Connecticut State Dental v. Anthem Health Plans

• Decision Date: 30 December 2009
• Docket Number: No. 08-15268.,No. 08-15277.,08-15268.,08-15277.
• Citation: 591 F.3d 1337
• Parties: CONNECTICUT STATE DENTAL ASSOCIATION, Plaintiff-Appellant, v. ANTHEM HEALTH PLANS, INC., d.b.a. Anthem Blue Cross & Blue Shield of CT, Defendant-Appellee. DDS Martin J. Rutt, DDS Michael Egan, Plaintiffs-Appellants, v. Anthem Health Plans, Inc., d.b.a. Anthem Blue Cross & Blue Shield of CT, Defendants-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

591 F.3d 1337

CONNECTICUT STATE DENTAL ASSOCIATION, Plaintiff-Appellant, v. ANTHEM HEALTH PLANS, INC., d.b.a. Anthem Blue Cross & Blue Shield of CT, Defendant-Appellee.

DDS Martin J. Rutt, DDS Michael Egan, Plaintiffs-Appellants, v. Anthem Health Plans, Inc., d.b.a. Anthem Blue Cross & Blue Shield of CT, Defendants-Appellee.

No. 08-15268.

No. 08-15277.

United States Court of Appeals, Eleventh Circuit.

December 30, 2009.

Michael D. Neubert, Simon I. Allentuch, Neubert Pepe & Monteith, P.C., New Haven, CT, Joe R. Whatley, Jr., Jospeh P. Guglielmo, Whatley, Drake & Kallas, L.L.C., New York City, for Plaintiffs-Appellants.

Catherine E. Stetson, Craig A. Hoover, E. Desmond Hogan, Hogan & Hartson, LLP, Washington, DC, for Defendant-Appellant.

Jack R. Bierig, Sidley, Austin, Brown & Wood, LLP, Chicago, IL, for Amicus Curiae, Am. Dental Ass'n.

Appeals from the United States District Court for the Southern District of Florida.

Before BARKETT and HULL, Circuit Judges, and QUIST,^* District Judge.

QUIST, District Judge:

These consolidated appeals require us to decide whether § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), completely preempts one or more of Plaintiffs' state law claims, thus providing a basis for federal question jurisdiction. Plaintiffs, Martin J. Rutt ("Rutt") D.D.S., Michael Egan ("Egan"), D.D.S., and Connect State Dental Association ("CSDA"), filed separate complaints in Connecticut state court, and Defendant, Anthem Health Plans, Inc. ("Anthem"), removed the cases on the basis of ERISA preemption. The district court denied Plaintiffs' motions to remand. For the following reasons, we conclude that ERISA completely preempts at least some portions of Rutt and Egan's state law claims but does not preempt CSDA's state law claim. We also conclude that the district court abused its discretion in denying Rutt and Egan's motion to vacate or amend the judgment. Therefore, we affirm in part and reverse in part the order denying Plaintiffs' motions to remand, reverse the order denying Rutt and Egan's motion to vacate or amend, and remand.

I. BACKGROUND

Rutt and Egan are dentists who practice in Connecticut. CSDA is a membership organization comprised of Connecticut dentists, including Rutt and Egan. Anthem offers and administers managed health and dental plans to employers and employer groups which provide coverage to employees and their eligible dependents. Many of these plans are "employee welfare benefit plans" governed by ERISA. See 29 U.S.C. § 1002(1).

Rutt and Egan participate in Anthem's network of dentists who provide services to individuals enrolled in Anthem's plans. They became participating dentists by entering into contracts with Anthem ("Provider Agreement"), pursuant to which they agreed to provide professional services in exchange for compensation in "the amount specified in the Comprehensive Schedule of Professional Services, or the Usual, Customary and Reasonable allowable determination."¹

On April 15, 2002, Rutt and Egan filed a five-count class action complaint against Anthem in Connecticut state court, alleging claims for breach of contract, breach of the duty of good faith and fair dealing, violation of the Connecticut Unfair Trade Practices Act ("CUTPA"), negligent misrepresentation, and unjust enrichment. The crux of the allegations was that Anthem employed a number of practices, such as "improper downcoding" and "improper bundling," as a means of underpaying participating dentists for services they performed. CSDA also sued Anthem in state court, alleging in a single count that Anthem violated the CUTPA. The factual allegations mirrored those in Rutt and Egan's complaint.

Anthem removed the cases to the United States District Court for the District of Connecticut on the basis that Plaintiffs' state law claims are completely preempted by ERISA. Plaintiffs filed motions to remand, but before the motions were decided, the cases were transferred by the Joint Judicial Panel on Multi-District Litigation as "tag along" cases in the multi-district litigation titled In re: Managed Care, pending in the Southern District of Florida. The Florida federal district court eventually denied Plaintiffs' motions to remand in brief orders, citing only its previous decision on a motion to remand in another case as the basis for denying Plaintiffs' motions.²

The district court stayed Plaintiffs' tag-along cases from August 2003 to April 2008, while it addressed the cases and matters on the main track. Prior to the stay, Anthem filed motions to dismiss, and Plaintiffs filed responses. The district court never ruled on these motions. Instead, twice it denied the motions without prejudice but directed Anthem to refile them. Anthem refiled its motions as instructed in November 2007 and again in April 2008. Plaintiffs responded to the November 2007 motions but, due to an error of counsel, failed to respond to the April 2008 motions. The district court thus granted Anthem's motions based on Plaintiffs' failure to respond. Plaintiffs then moved to vacate or amend the orders granting Anthem's motions, but the district court denied the motions, concluding that Plaintiffs had not shown excusable neglect. Plaintiffs timely appealed.

II. STANDARDS OF REVIEW

We review de novo denials of motions to remand as well as preemption determinations. Henderson v. Wash. Nat'l Ins. Co., 454 F.3d 1278, 1281 (11th Cir.2006); Anderson v. H & R Block, Inc., 287 F.3d 1038, 1041 (11th Cir.2002). "We have jurisdiction to consider denial of a motion to remand upon the entry of a final order," which occurred in this case on June 6, 2008, when the district court granted Anthem's motions to dismiss. Bailey v. Janssen Pharmaceutica, Inc., 536 F.3d 1202, 1205 (11th Cir.2008).

We review the district court's denial of the motions to vacate or amend judgment for an abuse of discretion. Lockard v. Equifax, Inc., 163 F.3d 1259, 1267 (11th Cir.1998).

III. MOTION TO REMAND

On a motion to remand, the removing party bears the burden of showing the existence of federal subject matter jurisdiction. Pacheco de Perez v. AT&T Co., 139 F.3d 1368, 1373 (11th Cir.1998). The test ordinarily applied for determining whether a claim arises under federal law is whether a federal question appears on the face of the plaintiff's well-pleaded complaint. Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908). "As a general rule, a case arises under federal law only if it is federal law that creates the cause of action." Diaz v. Sheppard, 85 F.3d 1502, 1505 (11th Cir.1996) (citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 8-10, 103 S.Ct. 2841, 2846, 77 L.Ed.2d 420 (1983)). Because Plaintiffs' complaints allege only state law claims, there is no jurisdiction under the well-pleaded complaint rule.

Complete preemption is a narrow exception to the well-pleaded complaint rule and exists where the preemptive force of a federal statute is so extraordinary that it converts an ordinary state law claim into a statutory federal claim. Caterpillar, Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 2430, 96 L.Ed.2d 318 (1987). See also Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1212 (11th Cir.1999) ("When Congress comprehensively occupies a field of law, `any civil complaint raising this select group of claims is necessarily federal in character' and thus furnishes subject-matter jurisdiction under 28 U.S.C. § 1331.") (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987)). Because federal jurisdiction turns on ERISA preemption, we briefly review the two types of ERISA preemption.

A. ERISA Preemption

ERISA is one of only a few federal statutes under which two types of preemption may arise: conflict preemption and complete preemption.³

Conflict preemption, also known as defensive preemption, is a substantive defense to preempted state law claims. Jones v. LMR Int'l, Inc., 457 F.3d 1174, 1179 (11th Cir.2006). This type of preemption arises from ERISA's express preemption provision, § 514(a), which preempts any state law claim that "relates to" an ERISA plan.⁴ 29 U.S.C. § 1144(a). Because conflict preemption is merely a defense, it is not a basis for removal. Gully v. First Nat'l Bank, 299 U.S. 109, 115-16, 57 S.Ct. 96, 99, 81 L.Ed. 70 (1936); see also Ervast v. Flexible Prods. Co., 346 F.3d 1007, 1012 n. 6 (11th Cir.2003) (stating that "defensive preemption ... provides only an affirmative defense to state law claims and is not a basis for removal").

Complete preemption, also known as super preemption, is a judicially-recognized exception to the well-pleaded complaint rule. It differs from defensive preemption because it is jurisdictional in nature rather than an affirmative defense. Jones, 457 F.3d at 1179 (citing Ervast, 346 F.3d at 1014). Complete preemption under ERISA derives from ERISA's civil enforcement provision, § 502(a), which has such "extraordinary" preemptive power that it "converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule." Taylor, 481 U.S. at 65-66, 107 S.Ct. at 1547. Consequently, any "cause[] of action within the scope of the civil enforcement provisions of § 502(a) [is] removable to federal court." Id. at 66, 107 S.Ct. at 1548.

Although related, complete and defensive preemption are not coextensive:

Complete preemption is [] narrower than "defensive" ERISA preemption, which broadly "supersede[s] any and all State laws insofar as they ... relate to any [ERISA] plan." ERISA § 514(a), 29 U.S.C. § 1144(a) (emphasis added). Therefore, a state-law claim may be defensively preempted under § 514(a) but not completely preempted under § 502(a). In such a case, the defendant may assert preemption as a defense, but preemption will not provide a basis for removal to federal court.

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