeals. Neither the Seventh nor the Eighth Circuithas adopted any such rule that parties may not bedismissed to cure diversity jurisdiction, nor has eitherCircuit ever adopted a rule that nondiverse plaintiffsmay not be dismissed to preserve diversity jurisdic-tion. This is, of course, perfectly logical, as such aruling would be contrary to the plain language ofRule 21 and long-standing law. Rather, in the twocases Petitioners cite, the Seventh and Eighth Cir-cuits simply considered factual circumstances verydifferent from those presented here and held that,under the facts of those cases, dismissal of the entireaction was appropriate.

A. The Seventh Circuit analyzed Rule 21in an entirely different factual scenario

In Sta-Rite Industries v. Allstate Insurance Co.,the plaintiffs filed parallel suits in federal and statecourt because the lone defendant in the state courtaction was nondiverse and would thus have defeatedjurisdiction in the federal action against the otherdefendants. 96 F.3d 281, 283-84 (7th Cir. 1996). Afterthe district court dismissed the federal suit, findingthe absent defendant "indispensable" under Rule 19,the plaintiffs discovered on appeal that one of theirown citizenships was nondiverse to another defen-dant. Id. at 283. Before the Seventh Circuit the

22

plaintiffs therefore challenged the Rule 19 rulingbelow and additionally asked the appellate court tosever either the nondiverse plaintiff or the nondiversedefendant. Id.

The Seventh Circuit affirmed the lower court’sRule 19 determination as to the absent state-courtdefendant and held that the defendant who wasdetermined to be nondiverse on appeal was similarlyindispensable. Id. at 285-86. Accordingly, by defini-tion the court could not employ Rule 21 to drop theseparties, as a suit may not proceed without an indis-pensable party. See Rule 19(b); Newman-Green, 490U.S. at 832-33, 838. Here, the D.C. Circuit’s opinionacknowledges and conforms precisely to this rule, asit requires the district court to first determine thatthe self-funded customers are "not indispensable" underRule 19 prior to addressing Rule 21. Pet. App. 10a.

As to the request on appeal to dismiss the non-diverse plaintiff, again the facts of Sta-Rite are inap-posite m.~d negate any purported circuit conflict. Inthat case, the plaintiffs’ complaint sought declaratoryrelief based on the conduct of both of the plaintiffs,such that to remove one of them would render thecourt unable to accord complete relief to the re-maining parties. Id. at 286-87. Here, by contrast, theself-funded customers’ claims are independent andsegregable from each other and from those ofRespondents. Indeed, the case was set to proceed totrial without them. Pet. App. 17a (district court"effectively dismissed" the self-funded claims priorto their reinstatement via ratification). Accordingly,

23

the self-funded customers cannot be necessary, muchless indispensable, and the district court can accordcomplete relief among the remaining parties. See Abelv. Am. Art Analog, Inc., 838 F.2d 691, 694 (3d Cir.1988). Petitioners’ arguments rely on the erroneouspremise that the self-funded customers are real par-ties in interest with respect to Respondents’ claims.Certainly the self-funded customers are the realparties in interest for their own, respective claims fordrug overcharges, but just as certainly they have nointerest in Respondents’ respective claims. See Pet.App. 17a.

Furthermore, the judicial economy interests inSta-Rite were such that even if it were addressing adispensable party, the court may well have declined toemploy Rule 21. Unlike the present case, in Sta-Ritejustness and efficiency were served by refusing toapply Rule 21, as there was a pending state actionthat offered a single forum for all claims and the bestcourt for resolution of the state law "issues of firstimpression" presented in the case. Id. at 286-88.Additionally, that suit was still in its incipiency, ratherthan in a post-trial appellate posture, as here. Id. at 287.

Further belying Respondents’ purported circuitsplit, the Seventh Circuit has itself employed Rule 21to dismiss a dispensable, nondiverse party, e.g.,Scaccianoce vo Hixon Mfg. & Supply Co., 57 F.3d 582,585 (7th Cir. 1995), and recently affirmed, citing Rule21 and Newman-Green, the district court’s severanceof two nondiverse parties to preserve jurisdiction.Dexia Credit Local v. Rogan, 602 F.3d 879, 883 (7th

24

Cir. 2010); see also Dexia Credit Local v. Rogan, 629F.3d 612, 621-22 (7th Cir. 2010); Wild v. SubscriptionPlus, Inc., 292 F.3d 526, 529 (7th Cir. 2002). This isjust what the D.C. Circuit has given the district courtthe opportunity to do here after proper Rule 19 andevidentiary inquiries.

B. Respondents’ Eighth Circuit case like-wise presents no conflict with the D.C.Circuit

In Associated Insurance Management Corp. v.Arkansas General Agency, the plaintiff sued as acollectio~a agent on behalf of two insurers, but had noclaims of its own and was not a real party in interest.149 F.3d 794, 797 (8th Cir. 1998). Upon defendants’motion to dismiss for lack of jurisdiction, the diverseinsurer joined as a plaintiff and the nondiverseinsurer ratified the collection agent’s pursuit of itsclaims under Rule 17(a). Id. On appeal, the EighthCircuit held that the nondiverse insurer’s continuedparticipation via ratification destroyed diversity juris-diction and should not have been permitted. Id. Indenying the plaintiffs’ request to drop the nondiverseinsurer’s claims, the Eighth Circuit expressed itsdispleas’~re with the plaintiffs’ tactics, noting that thedefendants had raised the jurisdictional issue prior totrial but rather than ask the district court to severthe actions at that juncture, the plaintiffs attemptedto keep an inappropriate case in federal court. Id. at798.

25

Thus, this case does not stand for the broadproposition Petitioners assert, but rather simplyillustrates the discretionary nature of Rule 21, whichcan serve, along with Rule 11 and the statutoryprohibition against collusive creation of jurisdiction,to check jurisdictional abuses. See supra Section I.B;cf. Caterpillar, 519 U.S. at 77 (rejecting argumentthat Court’s holding would incent attempts at wrong-ful removals to federal court). Associated InsuranceManagement involved parties the court found to haveflouted and attempted to manipulate jurisdictionalrules in the face of an early challenge. Associated Ins.Mgmt., 149 F.3d at 798. By contrast, this case in-volves Respondents who acted in good faith, andPetitioners who waited for a decade until the week ofappellate oral argument to object to subject matterjurisdiction. Additionally, the original plaintiff inAssociation Insurance Management was a collectionagent with no claims of its own, whereas the fourRespondents here each asserted substantial distinctdamage claims for independent injuries.

Demonstrating the harmony between the D.C.and Eighth Circuits on this issue, the Eighth Circuithas recently cited with approval a district court’sability to dismiss a nondiverse party via Rule 21,Bailey v. Bayer CropScience L.P., 563 F.3d 302, 308-09 (8th Cir. 2009), and even acknowledged in Associ-ated Insurance Management that the district courtcould have itself dismissed the claim of the non-diverse real party in interest to preserve jurisdictionover the diverse claim. Associated Ins. Mgmt., 149

26

F.3d at 798; see also Fetzer v. Cities Serv. Oil Co., 572F.2d 1250, 1252-53 & n.4 (8th Cir. 1978) (affirmingdistrict court’s severance of claims under Rule 21 topreserve diversity jurisdiction). There is no conflictamong the circuits as to the meaning and applicationof Rule 21.

CONCLUSION

Petitioners fail to state any compelling basis for a

writ of certiorari to this Court. The Petition should bedenied.

MARTIN R. LUECK

Counsel of RecordSARA A. POULOSJAMES R. SAFLEYSARAH E. HUDLESTONROBINS, KAPLAN, MILLER

& CIRESI L.L.P.2800 LaSalle Plaza800 LaSalle AvenueMinneapolis, MN 55402-2015(612) 349-8500mrlueck@rkmc.com

Attorneys for RespondentsBlue Cross Blue Shield ofMinnesota, Blue Cross BlueShield of Massachusetts, andFederated MutualInsurance Company

Respectfully submitted,

ROBERT T. RHOAD

RYAN C. TISCHCROWELL 8~ MORING LLP1001 Pennsylvania Ave. N.W.Washington, DC 20004-2595(202) 624-2545

Attorneys for RespondentHealth CareService Corporation