Singh v. Prudential Health Care Plan, Inc.

• Citation: 335 F.3d 278
• Decision Date: 03 July 2003
• Docket Number: No. 01-1102.,01-1102.
• Parties: Sabriyana M. Singh, Plaintiff-Appellant, v. PRUDENTIAL HEALTH CARE PLAN, INCORPORATED, t/a Prudential Insurance Companies of America, t/a Prudential Health Care Plan of the Mid-Atlantic, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 278

335 F.3d 278

Sabriyana M. Singh, Plaintiff-Appellant, v. PRUDENTIAL HEALTH CARE PLAN, INCORPORATED, t/a Prudential Insurance Companies of America, t/a Prudential Health Care Plan of the Mid-Atlantic, Defendant-Appellee.

No. 01-1102.

United States Court of Appeals, Fourth Circuit.

Argued: February 24, 2003.

Decided: July 3, 2003.

COPYRIGHT MATERIAL OMITTED

ARGUED: Frank Paul Bland, Jr., Trial Lawyers for Public Justice, Washington, D.C., for Appellant. Daly D.E. Temchine, Epstein, Becker & Green, P.C., Washington, D.C., for Appellee. ON BRIEF: Kathy C. Potter, Epstein, Becker & Green, P.C., Washington, D.C., for Appellee.

Before NIEMEYER, MICHAEL, and KING, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published opinion. Judge NIEMEYER wrote the opinion, in which Judge MICHAEL and Judge KING joined.

OPINION

NIEMEYER, Circuit Judge:

Sabriyana Singh commenced this action in State court against Prudential Health Care Plan, Inc., a health maintenance organization, seeking primarily reimbursement of monies paid to Prudential pursuant to a subrogation term in its policy that was issued as an employee benefit plan. Singh's complaint alleged that the subrogation term was illegal under the provisions of the Maryland Health Maintenance Organization Act (the "HMO Act"), Md. Code Ann., Health-Gen. II § 19-701 et seq., that have been construed by the Maryland Court of Appeals in Riemer v. Columbia Medical Plan, Inc., 358 Md. 222, 747 A.2d 677 (2000), to prohibit HMOs from pursuing subrogation with respect to their members' claims against third parties. Prudential removed the case to federal court, asserting that Singh's claims based on State law were completely preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., and then moved to dismiss Singh's complaint. Singh filed a motion to remand the case to State court. The district court denied Singh's motion to remand and granted Prudential's motion to dismiss the complaint.

Because we agree with the district court that ERISA completely preempts Singh's state-law claims, we affirm the district court's denial of Singh's motion to remand. We reverse, however, its order dismissing Singh's claims, holding that they must be taken as ERISA claims and resolved under § 502(a) of ERISA.

I

After Sabriyana Singh was involved in an automobile accident in March 1998, Prudential Health Care Plan, Inc. ("Prudential"), an HMO with whom Singh's employer contracted to provide healthcare benefits under an employee benefit plan, paid Singh $950.12 in respect to injuries sustained in the accident. Singh also made a claim against the other party to the accident, and in settlement of that claim, Allstate Insurance Company paid Singh $5,000 in February 1999. Based on a term of the employee benefit plan permitting Prudential, through subrogation, to assert members' claims against third parties for reimbursement of benefits paid, Prudential asserted a subrogation claim against the $5,000 for reimbursement of the $950.12 payment that it had earlier made to Singh, and in September 1999 Singh paid the subrogation claim.

Contending that the Prudential plan's subrogation provision was illegal under the Maryland HMO Act, Singh commenced this action in State court as a class action, alleging under State common law that Prudential was unjustly enriched and that it negligently misrepresented its right to subrogation. For relief, she sought (1) a declaratory judgment that the subrogation provision in the Prudential plan was illegal under the Maryland HMO Act, (2) an equitable award of restitution for subrogation amounts already paid by HMO members, (3) compensatory damages, and (4) an injunction directing Prudential to "cease and desist from asserting a subrogation interest in and a lien against any third-party recoveries" and prohibiting it from "increasing premiums, co-payments, or other charges to recover the losses incurred in connection with this litigation."

The Maryland HMO Act, on which Singh relied in her complaint, regulates any person or organization that provides its members with healthcare services on a "prepaid basis." See Md.Code Ann., Health-Gen. II § 19-701(f). Based on an HMO's provision of healthcare on a prepaid basis, the Maryland Court of Appeals construed the HMO Act to prohibit HMOs from "pursu[ing] its members for restitution, reimbursement, or subrogation after the members have received damages from a third-party tortfeasor." Riemer v. Columbia Medical Plan, Inc., 358 Md. 222, 747 A.2d 677, 697 (2000). Accordingly, if Maryland law were to apply, the provision of the Prudential plan that authorizes Prudential to pursue a subrogation claim with respect to benefits it provided under the plan would be illegal.

In response to the holding of Riemer, the Maryland legislature enacted, and on May 18, 2000, the governor signed, Senate Bill 903 to provide that an HMO is authorized to pursue subrogation with respect to members' recoveries from third parties. That legislation was made effective June 1, 2000, and provided that it would apply retroactively to all subrogation recoveries by HMOs since January 1, 1976. After the proceedings in this case were completed before the district court, the Maryland Court of Appeals held that the provision of Senate Bill 903 authorizing retroactive subrogation by HMOs violated the Maryland Constitution. Harvey v. Kaiser Foundation Health Plan, 370 Md. 604, 805 A.2d 1061 (Md.2002). Consequently, as Maryland law now stands, the subrogation prohibition of the HMO Act remained applicable until June 1, 2000.

In response to Singh's complaint, Prudential filed a notice of removal to federal court, pursuant to 28 U.S.C. §§ 1331 and 1441, asserting that the employee benefit plan in this case was regulated by ERISA and not by State law.

Singh filed a motion to remand to State court, arguing that her complaint arose under State law regulating insurance that was saved from preemption under ERISA's "saving clause," § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A), and that her claims did not seek impermissible alternative remedies to ERISA's enforcement provisions, § 502(a), 29 U.S.C. § 1132(a). Prudential filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), contending that Singh's complaint failed to state a claim under ERISA upon which relief could be granted. Following a hearing on the motions, the district court issued an oral ruling denying Singh's motion to remand because her claims required interpretation of the terms of an ERISA plan and were completely preempted under § 502(a) of ERISA. The district court apparently rejected Singh's argument that the State law on which her claims were based was "saved" from preemption under § 514(b)(2)(A). Because of this, the court dismissed Singh's claims, presumably because state-law claims relating to an ERISA plan that are not saved from preemption under § 514(b)(2)(A) must be dismissed. As an additional basis for its dismissal, the court noted that Senate Bill 903 was "clear on its face" in allowing retroactive subrogation by HMOs, and that plaintiff would, therefore, be unable to get any relief in any court. The court did not, of course, have the benefit of the Maryland Court of Appeals' Harvey decision holding the retroactivity provision of Senate Bill 903 unconstitutional. In view of the district court's apparent ruling that the HMO Act was not saved under § 514(b)(2)(A), the role of its commentary on the preempted State law, including Senate Bill 903, was not made clear.

From the district court's order denying remand and dismissing the complaint, Singh appealed.

II

Singh contends that her State common-law claims seek only to enforce the antisubrogation provision of the Maryland HMO Act, which she argues is a State regulation of insurance that is "saved" from ERISA's preemption under the express terms of § 514(b)(2)(A). She argues, "ERISA has no application to this state law dispute, and thus dismissal and removal were improper and the case should be remanded immediately to the state court."

Prudential contends that Singh's complaint seeks state-law remedies for claims based on the HMO Act that are preempted and subject to the exclusive remedial provisions of § 502(a) of ERISA, and therefore her claims must, under the doctrine of "complete preemption," be treated as federal claims. Therefore, according to Prudential, the action was properly removed. Prudential then argues, in the alternative and perhaps inconsistently, that Singh's claims cannot arise under the Maryland HMO Act because that Act does not create a private right of action. It asserts further that any common-law causes of action to enforce the subrogation prohibition of the HMO Act are preempted by § 514 of ERISA and thus should be dismissed.

In this appeal, we review the district court's order (1) denying Singh's motion to remand and (2) granting Prudential's motion to dismiss. To decide the remand issue, which actually involves Singh's challenge to removal jurisdiction, requires a determination of whether Singh's State common-law claims fall within the scope of ERISA's exclusive remedial scheme set forth in § 502(a), 29 U.S.C. § 1132(a), and therefore are completely preempted. As we explain herein, Singh's claims fall within the scope of § 502(a) if they are claims for benefits, entitlement to which must be determined by passing on the validity, interpretation or applicability of a term of an ERISA plan. Removal jurisdiction is only proper, then, if Singh's State common-law claims for unjust enrichment and negligent misrepresentation are, in fact, claims for benefits due under the terms of an ERISA plan. In this particular case, Singh's claims cannot be thought of as seeking enforcement of the terms of an ERISA plan unless a State law, the Maryland HMO Act, acts to define a term of the plan. Thus, our jurisdictional analysis must answer...