State of Louisiana v. Fresenius Medical Care Airline et al

Filing 107

Judge Nathaniel M. Gorton: MEMORANDUM AND ORDER entered. For the foregoing reasons, the State of Louisiana's renewed motion for remand (Docket No. 57 in 16-cv-11035) is ALLOWED. This case is REMANDED to the Nineteenth Judicial District Court, Parish of East Baton Rouge, Louisiana.Plaintiffs' request that the Court award the State its fees and costs associated with removal and remand is DENIED. So ordered. Associated Cases: 1:13-md-02428-NMG, 1:16-cv-11035-NMG(McManus, Caetlin)

United States District Court
District of Massachusetts
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This document relates to:
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STATE OF LOUISIANA, EX REL.
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JAMES D. “BUDDY” CALDWELL
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Plaintiff,
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v.
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FRESENIUS MEDICAL CARE HOLDINGS, )
INC., D/B/A FRESENIUS MEDICAL
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CARE NORTH AMERICA, ET AL.
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Defendant.
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IN RE: FRESENIUS GRANUFLO/
NAUTRALYTE DIALYSATE PRODUCTS
LIABILITY LITIGATION

Civil Action No.
16-11035-NMG
MDL No. 13-2428

MEMORANDUM & ORDER
GORTON, J.
The State of Louisiana (“the State” or “Louisiana”) and
Blue Cross Blue Shield of Louisiana (“BCBS”) (collectively,
“plaintiffs”) brought an action in Louisiana against Fresenius
Medical Care Holdings and its related entities (collectively,
“defendants” or “Fresenius”).

Louisiana and BCBS allege that

Fresenius engaged in unfair and deceptive practices related to
the manufacture, sale and marketing of their NaturaLyte Liquid
and GranuFlo Acid Concentrates, products used in dialysis
treatment.

The plaintiffs seek damages and Medicaid
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reimbursement for claims paid for what Louisiana contends were
goods of substandard quality.
Fresenius removed the case on diversity grounds, at which
point it was assigned to another session of this Court as part
of an ongoing Multi-District Litigation against Fresenius, only
to have that session remand it back to Louisiana state court.
After remand, BCBS intervened in the case, asserting its
subrogation rights as plan administrator both for Statesponsored health plans and private health plans, and sought
damages and reimbursement for funds paid to Fresenius for
GranuFlo and NaturaLyte.

Fresenius again removed the case and

it was transferred to the same session of this Court again by
the Judicial Panel on Multi-District Litigation (“JPML”).
That multi-district litigation was ultimately transferred
to this session of the District Court for the District of
Massachusetts and pending before it is Louisiana’s renewed
motion to remand.

For the reasons that follow, that motion will

be allowed.
I.

Background
In June, 2014, the State of Louisiana filed suit against

Fresenius in the Nineteenth Judicial District, Parish of East
Baton Rouge, Louisiana.

In its complaint, the State alleged

that Fresenius falsely advertised and marketed NaturaLyte and
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GranuFlo as safe in the quantities administered, and that,
therefore, the reimbursement it sought from and was paid by the
State for Medicaid patients who underwent treatment with those
substances was fraudulent.

Louisiana brought suit under the

Louisiana Unfair Trade Practices and Consumer Protection Act
(“LUTPA”), the Louisiana Medical Assistance Program Integrity
Law (“MAPIL”), and common law claims of false advertising,
negligent misrepresentation, unjust enrichment, redhibition and
fraud.

The previously described removal and remand led the case

back to Louisiana state court.
After remand, the case proceeded through discovery and
summary judgment in the state court and was scheduled for trial.
Shortly before the trial was due to commence, BCBS sought to
intervene, incorporating all of the allegations originally
brought by the State.

BCBS, a health management organization,

seeks to recover past and future payments it made to Fresenius
on behalf of members of its health plans for hemodialysis
treatment using the drugs in question.

It asserts its

subrogation rights on behalf of its plan members, avers that it
overpaid Fresenius for substandard treatments and pleads various
tort claims.
After intervention by BCBS, but before the commencement of
trial, Fresenius removed the case a second time and once again
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it was transferred by the JPML to the predecessor session of
this Court.

Fresenius opposes any remand of this case,

contending that there exists federal question jurisdiction
pursuant to 28 U.S.C. § 1331.

It argues that BCBS has foisted

into this case claims that are preempted by the Employee
Retirement Income Security Act of 1974 (“ERISA”), 88 Stat. 829,
29 U.S.C. § 1001 et seq, and that this Court should exercise
supplemental jurisdiction over the other claims in the case.
BCBS responds that ERISA does not preempt its claims.
Louisiana agrees but urges that, if the Court finds that the law
does preempt the private claims added by BCBS, the Court sever
and retain jurisdiction over those claims while remanding all
other claims to Louisiana state court.
II.

Motion to Remand
A.

Legal Standard

28 U.S.C. § 1441(a) states that
any civil action brought in a State court of which the
district courts of the United States have original
jurisdiction, may be removed by the defendant [to a
federal court].
The jurisdiction alleged here is that of federal question
jurisdiction which grants federal district courts original
jurisdiction over cases “arising under the Constitution, laws,
or treaties of the United States.”
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28 U.S.C. § 1331.

Determination of federal question jurisdiction normally depends
upon analysis of the “well-pleaded complaint” rule. See
Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation
Tr. for S. Cal., 463 U.S. 1, 9-10 (1983).

That rule provides:

a defendant may not remove such a case to federal
court unless the plaintiff’s complaint establishes
that the case “arises under” federal law within the
meaning of § 1331, and it may not be removed on the
basis of a federal defense, including the defense of
preemption, even if the defense is anticipated in the
complaint and both parties admit that the defense is
the only question truly at issue.
Id. at 2.

In essence, the well-pleaded complaint rule means

that a case may be removed only if the plaintiff could have
brought the case originally in federal court asserting a federal
claim.
Although the subject rule normally ends the inquiry, there
is an exception “when a federal statute wholly displaces the
state-law cause of action through complete preemption” which
permits the state claim to be removed. Beneficial Nat. Bank v.
Anderson, 539 U.S. 1, 8 (2003).

This is 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.

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Id.

The exception is implicated in this case because “ERISA is

one of those statutes.” Aetna Health Inc. v. Davila, 542 U.S.
200, 208 (2004).
B.

Application
1.

ERISA Preemption

The goal of ERISA is
to protect . . . the interests of participants in
employee benefit plans and their beneficiaries, [29
U.S.C. § 1001(b) & (c), and to] provide a uniform
regulatory regime over employee benefit plans.
Davila, 542 U.S. at 208.

ERISA includes two sections that act

to preempt state law: 1) express preemption, codified at 29
U.S.C. § 1144(a) and 2) complete preemption, codified at 29
U.S.C. § 1132(a).

Fresenius contends that BCBS’ claims are

completely preempted under the analysis articulated by the
United States Supreme Court in Davila, 542 U.S. 200.
Although those provisions, particularly the complete
preemption under § 1132(a), are broadly construed, ERISA
preemption is still governed by standard preemption norms and
courts still presume that Congress did not intend to supplant
state law, particularly in “fields of traditional state
regulation,” unless it is the “clear and manifest purpose of
Congress” to do so. New York State Conf. of Blue Cross & Blue
Shield Plans v. Travelers Inc. Co., 514 U.S. 645, 654 (1995).
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It is also well established that “the historic police powers of
the State include the regulation of matters of health and
safety.” De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520
U.S. 806, 814 (1997).
Fresenius relies upon the proposition that BCBS’ claims are
completely preempted by ERISA.

It focuses in particular upon

the claims related to payments made by BCBS on behalf of its
private plan members rather than those brought on behalf of its
government-related OGB plan members.

That is prudent because 29

U.S.C. § 1003(b)(1) clearly and explicitly exempts any
plan established or maintained for its employees . . .
by the government of any State of political
subdivision thereof, or by any agency or
instrumentality of any of the foregoing.
29 U.S.C. § 1002(32).

Consequently, supplemental jurisdiction

over the entire case depends upon a finding that ERISA preempts
the claims that BCBS brings on behalf of its private plan
members.
Congress enacted ERISA to assure that the regulation of
employee benefit plans would be exclusively a federal concern,
Davila, 542 U.S. at 208, and created an exclusive regime for
plan members, beneficiaries, administrators and other
fiduciaries to enforce ERISA-related claims as codified in 29
U.S.C. § 1132(a).

The policy behind the exclusive list of
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remedies afforded under that section of the statute establishes
that ERISA
would be completely undermined if ERISA-plan
participants and beneficiaries were free to obtain
remedies under state law that Congress rejected in
ERISA.
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987).
Under Davila, a state law claim is completely preempted by
ERISA when someone
[1] could have brought his claim under [one of the
ERISA § 502(a) enforcement provisions, and 2)] where
there is no other independent legal duty that is
implicated by a defendant’s actions.
Davila, 542 U.S. at 210.
As an initial matter, most of the provisions in § 1132(a)
authorize only a plan participant, beneficiary, or the Secretary
of Labor to commence an action under ERISA.

But, as Fresenius

correctly observes, the status of BCBS as a fiduciary entitles
it to bring a claim under § 1132(a)(3).

That provision allows a

civil ERISA action to be brought
by a participant, beneficiary, or fiduciary (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.
ERISA defines a fiduciary as any person
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to the extent . . . he has any discretionary authority
or discretionary responsibility in the administration
of [an employee benefit] plan.
29 U.S.C. § 1002(21)(A)(iii).

BCBS does not dispute that it is

a fiduciary with respect to the plans that it managed for the
Fresenius patients for whom it exercised rights of subrogation.
The claims that Louisiana and BCBS assert against Fresenius
are not, however, ERISA claims.

Invoking § 1132(a)(3) as a

jurisdictional ground for preemption requires that the claim
asserted be a violation of ERISA itself or of the plan.
Although BCBS has a relationship with the beneficiaries and
members of its plans, Fresenius has no privity with BCBS with
respect to an employee benefit plan.
To be sure, were it not for the private plan members for
whom BCBS asserts claims for wrongfully collected payments, BCBS
would have no non-government plan subrogation rights to assert
against Fresenius.

Fresenius construes that to mean that,

although the patients themselves could not have brought claims
against Fresenius under ERISA, because BCBS has subrogation
rights under the plan that is enough to authorize BCBS to pursue
such claims under ERISA.
The Court disagrees because the claims in this case are not
of the kind that § 1132(a)(3) was designed to address, and,
therefore, are not within the realm of ERISA enforcement claims
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meant to be completely preempted.

The dispute resolution

mechanism of ERISA simply was not designed to apply outside of
the context of employee benefit plan administration, even as
exhaustive as has been the attempt to expand its coverage.

To

interpret § 1132(a)(3) otherwise would preempt multiple state
laws such as the tort laws invoked here because of claims that
have only a tangential connection to ERISA.
Consequently, Fresenius’ argument for complete preemption
fails because the BCBS claim does not satisfy the first prong of
the Davila test. See Davila, 542 U.S. at 210.

The claim that it

asserts on behalf of its private plan members could not have
been brought originally as an ERISA claim.

Permitting BCBS to

proceed on its state private plan claims does not “pose an
obstacle to the purposes and objectives of Congress” with
respect to ERISA’s regulation of employee benefit plans. See id.
at 217 (quoting Pilot Life Ins. Co., 481 U.S. at 52).

Fresenius

is correct in asserting that the only relationship between BCBS
and Fresenius is that of an ERISA fiduciary and a healthcare
provider.

But just because BCBS is an ERISA fiduciary does not

render this an ERISA dispute.

The claims asserted by the

plaintiffs are thus not preempted by federal law.

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2.

Other Issues

Having found that the claims of BCBS and Louisiana are not
preempted by ERISA, there remain no claims that could form the
basis for an assertion of federal jurisdiction in this case.
Consequently, there is no foundation for supplemental
jurisdiction over the other issues present.

The State of

Louisiana and BCBS have, however, also moved to impose costs on
Fresenius for removing the case in a manner which plaintiffs
believe to have been dilatory.
The relevant statute provides that an order remanding a
removed case to state court
may require payment of just costs and any actual
expenses, including attorney fees, incurred as a
result of the removal.
28 U.S.C. § 1447(c).

However, the statute also provides little

guidance on when such fees are warranted. Martin v. Franklin
Capital Corp., 546 U.S. 132, 134 (2005).

The general rule is

that absent unusual circumstances, attorneys’ fees are not
awarded when the removing party has “an objectively reasonable
basis for removal.” Id. at 136.

The test

recognize[s] the desire to deter removals sought for
the purpose of prolonging litigation and imposing
costs on the opposing party, while not undermining
Congress’ basic decision to afford defendants a right
to remove as a general matter, when the statutory
criteria are satisfied.
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Id. at 140.
The addition of BCBS as an intervenor gave Fresenius
objectively reasonable grounds for seeking removal.

It is a

stretch to contend that ERISA and its preemption provisions
cover this kind of case but stretches are not necessarily
unreasonable.

Here, there is no authority definitively negating

Fresenius’ argument for removal.

The preemption provisions of

ERISA are extremely broad in the area of employee benefit plan
administration and Fresenius made a colorable argument as to why
this dispute should fall into that category.

Although the Court

disagrees with that argument, it does not find it unreasonable.
ORDER
For the foregoing reasons, the State of Louisiana’s renewed
motion for remand (Docket No. 57) is ALLOWED.

This case is

REMANDED to the Nineteenth Judicial District Court, Parish of
East Baton Rouge, Louisiana.
Plaintiffs’ request that the Court award the State its fees
and costs associated with removal and remand is DENIED.
So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated: September 7, 2023
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