Court Opinion

ID: 31916
Source: CourtListenerOpinion
Date Created: 2010-04-25 18:47:17+00
Date Added: 2024-06-11T14:55:59.265521
License: Public Domain

United States Court of Appeals
                                                                  Fifth Circuit
                                                               F I L E D
                                                                 July 10, 2003
                 IN THE UNITED STATES COURT OF APPEALS
                                                           Charles R. Fulbruge III
                         FOR THE FIFTH CIRCUIT                     Clerk

                             No. 01-30922

     JULIO C ARANA

                            Plaintiff - Appellee

     v.

     OCHSNER HEALTH PLAN

                            Defendant - Appellant

             Appeal from the United States District Court
                 for the Eastern District of Louisiana

Before KING, Chief Judge, JOLLY, HIGGINBOTHAM, DAVIS, JONES,
SMITH, WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES,
STEWART, DENNIS, CLEMENT, and PRADO, Circuit Judges.

KING, Chief Judge:

     Julio C. Arana sued Ochsner Health Plan, Inc. in state court

to obtain a declaration that he is entitled to retain tort

settlement proceeds free of Ochsner Health Plan, Inc.'s claim for

reimbursement of health care benefits previously paid for Arana's

account and to obtain attorney's fees and statutory penalties as

well.     The case was removed to federal court.    The district court

granted summary judgment for Arana.     A panel of this court

reversed, holding that the district court did not have subject

                                   1
matter jurisdiction, and directed that the case be remanded to

state court.   See Arana v. Ochsner Health Plan, Inc., 302 F.3d

462 (5th Cir. 2002), vacated and reh'g en banc granted, 319 F.3d

205 (5th Cir. 2003).     Rehearing en banc was granted, thereby

vacating the panel opinion.     Because Arana states a claim to

recover benefits or to enforce his rights that is completely

preempted by ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B)

(2000), we find that the district court had federal subject

matter jurisdiction.     We do not address the merits of this case,

instead returning the case to the panel for that purpose.

                  I.   FACTUAL AND PROCEDURAL HISTORY

     A.   Facts

     Julio C. Arana ("Arana") was injured in a car accident.

Ochsner Health Plan, Inc. ("OHP") paid approximately $180,000 in

benefits under the terms of an employer-sponsored health plan

offered by Arana's mother's employer.     Arana then asserted tort

claims against, and ultimately settled with, three other

insurance companies.1     Though his mother's health benefits plan,

which all parties agree is governed by the Employee Retirement

Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461 (2000),

required Arana to notify OHP of any litigation or settlement of

claims against third parties for which OHP had made payment,

     1
          Approximately $150,000 of the tort settlements is being
held in Arana's attorney's trust fund account.

                                    2
Arana did not do so.   OHP learned of the settlements and

contacted Arana's mother.   OHP claimed a right to subrogation of

Arana's personal injury cause of action and reimbursement of

benefits it paid for Arana's injuries to the extent that Arana

was compensated by other insurers.2

     2
          The Group Health Services Agreement is the ERISA plan
between OHP (here designated O/SCHP) and Arana. The portion at
issue in this case reads:

     If any Member is injured by an act or omission of a
     third party and if such third party and/or any other
     third party or entity, including but not limited to the
     Member's medical, health and accident,
     uninsured/underinsured motorist, school, and/or no
     fault insurer(s) (each referred to hereafter as a
     "Third Party"), is subsequently determined to be liable
     and/or responsible for the Expenses incurred because of
     such act or omission or by contract, O/SCHP will be
     subrogated to, and may enforce the rights of, the
     Member against the Third Party(ies) for such Expenses.

     In addition to and notwithstanding the subrogation
     rights granted to O/SCHP, by becoming a Member of
     O/SCHP and/or accepting benefits under O/SCHP and the
     provision of health care services by O/SCHP, including
     payment of the Expenses, each Member does hereby assign
     and shall be deemed to have assigned to O/SCHP all
     rights and claims against such Third Party(ies) for
     such Expenses, including the right to compromise claims
     independently of the Member, to commence and prosecute
     any legal proceeding, and to pursue judgments through
     collection, in its name or in the Member's name.

     . . .

     Any settlement, compromise, or release by a Member in
     favor of a Third Party, made in violation of the
     provisions of this Section 1, shall be deemed to
     include the full amount due O/SCHP, up to the amount of
     the settlement, compromise, or release, regardless of
     whether the Member receives full or partial recovery
     from such Third Party, and any funds received by the
     Member shall be held in trust by the Member and/or his

                                 3
     B.   District Court Decision

     Arana sued OHP in Louisiana state court, seeking a

declaratory judgment.   Arana asked the court to find that OHP

could not obtain reimbursement from him for amounts OHP

previously paid for his medical bills.   Arana raised two claims:

(1) a request for a declaratory judgment "requiring OHP to

release its notice of lien and to withdraw and release OHP's

subrogation, reimbursement and assignment claims" because LA.

REV. STAT. § 22:6633 bars OHP from asserting these rights; and (2)

a request for statutory penalties and attorney's fees under LA.

REV. STAT. § 22:6574 for OHP's allegedly wrongful attempt to assert

     attorney or other representative and paid to O/SCHP
     without any deductions for attorneys' fees or other
     costs.
     3
          Section 22:663 reads:

     Notwithstanding any other provisions in this title to
     the contrary, no group policy of accident, health or
     hospitalization insurance, or of any group combination
     of these coverages, shall be issued by any insurer
     doing business in this state which by the terms of such
     policy group contract excludes or reduces the payment
     of benefits to or on behalf of an insured by reason of
     the fact that benefits have been paid under any other
     individually underwritten contract or plan of insurance
     for the same claim determination period. Any group
     policy provision in violation of this section shall be
     invalid.

LA. REV. STAT. ANN. § 22:663 (West 1995 & Supp. 2003).
     4
          Section 22:657 reads, in part:

     All claims arising under the terms of health and
     accident contracts issued in this state, except as
     provided in Subsection B, shall be paid not more than

                                  4
a lien against his tort settlements and obtain reimbursement from

him.       Arana brought the case as a class action, but no class has

been certified.

       OHP removed the case to federal district court, basing

subject matter jurisdiction on the argument that ERISA completely

preempts Arana's claims.       The district court found that there was

subject matter jurisdiction because Arana stated a claim "to

recover benefits" under ERISA § 502(a)(1)(B).5      The district

court then granted partial summary judgment to Arana on the

       thirty days from the date upon which written notice and
       proof of claim, in the form required by the terms of
       the policy, are furnished to the insurer unless just
       and reasonable grounds, such as would put a reasonable
       and prudent businessman on his guard, exist. The
       insurer shall make payment at least every thirty days
       to the assured during that part of the period of his
       disability covered by the policy or contract of
       insurance during which the insured is entitled to such
       payments. Failure to comply with the provisions of
       this Section shall subject the insurer to a penalty
       payable to the insured of double the amount of the
       health and accident benefits due under the terms of the
       policy or contract during the period of delay, together
       with attorney's fees to be determined by the court.
       Any court of competent jurisdiction in the parish where
       the insured lives or has his domicile, excepting a
       justice of the peace court, shall have jurisdiction to
       try such cases.

LA. REV. STAT. ANN. § 22:657 (West 1995 & Supp. 2003).
       5
               The district court reasoned:

       Arana's argument that his claim is brought only under
       state law because it is not a claim to obtain benefits
       is unconvincing. Even though the benefits have been
       paid, Ochsner is attempting to reduce the amount of the
       benefits paid under the health plan. The claim is
       brought under § 502(a) . . .

                                     5
merits of his claims.

     C.     Fifth Circuit Proceedings

     On appeal, Arana argued that the federal courts do not have

subject matter jurisdiction over this action because his claims

are not completely preempted by ERISA.     The panel agreed.   The

panel held that Arana's first claim is not a claim "to recover

benefits" within the scope of ERISA § 502(a)(1)(B) because OHP

has already paid Arana all of the health benefits due and Arana

is not seeking additional benefits.     The panel also rejected

OHP's argument that Arana's first claim is one "to enforce his

rights under the terms of the plan" under § 502(a)(1)(B) because

Arana is not seeking to enforce the plan's terms but rather to

declare a portion of the plan illegal under Louisiana law if

enforced.    Finally, the panel determined that Arana's second

claim, which seeks penalties and attorney's fees, is not within

the scope of ERISA § 502(a) because, though LA. REV. STAT. § 22:657

may conflict with ERISA, a mere conflict with federal law is

insufficient for jurisdiction.

     We granted OHP's petition for rehearing en banc to consider

the jurisdictional issue.6

     6
          Participating in this case as amici curiae are
Louisiana Managed Health Care Association, Inc., et al.; Benefit
Recovery, Inc.; Elaine L. Chao, Secretary of the United States
Department of Labor; and Professors Edward H. Cooper and Dana M.
Muir of the University of Michigan Law School. Professors Cooper
and Muir filed their brief at the request of the court, and we
are grateful for their participation.

                                  6
                         II.   STANDARD OF REVIEW

     We review challenges to our subject matter jurisdiction de

novo.    See, e.g., Hussain v. Boston Old Colony Ins. Co., 311 F.3d

623, 628 (5th Cir. 2002).

           III.    DISCUSSION OF SUBJECT MATTER JURISDICTION

     A.     Requirements for Complete Preemption Subject Matter
            Jurisdiction

     The federal removal statute authorizes removal to federal

court of a civil action filed in state court if the claim is one

"arising under" federal law or if there is diversity jurisdiction

and the defendant is not a citizen of the state where the action

is brought.7      See 28 U.S.C. § 1441(b) (2000).   As the Supreme

Court recently explained:

     To determine whether the claim arises under federal
     law, we examine the "well pleaded" allegations of the
     complaint and ignore potential defenses: "A suit arises
     under the Constitution and the laws of the United
     States only when the plaintiff’s statement of his own
     cause of action shows that it is based upon those laws
     or that Constitution. It is not enough that the
     plaintiff alleges some anticipated defense to his cause
     of action and asserts that the defense is invalidated
     by some provision of the Constitution of the United
     States." Louisville & Nashville R. Co. v. Mottley, 211
     U.S. 149, 152 (1908); see Taylor v. Anderson, 234 U.S.
     74 (1914). . . . As a general rule, absent diversity
     jurisdiction, a case will not be removable if the
     complaint does not affirmatively allege a federal
     claim.

Beneficial Nat'l Bank v. Anderson, 123 S. Ct. 2058, 2062 (2003).

     7
          OHP and Arana are citizens of Louisiana, so removal is
only proper in this case if there is federal question
jurisdiction.

                                     7
     There is an exception to the well-pleaded complaint rule,

though, if Congress "so completely pre-empt[s] a particular area

that any civil complaint raising this select group of claims is

necessarily federal in character."   Metro. Life Ins. Co. v.

Taylor, 481 U.S. 58, 63-64 (1987).   In Metropolitan Life

Insurance Co. v. Taylor, the Supreme Court found that state law

claims seeking relief within the scope of ERISA § 502(a)(1)(B)

are completely preempted.   See id. at 62-66.

     B.   Analysis of Arana's LA. REV. STAT. § 22:663 Claim

     Arana's first claim requests a declaratory judgment

"requiring OHP to release its notice of lien and to withdraw and

release OHP's subrogation, reimbursement, and assignment claims"

because such claims violate LA. REV. STAT. § 22:663.   This claim

is completely preempted because it falls within the scope of

ERISA § 502(a)(1)(B).   Section 502(a)(1)(B) reads:

     (a) A civil action may be brought–
          (1) by a participant or beneficiary–
          . . .
                (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 benefits under the terms
                of the plan . . .

29 U.S.C. § 1132 (2000).

     Arana's LA. REV. STAT. § 22:663 claim can fairly be

characterized either as a claim "to recover benefits due to him

under the terms of his plan" or as a claim "to enforce his rights

                                 8
under the terms of the plan."8   As it stands, Arana's benefits

are under something of a cloud, for OHP is asserting a right to

be reimbursed for the benefits it has paid for his account.    It

could be said, then, that although the benefits have already been

paid, Arana has not fully "recovered" them because he has not

obtained the benefits free and clear of OHP's claims.

Alternatively, one could say that Arana seeks to enforce his

rights under the terms of the plan, for he seeks to determine his

entitlement to retain the benefits based on the terms of the

plan.

     8
       See Clancy v. Employers Health Insurance Co., 82 F. Supp.
2d 589, 591-92, 596 (E.D. La. 1999), aff'd, 248 F.3d 1142 (5th
Cir. 2001) (unpublished opinion), cert. denied, 534 U.S. 820
(2001) (finding that a suit based on LA. REV. STAT. § 22:663
seeking to obtain benefits and prevent an insurer from recovering
benefits it had already paid fell within § 502(a)(1)(B) as a
claim "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"); see also Coughlin v. Health Care Serv. Corp., 244 F.
Supp. 2d 883, 885-89 (N.D. Ill. 2002) (finding than the insureds'
declaratory judgment class action claims, which sought to retain
tort settlements in light of the insurers' claims for
reimbursement, were claims to "enforce [their] rights under the
terms of the plan" and to "clarify [their] rights to future
benefits under the terms of the plan"); Carducci v. Aetna U.S.
Healthcare, 204 F. Supp. 2d 796, 799-803 (D.N.J. 2002) (holding
that the insureds' suits to recover funds their ERISA plans had
obtained via subrogation liens on their tort settlement proceeds
were suits for "benefits due" under their plans); Franks v.
Prudential Health Care Plan, Inc., 164 F. Supp. 2d 865, 868-69
(W.D. Tex. 2001) (finding that an insured's suit to recover
amounts he had paid to reimburse his ERISA plan from tort
settlement proceeds was a suit "to recover benefits due 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") (emphasis in original).

                                 9
     Arana contends that he does not seek relief under ERISA

§ 502(a)(1)(B) because he claims entitlement to relief under

Louisiana law, not under the terms of his ERISA plan.       That is,

according to Arana, LA. REV. STAT. § 22:663 nullifies the term of

his ERISA plan which provides for reimbursement, so his claims do

not seek relief under the plan's terms.       As we see it, however,

Arana does seek benefits "under the terms of the plan" because

the plan explicitly provides that the plan is to be enforced

according to Louisiana law.       Specifically, the plan contains a

choice-of-law clause mandating that the plan be construed in

light of Louisiana law so long as Louisiana law is not preempted

by ERISA.9    Our holding that Arana seeks relief under the terms

of the plan is bolstered by a Seventh Circuit decision which also

found that a claim seeking benefits premised on an ERISA plan

read in conjunction with state law falls within § 502(a)(1)(B).

See Plumb v. Fluid Pump Serv., Inc., 124 F.3d 849, 860-62 (7th

Cir. 1997); cf. Ward, 526 U.S. at 377 ("Ward sued under

§ 502(a)(1)(B) 'to recover benefits due . . . under the terms of

the plan.'    The [California] notice-prejudice rule supplied the

     9
             This clause reads:

     Section 15. Governing Law: This Agreement shall be
     construed, administered and enforced as a Louisiana
     contract according to the internal laws of the State of
     Louisiana. However, it is specifically intended that
     to the extent ERISA or any other federal law preempts
     state law, this Agreement shall be construed,
     administered and enforced in accordance with such laws.

                                    10
relevant rule of decision for this § 502(a) suit.").     Thus,

Arana's claim seeks relief under the terms of his ERISA plan, as

ERISA § 502(a)(1)(B) requires.

     Arana's final argument is that, even if his claim falls

within ERISA § 502 so that it is completely preempted, there is

no jurisdiction because his claim is not conflict preempted as

well.   Conflict preemption, also known as ordinary preemption,

arises when a federal law conflicts with state law, thus

providing a federal defense to a state law claim, but does not

completely preempt the field of state law so as to transform a

state law claim into a federal claim.     See, e.g., Heimann v.

Nat'l Elevator Indus. Pension Fund, 187 F.3d 493, 499-500 (5th

Cir. 1999).   Arana reasons that although his claim is conflict

preempted under ERISA § 514(a), 29 U.S.C. § 1144(a) (2000),

because it is a claim that "relates to" an ERISA plan, it is

saved from preemption because LA. REV. STAT. § 22:663 is a state

law that "regulates insurance" under § 514(b)(2)(A), 29 U.S.C.

§ 1144(b)(2)(A) (2000), within the meaning of FMC Corp. v.

Holliday, 498 U.S. 52 (1990), and Kentucky Ass'n of Health Plans,

Inc. v. Miller, 123 S. Ct. 1471 (2003).

     This circuit has not been content to require only § 502

complete preemption for federal jurisdiction, requiring § 514

conflict preemption as well.     See, e.g., Copling v. Container

Store, Inc., 174 F.3d 590, 597 n.14 (5th Cir. 1999); McClelland

v. Gronwaldt, 155 F.3d 507, 517 & n.31 (5th Cir. 1998).    The

                                  11
source of this two-part test, as best we can tell, is Hartle v.

Packard Electric, where we stated:

          Federal preemption is ordinarily raised as a
     matter of defense, and therefore does not authorize
     removal to federal court. In Metropolitan Life
     Insurance Co. v. Taylor, 481 U.S. 58, 107 S. Ct. 1542,
     95 L. Ed. 2d 55 (1987), however, the United States
     Supreme Court held that state law actions displaced by
     the civil enforcement provisions of ERISA can be
     characterized as claims arising under federal law.
     Therefore, such actions can properly be removed to
     federal court even though ERISA preemption does not
     appear on the face of the complaint.
          A prerequisite to this exercise of jurisdiction,
     however, is that the state law claims actually be
     preempted by ERISA.

877 F.2d 354, 355 (5th Cir. 1989).   Succeeding cases have been

controlled by this language.

     Today, in view of the possibility that Arana’s claim is not

preempted by § 514(a), we must revisit our two-part test for

finding complete preemption jurisdiction.   First, Metropolitan

Life, to which the Hartle case referred, did not hold that a two-

part test is required in order to find complete preemption.    In

Metropolitan Life, in assessing whether removal of the common law

contract and tort claims at issue was proper, the Supreme Court

simply noted that the claims were preempted by § 514 and then

went on to consider § 502(a) complete preemption.   See 481 U.S.

at 62-63.   Second, Supreme Court cases decided after Metropolitan

Life (and after we adopted our two-part test) have made it clear

that § 514 conflict preemption is not necessary to find complete

preemption jurisdiction.   In UNUM Life Insurance Co. of America

                                12
v. Ward, the Court determined that a California state law was not

preempted under § 514 (because it was a law regulating insurance)

but acknowledged that the plaintiff properly brought a claim in

federal court under ERISA § 502(a).   See 526 U.S. 358, 365-77

(1999).   Similarly, in Rush Prudential HMO, Inc. v. Moran, the

Court found that ERISA § 514 did not preempt the Illinois HMO Act

(because it too was a law regulating insurance) but nonetheless

noted, and did not question the fact that, the Seventh Circuit

found federal subject matter jurisdiction over the claim under

ERISA § 502(a).   See 536 U.S. 355, 363-87 (2002).   These cases

clearly indicate, then, that there may be complete preemption

subject matter jurisdiction over a claim that falls within ERISA

§ 502(a) even though that claim is not conflict preempted by

ERISA § 514.

     We thus hold that only complete preemption of a claim under

ERISA § 502(a) is required for removal jurisdiction; conflict

preemption under ERISA § 514 is not required;10 and we overrule

the relevant portions of our precedent to the contrary.11   Put

simply, there is complete preemption jurisdiction over a claim

that seeks relief "within the scope of the civil enforcement

     10
          We thus do not address whether Arana's LA. REV. STAT.
§ 22:663 claim is conflict preempted under ERISA § 514.
     11
          These portions of our precedent include: Heimann, 187
F.3d 493, 502 (5th Cir. 1999); Copling, 174 F.3d at 597 n.14;
McClelland, 155 F.3d at 517 & n.31; Hartle, 877 F.2d at 355.

                                13
provisions of § 502(a)."     Metro. Life Ins. Co., 481 U.S. at 66.12

                            IV.   CONCLUSION

     We find that there is subject matter jurisdiction over this

case.     We RETURN the case to the panel to address the merits of

Arana's claims.

     12
           Because the district court correctly held that there is
subject matter jurisdiction over Arana's LA. REV. STAT. § 22:663
claim, we need not address OHP's argument that Arana's LA. REV.
STAT. § 22:657 claim for attorney's fees and penalties provides
an independent basis of jurisdiction. We also decline to address
OHP's argument that there is subject matter jurisdiction because
OHP has a federal claim under Great-West Life & Annuity Insurance
Co. v. Knudson, 534 U.S. 204 (2002), and Franchise Tax Board v.
Construction Laborers Vacation Trust for Southern California, 463
U.S. 1 (1983).

                                   14