Noetzel v. Hawaii Medical Service Association
Filing
23
ORDER REJECTING THE MAGISTRATE JUDGE'S FINDINGS AND RECOMMENDATION TO GRANT ELIZABETH NOETZEL'S MOTION TO REMAND re 16 , 17 - Signed by JUDGE SUSAN OKI MOLLWAY on 4/27/2016. "Because HMSA has shown that Noetzel 's claim is completely preempted by ERISA § 502(a), this court rejects the Magistrate Judge's Findings & Recommendation to Grant Plaintiff Elizabeth Noetzel's Motion to Remand. Noetzel's Motion to Remand is denied." (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
ELIZABETH NOETZEL,
)
)
Plaintiff,
)
)
vs.
)
)
HAWAII MEDICAL SERVICE
)
ASSOCIATION,
)
)
Defendant.
)
)
_____________________________ )
CIVIL NO. 15-00310 SOM/KJM
ORDER REJECTING THE
MAGISTRATE JUDGE’S FINDINGS
AND RECOMMENDATION TO GRANT
ELIZABETH NOETZEL’S MOTION TO
REMAND
ORDER REJECTING THE MAGISTRATE JUDGE’S FINDINGS AND
RECOMMENDATION TO GRANT ELIZABETH NOETZEL’S MOTION TO REMAND
I.
INTRODUCTION.
Defendant Hawaii Medical Service Association objects to
the Magistrate Judge’s Findings & Recommendation (“F & R”) to
Grant Plaintiff Elizabeth Noetzel’s Motion to Remand.
Noetzel initially asked a state court to determine that
HMSA, which had paid Noetzel’s medical bills pursuant to a health
plan, was not entitled to be reimbursed from a settlement Noetzel
reached with a third-party tortfeasor.
HMSA removed the action
to federal court on the ground that Noetzel’s state court action
was “completely preempted” by § 502(a) of the Employee Retirement
Income Security Act of 1974.
The F & R, concluding that HMSA had
failed to establish that Noetzel’s claim was completely
preempted, recommended that the action be remanded.
This court rejects the F & R and denies Noetzel’s
Motion to Remand.
II.
FACTUAL BACKGROUND.
On September 2, 2010, Noetzel was in a motor vehicle
accident involving a large truck owned by Kuwayne Trucking Inc.
See ECF No. 1-2, PageID # 12.
Noetzel suffered severe head,
neck, and back injuries in the accident.
See id.
HMSA provided Noetzel with medical insurance coverage
for these injuries pursuant to its Preferred Provider Plan.
ECF No. 1, PageID # 3; ECF No. 1-2, PageID # 13.
See
The Plan is an
employee welfare benefit plan provided to Noetzel by her employer
pursuant to ERISA.
See ECF No. 1, PageID # 3.
Noetzel filed a motor vehicle tort action in Hawaii
state court against Kuwayne Trucking and the employee who was
operating the truck that struck her.
13.
See ECF No. 1-2, PageID #
The parties entered into a confidential settlement
agreement.
See id.
Upon learning of the settlement, HMSA
notified Noetzel that it intended to seek reimbursement from the
settlement for the health benefits provided to her, pursuant to
the reimbursement terms of its Plan.
See id., PageID #s 13-14.
According to the reimbursement terms in the Plan’s “Guide to
Benefits,” HMSA
shall have a right to be reimbursed for any
benefits we provide, from any recovery
received from or on behalf of any third party
or other source of recovery in connection
with the injury or illness, including, but
not limited to, proceeds from any:
Settlement, judgment, or award;
2
. . . .
We shall have a first lien on such recovery
proceeds, up to the amount of total benefits
we pay or have paid related to the injury or
illness. You must reimburse us for any
benefits paid, even if the recovery proceeds
obtained (by settlement, judgment, award,
insurance proceeds, or other payment):
Do not specifically include medical expenses;
Are stated to be for general damages only;
Are for less than the actual loss or alleged
loss suffered by you due to the injury or
illness;
Are obtained on your behalf by any person or
entity, including your estate, legal
representative, parent, or attorney;
Are without any admission of liability,
fault, or causation by the third party or
payor.
Our lien will attach to and follow such
recovery proceeds even if you distribute or
allow the proceeds to be distributed to
another person or entity. Our lien may be
filed with the court, any third party or
other source of recovery money, or any entity
or person receiving payment regarding the
illness or injury.
ECF No. 10-2, PageID # 158.
On July 2, 2015, Noetzel filed a Petition for
Determination of Validity of Claim of Lien of HMSA in state
court.
See ECF No. 1-2.
The Petition sought a determination by
the state court, pursuant to Haw. Rev. Stat. §§ 431:13-1-3(a)(10)
and 663-10, that HMSA was not entitled to reimbursement from the
settlement proceeds because HMSA’s lien “seeks reimbursement from
3
settlement funds that do not correspond to special damages
recovered in the subject settlement.”
See id., PageID # 15.
Noetzel notes that Haw. Rev. Stat. § 663-10 refers to recovery by
an insurer like HMSA of benefits paid equivalent to the special
damages in a settlement.
See id., PageID # 14.
HMSA removed the action to federal court on August 7,
2015, asserting that the court has original jurisdiction over
this matter pursuant to 28 U.S.C. § 1331, because Noetzel’s state
law claims are “completely preempted” by ERISA § 502(a), 29
U.S.C. § 1132(a).
See ECF No. 1, PageID #s 3-4.
In response, Noetzel filed a Motion to Remand on August
24, 2015, in which she argued that her state law action is not
completely preempted by ERISA, and that, therefore, the court
lacks federal subject matter jurisdiction over the matter.
See
ECF No. 6.
In the F & R, the Magistrate Judge made findings and
recommended that the Motion to Remand be granted.
16, PageID # 236.
See ECF No.
The F & R concluded that, under the two-part
test set forth by the United States Supreme Court in Aetna Health
Inc. v. Davila, 542 U.S. 200, 210 (2004), Noetzel’s action was
not completely preempted by ERISA § 502(a).
PageID #s 238-43.
See ECF No. 16,
The F & R relied on Wurtz v. Rawlings Co.,
LLC, 761 F.3d 232 (2d Cir. 2013), in holding that HMSA had failed
to meet the first prong of the Davila test, which asks whether
4
the “individual, at some point in time, could have brought the
claim under ERISA § 502(a).”
See ECF No. 16, PageID #s 241-43.
Because the F & R found this first prong dispositive, it did not
address the second Davila prong, which requires a court to
consider whether an independent legal duty is implicated by a
defendant’s actions.
See id., PageID #s 238-43.
See Davila, 542
U.S. at 210.
HMSA objects to the F & R.
III.
See ECF No. 17.
Standard of Review.
“This Court treats a motion to remand as a dispositive
motion, requiring the issuance of a findings and recommendation
by the magistrate judge.”
PSC Indus. Outsourcing, LP v.
Burlington Ins. Co., Civ. No. 10–00751 ACK–BMK, 2011 WL 1793333,
at *3 (D. Haw. May 10, 2011) (citing Keown v. Tudor Ins. Co., 621
F. Supp. 2d 1025, 1029 (D. Haw. 2008)); see also Eggs ‘N Things
Int’l Holdings Pte. Ltd. v. ENT Holdings LLC, No. CIV.
11-00626LEK-KSC, 2012 WL 665038, at *1 (D. Haw. Feb. 29, 2012).
Congress has empowered magistrate judges, upon referral
of dispositive pretrial motions by district judges, to conduct
hearings and issue findings and recommendations regarding
dispositive pretrial motions.
See 28 U.S.C. § 636(b)(1)(B); see
also Fed. R. Civ. P. 72(b) (promulgating rule).
A district judge reviews a magistrate judge’s findings
and recommendation prior to ruling on the motion, and may accept,
5
reject, or modify, in whole or in part, the findings and
recommendation made by the magistrate judge.
72(b).
Fed. R. Civ. P.
If a party timely objects to portions of the findings and
recommendation, the district judge reviews those portions of the
findings and recommendation de novo.
Local Rule 74.2.
Fed. R. Civ. P. 72(b)(3);
The district judge may consider the record
developed before the magistrate judge.
Local Rule 74.2.
The
district judge also has discretion to receive further evidence.
28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3); Local Rule 74.2;
see also United States v. Raddatz, 447 U.S. 667, 676 (1980)
(district judge has wide discretion in deciding whether to allow
new evidence).
The de novo standard requires the district court to
consider a matter anew and arrive at its own independent
conclusions, but a de novo hearing is not ordinarily required.
United States v. Remsing, 874 F.2d 614, 617 (9th Cir. 1989);
United States v. Boulware, 350 F. Supp. 2d 837, 841 (D. Haw.
2004); Local Rule 74.2.
The district judge may accept the portions of the
findings and recommendation to which the parties have not
objected as long as it is satisfied that there is no clear error
on the face of the record.
See United States v. Bright, Civ. No.
07–00311 ACK/KSC, 2009 WL 5064355, at *3 (D. Haw. Dec. 23, 2009);
Stow v. Murashige, 288 F. Supp. 2d 1122, 1127 (D. Haw. 2003);
6
Fed. R. Civ. P. 72(b) advisory committee’s note.
IV.
ANALYSIS.
A.
Complete Preemption Under ERISA § 502(a).
Noetzel seeks to have this action remanded to state
court for lack of subject matter jurisdiction.
See ECF No. 6.
Noetzel argues that this court lacks subject matter jurisdiction
because no federal question appears on the face of Noetzel’s
petition, and the petition is not completely preempted by ERISA
§ 502(a).
See id., PageID # 96.
Removal of a matter from state to federal court is
proper when the federal court has original jurisdiction; that is,
the removed claims must “aris[e] under the Constitution, laws, or
treaties of the United States.”
28 U.S.C. § 1331.
An action
“arises under” federal law when “federal law creates the cause of
action.”
Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808
(1986).
The well-pleaded complaint rule “provides that federal
jurisdiction exists only when a federal question is presented on
the face of the plaintiff’s properly pleaded complaint.”
Hunter
v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009); see
also Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).
the allegations stated on the face of a well-pleaded complaint
If
present only state law claims, removal is generally improper.
“There is an exception, however, to the well-pleaded
7
complaint rule.
‘[W]hen a federal statute wholly displaces the
state-law cause of action through complete pre-emption,’ the
state claim can be removed.”
Davila, 542 U.S. at 207; see also
Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941,
945 (9th Cir. 2009) (“Complete preemption removal is an exception
to the otherwise applicable rule that a ‘plaintiff is ordinarily
entitled to remain in state court so long as its complaint does
not, on its face, affirmatively allege a federal claim.’”
(quoting Pascack Valley Hosp. v. Local 464A UFCW Welfare
Reimbursement Plan, 388 F.3d 393, 398 (3d Cir. 2004))).
“This is
so because ‘[w]hen the federal statute completely pre-empts the
state-law cause of action, a claim which comes within the scope
of that cause of action, even if pleaded in terms of state law,
is in reality based on federal law.”
Davila, 542 U.S. at 208.
The term “complete preemption” is actually a misnomer
in the § 502(a) context.
“Complete preemption under § 502(a) is
‘really a jurisdictional rather than a preemption doctrine, [as
it] confers exclusive federal jurisdiction in certain instances
where Congress intended the scope of a federal law to be so broad
as to entirely replace any state-law claim.’”
Marin Gen. Hosp.,
581 F.3d at 945 (quoting Franciscan Skemp Healthcare, Inc. v.
Cent. States Joint Bd. Health & Welfare Trust Fund, 538 F.3d 594,
596 (7th Cir. 2008)).
ERISA § 502(a), 29 U.S.C. § 1132(a) “sets forth a
8
comprehensive civil enforcement scheme that completely preempts
state-law causes of action within the scope of these civil
enforcement provisions.”
Fossen v. Blue Cross & Blue Shield of
Montana, Inc., 660 F.3d 1102, 1107 (9th Cir. 2011) (citations,
quotation marks, brackets omitted).
ERISA § 502(a)(1) provides:
A civil action may be brought-(1) by a participant or beneficiary-(A)
for the relief provided for in
subsection (c) of this section, or
(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[.]
ERISA § 502(a)(3) further authorizes a beneficiary or
participant “(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[.]”
29 U.S.C. § 1132(a)(3).
“[A]ny 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.”
Davila, 542 U.S.
at 209 (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54-56
9
(1987)).
In Davila, the United States Supreme Court said that a
claim is completely preempted “if an individual, at some point in
time, could have brought his claim under ERISA § 502(a)(1)(B),
and where there is no other independent legal duty that is
implicated by a defendant’s actions.”
542 U.S. at 210.
The
plaintiffs in Davila had filed state tort claims against their
respective health maintenance organizations (HMOs) alleging that
they had been injured by the HMOs’ decisions to deny coverage for
treatment recommended by physicians.
See id. at 204.
The state
law invoked by the plaintiffs imposed a duty on managed care
entities to “exercise ordinary care when making health care
treatment decisions.”
See id. at 212.
The Supreme Court granted certiorari to determine
whether the plaintiffs’ causes of action were completely
preempted by the broad remedial scheme of ERISA.
See id. at 204.
Applying the first prong of its test, the Davila Court held that
the plaintiffs’ claims fell “within the scope” of ERISA
§ 502(a)(1)(B) because the plaintiffs were complaining only about
denials of coverage promised under the terms of ERISA-regulated
employee benefit plans.
See id. at 211.
Under the second prong,
the Court concluded that, in the context of the case, the duties
imposed by the state law did not arise independently of ERISA or
the plan terms.
See id. at 212-13.
10
The Court reasoned that the
HMOs’ liability “derive[d] entirely from the particular rights
and obligations established by the benefit plans,” and that the
interpretation of the plaintiffs’ benefit plans therefore formed
an essential part of their state law claim.
See id. at 213.
“Following Davila, [the Ninth Circuit has] distilled a
two-part test for determining whether a state-law claim is
completely preempted by ERISA § 502(a):
‘a state-law cause of
action is completely preempted if (1) an individual, at some
point in time, could have brought the claim under ERISA
§ 502(a)(1)(B), and (2) where there is no other independent legal
duty that is implicated by a defendant’s actions.’”
Fossen, 660
F.3d at 1107-08 (quoting Marin Gen. Hosp., 581 F.3d at 946).
“Because this ‘two-prong test . . . is in the
conjunctive[,] [a] state-law cause of action is preempted by
§ 502(a)(1)(B) only if both prongs of the test are satisfied.’”
Fossen, 660 F.3d at 1108 (quoting Marin Gen. Hosp., 581 F.3d at
947).
Although Fossen addressed § 502(a)(1)(B), the Ninth
Circuit has made it clear that the complete preemption doctrine
applies to other subparts of § 502(a) as well.
660 F.3d at 1108
(quoting Metro. Life, 481 U.S. at 66).
Furthermore, the Ninth Circuit has noted that
preemption under ERISA § 502(a) is not affected by the Savings
Clause in ERISA § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A).
See,
e.g., Cleghorn v. Blue Shield of California, 408 F.3d 1222, 1226
11
n.6 (9th Cir. 2005) (“[W]e need not decide whether [the state
law] is excepted from preemption under section 514(b)(2)(A) as a
state regulation of insurance.
Preemption under ERISA section
502(a) is not affected by that exception.” (citation omitted)).
The Savings Clause provides, “Except as provided in subparagraph
(B), nothing in this subchapter shall be construed to exempt or
relieve any person from any law of any State which regulates
insurance, banking, or securities.”
29 U.S.C. § 1144(b)(2)(A).
The Ninth Circuit has concluded that the Savings Clause relates
to conflict preemption, but is irrelevant to a complete
preemption analysis under § 502(a).
See, e.g., Cleghorn, 408
F.3d at 1226 n.6.
B.
Noetzel’s Claim.
As a preliminary matter, Noetzel does not dispute that
HMSA’s Preferred Provider Plan qualifies as an ERISA plan and
that she was a beneficiary of the Plan.
See ECF No. 12.1
Noetzel’s claim seeks a determination that HMSA is not
entitled to be reimbursed out of Noetzel’s settlement because the
1
In Noetzel’s Reply to HMSA’s Opposition to her Motion to
Remand, she argues for the first time that HMSA’s brochure,
attached as Exhibit “A” to ECF No. 10, is not an ERISA plan
document. See ECF No. 12, PageID # 190. The Magistrate Judge
correctly declined to consider this improperly raised argument,
which Noetzel did not renew in her Reply to HMSA’s Objections to
the F & R. In any event, the court need not address this issue
while deciding the present motion because this issue goes to the
ultimate merits of Noetzel’s claim and not to whether the claim
is completely preempted under ERISA § 502(a).
12
terms in the Plan providing for HMSA to be reimbursed out of her
tort settlement are void under state law.
PageID #s 11-15.
See ECF No. 1-2,
Noetzel asserts her claim pursuant to Haw. Rev.
Stat. § 663-10 and Haw. Rev. Stat. § 431:13-103(a)(10).
See ECF
No. 18, PageID # 422.
Haw. Rev. Stat. § 663-10(a) provides in relevant part:
In any civil action in tort, the court,
before any judgment or stipulation to dismiss
the action is approved, shall determine the
validity of any claim of a lien against the
amount of the judgment or settlement by any
person who files timely notice of the claim
to the court or to the parties in the action.
The judgment entered, or the order subsequent
to settlement, shall include a statement of
the amounts, if any, due and owing to any
person determined by the court to be a holder
of a valid lien and to be paid to the
lienholder out of the amount of the
corresponding special damages recovered by
the judgment or settlement. . . . If there is
a settlement before suit is filed or there is
no civil action pending, then any party may
petition a court of competent jurisdiction
for a determination of the validity and
amount of any claim of a lien.
The particular language in section 663-10(a) that
Noetzel focuses on is the reference to payment to a lienholder
“out of the amount of corresponding special damages recovered by
the judgment or settlement.”
Noetzel’s settlement purported to
be entirely for general damages, with no mention of special
damages.
Haw. Rev. Stat. § 431:13-103(a)(10) states that an
insurance company commits an unfair method of competition by:
13
Refusing to provide or limiting coverage
available to an individual because the
individual may have a third-party claim for
recovery of damages; provided that:
(A) Where damages are recovered by judgment
or settlement of a third-party claim,
reimbursement of past benefits paid shall be
allowed pursuant to section 663-10[.]
Noetzel’s invocation of Haw. Rev. Stat. § 431:13103(a)(10), a statute regulating unfair methods of competition by
an insurance company, is an attempt to fit her claim under the
Savings Clause in ERISA § 514(b)(2)(A).
provides:
The Savings Clause
“Except as provided in subparagraph (B), nothing in
this subchapter shall be construed to exempt or relieve any
person from any law of any State which regulates insurance,
banking, or securities.”
29 U.S.C. § 1144(b)(2)(A).
As
discussed above, however, the Savings Clause in ERISA § 514 is
irrelevant to the issue of whether Noetzel’s action is completely
preempted under § 502(a), the matter now before this court.
Cleghorn, 408 F.3d at 1226 n.6.
See
If Noetzel’s claim is completely
preempted by § 502(a), it will not be “saved” by ERISA
§ 514(b)(2)(A), even if Haw. Rev. Stat. § 431:13-103(a)(10) is a
state law regulating insurance.
In any event, Noetzel cannot bring any claim under Haw.
Rev. Stat. § 431:13-103(a)(10).
Haw. Rev. Stat. § 431:13-107
provides, “All remedies, penalties and proceedings set forth in
this article are to be invoked solely and exclusively by the
14
commissioner.”
“[T]he statute was intended as a regulatory one,
enforceable by the insurance commissioner, and not one
authorizing private remedies to aggrieved individuals.”
Jenkins
v. Commonwealth Land Title Ins. Co., 95 F.3d 791, 797 n.4 (9th
Cir. 1996) (citing Genovia v. Jackson National Life Insurance
Co., 795 F. Supp. 1036, 1044-45 (D. Haw. 1992)).
See Wittig v.
Allianz, A.G., 112 Haw. 195, 206 n.5, 145 P.3d 738, 749 n.5 (Ct.
App. 2006), as corrected (July 3, 2006) (“There is no private
cause of action for violations of HRS § 431:13–103 (2005).”
(citing Hough v. Pacific Ins. Co., Ltd., 83 Haw. 457, 469–70, 927
P.2d 858, 870–71 (1996)); see also Young v. Car Rental Claims,
Inc., 255 F. Supp. 2d 1149, 1154 (D. Haw. 2003) (“Plaintiff
cannot bring a private cause of action under HRS § 431:13–103 to
effect private enforcement.”).
Noetzel’s Motion for Remand thus turns on whether her
claim under Haw. Rev. Stat. § 663-10 is completely preempted
under the test in Davila, and not on whether her claim under Haw.
Rev. Stat. § 431:13–103(a)(10) was “saved” from preemption by
ERISA § 514.
C.
First Davila Prong: Noetzel Could Have Brought
Her Claim Under ERISA § 502(a).
The first Davila prong asks whether the “individual, at
some point in time, could have brought his claim under ERISA
§ 502(a).”
542 U.S. at 210.
ERISA § 502(a)(1)(B) provides that a civil action may
15
be brought by a participant or beneficiary “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).
The Ninth Circuit has not yet addressed the issue of
whether a challenge to an ERISA plan provider’s reimbursement
claim falls within the scope of ERISA § 502(a)(1)(B).
This court
therefore looks to other circuits that have addressed the issue.
See Wirth v. Aetna U.S. Healthcare, 469 F.3d 305 (3d Cir. 2006);
Levine v. United Healthcare Corp., 402 F.3d 156 (3d Cir. 2005),
cert. denied, 2005 WL 3144545 (U.S. Nov. 28, 2005)(No. 05–387);
Arana v. Ochsner Health Plan, 338 F.3d 433 (5th Cir. 2003)(en
banc); Singh v. Prudential Health Care Plan, Inc., 335 F.3d 278
(4th Cir. 2003).
But see Wurtz v. Rawlings Co., LLC, 761 F.3d
232, 239-41 (2d Cir. 2014), cert. denied, 135 S.Ct. 1400 (2015)
(holding that claim challenging insurer’s right to reimbursement
for benefits paid pursuant to ERISA plan did not fall within
scope of ERISA § 502(a)).
Although Arana, Singh, Levine, and
Wirth did not apply the Davila test, they nonetheless provide
useful guidance to the extent they addressed the exact question
that the first prong of Davila requires this court to address,
namely, whether a claim challenging a request for reimbursement
for benefits already provided falls within the scope of § 502(a).
In Arana, the plaintiff sought a declaratory judgment
16
that he was entitled to retain tort settlement proceeds free of a
health plan’s claim for reimbursement of benefits paid.
Arana
argued that a state statute prohibiting a reduction in health
insurance benefits barred the health insurer from being
reimbursed out of any tort settlement funds Arana had received.
338 F.3d at 436 & n.3.
The Fifth Circuit, sitting en banc, concluded that
Arana’s claim was completely preempted by ERISA § 502(a)(1)(B)
because the plaintiff was seeking either “to recover benefits due
to him under the terms of his plan” or “to enforce his rights
under the terms of the plan.”
Id. at 438.
The Fifth Circuit
explained:
As it stands, Arana’s benefits are under
something of a cloud, for [the insurer] is
asserting a right to be reimbursed for the
benefits it has paid for his account. It
could be said, then, that although the
benefits have already been paid, Arana has
not fully “recovered” them because he has not
obtained the benefits free and clear of OHP’s
claims.
Id.
The Fifth Circuit added that “one could [also] say that
Arana seeks to enforce his rights under the terms of the plan,
for he seeks to determine his entitlement to retain the benefits
based on the terms of the plan.”
Id.
In Singh, members of an HMO commenced a class action
seeking to recover amounts they had paid to the HMO pursuant to
the reimbursement and subrogation terms in their ERISA plan.
17
335
F.3d at 281.
Singh, on behalf of the class members, sought a
declaratory judgment that the subrogation terms were illegal
under Maryland’s HMO act, and a ruling requiring the return of
the monies paid pursuant to the subrogation terms.
Id.
The Fourth Circuit viewed Singh’s claims as claims for
benefits under the terms of the governing plan and therefore
completely preempted.
Id. at 290.
Notably, the Fourth Circuit
treated Singh’s claim as one for recovery of her “benefit that
was diminished by her payment to Prudential under the unlawful
subrogation term of the plan,” and said that her claim was “no
less a claim for recovery of a plan benefit under § 502(a) than
if she were seeking recovery of a plan benefit that was denied in
the first instance.”
Id.
As the Fourth Circuit put it, “ERISA’s
complete dominion over a plan participant’s claim to recover a
benefit due under a lawful application of plan terms is not
affected by the fortuity of when a plan term was misapplied to
diminish the benefit.”
Id.
The Third Circuit addressed a similar claim in Levine.
The beneficiaries under an ERISA plan sued the plan providers to
recover amounts the beneficiaries had paid the plan providers in
accordance with the respective plans’ reimbursement and
subrogation clauses.
402 F.3d at 159.
The plaintiffs had used
settlement proceeds from their tort cases to reimburse their
insurers for medical benefits they had received.
18
Id.
However,
after the statute permitting an insurer to seek reimbursement was
invalidated by a state court decision, the beneficiaries brought
suit in state court to recover the amounts they had paid.
Id. at
159-60.
The Third Circuit held that the beneficiaries’ claims
were completely preempted by ERISA § 502(a)(1)(B).
Id. at 163.
Relying on the reasoning of both Arana and Singh, the Third
Circuit in Levine concluded that the beneficiaries’ attempt to
void the insurers’ right to reimbursement was, for all intents
and purposes, a claim seeking “to have certain health insurance
claims paid under their ERISA plans.”
402 F.3d at 162-63.
In Wirth, the Third Circuit revisited the issue of
whether a claim challenging an insurer’s right to reimbursement
under an ERISA plan for benefits paid was completely preempted by
ERISA § 502(a).
Wirth was a class action filed by the
beneficiaries of an ERISA plan to challenge the plan
administrator’s assertion of a subrogation lien over settlement
proceeds in a tort case.
469 F.3d at 307.
The plaintiffs
asserted state law claims for unjust enrichment and alleged the
violation of a state motor vehicle financial responsibility law.
Id.
The Third Circuit affirmed the district court’s ruling
that the plaintiffs’ claims for monies taken pursuant to
subrogation and reimbursement provisions in their ERISA health
19
plans were claims for “benefits due” within the meaning of ERISA
section 502(a)(1)(B).
Although the Third Circuit did not mention
Davila, which by that time had been decided, the Third Circuit
applied the reasoning in Davila when it relied on Levine, Arana,
and Singh.
The Third Circuit said:
Here, as in Levine, the actions undertaken by
the insurer resulted in diminished benefits
provided to the plaintiff insureds. That the
bills and coins used to extinguish Aetna’s
lien are not literally the same as those used
to satisfy its obligation to cover Wirth’s
injuries is of no import–-“the benefits are
under something of a cloud.”
•
Wirth, 469 F.3d at 309 (quoting Arana, 338 F.3d at 438).
Relying on the preceding circuit court rulings, the
district court in Cavanaugh ex rel. Cavanaugh v. Providence
Health Plan, 3:08-cv-01351-BR, at 3 (D. Or. April 14, 2009),
ruled that complete preemption barred a plaintiff’s action
seeking a declaration that a plan provider had no right under
state law to assert a lien on settlement proceeds to obtain
reimbursement for medical benefits provided.
Id. at 18-19.
The
plaintiff argued that she was not seeking to clarify her rights
under the plan, but was instead seeking to have the reimbursement
terms declared void on the basis of state law.
Id. at 20-21.
Unpersuaded, the district court held that her claim was
completely preempted by § 502(a).
The court stated that it found
“the reasoning of Arana and Wirth persuasive”:
Here, as in Arana and Wirth, Plaintiff’s
20
benefits are under a cloud because even
though Defendant has paid some benefits,
Plaintiff has not fully recovered them
because she has not obtained them free and
clear of Defendant’s claims for
reimbursement. Accordingly, Plaintiff’s
claim is one to recover benefits under an
ERISA plan. Alternatively, the Court
concludes Plaintiff seeks to enforce her
rights under the terms of the Plan because
she seeks a determination as to her
entitlement to retain the benefits based on
the terms of the Plan. Thus, the Court
concludes Plaintiff’s claim as to the
allegedly “less favorable” provisions of the
Plan is completely preempted under § 1132(a)
of ERISA, and, therefore, removal of this
action is proper.
Id. at 24-25.
In Helfrich v. Blue Cross and Blue Shield Ass’n, 804
F.3d 1090 (10th Cir. 2015), the Tenth Circuit agreed with the
Third, Fourth, and Fifth Circuits that a claim challenging a
contractual right to reimbursement is essentially a claim for
benefits.
Although Helfrich concerned the Federal Employees
Health Benefits Act of 1959 (FEHBA) rather than ERISA, the Tenth
Circuit cited approvingly to Arana, Levine, and Singh in
rejecting the argument that a claim challenging a right to
reimbursement is somehow distinguishable from a claim for
benefits.
Id. at 1106.
The Tenth Circuit noted:
the subrogation and reimbursement
requirements in the Plan are tied directly to
“payments with respect to benefits.” . . .
[A] carrier’s contractual right to
reimbursement and subrogation arises from its
payment of benefits; and an enrollee’s
ultimate entitlement to benefit payments is
21
conditioned upon providing reimbursement from
any later recovery or permitting the Plan to
recover on the enrollee’s behalf. No wonder
that the reimbursement and subrogation
requirements are contained in the Plan’s
“statement of benefits.”• We note that
several circuit courts have interpreted an
ERISA provision authorizing civil actions to
“recover benefits due . . . under the terms
of [a] plan,” 29 U.S.C. § 1132(a)(1)(B), as
encompassing suits disputing a plan’s
reimbursement efforts. See Levine v. United
Healthcare Corp., 402 F.3d 156, 163 (3d Cir.
2005) (“Where, as here, plaintiffs claim that
their ERISA plan wrongfully sought
reimbursement of previously paid health
benefits, the claim is for ‘benefits due’ . .
. .”); Arana v. Ochsner Health Plan, 338 F.3d
433, 437-38 (5th Cir. 2003); Singh v.
Prudential Health Care Plan, Inc., 335 F.3d
278, 291 (4th Cir. 2003). But see Wurtz v.
Rawlings Co., 761 F.3d 232, 242 (2d Cir.
2014).
Helfrich, 804 F.3d at 1106.
This court agrees with those authorities from other
jurisdictions that hold that claims attempting to invalidate
reimbursement clauses in ERISA plans are claims that could be
brought under ERISA § 502(a)(1)(B).
Although some of the cases
discussed above preceded Davila or did not specifically discuss
it, nothing in Davila conflicts with or undercuts the reasoning
in those cases.
Noetzel could have brought her claim under ERISA
§ 502(a)(1)(B) in order to “enforce [her] rights under the terms
of the plan.”
29 U.S.C. § 1132(a)(1)(B).
Noetzel, after all,
does not dispute that she is entitled to coverage or that the
22
Plan terms under which she received medical benefits are valid.
Noetzel simply argues that other Plan terms, specifically those
permitting reimbursement for amounts equivalent to general
damages, are void under Haw. Rev. Stat. § 663-10.
Relatedly, Noetzel argues that HMSA is not entitled to
reimbursement because the funds “do not correspond to special
damages recovered in the subject settlement.”
PageID # 15.
ECF No. 1-2,
Noetzel points out that Haw. Rev. Stat. § 663-10(a)
refers to the inclusion in a judgment or settlement of a
statement of any amounts owed to a lienholder “to be paid to the
lienholder out of the amount of the corresponding special damages
reovered by the judgment or settlement.”
Noetzel’s settlement
purportedly stated that it was for general, not special, damages.
Noetzel’s claim essentially seeks to enforce her right to retain
the full amount of benefits she received under the Plan based on
her belief that certain reimbursement terms are void and other
reimbursement terms are inapplicable to her settlement.
Noetzel’s claim alternatively could have been brought
as a claim “to recover benefits due to [her] under the terms of
[her] plan.”
29 U.S.C. § 1132(a)(1)(B).
benefits is completely preempted.
Any claim to recover
“[F]or the purpose of
determining whether a suit is for benefits and therefore
completely preempted, funds obtained from a settlement with a
third-party tortfeasor cannot be strictly separated from benefits
23
previously paid by the plan to the beneficiary.”
Cent. States,
Se. & Sw. Areas Health & Welfare Fund v. Health Special Risk,
Inc., No. 3:11-CV-2910-D, 2013 WL 2656159, at *5 (N.D. Tex. June
13, 2013), aff’d sub nom., Cent. States, Se. & Sw. Areas Health &
Welfare Fund ex rel. Bunte v. Health Special Risk, Inc., 756 F.3d
356 (5th Cir. 2014).
See also Helfrich, 804 F.3d at 1106 (“the
subrogation and reimbursement requirements in the Plan are tied
directly to ‘payments with respect to benefits’”).
What Noetzel seeks is recovery of the entire benefit
provided by HMSA, as opposed to the benefit minus the amount to
be reimbursed to HMSA.
Like the plaintiff in Arana, Noetzel’s
benefits are still “under something of a cloud,” given HMSA’s
assertion of a right to recoup some of the value of the benefits
paid.
“It could be said, then, that although the benefits have
already been paid, [Noetzel] has not fully ‘recovered’ them
because [she] has not obtained the benefits free and clear of
[HMSA’s] claims.”
See Arana, 338 F.3d at 438.
That HMSA had
already provided the benefits to Noetzel, as opposed to having
denied them in the first instance, does not change the nature of
her claim, which, for all intents and purposes, seeks to
establish her entitlement to ERISA benefits.
Had HMSA denied benefits to Noetzel up front, instead
of first providing benefits and later seeking to “diminish” them
under the Plan’s reimbursement terms, a challenge by Noetzel to
24
that denial would undisputably have fallen within ERISA
§ 502(a)(1)(B).2
This court sees no justification, and Noetzel
posits none, for reading ERISA § 502(a)(1)(B) as authorizing a
claim challenging the up-front denial of benefits, but not a
claim challenging the later diminution of benefits.
Admittedly,
a beneficiary might sustain greater injury when an ERISA plan
provider denies a benefit up front.
Such a denial could deprive
the beneficiary of medical care if he or she cannot pay out of
pocket or from another source.
what § 502(a)(1)(B) permits.
But this risk does not change
Both an initial denial of benefits
and a later diminution of benefits involve alleged repudiations
of an ERISA plan benefit and may trigger a claim by a participant
or beneficiary “to recover benefits due . . . under the terms of
[the] plan” or “to enforce rights under the terms of the plan.”
29 U.S.C. § 1132(a)(1)(B).
Congress could not have intended that § 502(a)(1)(B) be
applied differently based solely on the timing of an ERISA plan
provider’s repudiation of a benefit.
Interpreting § 502(a)(1)(B)
as providing no federal remedy when benefits are initially
provided but later canceled or offset would undermine “the
purpose of ERISA . . . to provide a uniform regulatory regime
2
Davila involved such a claim. 542 U.S. 200. The
plaintiffs there sued their respective HMOs for having denied
coverage for certain medical treatments and services. Id. at
204-05.
25
over employee benefit plans.”
Davila, 542 U.S. at 208.
Like the
court in Singh, this court concludes that “ERISA’s complete
dominion over a plan participant’s claim to recover a benefit due
under a lawful application of plan terms is not affected by the
fortuity of when a plan term was misapplied to diminish the
benefit.”
335 F.3d at 291.
While the discussion above has analyzed Noetzel’s claim
as cognizable under ERISA § 502(a)(1)(B), Noetzel could have
alternatively brought her claim under ERISA § 502(a)(3).
ERISA
§ 502(a)(3) authorizes a beneficiary or participant “(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[.]”
29 U.S.C. § 1132(a)(3).
Under ERISA § 502(a)(3), Noetzel could have brought a
claim to enjoin HMSA from enforcing those parts of the Plan that
required that HMSA be reimbursed.
Noetzel could have even asked
the court to declare that the Plan’s reimbursement terms were
overbroad or illegal and to enforce the remaining terms of the
Plan.
See, e.g., Elexco Land Services, Inc. v. Hennig, No.
11-CV-00214 A M, 2011 WL 9368970, at *5 (W.D.N.Y. Dec. 28, 2011),
report and recommendation adopted, No. 11-CV-214, 2012 WL 5288760
(W.D.N.Y. Oct. 23, 2012) (noting court’s equitable discretion to
26
“blue pencil” overbroad clause).
In viewing Noetzel’s claim as not completely preempted
by ERISA § 502(a), the F & R relied almost exclusively on Wurtz
v. Rawlings Co., LLC, 761 F.3d 232 (2d Cir. 2014).
16, PageID #s 241-42.
See ECF No.
Wurtz represents the minority view that a
challenge to an ERISA plan administrator’s right to subrogation
or reimbursement falls outside the scope of ERISA § 502(a).
While this court would not hesitate to adopt a minority position
if convinced it was the better-reasoned approach, this court
identifies problems that preclude the adoption of the reasoning
in Wurtz.
First, Wurtz flouts the direction in Davila to examine
the essence of a claim in determining whether it is completely
preempted by ERISA § 502(a).
That is, Davila counsels the court
not to accept claims at face value.
“[D]istinguishing between
pre-empted and non-pre-empted claims based on the particular
label affixed to them would elevate form over substance and allow
parties to evade the pre-emptive scope of ERISA simply by
relabeling their contract claims as [state law] claims.”
U.S. at 214.
The Ninth Circuit echoes this concern:
542
“Artful
pleading does not alter the potential for this suit to frustrate
the objectives of ERISA.”
Cleghorn, 408 F.3d at 1226.
Wurtz
focused on the language in the complaint instead of analyzing
whether the plaintiff could have brought a claim under ERISA
27
§ 502(a).
The Second Circuit thus said:
ERISA § 502(a)(1)(B) allows a plaintiff “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.” The claims in plaintiffs’ complaint
seek to do none of these things. Plaintiffs
do not contend that they have a right to keep
their tort settlements “under the terms of
[their] plan[s]”—-rather, they contend that
they have a right to keep their tort
settlements under N.Y. Gen. Oblig. Law
§ 5–335.
Wurtz, 761 F.3d at 242.
Focusing on how a claim is pled risks missing the
critical inquiry as to whether “an individual, at some point in
time, could have brought his claim under ERISA § 502(a)[.]”
Davila, 542 U.S. at 210 (emphasis added).
F.3d at 1107-08.
See also Fossen, 660
The Second Circuit inexplicably criticized the
district court in Wurtz for having looked behind Wurtz’s pleading
and for concluding, based on the underlying allegations, that
Wurtz’s claims effectively were for benefits under ERISA
§ 502(a)(1)(B).
The district court had stated that “the claims
are ‘really about [plaintiffs’] right to keep the monetary
benefits received from defendants under their ERISA-governed
plans; this triggers issues concerning their rights and ability
to recover (and/or retain) benefits under the Plans, and
accordingly, brings ERISA § 502(a)(1)(B) directly into play.’”
Id. (quoting Wurtz v. Rawlings Co., LLC, 933 F. Supp. 2d 480, 495
28
(E.D.N.Y. 2013)).
The Second Circuit’s criticism of the district court
highlights another problem.
In the course of discussing the
district court’s analysis, the Second Circuit read the ERISA
“Savings Clause” in a manner contrary to the Ninth Circuit’s
reading:
This expansive interpretation ignores the
fact that plaintiffs’ claims are based on a
state law that regulates insurance and are
not based on the terms of their plans. As a
result, state law does not impermissibly
expand the exclusive remedies provided by
ERISA § 502(a). Under ERISA § 514(a)-(b),
state laws that “relate to” ERISA plans are
expressly preempted, but not if they
“regulate[ ] insurance.” 29 U.S.C.
§ 1144(a)-(b). Based on this “insurance
saving clause,” the Supreme Court has held
that state statutes regulating insurance that
nonetheless affect ERISA benefits are not
expressly preempted, with no hint that claims
under these statutes might still be
completely preempted and thus unable to be
adjudicated under those state laws when they
do not expand the remedies available for
beneficiaries for claims based on the terms
of their plans.
761 F.3d at 242-43.
The Second Circuit reasoned that Wurtz’s
claim could not be completely preempted under § 502(a) because it
was based on a state statute regulating insurance that was saved
from preemption under ERISA § 514(a)-(b)’s “Savings Clause.”
That is, in the Second Circuit’s view it did not make sense to
conclude, as the district court had, that a claim based on a
statute “saved” from preemption under § 514(a)-(b) would
29
nonetheless be completely preempted under § 502(a).
This was also the basis on which the Second Circuit
rejected the reasoning of Arana, Singh, and Levine.
The Second
Circuit concluded that “the logic of Arana, Singh, and Levine
would expand complete preemption to encompass state laws that
regulate insurance and that do not impermissibly expand the
exclusive remedies provided by ERISA § 502(a).”
Wurtz, 761 F.3d
at 244.
This analysis in Wurtz conflicts directly with
governing Ninth Circuit precedent.
In the Ninth Circuit,
“[p]reemption under ERISA section 502(a) is not affected by
[section 514(b)(2)(A) as a state regulation of insurance].”
Cleghorn, 408 F.3d at 1227.
Cleghorn provides:
“A state cause
of action that would fall within the scope of this scheme of
remedies [in § 502(a)] is preempted as conflicting with the
intended exclusivity of the ERISA remedial scheme, even if those
causes of action would not necessarily be preempted by section
514(a).”
Id. at 1225 (citing Davila, 542 U.S. at 214 n.4).3
3
At the hearing on the motion, Noetzel pointed to
Cleghorn’s use of the word “conflicting” to argue that Cleghorn
only concerned conflict preemption and, therefore, does not
undercut Wurtz and its analysis of complete preemption. This is
incorrect. Although the Ninth Circuit used the word
“conflicting,” the context makes it clear that the Ninth Circuit
was talking about complete preemption: “A state cause of action
that would fall within the scope of this scheme of remedies is
preempted as conflicting with the intended exclusivity of the
ERISA remedial scheme, even if those causes of action would not
necessarily be preempted by section 514(a).” Cleghorn, 408 F.3d
30
Adopting the reasoning in Wirth, Levine, Arana, and
Singh, this court rules that the first prong of the Davila test
is met because Noetzel could have brought her claim under either
ERISA § 502(a)(1)(B) or ERISA § 502(a)(3).
D.
The Second Davila Prong: HMSA’s Actions Do Not
Implicate an Independent Legal Duty.
To apply the second part of Davila’s complete
preemption test, the court “must ask whether or not an
‘independent legal duty . . . is implicated by [the] defendant’s
actions.’”• 542 U.S. at 210.
This prong can be separated into two questions.
The
preliminary inquiry is whether defendant’s actions implicate a
legal duty.
If so, the court examines whether that legal duty is
independent of ERISA.
This court concludes that HMSA’s conduct does not
implicate a legal duty, let alone a duty independent of ERISA.
A “duty” is “[a] legal obligation that is owed or due
to another and that needs to be satisfied; that which one is
bound to do, and for which somebody else has a corresponding
right.”
Black’s Law Dictionary (10th ed. 2014).
A “legal duty”
at 1225. This in fact echoes a statement by the Supreme Court in
Davila, which clearly addressed complete preemption, that “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.” See Davila, 542 U.S. at 209 (citing
Pilot Life Ins., 481 U.S. at 54-56) (emphasis added).
31
is “[a] duty arising by contract or by operation of law; an
obligation the breach of which would give a legal remedy.”
Id.
A legal duty, in other words, imposes some obligation whether in
contract, tort, or otherwise, that, if breached, could lead to
liability under the law.
Noetzel asserts that Haw. Rev. Stat. § 663-10(a)
precludes HMSA from being reimbursed because that statute refers
to a lienholder’s recovery from a settlement only for special
damages.
Noetzel says she “has not recovered from said
settlement an amount for special damages that corresponds to
health insurance benefits provided by HMSA, from which Respondent
HMSA may seek reimbursement of the past benefits provided in this
case.”
ECF No. 1-2, PageID # 14.
Whether brought under this
provision or Haw. Rev. Stat. § 431:13-103(a)(10), Noetzel’s claim
involves no legal duty owed by HMSA to her relating to the
reimbursement lien.
Indeed, the portions of section 663-10(a) that Noetzel
relies on for her claim cannot be read as imposing a legal duty
on any litigant.
The plain language of the provision indicates
that it is a directive to the court regarding, first, the
determination of a lien on a judgment or settlement and, second,
what language to include in a judgment.
provides:
Section 663-10(a)
“In any civil action in tort, the court, before any
judgment or stipulation to dismiss the action is approved, shall
32
determine the validity of any claim of a lien against the amount
of the judgment or settlement.” (Emphasis added.)
continues:
The statute
“The judgment entered, or the order subsequent to
settlement, shall include a statement of the amounts, if any, due
and owing to any person determined by the court to be a holder of
a valid lien and to be paid to the lienholder out of the amount
of the corresponding special damages recovered by the judgment or
settlement.”
states:
(Emphasis added.)
Finally, section 663-10(a)
“In determining the payment due the lienholder, the
court shall deduct from the payment a reasonable sum for the
costs and fees incurred by the party who brought the civil action
in tort.”
(Emphasis added.)
The only sentence in section 663-10(a) addressed to
parties states:
“If there is a settlement before suit is filed
or there is no civil action pending, then any party may petition
a court of competent jurisdiction for a determination of the
validity and amount of any claim of a lien.”
This sentence
authorizes a permissive action by a potential claimant; it does
not impose a legal duty on any party.
Noetzel is reading section 663-10(a) as imposing a
legal duty on HMSA to refrain from asserting a lien for an amount
equivalent to general damages.
This reading expands the concept
of legal duty beyond recognition.
It is akin to construing a
statute of limitations as imposing a legal duty on an individual
33
to refrain from filing suit after a limitations period has
expired.
Statutes invalidating actions that, absent the
statutes, would be permitted cannot fairly be said to create
legal obligations that, if breached, create liability.
Haw. Rev. Stat. § 663-10(a) is fundamentally different
from the tort laws or contractual obligations that gave rise to
legal duties in cases such as Fossen, Marin General Hospital,
Pierce, and Davila.
Fossen, for example, involved a prohibition
on unfair discrimination by a health insurer against similarly
situated individuals when charging policy premiums.
1105, 1111.
660 F.3d at
Marin General Hospital, 581 F.3d at 950, Pierce v.
Wells Fargo Bank, N.A., 380 Fed. Appx. 635, 636 (9th Cir. 2010),
and Board of Trustees of Laborers Health & Welfare Trust Fund for
Northern California v. Doctors Medical Center of Modesto, 351
Fed. Appx. 175, 176 (9th Cir. 2009), involved legal duties
imposed on defendants by contracts.
exposed the defendants to liability.
Breach of those duties
Davila involved a tort law
duty to “exercise ordinary care when making health care treatment
decisions.”
542 U.S. at 205, 212.
Unlike what Noetzel says is a
duty imposed by section 663-10(a), breach of the duties imposed
by law or contract in those cases placed the defendants at risk
of being held liable.
Noetzel’s claim does not allege or imply
that, under section 663-10(a), HMSA owed her any legal duty the
breach of which could render HMSA liable to her.
34
To the extent Noetzel relies on Haw. Rev. Stat.
§ 431:13-103(a)(10) as imposing a legal duty on HMSA, Noetzel is
similarly unsuccessful.
While there are provisions in Haw. Rev.
Stat. § 431:13-103(a)(10) that may be said to impose legal duties
on insurance companies like HMSA, the provision Noetzel cites,
Haw. Rev. Stat. § 431:13-103(a)(10)(A), imposes no duty.
That
provision allows an insurer to seek reimbursement of past
benefits in accordance with Haw. Rev. Stat. § 663-10.
See ECF
No. 1-2, PageID # 14 (citing Haw. Rev. Stat. § 431:13103(a)(10)(A), which provides, “Where damages are recovered by
judgment or settlement of a third-party claim, reimbursement of
past benefits paid shall be allowed pursuant to section
663-10.”).
Haw. Rev. Stat. § 431:13-103(a)(10)(A), the provision
Noetzel relies on, is purely permissive.
Nor does the Plan itself impose a legal duty on HMSA to
refrain from seeking reimbursement for amounts equivalent to
general damages.
The Plan, in fact, states the opposite.
The
Plan authorizes HMSA to seek reimbursement for amounts in a
settlement equivalent to general damages.
And even if the Plan
did impose a legal duty on HMSA to refrain from seeking
reimbursement in this case, such a duty could not be said to be
independent of ERISA or of an ERISA plan.
at 210.
See Davila, 542 U.S.
Independence is, of course, the inquiry that this court
must undertake if it finds a legal duty imposed on HMSA.
35
While this court has not found the requisite legal
duty, this court cannot envision how, even assuming it found a
legal duty, the duty could possibly be independent of ERISA.
Under the second prong of Davila, “State law legal
duties are not independent of ERISA where interpretation of the
terms of the benefit plan ‘forms an essential part’ of the claim,
and legal liability can exist ‘only because of [the defendant’s]
administration of ERISA-regulated benefit plans.’”
McGill v.
Pac. Bell Tel. Co., No. CV1506323BROPLAX, 2015 WL 6039267, at *7
(C.D. Cal. Oct. 15, 2015) (quoting Davila, 542 U.S. at 213).
Interpretation of the terms of the Plan forms an
essential part of Noetzel’s claim.
As discussed above, Noetzel
does not contest that HMSA has a right to reimbursement in
certain circumstances under the Plan’s reimbursement terms.
She
never alleges that all of the reimbursements terms are void.
Instead, she argues that Haw. Rev. Stat. § 663-10 nullifies the
portion of the reimbursement terms providing that HMSA has the
right to seek reimbursement from general damages.
Noetzel is
content to acknowledge HMSA’s right to reimbursement from any
special damages settlement because, she says, her settlement
funds “do not correspond to special damages recovered in the
subject settlement.”
ECF No. 1-2, PageID # 15.
Any
determination of Noetzel’s section 663-10(a) claim would require
interpretation of the Plan’s terms in light of Haw. Rev. Stat.
36
§ 663-10 and the settlement terms to see whether reimbursement is
permitted.
Moreover, any claim against HMSA arises only out of
HMSA’s administration of ERISA-regulated benefit plans.
Davila, 542 U.S. at 213.
See
Noetzel would have no claim in the
absence of the ERISA Plan itself.
It is, after all, the Plan’s
authorization of reimbursement for amounts equivalent to general
damages that Noetzel is challenging in her claim.
Thus, even if
there is a legal duty in issue here, the duty is entirely
dependent on the ERISA Plan.
This court concludes that the second prong of Davila is
met in this case.
V.
CONCLUSION.
Because HMSA has shown that Noetzel’s claim is
completely preempted by ERISA § 502(a), this court rejects the
Magistrate Judge’s Findings & Recommendation to Grant Plaintiff
Elizabeth Noetzel’s Motion to Remand.
Noetzel’s Motion to Remand
is denied.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, April 27, 2016.
/s/ Susan Oki Mollway
Susan Oki Mollway
United States District Judge
Elizabeth Noetzel v. Hawaii Medical Service Association, Civ. No. 15-00310
SOM/KJM; ORDER REJECTING THE MAGISTRATE JUDGE’S FINDINGS AND RECOMMENDATION TO
GRANT ELIZABETH NOETZEL’S MOTION TO REMAND
37
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?