Lee Mem'l Health Sys. v. Blue Cross & Blue Shield of Fla., Inc.

LEE MEMORIAL HEALTH SYSTEM, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC., HORIZON HEALTHCARE SERVICES, INC.,HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY and HORIZON BCBSNJ, Defendants.

Case No: 2:16-cv-901-FtM-38MRM

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA FORT MYERS DIVISION

February 22, 2017

REPORT AND RECOMMENDATION

Pending before the Court are the following:

1) Motion to Dismiss Complaint (Doc. 9) filed on August 29, 2016;

2) Response in Opposition to Motion to Dismiss (Doc. 12) filed on October 12, 2016;

3) Motion for Remand (Doc. 13) filed on October 12, 2016;

4) Notice of Filing Affidavits in Support of Motion for Remand and in Opposition to Defendants' Motion to Dismiss Complaint (Doc. 14) filed on October 12, 2016; and

5) Response in Opposition to Motion to Remand (Doc. 17) filed on November 14, 2016.

These matters were referred to the Undersigned for a Report and Recommendation on January 6, 2017. In the Complaint (Doc. 2), Plaintiff Lee Memorial Health System ("Lee Memorial") asserts state-law claims under an Agreement between Lee Memorial, on the one hand, and Defendants Blue Cross and Blue Shield of Florida, Inc. ("BCBSF") and Horizon Healthcare Services, Inc. d/b/a Blue Cross Blue Shield of New Jersey, Horizon Blue Cross Blue Shield of New Jersey, and Horizon BCBSNJ (collectively "BCBSNJ"), on the other hand. Defendants argue that all of Lee Memorial's state-law claims are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29, U.S.C. § 1001, et seq. The primary issue in this case is, therefore, whether any of the state-law claims asserted are preempted by ERISA. If so, then removal to federal court was proper and dismissal of the preempted claims in the Complaint is warranted. Defendants also assert alternative arguments pursuant to Fed. R. Civ. P. 12(b)(6) that the state-law claims fail to state a claim.

I. Background

Brief backgrounds concerning the contractual relationship between the parties, the allegations in the Complaint, and the procedural posture of this case are instructive.

A. Preferred Patient Care Hospital Agreement

On October 1, 1985, Lee Memorial entered into a Preferred Patient Care Hospital Agreement ("Agreement") with BCBSF. (Doc. 2 at ¶ 9). Under the terms of the Agreement, Lee Memorial agreed to provide hospital services to policyholders of BCBSF in exchange for payment by BCBSF. (Id.). The parties amended the Agreement numerous times. (Id. at ¶ 10).

Relevant to this action is the Tenth Amendment executed on November 22, 1994, which states in pertinent part, "that no person, entity or organization other than BLUE CROSS AND BLUE SHIELD [i.e. BCBSF] shall be held accountable or liable to HOSPITAL [i.e. LEE MEMORIAL] for any of BLUE CROSS AND BLUE SHIELD'S obligations to HOSPITAL created under this Agreement." (Id.).

Also relevant to this action is the Twentieth Amendment entered into on December 9, 2008, which states in pertinent part:

It is further agreed that BLUE CROSS AND BLUE SHIELD is entitled to treat individuals covered through sister Blue Cross and/or Blue Shield Plans (i.e. each Plan an independent corporation operating under a license or sub-license with the Blue Cross and Blue Shield Association) as Policyholders under this Agreement.

Such individuals being treated as being covered under a PREFERRED PATIENT CARE Benefit Agreement or other benefit agreement which provides access to participating providers in either the PREFERRED PATIENT CARE network or NetworkBlue network whichever is applicable. . . . Payment for covered services provided to such Policyholders shall be in accordance with Exhibit D PREFERRED PATIENT CARE if the Policyholder is entitled to access the PREFERRED PATIENT CARE network or in accordance with Exhibit D NETWORK BLUE if the Policyholder is entitled to access the NetworkBlue network.

(Id. at ¶ 11).

B. Factual Allegations in the Complaint (Doc. 2)

The Complaint alleges that Heather Picardi, a policyholder under a health plan underwritten by BCBSNJ, was admitted to Lee Memorial for treatment of complications relating to pregnancy. (Id. at ¶ 13). On May 26, 2011, Ms. Picardi prematurely gave birth to her minor son, N.P., who was a covered dependent of Ms. Picardi's BCBSNJ Plan. (Id. at ¶ 14). Pursuant to the Agreement, Lee Memorial submitted claims to BCBSF for the hospital services provided to Ms. Picardi and N.P. (Id. at ¶ 15).

Initially, BCBSF denied the claim for N.P. because Lee Memorial had only obtained authorization to treat him from May 20, 2011 to May 29, 2011. (Id. at ¶ 16). Lee Memorial had, in fact, obtained preauthorization and because the birth did not occur until May 26, 2011, BCBSF was in error. (Id. at ¶ 17). After review, BCBSF advised Lee Memorial that authorization for the entire 124-day hospital stay would not be disputed, a new authorization number was being issued, and the claim would be paid. (Id. at ¶ 18). Further delays occurred with the following excuses: (1) a new authorization number had not been processed properly, but this error was corrected; (2) a technical problem regarding restoring Lee Memorial's provider number in the database occurred following the initial claim denial, but BCBSF represented payment was forthcoming; and (3) continued other assurances that the claim was being processed. (Id. at ¶¶ 19-21).

In January 2014, Lee Memorial was advised that the claim was being denied because of "failure to coordinate benefits." (Id. at ¶ 21). Specifically, Lee Memorial was told that primary coverage for the treatment of N.P. was afforded under a separate BCBSNJ group policy held by N.P.'s father and that coverage under Heather Picardi's BCBSNJ policy was only secondary. (Id. at ¶ 22). Further, Lee Memorial was advised that because the claim was beyond a one-year time frame, any new claim would be untimely under the father's policy. (Id. at ¶ 23). On September 4, 2014, Lee Memorial's final appeal of the claim denial for treatment of N.P. was denied by BCBSF. (Id. at ¶ 24).

Lee Memorial brings the following claims: Count I, for Declaratory Relief under Florida Statutes Chapter 86 (id. at ¶¶ 28-33); Count II, for Breach of Contract (id. at ¶¶ 35-38); Count III, for Promissory/Equitable Estoppel (id. at ¶¶ 40-44); Count IV, for Negligent Misrepresentation (id. at ¶¶ 46-51); Count V, for Breach of Fiduciary Duty (id. at ¶¶ 54-59); Count VI, for Unjust Enrichment (id. at ¶¶ 61-69); and Count VII, for Breach of Implied Covenants of Good Faith and Fair Dealing Against BCBSF (id. at ¶¶ 97-100).

C. Procedural Background

On August 12, 2016, Defendants removed the case to federal court on the ground that the policies held by Heather Picardi and the father are central to this controversy and constitute "employee welfare benefit plans" within the meaning of ERISA. (Doc. 1 at 6). Defendants claim that these two plans are "self-funded" employee welfare benefit plans governed by ERISA. (Id. at 7). As such, Defendants assert that the state-law claims raised in this case are completely preempted by ERISA and removal was appropriate. (Id.). Defendants also move to dismiss this action, arguing that the state-law claims are completely and defensively preempted by ERISA. (Doc. 9 at 1).

Following removal, Lee Memorial moved to remand this action back to state court, asserting that this Court lacks jurisdiction over this matter. (See Doc. 13 at 6). Many of the arguments in the Motion to Dismiss (Doc. 9) and Motion to Remand (Doc. 13) are intertwined and repetitive. Nevertheless, the Court must first address whether it has subject-matter jurisdiction in this case before delving into the non-jurisdictional issues raised in the Motion to Dismiss. See Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999) ("[A] federal court must remand for lack of subject matter jurisdiction notwithstanding the presence of other motions pending before the court."); see also Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 587 (1999) (determining subject-matter jurisdiction at the outset of the case is often the most efficient way of proceeding). Thus, the Court will address the jurisdictional issues raised in the Motion for Remand (Doc. 13) first and then turn to the remaining issues raised in the Motion to Dismiss (Doc. 9).

II. Motion to Remand

Lee Memorial asserts that it brought only state-law claims and this Court lacks jurisdiction to determine these claims. Defendants argue that Lee Memorial's claims are completely preempted by ERISA and, thus, jurisdiction rests in federal court. The burden of establishing federal jurisdiction falls on the party attempting to invoke the jurisdiction of the federal court. McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936); see also Rocky Mountain Holdings, LLC v. Blue Cross & Blue Shield of Fla., Inc., No. 608-CV-686-ORL-19KRS, 2008 WL 3833236, at *1 (M.D. Fla. Aug. 13, 2008). The party seeking removal has "the burden of producing facts supporting the existence of federal subject matter jurisdiction by a preponderance of the evidence." Hobbs v. Blue Cross Blue Shield of Ala., 276 F.3d 1236, 1242 (11th Cir. 2001). District courts should strictly construe the requirements of 28 U.S.C. §1441 (removal jurisdiction) and remand all cases in which jurisdiction falls outside of the parameters of the statute. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109 (1941); see also Rocky Mountain Holdings, LLC, 2008 WL 3833236, at *1.

Removal to federal court is proper in "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). To establish original jurisdiction, an action must satisfy the requirements of either federal-question jurisdiction under 28 U.S.C. § 1331 or diversity jurisdiction under 28 U.S.C. § 1332. In this case, Defendants claim this matter arises under federal-question jurisdiction. (See Doc. 1 at 2).

Generally, the test to determine if...