Crossroads of Texas v. Great-West Life & Annuity

• Decision Date: 26 January 2006
• Docket Number: No. CIV.A. V-0549.,CIV.A. V-0549.
• Parties: CROSSROADS OF TEXAS, LLC; Children's Center of Victoria, LLP, Plaintiffs, v. GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY; Great-West Healthcare of Texas, Inc.; Private Healthcare Systems, Inc.; Does 1 through 100 Defendants.
• Court: U.S. District Court — Southern District of Texas

467 F.Supp.2d 705

CROSSROADS OF TEXAS, LLC; Children's Center of Victoria, LLP, Plaintiffs, v. GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY; Great-West Healthcare of Texas, Inc.; Private Healthcare Systems, Inc.; Does 1 through 100 Defendants.

No. CIV.A. V-0549.

United States District Court, S.D. Texas, Victoria Division.

January 26, 2006.

James M. Heidelberg, Escamilla & Poneck, Douglas A Poneck, Escamilla & Poneck, Inc., San Antonio, TX, for Plaintiffs.

Carl Christopher Scherz, Jason Levi Sanders, Locke Liddell et al., Dallas, TX, Alan N. Magenheim, Magenheim & Associates, Houston, TX, Nicholas P. Hansen, Denver, CO, for Defendants.

MEMORANDUM & ORDER

RAINEY, District Judge.

Pending before the Court is Plaintiffs' Motion to Remand (Dkt.# 9). The Court having reviewed the motion, the responses of the parties, and the applicable law, is of the opinion that the motion should be GRANTED in part and DENIED in part as explained below.

Factual and Procedural Background

Plaintiffs Crossroads Care of Texas, LLC, doing business as American Regional Health Center ("ARHC") and Children's Center of Victoria, LLP ("CCV") are business associations of physicians practicing in Victoria, Texas. " Defendants Great-West Life & Annuity Insurance Company ("GWL") and its subsidiary Great-West Health Care of Texas, Inc. ("GWH") are insurance companies responsible for administering the benefit claims of multiple ERISA plans not named, but implicated, by this action. Defendant Private Healthcare Systems, Inc. ("PHCS") is a large Preferred Provider Organization Network ("PPO") tasked with negotiating discounted rates with physicians and contracting that discounted fee schedule to insurers for a brokerage fee.

PHCS negotiated a PPO contract ("PHCS PPO contract") with Plaintiffs that would bind Plaintiffs to a discounted fee schedule and obligate PHCS to broker that contract to insurers willing to be bound by all the terms of the PHCS PPO contract. GWL and GWH (collectively "Great-West") were originally members of PHCS and, as such, would have legitimately been able to participate in the PHCS PPO contract negotiated with Plaintiffs. However, on March 1, 1996, Great-West left the PHCS system in the Victoria, Texas area and thereby forfeited its right to participate in the PHCS PPO contract. Despite this, Plaintiffs allege that Great-West continued to claim the benefits of the PHCS PPO contract by placing the PHCS name and logo on the identification cards issued to participants in its administered plans. These identification cards allowed patients to visit physicians within the PHCS network and file claims, via the physician provider, with Great-West for the discounted rate under the PHCS PPO contract. By administrative error, Plaintiffs accepted the allegedly fraudulent discounted rate from Great-West for an alleged approximately 3,500 separate claims processed from August 3, 1996 (the earliest date for which Plaintiffs have retained accounting records) until this action was filed in 2005.

In May 2004, Plaintiffs discovered that Great-West had allegedly fraudulently used PHCS's contracted discount with Plaintiffs. Plaintiffs issued a demand to Defendants for amounts representing the difference between the provider's full fee and the discounted rate under the PHCS PPO contract for the claims fraudulently processed by Great-West. Great-West responded with a demand for reimbursement of all claims incorrectly paid under the theory that Plaintiffs should pursue the patients for the full fee and return claims amounts improperly processed. Plaintiffs also allege that their records indicate that, prior to September 1, 2001, Great-West improperly processed claims using the One Health PPO discount to which Plaintiffs were not contracting parties.

From September 1, 2001 onward, Plaintiffs did enter into a contract with Great-West through a Preferred Provider Organization Network, Health First of Texas, P.A. ("HFT"). The contract with HFT is entitled "One Health Plan of Texas, Inc., Health First of Texas, P.A. PPO Medical Group Agreement" ("One Health Plan PPO contract"). Allegedly, Great-West processed claims with Plaintiffs that should have been covered by the One Health Plan PPO contract as "out-of-network" claims, thereby underpaying Plaintiffs.

Plaintiffs originally filed the present cause of action in the 24th Judicial District Court, Victoria, Texas, Cause No. 058-63,099-A, on August 5, 2005. Defendants removed the case to the United States District Court for the Southern District of Texas pursuant to 28 U.S.C. §§'1331, 1441(a). Plaintiffs have filed the present motion praying that the Court remand the action to Texas State court.

Standards for Removal & Remand

A civil action" filed in state court may be removed to federal court if the claim is one "arising under" federal law. 28 U.S.C. §§ 1331, 1441(a). Because the federal courts are courts of limited jurisdiction, a party removing an action from state to federal court bears the burden of establishing that court's proper jurisdiction. Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir.1988), appeal after remand, 915 F.2d 965 (5th Cir.1990), aff'd, 503 U.S. 131, 112 S.Ct. 1076, 117 L.Ed.2d 280 (1992); Century Assets Corp. v. Solow, 88 F.Supp.2d 659, 660 (E.D.Tex.2000). The removing party's burden "extends not only to demonstrating a jurisdictional basis for removal, but also necessary compliance with the requirements of the removal statute." Albonetti v. GAF Corporation-Chemical Group, 520 F.Supp. 825, 827 (S.D.Tex.1981). Doubts about whether an action may be removed should be resolved against removal and in favor of remanding the case to state court. Powers v. South Central United Food & Commercial Workers Unions & Employers Health & Welfare Trust, 719 F.2d 760, 762 (5th Cir. 1983); Monterey Mushrooms, Inc. v. Hall, 14 F. Supp.2d 988, 990 (S.D.Tex.1998); Scott v. Communications Servs., Inc., 762 F.Supp. 147, 150 (S.D.Tex.1991).

Ordinarily, unless the parties are diverse, removal is only proper if the plaintiffs well-pleaded complaint asserts causes of action under federal law which support federal question jurisdiction. Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003). "Where potential remedies exist under both state and federal law, a plaintiff may choose to proceed only under state law and avoid federal court jurisdiction." Baylor Univ. Medical Center v. Arkansas Blue Cross Blue Shield, 331 F.Supp.2d 502, 505-506 (N.D.Tex.2004) (citing Carpenter v. Wichita Falls Independent School District, 44 F.3d 362, 366 (5th Cir.1995)). "There is an exception to the well-pleaded complaint rule, though, if Congress `so completely preempt[s] a particular area that any, civil complaint raising this select group of claims, is necessarily federal in character.'" Arana v. Ochsner Health Plan, 338 F.3d 433, 437 (5th Cir.2003) (en banc) (quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)). State law claims seeking relief within the scope of the Employee Retirement Income Security Act of 1974 ("ERISA") § 502(a)(1)(B) must be treated as arising under federal law, and as such, are removable to federal court even if relief is not explicitly plead under federal law.

Analysis

In their Original Petition, Plaintiffs allege causes of action for violation, of Texas Prompt Pay Statutes, deceptive insurance practices under the Texas Insurance Code, quantum meruit, fraud, interference with contract, theft of service, and conspiracy. Those causes of action, as plead, are exclusively state law claims. However, Defendants contend that Plaintiffs' claims are for ERISA benefits under ERISA § 502(a)(1)(B). Defendants explain that ERISA plan participants assign their rights to seek reimbursements due from the insurer when they allow their physician provider to file a claim for benefits on their behalf. When the insurer fails to properly pay the claim, the physician provider has a derivative cause of action for ERISA benefits. Thus, Defendants contend, Plaintiffs' claims for reimbursement can only be sought through the civil enforcement provision of ERISA and are thus exclusively federal claims properly heard in federal court.¹

Plaintiffs contend that their causes of action are not derivative in nature, but are based directly on the contractual relationship that exists between the insurer, the PPO, and the provider networks and have only a tangential and tenuous impact on the ERISA plans administered by Defendant insurers. Lawsuits brought by independent third-party providers, such as Plaintiffs, based on "run-of-the-mill state-law claims — although obviously affecting and involving ERISA plans — are not preempted by ERISA," Baylor Univ. Medical Center, 331 F.Supp.2d at 507 (citing Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 833, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988)), so long as they don't directly affect "the relationship between traditional ERISA entities — the employer, the plan and its fiduciaries, and the participants and beneficiaries." Id. Conversely, an independent third-party provider's "state law claims for breach of fiduciary duty, negligence, equitable estoppel, breach of contract, and fraud are preempted by ERISA when the [provider] seeks to recover benefits owed under a plan to a plan participant who has assigned her right of benefits to the [provider]." Id.; see Memorial Hospital System v. Northbrook Life Insurance Co., 904 F.2d 236 (5th Cir.1990); Hermann Hospital v. MEBA Medical & Benefits Plan, 845 F.2d 1286 (5th Cir.1988). Thus, "[t]he critical question for the [C]ourt[ ] is whether the [Plaintiffs'] claim[dare] based on [ ] direct cause[s] of action against [Defendants], in which situation [they are] not preempted, or whether [they are] derivative to the patient[s'] cause[s] of action, where ERISA applies." Orthopaedic Surgery Associates of San Antonio, PA, et al. v....