NANCY F. ATLAS, District Judge.
This case is before the Court on the Motion to Remand (the "Motion") [Doc. # 7] filed by Plaintiff Texas Oral and Facial Surgery, PA ("TXOS" or "Plaintiff"), to which Defendants United Healthcare Dental, Inc. ("United") and Shell Oil Company ("Shell") filed a Response [Doc. # 11].
Plaintiff TXOS offers oral surgery services to patients in Texas, including to Shell employees who enjoy insurance benefits pursuant to an ERISA-governed benefit plan (the "Plan"). According to Plaintiff TXOS, United provides dental insurance to Shell employees covered by the Plan. Plaintiff alleges that Shell represented in writing to both its employees and third-party medical providers such as itself that "any cutting procedure done in a dental office setting is 100% covered" under the Plan. Fourth Amended Petition [Doc. # 6], p. 2. TXOS also asserts that United separately represented to it orally during the insurance preapproval process for Shell employees that any "cutting procedure" would be 100% covered. Id. TXOS alleges that it performed dental surgery for many Shell employees for whom Defendant United subsequently denied total coverage.
Plaintiff filed this lawsuit in Texas state court in early-June 2017 alleging that Shell negligently misrepresented the insurance coverage it provides its employees, and that United's false representation that it would provide 100% coverage for the services TXOS had preapproved for Shell employees constituted fraud and breach of contract. Defendants unsuccessfully attempted to remove Plaintiff's First Amended Petition to federal court on the grounds that Plaintiff's claims were preempted by ERISA (the "Initial Removal").
Following remand, the parties engaged in discovery. During the discovery process, it was established that at least some of the Shell employees that received treatment from Plaintiff TXOS had assigned their benefits under the Plan to Plaintiff. Plaintiff also amended its petition two additional times. In its state court Third Amended Petition filed November 27, 2017, Plaintiff not only continued to assert the same negligent misrepresentation claim against Shell and fraud and breach of contract claims against United that had been the subject of the Initial Removal, but also included a fourth claim for "statutory violations." In the new claim, Plaintiff alleged numerous violations of the Texas Administrative Code, Texas Insurance Code, and Texas Business and Commerce Code (the "Statutory Claims").
On March 26, 2018, Defendants filed a timely Notice of Removal [Doc. # 1]. Defendants assert in the Notice of Removal that at least one of Plaintiff's state law claims is subject to "complete preemption" under Davila, and thus the Court has subject matter jurisdiction over this dispute. In response, Plaintiff filed the pending Motion and also moved for leave to file a Fourth Amended Petition.
The Court concludes that none of Plaintiff's state law claims in the Fourth Amended Petition are subject to "complete preemption" under Davila, and subject matter jurisdiction is lacking as a result. This case accordingly must be remanded to Texas state court.
Federal jurisdiction is limited. The party invoking this Court's removal jurisdiction bears the burden of establishing federal jurisdiction. See Manguno v. Prudential Property and Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); Miller v. Diamond Shamrock Co., 275 F.3d 414, 417 (5th Cir. 2001); Frank v. Bear Stearns & Co., 128 F.3d 919, 921-22 (5th Cir. 1997) (citation omitted). The removal statute "is subject to strict construction because a defendant's use of that statute deprives a state court of a case properly before it and thereby implicates important federalism concerns." Frank, 128 F.3d at 922; Manguno, 276 F.3d at 723. In evaluating the propriety of removal, this Court must evaluate all factual allegations in the light most favorable to Plaintiff, must resolve all contested issues of fact in favor of Plaintiff, and must resolve all ambiguities of controlling state law in favor of Plaintiff. See Burden v. General Dynamics Corp., 60 F.3d 213, 216 (5th Cir. 1995) (citations omitted).
Removal is proper if the federal district court has original jurisdiction over an action brought in state court. See 28 U.S.C. § 1441(a). In order to determine whether a case was properly removed to federal court on the basis of federal question jurisdiction, a court must normally examine the plaintiff's claims under the well-pleaded complaint rule. Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 475 (1998). Under the well-pleaded complaint rule, "a defendant may not [generally] remove a case to federal court unless the plaintiff's complaint establishes that the case `arises under' federal law." Aetna Health Inc. v. Davila Davila, 542 U.S. 200, 207 (2004) (quoting Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 10 (emphasis in Davila)). "The existence of a federal defense normally does not create statutory `arising under' jurisdiction." Id. Thus, "federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Rivet, 522 U.S. at 475. Even if the factual predicate underlying a plaintiff's complaint could have served as the basis for a federal claim, the plaintiff has the prerogative to forgo the federal claim and assert only state law claims in order to prevent removal. The well-pleaded complaint rule makes the plaintiff the master of the claim; the plaintiff may avoid federal jurisdiction by exclusive reliance on state law. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987).
In certain areas of the law, however, a federal statute may wholly displace and therefore completely preempt a plaintiff's state law claim, rendering an action removable despite the plaintiff's efforts to keep the action in state court. See Davila, 542 U.S. at 208. Under the complete preemption doctrine, Congress may so completely preempt a particular field that any complaint raising claims in that field is necessarily federal in nature. Rivet, 522 U.S. at 475 ("Once an area of state law has been completely pre-empted, any claim purportedly based on that preempted state-law claim is considered, from its inception, a federal claim, and therefore arises under federal law.").
Section 502(a) of ERISA, 29 U.S.C. § 1132(a), is one such statute:
Davila, 542 U.S. at 209 (citations omitted) (holding that state law claims brought by beneficiaries and participants in ERISA-regulated employee benefit plans for failure to exercise ordinary care in handling coverage for medical treatments were completely preempted). In Davila, the Supreme Court stated the test for complete preemption of claims under § 502 of ERISA:
Id. at 210 (citation omitted).
Accordingly, under the Davila analysis, this case is removable only if: (1) Plaintiffs TXOS could have brought any of its state-law claims under ERISA § 502, and (2) no other independent legal duty supports the claim(s). Id.; Lone Star OB/GYN Assocs. v. Aetna Health Inc., 579 F.3d 525, 530 (5th Cir. 2009).
The first question under Davila's complete preemption test is whether Plaintiff is an "individual bring[ing] 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," or "an individual [who] at some point in time, could have brought his claim under ERISA § 502(a)(1)(B)." Davila, 542 U.S. at 210. The Fifth Circuit has held that a third-party medical provider has standing to sue under § 502(a) as an assignee of a participant or beneficiary in order to claim plan benefits. See N. Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, 781 F.3d 182, 195 (5th Cir. 2015) ("It is well established that a healthcare provider, though not a statutorily designated ERISA beneficiary, may obtain standing to sue derivatively to enforce an ERISA plan beneficiary's claim.") (quoting Harris Methodist Fort Worth v. Sales Support Servs., Inc. Employee Health Care Plan, 426 F.3d 330, 333-34 (5th Cir. 2005)). It is undisputed that Plaintiff received an assignment of benefits from at least some of the Shell employees it treated as to whom United denied 100% coverage. However, the parties disagree whether Plaintiff's receipt of benefit assignments, in of itself, is sufficient to satisfy Davila's first prong. It is not necessary to decide this issue. For the reasons stated in section III.B infra, the Court concludes that none of Plaintiff's state law claims satisfy Davila's second prong. Accordingly, the Court assumes, without deciding, that Plaintiff's status as an assignee of Shell's employee's benefits under the Plan suffices for purposes of Davila's first prong and turns to analysis of Plaintiff's claims under Davila's second prong.
The second question in the Davila complete preemption analysis is whether, for purposes of determining the Court's subject matter jurisdiction, Defendants' actions implicate a legal duty that is entirely independent of ERISA. McAteer v. Silverleaf Resorts, Inc., 514 F.3d 411, 418 (5th Cir. 2008); Innova Hosp. San Antonio, L.P. v. Humana Ins. Co., 25 F.Supp.3d 951, 961 (W.D. Tex. 2014). This question asks whether a plaintiff is in fact suing under obligations created by the ERISA plan itself, or under obligations independent of the plan and the plan member. The overarching "crucial question" for a complete preemption analysis "is whether [a plaintiff is] in fact seeking benefits under the terms of the plan, or rights that derive from" an independent source, such as separate contract. Lone Star OB/GYN Associates, 579 F.3d at 529 n.3. A legal duty is not independent of ERISA if it "derives entirely from the particular rights and obligations established by [ERISA] benefit plans." Davila, 542 U.S. at 210; accord Ambulatory Infusion Therapy Specialists, Inc. v. Aetna Life Ins. Co., 2006 WL 1663752, at *7 (S.D. Tex. June 13, 2006). The Court evaluates seriatim Plaintiff's state law claims for negligent misrepresentation against Shell, and breach of contract and fraud against United, under Davila's second prong.
Plaintiff's first cause of action is a claim for negligent misrepresentation against Shell. The basis for this claim is Shell's alleged distribution of "dental insurance literature" to Plaintiff TXOS, which represented that "any cutting procedure done in a dentist's office would be 100% covered." Defendants assert, and Plaintiff does not appear to dispute, that the "dental insurance literature" in question is the Plan itself or a summary or a description of its terms. Defendants contend that Plaintiff's negligent misrepresentation claim therefore depends on the Plan's terms and does not implicate an independent legal duty. The Court disagrees.
The Fifth Circuit has not applied Davila's complete preemption test to state law claims for negligent misrepresentation. In analyzing the applicability of the affirmative defense of conflict preemption under ERISA § 514, however, the Fifth Circuit has rejected the argument that a cause of action is preempted merely because it is "based on misrepresentations regarding the extent of coverage under an ERISA plan or the manner of processing and disposing of the claim for payment by the ERISA plan."
As pleaded, Plaintiff's negligent misrepresentation claim,
Plaintiff next asserts a claim for breach of contract against United. On its face, Plaintiff's breach of contract claim does not assert rights under, or seek enforcement of, the Plan. Indeed, the claim is premised on the allegations that when Plaintiff's employees called United to preapprove treatment for Shell employees, United "formed a valid contract with Plaintiff when they pre-approved the cutting procedures at 100% coverage."
In support of their argument that Plaintiff's breach of contract claim does not implicate a legal duty independent of ERISA, Defendants cite Spring, E.R., LLC v. Aetna Life Insurance Company ("Spring"),
In Spring, plaintiff health care provider Spring E.R. ("Spring") delivered emergency medical services to patients who presented insurance cards issued by defendant Aetna Life Insurance Company ("Aetna"). The insurance cards bore "express reference to the coverage terms and exclusions" of benefit plans governed by ERISA.
Spring is inapposite here.
Defendants' reliance on Paragon Office similarly lacks persuasive force. In Paragon Office, the district court held completely preempted the plaintiff medical providers' asserted implied contract claim against a group of insurers. The defendant insurers failed to pay the medical providers for anesthesia services rendered to the insureds. The implied contract claim in Paragon Office was not based on insurance cards that patients presented to the providers; instead, the claim derived from "the parties' agreements and course of dealing."
Paragon Office is not controlling here. The facts of Paragon Office differ fundamentally from the allegations at bar with respect to the critical issue of the basis for the alleged contract in issue. The purported contract between Plaintiff and United in this case is based on United's alleged explicit promise during the preauthorization process to cover 100% of the costs of the services Plaintiff provided to United's insureds. There is no reference to an ERISA-governed plan or contract. The plaintiffs in Paragon Office made no comparable allegations. Instead, those providers relied on their course of dealing with the defendant insurers, which course of dealing, based on the record before the court in that case, clearly involved the assertion of rights and payment of claims pursuant to the terms of ERISA-governed benefit plans.
For similar reasons, the Court also concludes that AITS is inapplicable to this case. Like Spring and Paragon Office, AITS involved claims by a plaintiff medical service provider against a defendant insurer for failing to pay for services that the plaintiff had provided to the defendant's insured. The defendant refused payment "on the grounds that the charges were duplicative or exceeded the reasonable and customary fees for such services."
Unlike the plaintiff in AITS, Plaintiff here has articulated clearly the basis of its breach of contract claim and that basis is independent of, and does not derive from, any ERISA-governed benefit plan. Also unlike the AITS case, resolving the merits of Plaintiff's breach of contract claim, i.e., determining if United agreed to cover 100% of the cost of the procedures TXOS preapproved regardless of the terms of the Plan, will not require the Court to analyze or rely on the terms of the Plan. Given these material distinctions, the court's reasoning in AITS holds little weight when applied to the facts of this case.
In sum, Plaintiff's breach of contract claim against United is based on a representation that is independent of the Plan. While the views of the wellrespected jurists Defendants cite in arguing that such a claim is completely preempted under Davila are informative, they are not binding and, in any event, the circumstances alleged in those matters are materially distinguishable from those at bar. The courts' conclusions in Spring, Paragon Office, and AITS are thus not dispositive in this case. Plaintiff's breach of contract claim implicates a duty United owes to TXOS that is independent of ERISA. Accordingly, this claim does not satisfy Davila's second prong and is not subject to complete preemption.
Plaintiff TXOS's final claim is for fraud against United on the grounds that United knowingly and falsely representing to TXOS that "any cutting procedure done in a dental office setting would be 100% covered." As with each of Plaintiff's other two claims, Defendants argue that this claim is subject to complete preemption because it necessarily requires review of the Plan and, thus, does not implicate a duty independent of ERISA. This argument lacks merit. Plaintiff's fraud claim, like its breach of contract claim, bears only a tangential connection to the terms of the Plan. The claim is based on the allegation that United made the unqualified representation that it would cover 100% of the costs of certain cutting procedures. The level of coverage actually afforded by the Plan is irrelevant; the merits of Plaintiff's fraud claim will turn solely on whether United made the false representation to TXOS that it would cover 100% of certain cutting procedures and whether United knew that representation was false. Said differently, the merits of Plaintiff's fraud claim do not implicate any duties United might have to TXOS under ERISA or the Plan.
Based on the foregoing, each of the three claims Plaintiff asserts in its operative pleading, negligent misrepresentation, breach of contract, and fraud, implicate duties Defendants owed Plaintiff TXOS independent from ERISA. As a result, none of Plaintiff's live claims satisfy Davila's second prong or are subject to complete preemption. The Court accordingly lacks subject matter jurisdiction over any of Plaintiff TXOS's state law claims. It is therefore
The Court will issue a separate Remand Order.