Opinion
CIVIL ACTION NO. 10-4346, SECTION "L"(2).
March 21, 2011
ORDER AND REASONS
The Court has pending before it a motion to remand to state court (Rec. Doc. 9) filed by Plaintiffs Center for Restorative Breast Surgery, L.L.C. ("the Center") and St. Charles Surgical Hospital ("St. Charles"). The Court has reviewed the briefs and the applicable law and now issues this Order and Reasons.
I. Background
This case arises out of alleged underpayment for medical services. The Center performs breast reconstruction surgery. St. Charles provides hospital services in connection with those procedures. Both Plaintiffs allege that they provided medical services to patients who were participants in Defendants' ERISA plans. The Plaintiffs allege that prior to rendering those services, they contacted the Defendants and obtained verification that the medical services would be reimbursed. The Plaintiffs allege that they performed the medical procedures and that the patients assigned their right to receive benefits for those procedures to the Plaintiffs. The Plaintiffs allege that the Defendants then underpaid for those procedures. The Plaintiffs filed suit in Civil District Court for the Parish of Orleans, asserting claims for breach of contract, failure to pay on an open account, detrimental reliance, unjust enrichment, and breach of the Louisiana statutory patient's bill of rights. Defendants timely removed to this Court.
Although the petition does not expressly state that the patients were participants in ERISA plans, it also does not expressly allege that the patients were not ERISA plan participants. Because the parties frame the issues in terms of ERISA preemption, the Court draws the conclusion that the Defendants are proper ERISA parties.
The Plaintiffs now move to remand, arguing that they have not asserted any claims under ERISA and that no other basis of federal jurisdiction is apparent from the face of the petition. The Defendants argue that certain of Plaintiffs' claims are completely preempted by ERISA and that removal was proper based on those inherently federal claims.
II. Law Analysis
A federal court is a court of limited jurisdiction. In opposing a motion to remand, the "removing party bears the burden of showing that federal jurisdiction exists and that removal was proper." Manguno v. Prudential Prop. Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). "Any ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand." Id. The only potential basis for federal jurisdiction in this case is federal question jurisdiction under 28 U.S.C. § 1331. Pursuant to the "well-pleaded complaint rule," the Court generally looks to the face of the state complaint or petition to determine whether federal question jurisdiction exists. McAteer v. Silverleaf Resorts, Inc., 514 F.3d 411, 416 (5th Cir. 2008). However, federal law can occupy a particular area of law so completely that "any civil complaint raising this select group of claims is necessarily federal in character." Giles v. NYLCare Health Plans, Inc., 172 F.3d 332, 336 (5th Cir. 1999). When that occurs, the state law claim is "completely preempted" and "presents a federal question" that "provides grounds for a district court's exercise of jurisdiction upon removal," regardless of the well-pleaded complaint rule. See id. at 337. "ERISA provides one such area of complete preemption." McAteer, 514 F.3d at 416. To defeat remand, "all the defendant has to do is demonstrate a substantial federal claim, e.g., one completely preempted by ERISA, and the court may not remand." Giles, 172 F.3d at 337.
ERISA also contains an express or conflict preemption provision, 29 U.S.C. § 1144(a), but conflict preemption is an affirmative defense that does not make a state complaint removable. See Arana v. Ochsner Health Plan, 338 F.3d 433, 439-40 (5th Cir. 2003). Accordingly, conflict preemption is not relevant to the Court's analysis and the Court draws no conclusions about whether any of Plaintiffs' claims are expressly preempted.
In Aetna Health Inc. v. Davila, the Supreme Court addressed removability and the scope of ERISA's complete preemption. 542 U.S. 200 (2004). A state law claim falls within the scope of ERISA and is completely preempted "if an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B), and . . . there is no other independent legal duty that is implicated by a defendant's actions." Id. at 210. Put differently, the purported state law claim is completely preempted if "the individual is entitled to such coverage only because of the terms of an ERISA-regulated employee benefit plan, and . . . no legal duty (state or federal) independent of ERISA or the plan terms is violated." Id.
Whether a third-party health care provider's claims are completely preempted by ERISA depends on precisely what rights the provider seeks to enforce and what duty it alleges has been breached. See Conn. State Dental Ass'n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1346-47 (11th Cir. 2009). One possibility is that a third-party health care provider can seek to enforce its patient's rights to reimbursement pursuant to the terms of the ERISA plan, in a derivative capacity pursuant to an assignment of the patient's rights. That kind of derivative claim is completely preempted by ERISA. Id. at 1347. On the other hand, if a health care provider can assert a right to payment based on some separate agreement between itself and an ERISA defendant (such as a provider agreement or an alleged verification of reimbursement prior to providing medical services), that direct claim is not completely preempted by ERISA. See id. at 1346-47; accord Intra-Operative Monitoring Svcs., Inc. v. Humana Health Benefit Plan of La., Inc., No. 04-2621, 2005 WL 1155847 (E.D. La. May 5, 2005). A health care provider may also have both a valid assignment of its patient's rights and a direct claim arising under state law and can elect to assert either or both of those claims. Conn. State Dental Ass'n, 591 F.3d at 1347. In that third situation, the mere existence of an assignment of the patient's rights under the ERISA plan is jurisdictionally irrelevant so long as the provider is not actually seeking to enforce that derivative claim. See Intra-Operative Monitoring Svcs., 2005 WL 1155847, at *2.
Thus, the propriety of removal in this case depends on the nature of Plaintiffs' causes of action. If Plaintiffs allege only claims arising out of a breach of an independent legal duty assumed by Defendants when Defendants allegedly verified a specific degree of reimbursement, that claim is not completely preempted and there is no federal question jurisdiction for removal. But if Plaintiffs also derivatively assert their patients' claims for benefits under the Plans pursuant to an assignment, those claims are completely preempted and provide a jurisdictional hook that appears on the face of the petition.
The allegations in the state court petition unfortunately mix and match the concepts and terminology of direct and derivative claims. For example, Plaintiffs allege that "[t]he verification of benefits by the Defendants created a contract between the Defendants and one of the [Plaintiffs], as an assignee of the insured." Likewise, Plaintiffs allege that "[u]nder the terms of the assignment, the Defendants were obligated to reimburse [Plaintiffs] for the medical services to the insureds based on the pre-procedure verifications of the Defendants." Plaintiffs are conflating two different concepts; the assignment of rights and the pre-procedure verification are unrelated. Independent of any pre-procedure verification, the Defendants owed a duty to the patients to pay according to the terms of the plan; if the patients assigned those rights to the Plaintiffs and Plaintiffs intend to enforce those rights as assignees, then they step into the shoes of the patients and they are asserting the duty to reimburse owed pursuant to the Plan, not to any verification. Conversely, the Defendants allegedly made a promise directly to the Plaintiffs, and Plaintiffs can seek to enforce that agreement regardless of whether or not they received an assignment of any rights from their patients. Plaintiffs' pleadings apparently combine these two different theories of recovery.
There is authority suggesting that the Court should construe ambiguities in a state court petition in favor of remand rather than removal. Manguno, 276 F.3d at 723. However, the Court concludes that, although inexact, the petition is not ambiguous and is fairly read as asserting both direct and derivative assigned claims. With respect to the direct claims, Plaintiffs undoubtedly allege that the pre-procedure verifications created an independent legal duty on the part of the Defendants to reimburse Plaintiffs, characterized either as a claim for breach of contract or detrimental reliance. This type of claim relates to an independent legal duty and is not subject to complete preemption. See Intra-Operative Monitoring Svcs., 2005 WL 1155847, at *2.
This is different than the situation in Lorenz v. Tx. Workforce Comm'n, 211 F. App'x 242 (5th Cir. 2006). In Lorenz, the plaintiff filed in Texas state court, alleging that he was wrongfully discharged from employment based on his religious attire and labeling his claims as "Wrongful Discharge." Id. at 243. His employer removed, arguing that federal question jurisdiction existed because the plaintiff stated a claim for a Title VII violation. Id. at 244. The Fifth Circuit held that there was no federal question jurisdiction because, although the plaintiff's factual allegations were cognizable under the Civil Rights Act, they also stated a claim under Texas state law. The petition did not cite the precise legal basis for the cause of action, and thus it was "ambiguous as to what cause of action [plaintiff] is bringing and on what law he bases his claim." Id. at 245. Because it was "equally possible" that the plaintiff asserted a state or federal law claim, the Fifth Circuit construed the ambiguity against jurisdiction and in favor of remand. Id. Here, the extensive allegations regarding the assignments of rights from the Plaintiffs' patients are not equally likely cognizable as federal or state causes of action, because claims asserting the patients' rights are completely preempted and are inherently federal in character.
But Plaintiffs also attempt to assert the derivative assigned claims of their patients. Thirty-one paragraphs, nearly two-thirds of the petition, fall under the heading "Breach of Contract Claim by Defendants With the Petitioners As Assignees for the Insureds." (Rec. Doc. 1-2 at 5-9) (emphasis added). Plaintiffs allege that "[e]ach of the Defendants' insureds had a contract of health insurance with one of the Defendants herein," that "[u]nder the contract between the insureds and the Defendants, and in exchange for the fee paid by the insureds, the Defendants are obligated to pay a healthcare provider an `allowable amount' for services provided to the insureds," and that the patients assigned their rights to payment under the Plans to the Plaintiffs. And although Plaintiffs do not expressly allege that the Defendants failed to pay pursuant to the terms of the ERISA plans, they come close enough: "Under the terms of assignment, the Defendants were obligated to reimburse [Plaintiffs] for the medical services provided to the insureds based on the pre-procedure verifications of the Defendants." (Rec. Doc. 1-2 at 7) (emphasis added). Although Plaintiffs tack on the explanation that the claim is "based on the pre-procedure verifications of the Defendants," there is simply no reason for Plaintiffs to have even mentioned the existence of the assignments, let alone at such length and under the heading "Breach of Contract Claim by Defendants with the [Plaintiffs] As Assignees for the Insureds" if Plaintiffs were not asserting the derivative assigned claims.
Although mere arguments in a motion to remand do not create or defeat jurisdiction if jurisdiction is not evident from the face of the petition, the Court notes that Plaintiffs take the position that "the patients have assigned their rights under the insurance policies to the Center and the Hospital, and the Center and the Hospital stand in the patients' shoes." (Rec. Doc. 9-1 at 5).
Having categorized the claims actually asserted in the state court petition, the Court finds that the jurisdictional question is easily resolved. Plaintiffs are bringing both direct claims and derivative claims on behalf of their patients pursuant to the terms of an assignment. The patients could have brought the derivative claims themselves pursuant to the ERISA enforcement provision in the absence of an assignment. Moreover, there is no allegation that the duty of the Defendants to pay the patients arose from anything other than an ERISA plan. Accordingly those claims are completely preempted by ERISA and are inherently federal questions that appear on the face of the state court petition, giving rise to jurisdiction in this Court. Davila, 542 U.S. at 210.
Although Plaintiffs state in their petition that "The Center and the Hospital are not making any claims under the Employee Retirement Income Security Act," that is of no moment. (Rec. Doc. 1-2 at 5). Complete preemption makes a purportedly state-law cause of action inherently federal; there is no way to "forego" bringing it as a federal claim. Plaintiffs also argue that "they brought their claims against the defendants solely in the defendants' capacity as health insurers subject to state law and are not alleging any claims against Humana in its capacity as alleged ERISA administrators." A party cannot simply change the label of a claim and thereby bring it out of the scope of ERISA complete preemption.
Additionally, Plaintiffs' state-law claims (to the extent that they are not also expressly or completely preempted, which the Court does not reach), form part of the same case and controversy and exercise of supplemental jurisdiction over those claims is appropriate. 28 U.S.C. § 1367(a).
III. Conclusion
Accordingly, for the foregoing reasons,
IT IS ORDERED that Plaintiffs' motion to remand (Rec. Doc. 9) is DENIED.
New Orleans, Louisiana.