Peay v. BellSouth Medical Assitance Plan

• Decision Date: 06 March 2000
• Docket Number: No. 98-4180,98-4180
• Citation: 205 F.3d 1206
• Parties: (10th Cir. 2000) ROBERT PEAY, as guardian of minor child Jennifer McCluskey; TEEN HELP, doing business as Brightway Adolescent Hospital; DELBERT E. GOATES, M.D., Plaintiffs - Appellants, v. BELLSOUTH MEDICAL ASSISTANCE PLAN; BLUE CROSS BLUE SHIELD OF ALABAMA, Defendants-Appellees. UNITED STATES DEPARTMENT OF LABOR, Amicus Curiae
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1206

205 F.3d 1206 (10th Cir. 2000)

ROBERT PEAY, as guardian of minor child Jennifer McCluskey; TEEN HELP, doing business as Brightway Adolescent Hospital; DELBERT E. GOATES, M.D., Plaintiffs - Appellants, v. BELLSOUTH MEDICAL ASSISTANCE PLAN; BLUE CROSS BLUE SHIELD OF ALABAMA, Defendants-Appellees.

UNITED STATES DEPARTMENT OF LABOR, Amicus Curiae.

No. 98-4180

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

March 6, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH (D. Ct. No. 97-CV-916-K)

Brian S. King and Marcie E. Schaap, King & Isaacson, P.C., Salt Lake City, Utah, appearing for Plaintiffs-Appellants.

Keith W. Kochler, BellSouth Telecommunications, Inc., Atlanta, Georgia (Gary L. Johnson, Richards, Brandt, Miller & Nelson, Salt Lake City, Utah, with him on the brief), appearing for Defendants-Appellees.

Henry L. Solano, Solicitor of Labor, Allen H. Feldman, Associate Solicitor for Special Appellate and Supreme Court Litigation, and Edward D. Sieger, Senior Appellate Attorney, United States Department of Labor, filed an amicus curiae brief in support of Appellants.

Before TACHA, BRORBY, and EBEL, Circuit Judges.

TACHA, Circuit Judge.

Plaintiffs appeal the district court's order granting defendants' motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer for improper venue. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and reverse.

I.

At the time of the events in this case, plaintiff Jennifer McCluskey lived in Tennessee with her guardian, plaintiff Robert Peay. Peay's employer, BellSouth Telecommunications, Inc. (BST), provided both Peay and McCluskey with insurance through defendant BellSouth Medical Assistance Plan ("Plan"). BST is headquartered in Atlanta, Georgia, and operates in nine southeastern states. Defendant Blue Cross & Blue Shield of Alabama (BCBS), located in Birmingham, Alabama, provided third-party administration services to the Plan.

In 1993, McCluskey received in-patient psychiatric care at plaintiff Brightway Adolescent Hospital ("Brightway"), a Utah facility. Plaintiff Delbert Goates, a Utah resident, was McCluskey's treating physician. The Plan's utilization review agent precertified McCluskey's treatment, and the Plan and BCBS paid Goates for a portion of McCluskey's care. However, the Plan refused to pay 100% of the covered charges because McCluskey did not use a preferred provider's services. McCluskey and Peay executed an assignment of benefits in favor of Brightway and Goates.

McCluskey, Peay, Brightway, and Goates then sued the Plan and BCBS in Utah federal district court for a determination of medical benefits due under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B). Plaintiffs served a summons and the complaint on BCBS in Birmingham, and the Plan waived service of process.

Pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3), defendants moved to dismiss for lack of jurisdiction or, in the alternative, to transfer for improper venue. The district court granted defendants' motion to dismiss, and plaintiffs appealed.

II.

A.

We review de novo the district court's legal determination that it lacks personal jurisdiction over defendants. Application to Enforce Admin. Subpoenas Duces Tecem of the SEC v. Knowles, 87 F.3d 413, 415 (10th Cir. 1996). The district court found that neither the Plan nor BCBS has an address, an office, a statutory agent, a telephone listing, employees, active Plan participants, or other operations in Utah. McCluskey v. BellSouth Med. Assistance Plan, 23 F. Supp.2d 1312, 1315 (D. Utah 1998). Applying a "traditional personal jurisdiction test," the lower court held that defendants lacked "sufficient contacts" with Utah to support the exercise of personal jurisdiction and thus dismissed the suit. Id.

On appeal, plaintiffs argue that ERISA, 29 U.S.C. § 1132(e)(2), authorizes nationwide service of process and consequently nationwide personal jurisdiction. They assert that when a court's jurisdiction is invoked based on ERISA's nationwide service of process provision, minimum contacts with the forum are unnecessary. Under these circumstances, plaintiffs insist, a federal district court can exercise jurisdiction over defendants as long as defendants have minimum contacts with the United States. Plaintiffs claim that defendants have the requisite minimum contacts because defendants are large corporations carrying on day-to-day business throughout this country.¹

Defendants contend that even if § 1132(e)(2) authorizes nationwide service of process, it does not authorize nationwide jurisdiction. They argue that under the plain language of § 1132(e)(2), personal jurisdiction in ERISA cases is co-extensive with venue and plaintiffs cannot establish either of these procedural requirements.

B.

Before a federal court can assert personal jurisdiction over a defendant in a federal question case, the court must determine (1) "whether the applicable statute potentially confers jurisdiction" by authorizing service of process on the defendant and (2) "whether the exercise of jurisdiction comports with due process." Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 942 (11th Cir. 1997); see also Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987) (finding, in a federal question case, that before a federal court may exercise personal jurisdiction over a defendant, there must be "a basis for the defendant's amenability to service of summons").

While service of process and personal jurisdiction both must be satisfied before a suit can proceed, they are distinct concepts that require separate inquiries. Willingway Hosp., Inc. v. Blue Cross & Blue Shield, 870 F. Supp. 1102, 1104 (S.D. Ga. 1994) (citing 4 Charles Alan Wright and Arthur R. Miller, Federal Practice & Procedure § 1063 (1987)). In the federal system, service of process is governed by Rule 4 of the Federal Rules of Civil Procedure. By contrast, "'[t]he requirement that a court have personal jurisdiction flows . . . from the Due Process Clause. . . . It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty.'" Omni Capital Int'l, 484 U.S. at 104 (quoting Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982)). More specifically, in federal question cases, personal jurisdiction flows from the Due Process Clause of the Fifth Amendment.² See id. at 103-04 (assuming, in a federal question case, that a court's exercise of personal jurisdiction must comport with Fifth Amendment due process principles); Republic of Panama, 119 F.3d at 942 ("It is well established that when . . . a federal statute provides the basis for jurisdiction, the constitutional limits of due process derive from the Fifth, rather than the Fourteenth, Amendment.").

C.

To determine whether the applicable statute potentially confers jurisdiction over defendants by authorizing service of process, we begin with Fed. R. Civ. P. 4(h)(1). Rule 4(h)(1) governs service upon domestic corporations. In pertinent part, Rule 4(h)(1) provides that, unless a defendant waives service, service must be made "in a judicial district of the United States in the manner prescribed for individuals by" Rule 4(e)(1). Rule 4(e)(1) states, "Unless otherwise provided by federal law, service upon an individual . . . may be effected in any judicial district of the United States pursuant to the law of the state in which the district court is located . . . ."

In ERISA cases, federal law provides:

Where an action under this subchapter is brought in a district court of the United States, it may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any other district where a defendant resides or may be found.

29 U.S.C. § 1132(e)(2) (emphasis added). There is no question that the last clause of § 1132(e)(2) authorizes nationwide service of process. "When a federal statute provides for nationwide service of process, it becomes the statutory basis for personal jurisdiction." Republic of Panama, 119 F.3d at 942; see also Fed. R. Civ. P. 4(k)(1)(D) ("Service of a summons or filing a waiver of service is effective to establish jurisdiction over the person of a defendant when authorized by a statute of the United States."). Thus, provided that due process is satisfied, § 1132(e)(2) confers jurisdiction over defendants by authorizing service of process on them.³

D.

Next, we must determine whether the Utah district court's exercise of jurisdiction over defendants comports with due process. Plaintiffs argue that because ERISA authorizes nationwide service of process, the district court can constitutionally exercise jurisdiction over defendants as long as they have minimum contacts with the United States as a whole. Under this approach, the so-called "national contacts" test, a plaintiff could sue a defendant in any federal court in the United States, regardless of the defendant's contacts with the forum or the burden on the defendant of litigating in that forum. We are convinced that due process requires something more.⁴

As we noted above, the personal jurisdiction requirement flows from the Due Process Clause of the Fifth Amendment and restricts judicial power in order to protect the individual's liberty interest. Bauxites, 456 U.S. at 702. Thus, the "proper focus for a personal jurisdiction test should be on protecting an individual's liberty interest in avoiding the burdens of litigating" in an unfair or unreasonable forum. Busch v. Buchman, Buchman & O'Brien, 11 F.3d 1255, 1259 (5th Cir. 1994) (Garza, J., dissenting). "Requiring that the individual defendant in a national service of process case only reside somewhere in the United States does not protect this interest." Id. (Garza, J., dissenting); see also Willingway...