Walker v. HEALTH BEN. MANAGEMENT COST CONTAINMENT, Civ. A. No. 4:94-CV-144-Y.

• Citation: 860 F. Supp. 1163
• Decision Date: 22 August 1994
• Docket Number: Civ. A. No. 4:94-CV-144-Y.
• Parties: Thurman WALKER and his Wife, Barbara Walker, Plaintiffs, v. HEALTH BENEFIT MANAGEMENT COST CONTAINMENT, INC. and Service Lloyds Insurance Company, Defendants.
• Court: U.S. District Court — Northern District of Texas

860 F. Supp. 1163

Thurman WALKER and his Wife, Barbara Walker, Plaintiffs, v. HEALTH BENEFIT MANAGEMENT COST CONTAINMENT, INC. and Service Lloyds Insurance Company, Defendants.

Civ. A. No. 4:94-CV-144-Y.

United States District Court, N.D. Texas, Fort Worth Division.

August 22, 1994.

John Henry Fostell, Decatur, Kennedy Gill Kraatz, Fort Worth, for plaintiffs.

Robbie Luann Malone, Dallas, Ronald Habitzreiter, Austin, Darryl Jan Silvera, E. Thomas Bishop, Dallas, for defendants.

ORDER GRANTING PLAINTIFFS' MOTION TO REMAND AND DENYING DEFENDANT'S MOTION TO STAY

MEANS, District Judge.

Pending before this Court are a Motion to Remand filed on March 25, 1994 by Thurman Walker and Barbara Walker ("Plaintiffs"), and a Motion to Stay filed on March 4, 1994 by Service Lloyds Insurance Company, ("Service Lloyds"). After carefully considering both motions, the evidence presented therewith and the responses thereto, this Court has determined that Plaintiffs' motion to remand should be and is hereby GRANTED. Because remand divests this Court of jurisdiction over this cause, Service Lloyds' motion to stay should be and is hereby DENIED.

This cause was initiated in the 271st Judicial District Court in Wise County, Texas. Plaintiffs allege that plaintiff Thurman Walker was injured within the scope of his employment with James Burke Construction Company on or about August 8, 1992, and has been receiving workers' compensation indemnity benefits from Service Lloyds, Burke Construction's workers' compensation insurance carrier. Plaintiffs allege that Service Lloyds has denied "needed medical services" requested by Mr. Walker's treating physicians. Plaintiffs allege that defendant Health Benefit Management Cost Containment, Inc. ("HBM") determined that treatment proposed by Mr. Walker's treating physicians was not medically necessary, thus leading to a denial of benefits to Plaintiffs. Against both Service Lloyds and HBM, Plaintiffs assert causes of action arising under the Texas Insurance Code and claim Defendants breached the common-law duty of good faith and fair dealing on the part of an insurer.¹ Service Lloyds, with the consent of HBM, removed the cause to this Court, claiming federal question jurisdiction exists.

Service Lloyds argues that the Employee Retirement Income Security Act of 1974, as amended 29 U.S.C. §§ 1001-1461 ("ERISA"), preempts state bad-faith claims brought against workers' compensation carriers. Because the parties in this cause are not diverse, federal question jurisdiction pursuant to 28 U.S.C. § 1331 is the only grounds for jurisdiction in this Court. Unless a federal question exists, this cause must be remanded.

Where removal is based on federal question jurisdiction, the general rule is that the plaintiff's underlying allegations (if not the complaint) must invoke the jurisdiction of the federal courts for the cause to be properly removed. See 14A Charles A. Wright et al., Federal Practice and Procedure § 3734 (1985). However, ERISA's preemptive scope has been defined so broadly as to allow removal even where the plaintiff purports to raise only state law issues. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 64-66, 107 S.Ct. 1542, 1546-48, 95 L.Ed.2d 55 (1987); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48, 107 S.Ct. 1549, 1552-53, 95 L.Ed.2d 39 (1987) (common law contract and tort claims based on non-payments of benefits under an ERISA plan "relate to" an employee benefit plan and are thus preempted although plaintiff did not plead a cause of action provided by ERISA.) ERISA preempts all state laws which relate to employee benefit plans. See 29 U.S.C. § 1144(a). However, ERISA also contains a preemption savings clause. It saves from preemption state laws regulating benefit plans which are "maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation or disability insurance laws." 29 U.S.C. § 1003(b)(3).

Determining whether Congress intends to preempt state regulation in a given field requires examination of the extent to which its legislation expressly or implicitly creates total federal occupation of that field. See Osburn v. Anchor Labs., Inc., 825 F.2d 908, 911 (5th Cir.1987), cert. denied, 485 U.S. 1009, 108 S.Ct. 1476, 99 L.Ed.2d 705 (1988). Courts determine congressional intent to preempt state law by interpreting the language of the federal statute in question. See, e.g., Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 299-300, 108 S.Ct. 1145, 1150, 99 L.Ed.2d 316 (1988). Metropolitan Life and Pilot Life show that the Supreme Court has determined that ERISA is a manifestation of expressly stated congressional intent to occupy totally the field of employee benefits and pension plans. See Metropolitan Life, 481 U.S. at 62, 107 S.Ct. at 1545-46; Pilot Life, 481 U.S. at 45-46, 107 S.Ct. at 1551-52. However, the Court has also recognized that Congress, by including § 1003(b)(3) within this broadly preemptive statute, sought to reserve to the states some degree of control over their workers' compensation and disability schemes, which are institutions of the states' own creation. See Shaw v. Delta Air Lines, 463 U.S. 85, 108, 103 S.Ct. 2890, 2905-06, 77 L.Ed.2d 490 (1983). Concerned that allowing states to regulate employee benefits plans piecemeal would subject employers to inconsistent federal and state regulation, the Shaw Court held that only entire plans, rather than parts of plans, maintained solely to comply with state laws are exempted from ERISA's preemption. See id. at 107-08, 103 S.Ct. at 2905-06. Nonetheless, Shaw does recognize that Congress intended to preserve the role of state disability laws, foreclosing the argument that ERISA completely decimates states' authority to enforce their own laws in the area of workers' compensation and disability benefits. See id. Where a coordinate state regulatory role is recognized by Congress, such recognition must be given effect; just as a court cannot find preemption without clear evidence that Congress so intended, it must also respect evidence that Congress sought to preserve a state role. California v. Federal Energy Regulatory Comm'n., 495 U.S. 490, 497, 110 S.Ct. 2024, 2028-29, 109 L.Ed.2d 474 (1990).

In Foust v. City Ins. Co., 704 F.Supp. 752, 753 (W.D.Tex.1989), Fifth Circuit Judge Gee, sitting as a district court by designation, held that ERISA's own language prohibits preemption of a bad-faith claim. The defendant in Foust argued, as does Service Lloyds here, that § 1003(b)(3)'s phrase, "solely for the purpose of complying with applicable workers' compensation laws," means that for the preemption savings clause to apply the state laws under review must create a mandatory workers' compensation scheme. Only then, the argument goes, could the employer be said to have maintained its plan solely to comply with workers' compensation laws. And, since the Texas scheme is not mandatory, no plan funded by a Texas employer could be so maintained. See id. at 753. Judge Gee disagreed with this "somewhat awkward" argument, noting that while a Texas employer need not provide workers' compensation insurance, the employer must nonetheless comply with the workers' compensation law of Texas. See id. As Judge Gee noted:

When Mr. Foust's employer decided to go into a business in Texas that required it to hire workers, Texas law confronted it with a choice: limited liability without fault to any worker injured on the job or unlimited liability only in the event of fault but with no common law defenses. Buying compensation insurance elected the first course; not doing so, the second. The choice to depart the general common-law tort system had already been made by hiring workers. That done, the employer had no choice but to comply with the law, as one who dives from an aircraft must comply with that of gravity — gently by opening his parachute, violently by doing nothing.

Id. Thus, the court concluded, whichever choice an employer makes regarding workers' compensation insurance, that choice is made solely to comply with Texas workers' compensation law. See id. at 753-54. This position is also taken in Gibbs v. Service Lloyds Ins. Co., 711 F.Supp. 874, 878 (E.D.Tex.1989), Fears v. Luedke, 739 F.Supp. 327, 328 (E.D.Tex.1990), and Olivarez v. Utica Mut. Fire Ins. Co., 710 F.Supp. 642, 643 (N.D.Tex.1989), although each of these cases was not decided solely on whether § 1003(b)(3) applied.²

Service Lloyds argues that Foust is wrongly decided, and thus it and the cases following it should not be considered persuasive. (Def.'s Resp.Mot. Remand at 11-12.) Service Lloyds argues that Judge Gee was operating under the incorrect assumption that Texas law mandates workers' compensation coverage. (Def.'s Resp. at 12.) However, as the above-quoted passage from the Foust opinion makes clear, Judge Gee was under no such mistaken belief. This Court has previously cited Foust for the proposition that while providing workers' compensation insurance is not mandatory in Texas, complying with the workers' compensation law is. See Dean v. Texas Steel Co., 837 F.Supp. 212, 214 (N.D.Tex.1993).³ When employers choose not to subscribe to workers' compensation insurance under the Texas system, however, Northern District courts have held that laws creating bad-faith claims against whatever benefit plans are maintained by the nonparticipating employers are preempted.⁴

As noted above, the Supreme Court has held that under § 1003(b)(3) a particular benefit plan would have to be "separately administered" in order to be maintained solely to comply with state workers' compensation or other disability laws. Shaw, 463 U.S. at 108, 103 S.Ct. at 2905. The Shaw court reasoned that allowing piecemeal state regulation of parts of an otherwise preempted benefits plan would frustrate the intent of ERISA, which it found was to minimize any need for interstate employers to administer their employee benefit plans...