Southwest Louisiana Hospital Association v. Connecticut General Life Insurance Co

Filing 12

MEMORANDUM RULING re 4 MOTION to Remand filed by Southwest Louisiana Hospital Association. Signed by Magistrate Judge Kathleen Kay on May 21, 2012. (crt,Benoit, T)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAKE CHARLES DIVISION
SOUTHWEST LOUISIANA
HOSPITAL ASSOCIATION

:

CIVIL ACTION NO. 2:11-CV-2105

V.

:

JUDGE MINALDI

CONNECTICUT GENERAL LIFE
INSURANCE CO., ET AL.

:

MAGISTRATE JUDGE KAY

MEMORANDUM RULING

Before the court is a Motion to Remand [doc. 4] filed by plaintiff Southwest Louisiana

Hospital Association d/b/a Lake Charles Memorial Hospital (LCMH). This motion is opposed
by the defendants Connecticut General Life Insurance Co. (CGLI) and CIGNA Healthcare Inc.
(CIGNA) Doc. 9.
For the reasons set forth herein, LCMH’s motion is GRANTED and this case is
remanded to the 14th Judicial District Court for the Parish of Calcasieu, State of Louisiana.
Background
This case arises out of a “managed care agreement” between LCMH and CGLI. Doc. 1,
att. 1. The agreement provided that LCMH would accept a discounted payment from CIGNA’s
customers in exchange for certain acts on the part of CIGNA, including patient referral. Id.
LCMH alleges patient M.M. was admitted to LCMH’s facility, for treatment and care, on
three separate occasions in 2010 (March-April, July-August, and October). Doc. 1, p. 2. M.M.
was insured under a health plan provided by his employer and administered by CIGNA. Id.
LCMH verified M.M.’s coverage status with CIGNA upon each of M.M.’s stays at LCMH.
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Doc. 1, att. 1, p. 4-5. CIGNA paid LCMH in full for all of M.M.’s admissions and treatments.
Id.

However, on January 18, 2011, CIGNA contacted LCMH requesting refunds for the

payments rendered for M.M.’s stays in July-August, and October, on the basis that M.M. was not
covered under his employer’s health plan during that time. Id. at 5. LCMH refunded CIGNA
$36,378.55 under protest for M.M.’s October stay but refused to give any refund for the JulyAugust stay because LCMH deemed CIGNA’s request untimely under state law. Id.
On July, 21, 2011, LCMH filed suit in Louisiana’s 14th Judicial District Court, Calcasieu
Parish, naming CGLI and CIGNA as defendants. Id. at 1. LCMH alleges that the managed care
agreement was breached when CIGNA demanded repayment for M.M.’s stays at LCMH. See id.
at 6. Specifically, LCMH contends that, after LCMH verified M.M.’s coverage status with
CIGNA and obtained authorization for treatment, CIGNA was required to pay LCMH for
M.M.’s admission and treatment. See id. Therefore, LCMH has advanced state law claims of
breach of contract, and alternatively, for unjust enrichment and detrimental reliance. Id. at 6 -7.
With respect to damages, LCMH seeks the money it returned to CIGNA; $36,378.55. See id. at
5-8.
On December 5, 2011, the defendants removed this case to federal court. Doc. 1. In the
Notice of Removal defendants submitted that this court has both federal question and diversity
subject-matter jurisdiction. Id. at 2-3. Particularly, the defendants suggest that this court has
diversity jurisdiction because the plaintiff is a citizen of Louisiana and the defendants are citizens
of Connecticut (CGLI) and Vermont (CIGNA). Id. at 2. Further, the defendants contend that the
amount in controversy in this matter exceeds $75,000. Id. at 3. With respect to federal question
jurisdiction, the defendants argue that “this action arises under the Employee Retirement Income
Security Act (“ERISA”), a federal law, because the health plan which forms the foundation of

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this controversy is an ERISA plan. ERISA law supersedes any and all state laws related to such
a health plan.” Id. (citing 29 U.S.C. § 1144(a)).
On December 28, 2011, LCMH filed the instant motion to remand. Doc. 4. In support,
LCMH argues that the defendants improperly removed this case because federal subject-matter
jurisdiction does not exist. Specifically, LCMH disputes that its claims arise under ERISA or
that the amount in controversy exceeds $75,000. See doc. 4, att. 1. LCMH suggests that federal
jurisprudence allows for state law claims, independent from ERISA, when the claims are
asserted directly against a managed care provider and are based on a legal duty separate and
distinct from ERISA and that it is facially apparent from LCMH’s state court petition that the
amount in controversy is well below $75,000 ($36,378.55). See doc. 4, p. 4.
The defendants oppose remand and argue that LCMH has inaccurately calculated the
amount in controversy; they contend that the actual amount is $137,653.72. Doc. 9 at 3. The
defendants arrive at this figure by adding the amount from M.M.’s July-August stay at LCMH,
which amounted to $101,275.17 and suggest this amount should be added because LCMH:
alleges that it is entitled to retain the amounts paid [by CIGNA] for
the July-August hospital stay and that Defendants should not be
allowed to recoup those amounts through demands or otherwise.
Further, in its prayer for relief, LCMH requests all orders and
decrees necessary and for full general and equitable relief.
Id. (citations omitted). In essence defendants suggest that LCMH seeks a declaratory relief
concerning payment for the July-August stay and that this amount is included in the “amount in
controversy.” Defendants also note that they have filed a counterclaim against LCMH for
$101,275.17 (the July-August amount). Doc. 8, p. 7. The defendants do not address the issue of
federal-question jurisdiction in their opposition to LCMH’s motion to remand. See doc. 9.

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On January 27, 2012, LCMH filed a reply to the defendants’ opposition brief. Doc. 10.
Therein, LCMH argues that it is clear “from the face of [LCMH’s state court petition] that the
damages at issue in [this case] relate solely to the refund amount wrongfully sought and paid by
LCMH to CIGNA concerning patient M.M.’s October stay at [LCMH].” Id. at 2 (emphasis in
original). Furthermore, LCMH contends that federal jurisprudence precludes the consideration
of counterclaims when determining the “amount in controversy.” Id. at 3-4. Additionally,
LCMH makes note that the defendants did not brief the issue of federal-question jurisdiction, and
therefore, LCMH concludes that the defendants have conceded that issue. Id. at 1. For these
reasons, LCMH declares that subject-matter jurisdiction is lacking in this case, and that a remand
to state court would be proper.
Law and Analysis
Federal Courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of
America, 511 U.S. 375, 377 (1994).

They possess only that power authorized by the

Constitution and by statute. Id. Federal courts have original jurisdiction in all civil matters
arising under federal law, and also, where the parties are citizens of different states and the
amount in controversy exceeds $75,000.00. See 28 U.S.C. §§ 1331, 1332. Civil actions that are
filed in state court may be removed to federal court by a defendant if the conditions set forth in
either section 1331 or section 1332 are met. See 28 U.S.C. § 1441.
It is well settled that the removing party bears the burden of establishing the facts
necessary to show that federal jurisdiction exists. Allen v. R & H Oil & Gas Co., 63 F.3d 1326,
1335 (5th Cir. 1995) (citing Gaitor v. Peninsular & Occidental S.S. Co., 287 F.2d 252, 253-54
(5th Cir. 1961)). To assess whether jurisdiction is appropriate the court considers “the claims in
the state court petition as they existed at the time of removal.” Manguno v. Prudential Prop. &

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Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). “Any ambiguities are construed against
removal because the removal statute should be strictly construed in favor of remand.” Id.
In this case, the defendants are the removing parties, and they have attempted to
establish federal subject-matter jurisdiction by demonstrating that both federal-question (section
1331) and diversity (section 1332) jurisdiction exist.
I.

Federal Question Jurisdiction
In the defendants’ notice of removal, they argue that this case arises under ERISA, a

federal law, and therefore, that this court has federal-question jurisdiction.

However, this

argument was absent in the defendants’ opposition to remand brief. LCMH suggests that this
absence means that the defendants have abandoned the argument. Nevertheless, because the
defendants have not expressly conceded the issue, this court will examine the allegations made in
the notice of removal.
The defendants contend that M.M.’s health plan is an ERISA plan, and as such, ERISA
law preempts any state law claims made in relation to the health plan. See doc. 1, p. 3.
Therefore, even though LCMH’s state court petition did not include claims under federal law, the
defendants conclude that there is a federal question at issue in this case. See id.
Generally, the presence or absence of federal-question jurisdiction is governed by the
“well-pleaded complaint rule,” which provides that federal jurisdiction exists only when a
federal question is presented on the face of the plaintiff’s properly pleaded complaint.
Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing Gully v. First Nat’l Bank, 299 U.S.
109, 112-13 (1936)). “This rule makes the plaintiff the master of the claim; he or she may avoid
federal jurisdiction by exclusive reliance on state law.” Id.

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However, there is an exception to the well-pleaded complaint rule; “when a federal
statute wholly displaces the state-law cause of action through complete pre-emption, the state
law claim can be removed.” Aetna Health Inc. v. Davila, 542 U.S. 200, 207-08 (2004) (internal
quotation omitted). “This is so because when the federal statute completely pre-empts the statelaw 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. ERISA is one of these statutes.”
Id. at 208 (internal quotation and citation omitted).
The purpose of ERISA is to provide a uniform regulatory regime over employee benefit
plans. McAteer v. Silverleaf Resorts, Inc., 514 F.3d 411, 416 (5th Cir. 2008) (citing Aetna
Health Inc, 542 U.S. at 208). To this end, ERISA provides that it “shall supersede any and all
State laws insofar as they may now or hereafter relate to any employee benefit plan . . ..” 29
U.S.C. § 1144(a). The United States Supreme Court has stated that a law “relates to” an
employee benefit plan and is preempted if it has a connection with or reference to the plan. See
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983).
Under Fifth Circuit precedent, to determine whether a state law relates to a plan for
purposes of ERISA preemption, the court should ask: “(1) whether the state law claims address
areas of exclusive federal concern, such as the right to receive benefits under the terms of an
ERISA plan; and (2) whether the claims directly affect the relationship among the traditional
entities-the employer, the plan and its fiduciaries, and the participants and beneficiaries.”
McAnteer, 514 F.3d at 417 (citing Woods v. Tex. Aggregates, L.L.C., 459 F.3d 600, 602 (5th Cir.
2006)).
It is clear that LCMH’s claims in this case are not preempted. LCMH’s state law claims
relate to the contract between it and the defendants and have nothing to do with anyone’s right to

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receive benefits under the terms of an ERISA plan. Furthermore, LCMH’s contractual claims do
not involve “traditional” ERISA parties, such as the employer, the beneficiary, or even the terms
of the ERSIA plan. Additionally, numerous courts have found state law claims to not be
preempted in similar situations. See, e.g., Transitional Hosp. Corp. v. Blue Cross & Blue Shield,
164 F.3d 952, 954 (5th Cir. 1999) (holding that ERISA does not preempt state law when the
state-law claim is brought by an independent, third-party health care provider against an insurer
for its negligent misrepresentation regarding the existence of health care coverage); see also
Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d 236, 245-50 (5th Cir. 1990);
Center for Restorative Breast Surgery, LLC v. Blue Cross & Blue Shield, No. 06-9985, 2007 WL
1428717, at *5 (E.D. La. May 10, 2007).
For these reasons, this court finds that LCMH’s state law claims against the defendants
are not preempted by ERISA. Therefore, there is no federal question in this case and this court
does not have subject-matter jurisdiction pursuant to 28 U.S.C. § 1331.
II.

Diversity Jurisdiction
In the defendants’ notice of removal and opposition to remand they assert that this court

has diversity jurisdiction pursuant to 28 U.S.C. § 1332. It is uncontested that the parties in this
action are diverse; LCMH is a citizen of Louisiana and the defendants are citizens of Connecticut
(CGLI) and Vermont (CIGNA). However, the “amount in controversy” requirement set forth in
section 1332 is in dispute.
Generally, in determining the amount in controversy, when the plaintiff has alleged a
specific sum of damages in its petition, that amount controls, if made in good faith. St. Paul
Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938). However, if a defendant is able
to show, by a preponderance of the evidence, that the amount in controversy is, actually, over

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$75,000, then diversity jurisdiction may exist. See Lucket v. Delta Airlines, Inc., 171 F.3d 295,
298 (5th Cir. 1999). A defendant may do this by either showing that it is facially apparent that
the amount in controversy exceeds $75,000.00, or by setting forth facts in its removal petition (or
affidavit) that support a finding of the requisite amount in controversy. Id.
Defendant’s removal notice simply states that the amount in controversy exceeds
$75,000. See doc. 1, p. 3. In their opposition to remand brief defendants insinuate that LCMH
seeks declaratory relief when they state
LCMH also alleges that it is entitled to retain the amounts paid [by
CIGNA] for the July-August hospital stay and that Defendants
should not be allowed to recoup those amounts through demands
or otherwise. Further, in its prayer for relief, LCMH requests all
orders and decrees necessary and for full general and equitable
relief. Notably, the amounts paid in connection with the JulyAugust hospital stay total $101,275.17. Accordingly, the total
amount in controversy for purposes of determining diversity
jurisdiction is $137.653.72 . . ..
Doc. 9, p. 3 (internal citations omitted). In a footnote to the above quoted section of the
defendants brief, the defendants quote the Supreme Court’s decision in Hunt v. Washington State
Apple Adver. Comm’n, 432 U.S. 333, 347 (1977), for the proposition that “[i]n actions seeking
declaratory or injunctive relief, it is well established that the amount in controversy is measured
by the value of the object of the litigation.” Doc. 9, p. 3 n. 2.
Defendants’ valiant efforts to create this amount in controversy notwithstanding, we find
nothing in plaintiff’s petition that would suggest it intended to render the July-August payment
part of this controversy. Plaintiff has alleged three separate theories under which it is owed one
sum of money: breach of contract, unjust enrichment, and estoppel/detrimental reliance. See
doc. 1, att. 1, p. 4-5. Under each separate theory plaintiff seeks no more than the sum of money

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it refunded to CINGA. See id., ¶¶ 20, 22, and 25. Nowhere in plaintiff’s petition do we find any
request that we declare its entitlement to retain the July-August payment.
Defendants additionally argue that the amount in controversy is met when considering
their counterclaim to recover the July-August payment [doc. 8] and that this counterclaim should
be considered in the amount in controversy analysis. See doc. 9, p. 3-4. The Fifth Circuit has
held that using counterclaims as an independent basis for determining the amount in controversy
is “error as a matter of law.”1 St. Paul Reinsurance Co., Ltd. v. Greenburg, 134 F.3d 1250, 1254
(5th Cir. 1998) see also Royal Cosmopolitan, LLC v. Star Real Estate Group, LLC, 629 F.Supp.
594, 600-01 (E.D. La. 2008). Additionally, allowing federal subject-matter jurisdiction to be
created by a defendant’s counterclaim, filed post-removal, would be contrary to several
longstanding jurisdictional principles. See Mollan v. Torrnace, 22 U.S. 537, 539 (1824) (holding
that a federal court’s jurisdiction “depends upon the state of things at the time of the action
brought . . .”); Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 574-75 (2004)
(holding that events subsequent to the filing of the complaint cannot create federal jurisdiction);2
Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (noting that the plaintiff is the “master of
the claim” who may “avoid federal jurisdiction” by carefully tailoring the allegations in his
complaint).
For these reasons this court finds that amount in controversy is well below the
jurisdictional threshold in 28 U.S.C. § 1332 and that federal subject-matter jurisdiction does not
exist in this case.

1

 The Fifth Circuit allows for counterclaims to be considered to “merely clarify ambiguity regarding the amount in
controversy.” See Greenburg, 134 F.3d at 1254 n. 18.
2
 There is one narrow exception to this rule. See Grupo Dataflux, 541 U.S. at 572 (recognizing that a defect in
diversity jurisdiction may be cured by dismissing a nondiverse party).

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Conclusion
For the foregoing reasons, this court finds that the defendants’ have not carried their
burden in establishing that federal subject-matter jurisdiction exists in this case. The plaintiff’s
Motion to Remand [doc. 4] is GRANTED.
A separate order of remand is being issued herewith. As set forth in that order, the effect
of the order will be suspended for a period of fourteen (14) days from today’s date to allow the
parties to appeal to the district court for review. Should either party seek review from the district
court, then the effect of this order is suspended until final resolution of the issue by the district
court.
THUS DONE this 21st day of May, 2012.

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