Orthopaedic Surgery Assocs. v. Prudential Health, CIV A.SA00CA1529FB.

• Decision Date: 11 May 2001
• Docket Number: No. CIV A.SA00CA1529FB.,CIV A.SA00CA1529FB.
• Citation: 147 F.Supp.2d 595
• Parties: ORTHOPAEDIC SURGERY ASSOCIATES OF SAN ANTONIO, P.A., Jesse C. DeLee, M.D., John A. Evans, M.D., Peter F. Holmes, M.D., Lawrence W. Trick M.D., David R. Schmidt, M.D., Philip M. Jacobs, M.D., Paul S. Saenz, D.O., and Mark M. Casillas, M.D., Plaintiffs, v. PRUDENTIAL HEALTH CARE PLAN, INC. a/k/a Prucare of San Antonio, Defendant.
• Court: U.S. District Court — Western District of Texas

147 F.Supp.2d 595

ORTHOPAEDIC SURGERY ASSOCIATES OF SAN ANTONIO, P.A., Jesse C. DeLee, M.D., John A. Evans, M.D., Peter F. Holmes, M.D., Lawrence W. Trick M.D., David R. Schmidt, M.D., Philip M. Jacobs, M.D., Paul S. Saenz, D.O., and Mark M. Casillas, M.D., Plaintiffs, v. PRUDENTIAL HEALTH CARE PLAN, INC. a/k/a Prucare of San Antonio, Defendant.

No. CIV A.SA00CA1529FB.

United States District Court, W.D. Texas, San Antonio Division.

May 11, 2001.

COPYRIGHT MATERIAL OMITTED

S. Mark Murray, Law Offices of S. Mark Murray, Inc., San Antonio, TX, for Orthopaedic Surgery Associates of San Antonio, P.A., Jesse C. DeLee, M.D., John A. Evans, M.D., Peter F. Holmes, M.D., Lawrence W. Trick, M.D., David R. Schmidt, M.D., Philip M. Jacobs, M.D., Paul S. Saenz, D.O., Mark M. Casillas, M.D., plaintiffs.

John Bruce Shely, Andrews & Kurth, L.L.P., Houston, TX, for Prudential Health Care Plan, Inc. aka Prucare of San Antonio, defendants.

ORDER CONCERNING MOTION TO REMAND

BIERY, District Judge.

Before the Court is Plaintiff's Motion to Remand along with Defendant's Response and Plaintiff's Reply. Plaintiffs believe the case should be remanded because their claims are based entirely upon state law and are outside of any claimed benefits of an ERISA plan. Defendant maintains no matter how the claims are characterized, plaintiffs are seeking payment for services covered under the terms of ERISA plans, and therefore, the removal is proper.

According to their petition, plaintiffs entered into Speciality Care Physician Agreements with defendant Prudential, beginning in 1990, to provide services under Prudential coverage plans. Prudential agreed to pay the plaintiffs and/or their professional association, Orthopaedic Surgery Associates of San Antonio (OSASA), a specified sum of money for each of the selected services to be rendered. Although Prudential paid the plaintiffs for services rendered, Prudential did not pay the agreed upon amount and "short-changed the physicians and OSASA on most, if not all of the services that were provided, paying them less than the amount that had been agreed upon by the parties." Plaintiffs claim Prudential breached its contract with them.

Defendant asserts, in its notice of removal, that plaintiffs' claims "relate to one or more employee benefit plans" established and maintained pursuant to ERISA. Some, if not all, of the medical services which are alleged to be unpaid, "were provided to participants or beneficiaries of ERISA plans." Therefore, the claims for the amounts allegedly owed seek "benefits payable under the terms of one or more ERISA plans and relate to such plans and fall within ERISA's civil enforcement provision and are completely preempted."

In their motion to remand, plaintiffs state they are not beneficiaries, participants, employees, employers, administrators, the Secretary, or fiduciaries of any ERISA plan. Plaintiffs claim they are not seeking to recover under any plan but are seeking to recover the amount contractually promised by the defendant for services rendered to participants, beneficiaries, and/or employees of plans sold to others by the defendant. Plaintiffs maintain they are not seeking to receive benefits under the terms of an ERISA plan and their claims do not affect the relationship among the traditional ERISA entities such as plan administrator/fiduciaries and plan participants/beneficiaries. Defendant contends this distinction is one without legal significance.

In its response to the motion to remand, defendant argues the plaintiffs completely ignore the relationship between the parties and the contracts under which relief is sought, the fact the service agreements under which relief is sought only provide payment for "Covered Services," and plaintiffs previously accepted assignments of ERISA plan benefits from their patients and submitted claims to Prudential under those assignments. The challenge to the processing and payment of claims is, in fact, a derivative claim for benefits under ERISA plans and is therefore completely preempted under ERISA's civil enforcement provision and properly before this Court.

JURISDICTION OF FEDERAL COURTS

It is well settled that federal courts are courts of limited jurisdiction and unlike state courts, are not vested with "inherent" or "general" subject matter jurisdiction. Columbraria Ltd v. Pimienta, 110 F.Supp.2d 542, 545 (S.D.Tex. 2000); see Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)(federal courts are courts of limited jurisdiction; only possess power authorized by Constitution and statute); Turner v. Bank of North America, 4 U.S. (4 Dall.) 8, 1 L.Ed. 718 (1799)(federal courts are courts of limited jurisdiction; jurisdiction of state courts is general while jurisdiction of federal courts is special, "and in the nature of an exception from the general jurisdiction of the state courts"); Langley v. Jackson State Univ., 14 F.3d 1070, 1073 (5th Cir.)(federal court is court of limited jurisdiction), cert. denied, 513 U.S. 811, 115 S.Ct. 61, 130 L.Ed.2d 19 (1994). Because the limited jurisdiction of a federal court is not to be judicially expanded, the presumption is that "a cause lies outside this limited jurisdiction and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673 (citations omitted). Thus, defendant bears the burden of establishing its claims are federal in nature.

ERISA PREEMPTION

Because there is no assertion that jurisdiction is based on diversity of citizenship, removal is proper only if a federal question exists. Ordinarily, removal is not allowed unless the plaintiff's well pleaded complaint asserts causes of action under federal law which support federal question jurisdiction. Rodriguez v. Pacificare of Texas, Inc., 980 F.2d 1014, 1017 (5th Cir.), cert. denied, 508 U.S. 956, 113 S.Ct. 2456, 124 L.Ed.2d 671 (1993). Federal preemption raised as a defense to the asserted causes of action does not generally authorize removal to federal court because it "does not appear on the face of a well pleaded complaint." Id. However, an exception to the well pleaded complaint rule exists where "Congress has so `completely pre-empt[ed] a particular area that any civil complaint raising this select group of claims is necessarily federal in character.' Such a niche has been carved out by Congress for claims for benefits brought by participants and beneficiaries of ERISA-regulated employee benefit plans." Id.

As set forth in Section 514(a) of ERISA, ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." Hook v. Morrison Milling Co., 38 F.3d 776, 778-81 (5th Cir.1994). The "relate to" language is to be given a "broad yet common-sense meaning and a state law claim only relates to a benefit plan `if it has a connection with or reference to' the ERISA plan." Westbrook v. Beverly Enters., 832 F.Supp. 188, 190 (W.D.Tex.1993)(citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987)). However, despite the broad language, ERISA's preemptive scope is not without limits. Hook, 38 F.3d at 781. As set forth by the Supreme Court in Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), "[s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law `relates to' the plan." Hook, 38 F.3d at 781. This warning by the Supreme Court in Shaw concerning ERISA's limits has been explained as follows:

The Court's warning in Shaw on the limits of ERISA preemption stems from the Court's view that ERISA's scope, though comprehensive, remains subject to the traditional principle of federalism. In determining ERISA's preemptive scope, the Court has advised that we "must be guided by respect for the separate spheres of governmental authority preserved in our federalist system."

Id. (citations omitted). Although cognizant of ERISA's broad preemptive scope, the court noted that ERISA does not "reach claims that do not involve the administration of plans, even though the plan may be a party to the suit or the claim relies on the details of the plan." Id. at 784.

The Fifth Circuit has provided additional guidance concerning preemption as follows:

It is clear that ERISA preempts a state law cause of action brought by an ERISA plan participant or beneficiary alleging improper processing of a claim for plan benefits. We have also held in this circuit that ERISA preempts state law claims, based on breach of contract, fraud, or negligent misrepresentation, that have the effect of orally modifying the express terms of an ERISA plan and increasing plan benefits for participants or beneficiaries who claim to have been mislead. Although finer discernments might be made, these and similar cases binding in this circuit, which have found preemption of a plaintiff's state law causes of action, have at least two unifying characteristics: (1) the state law claims address areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claims directly affect the relationship among the traditional ERISA entities-the employer, the plan and its fiduciaries, and the participants and beneficiaries.

Memorial Hosp. Sys. v. Northbrook Life Ins., 904 F.2d 236, 245 (5th Cir.1990) (citations omitted). State law is not preempted by ERISA, however, "when the state-law claim is brought by an independent, third-party health care provider (such as a hospital) against an insurer for its negligent misrepresentation regarding the existence of health care coverage." Transitional Hosps. Corp. v. Blue Cross & Blue Shield, 164 F.3d 952, 954 (5th Cir.1999). State law claims by a hospital for "breach of fiduciary duty, negligence, equitable estoppel, breach of contract, and fraud are preempted by ...