Premiertox, Inc. et al v. Kentucky Spirit Health Plan, Inc. et al
Filing
25
MEMORANDUM OPINION AND ORDER by Chief Judge Joseph H. McKinley, Jr. on 5/29/2012, granting 6 Motion to Remand to Russell Circuit Court. Defendants' motions to dismiss (DN 7 , DN 8 , DN 9 ) DENIED as moot. IT IS FURTHER ORDERED that Defend ants' motion for leave to file an amended notice of removal (DN 16 ) is GRANTED. The amended notice of removal was considered in deciding the motion to remand. Case REMANDED to the Russell Circuit Court. cc: Counsel, Russell Circuit Court (CDF)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CIVIL ACTION NO. 1:12CV-00010-JHM
PREMIERTOX, INC. AND PREMIERTOX 2.0, INC.
PLAINTIFFS
VS.
KENTUCKY SPIRIT HEALTH PLAN, INC.;
CENTENE CORPORATION, and JEAN RUSH
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the Court on a motion to remand this case to the Russell Circuit Court
by Plaintiffs, PremierTox, Inc. and PremierTox 2.0, Inc. [DN 6], on motions to dismiss by
Defendants, Kentucky Spirit Health Plan, Inc., Centene Corporation, and Jean Rush, [DN 7, DN 8,
DN 9], and on a motion for leave to file an amended notice of removal by Defendants [DN 16].
Fully briefed, these matters are ripe for decision.
I. BACKGROUND
On December 28, 2011, Plaintiffs, PremierTox, Inc, and PremierTox 2.0, Inc. (collectively
“PremierTox”), filed this action in the Russell Circuit Court against Kentucky Spirit Health Plan,
Inc., its parent company Centene Corporation, and Jean Rush, individually and as President of
Kentucky Spirit Health Plan, Inc. In the Complaint, PremierTox alleges that it provided medical
services to Kentucky Medicaid recipients and is entitled to compensation from Kentucky Spirit.
(Complaint at ¶¶ 8, 9, and 11.) PremierTox claims that by failing to properly pay for services
rendered, Kentucky Spirit violated KRS 304.17A-7021 which mandates that all claims shall be paid
1
KRS § 304.17A-702 provides:
(1) Except for claims involving organ transplants, each insurer shall reimburse a
provider for a clean claim or send a written or an electronic notice denying or
contesting the claim within thirty (30) calendar days from the date that the claim
within 30 days. (Id. at ¶ 10.) Additionally, PremierTox claims that each of the Defendants made
false representations to PremierTox that they would in fact be paid. (Id. at ¶ 12.)
The Commonwealth of Kentucky is subdivided into eight Medicaid regions. Prior to 2011,
seven of the eight regions were administered directly by the Kentucky Cabinet for Health and
Family Services. In the Louisville region, the Cabinet contracted with University Healthcare in a
managed care contract. The Cabinet paid University Healthcare a capitated rate for Medicaid
recipients. University Healthcare then entered into agreements with providers and paid them for
services provided to Medicaid recipients. In the other seven regions, the Cabinet dealt directly with
healthcare providers and the providers received payment for services directly from the Cabinet.
In 2011, the Cabinet awarded three companies, Kentucky Spirit, Wellcare, and Coventry
Healthcare, managed care contracts to administer Medicaid benefits for the other seven regions. On
July 3, 2011, Kentucky Spirit signed its agreement with the State to arrange for the provision of
medical services to those individuals eligible under the Kentucky Medicaid Program. (Medicaid
Managed Care Contract, DN 17-2.) The Managed Care Contract between Kentucky Spirit and the
is received by the insurer or any entity that administers or processes claims on
behalf of the insurer. Clean claims involving organ transplants shall be paid,
denied, or contested within sixty (60) calendar days from the date that the claim is
received by the insurer or any entity that administers or processes claims on
behalf of the insurer.
(2) Within the applicable claims payment time frame, an insurer shall:
(a) Pay the total amount of the claim in accordance with any contract
between the insurer and the provider;
(b) Pay the portion of the claim that is not in dispute and notify the
provider, in writing or electronically, of the reasons the remaining portion of the
claim will not be paid; or
(c) Notify the provider, in writing or electronically, of the reasons no part
of the claim will be paid.
KRS § 304.17A-702(1), (2).
2
Commonwealth provides in relevant part as follows:
In accordance with the Balanced Budget Act (BBA) Section 4708, the
Contractor shall implement Claims payment procedures that ensure 90% of all
Provider Claims for which no further written information or substantiation is
required in order to make payment are paid or denied within thirty (30) days of the
date of receipt of such Claims and that 99% of all Claims are processed within ninety
(90) days of the date of receipt of such Claims. In addition, the Contractor shall
comply with the Prompt-Pay statute, codified within KRS 304.17A-700-730, as may
be amended, and KRS 205.593, and KRS 304.14-135 and 99-123, as may be
amended. . . . . Any conflict between the BBA and Commonwealth law will default
to the BBA unless the Commonwealth requirements are stricter.
(Medicaid Managed Care Contract, § 29.1.)
Kentucky Spirit then contracted with Commonwealth Healthcare Corporation, d/b/a Center
Care to use Center Care’s existing network of providers. PremierTox, who was already a contract
provider with Center Care, entered into an amendment with Center Care on November 14, 2011,
agreeing to provide services to Kentucky Medicaid recipients covered by the Kentucky Spirit
Managed Care Plan.2 (DN 9-3.) Pursuant to these contracts, PremierTox claims that it performed
and continues to perform certain lab testing and that Kentucky Spirit has failed and refused to pay
PremierTox for over 2,000 tests performed. Because Kentucky Spirit has failed to pay the past due
invoices, PremierTox brought suit in Russell Circuit Court.
2
The Notice of Amendment between Center Care and Premiertox specifically provides
that
Claims Payment. In accordance with the Balanced Budget Act (BBA) Section
4708, MCO shall ensure that all Provider claims for which no further written
information or substantiation is required in order to make payment, are paid or
denied within thirty (30) days of the date of receipt of such claims and that all
claims are processed within ninety (90) days of the date of receipt of such claims.
In addition, MCO will comply with the Prompt-Pay statute, codified within KRS
304.17A-700-730, as may be amended, and KRS 205.593, and KRS 304.14-135
and 99-123, as may be amended.
(Notice of Amendment, Appendix 1, § 4.6.)
3
Defendants removed the case to this Court. Upon removal of the case, Defendants
immediately filed motions to dismiss the Complaint for failure to state a claim, or alternatively to
compel arbitration. [DN 7, DN 8, DN 9] Plaintiffs timely filed a motion to remand pursuant to 28
U.S.C. § 1447(c) arguing that federal question jurisdiction does not exist. Thereafter, Defendants
filed a motion to amend/correct the notice of removal. [DN 16]
II. MOTION TO REMAND
Defendants initially removed this action from state court on grounds of federal question
jurisdiction arguing that Plaintiffs’ claim for compensation for services provided to Kentucky
Medicaid recipients is “entirely a claim under federal law.”
(Notice of Removal ¶ 21.)
Alternatively, Defendants argue that removal is proper because “the entitlement to, amount of, and
timing of, any such payments is determined by federal law,” and thus, the claims raise a substantial
federal question as that term is defined in Grable & Sons Metal Products, Inc. v. Darue Engineering
& Manufacturing, 545 U.S. 308 (2005). (Id.) Additionally, Defendants assert that the federal
Medicaid laws, specifically 42 U.S.C. § 1396u-2, preempts Plaintiffs’ state law claims. (Id. at ¶ 22.)
Defendants filed a motion for leave to file an amended notice of removal to clarify some factual
errors in the notice of removal, specifically that Plaintiffs are “in network” providers. Defendants
represent that there is no intention for this amended notice to assert any new grounds for removal.
Plaintiffs move to remand the case to state court arguing that this Court lacks federal question
jurisdiction and object to the motion for leave to file an amended notice of removal.
Having found that the amended notice of removal merely clarifies factual errors in the notice
of removal, the Court grants the Defendants motion for leave to file an amended notice of removal.
Therefore, the Court considers both the notice of removal and amended notice of removal in
4
deciding the Plaintiffs’ motion for remand.
A. Federal Question Jurisdiction
“Any civil action of which the district courts have original jurisdiction founded on a claim
or right arising under the Constitution, treaties or laws of the United States shall be removable” to
federal court. 28 U.S.C. § 1441(b). “A claim falls within this court’s original jurisdiction under 28
U.S.C. § 1331 ‘only [in] those cases in which a well-pleaded Complaint establishes either that
federal law creates the cause of action or that the plaintiff[’]s right to relief necessarily depends on
resolution of a substantial question of federal law.’” Eastman v. Marine Mechanical Corp., 438 F.3d
544, 550 (6th Cir. 2006) (citation omitted). However, “the plaintiff is the master of the claim,”
Gafford v. General Elec. Co., 997 F.2d 150, 157 (6th Cir. 1993), and “the fact that the wrong
asserted could be addressed under either state or federal law does not ordinarily diminish the
plaintiff’s right to choose a state law cause of action.” Alexander v. Electronic Data Sys. Corp., 13
F.3d 940, 943 (6th Cir. 1994). The defendant bears the burden of establishing the existence of
federal subject matter jurisdiction and the propriety of the removal. Eastman, 438 F.3d at 549. “If
at any time before final judgment it appears that the district court lacks subject matter jurisdiction,
the case shall be remanded.” 28 U.S.C. § 1447(c). “The Supreme Court has developed two limited
exceptions to the well-pleaded complaint rule: the complete preemption doctrine and the substantial
federal question doctrine.” Taylor Chevrolet Inc. v. Medical Mut. Services LLC, 306 Fed. Appx.
207, 210 (6th Cir. Dec. 22, 2008).
1. Complete Preemption
Defendants claim that the Plaintiffs’ statutory state-law claims are preempted by the
Balanced Budget Act, Section 4708, the Federal Deficit Reduction Act of 2005, 42 U.S.C. § 1396u-
5
2, which “sets the federal standard fee timely payment of Medicaid claims.” (Amended Notice of
Removal ¶ 22.)
Title 42 U.S.C. §1396u-2(f) provides in relevant part that
A contract under section 1396b(m) of this title with a medicaid managed care
organization shall provide that the organization shall make payment to health care
providers for items and services which are subject to the contract and that are
furnished to individuals eligible for medical assistance under the State plan under
this subchapter who are enrolled with the organization on a timely basis consistent
with the claims payment procedures described in section 1396a(a)(37)(A) of this
title, unless the health care provider and the organization agree to an alternate
payment schedule . . . .
42 U.S.C. § 1396u-2. Title 42 U.S.C. § 1396a(a)(37) provides that a State plan for medical
assistance must –
(37) provide for claims payment procedures which (A) ensure that 90 per centum of
claims for payment (for which no further written information or substantiation is
required in order to make payment) made for services covered under the plan and
furnished by health care practitioners through individual or group practices or
through shared health facilities are paid within 30 days of the date of receipt of such
claims and that 99 per centum of such claims are paid within 90 days of the date of
receipt of such claims . . . .
42 U.S.C. § 1396a(a)(37).
Complete preemption arises where Congress has so completely preempted a particular area
“that any civil complaint raising this select group of claims is necessarily federal in character.”
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987). In such cases, the plaintiff has
essentially “‘brought a mislabeled federal claim.’” Taylor Chevrolet Inc. v. Medical Mut. Services,
306 Fed. Appx. 207, 210 (6th Cir. 2008)(quoting King v. Marriott Int’l, Inc., 337 F.3d 421, 425 (4th
Cir. 2003)). “Unlike ordinary preemption, which is a federal defense to a state-law claim under the
Supremacy Clause of the Constitution that does not render a state-law claim removable to federal
court, complete preemption makes a state-law claim ‘purely a creature of federal law,’ and thus
removable from state to federal court from the outset.” Hansen v. Harper Excavating,Inc., 641 F.3d
6
1216, 1220-1221 (10th Cir. 2011)(quoting Franchise Tax Bd. v. Construction Laborers Vacation
Trust, 463 U.S. 1, 23–24 (1983)). See also Harvey v. Life Ins. Co. of North America, 404 F. Supp.
2d 969, 973 (E.D. Ky. 2005)(citing Caterpillar, Inc. . Williams, 482 U.S. 386, 393 (1987)); Roddy
v. Grand Trunk Western Railroad, Inc., 395 F.3d 318, 323 (6th Cir. 2005).
Complete preemption is a very narrow exception to the well-pleaded complaint rule.
AmSouth Bank v. Dale, 386 F.3d 763, 776 (6th Cir. 2004). See also Roddy, 395 F.3d at 323. In
fact, the Sixth Circuit in AmSouth Bank summarized the law in this area and noted the Supreme
Court has only found three statutes that evince Congressional intent to completely preempt a field:
§ 301 of the LMRA, see Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557, 560 (1968), §
502(a)(1)(B) of ERISA, see Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-66 (1987), and
§§ 85 and 86 of the National Bank Act, see Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 10-11
(2003). AmSouth Bank, 386 F.3d at 776; see also Mikulski v. Centerior Energy Corp., 501 F.3d
555, 563 (6th Cir. 2007). “In those cases where the Supreme Court has found complete preemption,
‘the federal statutes at issue provided the exclusive cause of action for the claim asserted and also
set forth procedures and remedies governing that cause of action.’” Roddy, 395 F.3d at 323 (quoting
Beneficial Nat’l Bank, 539 U.S. at 8.).
Defendants have not established that federal law creates the exclusive cause of action for
healthcare providers to sue a managed care organization for non-payment for services, or for that
matter, that federal law creates any private right of action for such an action by a provider against
a managed care organization for non-payment. See Baptist Hospital of Miami, Inc. v. Wellcare of
Florida, Inc., 2011 WL 2084003, *6 (S.D. Fla. May 23, 2011)(“it is clear to the Court that Wellcare
has not established any aspect of federal [Medicaid] law that completely preempts Florida law
7
regarding emergency-services reimbursement such that this case is removable.”); Hood v.
AstraZeneca Pharmaceuticals, LP, 744 F. Supp. 2d 590, 605 (N.D. Miss. 2010).
Instead, the
statutory provision of § 1396u-2(f) merely instructs the State concerning the timeliness of payment
provisions to be placed in managed care contracts. It does not provide that the sole cause of action
for non-payment of services against a managed care organization is under federal law. In fact, the
statute recognizes that the health care provider and the managed care organization can agree to an
alternate payment schedule. 42 U.S.C. § 1396u-2(f). Furthermore, “Medicaid is the hallmark of
‘cooperative Federalism.’” Hood, 744 F. Supp. 2d at 605(quoting Harris v. McRae, 448 U.S. 297,
308 (1980)). Medicaid is administered jointly by state and federal government and is described as
“‘a cooperative federal-state program that directs federal funding to states to assist them in providing
medical assistance to low-income individuals.’” G., ex rel., K. v. Hawaii, Dept. of Human Services,
2009 WL 1322354, *2 (D. Haw. May 11, 2009)(citing Ball v. Rodgers, 492 F.3d 1094, 1098 (9th
Cir. 2007)). Thus, “the very nature of the Medicaid program nullifies any claim that it completely
preempts [Kentucky] law in order to warrant federal removal jurisdiction.” Hood, 744 F. Supp. 2d
at 605.
In as much as Defendants raise provisions of the federal Medicaid statute and regulations as
a defense to certain aspects of Plaintiffs’ state law claims, a defense of preemption does not itself
provide a basis for federal question jurisdiction. “‘[A] case may not be removed to federal court on
the basis of a federal defense, including a defense of pre-emption, even if the defense is anticipated
in the plaintiff’s complaint, and even if both parties concede that the federal defense is the only
question truly at issue.’” In re Air Crash at Lexington, Kentucky, 486 F. Supp. 2d 640, 645 (E.D.
Ky. 2007)(quoting Roddy, 395 F.3d at 322). In fact, a defense that an action is preempted is
8
properly heard and decided by the state court in which the action was initiated. Mikulski, 501 F.3d
at 560-61; Adkins v. Excel College of Corbin, Inc., 21 F.3d 427, 1994 WL 124268, *3 (6th Cir.
1994) (“Kentucky’s state courts are equally capable of determining [defendant’s] preemption
defense.”).
Finally, while Defendants cite preemption as a justification for jurisdiction in both its notice
of removal and amended notice of removal, Defendants did not address preemption in its response
to the motion to remand. Thus, it appears to the Court that Defendants have conceded that complete
preemption is not a proper grounds for removal of the present action.
For these reasons, the Court finds that Plaintiffs’ claims are not completely preempted by
federal Medicaid statutes and regulations, and removal was not proper on this basis.
2. Substantial Federal Question
Defendants argue that the Court has jurisdiction because the merits of the case turn on a
substantial federal issue. Specifically, Defendants contend that Plaintiffs have essentially presented
claims for reimbursement under the Medicaid system for medical lab services provided by
PremierTox to individuals in the Medicaid program. According to Defendants, the validity of these
claims, the amount owed, and the timing of any payments is ultimately controlled by federal statute
and regulation, both by operation of law and by the contract which governs the relationship between
PremierTox and Kentucky Spirit. (Defendants’ Response at 2.) Additionally, Defendants contend
removal is warranted because the federal Medicaid program involves a federal regulatory scheme
requiring uniformity in its interpretation and because Medicaid is primarily funded by the federal
government. (Id. at 9.)
The Complaint does not explicitly refer to or invoke any federal law for the relief Plaintiffs
9
seek. Even when no federal claim is present in a complaint, the Supreme Court has found that “a
case may arise under federal law ‘where the vindication of a right under state law necessarily turn[s]
on some construction of federal law.’” Merrell Dow Pharms., Inc. v. Thompson, 478 U.S. 804, 808
(1986) (quoting Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Trust for Southern
Cal., 463 U.S. 1, 9 (1983)). See also Mikulski, 501 F.3d at 568. However, “the mere presence of
a federal issue in a state cause of action does not automatically confer federal-question jurisdiction.”
Merrell Dow, 478 U.S. at 813. Federal question jurisdiction premised on the adjudication of a
federal issue within a state law claim “demands not only a contested federal issue, but a substantial
one, indicating a serious federal interest in claiming the advantages thought to be inherent in a
federal forum.” Grable & Sons., 545 U.S. at 313. The United States Supreme Court has identified
three parts to the substantial-federal-question doctrine: “(1) the state-law claim must necessarily
raise a disputed federal issue; (2) the federal interest in the issue must be substantial; and (3) the
exercise of jurisdiction must not disturb any congressionally approved balance of federal and state
judicial responsibilities.” Mikulski, 501 F.3d at 568 (citing Grable & Sons, 545 U.S. at 314).
Applying these principles, the Court finds that the substantial federal question doctrine does
not support removal in this case. First, Defendants have not identified any federal statute actually
in dispute. Both the Managed Care Contract and the Notice of Amendment identified by Defendants
specifically incorporate both federal and state law within those contracts. In fact, Congress in 42
U.S.C. § 1396u-2(f) recognized that managed care organizations and health care providers can agree
to alternative payment schedules. Consistent with the Balanced Budget Act, 42 U.S.C. § 1396u-2,
Kentucky Spirit agreed to comply with Kentucky’s prompt-pay statute, KRS 304.17A-700-730.
Additionally, even if a court may need to refer to the federal Medicaid statute and its regulations in
10
examining the reimbursement claims, “the federal courts have rejected the expansive view that mere
need to apply federal law in a state-law claim will suffice to open the ‘arising under’ door.” Baptist
Hosp. of Miami, Inc. v. Wellcare of Florida, Inc., 2011 WL 2084003, *4 n. 5 (S.D. Fla. May 23,
2011)(citing Adventure Outdoors, Inc. v. Bloomberg, 552 F.3d 1290, 1300 (11th Cir. 2008)(citing
Grable, 545 U.S. at 313)); Pruitt v. Honda of America Mfg. Inc., 2006 WL 889498, *5 (M.D. Tenn.
March 28, 2006)(reference to federal law requiring trucks operated in interstate commerce to be
insured for various limits does not create a substantial federal question).
Second, the Court finds that the federal aspect of Medicaid law in this case “does not present
a substantial federal issue that would give this Court original jurisdiction over [PremierTox’s] statelaw reimbursement claim.” Baptist Hosp., 2011 WL 2084003, *4. A year after deciding Grable,
the United States Supreme Court in Empire Healthchoice Assur. Inc. v. McVeigh, 547 U.S. 677
(2006), elaborated on the key factors that had supported a finding that a substantial federal interest
existed in Grable. The Supreme Court emphasized that in Grable, the “dispute centered on the
action of a federal agency and its compatibility with a federal statute; the resolution of the federal
issue was dispositive of the case; the interpretation of the IRS statute would be controlling in
numerous other cases; and the federal aspect of Grable involved a ‘nearly pure issue of law.’”
Baptist Hosp., 2011 WL 2084003, *4 (quoting Empire Healthchoice, 547 U.S. at 682-83.). See
Mikulski, 501 F.3d at 570. By contrast, in denying federal jurisdiction in Empire Healthchoice, the
Supreme Court noted “the dispute was between private parties, the federal issue was not dispositive,
and the nature of the state claim was ‘fact-bound and situation-specific.’” Id.
Unlike Grable, this dispute is between private parties and the actions at the center of the
lawsuit are those taken by Kentucky Spirit, a private party, and not a federal actor. Main &
11
Associates, Inc. v. Blue Cross and Blue Shield of Alabama, 776 F. Supp. 2d 1270, 1281 (M.D. Ala.
2011)(rejecting insurer’s argument that removal was proper because claims asserted by an operator
of nursing home healthcare facility for non-payment of benefits against the managed care
organization arise under the Medicare Act); Baptist Hospital, 2011 WL 2084003, *4. The dispute
in this case centers around whether Kentucky Spirit failed to timely pay for services rendered by
PremierTox in violation of the applicable contracts and Kentucky’s prompt-pay statute. Thus, the
dispute in this case is “unlikely to impact the federal government’s interests or its ability to vindicate
those interests through administrative action.” Baptist Hosp., 2011 WL 2084003, * 4(quoting
Adventures Outdoors, 552 F.3d at1300).3 Additionally, unlike Grable, where the issues were purely
issues of law, the determination of the issues in the present case will be more fact-bound and
situation specific, perhaps involving detailed factual considerations of each claim in question. Id.
Further, despite Defendants’ argument to the contrary, “the fact that a federally created program,
Medicaid, serves as the initial source of the funds the [Plaintiffs] seek[] to recover does not, without
more, confer federal jurisdiction.” Pennsylvania v. Eli Lilly & Company, Inc., 511 F. Supp. 2d 576,
585 (E.D. Pa. 2007).
The Court also rejects Defendants’ argument that the determination of whether the services
3
Cf. In re Zyprexa Products Liability Litigation, 2009 WL 691942, *3 (E.D.N.Y. March
11, 2009)(citing In re Zyprexa Products Liability Litigation, 451 F. Supp. 2d 458 (E.D.N.Y.
2006) (accepting jurisdiction of Medicaid-related claims under Grable standard when “[t]he
national nature of the Zyprexa litigation is illustrated by the present federal efforts to settle all
claims of the United States and the fifty states, as well as by the combined resolution of the fifty
state Medicaid liens and federal Medicare liens for individual tort recoveries for personal injury,
demonstrating that uniformity in treating federally-based claims brought in this multidistrict
litigation is desirable.”). The decision in In re Zyprexa Products Liability Litigation has not been
followed by numerous courts. See, e.g., Hood v. Ortho-McNeil-Janssen Pharmaceuticals, Inc.,
2009 WL 561575, *1 (N.D. Miss. Mar. 4, 2009)(citing cases).
12
were medically necessary presents a substantial federal question under Grable. In response to the
motion to remand, Defendants contend that the services in question were not “medically necessary”
as defined in 42 C.F.R. § 440.230 and 42 U.S.C. § 1396d. According to Defendants, the Notice of
Amendment defines “medically necessary” or “medical necessity” as “Covered Services which are
medically necessary as defined under 907 KAR 3:130, and provided in accordance with 42 CFR §
440.230, including children’s services pursuant to 42 U.S.C. 1396d(r).” (Notice of Amendment,
Appendix 1, § 2.6.) In light of this provision, Defendants contend that the issue of medical necessity
presents a federal issue sufficient to confer jurisdiction under the substantial-federal question
doctrine. However, Defendants’ argument that the claims were not medically necessary is properly
characterized as a defense to the Plaintiffs’ state-law reimbursement claim. “[I]t is now settled law
that a case may not be removed to federal court on the basis of a federal defense . . . even if the
defense is anticipated in the plaintiff’s complaint, and even if both parties concede that the federal
defense is the only question truly at issue.” Caterpillar, Inc. v. Williams, 482 U.S. 386, 393 (1987)
(emphasis in the original) (citing Franchise Tax Board, 463 U.S. at 12); see also Beneficial Nat’l
Bank v. Anderson, 539 U.S. 1, 6 (2003). Additionally, even if “medical necessity” was considered
a federal issue in the present case, there is no dispute as to the meaning of the terms “medically
necessary” or “medical necessity.” As discussed above, state courts are fully competent to construe
any federal Medicaid statute or regulation related to the timeliness of payments or the medical
necessity of a particular service. See Merrell Dow, 478 U.S. at 813; Baptist Hosp.,2011 WL
2084003, *4 n. 5.
Thus, in light of Grable and Empire Healthchoice, the Court finds that Plaintiffs claims do
not raise a substantial federal issue.
13
Third, even if the Court were to conclude that a substantial federal question existed, the
Court finds that accepting jurisdiction of this state-law reimbursement claim would be disruptive
of the sound division of labor between state and federal courts envisioned by Congress. Eastman
v. Marine Mechanical Corp., 438 F.3d 544, 553 (6th Cir. 2006); Grable & Sons, 545 U.S. at 314;
In re Oxycontin Antitrust Litigation, 821 F. Supp. 2d 591, 600 (S.D.N.Y. 2011). Defendants have
not demonstrated that federal law creates any private right of action for a health care provider
against a managed care organization for non-payment for services rendered. See Baptist Hosp.,
2011 WL 2084003, *6; Hood, 744 F. Supp. 2d at 605; In re Oxycontin Antitrust Litigation, 821 F.
Supp. 2d at 600 (“[A]s other federal district courts have found, it is telling that Congress has
specifically obligated states to seek reimbursement of Medicaid funds from legally liable third
parties, see 42 U.S.C. § 1396a(a)(25)(A), but has provided no federal cause of action to do so.”);
Utah v. Eli Lilly & Co., 509 F. Supp. 2d 1016, 1023 (D. Utah 2007); South Carolina v. Eli Lilly &
Co., Inc., 2007 WL 2261693, at *2–3 (D.S.C. Aug. 3, 2007)). While not dispositive, the Sixth
Circuit has held that the absence of a private right of action suggests that Congress did not intend
for federal courts to exercise jurisdiction. Eastman v. Marine Mechanical Corp., 438 F.3d 544, 552
(6th Cir. 2006)(“Congress’ withholding a private right of action from [a] statute[] is an important
signal to its view of the substantiality of the federal question involved.”). “[A] finding of federal
jurisdiction over any state cause of action implicating provisions of the Federal Medicaid Act and
its accompanying regulations could ‘attract [ ] a horde of original filings and removal cases raising
other state claims with embedded federal issues.’” Hood, 2009 WL 561575, *3 (quoting Grable, 545
U.S. at 313). Under these circumstances, “the fact that Congress provided no private right of action
in the Federal Medicaid Act presents compelling evidence that a finding of federal jurisdiction in
14
the instant case would not be ‘consistent with congressional judgment about the sound division of
labor between state and federal courts.’” Id. See also Hawaii v. Abbott Labs., Inc., 469 F. Supp.
2d 842, 856 (D. Haw. 2006) (observing that “if Congress had thought that [average wholesale price]
and other Medicare provisions implicated a substantial federal interest, it could have ensured that
only federal courts would hear such cases,” but it did not).
Based on the foregoing, the Court finds that the substantial federal question doctrine set forth
in Grable does not support removal in this case.
B. Plaintiffs’ Request for Costs and Attorney’s Fees
Pursuant to 28 U.S.C. § 1447(c), a district court that remands a case may require payment
of “just costs and any actual expenses, including attorney fees, incurred as a result of the removal.”
Whether to award costs, fees, and expenses is within the discretion of the trial court. Norton
Hospitals, Inc. v. Sagamore Health Network, Inc., 2011 WL 1885636, *3 (W.D. Ky. May 18,
2011)(citing Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238, 240 (6th Cir. 1993)). “‘Absent
unusual circumstances, courts may award attorney’s fees under § 1447(c) only where the removing
party lacked an objectively reasonable basis for seeking removal.’” Id. (quoting Martin v. Franklin
Capital Corp., 546 U.S. 132, 141 (2005)). “‘Conversely, when an objectively reasonable basis
exists, fees should be denied.’” Id. In the present case, the Court finds that although removal was
ultimately improper, the Court is not satisfied that the Defendants lacked an objectively reasonable
basis for removal. Accordingly, the Court will not award costs, fees, and expenses to Plaintiffs.
III. CONCLUSION
In the absence of subject matter jurisdiction, the Court cannot reach the merits of the motion
to dismiss. For these reasons, IT IS HEREBY ORDERED that Plaintiffs’ motion for remand [DN
15
6] is GRANTED and Defendants’ motions to dismiss [DN 7, DN 8, DN 9] is DENIED as moot.
IT IS FURTHER ORDERED that Defendants’ motion for leave to file an amended notice of
removal [DN 16] is GRANTED. The amended notice of removal was considered in deciding the
motion to remand. The case is REMANDED to the Russell Circuit Court.
cc: counsel of record
Russell Circuit Court
May 29, 2012
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