Summary
In Tenet Healthsystem v. Crosby Tugs, Inc., 2005 WL 1038072 (E.D.La. Apr. 27, 2005), the district court remanded a health care provider's breach-of-contract claim based on the insurer's failure to pay for services rendered to ERISA plan participants at the rate set forth in the parties' managed care contract.
Summary of this case from Lone Star Ob/Gyn Associates v. Aetna Health, Inc.Opinion
Civil Action No. 04-1632 Section "N" (3).
April 27, 2005
ORDER AND REASONS
Before the Court is the Motion to Remand filed by Plaintiff, Tenet Healthsystem Hospitals, Inc., d/b/a/ Northshore Regional Medical Center ("Northshore") (Rec. Doc. No. 9). For the reasons stated herein, the motion is GRANTED.
Background
In March and May 2001, Alfred Dufrene, an employee of Crosby Tugs, L.L.C., ("Crosby") received inpatient health care services at Northshore. At that time, Northshore was a party to a managed care contract with American LIFECARE, Inc. According to Northshore, that contract (hereinafter, the "ALC contract") provides for certain discounted payments to be paid to providers rendering health care services to ALC members.Northshore's petition alleges that Defendant Consolidated Health Plans, Inc. ("Consolidated") is a health insurer and provided health insurance benefits to Crosby employees, including Mr. Dufrene, in March and May 2001. Alternatively, Northshore alleges that Crosby, a self-insurer, provided health insurance benefits to its employees, and that Consolidated served as a third-party administrator of, and agent for, the Crosby health insurance plan. In any event, Northshore contends that Consolidated and/or Crosby subscribed to the ALC contract, but refused to pay it for health care services rendered to Mr. Dufrene at the rates established by that contract.
When Consolidated and Crosby failed to pay the total amount of charges presented for payment, Northshore filed suit, on May 3, 2004, in Louisiana state court. Northshore's petition asserts a breach of contract claim, seeking payment of a balance of $75,091.03. It also purports to make a claim for attorney's fees pursuant to Louisiana's Unfair Trade Practices and Consumer Protection Law, La.R.S. 51:1401, et seq.
On June 10, 2004, Defendants filed a notice of removal and an answer in this Court. Defendants aver that Crosby sponsored an employee benefits plan (the "Plan") covered by the Employee Retirement Income Security Act of 1974, 29 U.S.C. ¶ 1001, et seq., (ERISA), and that Consolidated is the third-party administrator of the Plan. Contending that Northshore's claims seek sums allegedly due under the Plan, Defendants assert this Court has subject matter and removal jurisdiction over this action pursuant to 28 U.S.C. § 1331, 29 U.S.C. § 1132(a)(3), and 28 U.S.C. § 1441(a) or (c). See Notice of Removal (Rec. Doc. No. 1) at ¶¶ VI-VII.
Northshore filed the motion to remand presently before the Court on October 20, 2004. The Court heard oral argument and received post-hearing memoranda regarding the motion in December 2004.
Law and Analysis
"Federal courts are courts of limited jurisdiction." Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.), cert. denied, 122 S. Ct. 459 (2001). Furthermore, courts "must presume that a suit lies outside this limited jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the federal forum." Id. Thus, in the context of actions removed from state court, the removing party bears the burden of demonstrating the federal court's jurisdiction and that removal was proper. See Manguno v. Prudential Prop. and Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). Because the removal statute should be strictly construed in favor of remand, any ambiguities in the state court petition are construed against removal. Id. (citing Acuna v. Brown Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000)).In support of its motion to remand, Northshore contends that it has asserted only state-law claims; therefore, this Court lacks federal question subject matter and removal jurisdiction. Northshore maintains that section 502(a) of ERISA, 29 U.S.C. § 1132(a), is not applicable and, thus, does not "completely preempt" its claims. Northshore further contends that the "conflict preemption" provided by section 514(a) of ERISA, 29 U.S.C. § 1144, if applicable provides only a federal defense to its claims and does not confer federal question jurisdiction.
I. ERISA
Urging that ERISA preemption bars remand, Defendants' opposition to Northshore's motion references the "relate to" preemption clause found in 29 U.S.C. § 1144(a). That section of ERISA, however, provides only a defense of "conflict preemption." It does not result in a plaintiff's claim being found to "arise under" federal law for purposes of 28 U.S.C. §§ 1331 and 1441(b). Thus, even if the state law providing the predicate for Northshore's claims does "relate to" an ERISA plan, for purposes of § 1144(a), which this Court does not decide, that statutory provision fails to provide a basis for removal. See Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6-8, 123 S. Ct. 2058, 2062-63 (2003); Ellis v. Liberty Life Assur. Co., 394 F.3d 262, 276, n. 34 (2004), as corrected, (1/19/05), pet. for cert. filed, No. 04-1395 (4/13/05); Giles v. NYL Care Health Plans, Inc., 172 F.3d 332, 337 (5th Cir. 1999).
See Opposition Memorandum (Rec. Doc. No. 11) at 8.
"State courts, being of equal dignity with federal courts, are equally competent to address" a potential conflict preemption defense. Giles, 172 F.3d at 339.
A state-law claim, however, that comes within the scope of the civil enforcement remedy established by section 502(a) of ERISA, 29 U.S.C. § 1132(a), is "completely preempted," and does provide subject matter and removal jurisdiction under 28 U.S.C. §§ 1331 and 1441(b). In other words, the ERISA civil enforcement provision, when applicable, converts a state-law claim into a federal claim for purposes of the "well-pleaded complaint" rule. See Aetna Health Inc. v. Davila, 542 U.S. 200, 124 S.Ct. 2488, 2494-96 (2004); Beneficial Nat'l Bank, 539 U.S. at 6-8, 123 S.Ct. at 2062-63; Ellis, 394 F.3d at 276, n. 34; Giles, 172 F.3d at 337.
Having considered the parties' written submissions and oral argument, the Court does not find that Defendants have satisfied their burden, as the removing parties, of demonstrating that removal of the instant action was authorized by § 1132(a). In other words, Defendants fail to establish that Northshore's claims, which rest on the ALC contract, come within the scope of the civil enforcement remedy provided by § 1132(a). Specifically, if Northshore had sued Defendants pursuant to an assignment of Mr. Dufrene's benefits under the Crosby Plan, Northshore's claims undeniably would seek to recover benefits and/or enforce rights under an ERISA plan, and would be completely preempted under § 1132(a). See Transitional Hosp. Corp. v. Blue Cross and Blue Shield of Texas, 164 F.3d 952, 954 (5th Cir. 1999); Hermann Hosps. v. MEBA Med. Benefits Plan, 845 F.2d 1286, 1289-90 (5th Cir. 1988) ( Hermann I). Significantly, however, Northshore, as agreed by Defendants at oral argument, does not seek recovery based on an assignment of Mr. Dufrene's rights.
Without an assignment of benefits from a "participant" or "beneficiary" of an ERISA plan, however, Northshore, as a third-party health care provider, does not have standing to assert an enforcement claim under § 1132(a). See 29 U.S.C. § 1132(a) (empowering participants, beneficiaries, and, under certain circumstances, fiduciaries, the Secretary of Labor, and states to bring civil actions); see also Hermann I, 845 F.2d at 1289; Baylor Univ. Med. Ctr. v. Epoch Group, L.C., 2004 WL 2434290, *2 (N.D. Tex.); Peninsula Reg'l Med. Ctr. v. Mid Atlantic Med. Servs., L.L.C., 327 F. Supp. 2d 572, 573-77 (D. Md. 2004). In addition, Northshore seeks payment for health care services rendered at rates set forth in the ALC contract, not the Crosby Plan. These are alleged rights to compensation amounts that patients like Mr. Dufrene, i.e. participants and beneficiaries of the Crosby Plan, could not assert. Given the foregoing, Northshore, "at some point in time, could [not] have brought [its] claim under ERISA § 502(a)(1)(B) [ 29 U.S.C. § 1132(a)(1)(b)]." Davila, 124 S. Ct. at 2496. Thus, the Court finds Davila, on which Defendants rely in arguing that § 1132(a) applies to Northshore's claims, to be distinguishable.
That Northshore may, in fact, have an assignment, is not itself dispositive, if the rights at issue are those provided by a third party agreement, rather than an ERISA plan. Cf. Blue Cross of Cal. v. Anesthesia Care Assocs. Med. Group, Inc., 187 F.3d 1045, 1051 (9th Cir. 1999) ("[t]he dispute here is not over the right to payment, which might be said to depend on the patients . . ., but the amount, or level, of payment, which depends on the terms of the provider agreements"); Children's Hosp. Corp. v. Kindercare Learning Ctrs., Inc., 2005 WL 525407 (D. Mass. 2005) (hospital has the right to assert independent causes of action regardless of the assignment); Baylor Univ. Med. Ctr. v. Arkansas Blue Cross Blue Shield, 331 F. Supp. 2d 502, 509-10 (N.D. Tex. 2004) ("[t]hat Baylor could have sued as an assignee is not dispositive . . . [g]iven [its] independent right of action as a creditor"); Lakeland Anesthesia, Inc. v. Louisiana Health Serv. Indem. Co., 2000 WL 1801834, * 8 (E.D. La.) (finding claim was asserted under separate provider agreement not assignment).
The Court recognizes that certain aspects of the Crosby Plan's performance of the duties it allegedly owes under the ALC contract may implicate ERISA. In addition, the ALC contract arguably also appears to require consultation of certain provisions of ERISA plans such as the Crosby Plan. Northshore contends, however, that it is the applicable rate of payment, which it maintains is set forth in the ALC contract, that is in dispute here, rather than whether the services themselves were usual, customary, reasonable, medically necessary, or otherwise "covered" under the Crosby Plan. Defendants, as the removing parties, have not shown the contrary to be true. Cf. Pascack Valley Hosp, Inc. v. Local 464A UFCW Welfare Reimbursement Plan, 388 F.3d 393, 402-04 (3d Cir. 2004) (noting coverage and eligibility under the alleged ERISA plan was not in dispute, as well as an absence of standing under § 502(a) of ERISA, 29 U.S.C. § 1132(a)); Blue Cross of Cal. v. Anesthesia Care Assocs. Med. Group, Inc., 187 F.3d 1045, 1051 (9th Cir. 1999) (where meaning of "covered billed charges" in provider agreement was not in dispute, fact that ERISA plan might be consulted in the course of litigation of a state-law claim did not result in complete preemption); River Parishes, Inc. v. Aetna U.S. Healthcare, Inc., 2001 WL 277938 (E.D. La. 2001) (dispute between hospitals and plan provider regarding rate allegedly required by contract between parties did not rise to level of § 1132 claim). In any event, assuming that these points possibly could have some bearing on the issue of whether Northshore's claims are "conflict preempted" by virtue of the "relate to" clause of section 514(a) of ERISA, 29 U.S.C. § 1144(a), they do not, for the reasons previously stated, convert Northshore's claims for payment, as a third-party provider under the ALC contract, into "completely preempted" claims for benefits under, or to enforce, the Crosby Plan. Cf. Children's Hosp. Corp. v. Kindercare Learning Ctrs., Inc., 2005 WL 525407 (D. Mass. 2005) (to the extent hospital's claim "substantially implicates plan interpretation or the relationship between the plan administrator and ERISA beneficiaries, it may well trigger the conflict preemption analysis" but that "defense . . . does not create subject matter jurisdiction").
See, e.g., ALC Agreement, Exhibit A to Plaintiff's Motion to Remand, ¶¶ 1.9, 6.2, and 12.3.
Id. at ¶¶ 1.4, 1.5, 3.2 and 5.1 (referencing "Covered Hospital Services" which are services that are, inter alia, "covered by a plan").
See Opposition Memorandum at 9-10 ("The Plan had [Northshore's] invoices audited and found inflated and erroneous charges. These charges were not reasonable and customary as defined by the Plan document").
II. Diversity of Citizenship
As previously stated, Defendants removed this action on June 10, 2004, on the basis of federal question jurisdiction. In their opposition to Northshore's motion to remand, they assert that diversity of citizenship jurisdiction provides an alternative basis for its removal. Defendants explain that diversity jurisdiction was not originally pled in the notice of removal because they are residents of Louisiana, which presents a procedural obstacle to removal under the "local defendant rule" set forth in 28 U.S.C. § 1441(b). Defendants essentially contend, however, that they now can rely on diversity jurisdiction as a basis for defeating remand, because the presence of a defendant from a forum state must be asserted within thirty days of removal, pursuant to 28 U.S.C. § 1447(c), and Northshore's motion to remand was filed thereafter. Defendants further rely upon Howery, 243 F.3d at 916, for the proposition that a removing party's failure to allege diversity jurisdiction in its removal pleadings is irrelevant, if such jurisdiction actually exists.
Id. at 6 and n. 16.
Although Northshore does not contest that the parties to this action are diverse, it contends that the amount in controversy does not exceed $75,000, as required by 28 U.S.C. § 1332(a). Specifically, while recognizing its complaint asserts an unpaid balance of more than $75,000, Northshore points to its initial disclosures, which allegedly reflect that the balance due is actually $74,335.83. In its post-hearing brief, Northshore further contends that Defendants' assertion of diversity jurisdiction should be treated as an untimely and, given the local defendant rule, substantively invalid motion to amend its notice of removal.
See Northshore's Reply Memorandum at 1-2 (Rec. Doc. No. 14) and Exhibit A thereto.
See Rec. Doc. No. 19. The Court ordered the parties to provide post-hearing briefs addressing the diversity issues at the conclusion of the December 15, 2004 oral arguments.
The Court agrees with Northshore that Defendants' assertion of diversity of citizenship jurisdiction in its opposition memorandum should be construed as a request to amend its notice of removal. Cf. Arancio v. Prudential Ins. Co. of America, 247 F.Supp.2d 333 (S.D.N.Y. 2002) (construing alternative assertion of diversity jurisdiction in brief as amendment to removal notice based on federal question jurisdiction). The Court further agrees that Defendants' request to amend should be and is denied.
A. Substantive Objections to Amendment of Grounds for Removal
Addressing substance first, the Court finds Defendants' efforts to assert a new basis of federal jurisdiction to be substantively invalid. Specifically, the Court is not convinced that a plaintiff should be required to file a precautionary motion to remand, asserting a local defendant defect, within thirty days of a removal premised solely on federal question; that is, when no procedural defect exists! See Arancio, 247 F. Supp. 2d 333 ("plaintiff can hardly be faulted for failing to object in a timely manner to a jurisdictional claim that [the defendant] had not yet made"). Indeed, an argument could be made that such a motion would be frivolous. Nor is the Court persuaded by the alternative notion that a plaintiff must assert motions challenging subject matter jurisdiction within the thirty-day period applicable to defects "other than subject matter jurisdiction," or risk losing the benefit of the local defendant rule in the event of a belated assertion of diversity jurisdiction as a basis for a federal forum. See, e.g., Caterpillar v. Lewis, 519 U.S. 61, 69, 117 S. Ct. 467, 473 (1996) (the 30-day limitation imposed by § 1447(c) does not apply to jurisdictional defects).
With regard to the jurisdictional amount, Northshore's petition, presently and as of the time Defendant sought to amend its grounds for removal to add diversity jurisdiction, alleges damages in excess of $75,000. Although Plaintiff's Initial Disclosures, which apparently were exchanged with Defendants on or about August 18, 2004, assert that the balance owed under the ALC contract actually is less than $75,000, the Court has not been provided with supporting documentation for this assertion. See Exhibit A to Defendants' Reply Memorandum (Rec. Doc. No. 14). By comparison, the documentation attached to the petition appear to support the higher amount stated therein. In any event, the Court cannot conclude, to a legal certainty, that Northshore's claim is really for less than the jurisdictional amount. Cf. De Aguilar v. Boeing, Co., 47 F.3d 1404, 1409-10 (5th Cir.) (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S. Ct. 586, 590 (1938)), 516 U.S. 865, 116 S. Ct. 180 (1995). Northshore's reply memorandum further states that it stipulates that $74,335.83 is the amount due. The Court, however, concludes that it cannot consider such a stipulation where the petition states an exact amount owed, and the stipulation is offered after Defendants have sought to assert diversity jurisdiction as an alternative grounds for removal. Cf. Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000) ("if it is facially apparent from the petition that the amount in controversy exceeds $75,000 at the time of removal, post-removal affidavits, stipulations, and amendments reducing the amount do not deprive the district court of jurisdiction). The Court additionally finds the cases cited by Northshore — Allen v. J.C. Penney Co., Inc., 2000 WL 381935 (E.D. La. 4/12/2000), and Tenet Health System Hosps., Inc. v. Corporate Resource Mgmt., No. 04-1197 (E.D. La. 11/4/04) — to be distinguishable.
The Court additionally finds Howery and Caterpillar, supra, on which Defendants rely, to be inapposite with regard to this issue. Howery addressed the application of 28 U.S.C. § 1653, post entry of judgment, where the defendant asserted diversity jurisdiction, for the first time, at oral argument before the court of appeals. That statute allows pleadings, including a removal notice, to be amended, prior to judgment, to "'remedy inadequate jurisdictional allegations," but not "'defective jurisdictional facts.'" Whitmire v. Victus Ltd., T/A Master Design Furniture, 212 F.3d 885, 888 (5th Cir. 2000) (emphasis added) (quoting Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 831, 832 n. 5, 109 S. Ct. 2218 (1989)). In otherwords, it serves to cure technical pleading defects and cannot be used to retroactively create jurisdiction where it did not exist before. Id. at 887-88. The Fifth Circuit ultimately determined that Allstate could not rely upon § 1653 in urging diversity jurisdiction at the appellate level as a means of precluding remand, because the record contained no evidence establishing diversity. Howery, 243 F.3d at 919-20 and n. 39 (explaining § 1653's requirements post-judgment as opposed to pre-judgment).
The statute provides: "Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts." See 28 U.S.C. § 1653.
The Howery court's analysis included consideration of the limited exception recognized in Caterpillar, supra, to the statutory requirement that diversity of citizenship exist at the time of removal. See 28 U.S.C. § 1441(b). In Caterpillar, the Supreme Court concluded that "a district court's error in failing to remand a [diversity] case improperly removed is not fatal to the ensuing adjudication if federal jurisdictional requirements are met at the time judgment is entered." See Caterpillar, 519 U.S. at 64, 75-77, 117 S. Ct. at 471, 476-77 (emphasis added); see also Howery, 243 F.3d at 916, 919. By the time judgment is rendered, the Caterpillar Court reasoned, "considerations of finality, efficiency, and economy" prevailed over statutory removal defects. Id. at 74-75, 117 S.Ct. at 475-76; see also Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 67, 124 S. Ct. 1920, 1924-27 (2004) (emphasizing Caterpillar addressed a statutory defect and a long-established method of curing a jurisdictional defect).
Significantly, here, unlike in Howery and Caterpillar, the defendants in this case are citizens of the forum state. Further, the question of remand — in the form of a request that Defendants be allowed to assert diversity of citizenship as an alternative basis for their removal — is not being considered after judgment has been entered, after trial, or after a dispositive motion has been granted. Rather, this Court is addressing the requirements of the removal statute at the pretrial stage of the proceedings at which remand, if otherwise appropriate, is to be ordered. See Caterpillar, 519 U.S. at 77, 117 S. Ct. at 477 (emphasizing that "[t]he procedural requirements for removal remain enforceable by the federal trial court judges to whom those requirements are directly addressed.) Accordingly, this Court finds that the existence of the local defendant defect renders the relief provided by 28 U.S.C. § 1653 and/or Caterpillar unavailable to Defendants.
Indeed, the Court notes the Supreme Court's references in Caterpillar to the district court's error in failing to remand. 519 U.S. at 64, 70, and 73, 117 S. Ct. at 471, 473, and 475.
Defendants also rely upon Devore v. Transport Technology Corp., 914 F. Supp. 355 (W.D. Mo. 1996), in opposing Northshore's motion. Following removal on diversity grounds, the court there allowed the joinder of a "local defendant" pursuant to Rule 20(a) of the Federal Rules of Civil Procedure, and refused to thereafter remand the matter to state court. Id. at 357-59. In addition to reasoning that 28 U.S.C. § 1441(b) should not be interpreted to apply retroactively after removal, the Devore court concluded that the doctrine of fraudulent joinder applied, because the plaintiffs had moved to join the local defendant on the mistaken assumption that joinder would destroy diversity jurisdiction. Id. at 358. Significantly, that court also reasoned that the Plaintiffs there could have prevented removal if they had alleged their claims against the additional defendant in their state court petition. Id. Here, Northshore does not seek a retroactive application of § 1441(b), and, of course, did name the local defendants in its state court petition. Accordingly, Devore is distinguishable and, furthermore, arguably favors Northshore's position.
Given the foregoing, the Court finds that allowing Defendants to rely upon diversity of citizenship jurisdiction as a means of avoiding remand would essentially allow them to disregard the limitation on removal established by the "local defendant rule." This the Court declines to do.
B. Timeliness Objections to Amendment of Grounds for Removal
The Court additionally finds that Defendants' efforts to amend the grounds for removal of Northshore's state court action to federal court are untimely. Given that neither § 1653 nor Caterpillar offers Defendants any assistance, they face the usual thirty-day removal period provided by 28 U.S.C. § 1446(b), and the August 26, 2004 deadline for amendments established by this Court's scheduling order. See Rec. Doc. No. 5. The thirty-day deadline has long since passed, even if the Court were inclined to entertain the notion of that time period commencing upon the expiration of the deadline for seeking remand under § 1447(c) on the basis of any defect other than a lack of subject matter jurisdiction. See Mahan v. Williams, 2003 WL 79017 (E.D. La.) (party may not amend removal notice more than thirty days after removal to assert a new ground for removal unless § 1653 applies); Lowes v. Cal Dive, Int'l., 1997 WL 178825 (E.D. La.). Nor have Defendants demonstrated good cause for extending the deadline time for amendments of pleadings set forth in the scheduling order. See Royal Ins. of America v. Schubert Marine Sales, 2003 WL 21664701, *2-3 (E.D.La.) (Rule 15's liberal standard for amendment applies only if Rule 16's good cause requirement has been satisfied).
Conclusion
As ERISA has not completely preempted Northshore's state law claims, federal question jurisdiction does not exist over this matter. Given the obstacle to removal on the grounds of diversity of citizenship jurisdiction posed by the local defendant rule found in 28 U.S.C. § 1441(b), as well as the untimeliness of Defendants' request to assert an alternative basis of jurisdiction, Plaintiff's motion to remand is GRANTED. The action is REMANDED to 24th Judicial District Court for the Parish of Jefferson, State of Louisiana.