McCaslin v. Blue Cross and Blue Shield of Alabama

• Decision Date: 20 December 1991
• Docket Number: No. CV-91-N-2482-S.,CV-91-N-2482-S.
• Citation: 779 F. Supp. 1312
• Parties: Dan McCASLIN, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF ALABAMA, Defendant.
• Court: U.S. District Court — Northern District of Alabama

779 F. Supp. 1312

Dan McCASLIN, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF ALABAMA, Defendant.

No. CV-91-N-2482-S.

United States District Court, N.D. Alabama, S.D.

December 20, 1991.

Don F. Wiginton, Wiginton & Samsil, Birmingham, Ala., for plaintiff.

Cathy S. Wright, Maynard Cooper Frierson & Gale, Birmingham, Ala., for defendant.

MEMORANDUM OF OPINION

EDWIN L. NELSON, District Judge.

This is a civil action in which the plaintiff seeks to enjoin the defendant insurance company from terminating his health insurance coverage, a judicial determination that the plaintiff is entitled to continued coverage, and damages for wrongful infliction of mental and emotional distress. The action was removed from the Circuit Court of Jefferson County, Alabama pursuant to 28 U.S.C. § 1441 on the basis of the defendant's claim that the health insurance plan in question is governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461.

I. Background

The record reflects that the plaintiff, Dr. Dan McCaslin, is a physician licensed to practice in the State of Alabama. He is a member of the Medical Association of Alabama (MASA) and is insured under a Group Hospital and Major Medical Contract established between Mutual Insurance Agency (MIA), on behalf of MASA, and defendant Blue Cross and Blue Shield of Alabama (Blue Cross). Dr. McCaslin and his family have been continuously covered under the MASA group policy since March 1981. In October 1981, Dr. McCaslin was diagnosed with congenital afibrinogenemia. Although Dr. McCaslin ceased practicing medicine because of his disability, he has remained a member of MASA "licensed and in good standing" and has continued to pay annual insurance premiums.

On July 24, 1991, defendant Blue Cross notified Dr. McCaslin that he was no longer eligible for benefits under MASA's group policy because he was no longer an "active, full-time employee" of MASA. On September 12, 1991, the plaintiff filed a declaratory judgment action in the Jefferson County Circuit Court seeking a determination of his eligibility for continued health insurance coverage under the Blue Cross policy. The defendant was served with the state court complaint on September 23, 1991, and on October 23, 1991, filed a notice of removal on the grounds that the insurance coverage at issue is governed by ERISA. Contemporaneously with the notice of removal the defendant filed a motion to dismiss the action and to strike the claim for punitive damages.¹ The plaintiff has moved to remand, asserting that MASA's group health insurance policy is not an employee benefit plan within the meaning of ERISA. The motion has been briefed and argued and is ready for a decision.

II. Discussion

A. Subject Matter Jurisdiction

The removal statute, being one which confers jurisdiction on the federal district courts, must be strictly construed. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). A due respect for state sovereignty and the independence of state courts demands that the federal courts exercise their right to remove cases properly before state courts only in strict conformity with the removal authority granted by Congress. Ashley v. Southwestern Bell Tel. Co., 410 F.Supp. 1389 (W.D.Tex.1976). Doubts concerning removability are to be resolved against removal and in favor of remand. Green v. Mutual of Omaha, 550 F.Supp. 815 (N.D.Cal.1982).

Federal district courts have original jurisdiction over cases raising questions of federal law. 28 U.S.C. § 1331. The "well-pleaded complaint" rule requires that the court determine whether a civil action involves a federal question based on "what necessarily appears in the plaintiff's statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose." Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 724, 58 L.Ed. 1218, 1219 (1914). The federal court must determine whether removal was proper "according to the plaintiff's pleadings at the time of the petition for removal." Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir.1983) (quoting Pullman Co. v. Jenkins, 305 U.S. 534, 537, 59 S.Ct. 347, 349, 83 L.Ed. 334, 337-38 (1939)); see also Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir.1989).

B. Basis for Removal

Blue Cross argues that the health insurance plan available exclusively to members of the Medical Association of the State of Alabama is an employee welfare benefit plan within the meaning of 29 U.S.C. § 1002(1) and, therefore, that any dispute as to coverage under the plan is governed by the provisions of ERISA. State law claims, such as those presented here, are, according to the defendant, preempted. This argument is premised on (1) the "safe harbor" regulation promulgated by the Secretary of Labor, 29 C.F.R. § 2510.3-1(j), and (2) Eleventh Circuit case law. The so-called "safe harbor" regulation provides in part:

For purposes of Title I of the Act and this chapter, the terms "employee welfare benefit plan" and "welfare plan" shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which

(1) No contributions are made by an employer or employee organization (2) Participation in the program is completely voluntary for employees or members;

(3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and

(4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.

29 C.F.R. § 2510-3.1(j) (emphasis added). Blue Cross concedes that the health insurance plan available to MASA members satisfies paragraphs (1), (2), and (3) of the regulation. Blue Cross argues, however, that the plan does not satisfy paragraph four of the safe harbor regulation because "MASA receives an economical benefit from administering the Blue Cross plan on behalf of its members by retaining the interest which accrues on the premium payments remitted by MASA members to the association." (Affidavit of Emmett Wyatt, filed Dec. 3, 1991, at ¶ 7).

Blue Cross also argues that the health insurance plan at issue is "a `plan, fund, or program' under the Eleventh Circuit's decision in Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.1982) (en banc). The Eleventh Circuit in Donovan held that an ERISA plan, fund, or program "is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits." Donovan, 688 F.2d at 1373; see also Williams v. Wright, 927 F.2d 1540, 1543 (11th Cir.1991) (applying Donovan). In addition, the Donovan court held:

To be an employee welfare benefit plan, the intended benefits must be health, accident, death, disability, unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits; the intended beneficiaries must include union members, employees, former employees or their beneficiaries; and an employer or employee organization, or both, and not individual employees or entrepreneurial businesses, must establish or maintain the plan, fund, or program.

Donovan, 688 F.2d at 1373 (emphasis in original). In Williams, supra, the Eleventh Circuit noted that a primary purpose of ERISA "is to protect employees once a plan is established." Williams, 927 F.2d at 1549 (emphasis added).

C. Statutory Construction

The court must apply well-settled principles of statutory construction to determine whether Congress intended that ERISA should govern the relationship between a self-employed physician who purchases health insurance coverage through a plan administered by a state professional association. "The cardinal rule of statutory construction is that a statute is to be read as a whole, ... since the meaning of statutory language, plain or not, depends on context." King v. St. Vincent's Hospital, ___ U.S. ___, ___, 112 S.Ct. 570, 574, 116 L.Ed.2d 578, 586 (1991) (citations omitted). Absent some clear indication of legislative intent to the contrary, the language of the statute controls its construction. Ford Motor Credit Co. v. Cenance, 452 U.S. 155, 158 n. 3, 101 S.Ct. 2239, 2241 n. 3, 68 L.Ed.2d 744, 749 n. 4 (1981). "Where Congress uses terms that have accumulated settled meaning under either equity or the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms." Kungys v. United States, 485 U.S. 759, 770, 108 S.Ct. 1537, 1546, 99 L.Ed.2d 839, 853 (1988) (quoting NLRB v. Amax Coal Co., 453 U.S. 322, 329, 101 S.Ct. 2789, 2794, 69 L.Ed.2d 672 (1981)). "Words are not pebbles in alien juxtaposition; they have only a communal existence; and not only does the meaning of each interpenetrate the other, but all in their aggregate take their purport from the setting in which they are used...." King, ___ U.S. at ___, 112 S.Ct. at 574 (quoting NLRB v. Federbush Co., 121 F.2d 954, 957 (2nd Cir.1941) (L. Hand, J.)). Except in "rare and exceptional circumstances," the court's inquiry is complete when it determines that the terms of a statute are unambiguous. Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 701, 66 L.Ed.2d 633, 638 (1981) (quoting Crooks v. Harrelson, 282 U.S. 55, 60, 51 S.Ct. 49, 50-51, 75 L.Ed. 156 (1930)). Finally, it is not the court's role to offer...