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Lee Memorial Health System v. Cross

United States District Court, M.D. Florida, Fort Myers Division

March 30, 2017


          OPINION AND ORDER [1]


          This matter comes before the Court on United States Magistrate Judge Mac R. McCoy's Report and Recommendation (Doc. 33) dated February 22, 2017. Judge McCoy recommends denying Plaintiff Lee Memorial Health System's (“Lee Memorial”) Motion for Remand (Doc. 13), granting Defendants Blue Cross and Blue Shield of Florida, Inc. (“BCBSF”), and Horizon Healthcare Services, Inc. d/b/a Blue Cross Blue Shield of New Jersey, Horizon Blue Cross and Blue Shield of New Jersey (“BCBSNJ”) and Horizon BCBSNJ's Motion to Dismiss (Doc. 9), and allowing Lee Memorial leave to file an amended complaint. (Doc. 33 at 37). The parties have filed timely objections to the Report and Recommendation. (Doc. 37; Doc. 38). Defendants BCBSF and BCBSNJ have responded to Lee Memorial's objections.[2] (Doc. 40). Thus, the Report and Recommendation is ripe for review.


         The Report and Recommendation extensively covers the background of this case. For the sake of brevity, the Court will only recount the necessary facts. This case is premised upon insurance coverage. Lee Memorial operates a healthcare system that includes a hospital providing medical services and treatments to admitted patients. Defendants BCBSF and BCBSNJ are underwriters and administrators of healthcare plans that provide policyholders with healthcare benefits and coverage.

         In 1985, Lee Memorial and BCBSF entered into a Preferred Patient Care Hospital Agreement (“Agreement”) in which Lee Memorial agreed to provide healthcare services in exchange for payment by BCBSF. There are two relevant amendments to the Agreement that bear mentioning. The first is the Tenth Amendment, which provides in pertinent part, “that no person, entity, or organization other than BLUE CROSS AND BLUE SHIELD shall be held accountable or liable to HOSPITAL for any of BLUE CROSS AND BLUE SHIELD'S obligations to HOSPITAL created under this Agreement.” (Doc. 2 at ¶ 10). The second relevant amendment is the Twentieth Amendment, which provides, in pertinent part:

It is further agreed that BLUE CROSS AND BLUE SHIELD is entitled to treat individuals covered through sister Blue Cross and/or Blue Shield Plans (i.e. each Plan an independent corporation operating under a license or sub-license with the Blue Cross and Blue Shield Association) as Policyholders under this Agreement. Such individuals being treated as being covered under a PREFERRED PATIENT CARE Benefit Agreement or other benefit agreement which provides access to participating providers in either the PREFERRED PATIENT CARE network or NetworkBlue network . . . whichever is applicable. . . . Payment for covered services provided to such Policyholders shall be in accordance with Exhibit D PREFERRED PATIENT CARE if the Policyholder is entitled to access the PREFERRED PATIENT CARE network or in accordance with Exhibit D NETWORK BLUE if the Policyholder is entitled to access the NetworkBlue network.

(Doc. 2 at ¶ 10).

         Relevant to this case is Heather Picardi and her son, N.P., who was born at Lee Memorial. Picardi is a policyholder of BCBSNJ and sought treatment at Lee Memorial for complications relating to her pregnancy. There, Picardi prematurely gave birth to N.P., a covered dependent under Picardi's BCBSNJ plan. Later, BCBSNJ argued that N.P. was covered under a separate group policy agreement held by N.P.'s father. Per the Agreement's Twentieth Amendment, Lee Memorial submitted claims to BCBSF for treatment provided to Picardi and N.P. BCBSF denied and delayed payment of the claims.

         Consequently, Lee Memorial filed this suit in state court. It alleges the following seven claims:

• Count I, Declaratory Relief Under Florida Statutes, Chapter 86;
• Count II, Breach of Contract;
• Count III, Promissory/Equitable Estoppel;
• Count IV, Negligent Misrepresentation;
• Count V, Breach of Fiduciary Duty;
• Count VI, Unjust Enrichment; and
• Count VII, Breach of Implied Covenants of Good Faith and Fair Dealing Against BCBSF.

(Doc. 2). Subsequent to Lee Memorial's filing, Defendants removed this case to federal court on grounds that Lee Memorial's state law claims are preempted by the Employee Retirement Income Security Act of 1974 (“ERISA”). (Doc. 1). The Motions before the Court are Lee Memorial's Motion for Remand and Defendants' Motion to Dismiss. (Doc. 9; Doc. 13). The undersigned referred both Motions to Judge McCoy for a Report and Recommendation. As stated, Judge McCoy recommends denying Lee Memorial's Motion for Remand, granting Defendants' Motion to Dismiss, but allowing Lee Memorial leave to amend. (Doc. 33). The parties object to the recommendations. (Doc. 37; Doc. 38; Doc. 40).


         After conducting a careful and complete review of the findings and recommendations, a district judge may accept, reject, or modify the magistrate judge's report and recommendation. See28 U.S.C. § 636(b)(1); see also Williams v. Wainwright, 681 F.2d 732 (11th Cir. 1982). In the absence of specific objections, there is no requirement that a district judge review factual findings de novo, Garvey v. Vaughn, 993 F.2d 776, 779 n.9 (11th Cir. 1993), and the court may accept, reject, or modify, in whole or in part, the findings and recommendations, 28 U.S.C. § 636(b)(1)(C). The district judge reviews legal conclusions de novo, even in the absence of an objection. See Cooper-Houston v. Southern Ry. Co., 37 F.3d 603, 604 (11th Cir. 1994).


         A. Motion for Remand

         Lee Memorial moves to remand this case to state court, arguing its state law claims are not preempted by ERISA, and that this Court lacks federal question jurisdiction. (Doc. 13). And, Lee Memorial raises several objections to the Report and Recommendation's finding to deny its Motion. (Doc. 37). First, it avers it lacks standing to assert an ERISA claim. (Doc. 37 at 12). In support, Lee Memorial insists that it is a third party healthcare provider and not as an assignee of a health plan beneficiary. (Doc. 37 at 12). Next, Lee Memorial asserts its claims are independent of any ERISA healthcare plan. (Doc. 37 at 19-20). As a final measure, Lee Memorial argues lack of jurisdiction and renews its request for remand. (Doc. 37 at 24).

         The burden of establishing subject matter jurisdiction falls on the party attempting to invoke the jurisdiction of the federal court. McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936); see also Rocky Mountain Holdings, LLC v. Blue Cross & Blue Shield of Fla., Inc., No. 608-CV-686- ORL-19KRS, 2008 WL 3833236, at *1 (M.D. Fla. Aug. 13, 2008). The party seeking removal has “the burden of producing facts supporting the existence of federal subject matter jurisdiction by a preponderance of the evidence.” Hobbs v. Blue Cross Blue Shield of Ala., 276 F.3d 1236, 1242 (11th Cir. 2001). District courts should strictly construe the removal requirements of 28 U.S.C. § 1441 and remand all cases in which jurisdiction falls outside of the parameters of the statute. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109 (1941); Rocky Mountain Holdings, 2008 WL 3833236, at *1. Removal to federal court is proper in “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” 28 U.S.C. § 1441(a). To establish original jurisdiction, an action must satisfy the requirements of federal question jurisdiction under 28 U.S.C. § 1331.

         Generally, the test to determine if federal question jurisdiction exists is whether a federal question appears on the face of the well-pleaded complaint. See Gables, Inc. v. Blue Cross & Blue Shield of Fla., Inc., 813 F.3d 1333, 1337 (11th Cir. 2015), cert. denied, 137 S.Ct. 296 (2016); Ervast v. Flexible Prods. Co., 346 F.3d 1007, 1012 (11th Cir. 2003). But, there is a relevant exception to the well-pleaded rule. The Eleventh Circuit has “recognized that ‘[c]omplete preemption is a narrow exception to the well-pleaded complaint rule and exists where the preemptive force of a federal statute is so extraordinary that it converts an ordinary state law claim into a statutory federal claim.'” Gables, 813 F.3d at 1337 (quoting Conn. State Dental Ass'n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1343 (11th Cir. 2009)).

         When considering a motion to remand, the court may consider the evidence in and outside the petition for removal and motion to remand. See May v. Lakeland Reg'l Med. Ctr., No. 809-CV-406-T-33AEP, 2010 WL 376088, at *3 (M.D. Fla. Jan. 25, 2010) (citing Sierminski v. Transouth Fin. Corp., 216 F.3d 945, 949 (11th Cir. 2000)). The evidence considered must be judged at the time of removal and must support the grounds for removal found in the Notice of Removal. Id. It bears noting that “[t]he removing party bears the burden of demonstrating complete preemption and, where jurisdiction is not absolutely clear, the Eleventh Circuit favors remand.” Sheridan Healthcorp, Inc. v. Aetna Health Inc., 161 F.Supp.3d 1238, 1244 (S.D. Fla. 2016).

         Against this backdrop, the Court will address Lee Memorial's objections to the Report and Recommendation's finding to deny its Motion for Remand.

         1. Standing

         Lee Memorial's first objection is that it lacks standing to bring any ERISA claim because it is a third party healthcare provider and not an assignee of a health plan beneficiary. (Doc. 37 at 12). Lee Memorial makes this argument per the test set forth in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004).In response to Lee Memorial's objection, Defendants assert that Lee Memorial has standing to present a colorable claim under ERISA.[3] (Doc. 40 at 9-10).

         A plan participant or a beneficiary under a health plan has a private right of action to recover benefits under a health insurance plan pursuant to § 502(a) of ERISA. Gables, 813 F.3d at 1337. That section 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.

29 U.S.C. § 1132(a)(1)(B); Davila, 542 U.S. at 210. “This provision is straightforward. If a participant or beneficiary believes that benefits promised to him under the terms of the plan are not provided, he can bring suit seeking provision of those benefits. A participant or beneficiary can also bring suit generically to ‘enforce his rights' under the plan, or to clarify any of his rights to future benefits.” Davila, 542 U.S. at 210. Section 502(a) “has such extraordinary preemptive power that it converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.” Gables, 813 F.3d at 1337 (internal quotes omitted).

         To determine whether causes of action fall under § 502(a), courts apply the two-part test established in Davila. See Gables, 813 F.3d at 1337. Under this test, a court must ask: “‘(1) whether the plaintiff could have brought its claim under § 502(a); and (2) whether no other legal duty supports the plaintiff's claim.'” Id.(quoting Conn. State Dental, 591 F.3d at 1345). If the answer to both questions is yes, the claim is preempted. See id.

         To bring a claim under ERISA, a plaintiff must have statutory standing, “meaning the plaintiff has the right to make a claim under section 502(a).” See Gables, 813 F.3d at 1338. Only two categories of individuals may bring suit under ERISA- plan participants and beneficiaries. Id. (citing 29 U.S.C. § 1132(a)(1)(B)). Healthcare providers generally are neither plan participants nor beneficiaries. Consequently, they lack independent standing to sue under ERISA. Id.But, there is an exception:

a healthcare provider may acquire derivative standing to sue under ERISA by obtaining a written assignment from a participant or beneficiary of his right to payment of medical benefits ..... [N]othing in ERISA prohibits a healthcare provider from acquiring derivative standing based upon an assignment of rights from a participant or beneficiary ..... We recognized that the interests of ERISA plan participants and beneficiaries are better served by allowing provider-assignees to sue ...

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