The opinion of the court was delivered by: VICTOR MARRERO, District Judge
*fn1 Michael O. Leavitt is substituted for his predecessor,
Tommy Thompson, as Secretary of the Department of Health and
Human Services. See Fed.R.Civ.P. 25(d).
Plaintiff Caremark Therapeutic Services ("CTS") brings this
action against the Secretary of the Department of Health and
Human Services (the "Secretary") and the Centers for Medicare &
Medicaid Services (collectively "Defendants") for judicial review
of a final decision of the Secretary pursuant to
42 U.S.C. §§ 405(g) and 1395ff(b) (1). CTS seeks reimbursement for
pharmaceutical services provided to a hemophilia patient.
Defendants contend that the Southern District of New York is not
the proper venue for this action and move to dismiss on that
basis under Rule 12(b) (3) of the Federal Rules of Civil
Procedure. They further dispute the existence of subject matter jurisdiction with respect to all but
one of CTS's causes of action and move to dismiss these claims
under Rule 12(b) (1) of the Federal Rules of Civil Procedure. For
the reasons discussed below, Defendants' motion to dismiss for
improper venue is GRANTED and the case is transferred to the
Central District of California.
CTS is a home health care provider, also licensed as a
pharmacist. (Compl. ¶ 7.) CTS is the assignee of a Medicare
beneficiary covered by Medicare Part B. (Compl. ¶ 6.) Medicare
Part B is a supplemental insurance program that covers outpatient
medical and other health services, including home health care
services, for eligible individuals. See 42 U.S.C. § 1395k. CTS
indicates that it was incorporated in California on its Medicare
Federal Health Care Provider/Supplier Enrollment Application (the
"Enrollment Application") (Enrollment Application, attached as
Exhibit A to the Declaration of Rachel H. Park, dated April 21,
2005 ("Park Decl."), at 9.)*fn2 CTS lists its practice
location as Redlands, San Bernardino County, California and
provides a correspondence address in Los Angeles on the
Enrollment Application. (See id.) Correspondence regarding Medicare
appeals is addressed to CTS in Redlands, California. (Compl. Ex.
A, Ex. B, Ex. D, Ex. G, Ex. H.) CTS's parent corporation,
Caremark RX, Inc. ("Caremark RX") is licensed to do business in
New York, but was incorporated in Delaware and has its principal
place of business in Nashville, Tennessee. (See Entity
Information Report, NYS Dep't of State, Div. of Corps., attached
as Exhibit C to Pl.'s Br.)*fn3 Several affiliates of CTS are
also licensed to do business or incorporated in New York. (See
id.) The Enrollment Application requires providers to disclose
information about individuals and entities with an ownership or
control interest in the provider. See 42 C.F.R. § 420.206;
Requirements for Establishing and Maintaining Medicare Billing
Privileges, 68 Fed. Reg. 22064 (proposed Apr. 25, 2003). CTS
indicated on the Enrollment Application that Caremark RX and
Caremark International, Inc. ("Caremark International") had a
five percent or more ownership interest in, and managing control
of, CTS at all relevant times. (Park Decl. Ex. A at 25.) Caremark
International is located in Northbrook, Illinois (Id.) and is
not licensed to do business in New York (Pl.'s Br. Ex. C). The
instructions to the Enrollment Application explain that "[a]ny organization that exercises operational or
managerial control over the provider, or conducts the day-to-day
operations of the provider, is a managing organization and must
be reported" as having managing control. See Requirements for
Establishing and Maintaining Medicare Billing Privileges,
68 Fed. Reg. 22064.
Defendants move to dismiss under Rule 12(b) (3) of the Federal
Rules of Civil Procedure, asserting improper venue. As the
plaintiff, CTS bears the burden of establishing proper venue in
this district. See Central Nat.-Gottesman v. M.V. "Gertrude
Oldendorff," 204 F. Supp. 2d 675, 677 (S.D.N.Y. 2002); Central
Sports Army Club v. Arena Assocs., 952 F. Supp. 181, 188
(S.D.N.Y. 1997). In assessing whether CTS has met this burden,
the Court accepts facts alleged in the complaint as true and
draws all reasonable inferences in CTS's favor. See Varabiev
v. Bank Leumi Le Israel (Switzerland), No. 03 Civ. 3063, 2004 WL
936804, at *2 (S.D.N.Y. Apr. 30, 2004); Central Nat.-Gottesman,
204 F. Supp. 2d at 677. As with a motion to dismiss for lack of
subject matter jurisdiction, courts may consider materials
outside the pleadings on a motion to dismiss for improper venue.
See Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th
Cir. 1996); Varabiev, 2004 WL 936804, at *2; Burell v. State Farm Fire & Cas. Co.,
No. 00 Civ. 5733, 2001 WL 797461, at *3 (S.D.N.Y. July 12, 2001).
B. VENUE UNDER 42 U.S.C. § 405(g)
CTS asserts that venue is proper under the Medicare Act, Title
XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et seq. The
Medicare Act provides that individuals or their representatives
who are dissatisfied with a benefits determination or their
representatives are entitled to judicial review of final
determinations of the Secretary as provided in 42 U.S.C. § 405(g)
("§ 405(g)"). Section 405(g) further provides that
[s]uch action shall be brought in the district court
of the United States for the judicial district in
which the plaintiff resides, or has his principal
place of business, or, if he does not reside or have
his principal place of business within any such
judicial district, in the United States District
Court for the District of Columbia.
Id. CTS asserts that it is a resident of the Southern District
of New York. The accuracy of this assertion depends on the
resolution of two distinct legal issues. First, the Court must
consider the meaning of the term "resides" as used in § 405 (g).
Second, the Court must consider whether, and in what
circumstances, the residence of a corporation for purposes of
venue may be based on the residence of its parent or affiliates. The Court addresses these issues in turn.
1. The Residence of a Plaintiff Corporation Under § 405(g)
CTS asks the Court to give a broad reading to the term
"reside" as used in § 405 (g). The traditional
definition of residence for a corporation the place of
incorporation. See Pure Oil Co. v. Suarez, 384 U.S. 202, 203 (1966);
17 James Wm. Moore et al., Moore Federal Practice § 110.03 (3d ed.
1997). In various contexts, this definition has been expanded
by congress and the courts. However, this case does not present
one of those contexts. In fact, the traditional definition of
residence has almost always been applied when the corporation is
a plaintiff. The rare exceptions to this rule, see, e.g., Upjohn Co. v. Finch,
303 F. Supp. 241, 254 (W.D. Mich. 1969), have now been foreclosed
by statute. See 28 U.S.C. § 1391(c); 15 Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 1311 (2d ed.
Supp. 2005). Nonetheless, because the meaning of the term
"resides" is perhaps less than crystal clear in the § 405(g)
context, the issue merits some discussion.
CTS relies on 42 U.S.C. § 1391 (c) ("§ 1391(c)"), which defines
residence for corporate defendants, for its assertion that it
resides of the Southern District of New York. This reliance is
misplaced. Because case law and commentary analysis of these various venue
provisions has been conducted against a changing statutory
background, some historical context is helpful to this inquiry.
In 1948, Congress revised and recodified the judicial code. See
Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 225
(1957). The general venue provision, 28 U.S.C. § 1391,
incorporated a newly broadened conception of corporate residence,
at least with respect to corporate defendants. See Manchester
Modes, Inc. v. Schuman, 426 F.2d 629, 632 (2d Cir. 1970).
Section 1391(c) stated that "[a] corporation may be sued in any
judicial district in which it is incorporated or licensed to do
business or is doing business, and such judicial district shall
be regarded as the residence of such corporation for venue
purposes." 62 Stat. 935 (1948) (current version at
28 U.S.C. § 1391 (c) (2000)).
In Manchester Modes, the Second Circuit explained the
circumstances which spurred Congress to act to expand venue for
corporate defendants:
As corporations spread their activities through the
country, states increasingly made them subject to
suit wherever they were "doing business" or could be
"found." A corresponding adjustment in federal
procedural law, however, did not occur; for venue
purposes, the definition of corporate residence as
the state of incorporation remained the rule.
426 F.2d at 630. Congress thus enacted § 1391(c) in "`response to a general conviction that it was intolerable if the
traditional concepts of "residence" and "presence" kept a
corporation from being sued wherever it was creating
liabilities.'" Pure Oil, 384 U.S. at 205 n. 3 (internal
quotations omitted) (quoting Transmirra Prods. Corp. v. Fourco
Glass Co.,
233 F.2d 885, 887 (2d Cir. 1956), rev'd on
other grounds,
353 U.S. 222 (1957)).
After the enactment of § 1391(c), courts were faced with the
question whether that provision applied to define the term
"resides" in specific venue statutes. At the same time, they also
considered whether the 1948 version of § 1391 (c) applied to
define the residence of corporate plaintiffs as well as corporate
defendants. The Second Circuit answered the second question in
the negative. See Manchester Modes,
426 F.2d 629. Congress
laid the latter debate to rest in 1988, when it repealed the 1948
statute and adopted a new § 1391 (c) which clearly applied only
to corporate defendants. See 15 Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 3811 (2d ed. Supp.
2005). Section 1391(c) currently provides:
For purposes of venue under this chapter, a defendant
that is a corporation shall be deemed to reside in
any judicial district in which it is subject to
personal jurisdiction at the time the action is
commenced. In a State which has more than one
judicial district and in which a defendant that is a
corporation is subject to personal jurisdiction at
the time the action is commenced, such corporation shall be deemed to reside
in any district in that State within which its
contacts would be sufficient to subject it to
personal jurisdiction if that district were a
separate State, and, if there is no such district,
the corporation shall be deemed to reside in the
district within which it ...