Rievley v. Blue Cross Blue Shield of Tennessee

• Decision Date: 29 September 1999
• Docket Number: No. 1:99-CV-147.,1:99-CV-147.
• Citation: 69 F.Supp.2d 1028
• Parties: Virginia RIEVLEY, by next friend, Earl Rievley, Plaintiff, v. BLUE CROSS BLUE SHIELD OF TENNESSEE; and PCS Health Systems, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

69 F.Supp.2d 1028

Virginia RIEVLEY, by next friend, Earl Rievley, Plaintiff, v. BLUE CROSS BLUE SHIELD OF TENNESSEE; and PCS Health Systems, Inc., Defendants.

No. 1:99-CV-147.

United States District Court, E.D. Tennessee, at Chattanooga.

September 29, 1999.

COPYRIGHT MATERIAL OMITTED

Anita B. Hardeman, Thomas J. Wybenga, Burnette, Dobson & Hardeman, Chattanooga, TN, for Plaintiff.

Joseph R. White, Spears, Moore, Rebman & Williams, Chattanooga, TN, Anthony F. Shelley, Mary O. Walker, Esq., Miller & Chevalier, Washington, DC, for Defendant.

MEMORANDUM

EDGAR, Chief Judge.

This matter comes before the Court on plaintiff Virginia Rievley's ("Rievley") motion to remand (Court File No. 5). In April 1999, Rievley filed a complaint in the Chancery Court of Hamilton County, Tennessee, claiming breach of insurance contract, breach of fiduciary duty, and bad-faith denial of insurance benefits under TENN. CODE ANN. § 56-7-105 (1994). Defendants Blue Cross Blue Shield of Tennessee ("BCBS-TN") and PCS Health Systems ("PCS") removed the case to the United States District Court for the Eastern District of Tennessee (Court File No. 1). Plaintiff moves to remand the case to state court, arguing that there is no basis for federal subject matter jurisdiction.¹

The issue to be resolved is whether Rievley's state law claims stemming from the defendants' denial of insurance benefits are preempted under the Federal Employee Health Benefits Act ("FEHBA") or federal common law. Rievley asserts that the Court must remand for lack of subject matter jurisdiction because her claims for breach of contract, breach of fiduciary duty, and bad-faith benefits denial are not preempted by federal law and that the state court's jurisdiction is proper. Defendants argue that the case is properly before this federal district court because the contract and tort claims are completely preempted by or require the construction of federal law. The Court agrees with defendants, and the courts which have most recently addressed the scope of FEHBA's preemption, that the plaintiff's claims are completely preempted by federal law. Alternatively, because this case involves an area of significant federal interest and highlights an area of conflict between federal policy and state law, federal law will govern. The plaintiff's motion to remand will be DENIED.

I. Background

Congress enacted the Federal Employee Health Benefits Act ("FEHBA"), 5 U.S.C. §§ 8901-8914, in 1959 to provide health insurance coverage for federal employees and their dependents. FEHBA authorizes the Office of Personnel Management (OPM) to contract with insurance carriers to provide health care benefits and to supervise the administration of FEHBA plans. 5 U.S.C. §§ 8902-8903. Rievley and her husband, a retired employee of the United States Postal Service, participate in the Service Benefit Plan ("the Plan"), a federal health insurance plan under FEHBA. The Plan is a contract between OPM and the Blue Cross Blue Shield Association, on behalf of Blue Cross Blue Shield companies nationally. No insurance contract exists, however, between the Rievleys and Blue Cross Blue Shield. Caudill v. Blue Cross Blue Shield of North Carolina, 999 F.2d 74, 76-77 (4th Cir.1993); Hanson v. Blue Cross Blue Shield of Iowa, 953 F.Supp. 270, 272 (N.D.Iowa 1996). Instead, the Rievleys are enrollees in a federal health insurance plan underwritten by BCBS-TN and they are subject to regulations promulgated by OPM. Id.; see also 5 C.F.R. § 890.101-.104, .301-.308 (prescribing terms of FEHBA enrollment program). Defendant BCBS-TN administers the Plan in Tennessee. As authorized by the Plan, BCBS-TN subcontracted the processing of pharmaceutical claims to defendant PCS.

Rievley was diagnosed with Alzheimer's disease. Rievley's physician, Aloys T. Mangan, M.D., prescribed the drug Cognex/Aricept to treat her Alzheimer's disease. Rievley submitted the bills for Cognex/Aricept to defendants, and BCBS-TN denied payment for the drugs. Rievley then appealed the denial, submitting supplemental information concerning the medication and treatment. On July 8, 1998, Blue Cross Blue Shield affirmed the denial of coverage, and informed Rievley that she could obtain further review from OPM to determine if the denial comports with the Plan.

Rather than seeking OPM review, Rievley filed this lawsuit in state court on April 5, 1999. Rievley claims that in denying coverage for Cognex/Aricept, BCBS-TN and PCS breached their contractual duty to provide benefits to her and breached their fiduciary duty to her as their insured. Moreover, Rievley contends that defendants' denial of coverage is in bad faith, thus subjecting them to additional liability pursuant to TENN. CODE ANN. § 56-7-105. Defendants timely removed the action to federal district court pursuant to 28 U.S.C. § 1441. (Court File No. 1). Rievley thereafter filed a motion to remand to state court (Court File No. 5). In August, 1999, several months after her complaint was filed and defendants removed the case to this Court, Rievley requested that OPM review the denial of coverage. On September 2, 1999, OPM upheld the denial.

II. Complete Preemption

A case, such as this one, initially brought in state court may be removed to federal district court only where "the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). Removal is thus proper only where the state court complaint could have been brought initially in the federal district court. Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987); Ahearn v. Charter Township of Bloomfield, 100 F.3d 451, 456 (6th Cir. 1996). The defendants who removed the case and are seeking to invoke this Court's subject matter jurisdiction have the burden to establish that the instant action arises under federal law. Ahearn, 100 F.3d at 453-54; Gotlib v. Paul Revere Life Ins. Co., 26 F.Supp.2d 989, 991 (E.D.Mich. 1998); see also Alexander v. Electronic Data Systems Corp., 13 F.3d 940, 948-49 (6th Cir.1994) (defendants as removing party bear the burden to establish federal subject matter jurisdiction).

The district courts of the United States have original jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Whether a claim raised in a complaint "arises under" federal law is determined by application of the well-pleaded complaint rule. Caterpillar, 482 U.S. at 398-99, 107 S.Ct. 2425, 96 L.Ed.2d 318; Franchise Tax Board v. Laborers Vacation Trust Corp., 463 U.S. 1, 9-10, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); Her Majesty the Queen v. City of Detroit, 874 F.2d at 338-39 (6th Cir.1989). According to this rule, plaintiffs may avoid the jurisdiction of the federal courts by relying solely on state-law claims. Caterpillar, 482 U.S. at 392, 107 S.Ct. 2425; Ahearn, 100 F.3d at 456. If the plaintiff's complaint on its face does not raise a federal question, then the federal district court may not assert jurisdiction. Caterpillar, 482 U.S. at 392, 107 S.Ct. 2425; Franchise Tax Board, 463 U.S. at 10, 103 S.Ct. 2841. Even where a federal defense, including federal preemption, is available to the defendant, if it does not appear on the face of the complaint, the defendant may not remove the case. Caterpillar, 482 U.S. at 393, 107 S.Ct. 2425; Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987).

An exception to the well-pleaded complaint rule exists where federal law completely preempts state law. Metropolitan Life, 481 U.S. at 63-64, 107 S.Ct. 1542; Her Majesty the Queen, 874 F.2d at 342. Federal law is the "supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. CONST. art. VI, cl. 2. The courts of the United States have interpreted the Supremacy Clause in the Constitution to nullify the application of state law that in any way encroaches on the administration of federal law. Louisiana Pub. Serv. Comm'n v. F.C.C., 476 U.S. 355, 368-69, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986); Wellons v. Northwest Airlines, Inc., 165 F.3d 493, 497 (6th Cir.1999) (Krupansky, J., dissenting); CSX Transportation, Inc. v. City of Plymouth, Michigan, 86 F.3d 626, 627-28 (6th Cir.1996). A federal statute's preemptive effect derives from one of three sources. Gustafson v. City of Lake Angelus, 76 F.3d 778, 782 (6th Cir.1996); Larkin v. State of Michigan Dep't of Soc. Serv., 89 F.3d 285, 289 (6th Cir.1996) (citing Michigan Canners & Freezers Ass'n v. Agricultural Marketing and Bargaining Bd., 467 U.S. 461, 469, 104 S.Ct. 2518, 81 L.Ed.2d 399 (1984)). First, Congress may state a clear intent to preempt state law. Id. Second, a federal statute may impliedly preempt state law by "`occupying the field' of regulation." Gustafson, 76 F.3d at 782 (quoting Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984)). Third, federal law preempts state law where there is a conflict between the two laws, such that the state law subverts the accomplishment of Congress's goals. Id. at 782-83 (citing Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-43, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963); Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)); Larkin, 89 F.3d at 289 (citing Michigan Canners, 467 U.S. at 469, 104 S.Ct. 2518).

Preemption analysis begins with the presumption that Congress does not intend to preclude state law. Wellons, 165 F.3d at 494 (citing New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995)). This presumption is overcome by a showing of Congress's "`clear and manifest purpose'" to create a federal preemption. Id. (citing Travelers, 514 U.S. at 655, 115 S.Ct. 1671; Parise v. Delta Airlines, Inc., 141 F.3d 1463, 1465 (11th Cir.1998)). In this...