Rolan v. New West Health Services
Filing
21
ORDER granting 3 Motion to Remand; denying 19 Motion for Hearing. Signed by Judge Charles C. Lovell on 2/29/2016. (MKB)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
HELENA DIVISION
DANA ROLAN,
CV 15–51–H–CCL
Plaintiff,
ORDER
vs.
NEW WEST HEALTH SERVICES,
Defendant.
Before the Court is Plaintiff Dana Rolan’s Motion to Remand all or part of
this case to Montana state district court. The motion is opposed. Plaintiff requests
a hearing on the motion, but the Court has determined that the motion is suitable
for decision without oral argument.
Background
Plaintiff Dana Rolan (“Rolan”) is a beneficiary of her mother’s group health
plan, which is provided by her mother’s employer, St. Peter’s Hospital. The New
West Health Plan (“the Plan”) is fully-insured by Defendant New West Health
Services (“New West”). Rolan was involved in an automobile accident that
resulted in her serious injuries requiring medical treatment.
Plaintiff provides a summary of factual background and the state court case
history in her Amended Complaint. The automobile accident occurred on
November 16, 2007, near Townsend, Montana. Medical expenses were
approximately $120,000. The tortfeasor possessed liability insurance through
Unitrin Services Group, which accepted responsibility for the accident and paid
medical bills of approximately $100,000. However, Rolan had asked her health
insurer carrier, New West, to pay her medical bills. Rolan alleges that New West
either directed Unitrin to pay Rolan’s medical bills or to reimburse New West for
its payment of Rolan’s medical bills (or both). Rolan further alleges that New
West did not first determine whether Rolan had been made whole for the entirety
of her damages as required by M.C.A. 33-30-1102(4).
In February 2010, Rolan filed suit in the First Judicial District, alleging that
New West violated her made-whole rights under Montana law. She sought
2
restitution of approximately $100,000 in medical benefits that she asserts should
have been paid by New West, and compensatory and punitive damages for unfair
claims settlement practices. New West answered the complaint and did not defend
under ERISA. New West “officials then stated in deposition testimony that the
plan was not an ERISA plan.” (Doc. 8, Amended Compl. at 3, ¶ 6.) On May 4,
2012, the state district court certified a class action of non-ERISA plan members
“whose claims are determinable solely by state law.” (Doc. 8, Amended Compl.,
at 3, ¶ 8.) New West appealed that decision to the Montana Supreme Court, which
affirmed the district court’s certification order. Rolan v. New West, 307 P.3d 291,
371 Mont. 228 (Mont. 2013). According to Rolan, “[o]n October 23, 2013, over
three and a half years into the lawsuit and six years since Rolan was deprived of
her liability insurance, New West changed its position. It moved to amend its
Answer to allege the plan in question was an ERISA plan after all and that
therefore, the action is preempted under federal law.” (Doc. 8, Amended Compl.,
at 4, ¶ 9.) The state district court granted New West’s motion to amend its
Answer. On May 5, 2014, New West moved for summary judgment, “arguing that
3
state courts have no jurisdiction over ERISA plans.” (Doc. 8, Amended Compl., at
4, ¶ 11.) According to Plaintiff’s Amended Complaint,
[o]n May 6, 2015, the state district court granted New West’s motion
for summary judgment in part. It held that Rolan was enrolled in an
ERISA plan and that the state court lacked jurisdiction to adjudicate
ERISA claims. The Court recognized New West’s ERISA plans, like
Rolan’s, which were not self-funded, are subject to Montana’s madewhole laws. It held Rolan had a right to amend her Complaint to
recast claims as ERISA claims and then her amended claims would be
removed to federal court. The Court did not rule on Rolan’s position
that members of the certified class, who were in non-ERISA plans,
continued to have state law claims. The Court held New West was
responsible for Rolan’s attorney fees and costs incurred over the four
plus years in which New West had misrepresented that Rolan’s plan
was non-ERISA and governed by Montana law.
(Doc. 8 at 4-5, ¶ 12.) Rolan filed an Amended Complaint, now stating both state
law claims and ERISA claims. On the same day Rolan filed her Amended
Complaint, New West filed its removal papers, all within 30 days after the state
district court ruling.
Removal of the Amended Complaint
New West removed Plaintiff’s Amended Complaint to this Court pursuant
to the Court’s original jurisdiction under the Employee Retirement Income
4
Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.
Plaintiff’s Amended Complaint (Doc. 8) states the following claims:
1. Count I, “Individual State Law Claim” asserts that New
West violated Montana’s statutory made-whole law, which provides
that no subrogation can occur until after the insured has determined
that the injured claimant has been fully compensated for her injuries.12
Rolan asserts that New West did not perform a made-whole analysis
before avoiding payment of benefits. Rolan cites the ERISA Savings
Clause that exempts state insurance laws from ERISA express
preemption. Rolan asserts that New West has an independent duty to
abide by Montana made-whole laws and that complete preemption
under ERISA is therefore inapplicable.
2. In Count II, Rolan asserts that she is currently the class
representative of a certified class alleging that New West violated
1
“33-30-1101. Subrogation rights. A hospital or medical service plan
contract issued by a health service corporation may contain a provision providing
that, to the extent necessary for reimbursement of benefits paid to or on behalf of
the insured, the health service corporation is entitled to subrogation, as provided
for in 33-30-1102, against a judgment or recovery received by the insured from a
third party found liable for a wrongful act or omission that caused the injury
necessitating benefit payments.” M.C.A. § 33-30-1101 (2015).
2
33-30-1102. Notice–shared costs of third-party action–limitation. ...
(4) The health service corporation’s right of subrogation granted in 33-30-1101
may not be enforced until the injured insured has been fully compensated for the
insured’s injuries.” M.C.A. § 33-30-1102 (2015).
5
their made-whole rights and entitling them to the same relief. A
Certification Order issued by the First Judicial District Court is
attached to the Amended Complaint. It alleged that New West either
permitted or forced tortfeasors and their insurance companies to pay
medical bills for the class, rather than New West, all without any
attempt by New West to make any made-whole determination.
3. In Count III, Rolan sets forth a subclass of members who are
in non-ERISA plans and asserts state law remedies under the Unfair
Settlement Practices Act (“UTPA”), M.C.A. §§33-18-201, et seq., for
this subclass. Count III alleges that New West violated the
requirement that it promptly, fairly and equitably pay claims and
conduct a reasonable investigation of claims. This subclass of state
claims is asserted to be remedied by punitive damages upon a jury
finding of malice or fraud.
Rolan groups the following counts under the subtitle “Concurrent
Jurisdiction Alternative Claims.”
4. In Count IV, Rolan asserts an “Individual ERISA Payment
Claim,” seeking concurrent jurisdiction by the state district court
pursuant to § 502(a)(1)(B) of ERISA.3 Rolan states that she is
3
Ҥ Civil Enforcement.
(a) Persons Empowered to Bring a Civil Action. A civil action may be brought–
(1) by a participant or beneficiary–
(A) for the relief provided for in subsection (c), 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
6
entitled to payment of benefits and clarification of her rights to
benefits. Rolan seeks her benefits, interest thereon, attorney fees and
costs.
5. In Count V, Rolan asserts a “Class Action ERISA Payment
Claim.” This count alleges on behalf of all class members paying
premiums to ERISA plans that New West violated their made-whole
rights and they are therefore entitled to ERISA benefits, interest, and
attorney fees and costs. Plaintiff points out that this claim can be
resolved by state courts pursuant to concurrent jurisdiction provided
by ERISA.4
The next group of counts is under the subtitle “Alternative Claims Recast as
ERISA Claims.” Rolan states that, in compliance with the state district court’s
Order of May 6, 2015,” she is recasting all her claims as ERISA claims, pleading
benefits under the terms of the plan; . . . .
29 U.S.C. § 1132.
4
“1329(e) Jurisdiction.
(1) Except for actions under subsection (a)(1)(B) of this section, the district courts
of the United States shall have exclusive jurisdiction of civil actions under this
subchapter brought by the Secretary or by a participant, beneficiary, fiduciary, or
any person referred to in section 1021(f)(1) of this title. State courts of competent
jurisdiction and district courts of the United States shall have concurrent
jurisdiction of actions under paragraphs (1)(B) and (7) of subsection (a) of this
section.
29 U.S.C. § 1329(e)(1).
7
in the alternative:
6. In Count VI, Rolan asserts that she is owed over $100,000
in ERISA benefits, with interest dating back to when the benefits
should have been paid to her in 2007, and attorney fees and costs.
7. In Count VII, Rolan asserts that a class should be certified
pursuant to Fed. R. Civ. P. 23 for all members of ERISA New West
plans funded by premiums (i.e., not self-insured plans).
8. Count VII seeks equitable relief pursuant to either
502(a)(1)(B) for payment of benefits and/or 502(a)(3) for payment of
restitution, plus interest and attorney fees and costs. Rolan is to be
the class representative when this class is certified by this Court.
Motion for Remand
Both in her Motion for Remand5 and in her Amended Complaint, Plaintiff
seeks relief in the form of a remand to state court “on the ground that ERISA
preemption does not apply.” (Doc. 8, Amend. Compl. at 16, ¶¶ 56-57.) Plaintiff
believes that either all of her original claims (Counts I through III) or some
5
“Since there is neither express nor complete preemption, the state court
has full jurisdiction over all state law claims that New West violated the madewhole laws. Therefore, the case should be remanded in its entirety.” (Doc. 4, Pl.’s
Brief in Supp. at 7.)
8
(alternative Counts IV (Rolan’s individual ERISA claim) and V (ERISA class
action)) of the counts should be remanded. If the case is to stay in federal district
court, however, Plaintiff intends to proceed under Counts VI (Rolan’s individual
ERISA claim) and VII (ERISA class action).
ERISA Benefit Claims
ERISA provides that both federal and state district courts have concurrent6
6
§ 1132. Civil enforcement.
...
(e) Jurisdiction. (1) Except for actions under subsection (a)(1)(B) of this
section, the district courts of the United States shall have exclusive jurisdiction of
civil actions under this title brought by the Secretary or by a participant,
beneficiary, fiduciary, or any person referred to in section 101(f)(1). State courts
of competent jurisdiction and district courts of the United States shall have
concurrent jurisdiction of actions under paragraphs (1)(B) and (7) of subsection
(a) of this section.
...
(f) Amount in controversy; citizenship of parties. The district courts of the
United States shall have jurisdiction, without respect to the amount in controversy
or the citizenship of the parties, to grant the relief provided for in subsection (a) of
this section in any action.
29 U.S.C. §§ 1132(e)-(f).
9
jurisdiction over a beneficiary’s claims “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)(1)(B),
29 U.S.C. § 1132(a)(1)(B); ERISA § 502(e)(1), 29 U.S.C. § 1132(e)(1). Besides
recovery of benefits under § 1132(a)(1)(B), ERISA remedies under § 502(a) can
include an injunction, other equitable relief, and attorney fees and costs. 29
U.S.C. § 1132(a)(3), (g).
ERISA Preemption
(Complete/Express and Conflict/Obstacle)
In this case, Rolan’s original Complaint filed in state district court only
asserted state law claims, not ERISA claims. Generally, such a case lacks federal
question jurisdiction. However, under the artful pleading doctrine, which is an
exception to the well-pleaded complaint rule, if a plaintiff’s state law claims are
completely, or expressly, preempted by § 514(a) of ERISA,7the complaint “is
7
“(a) Supersedure; effective date. . . . the provisions of this title and title IV
shall supersede any and all State laws insofar as they may now or hereafter relate
10
converted from ‘an ordinary state common law complaint into one stating a federal
claim for purposes of the well-pleaded complaint rule.’” Marin Gen. Hosp. v.
Modesto & Empire Traction Co., 581 F.3d 941, 945 (9th Cir. 2009) (quoting
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65, 107 S.Ct. 1542, 95 L.Ed.2d
55 (1987)). This is so because, in Metro. Life, 481 U.S. at 65, the Supreme Court
held that when a suit composed of state law claims “relates to” an ERISA plan
within the meaning of ERISA § 514(a), the suit is necessarily federal because
Congress intended to occupy the field of employee benefits law. Congress
announced its intent to completely occupy the field of employee benefit plans
when it enacted ERISA 514(a) [29 U.S.C. § 1144(a)], providing that ERISA “shall
supersede any and all State laws insofar as they may now or hereafter relate to any
employee benefit plan.”
to any employee benefit plan described in section 4(a) [29 USCS § 1003(a)] and
not exempt under section 4(b) [29 USCS §1003(b)]. This section shall take effect
on January 1, 1975. 29 U.S.C. § 1144(a).
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Express/Complete Preemption
Under the complete preemption doctrine, these state-law claims are deemed
to “arise under” federal law and on that basis may be removed to federal court
despite their presentation as state claims. Metro. Life, 481 U.S. at 64-65
(announcing complete preemption doctrine under ERISA). When state law claims
are thus preempted, a federal claim is substituted in its place. See Moore-Thomas
v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009). To determine if
Rolan’s claims are completely preempted, we must determine whether her claims
relate to an employee benefit plan within the scope of ERISA’s civil enforcement
provision, which is ERISA § 502(a)(1)(B). 29 U.S.C. § 1132(a)(1)(B). “If a
complaint alleges only state-law claims, and if these claims are entirely
encompassed by § 502(a), that complaint is converted from ‘an ordinary state
common law complaint into one stating a federal claim for purposes of the wellpleaded complaint rule.’” Marin Gen. Hosp., 581 F.3d at 945 (quoting Metro. Life,
481 U.S. at 65-66). “Congress had ‘clearly manifested an intent to make causes of
action within the scope of the civil enforcement provisions of § 502(a) removable
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to federal court.” Id. (quoting Metro. Life, 481 U.S. at 66).
The two-part test provided by the Supreme Court in Aetna Health Inc. v.
Davila, 542 U.S. 200, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004), is explained as
follows:
[W]here the individual is entitled to coverage only because of the
terms of an ERISA-regulated employee benefit plan, and where no
legal duty (state or federal) independent of ERISA or the plan terms is
violated, then the suit falls “within the scope of” ERISA
§ 502(a)(1)(B). In other words, 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, then the individual’s cause of action is
completely pre-empted by ERISA 502(a)(1)(B).
542 U.S. at 210 (citation omitted). The court should examine the factual
allegations, the statute(s) upon which the state law claim is founded, and the plan
document. Id. at 211. The labels utilized by the plaintiff are immaterial. Id. at
214-15. Under this test, complete preemption is triggered 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.” Id. at 210.
13
In Marin General Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941,
946, 950 (9th Cir. 2009), the Ninth Circuit analyzed whether complete preemption
supported defendant’s removal by applying the Davila two-part test to plaintiff’s
state law claims. In Marin, the plaintiff hospital asserted state-law claims for
breach of contract, negligent misrepresentation, and quantum meruit in state court
against an ERISA plan administrator. The factual allegations included an
allegation that a hospital employee had telephoned the plan administrator to
confirm that ERISA health insurance benefits were available to a prospective
patient. The plan administrator’s employee orally verified the patient’s coverage
and promised to pay 90% of the patient’s medical expenses, which eventually
totaled $178,926. Instead of paying 90% as allegedly promised, the plan
administrator paid only 26% of the expenses. The district court ruled that the
hospital’s remedy was by means of an ERISA claim, eventually dismissing the
hospital’s complaint. On appeal, the Ninth Circuit panel reversed, concluding that
the oral promise allegedly made by the plan administrator was an independent
legal basis giving rise to a duty to pay the hospital, and one that was completely
14
independent of the ERISA benefit plan.
In Aetna Health Inc. v. Davila, 542 U.S. 200, 215, 124 S.Ct. 2488, 159
L.Ed.2d 312 (2004), the Supreme Court considered whether plaintiffs could bring
state claims under the Texas Health Care Liability Act (“THCLA”) for their plans’
refusal to provide requested medical services as had been recommended by their
physicians. The Court noted that upon denial of benefits, plaintiffs could have
paid for the services themselves and then filed a federal suit pursuant to ERISA to
claim benefits or plaintiffs could have immediately sought a preliminary
injunction. Id. at 211. In asserting the violations, the plaintiffs specifically cited
two statutes in the THCLA that set forth the duty of ordinary care owed to an
insured by a health insurance carrier or health maintenance organization. The
plaintiffs argued that “this duty of ordinary care arises independently of any duty
imposed by ERISA or the plan terms... [so that] any civil action to enforce this
duty is not within the scope of the ERISA civil enforcement mechanism.” Id. at
212.
However, the Supreme Court rejected this argument, stating that the
15
statutory duty applicable under the THCLA did “not arise independently of ERISA
or the plan terms.” Id. Instead, any liability created by the THCLA would exist
“only because of petitioners’ administration of ERISA-regulated benefit plans.
[The plan administrators’] potential liability under the THCLA in these cases,
then, derives entirely from the particular rights and obligations established by the
benefit plans.” Id. at 213.
In Davila the Supreme Court also compared those facts to Caterpillar Inc. v.
Williams, 482 U.S. 386, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987), wherein a state
law claim was not preempted by the Labor Management Relations Act (“LMRA”)
§ 301 because the state claim was based on breach of an individual employment
contract, not the similar breach of a collective-bargaining agreement. Similarly,
the Court compared the Davila facts to those in Allis Chalmers Corp. v. Lueck,
471 U.S. 202, 217, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985), a state-law bad-faith
insurance claim that was preempted by LMRA § 301 because “the duties imposed
and rights established through the state tort . . . derive[d] from the rights and
obligations established by the contract.” Lueck, 471 U.S. at 217 (emphasis added).
16
Similarly, in this case, New West’s duty to pay benefits and Rolan’s right to
the payment of benefits derive not from an independent state law but from the
ERISA plan itself. Montana’s made-whole statute, standing alone, does not entitle
Rolan to benefits; it is the ERISA plan that entitles Rolan to benefits. That
Montana statute merely provides one basis for interpreting the ERISA plan.
Similarly, the gravamen of any violation of Montana’s Unfair Settlement Practices
Act, §§ 33-18-201, M.C.A., et seq., would be the failure to “promptly, fairly and
equitably pay” Rolan’s claim for benefits under the ERISA plan. Essentially, the
rights claimed pursuant to Montana law are dependent upon the existence of the
ERISA plan and not independent from it. Rolan’s citation to Wurtz v. Rawlings
Co., LLC, 761 F.3d 232 (2nd Cir. 2014), is unavailing because, in that case, the
plaintiffs were not seeking benefits under ERISA at all but merely attempting to
protect their tort settlements from the insurer’s claim for reimbursement.
Therefore, Rolan’s state causes of action fall within the scope of ERISA
502(a)(1)(B) (i.e., a claim for benefits under an ERISA plan without a legal right
independent of the ERISA plan), and are therefore completely preempted by
17
ERISA and removable to federal district court.
Conflict/Obstacle Preemption
General state laws may be preempted even if they do not “relate to” an
employee benefits plan, such as when they provide additional remedies for
conduct violating ERISA. A state law is an obstacle to ERISA and therefore
preempted if it “duplicates, supplements, or supplants” ERISA’s civil enforcement
remedies, because such a law conflicts with congressional intent to make ERISA’s
enforcement mechanism exclusive. Aetna Health Inc. v. Davila, 542 U.S. 200,
2009 (2004); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 51-54 (1987).
This is generally known as conflict or obstacle preemption.
In Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46 (1987), for example, the
plaintiff asserted a common-law action seeking emotional distress and punitive
damages for bad-faith insurance claims processing (as does Rolan in this case), but
the Supreme Court held that such remedies not found in ERISA are pre-empted.
“The policy choices reflected in the inclusion of certain remedies and the
exclusion of others under the federal scheme would be completely undermined if
18
ERISA-plan participants and beneficiaries were free to obtain remedies under state
law that Congress rejected in ERISA.” Ingersoll-Rand Co. v. McClendon, 498
U.S. 133, 144 (quoting Mass Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146
(1985)) (1990)). Using state law to supplement ERISA remedies would pose an
obstacle to ERISA’s policy choices, and the Supreme Court referred to this type of
preemption as “conflict preemption.” Ingersoll-Rand, 498 U.S. at 486.
In addition, because one of the main objectives of ERISA was interstate
uniformity in the federal regulation of employee benefit plans, state statutes setting
specified procedures for claim processing, such as a New Jersey statute prohibiting
offsetting worker compensation payments against pension benefits in Alessi v.
Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981),
have been set aside because they are an obstacle to uniform plan administration.
See Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 (1987) (“The employer
therefore was required to accommodate conflicting regulatory schemes in devising
and operating a system for processing claims and paying benefits–precisely the
burden that ERISA pre-emption was intended to avoid.”). The Court in Fort
19
Halifax described the underlying policy as follows:
It is thus clear that ERISA’s pre-emption provision was prompted by
recognition that employers establishing and maintaining employee
benefit plans are faced with the task of coordinating complex
administrative activities. A patchwork scheme of regulation would
introduce considerable inefficiencies in benefit program operation,
which might lead those employers with existing plans to reduce
benefits, and those without such plans to refrain from adopting them.
Pre-emption ensures that the administrative practices of a benefit plan
will be governed by only a single set of regulations. See, e.g.,
H.R.Rep. No. 93-533, p. 12 (1973), U.S. Code Cong. & Admin. News
1974, pp. 4639, 4650 (“[A] fiduciary standard embodied in Federal
legislation is considered desirable because it will bring a measure of
uniformity in an area where decisions under the same set of facts may
differ from state to state.”).
Id. at 11.
Insurance Savings Clause
This does not necessarily mean, however, that the Montana statutes asserted
by Rolan are without effect as to the New West plan at issue. The Montana
statutory limitations on insurance subrogation could either be impliedly preempted
by ERISA by means of conflict/obstacle preemption (either as to substantive law
or remedies) or, on the other hand, might be protected by ERISA’s Savings Clause
20
and applied to interpret the plan during the review of Rolan’s benefit claim.8
Generally speaking, self-funded ERISA plans are protected from state
insurance laws by the “Deemer Clause,” 29 U.S.C. 1144(b)(2)(B), ERISA
514(b)(2)(B). In this case, however, the St. Peter’s plan is fully insured, so that
state insurance laws are generally applicable due to ERISA’s Savings Clause,
although conflict/obstacle preemption may still be applied to state insurance laws.9
8
ERISA’s Savings Clause provides that “nothing in this title 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); ERISA
514(b)(2)(A).
9
The Savings Clause thus permits state insurance laws to apply to fullyinsured plans, so the Savings Clause “leaves room for complementary or dual
federal and state regulation,” but nevertheless ERISA may still pre-empt a state
insurance law if “the two regimes cannot be harmonized or accommodated.” John
Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86, 98 (1993)
(citing the federal Supremacy Clause). Discussing the Savings Clause, the
Supreme Court states that “[s]tate law governing insurance generally is not
displaced, but “‘where [that] law stands as an obstacle to the accomplishment of
the full purposes and objectives of Congress’ federal preemption occurs.” Id. at
99 (quoting Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248 (1984)). Two
Supreme Court cases involving insurance claims handling laws protected by the
Savings Clause both demonstrate that the Court continued its preemption review
despite the Savings Clause to decide that the laws did not undermine ERISA’s
21
The Supreme Court’s test for deciding in the first instance whether a state
insurance law is protected by the Savings Clause is (1) whether the state law is
“specifically directed toward entities engaged in insurance”, and (2) whether the
state law “substantially affects the risk pooling arrangement between the insurer
and the insured.” Kentucky Ass’n of Health Plans v. Miller, 538 U.S. 329, 341-42,
123 S.Ct. 1471, 155 L.Ed.2d 468 (2003) (making a “clean break from the
McCarran-Ferguson factors”); Standard Ins. Co. v. Morrison, 584 F.3d 837, 842
(9th Cir. 2009). This Court need not decide today whether Rolan’s central claim
for ERISA plan benefits (predicated on Montana’s limitation on subrogation,
M.C.A. § 33-30-1102(4)), meets this test for enforceability under the Savings
Clause as that crucial issue has not been briefed by the parties and is not
objectives. See UNUM Life Ins. Co. v. Ward, 526 U.S. 358, 377 (1999) (“[T]he
[state] notice-prejudice rule complements rather than contradicts” ERISA’s
claims-handling rules and thus provides the “relevant rule of decision” for
plaintiff’s benefits claim); Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355,
375-80, 384-86, 122 S.Ct. 2151, 153 L.Ed.2d 375 (2002) (noting that the state
insurance law did not attempt to supplement or supplant ERISA remedies and
recognizing “a limited exception from the savings clause for alternative causes of
action and alternative remedies....”).
22
determinative of the remand motion.
Removal Pursuant to 28 U.S.C. § 1141 & § 1146
An action is removable to federal court if the claims could have originally
been filed in federal court. 28 U.S.C. § 1441(a). Defendants must show by a
preponderance that removal is proper. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th
Cir. 1992) (citation omitted). Any doubts about the propriety of removal should
be resolved in favor of remand. Id.
Having already determined that this Court has concurrent subject matter
jurisdiction over Rolan’s ERISA claims, the Court next considers whether removal
is proper in this case from a procedural standpoint. Prior to removal, this case was
litigated in state court for four years, including one interlocutory appeal to
Montana’s Supreme Court. Given that the Court believes that the case was
removable from the very first filing, the Court must determine whether a four-year
delay in removal is timely. Specifically, the Court must apply section §1446(b)(1)
of Title 28, which provides that removal must occur within 30 days after formal
23
service of process on the removing defendant. Murphy Bros. v. Michetti Pipe
Stringing, Inc., 526 U.S. 344, 347-48, 354 (1999). Section 1446(b) also provides
that, in a case that was not initially removable, the removal must be accomplished
within thirty days “after receipt by the defendant, through service or otherwise, of
a copy of an amended pleading, motion, order or other paper from which it may
first be ascertained that the case is one which is or has become removable....” 28
U.S.C. § 1446(b)(3) (emphasis added).
In the instant case, the delay in removal appears to have multiple underlying
causes. First, there was New West’s inexplicable confusion over whether its own
plan was or was not an ERISA plan. Then, after learning in 2013 that the plan at
issue was an ERISA plan (and after the Montana Supreme Court affirmed the
district court’s class certification), New West busied itself in state court litigation.
According to Plaintiff’s amended complaint, on October 23, 2013, (over three
years into the state court litigation), New West informed the state district court that
the plan was in fact an ERISA plan subject to federal preemption. (See Doc. 8,
Amended Complaint, § 9.) Instead of filing for removal within 30 days, however,
24
New West filed a motion to amend its answer to assert ERISA preemption. The
state district court granted New West’s motion to amend, and thereafter New West
still did not remove but instead moved for summary judgment on jurisdictional
grounds. New West did not file for removal until after May 2015, when the state
district court (1) granted partial summary judgment to New West, (2) held that it
lacked jurisdiction to adjudicate Rolan’s ERISA claims, and (3) instructed Rolan
to amend her complaint to recast her claims under ERISA to permit removal to
federal district court.
However, under the artful pleading doctrine and the exception provided by
complete preemption under ERISA, Rolan’s complaint was removable from its
first filing. Certainly, by October 2013, when New West apparently realized that
the employee welfare plan was an ERISA plan, New West should have then
understood that it could remove Rolan’s complaint to federal court. The fact that
New West waited almost two years to file for removal causes this Court to
question whether New West should be precluded from such an untimely removal
under an estoppel or waiver theory.
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A similar circumstance was considered in Cantrell v. Great Republic Ins.
Co., 873 F.2d 1249 (9th Cir. 1989). In that case, the plaintiff filed a state court
action alleging breach of the implied covenant of good faith and fair dealing and
wrongful denial of the existence of an insurance contract. The plaintiff alleged
that she had obtained through her employer a group health insurance policy, but
that the defendant insurer later rescinded the insurance policy on the basis of
“unadmitted medical history” (but allegedly to avoid paying her claims for
benefits).
The plaintiff in Cantrell filed her original complaint in October 1985,
against Great Republic Ins. Co.,but the Great Republic Life Insurance Company (a
Washington corporation) answered the complaint in January 1986. The same
defense counsel represented both entities. In May of 1986, Great Republic Ins.
Co. admitted that it had issued a “certificate of insurance . . . for group medical
expense insurance coverage to plaintiff.” In June of 1986, Great Republic Life
Ins. Co. admitted that a specified numbered certificate of insurance had been
issued for the plaintiff on a date certain in 1981. Over a year later, in September,
26
1987, plaintiff sent a proposed amended complaint not changing her claims but
naming Great Republic Life Ins. Co. as a defendant and adding herself as
administrator of her daughter’s estate. Counsel for both insurance carrier entities
declined to stipulate to the filing of the amended complaint, so plaintiff filed a
motion for leave to amend, which was granted on October 21, 1987. On
November 20, 1987, both defendants filed their removal papers in federal district
court citing the district court’s original jurisdiction under ERISA. The defendants
asserted that the removal was timely (within the 30-day removal period) because
of the addition of new parties in the amended complaint. Plaintiff filed for remand
back to state court asserting that there was no federal original jurisdiction, but the
remand motion was denied by the federal court because ERISA preemption
overcame plaintiff’s artful pleading of state causes of action.
On appeal, the Ninth Circuit panel agreed that the district court had original
jurisdiction pursuant to ERISA over plaintiff’s state claims and that therefore her
action was removable. However, the panel reversed the district court’s denial of
remand, deciding that the removal was untimely because it was “clear that
27
Cantrell’s original complaint was removable.” Cantrell, 873 F.2d at 1253
(emphasis in original). The original complaint was filed on October 8, 1985, and
the removal papers were filed on November 20, 1987, far in excess of the thirtyday removal period set by 28 U.S.C. § 1446(b). The panel noted that there was no
evidence that the defendant insurers were ignorant of the ERISA component prior
to the filing of the amended complaint. Id. at 1256. In fact, in their brief opposing
remand, the defendant insurers asserted that no discovery was needed to show that
this was an ERISA claim on an ERISA plan. Id. at 1255, n.11. The Ninth Circuit
panel simply could not accept that defendants were entitled to “have it both
ways–to permit them to remove the action on the basis of ERISA preemption but
excuse them from compliance with the thirty-day removal period....” Id. at 1255.
The panel concluded that by their long delay the defendant insurers had waived
their right to remove the ERISA case from state court.
Similarly, here, four years elapsed between the filing of the original
complaint in state court and the filing of the removal papers. In between those two
points, there was a class certification and an interlocutory appeal to the Montana
28
Supreme Court. Certainly, New West had access to the plan documents from the
outset. At some point in the litigation, New West decided that the case should be
governed by ERISA, and New West began to brief and argue motions to that
effect, years before New West filed its removal papers. However, the case did not
become removable because the state district court ordered Rolan to amend her
complaint to rewrite her claims under ERISA. The case became removable when
Rolan filed her initial complaint stating claims that were preempted by ERISA,
and that fact was easily ascertainable by New West. Certainly, by the time that
New West began asserting ERISA arguments to the state district court, New West
had ascertained that the case was removable, so there is no mistake of fact
argument available here. In any event, section 1446(b)(3) makes clear that a case
may be removed during its pendency in state court only “if the case stated by the
initial pleading is not removable....” 28 U.S.C. 1446(b)(3) (emphasis added).
“Changes to a complaint that creates a new basis for removal do not undo the
original waiver.... [and] subsequent events do not make it ‘more removable’ or
‘again removable.’” Samura v. Kaiser Foundation Health Plan, Inc., 715 F.Supp.
29
970, 972 (N.D. Calif. 1989) (quoting Hubbard v. Union Oil Company, 601
F.Supp. 790, 795 (S.D. W.Va. 1985)). Certainly, the amended complaint did not
change the nature of Rolan’s original claims for removal purposes.
In this case, and because the removal statutes are strictly construed against
removal, the Court finds that New West’s removal was untimely and remand is
warranted. However, because New West was instructed to remove the case by the
state court, the Court will not award fees and costs against it.
This remand order may be appealable to the Court of Appeals for the Ninth
Circuit pursuant to 28 U.S.C. § 1291 and Pelleport Investors, Inc. v. Budco
Quality Theatres, Inc., 471 F.2d , 273, 276-78 (9th Cir. 1984). Accordingly,
IT IS HEREBY ORDERED that Plaintiff Rolan’s Motion for Remand is
GRANTED, and Plaintiff’s Motion for Hearing is DENIED. The Clerk shall mail
the clerk of the First Judicial District, Lewis and Clark County, a certified copy of
this remand order.
Dated this 29th day of February, 2016.
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