Arana v. Ochsner Health Plan, Inc.

• Decision Date: 15 August 2002
• Docket Number: No. 01-30922.,01-30922.
• Citation: 302 F.3d 462
• Parties: Julio C. ARANA, Plaintiff-Appellee, v. OCHSNER HEALTH PLAN, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

302 F.3d 462

Julio C. ARANA, Plaintiff-Appellee, v. OCHSNER HEALTH PLAN, INC., Defendant-Appellant.

No. 01-30922.

United States Court of Appeals, Fifth Circuit.

August 15, 2002.

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George Davidson Fagan (argued), Piper D. Griffin, Karen M. Dicke, Leake & Andersson, New Orleans, LA, for Plaintiff-Appellee.

Perry R. Staub, Jr., Michael Warren Hill (argued), Taggart, Morton, Ogden, Staub, Rougelot & O'Brien, New Orleans, LA, for Defendant-Appellant.

Errol John King, Jr., Ashley Byrd Lowe, Juston M. O'Brien, Emily B. Grey, McGlinchey Stafford, Baton Rouge, LA, for Louisiana Managed Healthcare Ass'n, Inc., Healthcare Recoveries Inc. and United Healthcare of Louisiana, Inc., Amici Curiae.

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

Before KING, Chief Judge, PARKER, Circuit Judge, and ELLISON,^* District Judge.

ELLISON, District Judge:

Defendant-Appellant Ochsner Health Plan, Inc. ("OHP") requested and received certification under 28 U.S.C. § 1292(b) to appeal the district court's order denying its motion to dismiss or, alternatively, motion for summary judgment, and granting partial summary judgment to Plaintiff-Appellee Julio C. Arana ("Arana"). We hold that the district court erred to the extent that it determined it had jurisdiction over the instant action, and we reverse the district court's order on that basis and direct that the case be remanded to state court. Because we find that subject matter jurisdiction is lacking, we do not reach the substantive issues raised on appeal.

I. FACTS AND PROCEEDINGS BELOW

On July 5, 1998, Arana sustained serious injuries when a 1996 Ford Crown Victoria struck the rear of a 1995 Nissan Pathfinder, operated by Arana and owned by his mother, Odette LeCler. At the time of the accident, and at all relevant times thereafter, Arana was a dependent beneficiary under the employee welfare benefit plan established by his mother's employer, LeCler Printing Company.¹ OHP provided health benefits to participants and beneficiaries of the LeCler Printing employee benefit plan ("the LeCler Plan") pursuant to a Group Health Services Agreement ("GHSA") between OHP and the employer. After the automobile accident, Arana's health care providers submitted to OHP claims for services rendered to Arana, and OHP has paid approximately $180,000 in health benefits for treatment of Arana's accident-related injuries.

In addition to the health benefits paid by OHP, coverage for the accident also was available under four automobile insurance policies: a State Farm liability policy covering the Crown Victoria, an Allstate liability policy carried by the non-owner operator of that vehicle, a Fireman's Fund uninsured motorist insurance policy issued on the Pathfinder, and an excess uninsured motorist policy underwritten by United Fire. In October, 1998, State Farm and Allstate paid their respective policy limits to Arana, in the total amount of $150,000. Fireman's Fund paid Arana $487,500, on a policy with a $500,000 limit. Finally, in late 2000, United Fire, which provided $2 million in excess uninsured motorist coverage subject to $650,000 in underlying limits, settled with Arana for $475,000. Prior to their settlements with Arana, Fireman's Fund and United Fire both were named as defendants in Civil Action No. 98-2927, which Arana filed in the Eastern District of Louisiana in connection with his automobile accident. Pursuant to the terms of the settlement of that lawsuit, Arana's attorney has maintained in a trust account $150,000 out of the settlement proceeds obtained from United Fire. The remainder of the funds received from the four automobile insurers has been disbursed.

During the relevant time period, OHP maintained an arrangement under which Subro Audit, Inc., a third-party contractor and subrogation specialist, handled subrogation for OHP. On November 2, 1999, while the federal tort lawsuit remained pending, Subro Audit wrote to Arana's mother and to United Fire, notifying both that OHP claimed a contractual right to reimbursement of the health benefits it had paid on Arana's behalf.

Arana disputed OHP's right to pursue subrogation and/or reimbursement, and filed the instant lawsuit against OHP in the 24th Judicial District Court for the Parish of Jefferson, both on his own behalf and on behalf of other similarly situated individuals. Specifically, in his petition Arana requests a declaratory judgment "requiring OHP to release its notice of lien and to withdraw and release OHP's subrogation, reimbursement, and assignment claims" against Arana, Fireman's Fund, and/or United Fire. Arana asserts that such claims violate LA. REV. STAT. 22:663.² Arana also asks that OHP be ordered to pay statutory penalties and attorney's fees pursuant to LA. REV. STAT. 22:657.³

OHP removed Arana's lawsuit to the Eastern District of Louisiana, on the grounds that the petition asserts claims that are completely preempted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461. OHP then filed a motion to dismiss pursuant to FED. R. CIV. P. 12(b)(6) or, alternatively, a motion for summary judgment. OHP's motion focuses on three issues: whether ERISA preempts LA. REV. STAT. 22:663, whether 22:663 prohibits the defendant from claiming subrogation and/or reimbursement rights, and whether Arana failed to exhaust the administrative remedies provided by an ERISA plan prior to filing suit. Arana filed a motion for partial summary judgment seeking a declaration that, under Louisiana law, OHP does not have a right to pursue subrogation and reimbursement for medical expenses that it paid on behalf of Arana from any amount received by Arana under the United Fire policy. The district court granted Arana's motion and denied the motion filed by OHP. In reaching its decision, the district court found that Arana's petition stated a claim for benefits under 29 U.S.C. § 502(a) that was completely preempted by ERISA.

Pursuant to 28 U.S.C. § 1292(b), OHP appeals the district court's order as to OHP's and Arana's respective motions. On appeal, Arana asserts that subject matter jurisdiction is lacking.⁴

II. JURISDICTION

A. Complete Preemption and Removal

"[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. 1441(a). Moreover,

"[a]ny civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought."

28 U.S.C. § 1441(b); see also 28 U.S.C. § 1331 (granting federal question jurisdiction to district courts). Because OHP is a citizen of Louisiana, removal to the district court was proper only if the instant action arises under federal law.

It is well settled that a cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law. Heimann v. Nat'l Elevator Indus. Pension Fund, 187 F.3d 493, 499 (5th Cir.1999) (citing Gully v. First Nat'l Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908)). Accordingly, petitions, such as Arana's, that on their face assert only state law claims generally do not provide a basis for the exercise of federal question jurisdiction. In limited circumstances, however, "Congress may so completely pre-empt 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). In effect, the application of the complete preemption doctrine converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule. McClelland v. Gronwaldt, 155 F.3d 507, 512 (5th Cir.1998) (citation omitted). Because they are recast as federal claims, state law claims that are held to be completely preempted give rise to federal question jurisdiction, and thus may provide a basis for removal. Id.

In particular, certain state law claims that fall within the scope of ERISA section 502(a), 29 U.S.C. § 1132(a), are completely preempted and may be removed to federal court. See Metro. Life Ins. Co., 481 U.S. at 66, 107 S.Ct. 1542; Copling v. Container Store, Inc., 174 F.3d 590, 594 (5th Cir.1999). "Section 502, by providing a civil enforcement cause of action, completely preempts any state cause of action seeking the same relief, regardless of how artfully pled as a state action." Copling, 174 F.3d at 594. Complete preemption under section 502(a) thus is jurisdictional in nature, rather than an affirmative defense to a plaintiff's claims under state law. Heimann, 187 F.3d at 500.

Complete preemption must be distinguished in this regard from ordinary preemption, also known as conflict-preemption. In general terms, ordinary preemption is a federal defense to the plaintiff's suit, and may arise either by express statutory term or by a direct conflict between the operation of federal and state law. Id. at 500. In the context of ERISA, section 514(a) provides for the ordinary preemption of "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" regulated by that statute. 29 U.S.C. 1144(a). State laws preempted under section 514 therefore are displaced by federal law. McClelland, 155 F.3d at 516. However, because ordinary ERISA preemption...