Opinion
Civil Action No. DKC 2000-2946
May 23, 2001
MEMORANDUM OPINION
Pending before the court and ready for resolution is Plaintiff Shade Popoola's Motion to Stay or, in the alternative, to Remand to State Court. Plaintiff alleges that Defendant M.D.-Individual Practice Association, Inc., ("M.D. IPA") asserted liens on and subrogation interests in certain recoveries received by its insureds from third party tortfeasors in violation of anti-subrogation provisions in Md. Code Ann. Health-Gen. II, §§ 19-701(f)(3) and 19-710(o). Plaintiff seeks to bring a class action against health maintenance organizations ("HMOs") M.D. IPA, Optimum Choice, Inc., and MAMSI Life and Health Insurance Company for unjust enrichment (Count I) and negligent misrepresentation (Count II). Plaintiff also seeks a declaratory judgment that provisions in M.D. IPA's insurance contracts granting it subrogration rights are illegal under Maryland law. Defendants argue that this action is preempted by the Employee Retirement Income Security Act of 1974 ("ERISA") 29 U.S.C. § 1001 et seq. No hearing is deemed necessary, and the court now rules pursuant to Local Rule 105.6. For the reasons that follow, the court will GRANT Plaintiff's motion to stay and DENY her motion to remand.
I. Background
Plaintiff alleges that she was covered under an M.D. IPA health plan containing a subrogration provision, which provides that if a "covered person" is injured and, as a result of the injury, recovers money from a third party, then M.D. IPA may exercise subrogation rights to the extent of the benefits received under the contract. Plaintiff does not dispute that the plan under which she is covered is an ERISA plan provided by her employer. On September 3, 1998, Popoola received $20,000 from another insurer to resolve a claim arising from an automobile accident. M.D. IPA allegedly asserted a lien against the recovery, and Plaintiff paid Defendants $3,367.94. According to the complaint, prior to June 1, 2000, M.D. IPA regularly asserted subrogration rights against its members.
In an earlier similar action in Maryland state court, Riemer v. Columbia Medical Plan, a purported class of plaintiffs challenged their insurer's subrogation rights under their respective contracts. The plaintiffs in Riemer advanced the same causes of action and arguments as Plaintiff in this case. Columbia Medical Plan ("Columbia") removed the action to this court, claiming that the plaintiffs' claims were preempted by ERISA, and the matter was heard by Judge Benson E. Legg. The district court in Riemer held that ERISA preempted Md. Code Ann., Health-Gen. II, § 19-701 et seq. (2000) ("HMO Act"). Plaintiffs filed a motion for reconsideration, and the court affirmed its prior decision, dismissing the claims of Columbia members who were covered under plans governed by ERISA. That decision is on appeal before the Fourth Circuit. The district court remanded the claims of non-ERISA plan members to state court, explaining that the Maryland courts had not yet determined whether the HMO Act permits subrogation rights.
Plaintiffs in Riemer also brought a fraud claim.
In May 2000, the Court of Appeals of Maryland held that an insurer's practice of asserting subrogation rights against its members' recoveries violated Maryland law. Riemer v. Columbia Medical Plan, 358 Md. 222, 747 A.2d 677 (2000). Within a few days of that decision, however, the Maryland legislature amended the HMO Act expressly to provide for subrogation rights, and made the provisions retroactive to any amounts recovered on or after January 1, 1976. See Md. Code Ann. Health-Gen. II, § 19-713.1(d) (Editor's note).
II. Standard of Review
"The determination by a district judge in granting or denying a motion to stay proceedings calls for an exercise of judgment to balance the various factors relevant to the expeditious and comprehensive disposition of the causes of action on the court's docket." United States v. Georgia Pacific Corp., 562 F.2d 294, 296 (4th Cir. 1977) (citing Landis v. North American Co., 299 U.S. 248, 254 (1936)). A district court has inherent power to stay proceedings "to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." Landis, 299 U.S. at 254; see also Clinton v. Jones, 520 U.S. 681, 706-07 (1997) (citing Landis for the same proposition); Climax Molybdenum Co. v. M/V Seatrain Antwerp, 51 B.R. 192, 195 (D.Md. 1984) (power to stay proceedings is within the inherent powers of a trial court) (citation omitted). A stay may be justified when a similar action is pending in another court. 5A Charles Alan Wright and Arthur R. Miller, Federal Practice and Procedure § 1360 (2d ed. 1990) (citations omitted).
III. Analysis
Plaintiff requests that the court stay this matter pending the outcome in Riemer because, like Plaintiff in this case, plaintiffs in Riemer alleged that their insurer asserted liens against and subrogation interests in amounts they recovered from third-party tortfeasors in violation of the HMO Act, and brought causes of action against Columbia for unjust enrichment and negligent misrepresentation. Moreover, like Defendants in this action, the defendant in Riemer removed that case to this court, claiming that ERISA preempted the alleged anti-subrogation provisions of the HMO Act.
ERISA preemption generally involves two provisions, 29 U.S.C. § 1144(a), ERISA's preemption provision, and 29 U.S.C. § 1132(a), ERISA's civil enforcement provision. Custer v. Sweeney, 89 F.3d 1156, 1165 (4th Cir. 1996) (courts look to both the preemptive scope (preemption provision) and force (civil enforcement provision) of ERISA in applying the complete preemption doctrine). ERISA's civil enforcement provision states, in pertinent part, that a person may bring a civil action "to recover benefits due to him . . . to enforce his rights . . . or to clarify his rights to future benefits under the terms of the plan. . . ." 29 U.S.C. § 1132(a)(1)(B). An action can not be removed to federal court unless it falls within the scope of the civil enforcement provision. Metropolitan Life Ins. Co. v. General Motors Corp., 481 U.S. 58, 65-66 (1987). ERISA's preemption provision provides that "[e]xcept as provided in subsection (b) ["saving clause"] . . . the provisions of this . . . Chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." 29 U.S.C. § 1144(a). The saving clause provides "[e]xcept as provided in subparagraph (B) [the "deemer clause"], nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance. . . ." 29 U.S.C. § 1144 (b)(2)(A). As explained later, Plaintiff asserts, and Defendants do not dispute, that the deemer clause is inapplicable to this action.
As to the claims by class members who were covered under employee benefit plans governed by ERISA, the district court in Riemer found that ERISA preempted their state law claims and dismissed them. The court held that the action fell within the scope of ERISA's civil enforcement provision, 29 U.S.C. § 1132 (a)(1)(B), and was properly removable, because to resolve the plaintiffs' claims, the court would have had to construe the reimbursement provisions of the benefits plans. Paper no. 9, Plaintiff's exhibit 2 at 4-5. The court held that "such plan construction falls squarely within the exclusive civil enforcement scheme set out in ERISA § 502 [ 29 U.S.C. § 1132(a)], and is thus preempted." Id. The court also held that the plaintiff's claims related to an employee benefit plan, for purposes of 29 U.S.C. § 1144(a), ERISA's preemption provisions, and that the HMO Act is not saved from preemption by the saving clause. The Riemer plaintiffs filed a motion for reconsideration, and the court again held that the plaintiffs' claims fell within ERISA's civil enforcement provision and the case was thus properly removed to federal court. Paper no. 9, Plaintiff's exhibit 3 at 3. The court then stated that because removal was appropriate, it did not have to reach the plaintiffs' arguments under ERISA's preemption provision. Id. As already explained, that decision is now on appeal before the Fourth Circuit.
If a claim "relates to" an employee benefit plan, under 29 U.S.C. § 1144(a), then ERISA preempts that claim unless the saving clause precludes preemption. Jenkins v. Montgomery Indus. Inc., 77 F.3d 740, 744 n. 4 (4th Cir. 1996). Thus, if the saving clause in subsection (b) of the preemption provision applies, then a state law, or a claim brought thereunder, is not preempted under subsection (a). Franklin H. Williams Ins. Trust v. Travelers Ins. Co., 50 F.3d 144, 151 (2d Cir. 1995). One reason the court in Riemer gave for finding the saving clause did not apply to the plaintiffs' action was that Maryland law distinguishes between HMOs and insurers. Paper no. 9, Plaintiff's exhibit 2 at 9. Citing several cases, including Pomeroy v. Johns Hopkins Medical Services, 868 F. Supp. 110, 114 (D.Md. 1994) and O'Reilly v. Ceuleers, 912 F.2d 1383, 1389 (11th Cir. 1990), the court stated that HMOs are not in the business of insurance for purposes of the ERISA saving clause. Other courts have reached the opposite result. See e.g., Washington Physicians Serv. Ass'n v. Gregoire, 147 F.3d 1039, 1046 (9th Cir. 1998) (finding that HMOs are in the business of insurance, and ERISA's saving clause did apply).
Defendants oppose a stay primarily because they claim that certain procedural errors in the Riemer appeal may keep the Fourth Circuit from reaching the merits of the action. Specifically, they argue that the plaintiffs in Riemer "expressly excluded" from their Notice of Appeal the district court's decision to deny remand, and failed to "preserve in the district court any issue concerning the proper dismissal of their claims." Indeed, the defendant in Riemer raised both these arguments in its appellate brief.
With respect to the first contention, the Fourth Circuit considered and rejected a similar argument in Canady v. Crestar Mortgage Corp., 109 F.3d 969, 974-75 (4th Cir. 1997). In that breach of contract action, the appellants had excluded from their Notice of Appeal whether the district court had erred in setting the date on which interest began to accrue, for purposes of calculating damages. Id. at 974. The appellee asserted that the appellants had therefore waived that issue, although they had argued it in their brief. Id. The Fourth Circuit held that it would construe Fed.R.App.P. 3(c) (Contents of the Notice of Appeal) liberally, and that as long as the "intent to appeal a specific judgement can be fairly inferred and the appellee is not prejudiced by the mistake," an appeal on an issue excluded from the Notice of Appeal is not lost. Id. (citations and internal quotation marks omitted). An appellee has notice and is not prejudiced if the appellant argues in her opening brief the merits of the issue excluded in the Notice of Appeal. Id. (explaining that there was notice and no prejudice as the Canady's argued the merits of the interest starting date in their opening brief, and Crestar responded to their arguments in its brief).
In Riemer, the Notice of Appeal states that Plaintiffs appealed that portion of Judge Legg's reconsideration order that "granted dismissal and summary judgment to the Defendant of the Plaintiffs' putative class whose membership in the health care plan of Defendant . . . is purportedly governed by" ERISA. In their opening brief, plaintiffs in Riemer raised several issues, all related to whether ERISA preempts the HMO Act, including: (1) Did the district court err in holding that the anti-subrogation provisions of the Maryland HMO Act were not within ERISA's savings clause . . . (2) Did the district court err in holding that it had jurisdiction over this case under ERISA's enforcement clause, . . . when the plaintiffs' claims are not based upon the terms of the plan . . . [and] (3) Did the district court err in holding that ERISA's [civil] enforcement clause creates federal removal jurisdiction even when a case falls within ERISA's savings clause?" The Riemer plaintiffs expressly argued in their opening brief that Maryland's alleged anti-subrogration provisions are state regulations of insurance, and are saved from preemption and removal under ERISA's saving clause. While Defendant in Riemer raised the procedural issues explained above, it also addressed the merits of the plaintiffs' arguments. Specifically, Defendant argued that the class members' claims were properly removable under ERISA's civil enforcement provision, because the district court would have had to construe the benefits plans to resolve the plaintiffs' claims. It also argued that ERISA's saving clause does not "save," a claim from preemption when the claim falls within the scope of the civil enforcement provision. Thus, because the Riemer plaintiffs argued in their opening brief these issues pertaining to ERISA preemption of the alleged anti-subrogation provisions of the HMO ACT, and the defendant responded to these arguments, it is unlikely that the issues will be deemed waived despite any defects in the Notice of Appeal. Moreover, Plaintiffs contend, and Defendants have not disputed, that during oral arguments in Riemer, the Fourth Circuit posed no questions regarding the procedural issues that Defendants claim will prevent that court from reaching the merits of the appeal. In short, Defendants have not shown any likelihood that the Fourth Circuit will fail to reach the merits of the arguments raised in Riemer.
In this action, both parties advance the same arguments as their counterparts in Riemer. Plaintiff argues that preemption and removal are inappropriate because the alleged anti-subrogation provisions of the HMO Act are state regulations of insurance that fall within ERISA's saving clause, and that because the plans at issue are insured rather than self-funded, the deemer clause is inapplicable. Plaintiff also claims that ERISA's civil enforcement provision does not apply to this action because her claims are not based on the plan itself but rather on state common law. Thus, she argues that a court will not have to construe the plan to resolve any of her claims. This latter argument is particularly pertinent as the district court in Riemer held that the action was properly removable under ERISA's civil enforcement provision because the resolution of plaintiffs' claims required the court to construe their contracts. Paper no. 9, Plaintiff's exhibit 2 at 4-5.
In FMC Corp. v. Holliday, 498 U.S. 52, 58 (1990), the Court held that "[t]he saving clause returns to the States the power to enforce those state laws that regulat[e] insurance, except as provided by the deemer clause") (internal quotation marks omitted). The deemer clause exempts "self-funded ERISA plans from state laws . . . regulat[ing] insurance within the meaning of the saving clause." FMC Corp., 498 U.S. at 61 (internal quotation marks omitted). In FMC, the Court held that, because of the deemer clause, ERISA preempted a state's anti-subrogation provisions with respect to self-funded plans. Id. at 61-64. In the instant action, Plaintiff claims that the plan at issue is insured and not self-funded, thus the deemer clause is inapplicable.
Defendants argue that the saving clause analysis, or any analysis under ERISA's preemption provision, is irrelevant to the question of removal, and that the court should focus only on ERISA's civil enforcement provision to determine whether removal is appropriate. Defendants do not otherwise respond to Plaintiff's preemption arguments. However, the arguments they raise regarding removal were also advanced by appellee in Riemer. Thus, the issues raised by litigants in both actions are virtually identical, and a decision in Riemer on these issues will necessarily resolve the issues raised in this case.
Further, Defendants have not shown that they would be prejudiced if this action is stayed. Defendants themselves assert that this action should be stayed if this court were to decide that remand is appropriate. They contend that if this court determines that ERISA does not preempt Plaintiff's claims, and the Fourth Circuit reaches the opposite result with respect to the claims of the Riemer plaintiffs, Defendants in this action would be prejudiced as that remand order would be non-appealable. See Hinson v. Norwest Fin. South Carolina, Inc., 239 F.3d 611, 614 (4th Cir. 2001) (remand orders based on lack of subject matter jurisdiction are non-reviewable on appeal) (citing Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 711-12 (1996)); Copling v. The Container Store, Inc., 174 F.3d 590, 596-97 (5th Cir. 1999) (circuit court had no jurisdiction to review appeal of district court's remand order after trial court had determined that ERISA did not preempt state law claims, which wrested it of subject matter jurisdiction). Thus, Defendants essentially admit that the issues raised in this case are the same ones now before the Fourth Circuit, and that if the defendant in that case obtains a favorable result, Defendants in this case will as well.
Defendants also argue that it would be unfair for the court to stay this action as the parties in this case and in Riemer are distinct, and the only connection between the two groups is that the plaintiffs in both actions share the same counsel. They further argue that whatever the outcome in Riemer, the parties here "can fully preserve their positions" so that the Riemer decision can be applied to this case. However, a district court has discretion to stay actions when proceedings in another matter involve similar issues. 5A Charles Alan Wright and Arthur R. Miller, Federal Practice and Procedure § 1360 (2d ed. 1990) (citations omitted). The litigants in the two matters need not be the same. Landis, 299 U.S. at 254. As already explained, if this court determined that remand was appropriate, that would end the matter in federal court. On the other hand, if the court were to determine that ERISA preempted Plaintiff's claims, and that decision was appealed, then based on the arguments Plaintiff now raises, the Fourth Circuit would ultimately confront in this case the exact issues that the Riemer plaintiffs already have advanced. Rather than apply any decision obtained from Riemer retroactively, as Defendants suggest, it makes more sense to allow the Fourth Circuit to address the issues before it, and then to apply that decision, which this court must follow, to this case. Consequently, because the issues raised in this case and Riemer are identical, and Defendants have failed to show any likelihood that the Fourth Circuit will not reach the merits in that case or that they will suffer prejudice if the instant matter is stayed, the court will grant Plaintiff's motion to stay this action pending the Fourth Circuit's decision in Riemer.
IV. Conclusion
For the foregoing reasons, Plaintiff's motion to stay is granted, and her motion to remand is denied.
A separate Order will be entered.
ORDER
In accordance with the accompanying Memorandum Opinion, IT IS this ___ day of May, 2001, by the United States District Court for the District of Maryland, ORDERED that:1. Plaintiff's Motion to Stay BE, and the same hereby IS, GRANTED;
2. Plaintiff's Motion to Remand BE, and the same hereby IS, DENIED;
3. The parties are directed to notify the court promptly of the resolution of the Riemer case so that further proceedings can be scheduled as appropriate; and
4. The clerk is directed to administratively CLOSE this case, subject to reopening upon notice of the Riemer decision.