Kindred Hosps. Ltd. v. Aetna Life Ins. Co.

• Decision Date: 05 September 2018
• Docket Number: Civil Action No. 3:18-CV-1099-D
• Parties: KINDRED HOSPITALS LIMITED PARTNERSHIP d/b/a KINDRED HOSPITAL HOUSTON MEDICAL CENTER, et al., Plaintiffs, v. AETNA LIFE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

KINDRED HOSPITALS LIMITED PARTNERSHIP d/b/a KINDRED HOSPITAL HOUSTON MEDICAL CENTER, et al., Plaintiffs, v. AETNA LIFE INSURANCE COMPANY, et al., Defendants.

Civil Action No. 3:18-CV-1099-D

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

September 5, 2018

MEMORANDUM OPINION AND ORDER

In this action removed for the second time on the basis of ERISA¹ preemption, plaintiffs' motion to remand presents the question whether the factual basis for this action has changed such that ERISA now completely preempts any of plaintiffs' claims and thus confers federal question jurisdiction. Concluding that the factual basis for this action has not changed and that the case is not removable based on complete preemption under ERISA, the court grants the motion to remand and awards plaintiffs their just costs and any actual expenses, including attorney's fees, incurred as a result of the removal.

I

The background facts and procedural history of this case remain largely unchanged from the court's prior memorandum opinion and order remanding this case. See KindredHosps. Ltd. P'ship v. Aetna Life Ins. Co. (Kindred I), 2017 WL 2505001, at *1-2 (N.D. Tex. June 9, 2017) (Fitzwater, J.). The court will therefore recount the background facts and procedural history only to the extent necessary to understand today's decision.

Plaintiffs Kindred Hospitals Limited Partnership d/b/a Kindred Hospital Houston Medical Center, THC Houston, Inc. d/b/a Kindred Hospital-Bay Area, and d/b/a Kindred Hospital Houston-Northwest, and Transitional Hospitals Corporation of Texas, Inc. d/b/a Kindred Hospital Tarrant County-Fort Worth Southwest (collectively, "Kindred"), operators of long-term acute care hospitals, filed suit against defendants Aetna Life Insurance Company and Aetna Health, Inc. (collectively, "Aetna") in Texas state court. Kindred sues under state law to recover unpaid insurance payments based on Aetna's representations that insurance would cover the charges. Kindred alleges that, before admitting the patients in question, it sought Aetna's confirmation of what charges would be covered, but that Aetna's payments were less than what it represented would be paid.

Aetna filed its first notice of removal within 30 days of receipt of Kindred's state-court original petition ("petition"), asserting that some of Kindred's claims were completely preempted under ERISA because, inter alia, Kindred's claims disputed the right of payment for particular services and coverage determinations. See Kindred I, 2017 WL 2505001, at *10-12. Kindred moved to remand, and the court granted the motion, concluding, inter alia, that Kindred had established that each of its claims rested on independent legal duties. Id. at *14.

After the court remanded the case, Aetna removed it a second time. This secondremoval followed Aetna's receipt of a reply memorandum that Kindred filed in support of a motion to compel production ("reply memorandum"). Within Aetna's notice of removal, it highlights the following statements that Kindred made in the reply memorandum:

Each of Kindred's arguments as to relevance was shown to be correct when two public entities, Harris County and the City of LaPorte, produced documents in response to Kindred's subpoenas.

Under the Harris County contract, Aetna was supposed to pay claims at the vendor contract rate (e.g., MultiPlan) unless no contract rate was available. If no contract rate was available, then Aetna would attempt to negotiate a rate or do a Facility Change Review to establish a "Reasonable Charge." Aetna received a much lower amount if claims were paid at a contract rate than if they were paid at the "Reasonable Charge" amount.

Basically, at the same time Aetna acknowledged in its communications and contracts with employers that a provider was entitled to be paid at its usual and customary billed charges, Aetna used deception and hard-ball tactics to compel a provider to accept less to benefit itself.

In that regard, Aetna underpaid Kindred by over $4.2 million in connection with the insured at issue in this action. Thus, Aetna likely earned millions by underpaying Kindred's claims as it did.

Aetna 4/30/18 Notice of Removal 7.

Aetna maintains that these statements "constitute removable claims based on ERISA complete preemption." See id. Kindred moves for a second time to remand this case, and it requests sanctions in the form of attorney's fees and costs. Aetna opposes the motion.

II

As the removing party, Aetna "has the burden of overcoming an initial presumption against jurisdiction and establishing that removal is proper." Carnes v. Data Return, LLC, 2005 WL 265167, at *1 (N.D. Tex. Feb. 1, 2005) (Fitzwater, J.) (citing Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001)). "In general, defendants may remove a civil action if a federal court would have had original jurisdiction." De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995) (citing 28 U.S.C. § 1441(a)). "Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which (a federal) statute has defined." Victory Carriers, Inc. v. Law, 404 U.S. 202, 212 (1971) (quoting Healy v. Ratta, 292 U.S. 263, 270 (1934)). "The federal removal statute, 28 U.S.C. § 1441 (1997), is subject to strict construction because a defendant's use of that statute deprives a state court of a case properly before it and thereby implicates important federalism concerns." Frank v. Bear Stearns & Co., 128 F.3d 919, 922 (5th Cir. 1997) (citing Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995)). "[D]oubts regarding whether removal jurisdiction is proper should be resolved against federal jurisdiction." Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000).

Ordinarily, "[r]emoval is not possible unless the plaintiff[s'] 'well pleaded complaint' raises issues of federal law sufficient to support federal question jurisdiction." Rodriguez v. Pacificare of Tex., Inc., 980 F.2d 1014, 1017 (5th Cir. 1993) (citing Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 152 (1908)). "There is an exception, however, to thewell-pleaded complaint rule." Aetna Health Inc. v. Davila, 542 U.S. 200, 207 (2004).

When a federal statute wholly displaces the state-law cause of action through complete pre-emption, the state claim can be removed. This is so because when the federal statute completely pre-empts the state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law.

Id. at 207-08 (citation, brackets, and internal quotation marks omitted) (quoting Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 8 (2003)). Thus because plaintiffs' petition does not assert claims under federal law, and because Aetna does not contend that the court has diversity jurisdiction, Aetna can establish removal jurisdiction only if ERISA completely preempts one or more of Kindred's state-law claims. Kindred I, 2017 WL 2505001, at *3 (citing Westfall v. Bevan, 2009 WL 111577, at *2 (N.D. Tex. Jan. 15, 2009) (Fitzwater, C.J.)).

Complete preemption is available under ERISA § 502, the statute's civil-enforcement provision, which "Congress intended to be the exclusive vehicle for suits by a beneficiary to recover benefits from a covered plan." Mem'l Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 250 (5th Cir. 1990); see also, e.g., Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 66 (1987) ("Congress has clearly manifested an intent to make causes of action within the scope of the civil enforcement provisions of § 502(a) removable to federal court."). "Section 502, by providing a civil enforcement cause of action, completely preempts any state cause of action seeking the same relief, regardless of how artfully pleaded as a state action." McGowin v. ManPower Int'l, Inc., 363 F.3d 556, 559 (5th Cir. 2004) (quoting Giles v.NYLCare Health Plans, Inc., 172 F.3d 332, 337 (5th Cir. 1999)). In particular, § 502(a)(1)(B) preempts all suits involving ERISA-governed plans "brought . . . by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). A cause of action falls within the scope of § 502(a)(1)(B), and is therefore completely preempted, if (1) the "individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B)," and (2) "where there is no other independent legal duty that is implicated by a defendant's actions." Davila, 542 U.S. at 210; see also, e.g., Ambulatory Infusion Therapy Specialists, Inc. v. Aetna Life Ins. Co., 2006 WL 1663752, at *7 (S.D. Tex. June 13, 2006) ("Complete preemption under § 502(a) requires both standing and the lack of an independent legal duty supporting a state-law claim." (citing Davila, 542 U.S. at 210)). "To determine whether [plaintiffs'] causes of action fall 'within the scope' of ERISA § 502(a)(1)(B), we must examine [plaintiffs'] complaint[], the statute on which their claims are based . . . , and the various plan documents." Davila, 542 U.S. at 211. "[I]t is an independent corollary of the well-pleaded complaint rule that a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint." Franchise Tax Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 22 (1983).

"A state-law claim that is completely preempted under § 502 is transformed into a new federal claim." Cardona v. Life Ins. Co. of N. Am., 2009 WL 3199217, at *4 (N.D. Tex. Oct. 7, 2009) (Fitzwater, C.J.). In other words, complete preemption "eliminates the state-lawclaim" and "replaces [it] with a federal claim." Id. "'Because they are recast as federal claims,' state-law claims that are completely preempted...