Giles v. NYLCare Health Plans, Inc.

• Citation: 172 F.3d 332
• Decision Date: 09 April 1999
• Docket Number: No. 97-20840,97-20840
• Parties: 22 Employee Benefits Cas. 2974, Pens. Plan Guide (CCH) P 23953Y Bridgett GILES, Individually and as the Personal Representative of the Estate of Alex Giles, a Minor, Deceased, Plaintiff-Appellee, v. NYLCARE HEALTH PLANS, INCORPORATED, et al., Defendants, NYLCare Health Plans, Incorporated, and NYLCare Health Plans of the Gulf Coast, Inc., Formerly Known as Sanus Health Plan, Incorporated, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 332

172 F.3d 332

22 Employee Benefits Cas. 2974,

Pens. Plan Guide (CCH) P 23953Y

Bridgett GILES, Individually and as the Personal Representative of the Estate of Alex Giles, a Minor, Deceased, Plaintiff-Appellee, v. NYLCARE HEALTH PLANS, INCORPORATED, et al., Defendants,

NYLCare Health Plans, Incorporated, and NYLCare Health Plans

of the Gulf Coast, Inc., Formerly Known as Sanus

Health Plan, Incorporated, Defendants-Appellants.

No. 97-20840.

United States Court of Appeals, Fifth Circuit.

April 9, 1999.

Maria P. Sperando, Gary, Williams, Parenti, Finney, Lewis & McManus, Stuart, FL, George Parker Young, Friedman, Young & Suder, Fort Worth, TX, Price Ainsworth, Spivey & Ainsworth, Houston, TX, for Plaintiff-Appellee.

George William Scott, Karen L. Handorf, U.S. Dept. of Labor, Office of the Solicitor, Washington, DC, for Secretary of Labor, Amicus Curiae.

Neal Stuart Manne, J. Hoke Peacock, III, Susman Godfrey, Houston, TX, for Defendants-Appellants.

Appeal from the United States District Court for the Southern District of Texas.

Before DAVIS, SMITH and WIENER, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

After her son Alex died while under a provider's care, Bridgett Giles sued her health maintenance organization ("HMO") alleging, inter alia, vicarious liability and negligence in selecting the plan's providers. After removal, the district court remanded to state court. We affirm.

I.

Giles brought this medical malpractice case on behalf of Alex against NYLCare Health Plans of the Gulf Coast, Inc. ("NYLCare"), an HMO; the two doctors who treated Alex; and OneCare, the medical group that employs one of the doctors. At the time of treatment, Alex and his mother were enrolled in a health plan offered by NYLCare through an employee benefit plan provided by Giles's employer, Sanus of Texas, Inc. (now known as NYLCare of Texas, Inc.). The underlying basis of Giles's complaint is that one of the doctors failed to diagnose Alex's heart defect, resulting in death.

Giles originally sued NYLCare in state court for negligence, vicarious liability, breach of contract, misrepresentation, and breach of warranty. NYLCare removed to federal court on the ground that the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., preempts the claims. Giles then amended, dropping the breach of contract, misrepresentation, and breach of warranty claims that she admitted were preempted, and moved for remand. Relying primarily on Dukes v. U.S. Healthcare, Inc., 57 F.3d 350 (3d Cir.1995), the district court, noting that ERISA did not preempt Giles's remaining vicarious liability and negligence claims, granted the motion, stating that "this is an appealable order because the basis of my ruling is an exercise of discretion to remand pendent state law claims."

II.

Before reaching the merits, we must examine the basis of our appellate jurisdiction and, if there is doubt, we must address it, sua sponte if necessary. See Castaneda v. Falcon, 166 F.3d 799, 801 (5th Cir.1999); Jones v. Collins, 132 F.3d 1048, 1051 (5th Cir.1998). We begin with 28 U.S.C. § 1447(d), which provides, "An order remanding a case to State court from which it was removed is not reviewable on appeal or otherwise...." Interpreted in pari materia with § 1447(c), this indicates that an appellate court lacks jurisdiction to review a remand under § 1447(c); conversely, remands on other grounds may be reviewed. ¹

A § 1447(c) remand may not be reviewed even if the district court's order was erroneous. See Thermtron, 423 U.S. at 351, 96 S.Ct. 584; Angelides, 117 F.3d at 836. Reviewable non-s 1447(c) remands are a narrow class of cases, meaning we review a remand order only if the district court "clearly and affirmatively" relies on a non-s 1447(c) basis. See Soley, 923 F.2d at 409; see also Tillman v. CSX Transp., Inc., 929 F.2d 1023, 1027 (5th Cir.1991).

The record plainly demonstrates that the district court did not remand under § 1447(c). The court specifically noted that "this is an appealable order because the basis of my ruling is an exercise of discretion to remand pendent state law claims." Thus, the court affirmatively stated a non-s 1447(c) reason for remanding and gave no indication that it believed it lacked subject matter jurisdiction. In these circumstances, § 1447(d) does not deprive us of jurisdiction, and we review the district court's exercise of discretion to remand supplemental (formerly termed "pendent") state law claims. ²

III.

A.

A lack of subject matter jurisdiction may be raised at any time, ³ which means we can examine the district court's jurisdiction for the first time on appeal. Furthermore, a court sua sponte must raise the issue if it discovers it lacks subject matter jurisdiction. ⁴ A well-pleaded complaint raising a federal question provides one basis for subject matter jurisdiction. ⁵

B.

As we recently explained in McClelland v. Gronwaldt, 155 F.3d 507 (5th Cir.1998), there are two types of preemption under ERISA. First, ERISA may occupy a particular field, resulting in complete preemption under § 502(a), 29 U.S.C. § 1132(a). See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 66, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987); McClelland, 155 F.3d at 516-17. ⁶ This functions as an exception to the well-pleaded complaint rule; "Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan Life, 481 U.S. at 64-65, 107 S.Ct. 1542. Section 502, by providing a civil enforcement cause of action, completely preempts any state cause of action seeking the same relief, regardless of how artfully pleaded as a state action.

Furthermore, because such a claim presents a federal question, it provides grounds for a district court's exercise of jurisdiction upon removal. ⁷ If the plaintiff moves to 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. Once the court has proper removal jurisdiction over a federal claim, it may exercise supplemental jurisdiction over state law claims, see 28 U.S.C. § 1367, even if it dismisses or otherwise disposes of the federal claim or claims.

C.

Alternatively, ERISA might preempt a state law cause of action by way of conflict-preemption (also known as ordinary preemption) under § 514. See 29 U.S.C. § 1144. "State law claims [that] fall outside the scope of ERISA's civil enforcement provision, § 502, even if preempted by § 514(a), are still governed by the well-pleaded complaint rule and, therefore, are not removable under the complete-preemption principles established in Metropolitan Life." Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 355 (3d Cir.1995). ⁸

The presence of conflict-preemption does not establish federal question jurisdiction. Rather than transmogrifying a state cause of action into a federal one--as occurs with complete preemption--conflict preemption serves as a defense to a state action. ⁹

When the doctrine of complete preemption does not apply, but the plaintiff's state claim is arguably preempted under § 514(a), the district court, being without removal jurisdiction, cannot resolve the dispute regarding preemption. It lacks power to do anything other than remand to the state court where the preemption issue can be addressed and resolved.

Dukes, 57 F.3d at 355 (citing Franchise Tax Bd., 463 U.S. at 27-28, 103 S.Ct. 2841). ¹⁰

Hence, when a complaint raises state causes of action that are completely preempted, the district court may exercise removal jurisdiction. When a complaint contains only state causes of action that the defendant argues are merely conflict-preempted, the court must remand for want of subject matter jurisdiction. When a complaint raises both completely-preempted claims and arguably conflict-preempted claims, the court may exercise removal jurisdiction over the completely-preempted claims and supplemental jurisdiction (formerly known as "pendent jurisdiction") over the remaining claims. ¹¹

D.

We face one complication: Burks v. Amerada Hess Corp., 8 F.3d 301, 304 (5th Cir.1993). As NYLCare contends, we ostensibly held in Burks that a court cannot remand without first deciding that the claims are not conflict-preempted. ¹² We stated that

[a]lthough the district court ostensibly exercised its discretion to remand a case in which federal jurisdiction has disappeared, a district court has no discretion to remand a matter in which a federal law claim still exists. Because the first and second amended complaints contain a claim that is preempted by federal law, the district court could not decline to hear the removed case.

Id. (citations omitted).

The only preemption we addressed in Burks was § 514(a) conflict preemption; we did not address complete preemption. ¹³ Apparently, we mistakenly held, contrary to Supreme Court precedent and Soley, that conflict preemption, rather than serving as merely a defense, transforms the cause of action into "a federal law claim" that the district court has no discretion to remand, thus serving as a "defense" to a remand motion.

We now clarify that a district court has discretion to remand a case involving solely arguably conflict-preempted causes of action. To the extent it holds otherwise, Burks is not the binding law of this circuit, because it directly conflicts with both our precedent and Supreme Court precedent that hold that ERISA conflict preemption does not make a state cause of action federal. ¹⁴

IV.

Giles originally alleged both claims that may have been completely preempted and putatively conflict-preempted claims. The former provide a basis for the district court to exercise jurisdiction over the entire case. Ordinarily, after deciding that certain claims are, in fact, completely preempted, it could dismiss those. It then either could exercise its discretion to remand the putatively...