Opinion
Civil Action No: 01-585, Section: "J"(4)
May 16, 2001
MINUTE ENTRY
The following motions were taken under advisement on April 25, 2001, after oral argument:
Defendant United Healthcare's Motion to Dismiss (Rec. Doc. 3; REF: 01-585)
Plaintiff's Motion for Partial Summary Judgment (Rec. Doc. 9; REF: 01-585)
Defendant Healthcare Recoveries' Motion to Dismiss (Rec. Doc. 28; REF: 01-650)
The motions pertain to two consolidated cases. Civil Action 01-585 ("CA 01-585") is a putative class action lawsuit which was removed to this Court from state court. Civil Action 01-650 ("CA 01-650"), another putative class action which arose out of the same events that gave rise to CA 01-585, was filed in this Court after defendant United Healthcare of Louisiana, Inc. removed CA 01-585. The cases were subsequently consolidated. By way of the aforementioned motions, Defendants have moved to dismiss both cases based on Plaintiff's failure to exhaust the administrative remedies outlined in Plaintiff's Employee Retirement Income Security Act ("ERISA") plan, and Plaintiff has moved for partial summary judgment in CA 01-585.
After reviewing the motions, Plaintiff's state court petition, and the-Notice of Removal, the Court sua sponte raised the issue of removal jurisdiction in CA 01-585. The parties were ordered to brief the issue prior to oral argument on the motions. See Rec. Doc. 34.
Having now considered the memoranda, arguments presented by counsel, the record, and the applicable law, the Court concludes that CA 01-585 was improperly removed as this Court has no subject matter jurisdiction over the case. Accordingly, CA 01-585 is REMANDED to state court. Consequently, defendant United Healthcare's Motion to Dismiss (Rec. Doc. 3) and Plaintiff's Motion for Partial Summary Judgment (Rec. Doc 9) are DENIED AS MOOT. Finally, defendant Healthcare Recoveries' Motion to Dismiss (Rec. Doc. 28), filed in CA 01-650, is DENIED for the reasons that follow.
Background
In October 1999, Kyle M. Hamilton ("Plaintiff") was seriously injured in a single-vehicle automobile accident in which he was a guest passenger. As a result of the accident, Plaintiff required medical and other treatment. Defendant United Healthcare of Louisiana, Inc. ("United") had in force a group health plan, offered through Plaintiff's father's employer, pursuant to which Plaintiff was insured as a dependent. Pursuant to that coverage, United paid for certain of the medical and other services, necessitated by the accident, allegedly totaling in excess of $100,000.
At the time of the accident, Plaintiff's father also had in effect uninsured and/or underinsured motorist ("UM") coverage pursuant to two polices with State Farm Insurance Company ("State Farm"). State Farm paid nearly $250,000 in UM benefits and $5,000 in MedPay benefits to Plaintiff pursuant to those policies. Shortly thereafter, defendant Healthcare Recoveries, Inc. ("HRI"), acting pursuant to its contract with United, began sending notices to Plaintiff's father and State Farm in an attempt to enforce subrogation rights that United claimed to have against any of the proceeds that Plaintiff might receive from third parties, including his own insurer State Farm. State Farm, through Plaintiff's counsel, subsequently paid $57,757.06 out of the $250,000 UM policy proceeds to which Plaintiff would have otherwise been entitled, to HRI on behalf of United.
Plaintiff's damages far exceeded the limits of the driver's auto liability policy.
At oral argument, counsel for United and HRI explained that HRI provides subrogation enforcement services for insurers such as United. HRI provides these services pursuant to a contractual agreement with the insurer. HRI and United are wholly separate business entities with no common ownership.
Plaintiff then retained new counsel who attempted to recover the monies that United had obtained from State Farm. On February 2, 2001, counsel sent United a letter outlining in detail why Louisiana Revised Statutes 22:2006(7) and 22:663 precluded the type of subgrogation claims that United had made against the State Farm proceeds. Attached to that letter was a copy of Plaintiff's state court petition (CA 01-585). In correspondence dated March 5, 2001, United. rejected Plaintiff's position.
In this-suit (CA 01-585), Plaintiff's seeks to recover the monies paid to United through HRI and asks the Court to enjoin any further attempts by United to either coordinate benefits or subrogate claims to any future proceeds under the State Farm policies. Plaintiff argues that La. R.S. 22:663 prohibits an HMO like United from coordinating benefits and/or subrogating claims against an individually written policy of insurance such as Plaintiff's State Farm policies. United removed the case to this Court alleging that ERISA completely preempts Plaintiff's state law claims.
After United removed CA 01-585, Plaintiff filed CA 01-650, another putative class action, naming HRI as defendant. In that suit, Plaintiff alleges that HRI's acts during its recovery of funds from Plaintiff and others violates 15 U.S.C. § 1692, et. seq. (Fair Debt Collection Practices Act or "FDCPA"), as well as La. R.S. 51:1401, et seq. (Louisiana Unfair Trade Practices Act or "LUTPA"). The cases were consolidated in this Court.
Defendants in both cases have filed identical motions to dismiss. Those motions are grounded on the assertion that Plaintiff's claims are governed by ERISA and. that the jurisprudence requires an ERISA plaintiff to exhaust his administrative remedies prior to seeking redress in the courts. United and HRI assert that Plaintiff has not fully availed himself of the administrative proceedings outlined in his ERISA plan, and therefore, both suits must be dismissed as premature. Plaintiff opposes both motions and has moved for partial summary judgment in CA 01-585.
CA 01-585 — Subject Matter Jurisdiction
As noted above, while reviewing the motions filed by both parties in this case, the Court sua sponte began to question whether it had subject matter jurisdiction over CA 01-585. United and Plaintiff are both citizens of Louisiana, and on its face, Plaintiff's well-pleaded state court petition raises only issues of state law. In the Notice of Removal, United asserts that ERISA preempts Plaintiff's state law claims giving this Court original jurisdiction founded on 28 U.S.C. § 1331 and making the case removable pursuant to 28 U.S.C. § 1441 (a). Even where the non-removing party has failed to question subject matter jurisdiction, the Court is duty-bound to ascertain that the case is properly in federal court. See Copling v. Container Store, Inc., 174 F.3d 590, 594 (5th Cir. 1999) (citing Free v. Abbott Labs., Inc., 164 F.3d 270, 272 (5th Cir. 1999)).
Pursuant to 28 U.S.C. § 1441 (a), any civil action over which the district court has original jurisdiction is removable from state court. One such category of civil actions over which district courts have original jurisdiction are "federal question" cases or those arising under the Constitution or laws of the United States. 28 U.S.C. § 1331;Heimann v. National Elevator Indus. Pens. Fund, 187 F.3d 493, 499 (5th Cir. 1999). Under the "well-pleaded complaint" rule, the district courts have "federal question" jurisdiction over a case only when plaintiff's wellpleaded complaint raises issues of federal law. Id. (citing Gully v. First Nat'l Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936);Louisville Nashville R. Co. v. Mottley, 211. U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908)). Absent some other basis for subject matter jurisdiction, the well-pleaded complaint. rule does not allow removal based solely upon an anticipated or even inevitable federal defense. See Carpenter v. Wichita Falls, Indep. Sch. Dist., 44 F.3d 362, 366 (5th Cir. 1995) (quoting Gully, 299 U.S. at 111, 57 S.Ct. at 97).
A narrow exception to the requirement that the basis of federal question jurisdiction appear on the face of plaintiff's well-pleaded complaint is the doctrine of complete preemption. Id. at 367; Heimann, 187 F.3d at 499. Complete preemption, a corollary to the well-pleaded complaint rule, recognizes that "Congress may so completely preempt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Heinmaun, 187 F.3d at 499. Under the doctrine of complete preemption, Plaintiff cannot avoid removal by artful pleading, i.e., casting his federal suit as one arising exclusively under state law, because federal law "so forcibly and completely displace[s] state law" so as to leave plaintiff with no viable state law claim. Carpenter, 44 F.3d at 366. Under complete preemption, plaintiff's state law claims are "transmogrified" into federal claims. See Copling, 174 F.3d at 595. Where federal law completely preempts plaintiff's state law claim, removal jurisdiction exists. Heimann, 187 F.3d at 499.
In contrast to complete preemption which creates removal jurisdiction, the more common type of preemption, ordinary or conflict preemption, does not. Id. (citing McClelland v. Gronwaldt, 155 F.3d 507, 515 (5th Cir. 1998)). Rather, ordinary or conflict preemption serves as a federal defense to plaintiff's suit and may arise either by an express statutory statement or by a direct conflict between the operation of federal and state law. Id. at 500. Because ordinary preemption is a defense, it does not appear on the face of plaintiff's well-pleaded complaint, and therefore, does not authorize removal to federal court. Id. (citingMcClelland, 155 F.3d at 516).
ERISA contemplates complete preemption pursuant to 29 U.S.C. § 1132 (a) and ordinary preemption pursuant to 29 U.S.C. § 1144 (a) See Lakeland Anesthesia, Inc. v. Aetna U.S. Healthcare, Inc., 2000 WL 777911 (E.D. La. 2000) (citing Copling, 174 F.3d at 594). Thus, state law claims that fall within the purview of section 1132(a) are removable to federal court notwithstanding the well-pleaded complaint rule and "regardless of how artfully pled as a state action." Id. (quotingCopling, 174 F.3d at 594); Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)). On the other hand, claims subject only to ordinary preemption under section 1144(a) confer no basis for federal question jurisdiction, and are therefore, not removable. McClelland, 155 F.3d at 517. Thus, in. a removed case where no other basis for federal subject matter jurisdiction exists, complete preemption must apply in order for the court to retain jurisdiction.
Section 1132, entitled Civil enforcement, provides in pertinent part:
A civil action may be brought — (1) by a participant or beneficiary —
* * *
(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.
29 U.S.C.A; § 1132 (1999).
Section 1144 is recited in the text at pp. 11-12 infra.
In the Fifth Circuit, courts apply a two-part test when determining whether a state cause of action is completely preempted by ERISA section 1132(a). Copling, 174 F.3d at 594-95; McClelland, 15 F.3d at 517; Hartle v. Packard Electric, 877 F.2d 354, 355 (5th. Cir. 1989) ("A prerequisite to [complete preemption under section 1132] is that the state law claims actually be preempted by ERISA [section 1144]."). Part one asks whether the state law claim at issue is subject to ordinary preemption under section 1144(a) because without ordinary preemption-complete preemption will not apply. McClelland, 155 F.3d at 517. If the state law claim is in fact subject to ordinary ERISA preemption, then the Court goes on to part two, which is to determine whether the claim falls under section 1132, the complete preemption provision. If both parts are satisfied, then the claim is subject to complete preemption. Thus, the Court begins its analysis with a determination as to whether La. R.S. 22:663 is subject to ordinary preemption under ERISA section. 1144.
Other courts have rejected the two-part test because it requires the district court to make a ruling on a substantive matter, i.e., whether ERISA provides a federal defense to plaintiff's state law claims, even if the district court ultimately concludes: that it has no jurisdiction. See. e.g., Tovey v. Prudential Ins. Co., 42 F. Supp.2d 919, 924 (W.D. Mo. 1999); see also Cooling, 174 F.3d at 597-99 (Wiener, J., specially concurring). The Fifth Circuit has noted, however, that because remand after rejection of complete preemption is jurisdictional, the district court's comments on the substantive preemption defense are irrelevant. Copling, 174 F.3d. at 595 n. 7 (citing Soley v. First Nat'l Bank of Commerce, 923 F.2d 406 (5th Cir. 1991)); Heaton v. Monogram, 231 F.3d 994, 1000 (5th Cir. 2000) (citingSmith v. Texas Children's Hosp., 172 F.3d 923, 926 (5th Cir. 1999)). (a) Except as provided in subsection (b) of this section ["the savings clause"], the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title.
Section 1144(a), entitled "Other laws," provides in pertinent part:
29 U.S.C.A. § 1144(a) (1999) (emphasis added).
A law relates to an ERISA plan if it has a connection with or reference to the plan. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48, 107 S.Ct. 1549, 1553, 95 L.Ed.2d 39 (1987) (quoting Metropolitan Life, .471 U.S. at 739, 105 S.Ct. at 2389). The phrase "relate to" has been interpreted to apply in a broad and sweeping manner. Heinmann, 187 F.3d at 512.
Notwithstanding the broad sweep of section 1144(a), subsection (b), termed "the savings clause," excludes or saves from preemption "any law of any State which regulates insurance, banking, or securities." 29 U.S.C. § 1144 (b)(2)(A). As long as the ERISA plan at issue is insured as opposed to self-funded, "the savings clause, ' saves from ordinary preemption any state law that regulates insurance. FMC Core. v. Holliday, 498 U.S. 52, 61, 111 S.Ct. 403, 409, 112 L.Ed.2d 356 (1990) (citing 29 U.S.C. § 1144 (b)(2) (B) "the deemer clause"). Thus, under the two-part analysis applied in the Fifth Circuit, in the case of an insured ERISA plan where a statute otherwise within the scope of section 1144(a) (ordinary preemption) is saved from preemption under section 1144(b)(2)(A) (the savings clause), there is no complete preemption.
However, when the state law at issue creates an alternative remedy for obtaining benefits under an ERISA plan, the law may nevertheless be preempted under section 1132 notwithstanding that it would otherwise be saved under the savings clause. Coporate Health Ins., Inc. v. Texas Dep't of Ins., 215 F.3d 526, 538-39 (5th Cir. 2000) (citing Pilot Life, 481 U.S. at 52, 107 S.Ct. 1558); Parra v. John Alden Life Ins. Co., 22 F. Supp.2d 1360, 1364 (S.D. Fla. 1998). In the instant case, such an exception to the savings clause would not apply because Plaintiffs are not, via this lawsuit, seeking benefits under an ERISA plan.
Against these precepts the Court turns its attention to the case at hand. As noted by defense counsel at oral argument, the ERISA plan at issue in this case is an. insured plan as opposed to a self-funded plan. Because the plan is insured, it is not exempt from regulation under state laws that regulate insurance within the meaning of the ERISA savings clause. Accordingly, if La. R.S. 22:663 falls within the savings clause, then it is not subject to ordinary preemption under ERISA.
The Supreme Court has developed a framework for resolving whether a state law "regulates insurance" within the meaning of the savings clause. See Unum Life Ins. Co. v. Ward, 526 U.S. 358, 367, 119 S.Ct. 1380, 1386, 143 L.Ed.2d 462 (1999). First, the court asks whether from a "common-sense" view, the contested law regulates insurance. Id. (citing Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724; 105 S.Ct. 2380, 85 L. Ed. 2d 728 (1985); Pilot Life, 481 U.S. at 48, 107 S.Ct. 1549). Second, the court considers three factors employed to determine whether the regulation or law fits within the "business of insurance" as that phrase is used in the McCarran-Ferguson Act, 15 U.S.C. § 1011,et seq.: (1) Does the law have the effect of transferring or spreading a policyholder's risk, (2) Does the law serve as an integral part of the policy relationship between the insurer and the insured, and (3) Is the law's application limited to entities within the insurance industry or is it a law of general application? Id. (citing Metropolitan Life, 471 U.S. at 743, 105 S.Ct. 2380; Pilot Life, 481 U.S. at 48-49; 107 S.Ct. 1549). A statute need not satisfy all three of the McCarran Ferguson factors in order to regulate insurance under the ERISA's savings clause. Unum Life, 526 U.S. at 373, 119 S.Ct. at 1389.
Assuming arguendo that La. R.S. 22:663 would be preempted under the broad reach of section 1144(a) (ordinary preemption), based upon the factors noted above, the Court concludes that it falls squarely within the anibit of the savings clause of section 1144(b)(2) (a), and is therefore not subject to ordinary preemption. La. R.S. 22:663, located in Louisiana's Insurance Code, provides:
Notwithstanding any other provisions in this title to the contrary, no group policy of accident, health or hospitalization insurance, or of any group combination of these coverages, shall be issued by any insurer doing business in this state which by the terms of such policy group contract excludes or reduces the payment of benefits to or on. behalf of an insured by reason of the fact that benefits have been. paid under any other individually underwritten contract or plan of insurance for the same claim determination period. Any group policy provision in. violation of this section shall be invalid.
La. R.S. 22:663 (West 1995).
It is beyond cavil that this statute "regulates insurance" as that term has been interpreted by the courts. Further, the statute is clearly aimed solely at insurance entities as opposed to being a law of general application. By severely limiting an insurer's ability to rely on individually written policies to limit its exposure, the statute unarguably alters the allocation of risk between the parties and plays an integral part in the policy relationship. In sum, La R 5 22 663 more than meets all of the requirements that the Supreme Court has promulgated for evaluating state laws under the ERISA saving clause. Other courts in this district that have considered whether La. R.S. 22:663 is saved from ordinary ERISA preemption have reached the same conclusion. Arana v. Ocshner Health Plan. Inc., 2001 WL 282823 (E.D. La. Mar. 13, 2001);Clancy v. Employers Health Ins. Co., 82 F. Supp.2d 589 (E.D. La. 1999). That being the case, it is saved from ordinary preemption under ERISA. And because it is not subject to ordinary preemption, and conflicts with no other substantive provisions of ERISA, Corporate Health Ins. Inc., 215 F.3d at 538-39, it is not completely preempted so as to confer subject matter jurisdiction upon this Court. Consequently, the Court concludes that it lacks subject matter jurisdiction over CA 01-585 and REMANDS that case to state court pursuant to 28 U.S.C. § 1447 (c). The two pending motions in that case are DENIED AS MOOT.
The Court notes that the Arana and Clancy courts also found that La. R.S. 22:663 was only enforceable via ERISA's civil enforcement provisions notwithstanding that it was saved from ordinary preemptiom. Other courts have disagreed with that approach. See e.g., Franklin H. Williams Ins. Trust v. Travelers Ins. Co., 50 F.3d 144, 151, (2d Cir. 1995) (concluding that "[i]t would be quixotic to rule" that a suit not removable to federal court [because it is saved and not subject to ordinary preemption], may nonetheless be enforced only via ERISA's civil enforcement provisions). The Supreme Court has expressly reserved taking a position on the issue until it is squarely presented. See Unum Life, 526 U.S. at 377 n. 7, 119 S.Ct. at 1391).
CA 01-650 — HRI's Motion to Dismiss
In its motion to dismiss, HRI argues that it is entitled to the protections of ERISA, including the exhaustion of administrative remedies doctrine, because HRI was at all times acting as agent for United. HRI asserts that Plaintiff has not exhausted his administrative remedies in accordance with the requirements of the ERISA plan at issue in this case, and that his suit should be dismissed or at least stayed. In opposition, Plaintiff argues that the exhaustion doctrine does not apply to his claims against HRI because HRI has no relationship to any ERISA plan. Plaintiff also argues that any further steps toward administrative exhaustion would be futile anyway given that only issues of statutory interpretation are at issue in this case.
Generally a plaintiff must exhaust all administrative remedies afforded by his ERISA plan before filing an ERISA claim in court. Hager v. Nationsbank, 167 F.3d 245, 247 (5th Cir. 1999) (citing Hall v. National Gypsum Co., 105 F.3d 225, 231 (5th Cir. 1997); Medina v. Anthem Life Ins. Co., 983 F.2d 29, 33 (5th Cir. 1993)). In the ERISA context, the exhaustion requirement is mandated, see Denton v. First National Bank of Waco, 765 F.2d 1295, 1297 (5th Cir. 1985) (holding that the ERISA administrative exhaustion requirement mandated in other circuits would also apply in the Fifth Circuit), and is not a prerequisite to a federal court's jurisdiction. Hager, 167 F.3d at 248 n. 3 (citing Chailland v. Brown Root. Inc., 45 F.3d 947, 950 n. 6 (5th Cir. 1995); Painter v. Golden Rule Ins. Co., 121 F.3d 436, 441 (8th Cir. 1997)). Where Congress has not clearly required exhaustion, "sound judicial discretion governs."Zephyr Aviation. L.L.C. v. Dailey, 2001 WL 332822, *2 (5th Cir. Apr. 4, 2001).
Assuming arguendo that HRI, as a party contracting with United, is entitled to "the protections" afforded by ERISA, a dubious premise to say the least, the Court nevertheless concludes that HRI's motion must be denied. Administrative exhaustion is required to further specific goals such as ensuring that Congress's desire to have ERISA trustees and not the federal courts be responsible for the actions of plan administrators, providing a clear record of administrative action if litigation ensues, and allowing judicial review of fiduciary action or inaction under the abuse of discretion standard, where applicable, rather than de novo. Bourgeois v. Pension Plan, 215 F.3d 475, 479 (5th Cir. 2000 )( citing Batchelor v. International Bro. of Elec. Workers Local 861 Pen. Ret. Fund, 877 F.2d 441, 444 n. 10 (5th Cir. 1989)). None of those goals would be furthered by dismissing or delaying Plaintiff's suit, grounded on allegations of fraud against HRI in its debt collection: practices, to require administrative exhaustion. Although narrowly applied, the Fifth Circuit has recognized an exception to the affirmative defense of failure to exhaust administrative remedies when such attempts would be futile. Bourgeois, 215 F.3d at 479 (citing Hall v. National Gypsum Co., 105 F.3d 225, 232 (5th Cir. 1997)).
Furthermore, assuming arguendo that Plaintiff was required to exhaust administrative remedies before filing suit against HRI, the Court concludes that the February 2, 2001 letter from Plaintiff's counsel to United was sufficient to meet that requirement. In response to that letter, a representative of United sent Plaintiff a letter rejecting his claim. That letter was reviewed by corporate counsel for United at their home off ice. HRI offers no plausible explanation as to how United's ERISA plan administrators are going to resolve claims against HRI under the FDCPA and LUTPA. Because the Court concludes that Plaintiff has exhausted his administrative remedies to the extent he was required to do so, HRI's motion to dismiss based on Plaintiff's failure to exhaust administrative remedies is DENIED.
Accordingly;
IT IS ORDERED that pursuant to 28 U.S.C. § 1447 (c), Civil Action 01-585 is REMINDED to the Civil District Court for the Parish of Orleans;
IT IS FURTHER ORDERED that United Healthcare's Motion to Dismiss (Rec. Doc. 3; REF: 01-585) should be and is hereby DENIED AS MOOT;
IT IS FURTHER ORDERED that Plaintiff's Motion for Partial Summary Judgment (Rec. Doc. 9; REP: 01-585) should be and is hereby DENIED AS MOOT;
IT IS FURTHER ORDERED that Healthcare Recoveries' Motion to Dismiss (Rec. Doc. 28; REF: 01-650) should be and is hereby DENIED.