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Molina Healthcare of New Mexico, Inc. v. El Paso Healthcare System

March 9, 2010

MOLINA HEALTHCARE OF NEW MEXICO, INC. PLAINTIFF,
v.
EL PASO HEALTHCARE SYSTEM, LTD. DEFENDANT.



MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS UNDER FEDERAL RULE OF CIVIL PROCEDURE 12(b)(3)

THIS MATTER comes before this Court on Defendant's Opposed Motion to Dismiss or Transfer for Improper or Inconvenient Venue under Rule 12(b)(3) of the Federal Rules of Civil Procedure. The parties to this suit dispute the reimbursement rate provided under New Mexico's Medicaid program. Defendant moves to dismiss Plaintiff's Complaint, asserting that the claims in this lawsuit are compulsory counterclaims that should have been asserted in an underlying lawsuit*fn1 in the United States District Court for the Western District of Texas ("the Texas lawsuit"). Because the claims plead in this case are compulsory counterclaims, Defendant's Motion to Dismiss is GRANTED, and this case is DISMISSED.

BACKGROUND

The Defendant, El Paso Healthcare System, Ltd. ("El Paso Healthcare"), originally sued Plaintiff Molina Healthcare of New Mexico, Inc. ("Molina") in Texas state court to obtain, in part, a declaratory judgment regarding the appropriate rate of reimbursement for outpatient services under the New Mexico Administrative Code. Molina operates a health plan that provides insurance to patients enrolled in the New Mexico Medicaid program. As part of Molina's arrangement with the New Mexico Medicaid agency, Molina receives a fee directly from the New Mexico Human Services Department for each Medicaid beneficiary who is enrolled in Molina's health plan. Many of the patients enrolled in Molina's health plan live in New Mexico communities that border El Paso, Texas and receive healthcare services at hospitals operated by El Paso Healthcare. Because El Paso Healthcare does not have a contract with Molina which defines reimbursement rates, Molina must pay El Paso Healthcare the regulatory default rate laid out in Medicaid regulations. N.M. ADMIN. CODE tit. 8 § 4.MAD.704. The parties dispute the default outpatient reimbursement rate required under New Mexico law.

Molina removed the Texas lawsuit to federal district court in El Paso, Texas, and then filed a motion to transfer the case to the United States District Court for the District of New Mexico on the basis that it was not amenable to process served in Texas and that the District of New Mexico was a more convenient forum. The Texas court denied Molina's motion and subsequently entered a scheduling order. Shortly before the deadlines for completion of discovery and filing of dispositive motions, Molina attempted to add counterclaims against El Paso Healthcare by filing a Motion for Leave to Amend and File a Counterclaim. On the same day, Molina filed, but did not serve, this lawsuit in federal district court in New Mexico.

Although both suits concern the proper Medicaid reimbursement rate, Molina contends that the claims brought before this Court are not compulsory counterclaims. El Paso Healthcare filed this Opposed Motion to Dismiss or Transfer for Improper or Inconvenient Venue based on two alternative legal questions: (i) whether Molina's claims represent compulsory counterclaims, barred by Federal Rule of Civil Procedure 13(a)(1); and (ii) if not, whether this Court should transfer Molina's claims to the Texas lawsuit. The Court finds that the counterclaims filed are compulsory ...


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