Charter Fairmount Inst. v. Alta Health Strategies

• Decision Date: 24 September 1993
• Docket Number: Civ. A. No. 93-3258.
• Citation: 835 F. Supp. 233
• Parties: CHARTER FAIRMOUNT INSTITUTE, INC. v. ALTA HEALTH STRATEGIES.
• Court: U.S. District Court — Eastern District of Pennsylvania

835 F. Supp. 233

CHARTER FAIRMOUNT INSTITUTE, INC. v. ALTA HEALTH STRATEGIES.

Civ. A. No. 93-3258.

United States District Court, E.D. Pennsylvania.

September 24, 1993.

Michael S. Dinney, Shea & Shea, Bryn Mawr, PA, for plaintiff.

Jeffrey S. Estabrook, Bolger, Picker, Hankin & Tannenbaum, Philadelphia, PA, Thomas R. Lee, Jill A.N. Parrish, Kimball, Parr, Waddoups, Brown & Gee, Salt Lake City, UT, for defendant.

MEMORANDUM AND ORDER

HUTTON, District Judge.

Presently before the Court is the plaintiff Charter Fairmount Institute's ("Charter Fairmount") Motion for Remand; defendant Alta Health Strategies' ("Alta") response; Charter Fairmount's reply; Alta's Motion to Dismiss; Charter Health's response; and Alta's reply.

I. FACTUAL BACKGROUND

The plaintiff, Charter Fairmount Institute, Inc., is a hospital seeking reimbursement for medical services rendered to Miss Heather Craiter. Miss Craiter was insured under her mother's health insurance plan. The defendant, Alta Health Strategies, administered the insurance plan that provided Miss Craiter's health insurance coverage. During the period from May 20, 1992 until June 25, 1992, Miss Craiter was hospitalized at the plaintiff's facility for major affective disorder. As a result of her hospitalization, charges were incurred in the amount of $43,536.75.

Alta allegedly confirmed that it would pay 100% of all expenses after the policy holder had met her $200 deductible. Miss Craiter's right to receive benefits under the plan was assigned to Charter Fairmount. Alta refused to pay, claiming that Miss Craiter's condition was "preexisting," and therefore excluded from coverage under the plan.

Charter Fairmount commenced an action in the Court of Common Pleas of Philadelphia County against Alta, in which it sought reimbursement for the $43,536.75 charge. Charter Fairmount premised its action on the following three common law theories: estoppel, misrepresentation and negligent misrepresentation. Believing the causes of action to be preempted by The Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001-1461, Alta removed the case to this Court.

II. DISCUSSION

The defendant's theory of the case is that it is entitled to dismissal under Fed.R.Civ.P 12(b)(6) because the plaintiff's state law claims are preempted by ERISA and its complaint fails to state a claim upon which relief may be granted under ERISA. The question of whether removal was appropriate in this case is inextricably intertwined with the question of whether the plaintiff's causes of action are preempted.

A. Removal Under § 1144(a)

The court's consideration of whether removal was proper must begin with a consideration of 28 U.S.C. § 1441, which grants defendants the right, in appropriate circumstances, to remove a case to federal court. Under 28 U.S.C. § 1441(a),

any 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....

28 U.S.C.A. § 1441(a) (West 1985 & Supp. 1993). However, the district court must remand a case "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction." Id. § 1447(c). Where there is no diversity of citizenship between the parties, the plaintiff's cause of action must raise a federal question. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987). In its Petition for Removal, the defendant did not allege that diversity jurisdiction lies in the present case.¹ Thus, this Court's original jurisdiction over this matter lies, if at all, under federal question jurisdiction. See 28 U.S.C. § 1331(a).

1. The Well Pleaded Complaint Rule

Alta's argument with respect to removal is that because the plaintiff's claims are preempted by ERISA, the complaint presents a federal question. Thus, it asserts, the matter is removable under § 1441(a). The general rule, however, is that the plaintiff is entitled to remain in state court so long as its complaint does not present, on its face, an issue under federal law. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 1546-47, 95 L.Ed.2d 55 (1987); Railway Labor Execs. Ass'n v. Pittsburgh & Lake Erie R.R. Co., 858 F.2d 936, 939 (3d Cir.1988). For a case to present a federal question, "the statute, ... right or immunity created by the Constitution or laws of the United States must be an element, and an essential one of the plaintiff's cause of action." Gully v. First Nat'l Bank in Meridian, 299 U.S. 109, 112, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936). Federal preemption is ordinarily a defense to a plaintiff's suit and, as such, does not appear on the face of a well-pleaded complaint. Albert Einstein Med. Ctr. v. National Benefit Fund for Hosp. & Health Care Employees, 740 F.Supp. 343, 348 (E.D.Pa.1989).

On its face, Charter Fairmount's complaint does not present a federal question. Rather, the complaint speaks the language of common law tort. It asserts claims for estoppel, misrepresentation and negligent misrepresentation. It does not expressly refer to ERISA and the rights or immunities created under ERISA are not essential elements of the plaintiff's claims. Accordingly, unless the doctrine of "complete preemption" is applicable, removal was inappropriate.

2. The Doctrine of "Complete Preemption"

Although the "well pleaded complaint rule" would ordinarily bar the removal of an action to federal court where federal jurisdiction is not presented on the face of the plaintiff's complaint, the action may be removed if it falls within the narrow class of cases to which the doctrine of "complete preemption" applies. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). This independent corollary to the "well pleaded complaint rule" permits removal where "Congress ... so completely preempts a particular area that any civil complaint raising this select group of cases is necessarily federal in character." Allstate Ins. Co. v. 65 Security Plan, 879 F.2d 90, 93 (3d Cir.1989) (quoting Taylor, 481 U.S. at 63-64, 107 S.Ct. at 1546). In Allstate, the Third Circuit Court of Appeals articulated a two-part test to be used in determining when a cause of action is completely preempted. The court stated that the doctrine applies only when:

(1) the enforcement provisions of a federal statute create a cause of action vindicating the same interest that the plaintiff's cause of action seeks to vindicate; and

(2) there is affirmative evidence of a congressional intent to permit removal despite the plaintiff's exclusive reliance on state law.

Id. The court will address each element of the Allstate test in turn.

a. A Federal Cause of Action Under ERISA

The first prong of the Allstate test has divided the district courts within this circuit. At issue in the present case is whether § 1132(a)(1)(B),² the enforcement provision under ERISA, creates a cause of action vindicating the same interests that the plaintiff's cause of action seeks to vindicate. Under § 1132(a)(1)(B), only "participants"³ and "beneficiaries" have standing to bring a lawsuit. Id.; 29 U.S.C.A. § 1132(a)(1) (West 1985 & Supp.1993). Charter Fairmount clearly does not fall within the definition of a "participant" for purposes of § 1132(a)(1)(B). Thus, if Charter Health has standing to sue, it can only be as a "beneficiary."

For purposes of § 1132(a)(1)(B), a beneficiary is "a person designated by a participant, or by the terms of an employee benefit plan who is or may become entitled to a benefit thereunder." 29 U.S.C.A. § 1002(8) (West 1985 & Supp.1993). The Third Circuit has held that a nonenumerated party, such as Charter Health, is not a beneficiary in its own right. Northeast Dep't ILGWU v. Teamsters Local Union No. 229, 764 F.2d 147 (3d Cir.1985). However, the more difficult question, and the one that has generated the most controversy is whether a health care provider has derivative standing to sue under § 1132(a)(1)(B) where the health care provider is an assignee of an insured's claim under an ERISA "employee welfare benefit plan."⁴

Several district courts within this circuit have held that health care providers are not "beneficiaries" under § 1132(a)(1)(B). The plaintiff has identified three of these cases. Specifically, the plaintiff argues that this case is controlled by The Horsham Clinic, Inc. v. Principal Mutual Life Ins. Co., C.A. No. 92-1003, 1992 WL 165109 (E.D.Pa. June 12, 1992), The Horsham Clinic, Inc. v. Trovarello, C.A. No. 90-2893, 1990 WL 73027 (E.D.Pa. May 29, 1990) and Health Scan, Ltd. v. Travelers Ins. Co., 725 F.Supp. 268 (E.D.Pa.1989).

In addition to the cases cited by the plaintiff, this Court's research has disclosed two other district court decisions within this circuit holding that health care providers lack standing to sue under § 1132(a)(1)(B). See Allergy Diagnostics Laboratory v. The Equitable, 785 F.Supp. 523, 527 (E.D.Pa.1991); Cameron Manor, Inc. v. United Mine Workers of America, 575 F.Supp. 1243, 1246 (E.D.Pa.1983). In all of the foregoing cases, both those identified by the plaintiff and those identified by this Court, the courts held that a medical provider lacked standing under § 1132(a)(1)(B). However, the courts did not all employ the same rationale to reach their holdings.

In Principal Mutual, The Horsham Clinic, a health care provider, brought a state court action against an insurance company, which insured participants and beneficiaries of an ERISA-qualified welfare benefit plan. Principal Mutual, 1992 WL 165109, at *1. The suit arose out of the clinic's having rendered medical services to a patient who was a beneficiary under his father's insurance plan. Id. Prior to admitting the patient, a representative of the clinic contacted the defendant-insurance company to ascertain the extent of the patient's health insurance coverage and, allegedly, was told by the defendant-insurance...