Oak West argues that it is distinct from Demorest. Oak West claims that it
never treated McCoy and never employed Demorest. McCoy alleges in his amended
complaint that Demorest was an employee or agent of Unicare and Oak West. (A
Compl. Count I, Par. 5, Count II, Par. 3, Count IV, Par. 2). However, it is clear from
the other allegations in McCoy’s amended complaint that the essential facts
concerning Demorest’s relationship with Oak West is not contested. McCoy does
not, for instance, argue that Demorest received a salary directly from Oak West.
Rather, it is apparent that McCoy seeks to have the court infer from the agreed upon
set of facts that the relationship was such that Demorest should be deemed an
employee or agent of Oak West. McCoy fails however, to cite any case law to
support his novel theory that such a connection may be inferred in this instance.
Neither does McCoy allege facts that would indicate that Demorest was involved in
treatment issues and eligibility issues. Clearly the facts in this action are not the type
of facts envisioned in Pegram when addressing ERISA. McCoy contends that
Demorest treated him, however, there is no indication whatsoever, that Demorest
made treatment decisions for Unicare or Oak West and was simultaneously the
administrator of McCoy’s plan or owned or operated the plan. The facts in this
action indicate that the two types of decisions remained separate and distinct. Also,
we would be reluctant to simply infer that a new type of mixed issue action has been
created in the FEHBA context because a similar type of claim was recognized in the

ERISA context, Also as will be discussed below, Aetna Health Inc. v. Davila, 124


regarding the terms and benefits of FEHBA plans.” Jd. at 1034(quoting Kight v.
Kaiser Found. Health Plan of Mid-Atlantic States, Inc, 34 F.Supp.2d 334, 339
(E.D.Va. 1999)). As the court indicated in Doyle, the doctrine of complete
preemption is not barred simply because Congress has not specifically stated that the
FEHBA area is “completely preempted.” 149 F.Supp.2d at 433. Such a requirement
of an express statement from Congress is not logical considering the courts’
instructions to consider evidence of Congressional intent in addressing the
applicability of the complete preemption doctrine. We conclude that there is
sufficient evidence that Congress intended to completely preempt claims connected
to FEHBA.

We also note that we do not find the opposing case law on this issue to be
persuasive. For example, in State Farm Indemnity v. Fornaro, 227 F Supp.2d 229,
239 (D.N.J. 2002) the court held that the doctrine of complete preemption is not
applicable to FEHBA. However, the court in making its ruling, relied uponGoepel
v. National Postal Mail Handlers Union, a Div. of LIUNA 36 F.3d 306 (3° Cir.
1994), stating that “Goepel is controlling.” Id. The problem with such reliance on
Goepel is that the ruling was made prior to the 1998 amendment to FEHBA and the
legislative history mentioned above. Thus, the court in State Farm Indemnity failed
to consider the effect of the 1998 amendment and the legislative history.

Likewise in Haller v. Kaiser Foundation Health Plan of the Northwest 184

F.Supp.2d 1040 (D.Or. 2001) the court noted that the district courts are split on the


there is a “congressional intent in the enactment of a federal statute not just to
provide a federal defense to a state created cause of action but to grant a defendant
the ability to remove the adjudication of the cause of action to a federal court by
transforming the state cause of action into a federal cause of action").

There are two alternative approaches in case law for the complete preemption
doctrine which are referred to as the complete preemption model and the
replacement model. See McQuerry v. American Medical Systems, Inc. 899 F.Supp.
366, 369 (N.D. Ill. 1995)(delineating approaches into complete preemption model
and replacement model). See also Rogers, 308 F.3d at 788 (indicating that
replacement model is an approach under complete preemption doctrine). But see
Bastien, 205 F.3d at 986(indicating that the applicable standard for the complete
preemption doctrine is whether Congress intended to completely preempt an area
and not leave room for state claims); Franczyk v. Cingular Wireless, LLG 2004 WL
178395, at *1 (N.D. Ill. 2004)(stating that “{ijn some instances, Congress has
completely preempted a particular area where there is no room for any state
regulation and the complaint is ‘necessarily federal in character."”)

Under the replacement model “removal is appropriate only if federal law not
only preempts the state claim but also replaces it with a federal remedy.” McQuerry,
899 F.Supp. at 369. According to this line of cases, the "ability to bring suit under
[federal law] is an element of ‘complete preemption.’" Rogers, 308 F.3d at 788. The

doctrine of complete preemption is not applicable “if a federal remedy did not exist


S.Ct. 2488 (2004) is instructive in the ERISA context regarding the complete

preemption of claims.

IL Complete Preemption

Unicare and Oak West removed the instant action to federal court on the basis
that McCoy’s claims are “fully pre-empted and displaced by FEHBA....” (Rem.
Par. 4). Federal courts have federal question subject matter jurisdiction for cases
that arise "under the Constitution, laws, or treaties of the United States." 28 U.S.C,
§ 1331. A claim arises “under the laws of the United States if the plaintiff's
complaint raises a federal issue.” Lister v. Stark, 890 F.2d 941, 943 (7" Cir. 1989).

Generally, “[fJederal pre-emption is ordinarily a federal defense to the
plaintiff's suit... [,] does not appear on the face of a well-pleaded complaint, and,
therefore, does not authorize removal to federal court.” Metropolitan Life Ins. Co. v.
Taylor, 481 U.S. 58, 63 (1987). However, a removal may be warranted under the
doctrine of complete preemption, which is an “‘independent corollary’ to the well-
pleaded complaint rule.” Caterpillar Inc., 482 U.S. at 393. The complete
preemption doctrine allows removal only where Congress has so completely
preempted a particular area that no room remains for any state regulation and the
complaint would be ‘necessarily federal in character.” Bastien v. AT&T Wireless
Servs., Inc., 205 F.3d 983, 986-87 (7" Cir. 2000); See also Rogers v. Tyson Foods,

Inc., 308 F.3d 785, 788 (7" Cir. 2002)(stating that there is complete preemption if


5 U.S.C. § 8902. The lower federal courts are split on the issue of the applicability
of the complete preemption doctrine to FEHBA. See Haller v. Kaiser Found. Health
Plan of the Northwest, 184 F .Supp.2d 1040, 1046-48 (D. Or. 2001)(explaining that
there is a split among the district courts).

We agree with the reasoning set forth in Doyle v. Blue Cross Blue Shield of
Illinois, 149 F.Supp.2d 427 (N.D. Il. 2001) and Rievley v. Blue Cross Blue Shield of
Tennessee, 69 F Supp.2d 1028 (E.D. Tenn. 1999). The courts in both cases
examined the expansive language included in FEHBA stating that the provisions
“shall supersede and preempt any State or local law,” 5 U.S.C. § 8902, and the
courts noted that in 1998 Congress expanded the scope of preemption farther by
removing language that limited preemption to circumstances where state law was
“inconsistent with” health insurance contracts. 149 F.Supp.2d at 432; 69 F.Supp.2d
at 1033-34. The courts also referred to the legislative history regarding the 1998
amendment in which Congress indicated the intent behind the amendment was to
“broaden the preemption of State and local laws” to the degree that “FEHB program
contract terms which relate to the nature or extent of coverage or benefits (including
payments with respect to benefits) completely displace State or local law relating to
health insurance or plans. .. .” ). H.R.Rep. No. 105-374, at 16 (1997)(emphasis
added); 149 F.Supp.2d at 432; 69 F.Supp.2d at 1034. We agree with the court in

Rievley that Congress has “clearly manifested an intent to preempt state law


Minute Order Form (06/97)

United States District Court, Northern District of Illinois

sir Magurate sedge | __Samuel Der-Yeghiayan “than Asigned ge
CASE NUMBER 04 C 1126 DATE 10/14/2004
CASE McCoy vs. Unicare Life Ins
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
qd) im} Filed motion of [ use listing in “Motion” box above.]
Q) a Brief in support of motion due
GB) a Answer brief to motion due__. Reply to answer briefdue__
(4 ira Ruling/Hearing on set for at
(5) oO Status hearing{held/continued to} [set for/re-set for]on___——ssetfor_ at
(6) a Pretrial conference[held/continued to] [set for/re-set for}on___—ssetfor ss at__
(7) a Trial[set for/re-set for}on___at
(8) Oo [Bench/Jury trial] [Hearing] held/continued to at
(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) CLocal Rule 41.1 CFRCP41(a)(1) OO FRCP41(a)(2).

ao [Other docket entry] Status hearing held and continued to 12/07/04 at 9:00 a.m. For the reasons
stated in the attached memorandum opinion, plaintiffs motion to remand is denied. The plaintiff is given
until 10/27/04 to respond to defendant Demorst’s motion to dismiss. Defendant Demorst is given until
11/04/04 to file his reply. The remaining defendants are given until 11/10/04 to answer, move or
otherwise plead to the plaintiff’s amended complaint. Enter Memorandum Opinion.

a) [For further detail see order attached to the original minute order,]

No notices requited, advised in open court

No notices required.
fo q umber of notices

Notices mailed by judge’s staff OCT 18 200

Notified counsel by telephone

date docketed

vw | Docketing to mail notices.

dep S initials

Mail AO 450 form. . peat

Copy to judge/magistrate judge.

courtroom ry eh ke
MW6 deputy’s Lito?
initials

date mailed notice

Date/time reccived’in
central Clerk’s Office mailing deputy initials



from the facts in the action that the allegations are essentially contesting the
eligibility of benefits rather than treatment decisions, then the claims should properly
be deemed what they truly are and the court should not proceed under the pretense
that the allegations are legitimate malpractice claims.

We also find that the claims in the instant action fit within the remedy
provisions of FEHBA and the scope of the preemption. In the instant action, McCoy
attempts to portray Unicare and Oak West’s involvement in his medical care as
malpractice. However, McCoy’s claims against Unicare and Oak West are in
essence complaints in regards to the administration of benefits and his dissatisfaction
with the administration of his benefits when he was referred to Westlake. There is
no indication that Unicare or Oak West had any role in the treatment of McCoy and
McCoy cannot artfully attempt to plead around FEHBA, particularly when, as in this
instance, Congress has indicated that the complete preemption doctrine is applicable.

Therefore, we deny the motion to remand.

CONCLUSION

Based on the foregoing analysis, we deny the motion to remand.

Sern? Dee fopheary—

Samuel Der-Yeghiayan
United States District Court Judge

Dated: October 14, 2004

1h


issue, but concluded that there is not complete preemption. Jd. at 1046-47.
However, in coming to such a conclusion the court in Hailer initially relies upon a
1996 case and a 1987 case which were ruled upon prior to the 1998 amendments to
FEHBA. Id. The court in Haller also relied upon Pegram, the holding of which has
recently been limited in Aetna Health Inc. v. Davila, 124 $.Ct. 2488 (2004). Id. at
1046. The court in Haller also places a great emphasis on case law pertaining to
ERISA in concluding that complete preemption is not applicable. Jd. ERISA and
FEHBA are not redundant acts. They serve different purposes and whether or not
Congress intended to take the step towards complete preemption in regards to one
act or the other act ultimately must be analyzed in accordance with the specific act
and Congressional intent of the act. Simply because Congress did or did not intend
complete preemption in regards to one of the acts does not dictate a like intention in
regards to the other statute. As indicated above, ERISA case law may be instructive,
but should not be given too much consideration. Thus, the over reliance in Haller
on ERISA case law is misplaced. We also disagree with the finding in Haller that
since there is no provision in the FEHBA providing a remedy for malpractice, that it
is a foregone conclusion that any malpractice claims cannot be the subject of
complete preemption. /d. at 1047-48. A plaintiff cannot circumvent the clear intent
of Congress to completely preempt an area of law by phrasing allegations so that
they appear to be malpractice allegations and by omitting any reference to the

FEHBA. Regardless of the titles and jargon included in a complaint, if it is clear


in the alternative . . . [because] [o]therwise, a plaintiff would be forced into federal
court with no relief available for ‘vindicating the same interest.’"Jd. Federal
preemption trumps state law, “but the foundation for removal is the creation of
federal law to replace state law." Jd. Thus, "unless the federal law has created a
federal remedy--no matter how limited--the federal law, of necessity, will only arise
as a defense to a state law action’ and will thus not give rise to federal question
jurisdiction underlying complete preemption.” Jd.

In the instant action the main thrust of Defendants’ argument is that McCoy’s
claims are preempted by federal law. Defendants’ arguments are mainly limited to
the complete preemption model and Defendants fail to provide any arguments
regarding the replacement model.

Defendants rely upon 4etna Health Inc. v. Davila, 124 $.Ct. 2488 (2004). In
Davila the court addressed the applicability of the complete preemption doctrine to
the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001ler
seq., completely preempted certain claims. Jd. at 2499. Although a comparison
between ERISA and FEHBA is instructive, we must also analyze FEHBA itself and
Congressional intent.

In 1998 Congress amended FEHBA and broadened the scope of the
preemption provision to read as follows:

The terms of any contract under this chapter which relate to the nature,
provision, or extent of coverage or benefits (including payments with respect
to benefits) shall supersede and preempt any State or local law, or any
regulation issued thereunder, which relates to health insurance or plans.

7


LEGAL STANDARDS

A party may file a motion to remand a case for improper removal based on
lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1447(c). The party
seeking removal bears the burden of establishing federal jurisdiction. Doe v. Allied-
Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993). Any doubt regarding jurisdiction
should be resolved in favor of remanding to the state. Jd. Furthermore, removal is
only proper where the state-court claims could have originally been brought in
federal court. 28 U.S.C. § 1441; Caterpillar Inc. v. Williams, 482 U.S. 386, 392
(1987).

DISCUSSION

I. Mixed Plan Eligibility and Treatment Issues

McCoy argues that his claim involves “mixed plan eligibility and treatment
issues” and that his claim is therefore the type of claim envisioned in Pegram v.
Herdrich, 530 U.S. 211 (U.S. 2000). However, in Aetna Health Inc. v. Davila, 124
S.Ct. 2488 (2004) the court limited the holding ofPegram stating that a “mixed
issues” claim referred to in Pegram is only applicable to situations where a treating
physician is making treatment decisions while simultaneously owning or operating
the health plan for the patient and making eligibility determinations. Jd. at 2500-01.
Also, the court in Pegram did not specifically address FEHBA. Rather it addressed

“mixed issues” claims in the context of ERISA. 530 U.S. at 2153-54.


spouse or dependent of a federal employee in a Federal Employee Health Benefits
Act of 1998 (“FEHBA”), 5 U.S.C. § 8901 et seq., HMO plan provided by Unicare.
Defendant Oak West Primary Physician Association, Inc. (“Oak West”) is an
Independent Physician Association that has a network of contracting health care
service providers who render care and services under medical plans, including
McCoy’s HMO plan.

In November of 2001, McCoy suffered first, second, and third degree burns
on his right arm and torso. Physicians at the Loyola University Medical Center
performed graft surgery on McCoy. McCoy was released from the hospital on
November 27, 2001, and his treating physician ordered McCoy to undergo
occupational therapy for the skin graft. McCoy alleges in his amended complaint
that Defendant Dr. David Demorest (“Demorest”), acting as an agent and employee
for Unicare and Oak West, determined that McCoy could only receive the
occupational therapy if he sought the therapy at Defendant Westlake Community
Hospital in Melrose Park, Illinois (“Westlake”). McCoy alleges that Westlake “did
not possess the requisite skill or knowledge to properly perform occupational
therapy on a skin graft patient” (A Compl. Count IV, Par. 9) and as a result he
suffered personal and pecuniary injury. (A Compl. Count IV, Par. 10). McCoy
brought the instant action in Illinois state court alleging malpractice claims against
Unicare, Oak West, Demorest, and Westlake. The action was subsequently removed

to federal court. McCoy has now filed a motion to remand.


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

EUGENE MCCOY,
Plaintiff,

v. No. 04 C 1126
UNICARE LIFE AND HEALTH
INSURANCE COMPANY, a corporation;
DAVID S. DEMOREST, M.D.; OAK
WEST PRIMARY PHYSICIAN
ASSOCIATION, INC., a corporation;
WESTLAKE COMMUNITY
HOSPITAL,

DOCKETED

OCT 1 8 2004

wee ewe

Defendants.

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge

This matter is before the court on Plaintiff Eugene McCoy’s (“McCoy”)

motion for remand. For the reasons stated below, we deny the motion to remand.

BACKGROUND
Defendant Unicare Life and Health Insurance Company (“Unicare”), is an
Independent Physician Association model HMO Plan that contracted with the United

States Office of Personal Management. McCoy was enrolled apparently as the