Opinion
Civil Action No. 02-354, SECTION "A"(5)
June 11, 2002
Before the Court is a Motion to Remand (Rec. Doc. 8) filed by plaintiff Transitional Hospitals Corporation of Louisiana, Inc. ("Transitional"). Defendant, Louisiana Health Service Indemnity Company d/b/a Blue Cross Blue Shield of Louisiana ("Blue Cross"), opposes the motion. The motion, set for hearing on June 5, 2002, is before the Court on the briefs without oral argument. For the reasons that follow, the motion is GRANTED IN PART AND DENIED IN PART.
Factual and Procedural Background
Transitional is a long-term acute care hospital located in New Orleans, Louisiana. Thomas Mitchell, not a party to this suit, was a patient at Transitional from February 9, 2001, to May 9, 2001. Transitional alleges that prior to its admitting Mr. Mitchell for treatment, defendant Blue Cross erroneously represented that Transitional would be reimbursed for treatment rendered to Mr. Mitchell pursuant to his health insurance plan, the Service Benefit Plan, with no lifetime maximum or restrictions applied.
The Service Benefit Plan is one of the federal government's health benefits plans for federal employees and is governed by the Federal Employees Health Benefits Act ("FEHBA"), 5 U.S.C. § 8901, et seq. The patient, Mr. Mitchell, was a retired federal employee when Transitional treated him. Blue Cross is the carrier that administers the Service Benefit Plan in Louisiana.
Following the treatment administered to Mr. Mitchell, Transitional submitted detail billings to Defendant but Blue Cross refused payment informing Transitional that it was not a provider under contract with the plan. Transitional alleges that Blue Cross's assurance of coverage induced it to administer medical treatment to Mr. Mitchell.
Transitional filed suit in the Civil District Court for the Parish of Orleans alleging state law claims of breach of contract and detrimental reliance, and seeking attorney's fees and penalties pursuant to La. R.S. 51:1405, et seq. All of Transitional's claims were brought in its capacity as an independent third-party medical provider rather than as an assignee of Mr. Mitchell's rights against his plan.
In fact Mr. Mitchell might very well have had no rights to assign to Transitional because Blue Cross had paid him directly for the services that Transitional rendered to him.
Blue Cross removed the suit to this Court pursuant to 28 U.S.C. § 1331 alleging that Transitional's state law claims "arise under" federal law as suits challenging the administration of FEHBA benefits are governed exclusively by federal common law and therefore necessarily turn on the construction of federal law. Blue Cross also asserted that Transitional's state law claims were completely preempted by FEHBA thereby creating removal jurisdiction. Alternatively, Blue Cross argued that this case is removable pursuant to 28 U.S.C. § 1442(a)(1), the federal officer removal statute.
Transitional moves to remand the case back to state court arguing that complete FEHBA preemption does not apply to Transitional, a third party health care provider, because Transitional is not suing under the terms of the plan. Transitional also argues that Blue Cross is not entitled to removal under 1442(a)(1) because it is not a "federal officer" within the meaning of the statute. Transitional also moves for attorney's fees and costs based on Blue Cross's improper removal of the case.
Because there is no diversity of citizenship between the parties, this matter is removable only if it arises under federal law or if the federal officer removal statute applies.
Discussion
Federal courts are courts of limited jurisdiction. Howery v. Allstate Insurance Co., 243 F.3d 912, 916 (5th Cir. 2001) (citing Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)). The Court must assume that a suit lies outside this limited jurisdiction until jurisdiction is established. Id. When a case is removed from state court, 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) (citing DeAguilar v. Boeing Co., 47 F.3d 1404 (5th Cir. 1994); Jernigan v. Ashland Oil Inc., 989 F.2d 812 (5th Cir. 1993) (per curiam); Willy v. Coastal Corp., 855 F.2d 1160 (5th Cir. 1988))
To determine whether jurisdiction is present for removal, the Court considers the claims in the state court petition as they exist at the time of removal. Id. (Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256 (5th Cir. 1995)). Any ambiguities or doubts are to be construed against removal and in favor of remand. Id. (citing Acuna v. Brown Root, Inc., 200 F.3d 335 (5th Cir. 2000)).
Given that Blue Cross removed the suit to this Court, it bears the burden of establishing a basis for federal subject matter jurisdiction.
1. Federal Question Jurisdiction
Blue Cross asserts two bases for federal question jurisdiction. First, it argues that the case is removable because as a FEHBA suit resolution of Transitional's claims turns on an interpretation of federal law and therefore the suit raises a federal question. Second, Blue Cross argues that FEHBA completely preempts Transitional's state law claims making the case removable. Plaintiff, on the other hand, argues that complete preemption does not apply where a third party health care provider sues outside of the terms of the plan.
A complaint creates federal question jurisdiction when it states a claim created by the Constitution or laws of the United States. Howery, 243 F.3d at 917. Pursuant to well-recognized Supreme Court precedent, a complaint also creates federal question jurisdiction when it states a cause of action created by state law and (1) a federal right is an essential element of the state claim, (2) interpretation of the federal right is necessary to resolve the case, and (3) the question of federal law is substantial. Id. (citing Gully v. First national Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)). Whether a federal issue "embedded in the matrix of a state law claim will support federal question jurisdiction entails a pragmatic assessment of the nature of the federal interest at stake." Id.
Based on the foregoing, it is clear that Transitional's claim does not arise under federal law so as to create federal subject matter jurisdiction. Transitional alleges breach of a contract created when Blue Cross allegedly gave assurances of payment prior to Transitional accepting Mr. Mitchell for treatment. Resolution of such a claim does not require determination of a federal right nor does a federal right comprise any part of such a claim. Furthermore, there is no question of federal law so substantial to Transitional's claim as to convert these state law claims into a federal case. None of Blue Cross's cited authorities support a contrary result because all of those cases were brought either by plan participants or beneficiaries-not third party providers as in this case. See, e.g., Caudill v. Blue Cross Blue Shield, 999 F.2d 74 (4th Cir. 1993).
To this end Blue Cross's argument that interpretation of the plan's precertification provisions is essential to this claim is unpersuasive. Regardless of what the precertification provisions do or do not establish, Transitional's claim is based upon its detrimental reliance on an alleged promise made outside of the plan's proscribed medical precertification process.
Blue Cross relies on Caudill for the proposition that federal common law completely displaces state contract law where FEHBA plans are involved. As Blue Cross candidly noted in its memorandum, Caudill has been rejected by some courts. See e.g., Arnold v. Blue Cross Blue Shield, 973 F. Supp. 726 (S.D. Tex. 1997). Regardless of Caudill's viability vel non in this circuit, that case involved a federal employee plan participant suing her plan for benefits. Thus, assuming arguendo. that Caudill would be good law in this circuit, it does not dictate that claims brought by a third party medical provider independent of the plan itself would likewise be subsumed by federal common law.
Likewise, the Court is not persuaded by Blue Cross's complete preemption argument. The law in the Fifth Circuit with respect to complete preemption under ERISA is that detrimental reliance claims brought by a third party provider in that capacity are not subject to complete preemption. See Transitional Hospitals Corp. v. Blue Cross Blue Shield, 164 F.3d 952 (5th Cir. 1999). None of Blue Cross's cited authorities support a different result where FEHBA is involved because all of the cited cases involved participants or beneficiaries asserting breach of contract claims against their own plans. As such, those cases are clearly distinguishable from the case at hand. Nor do any of Blue Cross's cited authorities suggest that preemption under FEHBA would be any broader than that recognized by ERISA. Blue Cross has simply failed to show that complete preemption is applicable in the instant case.
See for instance the authorities cited at note 2, page 15 of Blue Cross's memorandum in opposition.
In sum, Blue Cross has failed to show that any issue of federal law is an element or much less a substantial part of Transitional's claims. Nor has Blue Cross demonstrated that FEHBA completely preempts these third party provider claims. Accordingly, Blue Cross has not met its burden of demonstrating that this suit arises under federal law so as to create federal question jurisdiction.
2. Removal Jurisdiction as a "Federal Officer"
Blue Cross also asserts removal jurisdiction pursuant to 28 U.S.C. § 1442(a)(1), the federal officer removal statute.
The federal officer removal statute is designed to protect officers of the federal government, who when acting pursuant to authority granted them under federal law, run afoul of the laws of a state. Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 397 (5th Cir. 1998) (quotingWillingham v. Morgan, 395 U.S. 402, 89 s. Ct. 1813, 23 L.Ed.2d 396 (1969)). One of the most important functions of this right of removal is to allow a federal court to determine the validity of an asserted official immunity defense. Id. Removal pursuant to section 1442(a)(1) is meant to "ensure a federal forum in any case where a federal official is entitled to raise a defense arising out of his official duties." Id. (quoting Arizona v. Manypenny, 451 U.S. 232, 101 S.Ct. 1657, 68 L.Ed.2d 58 (1981)). Application of the federal officer removal statute is appropriate where (1) the defendant is a "person" within the meaning of the statute, (2) the defendant acted pursuant to a federal officer's directions when committing the acts that allegedly give rise to the injury at issue, and (3) the defendant can assert a colorable federal defense. Id. at 397-98.
Assuming arguendo that Blue Cross would qualify as a "person" within the meaning of the federal officer removal statute, it has given the Court nothing upon which to conclude that its employees were acting pursuant to any federal direction when they allegedly misrepresented coverage to Transitional. On this point, Blue Cross relies solely on the fact that the federal Office of Personnel Management sets forth the dictates of the medical precertification process for the plan at issue. However, as noted above, Transitional's claims arise out of a contract that it alleges was created as a result of representations made by Blue Cross employees when Transitional attempted to verify coverage. The claims do not arise out of any of the procedures dictated by the OPM. Accordingly, Blue Cross could not have been acting pursuant to federal authority when it allegedly mishandled the coverage inquiry.
Furthermore, Blue Cross has not set forth a colorable federal conferred by the federal law pursuant to which it claimed to be acting, i.e., the Service Benefit Plan or the FEHBA. Blue Cross has attempted to argue that preemption is its federal defense for purposes of the federal officer removal statute, but federal preemption of state law is not a defense conferred pursuant to the federal health plan at issue. Moreover, as discussed above, Blue Cross has not shown that these third party claims are subject to preemption under FEHBA. Consequently, Blue Cross has failed to show that it is entitled to removal as a federal officer.
Based on the foregoing discussion, the Court finds no basis to exercise subject matter jurisdiction over Transitional's state law claims.
Accordingly;
IT IS ORDERED that the Motion to Remand (Rec. Doc. 8) filed by Transitional Hospitals Corporation of Louisiana, Inc. should be and is hereby GRANTED IN PART AND DENIED IN PART. The motion is GRANTED insofar as this matter is REMANDED to Civil District Court for the Parish of Orleans pursuant to 28 U.S.C. § 1447(c) for lack of subject matter jurisdiction. The motion is DENIED as to the request for attorney's fees and costs.