Totten v. Hill

• Decision Date: 13 August 2007
• Docket Number: No. A114467.,A114467.
• Citation: Totten v. Hill, 64 Cal. Rptr. 3d 357, 154 Cal.App.4th 40 (Cal. App. 2007)
• Court: California Court of Appeals
• Parties: Larry TOTTEN et al. Plaintiffs and Appellants, v. Jeanne L. HILL, Defendant and Respondent.

64 Cal.Rptr.3d 357

154 Cal.App.4th 40

Larry TOTTEN et al. Plaintiffs and Appellants, v. Jeanne L. HILL, Defendant and Respondent.

No. A114467.

Court of Appeal, First District, Division 5.

August 13, 2007.

Stanton, Kay & Watson and Anne M. Bevington, San Francisco, for Plaintiffs and Appellants.

Halkides, Morgan & Kelley and John P. Kelley, Redding, for Defendant and Respondent.

SIMONS, J.

The Laborers Health and Welfare Trust Fund for Northern California (Trust Fund)¹ is an employee health and welfare benefit plan (Plan) subject to the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.) (ERISA). In 2003, it paid out $167,767 in benefits for medical expenses incurred by one of its participants, defendant and respondent Jeanne Hill (Hill), who had suffered a punctured bowel during surgery. In 2004, Hill received a $230,000 settlement in the medical malpractice lawsuit she filed against her doctor for his alleged negligence. Upon learning of the settlement, the Trustees attempted to obtain reimbursement for the medical expenses paid by the Trust Fund pursuant to the terms of the Plan, but Hill refused. The Trustees then filed a breach of contract claim in state court alleging Hill's failure to abide by the terms of the Plan. The trial court granted summary judgment in favor of Hill, and the Trustees appeal.

Preliminarily, we must decide whether the trial court had subject matter jurisdiction to hear this claim. This, in turn, requires us to determine whether an ERISA fiduciary may sue in either state or federal court for reimbursement of benefits paid to a plan participant or beneficiary who recovers personal injury damages from a third-party tortfeasor. We conclude the Trustees had a federal ERISA claim for reimbursement over which the federal courts exercise exclusive subject matter jurisdiction. Further, state courts not only lack concurrent jurisdiction over ERISA claims for reimbursement, but their jurisdiction over state law claims is displaced by ERISA. As a consequence, we order the judgment vacated and the complaint dismissed.

BACKGROUND

In December 2003, Hill filed a medical malpractice lawsuit in Shasta County Superior Court alleging that her doctor had negligently performed surgery on her on December 10, 2002. In December 2004, Hill settled this claim for $230,000, a figure that represented compensation for pain and suffering and lost wages.²

At the time of the alleged malpractice, Hill was a nurse at Mercy Medical Center in Redding. Her labor union had contracted with the Trust Fund to provide health and welfare benefits to the employees of Mercy Medical Center, and Hill was a participant in the Plan. Hill claimed $397,626.07 in medical bills related to the malpractice, and the Trust Fund paid $167,767.00 in benefits.³ The Plan is self-funded and does not provide benefits through insurance. Under its terms, when benefits are paid due to an illness, injury, or other condition for which a third party is responsible, the Trust Fund has an automatic lien on any recovery the participant receives for benefits paid by the Trust Fund as a result of such illness, injury, or condition.⁴

Upon learning of Hill's medical malpractice claim, the Trustees sent Hill a request to sign a reimbursement agreement, Hill did not return this agreement and did not reimburse the Trust Fund for the amounts paid on her behalf.

On March 7, 2005, the Trustees filed an action against Hill in San Francisco Superior Court for breach of contract. Hill demurred to the complaint on the ground that the Trustees' action was preempted by ERISA and subject matter jurisdiction was exclusive in federal court. The Trustees argued the case was not related to ERISA and, therefore, it could proceed in state court and under state law. The trial court overruled Hill's demurrer, finding the cause of action did not relate to the Plan and the state court had subject matter jurisdiction.

Hill then filed a motion for summary judgment and argued that Civil Code section 3333.1 of the Medical Injury Compensation Reform Act of 1975 (MICRA) applied to her malpractice settlement and precluded the Trustees' action seeking reimbursement from Hill's settlement proceeds.⁵ The Trustees took the position that MICRA was preempted by ERISA, and thus the claim was not barred. The Trustees moved for judgment on the pleadings as to Hill's affirmative defenses based on lack of state court subject matter jurisdiction and MICRA. The trial court reaffirmed its previous jurisdictional finding and granted the Trustees' motion as to Hill's affirmative defense contesting the court's subject matter jurisdiction. In addition, the trial court concluded that because the Trustees' breach of contract cause of action did not "relate to" ERISA, ERISA could not be used to defeat Hill's MICRA defense. The court granted Hill's motion for summary judgment, and entered judgment in favor of Hill. The Trustees now appeal from that judgment.

Discussion

I. Hill May Raise the Issue of Subject Matter Jurisdiction

In the proceedings below, Hill demurred to the Trustees' complaint on the ground that the Trustees' breach of contract cause of action was preempted by ERISA, and the state court had no subject matter jurisdiction. The trial court overruled Hill's demurrer, but subsequently granted Hill's motion for summary judgment and entered judgment in favor of Hill.

In their opening brief, the Trustees challenge the grant of summary judgment and the entry of judgment in favor of Hill. In her opposition brief, Hill first asserts a lack of subject matter jurisdiction and then addresses the substance of the Trustees' argument regarding summary judgment. In their reply, the Trustees argue the jurisdictional claim was procedurally barred because, as a nonappealing respondent, Hill cannot raise claims of error except to show any error claimed by the Trustees was harmless. We conclude subject matter jurisdiction may properly be challenged.

"Lack of jurisdiction in its most fundamental or strict sense means an entire absence of power to hear or determine the case, an absence of authority over the subject matter or the parties. [Citation.]" (Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 288, 109 P.2d 942.) "The adequacy of the court's subject matter jurisdiction must be addressed whenever that issue comes to the court's attention." (Keiffer v. Bechtel Corp. (1998) 65 Cal.App.4th 893, 896, 76 Cal.Rptr.2d 827.)

Chromy v. Lawrance (1991) 233 Cal.App.3d 1521, 285 Cal.Rptr. 400 is instructive. In Chromy, the defendants filed a demurrer challenging the court's subject matter jurisdiction, which the trial court overruled. The defendants did not seek relief by way of a writ, and a jury trial followed, resulting in a defense verdict. The plaintiff appealed and challenged the verdict on several grounds, but neither party discussed subject matter jurisdiction on appeal. (Id. at p. 1524, 285 Cal.Rptr. 400.) The Court of Appeal raised the issue sua sponte, found a lack of subject matter jurisdiction, vacated the judgment and ordered the trial court to dismiss the action. As the court explained "`[w]here a court is wholly lacking in jurisdiction of the subject matter of an action, jurisdiction may not be conferred by consent, waiver, agreement, acquiescence or estoppel.'" (Id. at p. 1524, 285 Cal.Rptr. 400.) We agree with that analysis and conclude Hill may raise her jurisdictional challenge.

II. ERISA Provides for Exclusive Federal Jurisdiction over the Trustees' Federal Claims

Section 1132 of title 29 of the United States Code⁶ provides for methods of civil enforcement under ERISA. Section 1132(a)(1)(B) provides "A civil action may be brought—[¶] (1) by a participant or beneficiary—[¶] ... [¶] (B) 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." Section 1132(a)(3) provides that a civil action may be brought "by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan."

Section 1132(e)(1) provides for jurisdiction: "Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, fiduciary, or any person referred to in section 1021(f)(1).... State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under paragraphs (1)(B) and (7) of subsection (a) of this section."

Pursuant to these provisions, the Trustees, as fiduciaries of the Plan, could have sought relief under section 1132(a)(3) in federal court for reimbursement of Hill's medical expenses paid for by the Plan. (Jefferson-Pilot Life Ins. Co. v. Krafka (1996) 50 Cal.App.4th 190, 195, 57 Cal. Rptr.2d 723 (Krafka).) The Trustees rely on Providence Health Plan v. McDowell (9th Cir.2004) 385 F.3d 1168 (McDowell) to argue Krafka was wrongly decided and section 1132(a)(3) does not provide the Plan a cause of action in federal court. In McDowell, as here, a health plan sued in state court for reimbursement of benefits paid. The Ninth Circuit found this breach of contract cause of action for reimbursement was not removable to federal court because it did not fall within ERISA's civil enforcement scheme. "As a fiduciary to the plan Providence's only vehicle for relief in addressing violations or seeking enforcement of a plan is [section] 1132(a)(3). However, that section allows a fiduciary to seek only equitable relief for violation of the plan. Here, Providence is seeking ordinary...