McCluskey v. Bellsouth Medical Assistance Plan

• Decision Date: 13 October 1998
• Docket Number: No. 2:97 CV 916 K.,2:97 CV 916 K.
• Citation: 23 F.Supp.2d 1312
• Parties: Jennifer McCLUSKEY, through her legal guardian, Robert Peay, et al., Plaintiffs, v. BELLSOUTH MEDICAL ASSISTANCE PLAN, et al., Defendants.
• Court: U.S. District Court — District of Utah

23 F.Supp.2d 1312

Jennifer McCLUSKEY, through her legal guardian, Robert Peay, et al., Plaintiffs, v. BELLSOUTH MEDICAL ASSISTANCE PLAN, et al., Defendants.

No. 2:97 CV 916 K.

United States District Court, D. Utah, Central Division.

October 13, 1998.

Brian S. King, Marcie E. Schaap, King & Isaacson, Salt Lake City, UT, for Robert Peay, Teen Help, Delbert E. Goates.

Gary L. Johnson, Richards Brandt Miller & Nelson, Salt Lake City, UT, Keith W. Kochler, BellSouth Telecommunications, Atlanta, GA, for BellSouth Medical Assistance Plan, Blue Cross Blue Shield of Alabama.

ORDER

KIMBALL, District Judge.

Before the Court is Defendants' Motion to Dismiss for Lack of Jurisdiction or, in the Alternative, to Transfer. Oral argument of the motion was held on September 22, 1998. At that time, Plaintiffs' counsel first asserted that personal jurisdiction over Defendants could be based on a provision of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001-1461, that authorizes nationwide service of process. 29 U.S.C. § 1132(e). Because of the importance and the complexity of the issue involved, the Court invited both parties to submit further memoranda addressing the "national contacts" test for personal jurisdiction in the ERISA context.¹

FACTUAL BACKGROUND

Plaintiff Jennifer McCluskey seeks a determination of medical benefits due pursuant to 29 U.S.C. § 1132(A)(1)(B). At the time of the events at issue, McCluskey was 15 years old and lived in Tennessee with her guardian, Robert Peay. Peay was employed by BellSouth Telecommunications, Inc. McCluskey was covered by the insurance plan provided by Peay's employer — Defendant BellSouth Medical Assistance Plan (the "Plan"). The Plan was sponsored and administered by the parent company of Peay's employer, BellSouth Corporation, headquartered in Georgia. Defendant Blue Cross & Blue Shield of Alabama ("Blue Cross"), located in Birmingham, Alabama, provided third-party administration services to the Plan.

The present action arises out of McCluskey's decision to obtain in-patient treatment from Plaintiff Teen Help (dba Brightway Adolescent Hospital) in St. George, Utah, which she did when her family and physicians in Tennessee determined that she needed treatment in an atmosphere removed from the influences of her friends and peers. The Plan's utilization review agent, United HealthCare, precertified the treatment at the time. Ultimately, however, the Plan refused to pay 100% of the covered charges on the grounds that preferred providers' services were not used.

McCluskey and Peay executed an assignment of benefits in favor of Brightway Adolescent Hospital and Plaintiff Dr. Delbert Goates, who treated McCluskey while she was there. All brought suit against the Plan and Blue Cross.

DISCUSSION

Under the traditional test for determining whether a federal district court has jurisdiction over a defendant in an action arising under federal law, the court must determine both that there is a statutory basis for asserting jurisdiction over the defendant and, second, that exercising jurisdiction comports with the requirements of the Due Process Clause of the Fifth Amendment. Phone Directories Company v. Contel Corp., 786 F.Supp. 930, 942 (D.Utah 1992). "[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (internal citation omitted).

Under the national contacts test, "when a federal court attempts `to exercise jurisdiction over a defendant in a suit based upon a federal statute providing for nationwide service of process, the relevant inquiry is whether the defendant has had minimum contacts with the United States.'" Bellaire General Hosp. v. Blue Cross Blue Shield, 97 F.3d 822, 825 (5th Cir.1996) (quoting Busch v. Buchman, Buchman & O'Brien, Law Firm, 11 F.3d 1255, 1258 (5th Cir.1994)). ERISA contains such a provision.²

The rationale behind the national contacts test is that in such cases, the relevant sovereign is the United States and the due process concerns of the Fifth Amendment are satisfied where a court exercises personal jurisdiction over a defendant residing within the United States. Id.

The Court of Appeals for the Fifth Circuit is apparently the only circuit court to have adopted the national contacts test for personal jurisdiction in the ERISA context. Neither the United States Supreme Court, the Court of Appeals for the Tenth Circuit, nor any other court within this district has held that it is an appropriate test for personal jurisdiction in ERISA cases. Moreover, in Bellaire, the Fifth Circuit applied the test only because it felt bound by the precedent of Busch, which applied the national contacts test to actions brought under the 1934 Securities Exchange Act.

In fact, Bellaire sets forward a compelling attack on the test's legal foundations. The court made clear that it followed Busch with "grave misgivings" and emphasized its disagreement with the case "to the extent it concludes that the proper personal jurisdiction test in a national service of process case is whether minimum contacts exist between the individual and the national sovereign." Bellaire, 97 F.3d at 826. The Bellaire court explained that because the personal jurisdiction requirement is a function of the individual liberty interest, the proper focus should be on protecting an individual's liberty interest in avoiding the burdens of litigating in a distant or inconvenient forum, not on the boundaries of the sovereign's power. Id; see also Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 2104, 72 L.Ed.2d 492 (1982) ("The personal jurisdiction requirement recognizes and protects an individual liberty interest. It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty."). If personal jurisdiction is a matter of due process rather than sovereignty, as the Supreme Court held in Insurance Corp. of Ireland, then personal jurisdiction may not be exercised by a court simply because it has the power, i.e., sovereignty, to do so. An analysis of the fairness to the defendant of the exercise of jurisdiction is also...