Hansen v. Blue Cross of California, 88-5910

Citation891 F.2d 1384
Decision Date18 December 1989
Docket NumberNo. 88-5910,88-5910
Parties, 11 Employee Benefits Cas. 1864 Mary Ann HANSEN, Plaintiff-Appellee, v. BLUE CROSS OF CALIFORNIA; Ventura County Foundation for Medical Care, Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Malissa Hathaway McKeith, Baker & McKenzie, Los Angeles, Cal., for defendants-appellants.

Timothy J. Morris, Gianelli & Morris, Los Angeles, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before NELSON and BOOCHEVER, Circuit Judges, and BROWNING, District Judge. *

BOOCHEVER, Circuit Judge:

OVERVIEW

This case involves the attempt by Blue Cross of California (Blue Cross) to obtain appellate review of a district court order remanding a removed case to state court. Mary Ann Hansen (Hansen) brought a class action suit alleging state law claims for Blue Cross' failure to pay insurance benefits. Blue Cross removed the action based solely on the existence of federal question jurisdiction. It contended that the Employment Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461 (1982 & Supp. V 1987), preempted the state law claims. The district court held that it

lacked subject matter jurisdiction after it concluded that Hansen's plan was not an ERISA plan because the individuals paid their own premiums.

FACTS

Hansen filed a class action suit in state court against Blue Cross, the Ventura County Foundation (administrator of the group plan), and Doe defendants 1-20 for failure to pay benefits for medical expenses incurred by Hansen and other class members between 1984 and 1987 based on an exclusion for temporomandibular joint syndrome (TMJ). Hansen's class action complaint consisted of two counts: one for declaratory relief that the exclusion was improper; and the second for breach of California Insurance Code § 790.03 for continuing to deny benefits after a California court held that the TMJ exclusion was unenforceable. Hansen also sought punitive damages for Blue Cross' alleged violation of section 790.03.

Blue Cross filed a timely notice to remove the action to federal court alleging that Hansen's claims were preempted under ERISA, and consequently her complaint arose under federal law. Hansen had been enrolled in the Ventura County Medical Group Health Plan through her employer, Dr. Pallais. When Hansen's employer retired in January of 1987, Hansen elected to continue her health benefits pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), 1 and began paying her own premiums. In the district court, Blue Cross then brought a motion to dismiss on grounds that the class action was improper, and the claims were preempted under ERISA. Hansen, in her Points and Authorities in Opposition to the motion to dismiss, claimed that her action was not preempted because she and all other class members paid their own premiums, and consequently pursuant to 29 C.F.R. § 2510.3-1(j) the group insurance plan was not an employee welfare plan. In the alternative, Hansen argued that California Insurance Code section 790.03 was a statute regulating insurance and fell within the savings clause of ERISA.

The district court remanded the action to state court on the grounds that it lacked subject matter jurisdiction because the group insurance plan was wholly voluntary and not employer supported. The court never decided whether section 790.03 fell within ERISA's savings clause nor did it decide the merits of the class action suit. Defendants filed a timely notice of appeal, but did not seek mandamus relief.

DISCUSSION

I. JURISDICTION

A. REMOVAL

28 U.S.C. § 1441(a) (1982) allows removal of "any civil action brought in a State court of which the federal courts of the United States have original jurisdiction...." 28 U.S.C. § 1331 (1982) confers original jurisdiction in cases arising under the laws of the United States. Blue Cross removed the action based solely on the existence of a federal question. A cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law. See, e.g., Gully v. First Nat'l Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936).

Federal preemption is ordinarily a defense that does not confer federal question jurisdiction because it does not appear on the face of the complaint. "One corollary Blue Cross claimed that Hansen's complaint was an artfully pleaded state law suit to recover benefits under an ERISA plan. If the group insurance plan was an ERISA plan, the district court had concurrent jurisdiction over Hansen's suit.

                of the well-pleaded complaint rule developed in the case law, however, is that Congress may so completely pre-empt 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).   Within this select group of claims, plaintiffs cannot avoid federal question jurisdiction by artfully pleading only state law claims.  "The courts recharacterize the 'artfully-pleaded' complaint as though it had been 'well-pleaded.' "  Paige v. Henry J. Kaiser Co., 826 F.2d 857, 861 (9th Cir.1987), cert. denied, 486 U.S. 1054, 108 S.Ct. 2819, 100 L.Ed.2d 921 (1988).   The Supreme Court has held that ERISA provides an exclusive remedy for actions to enforce benefit rights, or to recover benefits under an ERISA plan, and that such suits arise under federal law and are removable to federal court.  Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52, 56, 107 S.Ct. 1549, 1555, 1557, 95 L.Ed.2d 39 (1987). 2
                
B. REVIEWABILITY OF REMAND ORDERS

28 U.S.C. § 1447(c) provides that a district court shall remand a case "[i]f at any time before final judgment it appears that the case was removed improvidently and without jurisdiction...." Remand orders based on the grounds specified in section 1447(c), i.e. that removal was "improvident and without jurisdiction," are immune from appellate review. See 28 U.S.C. § 1447(d)(1982) 3; see also Gravitt v. Southwestern Bell Tel. Co., 430 U.S. 723, 723, 97 S.Ct. 1439, 1440, 52 L.Ed.2d 1 (1977) (per curiam).

Section 1447(d) precludes review of a district court's jurisdictional decision even if it was clearly wrong. See Thermtron Prod., Inc. v. Hermansdorfer, 423 U.S. 336, 343, 96 S.Ct. 584, 589, 46 L.Ed.2d 542 (1976); see also FSLIC v. Frumenti Dev. Corp., 857 F.2d 665, 667 (9th Cir.1988); Kunzi v. Pan American World Airways, Inc., 833 F.2d 1291, 1293 (9th Cir.1987); Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 276 (9th Cir.1984).

When a district court's remand order is based on a non-jurisdictional ground, however, section 1447(d) does not bar appellate review. See, e.g., Thermtron, 423 U.S. at 351-52, 96 S.Ct. at 593; Pelleport, 741 F.2d at 276-77. In Thermtron, the district court remanded a properly removed diversity action because of its crowded docket. The Supreme Court held that the district court exceeded its "statutorily defined power" by remanding the case on grounds not specified in the statute, and that a writ of mandate was the appropriate remedy to compel the district court to entertain the properly removed action. Thermtron, 423 U.S. at 351, 96 S.Ct. at 593.

In Pelleport, we held that a district court's order remanding a case to state court was reviewable on appeal as a final collateral order. The plaintiff sought to remand based on two theories: 1) the court lacked subject matter jurisdiction because of the inclusion of Doe defendants; and 2) the parties had entered into a valid forum selection clause mandating that any dispute be litigated in state court. The district court remanded the case after ruling that Blue Cross argues that the district court's remand order is reviewable under Pelleport because the district court made the factual determination that Hansen paid her own premiums and then concluded that Hansen's insurance policy was not covered by ERISA. We disagree. First, Hansen pled in her complaint that she converted her policy under COBRA, and paid her own premiums. The district court did not decide a disputed issue of fact but merely looked to the allegations in Hansen's complaint.

                the forum selection clause was enforceable.   We held that the remand order was reviewable because the district court "reached a substantive decision on the merits apart from any jurisdictional decision."  Pelleport, 741 F.2d at 276 (emphasis added)
                

Second, Blue Cross fails to demonstrate how the district court's legal decision was apart from the question of subject matter jurisdiction as required to fall within the exception to nonreviewability established by Thermtron and its progeny. Because the complaint alleged only state law claims, removal was only proper if there was federal question jurisdiction based on the complete preemption doctrine. Consequently, subject matter jurisdiction existed only if Hansen's group insurance plan was subject to ERISA. The district court's decision that Hansen's plan was not subject to ERISA, rather than being apart from the question of subject matter jurisdiction, was necessary to determine whether such jurisdiction existed.

In deciding whether subject matter jurisdiction exists, a district court will reach legal conclusions concerning the presence of diversity or a federal question. Blue Cross merely disagrees with the legal conclusion that the district court drew; namely that an ERISA plan does not exist because the employees pay their own premiums. Assuming, without deciding, that such a decision is erroneous, 4 section 1447(d) precludes review of remand orders based on lack of subject matter jurisdiction even when the decision is wrong. See Gravitt, 430 U.S. 723, 97 S.Ct. 1439 (reversing In re Southwestern Bell Tel. Co., 535 F.2d 859, 860 (5th Cir.), ...

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