Borrero v. United Healthcare Of N.Y. Inc
| Decision Date | 06 July 2010 |
| Docket Number | No. 08-15264,08-15265,08-15267,08-15273,08-15274 and 08-15275.,08-15271,08-15264 |
| Parties | M.D. Edgar BORRERO, on behalf of himself and all others similarly situated, M.D. Malcolm Gottesman, on behalf of himself and all others similarly situated, Plaintiffs-Appellants,v.UNITED HEALTHCARE OF NEW YORK, INC., United Healthgroup, Inc., Defendants-Appellees.M.D. Karen Laugel, Plaintiff-Appellant,v.United Healthcare Insurance Company, United Healthgroup, Inc., Defendants-Appellees.Tennessee Medical Association, Plaintiff-Appellant,v.United Healthgroup, Inc., United Healthcare of Tennessee, Inc., Defendants-Appellees.Medical Society of the State of New York, Plaintiff-Appellant,v.United Healthcare of New York, Inc., United Healthgroup, Inc., Defendants-Appellees.North Carolina Medical Society, Plaintiff-Appellant,v.United Healthgroup Incorporated, United Healthcare of North Carolina, Mamsi Life and Health Insurance Company, Defendants-Appellees.M.D. Zachery Rosenberg, on behalf of himself and all others similarly situated, Plaintiff-Appellant,v.United Healthgroup, Inc., United Healthcare of Tennessee, Inc., Defendants-Appellees.Connecticut State Medical Society, Plaintiff-Appellant,v.United Healthcare Insurance Company, United Healthgroup, Inc., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
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Ilze Caroline Thielmann, Edith M. Kallas, Joe R. Whatley, Jr., Whatley Drake & Kallas, LLC, Joseph P. Guglielmo, Scott & Scott, LLP, New York City, for Plaintiffs-Appellants.
Christopher R.J. Pace, Edward Soto, Weil, Gotshal & Manges, Miami, FL, for Defendants-Appellees.
Appeals from the United States District Court for the Southern District of Florida.
Before DUBINA, Chief Judge, KRAVITCH, Circuit Judge, and ALBRITTON, * District Judge.
In this consolidated appeal, three physicians and four representative organizations (“Appellants”) appeal the district court order dismissing their complaints against United HealthCare and its related entities (“United”). The district court held that the Appellants' contract-based claims were precluded by the judgment in a class action suit based on the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (2006) (“RICO”), asserted by physicians against United and other health insurance entities. Appellants dispute both the district court's subject matter jurisdiction and its substantive decision regarding the claim preclusive effect of the RICO class action judgment. We hold that the district court properly exercised subject matter jurisdiction over all of the claims presented, but reverse its order dismissing those claims based on res judicata.
Appellants independently brought seven cases against United in various state courts during the years 2001 and 2002. Appellants, who are healthcare providers or their representative associations, allege that United breached its contracts with them (often called provider or subscriber agreements) by not paying them the full contracted rate for services rendered to United's insureds, in violation of common and statutory law. United removed all of the cases to federal court, asserting the court's federal question jurisdiction over matters covered by the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a) (2006). At the time the cases were filed, another case was pending in the Southern District of Florida that alleged breaches of contract by various health insurers and a nationwide conspiracy among health insurers, including United, to delay and reduce payment to healthcare providers in violation of various subscriber agreements. See In re Managed Care Litig., 430 F.Supp.2d 1336 (S.D.Fla.2006) (“ Shane”) aff'd sub nom. Shane v. Humana, Inc., 228 Fed.Appx. 927 (11th Cir.2007) (unpublished).
The Joint Judicial Panel on Multidistrict Litigation transferred each of the cases covered by this consolidated appeal to the Southern District of Florida after its removal. There, the cases remained on the “tag-along” docket of the court and were stayed until the disposition of the Shane litigation, despite Appellants' efforts to remand the cases to state court. After the court entered judgment in the Shane litigation, United moved to dismiss all of the cases underlying this appeal based upon the preclusive effect of Shane. Appellants opposed the motions and argued that remand would be the proper disposition because the court lacked subject matter jurisdiction over their claims. The court held in favor of United and ordered dismissal of all Appellants' complaints.
The Shane litigation has its own complex procedural history that is exceedingly relevant to the outcome of the present action. In Shane, a group of plaintiffs, initially not including the Appellants, asserted breach of contract and RICO conspiracy claims against a number of health insurers, including United. The plaintiffs in Shane included healthcare providers both with and without contracts with the insurers.
An order compelling arbitration of all contract-based claims between insurers and providers who had an existing contractual relationship, based on the terms of the subscriber agreements, marked the first major procedural step in the Shane litigation. In re Managed Care Litig., 132 F.Supp.2d 989 (S.D.Fla.2000) modified, 143 F.Supp.2d 1371 (S.D.Fla.2001). This order did not apply to the Appellants in this case because the plaintiffs in Shane had not yet sought class certification. Left remaining in the case were the payment claims asserted by providers who had no contractual relationship with the insurers, as well as the RICO claims asserted by all of the providers.
The plaintiffs in the Shane action next sought class certification for both the remaining payment claims on behalf of the non-participating providers and for the RICO claims asserted by all of the providers. The district court certified both classes, but this court held that only the RICO claims were appropriate for class certification. Klay v. Humana, Inc., 382 F.3d 1241, 1261 (11th Cir.2004). In response, the Shane plaintiffs amended their complaint to include only the class action RICO claims, on which the district court granted summary judgment in Shane, 430 F.Supp.2d 1336. There, the district court granted summary judgment in favor of United and held that the class of physicians had failed to produce sufficient evidence that a conspiracy existed amongst the insurers to underpay and otherwise defraud the physicians. Id. at 1357. Following the disposition in Shane, the district court dismissed the underlying cases at issue here, leading to the instant appeal.
We review a district court's preemption analysis de novo. Ervast v. Flexible Prods. Co., 346 F.3d 1007, 1012 (11th Cir.2003). We also review de novo a dismissal order based on res judicata . Kizzire v. Baptist Health Sys., Inc., 441 F.3d 1306, 1308 (11th Cir.2006).
We confront two primary issues in this appeal: whether the claims of the individual and associational Appellants are completely preempted by ERISA § 502(a), 29 U.S.C. § 1132(a), and thus subject to federal question jurisdiction, and whether the claims pursued by the Appellants are sufficiently related to those resolved in the Shane litigation so as to preclude their assertion here. We conclude that Appellants' claims are completely preempted by ERISA and thus are subject to federal jurisdiction. Those claims are not, however, subject to claim preclusion because they arise from a nucleus of operative fact distinct from those resolved in the Shane litigation.
Section 502(a) of ERISA creates a civil cause of action for participants and beneficiaries of ERISA plans to recover benefits or enforce rights under an ERISA plan. 29 U.S.C. § 1132(a). This section definitively “converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.” Aetna Health Inc. v. Davila, 542 U.S. 200, 209, 124 S.Ct. 2488, 2496, 159 L.Ed.2d 312 (2004) (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65-66, 107 S.Ct. 1542, 1547, 95 L.Ed.2d 55 (1987)). United contends that Appellants' ostensible state law claims are preempted by ERISA because the claims seek enforcement of rights under ERISA plans.
The Supreme Court set out a two-part test for complete preemption under ERISA's remedies provision in Davila. A state law claim is completely preempted by ERISA, and therefore removable to federal court, if two conditions are met: the claimant must have been able to, at some point in time, bring his claim under ERISA § 502(a)(1)(B), and there must be “no other independent legal duty that is implicated by a defendant's actions.” Id. at 210, 124 S.Ct. at 2496. We adopted this framework for ERISA preemption analysis in Connecticut State Dental Ass'n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1345 (11th Cir.2009).
The first question posed by Davila in assessing complete preemption is whether “an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B).” Davila, 542 U.S. at 210, 124 S.Ct. at 2496. Under ERISA § 502(a)(1)(B), claims pursuant to ERISA benefit plans may be brought “by a participant or beneficiary.” 29 U.S.C. § 1132(a)(1). In Davila, it was clear that the plaintiffs, themselves participants in and beneficiaries under ERISA plans, were appropriate parties to enforce rights under the statute. By contrast, “[h]ealthcare providers ... generally are not considered ‘beneficiaries' or ‘participants' under ERISA” and thus lack standing to sue under the statute. Hobbs v. Blue Cross Blue Shield of Ala., 276 F.3d 1236, 1241 (11th Cir.2001).
Healthcare providers may have standing under ERISA only when they derivatively assert rights of their patients as beneficiaries...
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