Arana v. Ochsner Health Plan

United States Court of Appeals
Fifth Circuit
F I L E D
July 10, 2003
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
No. 01-30922
JULIO C ARANA
Plaintiff - Appellee
v.
OCHSNER HEALTH PLAN
Defendant - Appellant
Appeal from the United States District Court
for the Eastern District of Louisiana
Before KING, Chief Judge, JOLLY, HIGGINBOTHAM, DAVIS, JONES,
SMITH, WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES,
STEWART, DENNIS, CLEMENT, and PRADO, Circuit Judges.
KING, Chief Judge:
Julio C. Arana sued Ochsner Health Plan, Inc. in state court
to obtain a declaration that he is entitled to retain tort
settlement proceeds free of Ochsner Health Plan, Inc.'s claim for
reimbursement of health care benefits previously paid for Arana's
account and to obtain attorney's fees and statutory penalties as
well. The case was removed to federal court. The district court
granted summary judgment for Arana. A panel of this court
reversed, holding that the district court did not have subject
1
matter jurisdiction, and directed that the case be remanded to
state court. See Arana v. Ochsner Health Plan, Inc., 302 F.3d
462 (5th Cir. 2002), vacated and reh'g en banc granted, 319 F.3d
205 (5th Cir. 2003). Rehearing en banc was granted, thereby
vacating the panel opinion. Because Arana states a claim to
recover benefits or to enforce his rights that is completely
preempted by ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B)
(2000), we find that the district court had federal subject
matter jurisdiction. We do not address the merits of this case,
instead returning the case to the panel for that purpose.
I. FACTUAL AND PROCEDURAL HISTORY
A. Facts
Julio C. Arana ("Arana") was injured in a car accident.
Ochsner Health Plan, Inc. ("OHP") paid approximately $180,000 in
benefits under the terms of an employer-sponsored health plan
offered by Arana's mother's employer. Arana then asserted tort
claims against, and ultimately settled with, three other
insurance companies.1 Though his mother's health benefits plan,
which all parties agree is governed by the Employee Retirement
Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461 (2000),
required Arana to notify OHP of any litigation or settlement of
claims against third parties for which OHP had made payment,
1
Approximately $150,000 of the tort settlements is being
held in Arana's attorney's trust fund account.
2
Arana did not do so. OHP learned of the settlements and
contacted Arana's mother. OHP claimed a right to subrogation of
Arana's personal injury cause of action and reimbursement of
benefits it paid for Arana's injuries to the extent that Arana
was compensated by other insurers.2
2
The Group Health Services Agreement is the ERISA plan
between OHP (here designated O/SCHP) and Arana. The portion at
issue in this case reads:
If any Member is injured by an act or omission of a
third party and if such third party and/or any other
third party or entity, including but not limited to the
Member's medical, health and accident,
uninsured/underinsured motorist, school, and/or no
fault insurer(s) (each referred to hereafter as a
"Third Party"), is subsequently determined to be liable
and/or responsible for the Expenses incurred because of
such act or omission or by contract, O/SCHP will be
subrogated to, and may enforce the rights of, the
Member against the Third Party(ies) for such Expenses.
In addition to and notwithstanding the subrogation
rights granted to O/SCHP, by becoming a Member of
O/SCHP and/or accepting benefits under O/SCHP and the
provision of health care services by O/SCHP, including
payment of the Expenses, each Member does hereby assign
and shall be deemed to have assigned to O/SCHP all
rights and claims against such Third Party(ies) for
such Expenses, including the right to compromise claims
independently of the Member, to commence and prosecute
any legal proceeding, and to pursue judgments through
collection, in its name or in the Member's name.
. . .
Any settlement, compromise, or release by a Member in
favor of a Third Party, made in violation of the
provisions of this Section 1, shall be deemed to
include the full amount due O/SCHP, up to the amount of
the settlement, compromise, or release, regardless of
whether the Member receives full or partial recovery
from such Third Party, and any funds received by the
Member shall be held in trust by the Member and/or his
3
B. District Court Decision
Arana sued OHP in Louisiana state court, seeking a
declaratory judgment. Arana asked the court to find that OHP
could not obtain reimbursement from him for amounts OHP
previously paid for his medical bills. Arana raised two claims:
(1) a request for a declaratory judgment "requiring OHP to
release its notice of lien and to withdraw and release OHP's
subrogation, reimbursement and assignment claims" because LA.
REV. STAT. § 22:6633 bars OHP from asserting these rights; and (2)
a request for statutory penalties and attorney's fees under LA.
REV. STAT. § 22:6574 for OHP's allegedly wrongful attempt to assert
attorney or other representative and paid to O/SCHP
without any deductions for attorneys' fees or other
costs.
3
Section 22:663 reads:
Notwithstanding any other provisions in this title to
the contrary, no group policy of accident, health or
hospitalization insurance, or of any group combination
of these coverages, shall be issued by any insurer
doing business in this state which by the terms of such
policy group contract excludes or reduces the payment
of benefits to or on behalf of an insured by reason of
the fact that benefits have been paid under any other
individually underwritten contract or plan of insurance
for the same claim determination period. Any group
policy provision in violation of this section shall be
invalid.
LA. REV. STAT. ANN. § 22:663 (West 1995 & Supp. 2003).
4
Section 22:657 reads, in part:
All claims arising under the terms of health and
accident contracts issued in this state, except as
provided in Subsection B, shall be paid not more than
4
a lien against his tort settlements and obtain reimbursement from
him. Arana brought the case as a class action, but no class has
been certified.
OHP removed the case to federal district court, basing
subject matter jurisdiction on the argument that ERISA completely
preempts Arana's claims. The district court found that there was
subject matter jurisdiction because Arana stated a claim "to
recover benefits" under ERISA § 502(a)(1)(B).5 The district
court then granted partial summary judgment to Arana on the
thirty days from the date upon which written notice and
proof of claim, in the form required by the terms of
the policy, are furnished to the insurer unless just
and reasonable grounds, such as would put a reasonable
and prudent businessman on his guard, exist. The
insurer shall make payment at least every thirty days
to the assured during that part of the period of his
disability covered by the policy or contract of
insurance during which the insured is entitled to such
payments. Failure to comply with the provisions of
this Section shall subject the insurer to a penalty
payable to the insured of double the amount of the
health and accident benefits due under the terms of the
policy or contract during the period of delay, together
with attorney's fees to be determined by the court.
Any court of competent jurisdiction in the parish where
the insured lives or has his domicile, excepting a
justice of the peace court, shall have jurisdiction to
try such cases.
LA. REV. STAT. ANN. § 22:657 (West 1995 & Supp. 2003).
5
The district court reasoned:
Arana's argument that his claim is brought only under
state law because it is not a claim to obtain benefits
is unconvincing. Even though the benefits have been
paid, Ochsner is attempting to reduce the amount of the
benefits paid under the health plan. The claim is
brought under § 502(a) . . .
5
merits of his claims.
C. Fifth Circuit Proceedings
On appeal, Arana argued that the federal courts do not have
subject matter jurisdiction over this action because his claims
are not completely preempted by ERISA. The panel agreed. The
panel held that Arana's first claim is not a claim "to recover
benefits" within the scope of ERISA § 502(a)(1)(B) because OHP
has already paid Arana all of the health benefits due and Arana
is not seeking additional benefits. The panel also rejected
OHP's argument that Arana's first claim is one "to enforce his
rights under the terms of the plan" under § 502(a)(1)(B) because
Arana is not seeking to enforce the plan's terms but rather to
declare a portion of the plan illegal under Louisiana law if
enforced. Finally, the panel determined that Arana's second
claim, which seeks penalties and attorney's fees, is not within
the scope of ERISA § 502(a) because, though LA. REV. STAT. § 22:657
may conflict with ERISA, a mere conflict with federal law is
insufficient for jurisdiction.
We granted OHP's petition for rehearing en banc to consider
the jurisdictional issue.6
6
Participating in this case as amici curiae are
Louisiana Managed Health Care Association, Inc., et al.; Benefit
Recovery, Inc.; Elaine L. Chao, Secretary of the United States
Department of Labor; and Professors Edward H. Cooper and Dana M.
Muir of the University of Michigan Law School. Professors Cooper
and Muir filed their brief at the request of the court, and we
are grateful for their participation.
6
II. STANDARD OF REVIEW
We review challenges to our subject matter jurisdiction de
novo. See, e.g., Hussain v. Boston Old Colony Ins. Co., 311 F.3d
623, 628 (5th Cir. 2002).
III. DISCUSSION OF SUBJECT MATTER JURISDICTION
A. Requirements for Complete Preemption Subject Matter
Jurisdiction
The federal removal statute authorizes removal to federal
court of a civil action filed in state court if the claim is one
"arising under" federal law or if there is diversity jurisdiction
and the defendant is not a citizen of the state where the action
is brought.7 See 28 U.S.C. § 1441(b) (2000). As the Supreme
Court recently explained:
To determine whether the claim arises under federal
law, we examine the "well pleaded" allegations of the
complaint and ignore potential defenses: "A suit arises
under the Constitution and the laws of the United
States only when the plaintiff’s statement of his own
cause of action shows that it is based upon those laws
or that Constitution. It is not enough that the
plaintiff alleges some anticipated defense to his cause
of action and asserts that the defense is invalidated
by some provision of the Constitution of the United
States." Louisville & Nashville R. Co. v. Mottley, 211
U.S. 149, 152 (1908); see Taylor v. Anderson, 234 U.S.
74 (1914). . . . As a general rule, absent diversity
jurisdiction, a case will not be removable if the
complaint does not affirmatively allege a federal
claim.
Beneficial Nat'l Bank v. Anderson, 123 S. Ct. 2058, 2062 (2003).
7
OHP and Arana are citizens of Louisiana, so removal is
only proper in this case if there is federal question
jurisdiction.
7
There is an exception to the well-pleaded complaint rule,
though, if Congress "so completely pre-empt[s] a particular area
that any civil complaint raising this select group of claims is
necessarily federal in character." Metro. Life Ins. Co. v.
Taylor, 481 U.S. 58, 63-64 (1987). In Metropolitan Life
Insurance Co. v. Taylor, the Supreme Court found that state law
claims seeking relief within the scope of ERISA § 502(a)(1)(B)
are completely preempted. See id. at 62-66.
B. Analysis of Arana's LA. REV. STAT. § 22:663 Claim
Arana's first claim requests a declaratory judgment
"requiring OHP to release its notice of lien and to withdraw and
release OHP's subrogation, reimbursement, and assignment claims"
because such claims violate LA. REV. STAT. § 22:663. This claim
is completely preempted because it falls within the scope of
ERISA § 502(a)(1)(B). Section 502(a)(1)(B) reads:
(a) A civil action may be brought–
(1) by a participant or beneficiary–
. . .
(B) 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 (2000).
Arana's LA. REV. STAT. § 22:663 claim can fairly be
characterized either as a claim "to recover benefits due to him
under the terms of his plan" or as a claim "to enforce his rights
8
under the terms of the plan."8 As it stands, Arana's benefits
are under something of a cloud, for OHP is asserting a right to
be reimbursed for the benefits it has paid for his account. It
could be said, then, that although the benefits have already been
paid, Arana has not fully "recovered" them because he has not
obtained the benefits free and clear of OHP's claims.
Alternatively, one could say that Arana seeks to enforce his
rights under the terms of the plan, for he seeks to determine his
entitlement to retain the benefits based on the terms of the
plan.
8
See Clancy v. Employers Health Insurance Co., 82 F. Supp.
2d 589, 591-92, 596 (E.D. La. 1999), aff'd, 248 F.3d 1142 (5th
Cir. 2001) (unpublished opinion), cert. denied, 534 U.S. 820(2001) (finding that a suit based on LA. REV. STAT. § 22:663
seeking to obtain benefits and prevent an insurer from recovering
benefits it had already paid fell within § 502(a)(1)(B) as a
claim "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"); see also Coughlin v. Health Care Serv. Corp., 244 F.
Supp. 2d 883, 885-89 (N.D. Ill. 2002) (finding than the insureds'
declaratory judgment class action claims, which sought to retain
tort settlements in light of the insurers' claims for
reimbursement, were claims to "enforce [their] rights under the
terms of the plan" and to "clarify [their] rights to future
benefits under the terms of the plan"); Carducci v. Aetna U.S.
Healthcare, 204 F. Supp. 2d 796, 799-803 (D.N.J. 2002) (holding
that the insureds' suits to recover funds their ERISA plans had
obtained via subrogation liens on their tort settlement proceeds
were suits for "benefits due" under their plans); Franks v.
Prudential Health Care Plan, Inc., 164 F. Supp. 2d 865, 868-69
(W.D. Tex. 2001) (finding that an insured's suit to recover
amounts he had paid to reimburse his ERISA plan from tort
settlement proceeds was a suit "to recover benefits due 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") (emphasis in original).
9
Arana contends that he does not seek relief under ERISA
§ 502(a)(1)(B) because he claims entitlement to relief under
Louisiana law, not under the terms of his ERISA plan. That is,
according to Arana, LA. REV. STAT. § 22:663 nullifies the term of
his ERISA plan which provides for reimbursement, so his claims do
not seek relief under the plan's terms. As we see it, however,
Arana does seek benefits "under the terms of the plan" because
the plan explicitly provides that the plan is to be enforced
according to Louisiana law. Specifically, the plan contains a
choice-of-law clause mandating that the plan be construed in
light of Louisiana law so long as Louisiana law is not preempted
by ERISA.9 Our holding that Arana seeks relief under the terms
of the plan is bolstered by a Seventh Circuit decision which also
found that a claim seeking benefits premised on an ERISA plan
read in conjunction with state law falls within § 502(a)(1)(B).
See Plumb v. Fluid Pump Serv., Inc., 124 F.3d 849, 860-62 (7th
Cir. 1997); cf. Ward, 526 U.S. at 377 ("Ward sued under
§ 502(a)(1)(B) 'to recover benefits due . . . under the terms of
the plan.' The [California] notice-prejudice rule supplied the
9
This clause reads:
Section 15. Governing Law: This Agreement shall be
construed, administered and enforced as a Louisiana
contract according to the internal laws of the State of
Louisiana. However, it is specifically intended that
to the extent ERISA or any other federal law preempts
state law, this Agreement shall be construed,
administered and enforced in accordance with such laws.
10
relevant rule of decision for this § 502(a) suit."). Thus,
Arana's claim seeks relief under the terms of his ERISA plan, as
ERISA § 502(a)(1)(B) requires.
Arana's final argument is that, even if his claim falls
within ERISA § 502 so that it is completely preempted, there is
no jurisdiction because his claim is not conflict preempted as
well. Conflict preemption, also known as ordinary preemption,
arises when a federal law conflicts with state law, thus
providing a federal defense to a state law claim, but does not
completely preempt the field of state law so as to transform a
state law claim into a federal claim. See, e.g., Heimann v.
Nat'l Elevator Indus. Pension Fund, 187 F.3d 493, 499-500 (5th
Cir. 1999). Arana reasons that although his claim is conflict
preempted under ERISA § 514(a), 29 U.S.C. § 1144(a) (2000),
because it is a claim that "relates to" an ERISA plan, it is
saved from preemption because LA. REV. STAT. § 22:663 is a state
law that "regulates insurance" under § 514(b)(2)(A), 29 U.S.C.
§ 1144(b)(2)(A) (2000), within the meaning of FMC Corp. v.
Holliday, 498 U.S. 52 (1990), and Kentucky Ass'n of Health Plans,
Inc. v. Miller, 123 S. Ct. 1471 (2003).
This circuit has not been content to require only § 502
complete preemption for federal jurisdiction, requiring § 514
conflict preemption as well. See, e.g., Copling v. Container
Store, Inc., 174 F.3d 590, 597 n.14 (5th Cir. 1999); McClelland
v. Gronwaldt, 155 F.3d 507, 517 & n.31 (5th Cir. 1998). The
11
source of this two-part test, as best we can tell, is Hartle v.
Packard Electric, where we stated:
Federal preemption is ordinarily raised as a
matter of defense, and therefore does not authorize
removal to federal court. In Metropolitan Life
Insurance Co. v. Taylor, 481 U.S. 58, 107 S. Ct. 1542,
95 L. Ed. 2d 55 (1987), however, the United States
Supreme Court held that state law actions displaced by
the civil enforcement provisions of ERISA can be
characterized as claims arising under federal law.
Therefore, such actions can properly be removed to
federal court even though ERISA preemption does not
appear on the face of the complaint.
A prerequisite to this exercise of jurisdiction,
however, is that the state law claims actually be
preempted by ERISA.
877 F.2d 354, 355 (5th Cir. 1989). Succeeding cases have been
controlled by this language.
Today, in view of the possibility that Arana’s claim is not
preempted by § 514(a), we must revisit our two-part test for
finding complete preemption jurisdiction. First, Metropolitan
Life, to which the Hartle case referred, did not hold that a two-
part test is required in order to find complete preemption. In
Metropolitan Life, in assessing whether removal of the common law
contract and tort claims at issue was proper, the Supreme Court
simply noted that the claims were preempted by § 514 and then
went on to consider § 502(a) complete preemption. See 481 U.S.
at 62-63. Second, Supreme Court cases decided after Metropolitan
Life (and after we adopted our two-part test) have made it clear
that § 514 conflict preemption is not necessary to find complete
preemption jurisdiction. In UNUM Life Insurance Co. of America
12
v. Ward, the Court determined that a California state law was not
preempted under § 514 (because it was a law regulating insurance)
but acknowledged that the plaintiff properly brought a claim in
federal court under ERISA § 502(a). See 526 U.S. 358, 365-77
(1999). Similarly, in Rush Prudential HMO, Inc. v. Moran, the
Court found that ERISA § 514 did not preempt the Illinois HMO Act
(because it too was a law regulating insurance) but nonetheless
noted, and did not question the fact that, the Seventh Circuit
found federal subject matter jurisdiction over the claim under
ERISA § 502(a). See 536 U.S. 355, 363-87 (2002). These cases
clearly indicate, then, that there may be complete preemption
subject matter jurisdiction over a claim that falls within ERISA
§ 502(a) even though that claim is not conflict preempted by
ERISA § 514.
We thus hold that only complete preemption of a claim under
ERISA § 502(a) is required for removal jurisdiction; conflict
preemption under ERISA § 514 is not required;10 and we overrule
the relevant portions of our precedent to the contrary.11 Put
simply, there is complete preemption jurisdiction over a claim
that seeks relief "within the scope of the civil enforcement
10
We thus do not address whether Arana's LA. REV. STAT.
§ 22:663 claim is conflict preempted under ERISA § 514.
11
These portions of our precedent include: Heimann, 187
F.3d 493, 502 (5th Cir. 1999); Copling, 174 F.3d at 597 n.14;
McClelland, 155 F.3d at 517 & n.31; Hartle, 877 F.2d at 355.
13
provisions of § 502(a)." Metro. Life Ins. Co., 481 U.S. at 66.12
IV. CONCLUSION
We find that there is subject matter jurisdiction over this
case. We RETURN the case to the panel to address the merits of
Arana's claims.
12
Because the district court correctly held that there is
subject matter jurisdiction over Arana's LA. REV. STAT. § 22:663
claim, we need not address OHP's argument that Arana's LA. REV.
STAT. § 22:657 claim for attorney's fees and penalties provides
an independent basis of jurisdiction. We also decline to address
OHP's argument that there is subject matter jurisdiction because
OHP has a federal claim under Great-West Life & Annuity Insurance
Co. v. Knudson, 534 U.S. 204 (2002), and Franchise Tax Board v.
Construction Laborers Vacation Trust for Southern California, 463
U.S. 1 (1983).
14