McCulloch Orthopaedic Surgical Servs., PLLC v. Aetna Inc.

• Decision Date: 18 May 2017
• Docket Number: No. 15-2150-cv,August Term, 2015,15-2150-cv
• Citation: 857 F.3d 141
• Parties: MCCULLOCH ORTHOPAEDIC SURGICAL SERVICES, PLLC, a/k/a Dr. Kenneth E. McCulloch, Plaintiff-Appellant, v. AETNA INC., dba Aetna Health and Life Insurance Co., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

857 F.3d 141

MCCULLOCH ORTHOPAEDIC SURGICAL SERVICES, PLLC, a/k/a Dr. Kenneth E. McCulloch, Plaintiff-Appellant,

v.AETNA INC., dba Aetna Health and Life Insurance Co., et al., Defendants-Appellees.

No. 15-2150-cv

August Term, 2015

United States Court of Appeals, Second Circuit.

Argued: April 26, 2016

Decided: May 18, 2017

Kenneth J. McCulloch , Law Office of Kenneth J. McCulloch, New York, NY, for Plaintiff-Appellant.

Edward Wardell (Patricia A. Lee, on the brief), Connell Foley LLP, New York, NY, for Defendants-Appellees.

Before: Walker, Calabresi, and Hall, Circuit Judges.

John M. Walker, Jr., Circuit Judge:

We consider in this case whether the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq ., completely preempts an "out-of-network" health care provider's promissory-estoppel claim against a health insurer where the provider (1) did not receive a valid assignment for payment under the health care plan and (2) received an independent promise from the insurer that he would be paid for certain medical services provided to the insured. We hold that ERISA does not completely preempt such a claim.

BACKGROUND

Plaintiff-appellant McCulloch Orthopaedic Surgical Services, PLLC, a/k/a Dr. Kenneth E. McCulloch ("McCulloch") filed this action against defendant-appellee Aetna Inc. and several of its wholly-owned subsidiaries¹ in New York State Supreme Court. McCulloch, an orthopedic surgeon, seeks reimbursement from Aetna for performing two knee surgeries on a patient who is a member of an Aetna-administered health care plan that is governed by ERISA. McCulloch is an "out-of-network" provider under this plan—he does not have a contract with Aetna and is not identified by Aetna as a participating physician who has agreed to abide by a set fee schedule.

Before performing the patient's surgeries, McCulloch's office staff called a number listed on the patient's Aetna insurance card to obtain information about the patient's coverage. An Aetna representative informed McCulloch's staff that the patient was covered by a health care plan administered by Aetna, that the plan provided for payment to out-of-network physicians, and that the plan covered the surgical procedures that McCulloch would be providing for the patient. The Aetna representative stated that McCulloch would be reimbursed at seventy percent of the usual, customary, and reasonable ("UCR") rate for the knee surgeries and that this rate would be based on an industry-standard schedule.²

Relying on Aetna's promise of reimbursement, McCulloch performed the two surgeries and billed Aetna at the UCR rate for a total of $66,048. McCulloch then submitted a health insurance claim form to Aetna for each surgery (Centers for Medicare and Medicaid Services Form 1500). The claim form has two sections that concern the assignment of payment for medical benefits. First, in Box 13, the insured must authorize the "payment of medical benefits to the undersigned physician ... for services described below." The parties do not dispute that the patient signed both of the completed forms submitted by McCulloch. Second, in Box 27, the form asks if the provider will "Accept Assignment?". The parties also do not dispute that McCulloch checked "yes" in response to this question on the forms.

The patient's health care plan, however, has an anti-assignment provision, which states that:

Coverage may be assigned only with the written consent of Aetna. To the extent allowed by law, Aetna will not accept an assignment to an out-of-network provider, including but not limited to, an assignment of:

• The benefits due under this contract;

• The right to receive payments due under this contract; or

• Any claim you make for damages resulting from a breach or alleged breach, of the terms of this contract.

Despite this provision, Aetna reimbursed McCulloch $842.51 for the first surgery and $14,425 for the second surgery, for a total of $15,267.51.

On February 17, 2015, McCulloch sued Aetna in New York State court on a single cause of action: promissory estoppel. McCulloch alleged that Aetna had made a clear and unambiguous promise to reimburse him for seventy percent of the UCR rate for both knee surgeries ($46,233.60), that he had reasonably and foreseeably relied on that promise, and that he had been injured as a result. McCulloch sought $30,966.09—the difference between seventy percent of the UCR rate ($46,233.60) and what Aetna had paid him ($15,267.51)—plus interest from August 4, 2011, costs, and other appropriate relief.

On March 17, 2015, Aetna timely removed this action to the United States District Court for the Southern District of New York. Aetna invoked federal-question jurisdiction, asserting that McCulloch's complaint raised a claim for benefits under an employee welfare-benefit plan governed by ERISA. McCulloch then filed a motion to remand the action to state court. On May 11, 2015, the district court (Katherine B. Forrest, J. ) issued an opinion and order denying McCulloch's motion to remand and directing McCulloch to amend his complaint "to assert ERISA cause[s] of action not later than ... May 25, 2015." App'x at 233.

On May 21, 2015, McCulloch moved for reconsideration of the district court's order. He requested that the district court either remand this case to state court or enter a final judgment dismissing the action for failure to state a claim under ERISA. McCulloch did not file an amended complaint. On June 8, 2015, the district court denied McCulloch's motion for reconsideration and, "[i]n light of plaintiff's refusal to amend," dismissed this action. McCulloch timely appealed.

LEGAL STANDARD

We review de novo whether a district court has subject matter jurisdiction. Montefiore Med. Ctr. v. Teamsters Local 272 , 642 F.3d 321, 327 (2d Cir. 2011). An action filed in state court may be properly removed by a defendant to federal court in "any civil action ... of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). "The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.

The defendant, as the party seeking removal and asserting federal jurisdiction, bears the burden of demonstrating that the district court has original jurisdiction. See Montefiore , 642 F.3d at 327. Under the "well-pleaded complaint rule," a defendant generally may not "remove a case to federal court unless the plaintiff's complaint establishes that the case arises under federal law." Aetna Health Inc. v. Davila , 542 U.S. 200, 207, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (citation and internal quotation marks omitted). There is, however, an exception to this rule. Id. A defendant may properly remove a state-law claim when a federal statute "wholly displaces the state-law cause of action," such that the claim, "even if pleaded in terms of state law, is in reality based on federal law." Id. at 207-08, 124 S.Ct. 2488 (citation omitted).

ERISA provides for the wholesale displacement of certain state-law claims. Pursuant to ERISA § 502(a)(1)(B), a participant or beneficiary may bring an action "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." ERISA § 502(a)(1)(B), codified at 29 U.S.C. § 1132(a)(1)(B). This civil enforcement scheme "completely preempts any state-law cause of action that ‘duplicates, supplements, or supplants' an ERISA remedy." Montefiore , 642 F.3d at 327 (citation omitted).

In Aetna Health Inc. v. Davila, the Supreme Court established a two-pronged test to determine whether a state-law claim is completely preempted by ERISA § 502(a)(1)(B) (the " Davila " test). 542 U.S. at 209-10, 124 S.Ct. 2488 ; see Wurtz v. Rawlings Co. , 761 F.3d 232, 242 (2d Cir. 2014). The Davila test is conjunctive—a state-law claim is completely preempted by ERISA only if both prongs of the test are satisfied. Montefiore , 642 F.3d at 328. Under the first prong, the claim must be brought by "an individual [who], at some point in time, could have brought his claim under ERISA § 502(a)(1)(B)." Davila , 542 at 210, 124 S.Ct. 2488. In making this determination, we consider: (1) whether the plaintiff is the type of party that can bring a claim pursuant to § 502(a)(1)(B) and also (2) whether the actual claim that the plaintiff asserts can be construed as a colorable claim for benefits pursuant to § 502(a)(1)(B). Montefiore, 642 F.3d at 328. Under the second prong of the Davila test, the claim must involve "no other independent legal duty that is implicated by a defendant's actions." Davila, 542 U.S. at 210, 124 S.Ct. 2488.

DISCUSSION

The district court held that McCulloch's promissory-estoppel claim was completely preempted by ERISA under the Davila test. The district court found that the first prong of this test was satisfied because McCulloch was assigned the right to receive payment under the plan and because McCulloch's promissory-estoppel claim could be construed as a colorable claim for benefits pursuant to § 502(a)(1)(B). The district court further found that the second prong of the Davila test was satisfied because the Aetna representative's oral statements did not give rise to an "independent legal duty" and, instead, that any duty to reimburse McCulloch "ar[ose] out of the terms and conditions of [the patient's] plan." App'x at 243-44.

On appeal, McCulloch argues inter alia that his state-law claim is not preempted by ERISA because: (1) he did not receive a valid assignment and thus is not the "type of party" that can bring a claim pursuant to § 502(a)(1)(B) and (2) Aetna's oral statements gave rise to a duty that was distinct and independent from its obligations under the patient's health care plan. We agree.

I. Davila , Prong 1, Step 1

We first must determine whether McCulloch is "the type of party that can bring a claim...