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Medical Development International v. California Dep't of Corrections and Rehabilitation

January 21, 2010



Plaintiff Medical Development International ("MDI") brought this action against defendants California Department of Corrections and Rehabilitation ("CDCR"), Robert Sillen ("Sillen"), individually and as Reciever, and J. Clark Kelso ("the Receiver"), as Receiver. Presently before the court is the Receiver's motion to transfer this action to the Northern District of California pursuant to 28 U.S.C. § 1404(a).

I. Factual and Procedural Background

On October 3, 2005, the Honorable Thelton Eugene Henderson of the Northern District of California issued an opinion in Plata v. Schwarzenegger, No. 01-1351, 2005 WL 2932253 (N.D. Cal. Oct. 3, 2005),*fn1 a class action challenging the constitutional adequacy of medical care provided to CDCR inmates with serious medical needs. Id. at *1. In his opinion, Judge Henderson determined that the California prison medical care system was "broken beyond repair." Id.

In response to these systemic defects, Judge Henderson established a Receivership to manage the health care systems at the CDCR's various institutions to bring the medial care up to constitutional standards. Id. Judge Henderson subsequently appointed defendant Sillen as the Receiver on February 14, 2006 (effective April 17, 2006) and charged him with the "duty to control, oversee, supervise, and direct all administrative, personnel, financial, accounting, contractual, legal, and other operational functions of the medical delivery component of the CDCR." Plata v. Schwarzenegger, No. 01-1351, slip op. at 2 (N.D. Cal. Feb. 14, 2006) ("Order Appointing Receiver") (hereinafter "OAR").

In a subsequent order on March 30, 2006, Judge Henderson directed the CDCR, then under the control of Sillen, to begin developing new processes for medical contract management. Plata v. Schwarzenegger, No. 01-1351, slip op. at 5-7 (N.D. Cal. Mar. 30, 2006). The March 30, 2006 Order required the CDCR to pay "all current outstanding, valid, and CDCR approved medical invoices (even in the absence of a separate written approved contract) within 60 days of the date of this order." Id. at 5. The Order further provided that during a 180-day planning period, "to ensure continuity of medical care, and to mitigate the loss of life or limb and preserve the limited pool of competent providers, CDCR shall not be required to competitively bid medical services contracts nor file bid exemption applications . . . ." Id.

At about this same period, the CDCR entered into negotiations with plaintiff--an administrator of prison health care systems--to provide specialty medical services for inmates at two California correctional facilities as part of a pilot program. (Compl. ¶¶ 8, 20-21.) In early September 2006, CDCR officials permitted plaintiff to begin performing services at the two institutions notwithstanding the absence of a final executed contract. (Id. ¶¶ 25-27.)

Shortly after plaintiff began providing its services, the CDCR staff--noting that plaintiff was not licensed to practice medicine in California--questioned whether plaintiff was functioning in violation of California's prohibition on the corporate practice of medicine. (Id. ¶¶ 33-34.) In January 2007, amid the ongoing concerns regarding the legality of plaintiff's services, Sillen called for a halt to the CDCR's processing of plaintiff's final contract and ordered the CDCR to stop further payments on plaintiff's invoices. (Id. ¶¶ 36-37.) Plaintiff nonetheless continued providing services without compensation. (Id. ¶ 42.) During a February 16, 2007 meeting, Sillen renewed his concerns to plaintiff regarding the legality of its services and indicated that plaintiff could be paid only if it was determined that it could lawfully provide services in California. (Id. ¶ 44.) Plaintiff again continued to provide services to the two institutions, purportedly in reliance on "Mr. Sillen's representations regarding future payment." (Id. ¶ 45.)

On March 7, 2007, plaintiff provided Sillen with a legal memorandum--drafted by its counsel--that concluded its services were being lawfully provided. (Id. ¶ 46.) Sillen "refused to accept the opinion," ultimately demanding that plaintiff obtain an official opinion from the Medical Board of California. (Id. ¶¶ 47-48.) When plaintiff failed to promptly comply with his demand, Sillen effectively ended their relationship when he allegedly "physically expelled Plaintiff['s] personnel" from the two CDCR pilot program institutions on April 7, 2007. (Id. ¶¶ 50-51.)

On September 17, 2007, plaintiff filed a complaint in Sacramento Superior Court against Sillen (in both his official and individual capacities) and the CDCR. In its Complaint, plaintiff alleges fifteen state law causes of action arising from its purported reliance on certain misrepresentations that Sillen and the CDCR made throughout the preliminary contract negotiations. On October 16, 2007, Sillen removed the action to this court pursuant to 28 U.S.C. § 1442(a)(1).

On January 23, 2008, Judge Henderson dismissed Sillen as Receiver, simultaneously appointing Kelso as the new Receiver. On February 14, 2008, this court dismissed the action on the ground that plaintiff was required to obtain Judge Henderson's permission to bring an action against the Receiver. (Docket No. 50.) Plaintiff then filed an ex parte application with Judge Henderson in the Northern District requesting leave to file suit against the Receiver, which was denied on the grounds that leave would be futile because the Receiver was immune from suit. Plaintiff appealed both rulings.

The Ninth Circuit reversed in part, finding that permission from the appointing court was unnecessary to sue the Receiver under the statutory exception in 28 U.S.C. § 959(a) and that the Receiver was not immune from suit. Med. Dev. Int'l v. Cal. Dept. of Corr. & Rehab., 585 F.3d 1211, 1216, 1219 (9th Cir. 2009). The Ninth Circuit then remanded the action to this court, noting "that nothing in [its] opinion prevents the Eastern District from coordinating with or, if appropriate, transferring the action to the Northern District." Id. at 1222. The Receiver subsequently filed a motion to transfer the action to the Northern District. (Docket No. 60.) CDCR filed a statement of its non-opposition to the motion to transfer. (Docket No. 66.)

II. Discussion

"For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a).*fn2 Under § 1404(a), a district court "has discretion to adjudicate motions for transfer according to an individualized, case-by-case consideration of convenience and fairness." Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000) (quoting Stewart Org. v. Ricoh Corp., 487 U.S. 22, 29 (1988)) (internal quotation marks omitted). To undertake this analysis of "convenience" and the "interests of injustice," a district court may weigh "multiple factors," including the plaintiff's choice of forum, the contacts relating to the plaintiff's cause of action in the chosen forum, the convenience of witnesses and parties, and the ease of access to sources of proof.*fn3 Id. at 498-99; see DeFazio v. Hollister Employee Share Ownership Trust, 406 F. Supp. 2d 1085, 1088-89 (E.D. Cal. 2005) (Karlton, J.); Williams v. Bowman, 157 F. Supp. 2d 1103, 1106 (N.D. Cal. 2001).

"No single factor is dispositive and a district court has broad discretion to adjudicate motions for transfer on a case-by-case basis." Ctr. for Biological Diversity v. Kempthorne, No. 08-1339, 2008 WL 4543043, at *2 (N.D. Cal. Oct. 10, 2008) (citing Stewart Org., 487 U.S. at 29; Sparling v. Hoffman Constr. Co., 964 F.2d 635, 639 (9th Cir. 1988)). Ultimately, the party moving for a transfer of venue under ยง 1404(a) "bears the burden to show that another forum is more convenient and serves the interest ...

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