Summary
emphasizing that the cases before the court were based upon a direct contractual agreement between the plaintiff hospitals and the defendant insurer under a managed care agreement, and not upon an assignment of right to benefits
Summary of this case from Transitional Hospitals Corp. of La. v. DBL North AmericanOpinion
Civil Action No. 00-3380, Section "K" (3) Civil Action No. 00-3381, Section "K" (5)
March 20, 2001
ORDER AND REASONS
Before the Court are motions to remand filed by plaintiffs River Parishes, Inc. (C.A. 00-3380, doc. 3) and Chalmette Medical Center, Inc. (C.A. 00-3381, doc. 3). Because each motion contains nearly identical factual and legal arguments against a common defendant, the Court will address both motions together. The two motions were set for hearing on December 20, 2000 and were taken on the briefs without oral argument. The Court has considered the pleadings, memoranda and relevant law and finds that the motions to remand shall be granted for the reasons that follow.
Each case has been brought by a healthcare provider, River Parishes, Inc. ("RP Hospital") and Chalmette Medical Center, Inc. ("CMC Hospital"), for breach of a contract that establishes a reimbursement schedule for services already provided by that healthcare provider. RP Hospital's breach of contract suit was brought in the Fortieth Judicial District Court for St. John the Baptist Parish and was removed by Aetna to this Court on November 14, 2000. CMC Hospital's breach of contract suit was brought in the Thirty Fourth Judicial District Court for St. Bernard Parish and also was removed to this Court on November 14, 2000. Both matters were removed based on Aetna's argument that the claims arise under the Employee Retirement income Security Act ("ERISA"), 29 U.S.C. § 1002 (1), because the suits allegedly seek payment for medical expenses arising out of medical coverage governed by ERISA. As such, it is Aetna's contention that this Court has federal question jurisdiction over these actions pursuant to 28 U.S.C. § 1331 and Section 502 of ERISA, 29 U.S.C. § 1132 (a) and (e)(1). According to defendant, the complete preemption defense requires the Court to exercise jurisdiction over these matters.
I. Background
River Parishes, Inc. owns and operates River Parishes Hospital in LaPlace, Louisiana, and Chalmette Medical Center, Inc. owns and operates Chalmette Medical Center in Chalmette, Louisiana. Each respective plaintiff entered into a Managed Care Agreement ("Agreement") with Aetna U.S. Healthcare, Inc. According to the Agreements, RP Hospital and CMC Hospital were to provide "hospital care, facilities, equipment and services to Aetna members." RP Hospital Petition at ¶ 5, CMC Hospital Petition at ¶ 5. "The parties agreed to a specified compensation schedule for the services provided by the Hospital to Aetna members."Id. RP Hospital has asserted causes of action for breach of contract and breach of the duty of good faith RP Hospital alleges that Aetna breach its contractual obligation in at least four respects, including, (1) improperly paying for Golden Medicare members on the commercial per diem rate rather than the contractually required DRG basis; (2) arbitrarily and improperly bundling outpatient services . . .; (3) authorizing admission . . . and later denying payments for same after discharge, and; (4) improperly paying the Hospital SNF rates rather than the contractual rates under to the Agreement. RP Hospital Petition at ¶ 10. CMC Hospital alleges the same two causes of action, claiming that Aetna breached its contractual obligations in at least two respects, including, (1) improperly paying for Golden Medicare members on the commercial per diem rate rather than the contractually required DRG basis, and; (2) arbitrarily and improperly bundling outpatient services. . . . CMC Hospital Petition at ¶ 8.
In each case, the hospital argues that it is suing on Aetna's direct promises of payment to the Hospital as a party to the Managed Care Agreement. They contend that there is no ERISA preemption because the causes of action are for breach of contract between each respective hospital and Aetna. To put it another way, the plaintiffs argue that in the instant suits, the terms of insurance agreements between Aetna and its insureds are completely irrelevant to the breach of contract claim between Aetna and the respective hospitals. As plaintiffs contends that the pertinent issues do not relate to an ERISA plan but to the contract between the parties, plaintiffs maintain that there is no federal question to support removal.
In opposition, Aetna claims that Plaintiff's breach of contract lawsuits are for failure to pay the correct amount for medical services and that some of those medical services were rendered to employees protected by ERISA. As a result, defendant argues that the lawsuit relates to an employee welfare benefit plan and is therefore completely preempted by ERISA. It claims that because the breach of contract can be resolved only through reference to Managed Care Agreement and that plaintiffs' rights are derived from assignments of members' rights to benefits under ERISA plan, the matter was properly removed as plaintiffs seek to enforce ERISA claims as contemplated under 29 U.S.C. § 1132.
II. Analysis
28 U.S.C. § 1441 allows removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1411. Original federal question jurisdiction arises when a plaintiff sets forth allegations "founded on a claim or right arising under the Constitution, treaties or laws of the United States." See 28 U.S.C. § 1441 (b); § 1331. "The presence or absence of federal question jurisdiction is governed by the `well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). The plaintiff is the "master of the claim" and may avoid federal jurisdiction by "exclusive reliance on state law." Id.
In the removal context, the determination as to whether a cause of action presents a federal question, and therefore is subject to removal, also depends upon the allegations made on the face of the plaintiff's well-pleaded complaint. Carpenter v. Wichita Falls Indep. School Dist., 44 F.3d 362, 366 (5th Cir. 1995). A federal defense to a state law claim does not create removal jurisdiction. Aaron v. National Union Fire Ins. Co., 876 F.2d 1157, 1161 (5th Cir. 1989), cert. denied, 493 U.S. 1074 (1990). A defendant may not remove a case on the basis of an anticipated or even inevitable federal defense, but instead must show that a federal right is an essential element of the plaintiff's cause of action. Gully v. First Nat'l Bank, 299 U.S. 109, 111, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936); Carpenter, 44 F.3d at 366; see Sears v. Chrysler Corp., 884 F. Supp. 1125 (E.D.Mich. 1995). The removal statute is strictly construed "because a defendant's use of that statute deprives a state court of a case properly before it and thereby implicates important federalism concerns." Frank v. Bear, Stearns Co., 128 F.3d 919, 922 (5th Cir. 1997). This rule of strict construction is "consistent with the notion that the federal courts are courts of limited jurisdiction." Wright, Miller Cooper, Federal Practice and Procedure: Jurisdiction 3d § 3721 at 348-51.
A defendant may not remove a civil action on the basis of a defense of federal preemption, even if the defense is anticipated in the complaint, and even if preemption is the only issue in the case. Caterpillar, 482 U.S. at 393, 107 S.Ct. at 2425. There exists however, a class of cases where the preemptive force of a statute is so "extraordinary" that any claim based on preempted state law is considered a claim arising under federal law. The application of complete preemption "converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule." Metropolitan Life Ins. v. Taylor, 481 U.S. 58, 65, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987).
There are two types of preemption under the Employee Retirement Income Security Act of 1974 ("ERISA"): (1) complete preemption under § 502(a), 29 U.S.C. § 1132 (a), and (2) conflict preemption or ordinary preemption under § 514, 29 U.S.C. § 1144. Copling v. Container Store. Inc., 174 F.3d 590, 594-95 (5th Cir. 1999). Complete preemption provides removal jurisdiction whereas conflict preemption does not Id; See generally Wright, Miller Cooper, Federal Practice Procedure: Jurisdiction 3d, § 3722.1 at pp. 529-39. For there to be complete preemption, which as noted acts as an exception to the well-pleaded complaint rule, the Court must find that Congress has "so completely pre-empted a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan Life Ins. Co. v. Taylor, 107 S.Ct. 1542 (1987). Section 502 of ERISA, which provides a civil enforcement cause of action, completely preempts any state cause of action seeking the same relief regardless of how artfully pled as a state cause of action. Copling, 174 F.3d at 594. Thus, if plaintiffs' claims arise under the civil enforcement provision, this Court would be required to exercise its removal jurisdiction. On the other hand, if Aetna's defense arises under federal law but not under the civil enforcement provision, such ordinary preemption cannot serve as a basis for removal jurisdiction. See Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 355 (3d Cir. 1995). Thus, the inquiry becomes whether the claims raised by RP Hospital's and CMC Hospital's petitions really constitute a claim under § 1132 of ERISA and are thus removable.
29 U.S.C. § 1132 provides that a participant or beneficiary of an employee welfare benefit plan may bring a civil action 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. § 1132. The term "beneficiary" is defined under the statute as "a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder." 29 U.S.C. § 1002 (2)(B)(8). A "participant" is defined as "any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, whose beneficiaries may be eligible to receive any such benefit." 29 U.S.C. § 1002 (2)(B)(7). Aside from the two aforementioned groups, it is recognized that a third party health care provider may bring a derivative action for health care benefits under the terms of a plan when it receives a valid assignment of rights from a participant or beneficiary. See Herman Hospital v. MEBA Meidcal Benefits Plan, 845 F.2d 1286, 1289 (5th Cir. 1988); Lakeland Anesthesia, Inc. v. Louisiana Health Care Service Indemnity Co., 2000 WL 1801834 (E.D. La. 2000). Thus, ERISA preemption is complete when a health care provider is asserting a derivative action.
It is clear and uncontested that RP Hospital and CMC Hospital are not beneficiaries, participants or fiduciaries as defined by the statute. In an attempt to fall within the third party beneficiary category, Aetna submitted the affidavit of a Senior Network Manager attesting that several of the payments sought by the respective plaintiffs are for services provided to employees insured by employer health care plans. However, what defendant fails to acknowledge is that plaintiffs' cases are based upon a direct contractual relation between the respective hospitals and Aetna under the Agreements, not upon any purported assignment of rights. As the hospitals bring suit in their own capacity, any assignment of rights is simply irrelevant to this matter. See Jefferson Parish Hospital Service District No. 2 v. Principal Health Care of Louisiana. 934 F. Supp. 206, 208 (E.D. La. 1996). Indeed, neither hospital is subsumed under ERISA merely because it is part of an insurer's network and accepts payments for services rendered to patients who may be covered by an ERISA plan.
The United States Court of Appeals for the Fifth Circuit has found that decisions finding preemption of state law claims "have at least two unifying characteristics: (1) the state law claims address areas of exclusive federal concern, such as the rights to receive benefits under the terms of an ERISA plan; and (2) the claims directly affect the relationship among the traditional ERISA entities — the employer, the plan and its fiduciaries, and the participants and beneficiaries."Memorial Hospital System v. Northbrook Life Ins. Co., 904 F.2d 236, 245 (5th Cir. 1990) (citations omitted); Hubbard v. Blue Cross Blue Shield, 42 F.3d 942, 945 (5th Cir. 1995); Barton v. Southern Farm Bureau Life Insurance Co., 2001 WL 58860 (S.D. Miss. 2001). In the cases before this Court, it is clear that each plaintiff's cause of action is for a breach of the Managed Care Agreement, not for a failure to provide benefits. Moreover, the hospital suits to recover under the agreements with Aetna does not affect the relationship among the employer, the plan and the participants as neither the employers or participants are directly affected by, or even parties to, these actions.
That these independent third party providers direct causes of action do not rise to the level of a section 1132 claim is well settled in this circuit and this district. See e.g., Barton v. Southern Farm Bureau Life Insurance Comp., 2001 WL 58860 (S.D. Miss. 2001); Lakeview Medical Center v. Aetna Health Management, Inc., 2000 WL 1727553 (E.D. La. 2000);Lakeland Anesthesia, Inc. v. Aetna, 2000 WL 777911 (E.D. La. 2000);Lakeland Anesthesia, Inc. v. Louisiana Health Service Indemnity Co., 2000 WL 1801834 (E.D. La. 2000); Lakeland Anesthesia, Inc. etc. v. United healthcare of Louisiana. Inc., C.A. 00-1149 (E.D. La. 6/30/00); Board of Trustees of the Total Community Action Inc. Employees Retirement Plan Trust v. Pan American Life Insurance Company, 112 F. Supp.2d 602 (E.D. La. 2000); Jefferson Parish Hospital Service Dist. No. 2 v. Princiapl Health Care of Louisiana. Inc., 934 F. Supp. 206 (E.D. La. 1996) (detrimental reliance); Union Health Care, Inc. v. John Alden Life Insurance Company, 908 F. Supp. 429 (S.D. Miss. 1995). Indeed, as plaintiffs are not acting as participants or beneficiaries, do not seek to recover benefits or enforce rights under an ERISA plan pursuant to section 502(a)(1)(B), and do not seek relief for breach of fiduciary duty or for violations of reporting requirements, they do not assert a claim that falls within any of the causes of action provided by section 502(a). See McClelland v. Gronwaldt, 155 F.3d 507, 518 (5th Cir. 1998).
Nor do plaintiffs' actions sufficiently "relate to" ERISA plans as required by the Fifth Circuit. In Corporate Health Insurance. Inc. v. Texas Dept. of Insurance, 215 F.3d 526 (5th Cir. 2000) the Court of Appeals analyzed recent Supreme Court jurisprudence with regards to ERISA preemption and concluded that "[i]n each of [the three most recent Supreme Court cases], the Court was returning to a traditional analysis of preemption, asking if a state regulation frustrated the federal interest in uniformity." Id. at 533. As such, "the Court has insisted on a significant conflict with an identifiable federal policy or interest" in order to find ERISA preemption. Id. The matters before this Court involve breach of contract disputes between care givers and plan providers for claims that were allegedly promised to be paid at a certain rate and were not. The causes of action do not involve an issue of the denial or extent of benefits to those sought to be protected by ERISA and can be resolved with reference to the Louisiana law of contract. In sum, the Court "finds that this contractual claim is not so "related to" ERISA plans such that a court's decision with respect to these breach of contract claims would undermine or affect the objectives of the ERISA statute." Lakeview Medical Center v. Aetna Health Management, Inc., 2000 WL 1727553 at *4 (E.D. La. 2000) (citations omitted). Moreover, "relation to" preemption is established through ERISA section 514(a) which merely provides for displacement of state law. Such ordinary preemption "typically cannot serve as the basis for removal jurisdiction." McClelland v. Gronwaldt, 155 F.3d 507, 515 (5th Cir. 1998). Accordingly,
IT iS ORDERED that these motions to remand are GRANTED, and pursuant to 28 U.S.C. § 1447, C.A. 00-3380 is REMANDED to the Fortieth Judicial District Court for St. John the Baptist Parish, and C.A. 00-3381 is REMANDED to the Thirty Fourth Judicial District Court for St. Bernard Parish.