Declaratory Judgment Act Claim Should Be Dismissed When Plaintiff Does Not Establish That Defendants Could Have Filed A Federal Claim
DEBARTOLO v. HEALTHSOUTH CORPORATION (June 26, 2009)
Hansel DeBartolo was a surgeon and a limited partner in a surgical center in Joliet. The partnership agreement required DeBartolo to certify each year that he earned at least one third of his medical income from Medicare-approved procedures and he performed at least one third of those procedures at the surgical center in Joliet. The purpose of the certification was to qualify for a "safe harbor" in the Anti-Kickback Act, an act that makes criminal certain referral payments to physicians. When DeBartolo was unable to meet his certification obligations, the general partner exercised the contractual right to buy his interest. DeBartolo initiated an action for declaratory relief, claiming that the certification requirements of the partnership agreement violated the Anti-Kickback Act and, thus, were unenforceable. The district court dismissed for failure to state a claim. DeBartolo appeals.
In their opinion, Chief Judge Easterbrook and Judges Ripple and Rovner vacated and remanded. Although both parties agreed that the district court had jurisdiction, the Court engaged in its own jurisdiction analysis. Section 1331 grants the power to hear matters "arising" under federal law. Here, DeBartolo cites the Anti-Kickback Act as a defense to an anticipated contract claim of the defendant. But, the Court said, a federal defense does not satisfy the "arising under" requirement of section 1331. When a party brings an action under the Declaratory Judgment Act, he must establish that the defendants have a claim "arising under" federal law. The Court vacated the dismissal order of the district court and remanded with instructions to dismiss for lack of jurisdiction.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select