Opinion
No. 1:03-cv-140
January 6, 2004
MEMORANDUM
Plaintiff BlueCross BlueShield of Tennessee ("BlueCross") has filed a claim for reimbursement of funds owed to a health insurance plan created pursuant to the Federal Employees Health Benefits Act ("FEHBA"), 5 U.S.C. § 8901-8914. The claims are asserted against the insured, Crystal Griffin ("Griffin"), and her attorney J. Stewart Wheeler ("Wheeler"). Before the Court is Wheeler's verified motion to dismiss for lack of venue. [Court File No. 4]. BlueCross has responded to this motion by asserting that venue is proper, but also arguing that the case should be transferred to the Western District of Kentucky, rather than dismissed, in the event that the Court finds venue is not proper. [Court File No. 6].
I. Background
On April 24, 2003, BlueCross filed this case in the Eastern District of Tennessee. In its claim against defendant Griffin, BlueCross asserts that it is owed reimbursement for funds paid for medical services received by Griffin due to injuries sustained during an automobile accident. The complaint states that Griffin received a settlement from a third party during litigation that arose from the accident, which triggered a clause in the plan providing for reimbursement of BlueCross. Griffin has not answered the complaint and the Clerk of Court has issued an entry of default against Griffin pursuant to FED. R. CIV. P. 55(a). [Court File No. 12].
Defendant Wheeler represented Griffin in the third party settlement. BlueCross asserts the following claim against Wheeler:
Defendant J. Stewart Wheeler, knowing that Plaintiff was subrogated to Crystal Griffin's claim to the extent of benefits paid, prevented Plaintiff from collecting all amounts owed to it under the Plan. Accordingly, Defendant J. Stewart Wheeler is jointly and severally liable with Defendant Crystal Griffin for the amount of $24, 870.95, plus pre-judgment interest attorney's fees, and costs.
[Court File No. 1 at 3]. In response, Wheeler has filed a motion to dismiss for lack of proper venue. [Court File No. 4].
II. Analysis
Defendant Wheeler argues that venue is not proper in this Court. "Since venue is a personal privilege of the defendant, the burden is on the defendant to object in a proper and timely fashion if he thinks venue is improper. The failure to raise the objection is a waiver." 15 CHARLES ALAN WRIGHT, ARTHUR R. MILLER, EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 3826 (2nd ed. 1987). Wheeler has properly raised this issue before the Court, however it is first necessary for the Court to examine whether subject matter jurisdiction exists, an issue which cannot be waived by a defendant.
A. Jurisdiction
The complaint asserts that "[t]his Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331," which provides original jurisdiction over claims involving a federal question. [Court File No. 1]. "[F]ederal courts have a continuing obligation to inquire into the basis of subject-matter jurisdiction to satisfy themselves that jurisdiction to entertain the action exists." Campanella v. Commerce Exchange Bank, 137 F.3d 885, 890 (6th Cir. 1998) (citations omitted). Furthermore, "[t]his duty applies irrespective of the parties' failure to raise a jurisdictional challenge on their own, and if jurisdiction is lacking, dismissal is mandatory." Id. Thus, the Court must first address an issue not raised by the parties.
The FEHBA provides that "[t]he district courts of the United States have original jurisdiction, concurrent with the United States Court of Federal Claims, of a civil action or claim against the United States founded on this chapter." 5 U.S.C. § 8912. However, because no claim against the United States is asserted in this action, the Court cannot rely on this provision for jurisdiction.
The FEHBA also contains a preemption clause which states:
The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.5 U.S.C. § 8902(m)(1). Prior to 1998, the preemption clause above contained a limiting statement which provided for preemption only to the extent that a state or local "law or regulation is inconsistent with such contractual provisions." 5 U.S.C. § 8902(m)(1) (prior to 1998 amendment). The inclusion of the limiting statement was widely interpreted as a bar to the exercise of federal jurisdiction because the provision amounted to something less than complete preemption. See Arnold v. Blue Cross Blue Shield of Texas, Inc., 973 F. Supp. 726, 731-732 (S.D.Tex. 1997); Sarkis v. Heimburger, 933 F. Supp. 828, 831 (E.D.Mo. 1996); Lambert v. Mail Handlers Benefit Plan, 886 F. Supp. 830, 835-836 (M.D.Ala. 1995); Baptist Hasp, of Miami, Inc. v. Timke, 832 F. Supp. 338, 341 (S.D.Fla. 1993); Mooney v. Blue Cross of Western Pennsylvania, 678 F. Supp. 565, 567 (W.D. Pa. 1988); Eidler v. Blue Cross Blue Shiled United of Wisconsin, 671 F. Supp. 1213, 1217 (E.D. Wis. 1987). However, following the amendment of the statute, this Court held that "Congress has demonstrated a clear intention that FEHBA completely preempt state law in the area of federal employee health insurance plans." Rievley v. Blue Cross Blue Shield of Tennessee, 69 F. Supp.2d 1028, 1034 (E.D.Tenn. 1999) (citing Knight v. Kaiser Foundation Health Plan, 34 F. Supp.2d 334 (E.D.Va. 1999); accord Carter v. Blue Cross Blue Shield of Tennessee, 61 F. Supp.2d 1237, 1240 (N.D. Fla. 1999); but see Ramirez v. Human, Inc., 119 F. Supp.2d 1307, 1313 (M.D. Fla. 2000) (discussing Rievley and reaching opposite conclusion); Weathington v. United Behavioral Health, 41 F. Supp.2d 1315, 1320 (M.D. Ala. 1999) (this case appears to reason from precedent developed prior to the 1998 amendment).
After the amendment, several courts have looked at the question of federal question jurisdiction involving suits by FEHBA insurers against the insured for reimbursement and these courts have found that jurisdiction does not exist. See e.g. Blue Cross Blue Shield of Illinois v. Cruz, No. 01 C 9821, 2003 WL 22715815, *6 (N.D.Ill. Nov. 17, 2003); State Farm Indem. v. Forano, 227 F. Supp.2d 229, 238-239 (D.N.J. 2002); Empire HealthChoice Assurance v. McVeigh, No. 03 Civ. 2728(DLC), 2003 WL 22171693, *3 (S.D. N.Y. Sept. 18, 2003) (quoting pre-1998 version of statute); but see Medcenters Health Care v. Ochs, 26 F.3d 865, 867 (finding subject matter jurisdiction based on preemption in a subrogation case even prior to the 1998 amendment). In each of the cases listed above, however, the court has based its conclusion on a finding that the FEHBA does not provide complete preemption. Because this Court has previously found complete preemption was Congress's intent in amending the statute, the complete preemption also gives rise to federal question jurisdiction in this case. See Rievley, 69 F. Supp.2d 1034. As such, this Court has federal question jurisdiction over any claim for reimbursement related to a FEHBA plan and such claims would necessarily arise under federal common law. See Tackitt v. Prudential Insurance Co. of Am., 758 F.2d 1572, 1575 (11th Cir. 1985) ("[T]he interpretation of government health insurance contracts is controlled by federal, not state, law.")
B. Venue
Defendant Wheeler has moved for dismissal of the claim against him due to lack of venue. [Court File No. 4]. Assuming arguendo that BlueCross has stated a claim against defendant Wheeler, this Court must determine whether venue is proper in this Court.
In this case, the plaintiff asserts jurisdiction pursuant to 28 U.S.C. § 1331 due to the preemptive effect of the FEHBA. See 5 U.S.C. § 8902(m)(1). The relevant potion of the venue statute provides as follows:
A civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.28 U.S.C. § 1391(b).
BlueCross responds to Wheeler's motion by asserting that venue is proper under the second provision and the parties do not dispute that the first and third provisions are inapplicable in this case. Specifically, BlueCross argues that venue is proper in this case because the payments for medical expense were made from Tennessee and the damage for the failure to reimburse for these expenses is suffered in Tennessee. BlueCross acknowledges that the Western District of Kentucky also has a substantial connection to the claims because the accident occurred there and the medical expenses were paid on behalf of defendant Griffin to recipients in that state.
A determination regarding the location of a substantial part of the events and omissions giving rise to a claim is made on a case by case basis. See 16 LEE R. RUSS THOMAS F. SEGALLA, COUCH ON INSURANCE § 230:109 (3d ed. 2000). "The Sixth Circuit has held that venue is proper in any district where a substantial part of the events giving rise to the claim occurred, including any forum with a substantial connection to the plaintiff's claim." PTG Logistics, LLC. v. Bickel's Snack Foods, Inc., 196 F. Supp.2d 593, 604 (S.D.Ohio 2002) (citing First of Michigan Corp. v. Bramlet, 141 F.3d 260, 263 (6th Cir. 1998)). Applying this reasoning in a case involving alleged damaged due to repudiation of a contract, the Southern District of Ohio held that, although the location where the contract was formed and would have been performed was a proper venue, so too was the location to which the payments were made and where the damages were felt. Id.
In this case, it is clear that any damages created by the failure to reimburse were experienced in Tennessee and payments for defendant Griffin's medical expenses were made from Tennessee. Wheeler was aware that Tennessee would be the location of such damages as he states in his verified motion to dismiss that he "did temporarily agree to represent Plaintiff [BlueCross] on its potential reimbursement claim," but later withdrew from this representation. [Court File No. 4 at 2]. Presumably, the temporary representation would have coincided with Wheeler's representation of defendant Griffin.
Wheeler states that "[o]ther than a minor exchange of correspondence with the Plaintiff [BlueCross], Defendant Wheeler had no contact with the State of Tennessee." [Court File No. 4 at 2]. The number of contacts with a state, while tangentially relevant to a question of venue, goes more to the question of personal jurisdiction, which Wheeler has not raised. Because the Court finds that venue is proper, the plaintiff's motion to dismiss for improper venue will be DENIED.
C. Transfer pursuant to 28 U.S.C. § 1404(a)
Although the Court has determined that venue is proper in the Eastern District of Tennessee, because this is the location where the alleged damages occurred and from which the claims were paid, the Court deems that in the interest of justice and for the convince of the parties and witnesses, transfer pursuant to 28 U.S.C. § 1404(a) is appropriate.
A Court has the authority under 28 U.S.C. § 1404(a) to sua sponte transfer a civil action to any other district where it might have been brought for the convenience of parties and witnesses, in the interest of justice. Carver v. Knox Co., Tenn., 887 F.2d 1287, 1291 (6th Cir. 1989) cert. denied, 495 U.S. 919 (1990). The purpose of § 1404(a) "is to prevent the waste of `time, energy and money,' and `to protect litigants, witnesses and the public against unnecessary inconvenience and expense.'" Van Dusen v. Barrack, 376 U.S. 612, 616 (1964); Continental Grain Co. v. Barge FBL — 585, 364 U.S. 19, 26-27 (1960). The parties have had the opportunity to brief their positions regarding the venue of this Court, albeit in the form of a motion to dismiss and response, and the Court concludes that transfer pursuant to 28 U.S.C. § 1404(a) is appropriate.
Because the location of the accident, the settlement, the subsequent medical services, and the residence of both defendants is Kentucky, it appears that nearly all the witnesses and evidence relevant to this case will be found in Kentucky. Furthermore, Court notes the potential logistical difficulties associated with the enforcement of any judgment that could be rendered by this Court against defendants residing outside of the Eastern District of Tennessee. III. Conclusion
For the reasons stated above, the defendants motion to dismiss [Court File No. 4] will be DENIED. This case will be transferred in its entirety, pursuant to 28 U.S.C. § 1404(a), to the United States District Court for the Western District of Kentucky, Bowling Green Division.
An order will enter.
ORDER
For the reasons stated in the accompanying memorandum, the motion by J. Stewart Wheeler to dismiss for lack of venue [Court File No. 4] is DENIED.
It is hereby ORDERED that this action is TRANSFERRED in its entirety, pursuant to 28 U.S.C. § 1404(a), to the United States District Court for the Western District of Kentucky, Bowling Green Division.