Creighton Saint Joseph Regional Healthcare v. Omaha Construction Industry Health and Welfare Plan et al

Filing 37

REPORT AND RECOMMENDATION that this case be remanded, on the court's own motion, for lack of subject matter jurisdiction. It is further recommended that plaintiff's MOTION to Remand and For Costs and Attorney Fees 18 , and Objection to Reply 36 be denied as moot. Ordered by Magistrate Judge F. A. Gossett. (CLS, )

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF NEBRASKA C R E I G H T O N ST. JOSEPH R E G I O N A L HEALTHCARE, LLC, d /b /a ST. JOSEPH HOSPITAL ­ C R E I G H T O N UNIVERSITY M E D I C A L CENTER, P l a i n t i f f, vs. O M A H A CONSTRUCTION I N D U S T R Y HEALTH & WELFARE P L A N ; JOINT BOARD OF T R U S T E E S OF THE OMAHA C O N S T R U C T I O N INDUSTRY H E A L T H & WELFARE PLAN, D e fe n d a n ts and ThirdP a r t y Plaintiffs, vs. T H E BENEFIT GROUP, INC., T h ird -P a rty Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

8 :0 8 C V 2 3 8 R E P O R T AND R E C O M M E N D A T IO N

T h is matter is before the court on the plaintiff's motion (Doc. 18) to remand this m a tte r to state court. For the reasons explained below, I recommend that the case be re m a n d e d to state court on the court's own motion. I also recommend that no costs or atto rne y's fees be awarded to any party in this matter.

BACKGROUND P la in tif f filed this action on April 2, 2008 in the District Court for Douglas County, N e b ra sk a , seeking damages for breach of contract. The complaint specifically alleges that th e defendant Omaha Construction Industry Health and Welfare Plan ("OCI Plan") is an e m p lo ye e welfare benefit plan under the Employee Retirement Income Security Act, 29 U .S .C . 1001, et seq. ("ERISA"). The defendant Joint Board of Trustees ("OCI Trustees") is the plan sponsor, administrator, and named fiduciary of the OCI Plan. The OCI Trustees a n d OCI Plan (together, "OCI") contracted with The Benefit Group (TBG) to provide claims a d m in is tra tio n services to OCI for claims submitted under the OCI Plan, including the re c eip t, investigation and payment of claims. OCI also participated in a preferred provider o rg a n iza tio n network, Midlands Choice. Saint Joseph Hospital was a preferred provider in th e Midlands Choice PPO network. The hospital alleges that it is a third party beneficiary of the contract between M i d la n d s Choice and OCI. As a participant in the Midlands Choice PPO network, OCI a s s u m e d the responsibility for payment of claims submitted through it for payment. As a M id lan d s Choice preferred provider, Saint Joseph Hospital must accept discounted payments (3 5 % of billed charges) on "clean" claims from OCI if the claims are paid within 45 days of re c eip t. After 45 days, OCI is no longer entitled to the discount and is obligated to pay the h o s p ita l's full billed charges for the claim.

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P la in tif f alleges that an OCI Plan participant, Terry James, was admitted to Saint Jo se p h Hospital on June 4, 2006 and received necessary medical and surgical care, treatment, serv ices and supplies through June 30, 2006. The billed charges for Mr. James' medical care a m o u n te d to $578,061.77. The hospital submitted its claims for benefits to OCI through T B G for processing and payment on July 12, 2006. Midlands Choice repriced the claim and p ro v id e d the discounted pricing to OCI and TBG on July 12, 2006. OCI paid the discounted a m o u n t on or about November 30, 2006, outside the 45-day discount payment period, and h a s refused to make any further payment on the claim. Saint Joseph Hospital contends it is o w ed an additional $375,767.01 by OCI. O n May 5, 2008, OCI filed its answer in state court denying all liability, and asserted a third-party claim for indemnification and contribution against TBG. TBG was served with the third-party complaint on May 8, 2008 and removed the case to federal court pursuant to 28 U.S.C. §§ 1441 and 1446. The OCI Plan and the OCI T ru ste e s have not joined in the removal. L E G A L ANALYSIS P la in tif f contends that its claim for breach of contract was not preempted by ERISA; th e re f o re , the case should be remanded to state court for lack of subject matter jurisdiction. T h e third-party defendant, TBG, contends that plaintiff's motion was not timely filed under 2 8 U.S.C. § 1447(c) and that this court has subject matter jurisdiction because plaintiff's c la im s are preempted by ERISA. -3-

T h e court may raise the issue of subject matter jurisdiction on its own motion at any tim e and elects to do so in this instance. The removal statute, 28 U.S.C. § 1441, provides: (a ) Except as otherwise expressly provided by Act of Congress, any civil a c tio n brought in a State court of which the district courts of the United States h a v e original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing th e place where such action is pending. For purposes of removal under this c h a p te r, the citizenship of defendants sued under fictitious names shall be d is r e g a rd e d . (b ) A n y civil action of which the district courts have original jurisdiction f o u n d e d on a claim or right arising under the Constitution, treaties or laws of th e United States shall be removable without regard to the citizenship or re sid e n c e of the parties. Any other such action shall be removable only if none o f the parties in interest properly joined and served as defendants is a citizen o f the State in which such action is brought. (c ) W h e n e v e r a separate and independent claim or cause of action within th e jurisdiction conferred by section 1331 of this title is joined with one or m o re otherwise non-removable claims or causes of action, the entire case may b e removed and the district court may determine all issues therein, or, in its d i sc r e tio n , may remand all matters in which State law predominates. C o m m e n ta to rs have identified three aspects of the issue of whether a third-party defendant h a s the right to remove an action from a state to a federal court: (1) "is a third-party defendant a defendant within the meaning of § 1441"; (2) " is the application of § 1441(c) limited to claims joined by the plaintiff"; and (3 ) "is a third-party claim sufficiently unrelated to the main claim to be a s e p a ra te and independent cause of action." W a lte r W. Jones, Jr., Annotation, Right of Third-party Defendant to Removal of Action from S t a t e to Federal Court under 28 U.S.C.A. § 1441, 8 A.L.R. FED. 708, § 2 (quoting 1A M OORE'S, FEDERAL PRACTICE ¶ 0.167[10] (2d ed.)). "Although there is general agreement -4-

a m o n g courts that § 1441 is to be given a narrow construction in favor of limiting the re m o v a l rights of third-party defendants, there is a lack of accord as to whether this policy r e m o v e s completely third-party defendants' rights to remove." Id. It does not appear that Eighth Circuit precedent allows a third-party defendant to re m o v e a case to federal court under the circumstances presented in this case. In Duckson, C a rls o n , Bassinger, LLC v. The Lake Bank, N.A., 139 F. Supp. 2d 1117 (D. Minn. 2001), the c o u r t considered the issue of whether a third-party defendant had the right to remove a case to federal court: T h e courts are split on whether "defendants," in the context of § 1441(a), m e a n s only defendants joined in the original complaint. See Schmidt v. A s s o c ia tio n of Apartment Owners of Marco Polo Condo., 780 F. Supp. 699, 7 0 2 (D. Haw. 1991) (collecting cases). The majority view is that the d e te rm in a tio n of who is a defendant is made with reference to the original c o m p la in t, not subsequent complaints. Id. The few courts which allow removal by third-party defendants allow it o n ly if the removal is based on a cause of action in the third-party complaint th a t is "separate and independent" from the other claims in the case pursuant to § 1441(c). See, e.g., Carl Heck Engineers v. Lafourche Parish Police Jury, 6 2 2 F.2d 133, 136 (5th Cir. 1980) (holding third-party defendants sued under a separate and independent claim can remove). But see Lewis v. Windsor Door C o ., 926 F.2d 729, 733 (8th Cir. 1991) (holding that in almost all third-party c a se s, the third-party defendant may not remove under § 1441(c)). The Eighth C irc u it Court of Appeals has held that the "remote, ancillary possibility of a t h i r d - p a rty claim not yet matured" cannot constitute a basis for removal of a th ird -p a rty claim "which is not separate and independent of the plaintiff's c la im ." Lewis v. Windsor Door Co., 926 F.2d 729, 733 (8th Cir. 1991) (a d o p tin g the Seventh Circuit's analysis that a third-party defendant may not re m o v e under § 1441(c) in almost all cases). As the Eighth Circuit put it, " re m o v a l on such a basis is too much akin to the tail wagging the dog." Lewis, 9 2 6 F.2d at 733.... -5-

1 3 9 F. Supp. 2d at 1119. This court has previously followed the majority view, concluding that a third-party d ef en d an t is not a defendant for purposes of the removal privilege under 28 § U.S.C. 1441(a). S e e , e.g., Berndsen v. Able Professional Movers, Inc., No. 8:05cv471, slip op. at 2 (D. Neb., N o v . 3, 2005) (available on PACER). In this case, since the third-party claim seeks to im p o s e derivative liability, it is not "separate and independent" of the action brought by the o rig in a l plaintiff and the third-party defendant was without authority to remove the case to f e d e ra l court. B e c a u se the case was improperly removed to federal court by a third-party defendant, th is court lacks a basis upon which to exercise federal jurisdiction.1 Accordingly, I T IS RECOMMENDED that this matter be remanded to the District Court for D o u g la s County, Nebraska, on the court's own motion, for lack of jurisdiction. I T IS FURTHER RECOMMENDED that all pending motions (Doc. 18 & Doc. 36) b e denied as moot. P u r s u a n t to NECivR 72.3, a party may object to a this Report and Recommendation b y filing an "Objection to Report and Recommendation" within ten (10) days after being s e rv e d with the recommendation. The statement of objection shall specify those portions of th e recommendation to which the party objects and the basis of the objection. The objecting p a rty shall file contemporaneously with the statement of objection a brief setting forth the

Even if the plaintiff's claim for breach of contract is ultimately found to be preempted by ERISA, federal and state courts share concurrent jurisdiction over matters involving the wrongful denial of benefits under ERISA. See 29 U.S.C. §§ 1132(a)(1)(B) & (e)(1). -6 -

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p a rty's arguments that the magistrate judge's recommendation should be reviewed de novo a n d a different disposition made. D A T E D October 17, 2008. B Y THE COURT: s / F.A. Gossett U n ite d States Magistrate Judge

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