Montefiore Med. Ctr. v. 272

• Decision Date: 21 April 2011
• Docket Number: Docket No. 10–1451–cv.
• Parties: MONTEFIORE MEDICAL CENTER, Plaintiff–Appellant,v.TEAMSTERS LOCAL 272, Fred Alston, in his capacity as President of Teamsters Local 272, Local 272 Welfare Fund, Mark Goodman, in his capacity as Fund Manager of Local 272 Welfare Fund, Defendants–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

642 F.3d 321

50 Employee Benefits Cas. 2496

MONTEFIORE MEDICAL CENTER, Plaintiff–Appellant,

v.TEAMSTERS LOCAL 272, Fred Alston, in his capacity as President of Teamsters Local 272, Local 272 Welfare Fund, Mark Goodman, in his capacity as Fund Manager of Local 272 Welfare Fund, Defendants–Appellees.

Docket No. 10–1451–cv.

United States Court of Appeals, Second Circuit.

Argued: Feb. 15, 2011.Decided: April 21, 2011.

John G. Martin (Michael J. Keane, on the brief), Garfunkel Wild, P.C., Great Neck, NY, for plaintiff-appellant.Jane Lauer Barker, Pitta & Giblin LLP, New York, NY, for defendants-appellees.Before: CABRANES, POOLER, and CHIN, Circuit Judges.JOSÉ A. CABRANES, Circuit Judge:

This case is yet another act in the all-too-familiar drama involving patients, their health care providers, and their health care benefit plans. The question presented is whether a health care provider's breach of contract and quasi-contract claims against a benefit plan established pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq., are completely preempted by federal law under the two-pronged test for ERISA preemption established in Aetna Health Inc. v. Davila, 542 U.S. 200, 209, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). We hold: (1) an “in-network” health care provider may receive a valid assignment of rights from an ERISA plan beneficiary pursuant to ERISA § 502(a)(1)(B),¹ the provision setting forth ERISA's civil enforcement scheme; (2) where a provider's claim involves the right to payment and not simply the amount or execution of payment²—that is, where the claim implicates coverage and benefit determinations as set forth by the terms of the ERISA benefit plan, and not simply the contractually correct payment amount or the proper execution of the monetary transfer ³—that claim constitutes a colorable claim for benefits pursuant to ERISA § 502(a)(1)(B); and (3) in the instant case, at least some of plaintiff's claims for reimbursement are completely preempted by federal law; furthermore, the remaining state-law claims are properly subject to the District Court's supplemental jurisdiction.

I. BACKGROUND

Plaintiff-appellant Montefiore Medical Center (“Montefiore” or “plaintiff”) is a non-profit hospital in the Bronx, New York. Between May 2003 and August 2008, Montefiore provided medical services to beneficiaries of defendant-appellee Local 272 Welfare Fund (“the Fund”), an employee benefit plan governed by ERISA. The Fund provides health care coverage to individuals who work in “covered employment,” as defined by the Fund, and to their eligible dependents (collectively, the “beneficiaries” or “members” of the Fund). The coverage that the Fund offers is paid directly from contributions it receives from employers, who are obliged by their collective bargaining agreements with defendant-appellee Teamsters Local 272 (“the Union”) to make specified contributions to the Fund on behalf of their covered employees. As required by ERISA and U.S. Department of Labor regulations, the Fund's Plan Description (“the Plan”) sets forth the eligibility requirements for coverage, the nature of benefits provided, limitations on those benefits, services covered, and the procedures for claiming benefits and appealing claim denials.

Under the Plan, beneficiaries may obtain medical services in one of two ways. First, they may visit a health care provider who is in the network of providers with whom the Fund has specially contracted to provide services to its members (an “in-network” provider). Second, beneficiaries may visit a health care provider who is not in the Fund's network (an “out-of-network” provider). When Fund members obtain services from an in-network provider, they pay a small co-payment or co-insurance fee or pay nothing at all, and the Fund reimburses the remaining cost for services directly to the provider. When Fund members obtain services from an out-of-network provider, the member is responsible for paying the provider himself, and thereafter may seek reimbursement for covered services from the Fund.

The Plan generally sets forth the beneficiary's co-payments, co-insurance, and other rates of payment, but it does not establish a rate or schedule at which in-network or out-of-network providers will be reimbursed by the Plan. For example, the Plan provides that a beneficiary is responsible for paying a 10% co-insurance fee for maternity care, but it does not establish a ceiling or other limitation on the fee that a provider of maternity care may charge in order to qualify for reimbursement of the remaining cost. These types of limitations are usually set by separate agreements between providers and their Preferred Provider Organizations (“PPOs”),⁴ or between PPOs and the ERISA benefit plan, as explained below.

At all relevant times, Montefiore was an in-network provider of the Plan by virtue of its membership in two PPOs. Montefiore contracted with (1) Horizon Healthcare Insurance Company of New York (“Horizon”), from April 2003 until January 1, 2007, and (2) Preferred Choice Management Systems, Inc., d/b/a MagnaCare (“MagnaCare”), from January 1, 2007 through March 11, 2009 (the date Montefiore filed its complaint in this action). These PPOs entered into agreements with the Fund to provide eligible Plan beneficiaries with access to the PPOs' participating hospitals, including Montefiore.

Montefiore and the other providers, in turn, entered into agreements with the PPOs to provide health care services to beneficiaries of the Plan at agreed-upon reimbursement rates, which rates were typically discounted from the providers' usual and customary rates. The Fund's contracts with Horizon and MagnaCare established the specific rates and terms under which the Fund would reimburse the providers for services. These contracts also included many cross-references to the terms of the beneficiaries' benefit agreement with the Fund, i.e., the Plan.⁵

On March 10, 2009, Montefiore filed a complaint against defendants-appellees Teamsters Local 272 et al. (“defendants”) in New York state court seeking payment for over $1 million in medical services provided to Plan beneficiaries that the Fund had allegedly failed to reimburse. On its face, the complaint alleged, inter alia, state-law claims for breach of contract and unjust enrichment. On March 31, 2009, defendants removed the action to the District Court, alleging that the claims fell within the civil enforcement provisions of ERISA and were therefore completely preempted by federal law. See 29 U.S.C. § 1132(a). On June 29, 2009, Montefiore moved to remand the case to state court.⁶

On November 11, 2009, the District Court issued its Opinion & Order denying plaintiff's motion to remand to the state court and holding, pursuant to the Supreme Court's decision in Davila, that (1) Montefiore had “standing as an assignee of the Plan's participants and beneficiaries to bring a claim under [the civil enforcement provision of] ERISA,” and (2) “there [wa]s no independent duty” implicated by defendants' actions. Accordingly, the District Court concluded that Montefiore's claims were completely preempted by ERISA and removal was proper. Observing that “the Second Circuit has not yet determined whether an in-network provider such as Montefiore has standing under ERISA,” the District Court sua sponte certified its order for interlocutory appeal.

This appeal followed.

II. STANDARD OF REVIEW

A party seeking removal bears the burden of showing that federal jurisdiction is proper. Cal. Pub. Emps.' Ret. Sys. v. WorldCom, Inc., 368 F.3d 86, 100 (2d Cir.2004). A civil claim filed in state court can only be removed to federal court if the district court would have had original jurisdiction to hear the claim. See 28 U.S.C. § 1441(a). Under the “well-pleaded complaint rule,” federal subject matter jurisdiction typically exists only “when the plaintiff's well-pleaded complaint raises issues of federal law,” and not simply when federal preemption might be invoked as a defense to liability. Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). However, a “corollary of the well-pleaded complaint rule” provides that “Congress may so completely pre-empt a particular area [of law] that any civil complaint raising this select group of claims is necessarily federal in character.” Id. at 63–64, 107 S.Ct. 1542; accord In re WTC Disaster Site, 414 F.3d 352, 372–73 (2d Cir.2005) ( “Complete preemption permits removal of a lawsuit to federal court based upon the concept that where there is complete preemption, only a federal claim exists. Where Congress has clearly manifested an intent to make causes of action removable to federal court, the federal courts must honor that intent.” (alterations and quotation marks omitted)).

The District Court held, and defendants assert on appeal, that notwithstanding the complaint's express references to state claims for breach of contract and unjust enrichment, plaintiff's claims are completely preempted by ERISA and are therefore removable to federal court. We review de novo a district court's conclusions regarding its subject matter jurisdiction. Devlin v. Transp. Commc'ns Int'l Union, 173 F.3d 94, 98 (2d Cir.1999).

III. THE DAVILA TEST

ERISA was enacted to “protect ... participants in employee benefit plans and their beneficiaries” by establishing uniform regulations for such plans and “providing for appropriate remedies, sanctions, and ready access to the Federal courts.” 29 U.S.C. § 1001(b). Among other things, ERISA creates a comprehensive civil enforcement scheme that completely preempts any state-law cause of action that “duplicates, supplements, or supplants” an ERISA remedy. Davila, 542 U.S. at 209, 124 S.Ct. 2488; see also Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101, 113 (2d Cir.2008) (“The purpose of ERISA preemption is to ensure that all covered benefit plans will be governed...