Hofler v. Aetna Us Healthcare of California, 00-56401.

• Decision Date: 10 July 2002
• Docket Number: No. 00-56401.,00-56401.
• Citation: 296 F.3d 764
• Parties: Lucy Diane HOFLER, individually and as successor in interest of deceased, Louis Hofler, Plaintiff-Appellee, v. AETNA US HEALTHCARE OF CALIFORNIA, INC., fka Aetna Health Plans of California, Inc.; fka Aetna Health Management, Inc., a Delaware Corporation; Aetna U.S. Healthcare, Inc., a Pennsylvania Corporation; Aetna Services, Inc., a Connecticut Corporation; Aetna, Inc., a Connecticut Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 764

296 F.3d 764

Lucy Diane HOFLER, individually and as successor in interest of deceased, Louis Hofler, Plaintiff-Appellee, v. AETNA US HEALTHCARE OF CALIFORNIA, INC., fka Aetna Health Plans of California, Inc.; fka Aetna Health Management, Inc., a Delaware Corporation; Aetna U.S. Healthcare, Inc., a Pennsylvania Corporation; Aetna Services, Inc., a Connecticut Corporation; Aetna, Inc., a Connecticut Corporation, Defendants-Appellants.

No. 00-56401.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 5, 2001.

Filed July 10, 2002.

Kirk A. Patrick, Gibson, Dunn & Crutcher LLP, Los Angeles, CA, for the defendants-appellants.

Michael J. Bidart and Jeffrey Isaac Ehrlich, Shernoff, Bidart & Darras, Claremont, CA, for the plaintiff-appellee.

Appeal from the United States District Court for the Central District of California; Virginia A. Phillips, District Judge, Presiding. D.C. No. CV-00-00160-VAP.

Before: BROWNING, REINHARDT, and TALLMAN, Circuit Judges.

PER CURIAM.

Louis Hofler died of esophageal cancer that metastasized to his brain. At the time of his death, he was a 75 year-old retired bus driver, insured by Aetna's Medicare health care maintenance organization ("HMO") plan. Appellee Lucy Diane Hofler is his widow. She sued his health care provider, Aetna, and his doctors¹ in state court alleging that the defendants "withheld and denied Mr. Hofler medically necessary diagnostic exams, treatments, and referrals because these services undercut the defendants' profit margins." Aetna removed the case to federal court, claiming that Ms. Hofler's state law claims "arose under" the Medicare Act. The district court remanded the case to state court and awarded $9,750 in attorneys' fees to Ms. Hofler. Aetna now appeals the district court's fee award. We affirm.

I. Background

Medicare provides health benefits primarily to people 65 years old or older. In 1997, Congress added the Medicare + Choice ("M + C") program to its Medicare plan. Under M + C, Medicare beneficiaries receive their Medicare benefits through private managed health care programs such as HMOs. Medicare Program; Establishment of the Medicare + Choice Program, 63 Fed.Reg. 34,968, 34,968 (June 26, 1998).

The regulations implementing M + C contain two preemption provisions: (1) a general preemption provision providing that inconsistent state laws are preempted, see 42 U.S.C. § 1395w-26(b)(3)(A); 42 C.F.R. § 422.402(a) and (2) specific preemption provisions superseding state standards in three areas including: (a) "Benefit requirements;" (b) "Requirements relating to inclusion or treatment of providers and suppliers;" and (c) "Coverage determinations (including related appeals and grievance processes for all benefits included under an M + C contract)." 42 U.S.C. § 1395w-26(b)(3)(B)(i)-(iii); 42 C.F.R. § 422.402(b)(1)-(3).

Aetna's HMO operates under the capitated system of payment, i.e., providers are paid a fixed amount per month for each enrolled patient regardless of how much care the patient receives. 42 C.F.R. § 422.208(a). In return the plan is to provide the patients all necessary covered care. Id. Congress and the Heath Care Financing Agency have authorized use of capitated payment. 42 C.F.R. § 422.208.

Mr. Hofler enrolled in Aetna's Medicare HMO which promised "more benefits than Medicare and most Medicare Supplements combined." Ms. Hofler alleged, however, that the care Mr. Hofler received "did not match Aetna's promises." As stated by the district court, she claimed that under Aetna's plan Mr. Hofler's doctors:

(1) left untreated for seven years an unstable aortic aneurysm² which grew to nearly twice the size at which surgical intervention was appropriate (2) ignored his rising Prostate Specific Antigen level, which is an indication of prostate cancer, and refused to perform [various diagnostic tests] even when this index rose to six times the normal level; and

(3) failed to diagnose his esophageal cancer in its treatable stages, despite symptoms such as weight loss and expectoration of blood.

When Mr. Hofler asked for financial clearance for a second opinion about his esophageal cancer three months before he died, his doctor told him that although he was entitled to a second opinion, the clinic was unlikely to pay for it.

This combination of events allegedly caused Mr. Hofler's death: the late stage diagnosis of esophageal cancer meant that surgery was no longer practicable; the growth of his aneurysm meant that he was not a good candidate for aggressive chemotherapy; and his advanced prostate cancer foreclosed other treatments for his esophageal cancer.

II. Proceedings Below

After Mr. Hofler died, Ms. Hofler filed a complaint against Aetna in California state court alleging 12 state law causes of action.³ Aetna removed the action to federal district court, claiming that Ms. Hofler's action arose under and was completely preempted by Medicare. Ms. Hofler moved to remand to state court. The district court granted the motion and awarded attorneys' fees to Ms. Hofler. Aetna timely appealed the award of attorneys' fees.

III. Standard of Review

Although an "order remanding a case to the State court from which it was removed is not reviewable on appeal," 28 U.S.C. § 1447(d), we have jurisdiction to review for abuse of discretion an award of attorneys' fees in connection with a remand order. Balcorta v. Twentieth Century-Fox Film Corp., 208 F.3d 1102, 1105 (9th Cir.2000). Abuse of discretion review requires us to examine de novo "whether the remand order was legally correct." Id. at 1106.⁴

IV. Removal

An action can be removed from state court to federal court if it could have been filed in federal court originally. 28 U.S.C. § 1441(a); Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Because the removal in this case was based on federal question jurisdiction, the propriety of removal depends on whether the district court would have had federal question jurisdiction originally. Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 8, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). The removal statute is "strictly construed against removal jurisdiction." Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir.1988).

Whether federal question jurisdiction exists is governed by the well-pleaded complaint rule. Caterpillar, 482 U.S. at 392, 107 S.Ct. 2425. Under this rule, the federal question must appear "on the face of the plaintiff's properly pleaded complaint." Id. Federal question jurisdiction lies for causes of action "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Generally a complaint "arises under the law that creates the causes of action." Ethridge, 861 F.2d at 1394 (citation omitted).

Only state law causes of action are pled on the face of Ms. Hofler's complaint. See supra n. 3. "A state-created cause of action can be deemed to arise under federal law (1) where federal law completely preempts state law; (2) where the claim is necessarily federal in character; or (3) where the right to relief depends on the resolution of a substantial, disputed federal question."⁵ ARCO Envtl. Remediation v. Dep't of Health and Envtl. Quality, 213 F.3d 1108, 1114 (9th Cir.2000) (citations omitted).

A. Complete Preemption

Aetna argues that the M + C program's specific preemption provision completely preempts state law. Complete preemption is a "narrow exception to the `well-pleaded complaint rule.'" Holman v. Laulo-Rowe Agency, 994 F.2d 666, 668 (9th Cir.1993). It applies when Congress "so completely preempt[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, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). Most federal statutes do not fall in this category. See Judge William W Schwarzer et al., Federal Civil Procedure Before Trial § 2:726.2 (2001). Even when federal statutes supersede certain state laws, they usually do not preempt state laws to such an extent that removal is proper. Id. at § 2:726.5.

"The test [for complete preemption] is whether Congress clearly manifested an intent to convert state law claims into federal-question claims." Holman, 994 F.2d at 668. Aetna has not shown that Congress intended to preempt all state law claims. In the interim final rule⁶ for the M + C program, the agency stated that it was adopting a "narrow interpretation" of the specific preemption provisions and that state tort or contract claims relating to coverage determinations were not preempted. Medicare Program; Medicare + Choice Program, 63 Fed.Reg. 34,968, 35,012-35,013 (June 26, 1998). Because Congress did not clearly manifest any intention to convert all state tort claims arising from the administration of Medicare benefits into federal questions, we hold that the Medicare program does not completely preempt state tort law claims.

B. Express Preemption Asserted as a Defense

Aetna also argues that Ms. Hofler's claims pertain to the treatment of health care providers and are therefore expressly preempted by the specific preemption provisions relating to requirements for inclusion or treatment of providers. See 42 U.S.C. § 1395w-26(b)(3)(B)(i)-(iii); 42 C.F.R. § 422.402(b)(1)-(3). Even if Ms. Hofler's claims could be interpreted as relating to the requirements for inclusion or treatment of providers, a point upon which we express no opinion, Aetna asserts this argument as a defense to Ms. Hofler's state law claims. It is well-established that, when Congress has not completely preempted the field, removal cannot be based on the assertion of a federal preemption defense, "even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case." Franchise Tax Bd., 463 U.S. at 14, 103 S.Ct. 2841; Metro. Life, ...