State Va. Ex Rel. Darrell v. Mcgraw

Decision Date21 September 2010
Docket NumberCivil Action No. 2:09–1000.
PartiesState of WEST VIRGINIA ex rel. Darrell V. McGRAW, Jr., Attorney General, Plaintiffs,v.CVS PHARMACY, INC., a Rhode Island Corporation, KMart Holding Corporation, a Delaware Corporation, The Kroger Co., an Ohio Corporation, Wal–Mart Stores, Inc., a Delaware Corporation, Walgreen Co., an Illinois Corporation, and TARGET STORES, INC., a Minnesota Corporation, Defendants.
CourtU.S. District Court — Southern District of West Virginia

OPINION TEXT STARTS HERE

Brian A. Glasser, John W. Barrett, Michael L. Murphy, Bailey & Glasser, Frances A. Hughes, Office of the Attorney General, Joshua I. Barrett, Sean P. McGinley, Ditrapano Barrett & Dipiero, Charleston, WV, for Plaintiffs.Andrea K. Zollett, David B. Goroff, Robert H. Griffith, Foley & Lardner, Adam W. Wiers, Tina M. Tabacchi, Jones Day, Chicago, IL, Bryant J. Spann, Pamela C. Deem, Allen Guthrie & Thomas, Johnny M. Knisely, II, Susan C. Wittemeier, Goodwin & Goodwin, Nicholas S. Johnson, W. Henry Jernigan, Jr., Dinsmore & Shohl, Alexander Macia, Spilman Thomas & Battle, David A. Barnette, Jackson Kelly, Charleston, WV, Jill M. Wheaton, Dykema Gossett, Ann Arbor, MI, Todd Grant Gattoni, Detroit, MI, Craig S. Coleman, Wendy J. Wildung, Faegre & Benson, Minneapolis, MN, for Defendants.

MEMORANDUM OPINION AND ORDER

JOHN T. COPENHAVER, JR., District Judge.

Pending is the Attorney General's motion to remand, filed October 13, 2009.

I.

West Virginia law requires pharmacists to “substitute a less expensive equivalent generic name drug” for prescriptions for a brand name drug unless the generic drug is unsuitable for the particular patient. W. Va. Code § 30–5–12b(b). Further, West Virginia law requires that [a]ll savings in the retail price of the [generic] prescription ... be passed on to the purchaser,” and that “in no event shall such savings be less than the difference in acquisition cost of the brand name product prescribed and the acquisition cost of the substituted product.” Id. at § 30–5–12b(g).

On August 24, 2009, the Attorney General instituted this action in the Circuit Court of Boone County, alleging that defendants “routinely violate this law and do not pass on generic-drug cost-savings to purchasers as the statute requires.” (Compl. ¶ 20). The Attorney General's complaint contains three counts, discussed more fully infra: 1) violation of West Virginia's generic-drug pricing law, W. Va. Code § 30–5–12b(g); 2) violations of the West Virginia Consumer Credit and Protection Act (“WVCCPA”); and 3) impermissible collection of excess charges under West Virginia Code § 46A–7–111. ( Id. at ¶¶ 23–35). The Attorney General seeks injunctive relief, civil penalties, “disgorgement of monies obtained as a result of the generic-drug overcharges,” and other appropriate relief. ( Id. at ¶ 1).

Defendants removed on September 10, 2009, asserting three grounds: 1) preemption under the Federal Employees Health Benefits Act (“FEHBA”), 5 U.S.C. § 8902(a) et seq.; 2) preemption and “arising under” jurisdiction based upon the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132 et seq. ; and 3) the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332(d), 1453. On October 13, 2009, the Attorney General moved to remand.

II.
A. Governing Standard

“Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Title 28 U.S.C. § 1441(a) governs federal removal jurisdiction and provides as follows:

[a]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the ... defendants ... to the district court of the United States for the district and division embracing the place where such action is pending....

28 U.S.C. § 1441(a).

The burden of establishing removal falls upon the removing party. Mulcahey v. Colum. Organic Chem. Co., 29 F.3d 148, 151 (4th Cir.1994). Our court of appeals has observed time and again that it is obliged to construe removal jurisdiction strictly:

We have noted our obligation “to construe removal jurisdiction strictly because of the ‘significant federalism concerns' implicated” by it. Maryland Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 260 (4th Cir.2005) (quoting Mulcahey, 29 F.3d at 151).... Consistent with these principles, we have recognized that state law complaints usually must stay in state court when they assert what appear to be state law claims. See, e.g., Harless v. CSX Hotels, Inc., 389 F.3d 444, 450 (4th Cir.2004); King [ v. Marriott Intern. Inc. ], 337 F.3d 421, 424 (4th Cir.2003); Darcangelo v. Verizon Communications, Inc., 292 F.3d 181, 186 (4th Cir.2002); Cook v. Georgetown Steel Corp., 770 F.2d 1272, 1274 (4th Cir.1985).

Lontz v. Tharp, 413 F.3d 435, 440 (4th Cir.2005). “Any doubts concerning the propriety of removal must be resolved in favor of retained state court jurisdiction.” Marshall v. Manville Sales, Corp., 6 F.3d 229, 232 (4th Cir.1993).

One source of federal jurisdiction is 28 U.S.C. § 1331, which provides [t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” Removal is thus appropriate if the face of the complaint raises a federal question. Lontz, 413 F.3d at 439; Pinney v. Nokia, Inc., 402 F.3d 430, 442 (4th Cir.2005) (noting the well-pleaded complaint rule, namely, “that a plaintiff is the master of the claim, and he may avoid federal jurisdiction by exclusive reliance on state law in drafting his complaint.”) (internal quotation marks omitted).

Respecting ERISA and FEHBA, defendants rely for removal upon two exceptions to the well-pleaded complaint rule. First, defendants assert that FEHBA and ERISA completely preempt the Attorney General's claims. Second, defendants claim that, even if the Attorney General's claims are not completely preempted by ERISA, the Grable doctrine justifies removal because the Attorney General's complaint poses a “necessary and substantial” federal issue, a variant of arising under jurisdiction.

B. The Complete Preemption Doctrine

Under the doctrine of complete preemption, removal is appropriate if “the subject matter of a putative state law claim has been totally subsumed by federal law—such that state law cannot even treat on the subject matter.” Lontz, 413 F.3d at 439–40. When complete preemption exists, federal law provides the exclusive cause of action, and in essence “there is ... no such thing as a state-law claim.” Id. at 440 (quoting Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 11, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003)). “The doctrine of complete preemption thus prevents plaintiffs from ‘defeat[ing] removal by omitting to plead necessary federal questions.’ Id. (quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 22, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)). To prove complete preemption, “a defendant must establish that the plaintiff has a ‘discernible federal [claim] and that Congress intended [the federal claim] to be the exclusive remedy for the alleged wrong.’ Pinney, 402 F.3d at 449 (citing King, 337 F.3d at 425).

C. Federal Employee Health Benefits Act

While the sweep of this action is by no means limited to federal employees, it is noted that FEHBA, 5 U.S.C. § 8901 et seq., does create a comprehensive program of health insurance for federal employees. Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 682, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006). In section 8902, Congress authorized the Office of Personnel Management (“OPM”) to contract with insurance carriers to offer a variety of plans to federal employees. Also in section 8902, Congress included a preemption clause, which states:

The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.

5 U.S.C. § 8902(m)(1). “Thus, under § 8902(m)(1) as it now reads, state law—whether consistent or inconsistent with federal plan provisions—is displaced on matters of ‘coverage or benefits.’ Empire Healthchoice, 547 U.S. at 686, 126 S.Ct. 2121.

In Empire Healthchoice, the Supreme Court applied FEHBA's preemption provision to state-law claims made by a FEHBA insurance provider seeking reimbursement for insurance benefits that the enrollee recovered in a state-court tort action. Id. at 697–98, 126 S.Ct. 2121. Weighing the provider's argument that FEHBA's preemption provision independently conferred federal subject matter jurisdiction, the court concluded that section 8902(m)(1) “does not purport to render inoperative any and all state laws that in some way bear on federal employee-benefit plans.” Id. at 697–98, 126 S.Ct. 2121 (emphasis in original). FEHBA's preemption provision and its accompanying regulations, 5 CFR § 890.107(c), ensure that suits brought by beneficiaries for denial of benefits will land in federal court. Id. at 696, 126 S.Ct. 2121. “Had Congress found it necessary or proper to extend federal jurisdiction further, in particular, to encompass contract-derived reimbursement claims between carriers and insured workers, it would have been easy for Congress to say so.” Id.

Inasmuch as the parties failed to establish that FEHBA left “no room for any state law potentially bearing on federal employee-benefit plans in general, or carrier-reimbursement claims in particular,” the court found that complete preemption did not apply. Id. FEHBA's preemption clause is unusual inasmuch as section 8902(m)(1) provides that the terms of the FEHBA insurance plans shall preempt state law rather than giving the language of FEHBA itself preemptive...

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