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Texas Oral and Facial Surgery, PA v. United Healthcare Dental, Inc.

United States District Court, S.D. Texas, Houston Division

June 25, 2018



         This case is before the Court on the Motion to Remand (the “Motion”) [Doc. # 7] filed by Plaintiff Texas Oral and Facial Surgery, PA (“TXOS” or “Plaintiff”), to which Defendants United Healthcare Dental, Inc. (“United”) and Shell Oil Company (“Shell”) filed a Response [Doc. # 11');">11].[1] Based on the full record and governing legal authorities, the Court is unpersuaded that the Employee Retirement Income Security Act (“ERISA”) completely preempts any of Plaintiff TXOS's claims. As a result, the Court may not exercise subject matter jurisdiction over this dispute and the Motion is granted.

         I. BACKGROUND

         Plaintiff TXOS offers oral surgery services to patients in Texas, including to Shell employees who enjoy insurance benefits pursuant to an ERISA-governed benefit plan (the “Plan”). According to Plaintiff TXOS, United provides dental insurance to Shell employees covered by the Plan. Plaintiff alleges that Shell represented in writing to both its employees and third-party medical providers such as itself that “any cutting procedure done in a dental office setting is 100% covered” under the Plan. Fourth Amended Petition [Doc. # 6], p. 2. TXOS also asserts that United separately represented to it orally during the insurance preapproval process for Shell employees that any “cutting procedure” would be 100% covered. Id. TXOS alleges that it performed dental surgery for many Shell employees for whom Defendant United subsequently denied total coverage.

         Plaintiff filed this lawsuit in Texas state court in early-June 2017 alleging that Shell negligently misrepresented the insurance coverage it provides its employees, and that United's false representation that it would provide 100% coverage for the services TXOS had preapproved for Shell employees constituted fraud and breach of contract. Defendants unsuccessfully attempted to remove Plaintiff's First Amended Petition to federal court on the grounds that Plaintiff's claims were preempted by ERISA (the “Initial Removal”).[2] In deciding the merits of the Initial Removal, this Court concluded that Defendants failed to demonstrate satisfaction of the first element of the two-part test for “complete preemption” under ERISA established by the Supreme Court in Aetna Health Inc. v. Davila (“Davila”).[3] Specifically, in connection with the Initial Removal, Defendants were unable to demonstrate that Plaintiff could have asserted its state law claims under ERISA, either directly or by virtue of an assignment of benefits from the Shell employees it treated.

         Following remand, the parties engaged in discovery. During the discovery process, it was established that at least some of the Shell employees that received treatment from Plaintiff TXOS had assigned their benefits under the Plan to Plaintiff. Plaintiff also amended its petition two additional times. In its state court Third Amended Petition filed November 27, 2017, Plaintiff not only continued to assert the same negligent misrepresentation claim against Shell and fraud and breach of contract claims against United that had been the subject of the Initial Removal, but also included a fourth claim for “statutory violations.” In the new claim, Plaintiff alleged numerous violations of the Texas Administrative Code, Texas Insurance Code, and Texas Business and Commerce Code (the “Statutory Claims”).

         On March 26, 2018, Defendants filed a timely Notice of Removal [Doc. # 1]. Defendants assert in the Notice of Removal that at least one of Plaintiff's state law claims is subject to “complete preemption” under Davila, and thus the Court has subject matter jurisdiction over this dispute. In response, Plaintiff filed the pending Motion and also moved for leave to file a Fourth Amended Petition.[4]The proposed Fourth Amended Petition abandons the Statutory Claims, but in all other respects is substantively identical to the Third Amended Petition.[5] The Court grants Plaintiff's Motion for Leave [Doc. # 8], and deems the Fourth Amended Complaint [Doc. # 6] Plaintiff's operative pleading for purposes of deciding the merits of the Motion.

         The Court concludes that none of Plaintiff's state law claims in the Fourth Amended Petition are subject to “complete preemption” under Davila, and subject matter jurisdiction is lacking as a result. This case accordingly must be remanded to Texas state court.6" name="FN6" id="FN6">[6]


         Federal jurisdiction is limited. The party invoking this Court's removal jurisdiction bears the burden of establishing federal jurisdiction. See Manguno v. Prudential Property and Cas. Ins. Co., 6 F.3d 720');">276 F.3d 720, 723 (5th Cir. 2002); Miller v. Diamond Shamrock Co., 275 F.3d 414, 417 (5th Cir. 2001); Frank v. Bear Stearns & Co., 128 F.3d 919, 921-22 (5th Cir. 1997) (citation omitted). The removal statute “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, 128 F.3d at 922; Manguno, 276 F.3d at 723. In evaluating the propriety of removal, this Court must evaluate all factual allegations in the light most favorable to Plaintiff, must resolve all contested issues of fact in favor of Plaintiff, and must resolve all ambiguities of controlling state law in favor of Plaintiff. See Burden v. General Dynamics Corp., 60 F.3d 213');">60 F.3d 213, 216 (5th Cir. 1995) (citations omitted).

         Removal is proper if the federal district court has original jurisdiction over an action brought in state court. See 28 U.S.C. § 1441(a). In order to determine whether a case was properly removed to federal court on the basis of federal question jurisdiction, a court must normally examine the plaintiff's claims under the well-pleaded complaint rule. Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 475 (1998). Under the well-pleaded complaint rule, “a defendant may not [generally] remove a case to federal court unless the plaintiff's complaint establishes that the case ‘arises under' federal law.” Aetna Health Inc. v. Davila Davila, 542 U.S. 200, 207 (2004) (quoting Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 63 U.S. 1');">463 U.S. 1, 10 (emphasis in Davila)). “The existence of a federal defense normally does not create statutory ‘arising under' jurisdiction.” Id. Thus, “federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.” Rivet, 522 U.S. at 475. Even if the factual predicate underlying a plaintiff's complaint could have served as the basis for a federal claim, the plaintiff has the prerogative to forgo the federal claim and assert only state law claims in order to prevent removal. The well-pleaded complaint rule makes the plaintiff the master of the claim; the plaintiff may avoid federal jurisdiction by exclusive reliance on state law. Caterpillar, Inc. v. Williams, 6');">482 U.S. 386, 392 (1987).

         In certain areas of the law, however, a federal statute may wholly displace and therefore completely preempt a plaintiff's state law claim, rendering an action removable despite the plaintiff's efforts to keep the action in state court. See Davila, 542 U.S. at 208. Under the complete preemption doctrine, Congress may so completely preempt a particular field that any complaint raising claims in that field is necessarily federal in nature. Rivet, 522 U.S. at 475 (“Once an area of state law has been completely pre-empted, any claim purportedly based on that preempted state-law claim is considered, from its inception, a federal claim, and therefore arises under federal law.”).

Section 502(a) of ERISA, 29 U.S.C. § 11');">1132(a), is one such statute:
[T]he ERISA civil enforcement mechanism is one of those provisions with such ‘extraordinary pre-emptive power' that it converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule. Hence, causes of action within the scope of the civil enforcement provisions of § 502(a) are removable to federal court.

Davila, 542 U.S. at 209 (citations omitted) (holding that state law claims brought by beneficiaries and participants in ERISA-regulated employee benefit plans for failure to exercise ordinary care in handling coverage for medical treatments were completely preempted). In Davila, the Supreme Court stated the test for complete preemption of claims under § 502 of ERISA:

[I]f an individual brings suit complaining of a denial of coverage for medical care, where the individual is entitled to such coverage only because of the terms of an ERISA-regulated employee benefit plan, and where no legal duty (state or federal) independent of ERISA or the plan terms is violated, then the suit falls “within the scope of” ERISA § 502(a)(1)(B). In other words, if an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B), and where there is no other independent legal duty that is implicated by a defendant's actions, then the individual's cause of action is completely pre-empted by ERISA § 502(a)(1)(B).

Id. at 210 (citation omitted).[7]

         Accordingly, under the Davila analysis, this case is removable only if: (1) Plaintiffs TXOS could have brought any of its state-law claims under ERISA § 502, and (2) no other independent legal duty supports the claim(s). Id.; Lone Star OB/GYN Assocs. v. Aetna Health Inc., 579 F.3d 525, 530 (5th Cir. 2009).

         III. ANALYSIS

         A. Davila's First Prong

         The first question under Davila's complete preemption test is whether Plaintiff is an “individual bring[ing] suit complaining of a denial of coverage for medical care, where the individual is entitled to such coverage only because of the terms of an ERISA-regulated employee benefit plan, ” or “an individual [who] at some point in time, could have brought his claim under ERISA § 502(a)(1)(B).” Davila, 542 U.S. at 210. The Fifth Circuit has held that a third-party medical provider has standing to sue under § 502(a) as an assignee of a participant or beneficiary in order to claim plan benefits. See N. Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, 781 F.3d 182, 195 (5th Cir. 2015) (“It is well established that a healthcare provider, though not a statutorily designated ERISA beneficiary, may obtain standing to sue derivatively to enforce an ERISA plan beneficiary's claim.”) (quoting Harris Methodist Fort Worth v. Sales Support Servs., Inc. Employee Health Care Plan, 6 F.3d 330');">426 F.3d 330, 333-34 (5th Cir. 2005)). It is undisputed that Plaintiff received an assignment of benefits from at least some of the Shell employees it treated as to whom United denied 100% coverage. However, the parties disagree whether Plaintiff's receipt of benefit assignments, in of itself, is sufficient to satisfy Davila's first prong. It is not necessary to decide this issue. For the reasons stated in section III.B infra, the Court concludes that none of Plaintiff's state law claims satisfy Davila's second prong. Accordingly, the Court assumes, without deciding, that Plaintiff's status as an assignee of Shell's employee's benefits under the Plan suffices for purposes of Davila's first prong and turns to analysis of Plaintiff's claims under Davila's second prong.

         B. Davila's Second Prong

         The second question in the Davila complete preemption analysis is whether, for purposes of determining the Court's subject matter jurisdiction, Defendants' actions implicate a legal duty that is entirely independent of ERISA. McAteer v. Silverleaf Resorts, Inc., 514 F.3d 411');">11, 418 (5th Cir. 2008); Innova Hosp. San Antonio, L.P. v. Humana Ins. Co., 25 F.Supp.3d 951, 961 (W.D. Tex. 2014). This question asks whether a plaintiff is in fact suing under obligations created by the ERISA plan itself, or under obligations independent of the plan and the plan member. The overarching “crucial question” for a complete preemption analysis “is whether [a plaintiff is] in fact seeking benefits under the terms of the plan, or rights that derive from” an independent source, such as separate contract. Lone Star OB/GYN Associates, 579 F.3d at 529 n.3. A legal duty is not independent of ERISA if it “derives entirely from the particular rights and obligations established by [ERISA] benefit plans.” Davila, 542 U.S. at 210; accord Ambulatory Infusion Therapy Specialists, Inc. v. Aetna Life Ins. Co., 2006 WL 1663752, at *7 (S.D. Tex. June 13, 2006). The Court evaluates seriatim Plaintiff's state law claims for negligent misrepresentation against Shell, and breach of contract and fraud against United, under Davila's second prong.

         1. Negligent ...

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