Brock v. Provident America Ins. Co., CIV. A.3:01-CV-365-R.

Citation144 F.Supp.2d 652
Decision Date17 April 2001
Docket NumberNo. CIV. A.3:01-CV-365-R.,CIV. A.3:01-CV-365-R.
CourtUnited States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Northern District of Texas

John Lee Malesovas, Malesovas, Martin & Tekell, Alico Center, Waco, for Carol Brock.

Thompson Coe Cousins & Irons, Dallas, for Provident American Insurance Co.


BUCHMEYER, Chief Judge.

Plaintiff Carol Brock ("Ms. Brock") asserts claims against Defendant Provident America Insurance Company ("PAI") for 1) misrepresentation in violation of the Texas Insurance Code, and 2) breach of contract. Now before this Court is Plaintiff's Motion to Remand, filed on March 15, 2001. For the reasons discussed below, Plaintiff's motion is GRANTED.


This action arises over a dispute about the terms of a health care policy Ms Brock purchased from PAI on August 21, 1997. Essentially, Ms. Brock's complaint alleges that PAI misrepresented the policy's term that it was "guaranteed for the life of each person insured" by failing to disclose that the policy was actually terminable under both state and federal law.

After Ms. Brock purchased the comprehensive health care policy from PAI, she made all required premium payments and paid all applicable fees on time for almost three years. On June 29, 2000, PAI sent Ms. Brock a notice that they were cancelling her policy, as well as all other members' policies within the state of Texas, pursuant to 42 U.S.C. § 300gg-42(b)(3). This statute requires all health care policies in the United States to continue coverage at the option of the insured, and also states various exceptions to this general rule. See 42 U.S.C. § 300gg-42(a)-(e). The specific exception relied upon by PAI in this instance permits an insurance company to cancel an individual's insurance policy as long as the company fully withdraws all coverage from a particular state's market. See 42 U.S.C. § 300gg-42(b)(3); 42 U.S.C. § 300gg-42(c)(2)(A)(ii). As the statute dictates, PAI sent Ms. Brock the cancellation notice 180 days prior to the date they intended to cease her coverage (January 29, 2001). See 42 U.S.C. § 300gg-42(c)(2)(A)(i). At some point between the time Ms. Brock purchased coverage from PAI and the time this action was filed, she contracted breast cancer. As a result of her condition, Ms. Brock has been unable to secure alternate health insurance arrangements.

Ms. Brock filed suit in the 196th Judicial District of Hunt County, Texas on January 16, 2001, as a result of PAI's actions. Her complaint contains two Texas state law causes of action; breach of contract, and misrepresentation under four separate statutes of the Texas Insurance Code. The crux of Ms. Brock's misrepresentation claim is that PAI neither disclosed nor explained the exceptions to their representation that PAI health coverage was "guaranteed renewable," as the Texas Insurance Code mandates.1 Ms. Brock also claims that PAI misled her into believing that her coverage was renewable without exception. Ms. Brock's claim does not contend that PAI's cancellation of her policy violated any provisions of 42 U.S.C. § 300gg-42; nor does Ms. Brock's complaint allege that state law prevents PAI from cancelling her insurance.

On February 23, 2001, PIA filed a timely notice of removal in this action pursuant to 28 U.S.C. § 1446(b). In its Notice, PAI states that this Court has federal-question jurisdiction over this action pursuant to 28 U.S.C. § 1331.2 This Motion to Remand by Ms. Brock followed on March 15, 2001, and this Court considers the merits of the motion through its authority granted by Congress to review removed actions, 28 U.S.C. § 1447(c).


Title 28 U.S.C. § 1441(a) permits removal of "any civil action brought in a State Court of which the district courts of the United States have original jurisdiction." "Removal jurisdiction must be strictly construed, however, because it `implicates important federalism concerns.'" Ray v. State Farm Lloyds, 1999 WL 151667 (N.D.Tex.1999)(citing Frank v. Bear Stearns & Co., 128 F.3d 919, 922 (5th Cir.1997)). "Any doubts concerning removal must be resolved against removal in favor of remanding the case back to state court." Cross v. Bankers Multiple Line Insurance Company, 810 F.Supp. 748, 750 (N.D.Tex.1992). For these reasons, the burden of establishing subject matter jurisdiction in federal court rests on the party seeking removal. See Gaitor v. Peninsular & Occidental Steamship Co., 287 F.2d 252, 253-254 (5th Cir.1961.)

In this case, diversity between the parties is not alleged. As such, this Court cannot exert its jurisdiction over this action unless the Defendant shows that one of the laws in question "aris[es] under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The Court's inquiry about whether a case confers federal-question jurisdiction begins with the longstanding "well-pleaded complaint" rule, which requires that a federal question appear of the face of the Plaintiff's complaint before a district court can invoke its jurisdiction. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987); see also Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 53 L.Ed. 126 (1908). However, an exception to the "well-pleaded complaint rule" exists when a "substantial question of federal law" must be resolved before relief can be granted under the state law at issue. Franchise Tax Board v. Construction Laborers, 463 U.S. 1, 13, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983).3 The "substantial question of federal law" must lie in the complaint itself, as a "defense that raises a federal question is inadequate to confer federal question jurisdiction.... a defendant may remove a case only if the claim could have been brought in federal court." Merrell Dow Pharmaceuticals v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986)(citing Mottley, 211 U.S. 149, 29 S.Ct. 42, and 28 U.S.C. § 1441(b).) Here, Defendant PAI argues that even though no federal claim exists on the face of Ms. Brock's complaint, an analysis 42 U.S.C. § 300gg-42 is a substantial element of Ms. Brock's state law claims. PAI views this analysis as essential to the resolution of Ms. Brock's state law claims because unless Ms. Brock can prove that PAI did not comply with 42 U.S.C. § 300gg-42 when it cancelled Ms. Brock's "guaranteed renewable" insurance, she cannot succeed. Otherwise, PAI contends that Texas law would effectively prohibit the application of the federal statute.

Ms. Brock responds to PAI's claims in two ways that this Court finds persuasive. First, Ms. Brock argues that in enacting 42 U.S.C. § 300gg-42, Congress did not provide for a federal private right of action, because it anticipated that the states would be responsible for the statute's regulation. Second, Ms. Brock argues that outside of the private-right-of-action issue, the Fifth Circuit's recent re-articulation of the test for whether or not a state action substantially rests on a question of federal law in Howery v. Allstate Insurance Co., 243 F.3d 912 (5th Cir.2001) indicates that this action should be remanded to state court. Each of these issues are discussed below, in turn.

A. Private Right of Action

In its briefing on this issue, PAI stipulates that it agrees with Ms. Brock's analysis that 42 U.S.C. § 300gg-42 does not provide for a private right of action. See Def. Response to Plaintiff's Motion to Remand, p. 7. As both the Supreme Court and the Fifth Circuit have explained ad nauseam, the Defendant's stipulation in this regard is dispositive; the presence of a federal remedy in a statute is a minimum threshold requirement to determine whether Congress intended for federal courts to adjudicate state-court actions. Following controlling Fifth Circuit jurisprudence, "we begin with the minimum requirement that the federal statutes involved provide a private, federal remedy." Willy v. Coastal Corp., 855 F.2d 1160, 1169 (5th Cir.1988)(citing Merrell Dow, 478 U.S. at 813-816, 106 S.Ct. 3229). Here, as in that case, no private remedy exists. That is the end of the issue, and has been since the Supreme Court decided Merrell Dow. "The significance of the necessary assumption that there is no federal private cause of action thus cannot be overstated." Merrell Dow, 478 U.S. at 812, 106 S.Ct. 3229. "Merrell Dow held that a private, federal remedy was a necessary predicate to determining that the presence of a federal element in a state-created cause of action resulted in that cause of action being one which arose under federal law." Willy, 855 F.2d at 1168 (citing Merrell Dow, 478 U.S. at 813-814, 106 S.Ct. 3229.)

PAI offers three arguments why this Court should break with the precedent established in Merrell Dow and Willy: 1) the fact that Texas simply incorporates the federal standard of 42 U.S.C. § 300gg-42 is sufficient to establish federal-question jurisdiction; 2) the fact that Howery does not discuss the private right of action requirement indicates that such jurisprudence is "dead" in the Fifth Circuit; 3) Willy is "simple dicta," not controlling law, and this Court should not follow its "dicta." This Court addresses each of these arguments below.

1. Incorporation

First, PAI argues that since the Texas statute at issue simply incorporates the federal standard of when an insurer can withdraw insurance deemed "guaranteed renewable," this is sufficient to overcome the minimum private-right-of-action requirement. See Tex. Ins.Code Ann. Art. 3.70-1A(5)(b)(1-5)(stating that insurance that otherwise must be "guaranteed renewable" may be discontinued for the same five reasons set forth in 42 U.S.C. § 300gg-42); see also Tex. Ins.Code Ann. Art. 3.70-1A(c)(stating that "the commissioner [of health care in the state of Texas] shall adopt rules necessary to implement this article and to meet the minimum...

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