In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 12-‐‑3882 & 13-‐‑2230
BOB MYRICK and CHARLOTTE PHILLIPS,
Plaintiffs-‐‑Appellants,
v.
WELLPOINT, INC., et al.,
Defendants-‐‑Appellees.
____________________
Appeals from the United States District Court
for the Southern District of Illinois.
No. 10-‐‑cv-‐‑00357-‐‑JPG-‐‑SCW — J. Phil Gilbert, Judge.
____________________
ARGUED JANUARY 24, 2014 — DECIDED AUGUST 19, 2014
____________________
Before BAUER, EASTERBROOK, and WILLIAMS, Circuit Judg-‐‑
es.
EASTERBROOK, Circuit Judge. During 2001 the insurance
regulators of Illinois permitted WellPoint (through a subsid-‐‑
iary) to acquire RightCHOICE Managed Care, Inc., which
offered health insurance through its subsidiary Right-‐‑
CHOICE Insurance Company. WellPoint caused Right-‐‑
CHOICE Insurance to withdraw from the Illinois market in
2002; this cancelled all RightCHOICE policies. WellPoint of-‐‑
2 Nos. 12-‐‑3882 & 13-‐‑2230
fered the policyholders costlier UniCare policies as substi-‐‑
tutes. Persons who elected not to pay the higher premiums
had to shop for policies from different insurers, which usual-‐‑
ly declined to cover pre-‐‑existing conditions. Contending that
the cancellation of RightCHOICE policies violated Illinois
law, Greg Cima and several others filed suit and asked the
district court to certify a class of all former RightCHOICE
policyholders. The district court declined, Cima v. WellPoint
Health Networks, Inc., 250 F.R.D. 374 (S.D. Ill. 2008), and later
entered judgment against plaintiffs on the merits, Cima v.
WellPoint Health Networks, Inc., 2008 U.S. Dist. LEXIS 84882
(S.D. Ill. Oct. 22, 2008). No one appealed.
Because Cima had not been certified as a class action, the
judgment bound only the named plaintiffs. The law firm be-‐‑
hind Cima found another set of former policyholders and
filed a new suit, this time in state court, making the same
substantive contentions and again proposing certification as
a class action. The federal decision not to certify a class did
not prevent state courts from reaching a contrary decision,
see Smith v. Bayer Corp., 131 S. Ct. 2368 (2011), but the federal
decision on the merits remained. Defendants removed the
suit under 28 U.S.C. §1453, part of the Class Action Fairness
Act. Section 1453 incorporates the requirements of 28 U.S.C.
§1332(d), which makes this suit removable because the pro-‐‑
posed class has at least 100 members, the amount in contro-‐‑
versy exceeds $5 million, and at least one class member has a
citizenship different from at least one defendant.
Plaintiffs asked the district judge to remand the suit un-‐‑
der §1332(d)(4), which says that the court shall “decline to
exercise” the jurisdiction created under §1332(d)(2) if at least
two-‐‑thirds of the class’s members are citizens of the state in
Nos. 12-‐‑3882 & 13-‐‑2230 3
which the suit began and at least one defendant from which
“significant relief” is sought is a citizen of the same state. It
is agreed that the complaint seeks “significant relief” from
an Illinois defendant. Plaintiffs observed that the Right-‐‑
CHOICE policy was offered only to persons who represent-‐‑
ed that they live in Illinois (or, for group policies, to employ-‐‑
ers who represented that most beneficiaries live in Illinois).
The policies were cancelled in 2002, and plaintiffs main-‐‑
tained that, if their former holders left Illinois at the normal
rate (the Census Bureau estimates that roughly 2% of the na-‐‑
tion’s population changes states each year), about 87% of the
class would have been Illinois residents when the suit was
removed. But the district judge denied the motion to re-‐‑
mand. Phillips v. WellPoint, Inc., 2010 U.S. Dist. LEXIS 123844
(S.D. Ill. Nov. 23, 2010). It then again declined to certify a
class, Phillips v. WellPoint, Inc., 2012 U.S. Dist. LEXIS 147736
(S.D. Ill. Oct. 15, 2012), and again ruled in defendants’ favor
on the merits, Phillips v. WellPoint, Inc., 2012 U.S. Dist. LEXIS
175405 (S.D. Ill. Dec. 10, 2012). This time appeals have been
taken: by plaintiff Bob Myrick concerning all issues and by
plaintiff Charlotte Phillips concerning the district court’s
award of costs.
When deciding that the suit belongs in federal court, the
district judge noted that the policies were issued to persons
who represented that they “reside” in Illinois, while
§1332(d)(4) deals with the class members’ “citizenship”. For
purposes of the diversity jurisdiction, citizenship differs
from residence. Citizenship means domicile (the person’s
long-‐‑term plan for a state of habitation) rather than just cur-‐‑
rent residence. See In re Sprint Nextel Corp., 593 F.3d 669 (7th
Cir. 2010) (distinguishing residence from citizenship for the
purpose of §1332(d)(4)). What’s more, people who said they
4 Nos. 12-‐‑3882 & 13-‐‑2230
resided in Illinois might have meant something else; perhaps
some who lived in Indiana but worked in Illinois bought
RightCHOICE policies. And for the purpose of §1332(d)(4)
employers that purchased group plans have their own citi-‐‑
zenships, which may be distinct from the residence of the
policies’ beneficiaries. Group policies also covered persons
who lived outside of Illinois, if employers represented that
most workers lived inside. The district judge thought that
plaintiffs had failed to establish the exception to federal ju-‐‑
risdiction under §1332(d)(2).
It is not clear from the statute which side has the burden
of persuasion under §1332(d)(4), but Hart v. FedEx Ground
Package System, Inc., 457 F.3d 675 (7th Cir. 2006), holds that it
belongs to the party relying on the home-‐‑state exception. It
follows that the party proposing that the district court “de-‐‑
cline to exercise” jurisdiction that was properly invoked at
the time of removal also has the burden of production. The
jurisdictional rules are those in §1332(d)(2); the “decline to
exercise” clause of §1332(d)(4), like the local-‐‑law-‐‑remand
provision in 28 U.S.C. §1367(c), concerns whether the court
exercises jurisdiction to the full, not whether jurisdiction ex-‐‑
ists. See Morrison v. YTB International, Inc., 649 F.3d 533 (7th
Cir. 2011). This makes it a party-‐‑driven rather than a court-‐‑
driven rule. Judges must enforce limits on subject-‐‑matter ju-‐‑
risdiction no matter what the litigants do or concede, but
other case-‐‑processing rules may be waived or forfeited, and
judges may wait for issues to be properly presented. See,
e.g., Gonzalez v. Thaler, 132 S. Ct. 641 (2012); Reed Elsevier, Inc.
v. Muchnick, 559 U.S. 154 (2010). So plaintiffs needed to pro-‐‑
duce some evidence that would allow the court to determine
the class members’ citizenships on the date the case was re-‐‑
moved. Yet they produced none.
Nos. 12-‐‑3882 & 13-‐‑2230 5
Instead plaintiffs pointed to the policies’ language and
asked the court to infer that (a) because coverage under in-‐‑
dividual policies was supposed to be restricted to residents
of Illinois, it was so restricted in fact; (b) all residents of Illi-‐‑
nois also are citizens of Illinois; (c) holders of RightCHOICE
policies were no more likely to move than average citizens of
every state; and (d) employers purchasing group policies all
are citizens of Illinois, even though the policies do not re-‐‑
strict the location of employers (that is, California or Wis-‐‑
consin firms could purchase RightCHOICE policies for
workers at their facilities in Illinois). These propositions may
or may not be right, but plaintiffs did not offer any evidence
to support them.
In a supplemental memorandum filed after oral argu-‐‑
ment, plaintiffs contended that proving the citizenship of all
class members is simply too expensive, so proof should be
excused. Lawyers who launch class actions are not in a good
position to complain about the expenses they entail; plain-‐‑
tiffs and their counsel must be prepared to meet them or be
deemed inadequate representatives. Cf. Eisen v. Carlisle &
Jacquelin, 417 U.S. 156 (1974) (the cost of notifying all class
members does not justify foregoing notice or shifting the ex-‐‑
pense to the defendants).
Not that it would have been prohibitively costly to offer
evidence. Counsel for the proposed class assumed that there
were only two options: determine the citizenship of every
policyholder (expensive) or rely on assumptions (cheap). But
there’s at least one more option: take a random sample of
policyholders (100, say), ascertain the citizenship of each of
these on the date the case was removed, and extrapolate to
the class as a whole. If the sample yields a lopsided result
6 Nos. 12-‐‑3882 & 13-‐‑2230
(say, 90% Illinois citizens or only 50% Illinois citizens) then
the outcome is clear without the need for more evidence.
(The more lopsided the result, the smaller the sample need-‐‑
ed to achieve statistical significance.) If the result is close to
the statutory two-‐‑thirds line, then do more sampling and
hire a statistician to ensure that the larger sample produces a
reliable result. Nothing of the kind was done, however, and
on an empty record the district court was entitled to con-‐‑
clude that §1332(d)(4) has not been satisfied.
We skip over the question whether the plaintiffs could
have met the requirements for class certification under Fed.
R. Civ. P. 23, because counsel’s insouciance toward the need
for proof of the class members’ citizenship is only one illus-‐‑
tration of plaintiffs’ (and counsel’s) inadequacy as represent-‐‑
atives. The very fact that counsel have asked us to direct the
district court to certify this suit as a class action is another.
Plaintiffs have already lost on the merits; that counsel want
to take the rest of the putative class down in flames with
them shows what a slapdash approach they have adopted to
this litigation.
We could understand a contention that, if we first reverse
on the merits (or at least remand for a trial), then we should
direct the district judge to certify a class. But class counsel’s
brief maintains that a class should be certified no matter
what happens on the merits. (Counsel receded from this po-‐‑
sition at oral argument, but only after initially defending it.)
When writing the brief, counsel seems to have forgotten that,
had a class been certified in Cima, this suit could never have
been filed. Now that the district court has (again) ruled for
WellPoint on the merits, we would have expected defend-‐‑
ants to become the proponents of class certification, which
Nos. 12-‐‑3882 & 13-‐‑2230 7
would make a third suit impossible. Defendants appear to
be content with the precedential effect of an appellate deci-‐‑
sion, however, and it is unclear why that wouldn’t do nicely
for the putative class as well if plaintiffs prevail in this court.
No more need be said about Rule 23.
As for the merits: the district court has covered them in
detail, more than twice. (Both Cima and this suit produced
multiple opinions on different substantive issues, each time
followed by opinions dealing with requests for reconsidera-‐‑
tion.) We have nothing to add to what the district judge has
written and affirm substantially for the reasons he gave.
In brief: (1) A claim that WellPoint misrepresented its
plans to state insurance regulators when acquiring Right-‐‑
CHOICE may entitle the regulators to seek redress, but they
have not expressed any dissatisfaction; private litigants can-‐‑
not enforce state regulators’ entitlements. (2) Because Right-‐‑
CHOICE was losing money in 2001, it is unlikely that the ac-‐‑
quisition (or a statement made to an agency) was the cause
of the policy’s discontinuation or its replacement by a differ-‐‑
ent policy with a higher premium. (3) The Illinois Health In-‐‑
surance Portability and Accountability Act (HIPAA) cannot
be enforced by a private suit when there are other public or
private means to implement its terms. Abbasi v. Paraskevou-‐‑
lakos, 187 Ill. 2d 386 (1999); Fisher v. Lexington Health Care,
Inc., 188 Ill. 2d 455 (1999). Since the RightCHOICE policies
contained HIPAA’s substantive terms almost verbatim, en-‐‑
forcing the contract suffices. (4) Plaintiffs now concede that
as a matter of contract RightCHOICE Insurance was entitled
to withdraw from the Illinois market and cancel existing pol-‐‑
icies. HIPAA’s language about withdrawal and cancellation,
8 Nos. 12-‐‑3882 & 13-‐‑2230
215 ILCS 97/50(B)(3), (C), is materially identical to the poli-‐‑
cies in this respect, so HIPAA has not been violated.
The only remaining question concerns costs. Defendants
submitted a bill of costs running to about $96,000; the district
court awarded about $39,000. Phillips v. WellPoint, Inc., 2013
U.S. Dist. LEXIS 69830 (S.D. Ill. May 16, 2013). Appellants do
not contend that any of the awarded costs was improper
under 28 U.S.C. §1920 or that defendants needlessly ran up
the costs in this suit. Instead they maintain that, because de-‐‑
fendants’ conduct in replacing the RightCHOICE policy with
the more expensive UniCare policy was “reprehensible”, the
losing side should not have to pay costs. Yet Fed. R. Civ. P.
54(d)(1) creates a presumption in favor of awarding costs to
the prevailing party. The district court did not abuse its dis-‐‑
cretion in implementing that presumption.
Plaintiffs demanded many million dollars; a high-‐‑stakes
suit does not come cheap to either side. Despite losing Cima,
the law firm tried again in the hope that a different forum
would produce a different answer. After finding itself back
in the original forum and before the judge who had decided
Cima, the law firm did not economize. It could have asked
the district court to enter the same opinion as in Cima in or-‐‑
der to set up an appeal; instead it launched a new round of
discovery and proceeded to litigate as if Cima did not exist.
No wonder the defendants incurred substantial costs.
Law firms representing would-‐‑be class representatives
have portfolios of suits. Some will be settled for considerable
sums; others will fail. Paying the costs of failure is part of
being in this business. See Rand v. Monsanto Co., 926 F.2d 596
(7th Cir. 1991) (observing that class counsel properly agree
to bear the costs of suit, rather than leaving them with the
Nos. 12-‐‑3882 & 13-‐‑2230 9
figurehead representatives); see also White v. Sundstrand
Corp., 256 F.3d 580, 586 (7th Cir. 2001). Counsel should thank
their lucky stars that the district court did not sanction them
under 28 U.S.C. §1927 for filing a second suit rather than
pursuing the first through appeal.
AFFIRMED