Broadnax v. Blue Cross & Blue Shield of Virginia

• Decision Date: 08 November 1994
• Docket Number: Civ. No. 3:94CV603.
• Citation: 867 F. Supp. 398
• Parties: BROADNAX MILLS, INC., Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF VIRGINIA, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

867 F. Supp. 398

BROADNAX MILLS, INC., Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF VIRGINIA, Defendant.

Civ. No. 3:94CV603.

United States District Court, E.D. Virginia, Richmond Division.

November 8, 1994.

Michael Randolph Shebelskie and George H. Gromel, Jr., Hunton & Williams, and Virginia H. Hackney, Richmond, VA, for Brodnax Mills, Inc.

Roscoe Connell Roberts, Blue Cross/Blue Shield, Richmond, VA, and Richard C. Titus, Raleigh, NC, for Blue Cross and Blue Shield of Virginia.

MEMORANDUM

MERHIGE, District Judge.

This matter is before the Court on the plaintiff's motion to remand, pursuant to 28 U.S.C. § 1447(c). For the reasons set forth below, the Court will deny the motion.

I.

In 1978, the plaintiff established a fully insured health benefit plan for its employees. Because the plaintiff was unfamiliar with administering such a plan, it sought advice regarding plan administration and "the availability of, and the need for, insurance to provide ... reasonable protection from liability under the plan." Motion for Judgment ¶ 4. Since adopting the plan, the plaintiff has relied on the defendant for such advice.

The plan was, until August 1, 1989, fully insured by the defendant. On that date, the plan was converted to a self-insured plan. The plaintiff and the defendant concomitantly entered into an administration services only agreement ("ASO Agreement"). Pursuant to this agreement, the plaintiff agreed to pay premiums into an operating account managed by the defendant in exchange for the provision of various claims services. The monthly payments made by the plaintiff consisted of funds contributed by both the plaintiff and the plaintiff's employees. Receipts and charges were recorded by the defendant in the operating account. If, at the termination of the contract, the sum of claims paid plus administrative and other fees exceeded the amount of premiums paid, the plaintiff owed such an amount to the defendant, plus interest.

The ASO Agreement was renewed in subsequent years. In connection with the 1991-92 ASO Agreement, the plaintiff procured from the defendant an excess risk insurance policy with specific stop loss insurance. This policy limited the plaintiff's liability for claims paid in excess of $60,000.00 per year per participant as the plaintiff was reimbursed for claims exceeding such amount. The policy did not, however, provide any limit on the plaintiff's overall liability for operating account deficits. Motion for Judgment ¶ 22. The plaintiff contends that the defendant "did not inform Broadnax ... about the existence of, or the need for, any additional insurance to protect Broadnax against liability for a large deficit in the operating account." Id. at ¶ 23.

The ASO Agreement was renewed for the 1992-93 contract year after the defendant's review of the plaintiff's historical and projected claims levels.¹ Once again, the agreement did not provide for aggregate stop loss insurance for 1992-93. During that year, an unusually large number of claims were submitted by plan participants. As a result, the operating account showed a deficit of $240,000.00 at the end of the contract year. According to the plaintiff, the account would have shown a surplus of approximately $52,347 if the defendants had recommended and provided aggregate stop loss insurance.

The plaintiff also alleges that the defendants failed to explain a provider payment differential provision that was contained in the ASO Agreement. Specifically, the plaintiff claims that the defendant obtained discounts from various health care providers and that the 1992-93 deficit, as reported in the operating account, fails to account for these discounts which allegedly amounted to $48,952.27. The plaintiff states that this amount represents "undisclosed fees ... that were improperly and unfairly imposed" owing to the defendant's failure to explain the meaning of the ASO Agreement's provider payment differential provision. Motion for Judgment ¶¶ 44-45.

Finally, the plaintiff charges that the defendant failed to explain that, under the ASO Agreement, the plaintiff was liable "for all claims incurred but not reported prior to the termination of the ASO Agreement," and that terminal liability limit insurance was available to protect the plaintiff against potential "excessive terminal liability." Motion for Judgment ¶¶ 49-50. Because it was unaware that such insurance was available, the plaintiff alleges that it is now liable for an undetermined amount of claims submitted after the ASO Agreement expired on July 31, 1994.

On these allegations, the plaintiff filed a six count motion for judgment in the Circuit Court of Mecklenberg County on August 1, 1994. The motion for judgment contains state law causes of action including breach of contract, negligence, breach of fiduciary duty, promissory estoppel, negligent misrepresentation and constructive fraud. The motion for judgment nowhere mentions the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Nevertheless, the defendants filed a notice of removal on August 18, 1994, basing removal on federal question jurisdiction assertedly created by ERISA. The plaintiffs moved to remand the matter to state court on September 19, 1994.

II.

In order for removal jurisdiction to exist, a federal court must have "original jurisdiction." 28 U.S.C. § 1441(a). Original jurisdiction exists where the plaintiff's cause of action arises under the Constitution or federal law. See 28 U.S.C. § 1331. Whether or not an action "arises under" federal law is generally determined by the "well pleaded complaint" rule. Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vac. Trust for S. Cal., 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). As articulated by the Supreme Court,

whether a case is one arising under the Constitution or a law or treaty of the United States ... must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose.

Franchise Tax Bd., 463 U.S. at 10, 103 S.Ct. at 2846 (quoting Taylor v. Anderson, 234 U.S. 74, 34 S.Ct. 724, 58 L.Ed. 1218 (1914)). In the instant case, the complaint nowhere mentions ERISA or any other federal law. Rather, it asserts state law causes of action based on the defendant's advice, or lack thereof, regarding insurance and certain discounts related to the plaintiff's health benefits plan.

The plaintiff asserts that the absence of a federal law on the face of the complaint is alone sufficient to remand the action to state court. The Court does not agree as it is well settled that removal jurisdiction may nevertheless be established under the "complete preemption" doctrine. Pursuant to this doctrine, a federal court will have jurisdiction, regardless of the complaint's contents, where Congress has "so completely preempted a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 1546-47, 95 L.Ed.2d 55 (1987); Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 2430, 96 L.Ed.2d 318 (1987). In such cases, the complaint is "deemed to arise under federal law" and remand is "impermissible." Richmond v. American Systems Corp., 792 F.Supp. 449, 453, 455 (E.D.Va.1992). Because a general preemption defense is insufficient to establish removal jurisdiction, Taylor, 481 U.S. at 63, 107 S.Ct. at 1546, complete preemption requires more than an assertion of "federal occupation of the pertinent area of the law." Richmond, 792 F.Supp. at 456 (citing Taylor, 481 U.S. at 63, 107 S.Ct. at 1546). Where ERISA is cited as the jurisdictional basis, complete preemption exists where the plaintiff's claim is displaced by ERISA's preemption provision, 29 U.S.C. § 1144, and falls within ERISA's civil enforcement provision. 29 U.S.C. § 1132. Taylor, 481 U.S. at 64-67, 107 S.Ct. at 1546-48 (complete preemption exists because cause of action was preempted by ERISA and fell squarely within § 1132).²

III.

The "touchstone of the federal district court's removal jurisdiction is ... the intent of Congress." Taylor, 481 U.S. at 66, 107 S.Ct. at 1547. ERISA is the body of federal law regulating employer provided benefit plans.³ The law is designed to achieve uniformity in the regulation of pension plans and to "promote the interests of employees and their beneficiaries in employee benefit plans." Shaw v. Delta Airlines, Inc., 463 U.S. 85, 88, 103 S.Ct. 2890, 2895, 77 L.Ed.2d 490 (1983).

The ERISA statutory scheme relies heavily on the civil enforcement and preemption provisions to attain Congress' underlying objectives. ERISA's preemption provision reads, in pertinent part: "The provisions of this subchapter ... shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). This section

was intended to ensure that plans and sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between states and the Federal Government. Otherwise, the inefficiencies could work to the detriment of plan beneficiaries.

Ingersoll-Rand v. McClendon, 498 U.S. 133, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (citations omitted).

The civil remedies provision creates several discrete causes of action and identifies the parties who have standing to bring an action under that section.⁴ This section reflects a "careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 1556, 95 L.Ed.2d 39 (1987). These provisions provide the ...