Hamilton v. United Healthcare of Louisiana, Inc.

Decision Date01 November 2002
Docket NumberNo. 01-31179.,01-31179.
Citation310 F.3d 385
PartiesKyle M. HAMILTON, Plaintiff, v. UNITED HEALTHCARE OF LOUISIANA, INC., Defendant. Kyle M. Hamilton, Plaintiff-Appellant, v. Healthcare Recoveries, Inc., Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

George Davidson Fagan (argued), Leake & Andersson, New Orleans, LA, for Plaintiff-Appellant.

Errol John King, Jr. (argued), Juston M. O'Brien, Emily B. Grey, McGlinchey Stafford, Baton Rouge, LA, for Defendant-Appellee.

Appeals from United States District Court for the Eastern District of Louisiana.

Before DAVIS, EMILIO M. GARZA and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

Kyle M. Hamilton appeals from the dismissal of his Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq. (1997), claim against Healthcare Recoveries, Inc. ("HRI"), as well as from the district court's determination that it lacked diversity jurisdiction. He also appeals from the district court's refusal to allow him to amend his complaint. For the following reasons, we REVERSE in part, AFFIRM in part, and REMAND for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

In October of 1999, Hamilton was seriously injured in a single-vehicle automobile accident in which he was a passenger. As a result of the accident, Hamilton required medical and other treatment. Defendant, United Healthcare of Louisiana, Inc. ("United"), had in force a group health plan, offered through Hamilton's father's employer, pursuant to which Hamilton was insured as a dependent. Pursuant to that coverage, United paid for certain of the medical and other services necessitated by the accident, allegedly totaling in excess of $100,000. At the time of the accident, Hamilton's father also had in effect uninsured and/or underinsured motorist ("UM") coverage pursuant to two polices with State Farm Insurance Company ("State Farm"). State Farm paid nearly $250,000 in UM benefits and $5,000 in MedPay benefits to Hamilton pursuant to those policies. Shortly thereafter, HRI, acting pursuant to its contract with United,1 began sending notices to Hamilton's father and State Farm in an attempt to enforce subrogation rights that United claimed to have against any of the proceeds that Hamilton might receive from third parties, including his own insurer State Farm. State Farm, through Hamilton's counsel, subsequently paid $57,757.06 out of the $250,000 UM policy proceeds, to which Hamilton would have otherwise been entitled, to HRI on behalf of United. Hamilton then retained new counsel who attempted to recover the monies that United had obtained from State Farm. On February 2, 2001, counsel sent United a letter outlining in detail why Louisiana Revised Statutes Sections 22:2006(7) and 22:663 precluded the type of subrogation claims that United had made against the State Farm proceeds. Attached to that letter was a copy of a state court petition. Hamilton's state lawsuit sought to recover the funds paid to United through HRI and asked the Court to enjoin any further attempts by United to either coordinate benefits or subrogate claims to any future proceeds under the State Farm policies. United removed the case to federal court alleging that ERISA completely preempted Hamilton's state law claims. After United removed, Hamilton filed a putative class action, naming HRI as defendant. In that suit, Hamilton alleged that HRI's acts during its recovery of funds from himself and others violates the FDCPA, as well as the Louisiana Unfair Trade Practices Act, La.Rev.Stat. Ann. § 51:1401, et seq. (West 1987) ("LUTPA"). The two cases were subsequently consolidated and the defendants in both cases filed motions to dismiss. Thereafter, the district court remanded the United suit to state court. Hamilton v. United Health Care of La., Nos. Civ. A. 01-585 & 01-650, 2001 WL 536300, at * 7 (E.D.La. May 17, 2001). The district court then considered HRI's Motion for Judgment on the Pleadings and Alternative Motion for Summary Judgment, which the court treated as a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). By an order entered on July 17, 2001, the motion was granted in part, and the court dismissed Hamilton's FDCPA claim with prejudice, finding that Hamilton failed to state a claim because HRI was not collecting a "debt" under the FDCPA.

On August 21, 2001, the district court concluded that no independent basis for federal subject matter jurisdiction existed over the remaining state law claims because Hamilton failed to establish that the amount in controversy exceeded $75,000 for purposes of diversity jurisdiction. The court refused to exercise supplemental jurisdiction over the state law claims. As such, the state law claims were dismissed without prejudice. Hamilton then filed a Motion for Reconsideration and Motion for Leave to File a Supplemental and Amended Complaint seeking to add new theories of recovery in order to cure the amount-in-controversy defect. The district court denied these motions. In doing so, it concluded that the proposed amendments to Hamilton's complaint would not cure the amount in controversy defect. Judgment was entered and Hamilton appealed.

STANDARD OF REVIEW

We review a Rule 12(b)(6) dismissal de novo, accepting all well-plead facts as true. Abrams v. Baker Hughes, Inc., 292 F.3d 424, 430 (5th Cir.2002). Questions of fact are viewed in the light most favorable to the plaintiffs, and questions of law are reviewed de novo. Mowbray v. Cameron County, Tex., 274 F.3d 269, 276 (5th Cir.2001). "Rule 12(b)(6) motions should not be granted unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Castro Romero v. Becken, 256 F.3d 349, 353 (5th Cir.2001) (internal quotations and citations omitted).

DISCUSSION

The FDCPA was enacted in part "to eliminate abusive debt collection practices by collectors." 15 U.S.C. § 1692(e) (1997). "As such, the FDCPA enumerates several practices considered contrary to that goal, and forbids debt collectors from taking such action." Poirier v. Alco Collections, Inc., 107 F.3d 347, 349 (5th Cir.1997). For the FDCPA to apply, the obligation at issue must qualify as a "debt," defined as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." § 1692a(5).

The district court dismissed Hamilton's FDCPA claim pursuant to Rule 12(b)(6) after concluding that the subrogation claim that HRI sought to enforce on behalf of United was not a "debt" within the meaning of the FDCPA. The court began its analysis by noting that several key elements of the term "debt" appear to be present in this case. The court concluded that Hamilton entered into a consensual "transaction" for "insurance" and purchased that insurance for "personal or family use" for which Hamilton was "obligated to pay money" to United if its subrogation claim was valid. The court found that the question of whether Hamilton's obligation to pay "arises out of" his transaction with United to be more problematic. The court recognized that "but for" Hamilton's health insurance contract with United, his recovery on the UM proceeds would create no obligation. However, in rejecting Hamilton's argument that the "debt" arose out of his contract with United, the court relied on Garner v. Augustine, Kern & Levens, Ltd., No. 93 C 5968, 1994 WL 48589 (N.D.Ill. Feb.16, 1994). In Garner, Health Care Services Corporation ("Health Care") administered group health and welfare benefit plans for a number of employers, including Garner's employer. 1994 WL 48589, at *1. Garner was a member of that plan. Garner's daughter was injured and Health Care paid medical benefits to cover her medical care. Health Care filed suit for reimbursement of the benefits paid after Garner refused to respond to Health Care's requests for information, which would allow it to assess whether it had any reimbursement rights by reason of Garner's recovery from a third party, or to subsequent letters from Health Care's counsel. When Health Care's counsel learned that there was no right of reimbursement, the suit was voluntarily dismissed. Garner then filed a claim against the law firm representing Health Care, and one of its partners, under the FDCPA and state law. The district court held that Health Care's reimbursement claim against its insured was not a "debt" for purposes of the FDCPA. Id. at *2-3. The court reasoned that the inclusion of "debts" relating to insurance in § 1692a(5) was "obviously aimed at a consumer who contracts for insurance coverage and then does not pay the premium." Id. at *2. The court further concluded that the FDCPA was "not intended to cover the situation here, where an employee or his or her beneficiary under an employee benefit plan has received benefits that may give rise to a reimbursement obligation under that plan, then fails to respond to the plan's bona fide inquiries as to the facts that bear on the existence or nonexistence of the employees' or beneficiary's duty of reimbursement, so that the insurer is forced to sue." Id. To hold otherwise, the court concluded, "would unduly strain the normal meaning of the language that has been used by Congress" in the FDCPA. Id.

Based on Garner, the district court concluded that a contractual subrogation claim, while in fact "arising out of" the contract of insurance, is not the kind of payment obligation that Congress intended when it created the FDCPA for the protection of consumers.

Hamilton contends that HRI's claims against Hamilton "arise[] out of a transaction in which the ... insurance [that is] the subject of the transaction [is] primarily for personal, family, or...

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