Macro v. Independent Health Ass'n, Inc.

• Decision Date: 25 October 2001
• Docket Number: No. 01-CV-0504C(SC).,01-CV-0504C(SC).
• Parties: Cheryl MACRO and Kim Zastrow, Individually and as Representatives of a Class of Persons Similarly Situated, Plaintiffs, v. INDEPENDENT HEALTH ASSOCIATION, INC., and Independent Health Corporation, Defendants.
• Court: U.S. District Court — Western District of New York

180 F.Supp.2d 427

Cheryl MACRO and Kim Zastrow, Individually and as Representatives of a Class of Persons Similarly Situated, Plaintiffs, v. INDEPENDENT HEALTH ASSOCIATION, INC., and Independent Health Corporation, Defendants.

No. 01-CV-0504C(SC).

United States District Court, W.D. New York.

October 25, 2001.

Brown & Kelly, LLP, Buffalo, NY (Lisa T. Sofferin, of Counsel), for Plaintiffs.

Independent Health Association, Inc., Buffalo, NY (Frederick B. Cohen, of Counsel), for Defendants.

INTRODUCTION

CURTIN, District Judge.

Plaintiffs commenced this action in New York State Supreme Court, Erie County, against defendants Independent Health Association, Inc., and Independent Health Corporation (referred to collectively herein as "Independent Health" or "defendant") seeking to challenge a notice of modification of medical insurance coverage for the treatment of infertility. The case was removed by defendant to this court pursuant to 28 U.S.C. § 1441 on the basis of original jurisdiction under the Employee Retirement Income Security Act ("ERISA"). Plaintiffs have moved pursuant to 28 U.S.C. § 1447 to remand the action to state court, and for alternative relief should the court retain jurisdiction (Item 2). Defendant has filed a cross-motion to dismiss or for summary judgment pursuant to Fed.R.Civ.P. 12(b) and 56(c) (Item 8). For the following reasons, plaintiffs' motion to remand is granted.

BACKGROUND

Individual plaintiffs Cheryl Macro and Kim Zastrow are covered by medical insurance provided under Independent Health's Encompass Group Health Contract through their husbands' employer, the Tonawanda City School District. Both plaintiffs are currently receiving medical treatment to assist conception, including the prescription drug Repronex and intrauterine insemination ("IUI"), which is covered by Independent Health. (See Macro and Zastrow Affs., attached to Item 1, Ex. C).¹

Independent Health is a health maintenance organization ("HMO"), certified under Article 44 of New York Public Health Law to operate in eight counties in the Western New York region, "through which members of an enrolled population are each entitled to receive comprehensive health services for an advance or periodic charge ...." N.Y. Pub. Health Law § 4400 (see Item 11, ¶ 1). According to defendant, 80 percent of Independent Health members are covered under group health contracts offered through their employers and governed by the substantive provisions of ERISA (id., ¶ 20).²

In April 2001, Independent Health sent a notice to its group health insurance plan subscribers advising as follows:

[W]e would like to inform you of a change to the infertility benefit, which will not become effective until your group health plan's renewal date, beginning with groups that renew on July 1, 2001. As some of the other local plans have done, Independent Health will no longer cover the treatment of infertility as part of your group health contract, however diagnosis of infertility will be covered as it has in the past.

(State Court Complaint, Item 2, Ex. A) (emphasis in original). Plaintiffs' group health plan renewal date is January 1, 2002 (Item 8, Cohen Aff., ¶ 11).

On June 25, 2001, plaintiffs commenced a proposed class action in state court on behalf of themselves and all persons similarly situated as insured members of health plans issued by Independent Health who are being treated for infertility or correctable medical conditions related to infertility and have received (or will receive) the above notice (see Item 1, Ex. A). The proposed class is alleged upon information and belief to consist of more than 1,200 members (id., ¶ 6). The amended state court complaint, served and filed on July 9, 2001, sets forth eight causes of action challenging the purported exclusion of coverage for infertility treatment on state statutory and common law grounds (id., Ex. B). Specifically, in the first cause of action, plaintiffs allege that the exclusion violates several express provisions of New York Insurance Law, including § 3216(i), which provides as follows:

(A) Every policy which provides coverage for hospital care shall not exclude coverage for hospital care for diagnosis and treatment of correctable medical conditions otherwise covered by the policy solely because the medical condition results in infertility.

(B) Every policy which provides coverage for surgical and medical care shall not exclude coverage for surgical and medical care for diagnosis and treatment of correctable medical conditions otherwise covered by the policy solely because the medical condition results in infertility.

N.Y. Ins. Law § 3216(i)(13)³ (see Item 1, Ex. B, ¶¶ 20-24).

In the second cause of action, plaintiffs challenge the April 2001 notice as discriminatory in violation of New York Insurance Law and Human Rights Law in that it results in the provision of diminished health care benefits for persons disabled by infertility (see Item 1, Ex. B, ¶¶ 25-31). The third cause of action seeks declaratory relief with respect to the rights and obligations of the parties to the contract (id., ¶¶ 32-36). The fourth cause of action seeks to enjoin the termination or modification of coverage for the treatment of infertility or correctable medical conditions related to infertility (id., ¶¶ 37-40). The fifth cause of action alleges that the April 2001 notice constitutes a breach of contract (id., ¶¶ 41-44). The sixth cause of action alleges breach of the implied covenant of good faith and fair dealing (id., ¶¶ 45-52). The seventh cause of action alleges intentional misrepresentation as to the nature and extent of the coverage offered by defendant for treatment related to infertility (including conception and pregnancy maintenance), causing plaintiffs to suffer severe emotional distress (id., ¶¶ 53-62). The eighth cause of action, which was added by the amended complaint, alleges that the April 2001 notice is deceptive and misleading in violation of New York General Business Law § 349 (id., ¶¶ 63-71). Plaintiffs seek compensatory and punitive damages "in a sum according to proof," in addition to the specific requests for declaratory and injunctive relief.

Meanwhile, on July 5, 2001, New York State Supreme Court Justice Joseph G. Makowski granted plaintiffs' application for an order to show cause why the proposed class should not be certified and why discovery should not be expedited (Item 1, Ex. C). The order directed Independent Health to answer the complaint by July 16, 2001, and further directed the parties to submit responding and reply papers to the court by July 11, 2001 (id.).

On July 13, 2001, defendant served and filed a notice of removal of the action to this court, asserting original federal jurisdiction and preemption under ERISA, 29 U.S.C. § 1001, et seq., and/or the Health Insurance Portability and Accountability Act ("HIPAA"), 42 U.S.C. § 300gg, et seq. On July 18, 2001, plaintiffs filed a motion to remand the action to state court on the ground that defendant has failed to establish removal jurisdiction, and in the alternative for expedited class certification and discovery should the court retain jurisdiction (see Item 3). In response, Independent Health filed a cross-motion to dismiss or for summary judgment. Because I find remand to be appropriate, plaintiff's motion to remand is granted, and the court is without subject matter jurisdiction to rule on the issues raised by defendant's motion.

DISCUSSION

Plaintiffs contend removal of the action to this court was improper because the causes of action set forth in the amended state court complaint are based primarily on New York Insurance Law, and as such are not preempted by ERISA. According to plaintiffs, because ERISA preemption does not apply, this court has no subject matter jurisdiction and the case must be remanded to state court.

As an initial matter, when an action is removed from state court, the district court first must determine whether it has subject matter jurisdiction over the claims before considering the merits of a motion to dismiss, for summary judgment, or for other relief. See University of South Alabama v. The American Tobacco Company, 168 F.3d 405, 410 (11th Cir.1999). If removal was inappropriate, the court must remand for lack of subject matter jurisdiction, notwithstanding the pendency of the other motions. Id. at 411; see also Toumajian v. Frailey, 135 F.3d 648, 655 (9th Cir.1998) (district court should have remanded for lack of subject matter jurisdiction and should not have dismissed on grounds of ERISA preemption).

Under the removal statute, any civil action brought in state court may be removed by the defendant to federal district court if the district court has original jurisdiction. 28 U.S.C. § 1441(a); see Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 7, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). The defendant carries the burden of establishing removal jurisdiction. See United Food & Commercial Workers Union, Local 919 v. CenterMark Properties Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir.1994). "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c); Franchise Tax Bd., 463 U.S. at 7, 103 S.Ct. 2841. Because of its mandatory language, and the significant federalism concerns raised by removal jurisdiction, the federal courts are directed to construe the removal statute strictly. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). All doubts about jurisdiction should be resolved in favor of remand to state court. See University of South Alabama, 168 F.3d at 411(presumption in favor of remand is necessary because if federal court reaches merits of pending motion in removed case where subject matter jurisdiction is lacking, it deprives state court of its right under Constitution to resolve...