Univ. of Wis. Hosp. & Clinics Auth. v. Sw. Catholic Health Network Corp.

• Decision Date: 28 January 2015
• Docket Number: 14-cv-780-jdp
• Parties: UNIVERSITY OF WISCONSIN HOSPITAL AND CLINICS AUTHORITY, Plaintiff, v. SOUTHWEST CATHOLIC HEALTH NETWORK CORPORATION, MYR GROUP WELFARE PLAN, and PROFESSIONAL BENEFIT ADMINISTRATORS, Defendants.
• Court: U.S. District Court — Western District of Wisconsin

UNIVERSITY OF WISCONSIN HOSPITAL AND CLINICS AUTHORITY, Plaintiff, v. SOUTHWEST CATHOLIC HEALTH NETWORK CORPORATION,MYR GROUP WELFARE PLAN, and PROFESSIONAL BENEFIT ADMINISTRATORS,¹ Defendants.

14-cv-780-jdp

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN

January 28, 2015

OPINION & ORDER

Plaintiff University of Wisconsin Hospital and Clinics Authority (UW Hospital) initially brought this action in Wisconsin state court to recover payment for medical services it rendered to one of its patients. The patient, who is not a party to this case, was a participant in a healthcare plan governed by the Employee Retirement and Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. UW Hospital submitted a claim to the plan for the full amount of the services it provided, but defendants—the plan and its administrator—determined that UW Hospital was entitled to less than half of the amount billed. UW Hospital sued to recover the unpaid balance. But rather than filing a claim under ERISA, UW Hospital's complaint stated alternative claims for breach of an implied contract, breach of a quasi-contract, unjust enrichment, and breach of the implied covenant of good faith; all state law claims. Defendants removed the case to this court under 28 U.S.C. §§ 1331 and 1441, invoking federal question jurisdiction. Defendants asserted that UW Hospital's state law claims were actually ERISA claims in disguise, and thus, this court has exclusive jurisdiction over the dispute.

Two motions are pending before the court. The first is defendants' motion to dismiss. Dkt. 5. Defendants contend that ERISA preempts UW Hospital's state law claims, and that amending the complaint would be futile because any claim under ERISA is time-barred. The second pending motion is UW Hospital's motion to remand. Dkt. 11. UW Hospital contends that, contrary to defendants' assertion, its complaint does not fall within the scope of ERISA, and so this court lacks subject matter jurisdiction. The court will deny UW Hospital's motion to remand and grant defendants' motion to dismiss.

ALLEGATIONS OF FACT

For purposes of deciding UW Hospital's motion to remand, the court draws the following facts from the complaint, defendants' notice of removal, and the supporting materials for the pending motions. See Alicea-Hernandez v. Catholic Bishop of Chi., 320 F.3d 698, 701 (7th Cir. 2003) ("The court may look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists."). The court resolves any doubts in favor of remand. Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 758 (7th Cir. 2009). For purposes of deciding defendants' motion to dismiss, the court draws facts from UW Hospital's complaint, but may also "consider documents attached to a motion to dismiss if they are referred to in the plaintiff's complaint and are central to his claim." Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687, 690 (7th Cir. 2012) (internal citations and quotation marks omitted). Any factual disputes are resolved in UW Hospital's favor. Forrest v. Universal Sav. Bank, F.A., 507 F.3d 540, 542 (7th Cir. 2007).

In 2013, UW Hospital provided medical services to one of its patients, Bruce Daws. Mr. Daws participated in, and was insured under, defendant MYR Group Welfare Plan, which is governed by ERISA and administered by defendant Professional Benefit Administrators (PBA).UW Hospital submitted a claim for $43,799.16, the total cost of the services it provided. PBA authorized payment of $17,655.92, but denied the rest of the claim, citing reductions based on Redbook's Average Wholesale Price, Physician's Fee Reference, and a formula that used the allowed amount under Medicare and certain unnamed "industry standards." Dkt. 5, ¶ 13. To date, $26,143.24 of UW Hospital's claim remains unpaid.

The plan at issue gives healthcare providers a right to administratively appeal a denial of benefits regardless of whether the plan participant has authorized them to do so, and UW Hospital appealed the denied portion of its claim using the plan's internal procedures. The appeal was unsuccessful. In a letter dated March 4, 2014, defendants informed UW Hospital of their adverse determination, and indicated that UW Hospital had 180 days to seek judicial review of the decision.

Two hundred eleven days later, on September 30, 2014, UW Hospital filed a complaint in the Wisconsin Circuit Court for Dane County. UW Hospital asserted three contract claims (in the alternative) against defendants and one claim for statutory interest. The complaint first alleged that "[t]he course of conduct between the parties gives rise to a contract implied in fact." Dkt. 1-1, ¶ 23. In the alternative, the complaint alleged that "the course of conduct, course of dealing, and communication between the parties give rise to a quasi-contract," id. ¶ 28, or that "[a] duty should be imposed on the Defendants to pay the reasonable value for the services [UW Hospital] performed on the Defendants' insured, Bruce Daws," id. ¶ 35.

Defendants timely removed the case to this court, and they have moved to dismiss UW Hospital's complaint for failure to state a claim upon which relief can be granted. Dkt. 5. UW Hospital opposed the motion and, on the same day, filed its own motion to remand this case to state court. Dkt. 11.

ANALYSIS

UW Hospital contends that remand is necessary because this case contains purely state law claims, and so the court lacks subject matter jurisdiction.² Defendants disagree, asserting that ERISA completely preempts UW Hospital's claims and provides the exclusive mechanism through which UW Hospital can seek relief. But defendants also assert that UW Hospital has waited too long to bring any claim under ERISA and that, accordingly, the case must be dismissed as time-barred. The court agrees with defendants: removal was proper and UW Hospital cannot state a claim upon which relief may be granted. Thus, UW Hospital's motion to remand will be denied, and defendants' motion to dismiss will be granted.

A. UW Hospital's motion to remand

UW Hospital's claims are completely preempted by ERISA, and removal was therefore appropriate in this case.³ ERISA's pre-emptive effect is broad, and "any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004). ERISA's "civil enforcement mechanism . . . 'converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.'" Id. (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987)). Causes of action that fall under the scope of ERISA's civilenforcement provision—as UW Hospital's claims do in this case—are therefore removable to federal court. Id.; see also Franciscan Skemp Healthcare, Inc. v. Cent. States Joint Bd. Health & Welfare Trust Fund, 538 F.3d 594, 596 (7th Cir. 2008) ("Artful pleading on the part of a plaintiff to disguise federal claims by cleverly dressing them in the clothing of state-law theories will not succeed in keeping the case in state court.").

The parties agree that a two-part test determines whether UW Hospital's claims "fall within the scope" of ERISA, and whether this court has subject matter jurisdiction. In Davila, the Supreme Court summarized the test, explaining that

if an individual brings suit complaining of a denial of coverage for medical care, where the individual is entitled to such coverage only because of the terms of an ERISA-regulated employee benefit plan, and where no legal duty (state or federal) independent of ERISA or the plan terms is violated, then the suit falls "within the scope of" ERISA § 502(a)(1)(B).

542 U.S. at 210. Under Davila, this and other district courts first examine whether a plaintiff could have brought claims under ERISA, and then, if so, whether there is an independent legal duty implicated by the defendant's actions. See, e.g., Segerberg v. Pipe Fitters' Welfare Fund, Local 597, 918 F. Supp. 2d 780, 784 (N.D. Ill. 2013); Julka v. Standard Ins. Co., No. 09-cv-534, 2010 WL 376938, at *5 (W.D. Wis. Jan. 27, 2010). Under this test, UW Hospital's claims fall within the scope of ERISA.

UW Hospital could have brought its challenge to defendants' reductions under ERISA. ERISA provides that both a plan participant and his beneficiary can bring a civil action "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." 29 U.S.C. § 1132(a). As used in the statute, "[t]he term 'beneficiary' means a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to abenefit thereunder." Id. § 1002(8). The Seventh Circuit holds that patients can assign their right to benefits to their healthcare providers, who then become "beneficiaries" for purposes of ERISA. Kennedy v. Conn. Gen. Life Ins. Co., 924 F.2d 698, 700 (7th Cir. 1991).

The parties dispute whether Mr. Daws assigned his right to benefits to UW Hospital. Compare Dkt. 17, at 2 ("UWHC does not have an assignment from the patient."), with Dkt. 14, at 7 ("The Patient assigned his benefits under the Plan to UWHC."). Regardless, UW Hospital has conducted itself as a beneficiary up until now. For example, UW Hospital administratively appealed defendants' decision using a process outlined in the plan documents. Also, defendants paid benefits directly to UW Hospital, and under the plan's terms, "[p]ayment of benefits which have been assigned will be made directly to the assignee." Dkt. 1-4, at 91 (emphasis added). In its complaint, UW Hospital even identifies itself as "a third-party beneficiary of the contract of...