United States District Court, N.D. Texas, Dallas Division
KINDRED HOSPITALS LIMITED PARTNERSHIP d/b/a KINDRED HOSPITAL HOUSTON MEDICAL CENTER, et al., Plaintiffs,
AETNA LIFE INSURANCE COMPANY, et al., Defendants.
MEMORANDUM OPINION AND ORDER
A. FITZWATER UNITED STATES DISTRICT JUDGE
action removed on the basis of ERISA preemption, plaintiffs'
motion to remand presents the question whether ERISA
completely preempts any of plaintiffs' claims and thus
confers federal question jurisdiction. Concluding that it
does not, the court grants the motion to remand, but it
denies plaintiffs' request for attorney's fees and
a suit by plaintiffs Kindred Hospitals Limited Partnership
d/b/a Kindred Hospital Houston Medical Center, THC Houston,
Inc. d/b/a Kindred Hospital-Bay Area, and d/b/a Kindred
Hospital Houston-Northwest, and Transitional Hospitals
Corporation of Texas, Inc. d/b/a Kindred Hospital Tarrant
County-Fort Worth Southwest (collectively,
“Kindred”), operators of long-term acute care
hospitals, against defendants Aetna Life Insurance Company
and Aetna Health, Inc. (collectively, “Aetna”).
Kindred sues under state law to recover unpaid insurance
payments based on Aetna's representations that insurance
would cover the charges. Kindred alleges that, before admitting
the patients in question, it sought Aetna's confirmation
of what charges would be covered, but that Aetna's
payments were less than what it represented would be paid.
seeks to recover unpaid charges for 15 patients. To establish
that this case was removable based on the court's federal
question jurisdiction, Aetna need only establish that one of
the claims is completely preempted. Aetna focuses its
argument on five patients who it asserts, without dispute,
were ERISA plan participants or beneficiaries. The court will
do so as well.
admitting patient T.V.,  Kindred used the database Passport
OneSource to verify her insurance coverage. The database
information, originally provided by Aetna, indicated that
T.V.'s Aetna-administered plan included National
Advantage Program (“NAP”) coverage. Kindred
understood NAP coverage to mean that it would be compensated
at the rate provided in its contract with third-party network
MultiPlan. MultiPlan enters into contracts with hospitals and
payors, including Kindred and Aetna, to set payment rates.
When hospitals participate in MultiPlan, they agree to
provide care to patients whose insurers are MultiPlan
members, and to accept payments from insurers at discounted
rates if made within the contracted time limits. After
providing care to T.V., Kindred billed Aetna in the ordinary
course. Aetna paid Kindred on the claims, but did so at less
than the MultiPlan contract rate. Kindred appealed, but Aetna
upheld its original decision. Kindred alleges that it was
underpaid by $5, 843.93, the difference between the rate
Aetna represented that it would pay and the amount actually
paid. According to Aetna, it paid the T.V. claims at the
MultiPlan rate, but it denied particular charges because
T.V.'s plan limited coverage for private room charges.
L.J. was a patient at a Kindred hospital on five occasions.
Each time, before admitting L.J., Kindred contacted Aetna to
verify coverage and terms of payment. Each time, Aetna
represented that coverage existed, and that payment would be
made at the rate of 60% of usual and customary charges.
Kindred understood usual and customary charges to mean its
usual billed charges. But when Kindred billed Aetna for the
care of L.J., instead of paying 60% of the billed charges,
Aetna paid 60% of the MultiPlan discounted rate. Kindred
alleges that it was underpaid by $295, 629.81, the difference
between the rate Aetna represented that it would pay and the
amount actually paid. According to Aetna, the underpayment
was due to rejection of private room charges that were not
covered by L.J.'s plan, not to the rate of payment.
admitting patient J.J., Kindred contacted Aetna to verify
coverage and terms of payment. “Aetna advised Kindred
that J.J. was eligible for coverage, that Aetna would pay
primary to Medicare, and that Kindred would be paid based on
300 percent of the Medicare allowable rate.” Pet.
¶ 63. When J.J. was admitted a second time, Kindred
sought and received materially similar assurances. When
Kindred billed Aetna for care of J.J., Aetna underpaid the
claim compared with its prior representations. And while
Kindred was seeking further payment on the deficiency, Aetna
recouped some of the amount it had already paid, asserting
that Medicare had become the primary payor before J.J.'s
first admission. Kindred alleges that Aetna's position is
both substantively wrong-because Medicare did not become
primary payor until after the hospital stays in question-and
contrary to Aetna's representations during pre-admission
verification. Kindred alleges that it was underpaid by $238,
849.83, the difference between what Aetna represented that it
would pay and the amount retained by Kindred. According to
Aetna, the question whether J.J.'s insurance plan or
Medicare was primary is controlled by the terms of the plan.
admitting patient T.B., Kindred contacted Aetna to verify
coverage and terms of payment. An Aetna representative told
Kindred that T.B. was eligible for coverage and that Kindred
would be paid 100% of its usual, customary, and reasonable
charges after T.B.'s out-of-pocket maximum was met. When
Kindred billed Aetna for the T.B. claim, Aetna paid less than
what it initially represented. Kindred alleges that it was
underpaid by $32, 024.12, the difference between what Aetna
represented that it would pay and the amount actually paid.
According to Aetna, the difference between the billed charges
and payment was due to a different interpretation of what was
reasonable and customary. T.B.'s plan provided that
Recognized Charges, also known as Reasonable and Customary
charges, would be reimbursed, but also stated that what was
reasonable and customary would be determined by the claims
admitting patient J.S., Kindred contacted Aetna to verify
coverage and terms of payment. Aetna told Kindred that
coverage existed and that Kindred would be paid 100% of its
usual and customary charges after J.S.'s out-of-pocket
maximum was met. But when Kindred billed Aetna for care of
J.S., Aetna paid less than what it initially represented.
Kindred alleges that it was underpaid by $124, 861.65, the
difference between what Aetna represented that it would pay
and the amount actually paid. According to Aetna, the payment
differed from the billed charges because J.S.'s plan
excluded charges in excess of the Recognized Charge for
particular care in a geographic area. The plan granted Aetna
authority to determine the Recognized Charge.
sued Aetna in state court for fraudulent misrepresentation,
negligent misrepresentation, promissory estoppel, violations
of the Texas Insurance Code, breach of written contract,
breach of implied-in-fact contract, and declaratory judgment.
Aetna removed the case to this court on the basis that one or
more of Kindred's claims is completely preempted by
ERISA, thereby conferring federal question jurisdiction on
this court. Kindred now moves to remand and for its
attorney's fees and costs. Aetna opposes the motion.
removing party, Aetna “has the burden of overcoming an
initial presumption against jurisdiction and establishing
that removal is proper.” Carnes v. Data Return,
LLC, 2005 WL 265167, at *1 (N.D. Tex. Feb. 1, 2005)
(Fitzwater, J.) (citing Howery v. Allstate Ins. Co.,
243 F.3d 912, 916 (5th Cir. 2001)). “In general,
defendants may remove a civil action if a federal court would
have had original jurisdiction.” De Aguilar v.
Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995) (citing
28 U.S.C. § 1441(a)). “Due regard for the rightful
independence of state governments, which should actuate
federal courts, requires that they scrupulously confine their
own jurisdiction to the precise limits which (a federal)
statute has defined.” Victory Carriers, Inc. v.
Law, 404 U.S. 202, 212 (1971) (quoting Healy v.
Ratta, 292 U.S. 263, 270 (1934)). “The federal
removal statute, 28 U.S.C. § 1441 (1997), is subject to
strict construction because a defendant's use of that
statute deprives a state court of a case properly before it
and thereby implicates important federalism concerns.”
Frank v. Bear Stearns & Co., 128 F.3d 919, 922
(5th Cir. 1997) (citing Carpenter v. Wichita Falls Indep.
Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995)).
“[D]oubts regarding whether removal jurisdiction is
proper should be resolved against federal
jurisdiction.” Acuna v. Brown & Root Inc.,
200 F.3d 335, 339 (5th Cir. 2000).
“[r]emoval is not possible unless the plaintiff[s']
‘well pleaded complaint' raises issues of federal
law sufficient to support federal question
jurisdiction.” Rodriguez v. Pacificare of Tex.,
Inc., 980 F.2d 1014, 1017 (5th Cir. 1993) (citing
Louisville & Nashville R.R. Co. v. Mottley, 211
U.S. 149, 152 (1908)). “There is an exception, however,
to the well-pleaded complaint rule.” Aetna Health
Inc. v. Davila, 542 U.S. 200, 207 (2004).
When a federal statute wholly displaces the state-law cause
of action through complete pre-emption, the state claim can
be removed. This is so because when the federal statute
completely pre-empts the state-law cause of action, a claim
which comes within the scope of that cause of action, even if
pleaded in terms of state law, is in reality based on federal
Id. at 207-08 (citation, brackets, and internal
quotation marks omitted) (quoting BeneficialNat'l Bank v. Anderson, 539 U.S. 1, 8 (2003)).
Thus because plaintiffs' state-court original petition
(“petition”) does not assert claims under federal
law, and because Aetna does not contend that the court has
diversity jurisdiction,  Aetna can establish removal
jurisdiction only if ERISA completely preempts one or more of
Kindred's state-law claims. S ...