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SHADYSIDE v. WHIRLEY INDUSTRIES

September 23, 2005.

UPMC PRESBY SHADYSIDE, Plaintiff,
v.
WHIRLEY INDUSTRIES, INC., et al.,



The opinion of the court was delivered by: SEAN McLAUGHLIN, District Judge

MEMORANDUM OPINION

This case comes before the Court having been removed from the Court of Common Pleas of Allegheny County, Pennsylvania. Plaintiff's complaint asserts common law breach of contract claims against Defendants Whirley Industries, Inc. ("Whirley") and Benefits Services, Inc. ("BSI") arising from Plaintiff's efforts to recoup certain medical expenses incurred in connection with the treatment of one of Whirley's employees. Defendants filed a motion to dismiss the complaint, and Plaintiff has moved to remand the matter to the Court of Common Pleas. For the reasons that follow, Defendants' motion to dismiss will be denied and Plaintiff's motion to remand will be granted.

I. BACKGROUND

  Plaintiff, UPMC Presby Shadyside ("UPMC"), is a Pennsylvania corporation operating as a hospital in Pittsburgh. Whirley is a Pennsylvania corporation which operates out of Warren, Pennsylvania and provides traditional health insurance coverage or self insured health care coverage for its employees. BSI acts as the agent and third party administrator on behalf of Whirley for purposes of processing and administering health care coverage to Whirley's employees.

  During the time period from November 30 through December 23, 2003, one of Whirley's employees sought medical treatment at UPMC. The employee in question was a participant in the "Whirley Industries, Inc. Employee Benefit Plan" prepared and administered by BSI. On December 23, 2003, UPMC mailed claims to BSI in the amount of $226,732.75 relative to the employee's treatment. Partial payments of $70,000.00 and $50,059.92 were made to UPMC on January 30, 2004 and March 12, 2004, respectively.

  In total, UPMC claims that Defendants improperly discounted some $106,672.83 from the payments due. According to UPMC, the deficiency results from a combination of two types of discounts, both of which UPMC contends were improperly taken, to wit: (i) discounts taken for timely payment (which payments, according to UPMC, were in fact untimely) and (ii) discounts taken based upon Defendants' own conclusion, following an independent audit, that certain of UPMC's charges exceeded that which is "reasonable and customary."

  UPMC contends that, in taking the allegedly improper discounts, Defendants breached the terms of a "Memorandum of Understanding" ("MOU") to which UPMC and Crawford Health Plan/Vantage ("Vantage"), a Preferred Provider Organization ("PPO") are signatories. (See Ex. A to Pl.'s Br. in Supp. of Remand [Doc. # 6].) UPMC represents that it commonly offers prompt payment discounts through PPOs, which then enter into repricing contracts and negotiate volume-based discounts on behalf their clients (presumably, companies like Whirley) who generally lack the patient volume to be able to negotiate discounts independently. According to UPMC, the negotiated discounts are typically leased by the PPO to its client base. (See Pl.'s Br. in Supp. of Remand and in Opp. to Removal [Doc. # 6] at unnumbered p. 2.)

  By its terms, the MOU applies to "[Vantage's] self-funded employer groups" for "covered services" received at UPMC and allows for a 20% discount of UPMC's billed charges if payment is received within thirty (30) days after billing. (Id.) In relevant part, the MOU states as follows:
Effective March 1, 2000, this Memorandum of Understanding (MOU) is entered into between UPMC Presbyterian and UPMC Shadyside (herein referred to as "provider") and Crawford Health Plan/Vantage (herein referred to as "PPO") and confirms our intention of formalizing a signed contract.
The terms of this MOU shall apply to PPO's self-funded employer groups for covered services received at Provider.
1. Inpatient and outpatient claims will [be] paid at 80% of Provider's billed charges.
2. PPO shall remit payment on clean claims to Provider within thirty (30) calendar days of the receipt of the billing statement, including all interim bills. Interim bills are produced every fourteen (14) days or upon the accumulation of $75,000 in posted charges. If payment is not made within the thirty (30) calendar day period, all discount arrangements will be considered null and void and Provider's customary charges shall be due.
* * *
4. PPO agrees to comply with Provider's Chart Audit Policies, attached as Exhibit I and Exhibit II.
5. Neither Provider nor PPO may assign, transfer or subcontract its obligations under this MOU to another party without the written consent of both parties.
6. Provider agrees to send Claims to:
Vantage Health Care Network
* * *
This MOU shall be in effect until such time as PPO and Provider enter into the Definitive Agreement; provided however, that either party may terminate this MOU at any time upon not less than thirty (30) days prior written notice to the other party. * * *
(Id.)

  On February 8, 2005 UPMC sued Whirley and BSI in the Allegheny County Court of Common Pleas, asserting one claim against each Defendant for alleged breach of contract. Defendants then removed the action to this Court on the theory that UPMC's claims are subject to complete preemption under the civil enforcement provision of ERISA, 29 U.S.C. § 1132. Defendants now argue that UPMC's claims must be dismissed due to its failure to have exhausted its administrative remedies under ERISA. UPMC denies that complete preemption applies and moves to remand the action back to state court. II. DISCUSSION

  A civil action filed in state court is removable to federal court if the claim is one "arising under" federal law. 28 U.S.C. §§ 1331, 1441(a). See Pascack Valley Hospital, Inc. v. Local 464A UFCW Welfare Reimbursement Plan, 388 F.3d 393, 398 (2004), petition for cert. filed, 73 USLW 3661 (Apr. 29, 2005) (NO. 04-1452). Under the "well-pleaded complaint" rule, the plaintiff is generally entitled to remain in state court provided the complaint does not affirmatively allege a federal claim on its face. Id. (citing Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003)). To support removal, a right or immunity created by the Constitution or federal law must be an essential element of the plaintiff's cause of action. Id. (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 10-11 (1983)).

  Because federal preemption is normally considered a defense to suit, it is not construed as appearing on the face of a well-pleaded complaint, and therefore does not generally authorize removal to federal court. Metropolitan Life Ins. co. v. Taylor, 481 U.S. 58, 63 (1987); Pascask Valley Hosp., 388 F.3d at 398. However, an exception supporting removal exists if the civil action "falls within the narrow class of cases to which the doctrine of `complete preemption' applies." Pascask Valley Hosp., at 399 (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 124 S. Ct. 2488, 2494 (2004); Metro Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987)). This doctrine recognizes that "Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Id. (quoting Taylor, 481 U.S. at 63-64). That is because "[w]hen 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 law." Anderson, 539 U.S. at 8.

  Section 502(a) of ERISA — the statute's civil enforcement provision — is one such provision "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.'" Pascask Valley Hosp., 388 F.3d at 399-400 (quoting Davila, 124 S. Ct. at 2495). In relevant part, § 502(a) allows an ERISA plan "participant" or "beneficiary" to file a civil action "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(a)(1)(B). Thus, state law actions that are within the scope of § 502(a) are removable to federal court. Pascack, 388 F.3d at 399-400 (citations omitted).

  The question for this Court is whether Plaintiff has asserted claims falling within ERISA's civil enforcement provision such that the doctrine of complete preemption applies. In determining whether a plaintiff has artfully pled his suit so as to couch a federal claim in terms of state law, we are permitted to look beyond the face of the complaint. Pascack, 388 F.3d at 400 (citing Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266, 268, 274 (3d Cir. 2001)). See also AETNA Health, Inc. v. Davila, 542 U.S. 200, ___, 124 S. Ct. 2488, 2496 (2004) (to determine whether a cause of action falls within the scope of § 502(a)(1)(B), courts must examine the complaint, the statute on which the state law claims are based, and the various plan documents).

  Recently, the Supreme Court revisited the topic of complete preemption in AETNA Health Inc. v. Davila, supra. Davila involved consolidated cases in which two individuals, Juan Davila and Ruby Calad, sued their respective HMOs for alleged failures to exercise ordinary care in the handling of coverage decisions, thereby allegedly violating the Texas Health Care Liability Act (THCLA). Davila's claim arose out of his HMO's refusal to pay for Vioxx after it was prescribed by his treating physician. Calad's claim arose from her HMO's refusal to pay for an extended hospital stay despite her physician's recommendation that she remain hospitalized for an extended period following ...


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