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Wheeler v. Travelers Ins. Co.

filed: April 29, 1994; As Corrected 4, 1994.


On Appeal from the United States District Court for the Eastern District of Pennsylvania. D.C. Civil No. 84-02569.

Before: Greenberg, Roth, and Rosenn, Circuit Judges.

Author: Greenberg


GREENBERG, Circuit Judge.


A. Factual History

This matter is before the court on an appeal from a judgment of the district court entered on June 11, 1993. The germane facts are not in dispute. On November 16, 1982, the appellee, Helen Wheeler, was struck by an automobile.*fn1 She sustained injuries requiring her to incur over $25,000 in medical expenses between November 16, 1982 and June 6, 1983. During that period Wheeler was enrolled in the Medicare program, see 42 U.S.C. §§ 1395a et seq., and also was covered by a no-fault automobile insurance policy issued by the appellant, the Travelers Insurance Company. Medicare paid $21,947.15 directly to her healthcare providers on her behalf, and Travelers paid Wheeler $3,600.46 to cover the difference between the cost of her medical services and Medicare's payments.*fn2 Thus, Wheeler acknowledges that Medicare and Travelers fully paid the medical expenses she incurred as a result of her accident. Nevertheless, Wheeler sought recovery from Travelers for the $21,947.15 in expenses paid by Medicare. Travelers denied Wheeler's claim based on its construction of the Pennsylvania No-Fault Motor Vehicle Insurance Act.*fn3

B. Procedural History

In 1984, Wheeler and six other plaintiffs initiated individual and class actions against six motor vehicle insurance carriers, including Travelers, and the Southeastern Pennsylvania Transportation Authority, in the Court of Common Pleas of Philadelphia County, Pennsylvania.*fn4 Each of the plaintiffs alleged that he or she was injured in an automobile accident after December 5, 1980, and incurred medical expenses between that date and June 6, 1983, which Medicare paid, but each nevertheless sought reimbursement for these expenses under a no-fault policy pursuant to the Pennsylvania No-Fault Act. Collins v. Allstate Indem. Co., 426 Pa. Super. 197, 626 A.2d 1162, 1164 (Pa. Super. Ct. 1993). The insurers removed the cases to the United States District Court for the Eastern District of Pennsylvania, but that court remanded all the individual and class actions to the state court except for Wheeler's individual claim against Travelers. The district court then exercised diversity removal jurisdiction over Wheeler's individual claim.*fn5

The district court placed Wheeler's individual claim against Travelers in suspense in deference to the common pleas actions. The state court first adjudicated the individual claims against all the defendants except Travelers, granting partial summary judgment to the plaintiffs, and holding that their no-fault policies entitled them to recover the medical costs paid by Medicare, and interest on those costs, but not attorneys' fees.

On appeal the Pennsylvania Superior Court affirmed, Collins, 626 A.2d at 1173, holding that: (1) the plaintiffs had standing based on their contractual rights and their claims for attorneys' fees and interest on the allegedly overdue no-fault benefits payments, id. at 1166-67; (2) the Pennsylvania No-Fault Act entitled the plaintiffs to recover from the insurers for medical expenses paid by Medicare because as of December 5, 1980, the effective date of the Omnibus Reconciliation Act, 42 U.S.C. § 1395y(b)(1) (ORA), Medicare benefits became secondary to no-fault benefits, id. at 1167-69; (3) the Pennsylvania No-Fault Act entitled the plaintiffs to interest on the unpaid no-fault benefits, id. at 1170-71; and (4) the plaintiffs were not entitled to attorneys' fees. The Superior Court did not allow attorneys' fees because the insurers had not acted in "bad faith," the plaintiffs did not retain attorneys as a result of unreasonable delay by the insurers, and the insurers timely notified the plaintiffs that their claims had been denied on the theory that Medicare was the primary obligor for their losses, id. at 1171-73.*fn6 After the Superior Court decided Collins, Wheeler and Travelers filed a stipulation of facts and cross-motions for summary judgment in the district court, which then granted Wheeler's motion for summary judgment. Wheeler v. Travelers Ins. Co., 821 F. Supp. 1100, 1102 (E.D. Pa. 1993). The district court adopted the Superior Court's reasoning in Collins, and awarded Wheeler $21,947.15, together with interest at the annual rate of 18% from December 11, 1983. Id.*fn7 Travelers then appealed. We have jurisdiction under 28 U.S.C. § 1291.

II. Discussion

Travelers originally challenged Wheeler's standing before the district court, but did not raise the issue of standing in this appeal. This omission is understandable for, as we will explain, if a district court finds that a plaintiff in a removed case does not have standing, it will remand the case to the state court. In view of Collins, we believe that Travelers does not find that possibility very attractive. Of course, Wheeler contends that she has standing. But the agreement of the parties that Wheeler has standing does not foreclose our examination of this issue as we have an independent obligation to consider jurisdictional issues, see Elkin v. Fauver, 969 F.2d 48, 52 n.1 (3d. Cir.), cert. denied, 121 L. Ed. 2d 379, 113 S. Ct. 473 (1992), and "the doctrine of standing . . . goes to the subject matter jurisdiction of the district court and the validity of its judgment ab initio." Page v. Schweiker, 786 F.2d 150, 153 (3d Cir. 1986). Thus, standing is a "threshold question in every federal case." Warth v. Seldin, 422 U.S. 490, 498, 95 S. Ct. 2197, 2205, 45 L. Ed. 2d 343 (1975).

Although this appeal is in a diversity case which was removed to federal district court, we apply federal law in determining Wheeler's standing because, "standing to sue in any Article III court is, of course, a federal question which does not depend on the party's prior standing in state court." Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 804, 105 S. Ct. 2965, 2970, 86 L. Ed. 2d 628 (1985). To achieve standing, a plaintiff must satisfy both the case and controversy requirements of Article III of the Constitution and certain prudential requirements. Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99-100, 99 S. Ct. 1601, 1607-08, 60 L. Ed. 2d 66 ...

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