Source: http://ca.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20190911_0002646.C09.htm/qx
Timestamp: 2019-11-17 13:15:16
Document Index: 27720215

Matched Legal Cases: ['§ 502', '§ 514', '§ 502', '§ 514', '§ 502', '§ 502', '§ 502', '§ 502', '§ 514', '§ 502', '§ 1291', '§ 431', '§ 431', '§ 431', '§ 431', '§ 663', '§ 663', '§ 502']

FindACase™ | Rudel v. Hawai'i Management Alliance Association
Rudel v. Hawai'i Management Alliance Association
Randy Rudel, Plaintiff-Appellee/ Cross-Appellant,
Hawai'i Management Alliance Association, Defendant-Appellant/ Cross-Appellee.
Argued and Submitted June 12, 2019 Honolulu, Hawai'i
Appeal from the United States District Court for the District of Hawai'i J. Michael Seabright, Chief District Judge, Presiding No. 1:15-cv-00539-JMS-RLP.
Jordan J. Kimura (argued) and David J. Minkin, McCorriston Miller Mukai MacKinnon LLP, Honolulu, Hawai'i; Clarissa A. Kang and Angel L. Garrett, Trucker Huss, San Francisco, California; for Defendant-Appellant/Cross-Appellee.
Allen K. Williams (argued), Trecker Fritz & Williams, Honolulu, Hawai'i; Woodruff K. Soldner, Michael R. Cruise, and R. Aaron Creps, Leavitt Yamane & Soldner, Honolulu, Hawai'i; for Plaintiff-Appellee/Cross-Appellant.
Dianne Winter Brookins (argued) and Jasmine M. Fisher, Alston Hunt Floyd & Ing, Honolulu, Hawai'i, for Amicus Curiae Hawai'i Medical Service Association.
Kate S. O'Scannlain, Solicitor of Labor; G. William Scott, Associate Solicitor for Plan Benefits Security; Thomas Tso, Counsel for Appellate and Special Litigation; Kira Hettinger, Trial Attorney; United States Department of Labor, Office of the Solicitor, Plan Benefits Security Division, Washington, D.C., for Amicus Curiae R. Alexander Acosta, Secretary of Labor.
Before: Sidney R. Thomas, Chief Judge, and Consuelo M. Callahan and Morgan Christen, Circuit Judges.
ERISA / Preemption
The panel affirmed the district court's judgment holding that two Hawaii statutes restricting health insurers' subrogation recovery rights were saved from preemption under the Employee Retirement Income Security Act and provided the relevant rule of decision in a federal ERISA action to determine the validity of an insurer's lien on tort settlement proceeds.
The insurer paid health insurance benefits under an ERISA plan for plaintiff's medical care after a vehicle accident. Plaintiff also received a payment in a tort settlement for general damages. The insurer asserted a right to a portion of the tort settlement, and placed a lien, under a reimbursement provision of the ERISA plan.
The Hawaii statutes prohibited insurance providers from seeking reimbursement for general damages from third-party settlements. They thus contradicted the terms of the ERISA plan, which provided that the insurer could be reimbursed for general damages.
Plaintiff filed suit in state court, and the insurer removed the case to federal court. The district court denied plaintiff's motion for a remand and granted partial summary judgment in favor of plaintiff.
The panel held that, under ERISA § 502, asserted remedies and causes of action that conflict with ERISA's civil enforcement scheme are deemed preempted. When a claim is removed from state to federal court, the state law claim is reconfigured as a federal ERISA cause of action. ERISA § 514 expressly preempts state laws that relate to any employee benefit plan but saves from preemption any state law that regulates insurance, banking, or securities. If a case is properly before a federal court under § 502, then a state statute that is saved from preemption under § 514 and does not conflict with § 502, can supply the relevant rule of decision.
The panel held that § 502(a) completely preempted the Hawaii statutes, allowing the case to be removed to federal court. The panel concluded that plaintiff could have brought his claim under § 502(a) because, in substance, the claim was one to recover benefits or to clarify his rights to benefits pursuant to the ERISA plan. Joining the Third, Fourth, and Fifth Circuits, the panel held that challenges to a plan's right to reimbursement are properly characterized as § 502(a) claims. The panel also concluded that no other independent legal duties were implicated by the insurer's actions. Accordingly, plaintiff's state law claims were completely preempted, and the district court properly denied his remand motion.
The panel held that the Hawaii statutes related to an employee benefit plan but were saved from express preemption under § 514 because they regulated insurance. The panel concluded that the Hawaii statutes were specifically directed toward entities engaged in insurance and substantially affected the risk pooling arrangement between the insurer and the insured.
The panel held that the Hawaii statutes provided the rule of decision for the newly reconfigured federal ERISA action because the statutes did not impermissibly expand the scope of liability under § 502(a). The panel concluded that the Hawaii statutes operated to define the scope of a benefit provided by the ERISA plan and did not create additional remedies not permitted by ERISA. Thus, the Hawaii statutes were not conflict preempted and could provide the rule of decision.
In this case, we consider whether two Hawai'i statutes restricting health insurers' subrogation recovery rights are saved from preemption under the Employee Retirement Income Security Act of 1974 ("ERISA") and, if so, whether the statutes provide a relevant rule of decision in a federal ERISA action to determine the validity of the insurer's lien on tort settlement proceeds.
We have jurisdiction pursuant to 28 U.S.C. § 1291. We review de novo the district court's decisions regarding preemption. Winterrowd v. Am.Gen. Annuity Ins. Co., 321 F.3d 933, 937 (9th Cir. 2003). We affirm the judgment of the district court, which held that the statutes were saved from preemption and provided the relevant rule of decision.
While riding his motorcycle home from work, Randy Rudel was hit by a vehicle making an allegedly illegal left turn. As a result of the accident, Rudel sustained numerous severe injuries, including partial amputations of his left leg and left forearm. Rudel had health insurance benefits for his medical care from the Hawai'i Medical Alliance Association ("HMAA") pursuant to an employee benefit plan governed by ERISA ("the Plan"). In total, HMAA paid $400, 779.70 for medical expenses.[1]
In addition to the money paid by HMAA, Rudel also received a payment totaling $1.5 million in a tort settlement with the driver of the vehicle that struck him. The tort settlement agreement stipulated that the payment was for "general damages" including medical expenses and emotional distress, and did not include special damages such as those that would "duplicate medical payments, no-fault payments, wage loss, [or] temporary disability benefits."
HMAA asserted a right to a portion of the tort settlement proceeds under the Plan, which provided to HMAA the "right to be reimbursed for any benefits [it] provide[s], from any recovery received from . . . any third party or other source of recovery" including "general damages" from third-party settlements. As Rudel's settlements was for such general damages, HMAA placed a lien for $400, 779.70 on Rudel's tort settlement.
Two Hawai'i state statutes (collectively, "the Hawai'i Statutes") posed obstacles to HMAA's ability to recover: Hawai'i Revised Statutes ("HRS") §§ 431:13-103(a)(10) and 663-10. Read together, these statutes prohibit insurance providers from seeking reimbursement for general damages from third-party settlements. They do, however, permit special damages to be reimbursed if a state court determines the lien to be valid, pursuant to the statutory terms.[2] Thus, the Hawai'i Statutes directly contradict the terms of the Plan, which provided that the insurer could be reimbursed for general damages.
Specifically, Haw. Rev. Stat. § 431:13-103 is a provision of the Hawai'i insurance code that defines unfair methods of competition and unfair or deceptive acts or practices. Haw. Rev. Stat. § 431:13-103(a). Section 431:13-103(a)(10) defines one such unfair practice in the business of insurance as:
Refusing to provide or limiting coverage available to an individual because the individual may have a third-party claim for recovery of damages; provided that:
(A) Where damages are recovered by judgment or settlement of a third-party claim, reimbursement of past benefits paid shall be allowed pursuant to section 663-10.
Section 663-10(a), which is referenced in § 431:13-103(a)(10), establishes the procedure for determining if and when reimbursement can be permitted. Importantly, § 663-10 does not permit reimbursement for general damages-it only permits reimbursement for special damages. It reads:
In any civil action in tort, the court, before any judgment or stipulation to dismiss the action is approved, shall determine the validity of any claim of a lien against the amount of the judgment or settlement by any person who files timely notice of the claim to the court or to the parties in the action. The judgment entered, or the order subsequent to settlement, shall include a statement of the amounts, if any, due and owing to any person determined by the court to be a holder of a valid lien and to be paid to the lienholder out of the amount of the corresponding special damages recovered by the judgment or settlement. . . . As used in this section, lien means a lien arising out of a claim for payments made or indemnified from collateral sources, including health insurance or benefits, for costs and expenses arising out of the injury which is the subject of the civil action in tort. If there is a settlement before suit is filed or there is no civil action pending, then any party may petition a court of competent jurisdiction for a determination of the validity and amount of any claim of a lien.
Haw. Rev. Stat. § 663-10(a) (emphasis added).
In state court, Rudel filed an action asserting that the Hawai'i Statutes nullified the inapposite terms of the Plan so as to prevent HMAA from seeking reimbursement. Pursuant to the Hawai'i Statutes, he filed a petition for determination of validity of HMAA's lien in Hawai'i Circuit Court of the Third Circuit. There, he argued that, because his third-party settlement paid only general damages and because the Hawai'i Statutes only permit reimbursement for special damages, HMAA was not entitled to reimbursement. HMAA contended that the state statutes were irrelevant to any claims for reimbursement because the Plan was governed by ERISA, which preempts the Hawai'i Statutes and leaves the Plan terms to determine its subrogation rights.
HMAA then removed the case to the District of Hawai'i. Rudel moved for remand, arguing that his action implicated only state law because he sought only "to keep benefits already provided by HMAA" rather than to "recover benefits under the terms of the Plan."
The district court denied Rudel's remand motion, holding that Rudel's claim belonged in federal court because, in substance, he did not possess the benefits free and clear of HMAA's lien. Thus, for purposes of federal jurisdiction, the action remained one "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 ERISA § 502(a)(1)(B).
Rudel then filed a motion for determination of validity of HMAA's lien pursuant to the Hawai'i Statutes. In response, HMAA filed a motion for summary judgment, arguing that Rudel's action was preempted by ERISA ...