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Speights v. Bluecross Blueshield of South Carolina

United States District Court, D. South Carolina, Beaufort Division

January 16, 2018

DANIEL E. SPEIGHTS, individually and on behalf of others similarly situated Plaintiff,
v.
BLUECROSS BLUESHIED OF SOUTH CAROLINA Defendants.

          ORDER

          DAVID C. NORTON, UNITED STATES DISTRICT JUDGE.

         This matter comes before the court on plaintiff Daniel E. Speights's (“Speights”) motion to remand, ECF No. 6. For the reasons set forth below, the court denies the motion without prejudice.

         I. BACKGROUND

         Speights is a law partner in the Speights & Runyon Attorneys at Law law firm, and has been insured under the group account, Speights & Runyan Attorneys at Law, Group Number 05-43967-00 (“the Plan”). On February 3, 2014 Speights was diagnosed with cancer that was life threatening and referred to treatment at M.D. Anderson Cancer Center in Houston, Texas, an approved provider under the Plan. Speights was at M.D. Anderson Cancer Center from early February 2014 until June 2014, and then from July 2014 until September 2014. On April 24, 2014, M.D. Anderson Cancer Center authorized a plan of treatment that was particularly time-sensitive, given the advanced stage of cancer that Speights was in. Speights contacted BlueCross about coverage for the treatment plan, but received no approval from April 24-27. On August 28, 2014 BlueCross denied coverage for the treatment plan, stating that the treatment plan involved “proton radiation” of the cancer that was an “experimental treatment” under the Plan. Speights wired $74, 100 from his own bank account to M.D. Anderson Cancer Center to proceed with the treatment.

         Speights filed this case in the Court of Common Pleas for Hampton County, alleging a number of claims, including claims for breach of contract and bad faith refusal to pay health insurance benefits against defendant BlueCross BlueShield of South Carolina (“BlueCross”). Namely, Speights alleges claims for: (1) declaratory judgment that the Plan is ambiguous and BlueCross has interpreted it in a manner that is inconsistent with the language of the Plan and public policy considerations; (2) that BlueCross was negligent in selling a Plan which is ambiguous and vague and in promoting and selling health care coverage that contradicts the “purpose of procuring a health care policy”; (3) breach of contract because BlueCross interpreted the Plan in contravention of South Carolina law; (4) breach of express warranty because the Plan warrants to provide payment for health care that is medically necessary, which BlueCross did not provide; (5) unfair trade practices because he has been injured by BlueCross's unfair and deceptive actions in interpreting the Plan; (6) unjust enrichment because BlueCross used the ambiguous contract language in the Plan to reduce the scope of the coverage provided for in the Plan; and (7) outrage, because BlueCross's actions against Speights arose out of a business relationship and that BlueCross's actions were made in “callous disregard to insureds who have contracted for insurance.” Speights files the complaint as a proposed class action, asserting claims on behalf of a class of consumers defined as “all consumers who have purchased and/or been insured by [BlueCross]

         insurance and [BlueCross] has denied requests to pay for healthcare approved and/or requested by treating physicians.” BlueCross removed the case on March 3, 2017, alleging that all of Speights's claims are preempted by the Employee Retirement Income Security Act of 1974, as amended (“ERISA) 29 U.S.C. §1001 et seq. because all of the claims arise out of the denial of health insurance benefits under the Plan. Speights then filed the instant motion to remand on April 3, 2017, to which BlueCross responded on April 14, 2017. Speights replied on May 5, 2017. The motion has been fully briefed and is now ripe for the court's review.

         II. STANDARD

         As the parties seeking to invoke the court's jurisdiction, defendants have the burden of proving jurisdiction upon motion to remand. Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004) (citing Mulcahy v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994)). In deciding the motion, the federal court should construe removal jurisdiction strictly in favor of state court jurisdiction. Id. “If federal jurisdiction is doubtful, a remand is necessary.” Mulcahy, 29 F.3d at 151 (citations omitted).

         III. DISCUSSION

         The issue before the court is whether Speights's claims are preempted by ERISA.[1] BlueCross contends that Speights's claims are preempted because they all arise out of BlueCross's alleged denial of health insurance benefits under the Speights & Runyan Attorneys at Law group health care plan.[2] ECF No. 1 at 2. BlueCross concedes that the complaint does not present questions of federal law “on its face” but argues that Speights's claims for breach of contract and bad faith refusal to pay under the Plan are both governed by ERISA, and so while the complaint is inarticulately pleaded it is ultimately governed by ERISA. ECF No. 1 at 2.

         As an initial matter, although the breach of contract claim certainly seems to incorporate allegations of bad faith it does not appear that the complaint asserts a separate bad faith claim. The complaint does, however, assert a claim for breach of contract. Specifically, the complaint states that BlueCross breached the Plan by failing to pay for proton radiation treatment at M.D. Anderson Cancer Center, even though a team of five oncologists at M.D. Anderson included the proton radiation treatment in Speights's “medically necessary” treatment plan. Speights alleges that the denial of coverage for the proton radiation under the “experimental services” provision of the Plan is a breach of contract. BlueCross contends that this claim is preempted by ERISA. As the court explains below, the breach of contract claim seeks to enforce the provisions of the Plan and so is preempted by ERISA's civil enforcement plan.

         A. Preemption of Breach of Contract Claim under ERISA

         The Fourth Circuit has held that parties cannot “avoid ERISA's preemptive reach by recasting otherwise preempted claims as state-law contract and tort claims.” Wilmington Shipping Co. v. New England Life Ins. Co., 496 F.3d 326, 341 (4th Cir. 2007) (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 214 (2004)). Section 514 of ERISA defines the scope of ERISA's preemption of conflicting state laws.[3] It states that state laws are superseded if they “relate to” an ERISA plan. 29 U.S.C. § 1144(a). In Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987), the U.S. Supreme Court held that state common law cause of actions based on the alleged improper processing of a benefit claim under an employee benefit plan fell under ERISA's preemption clause, § 514(a). The breach of contract claims in the complaint certainly “relate to” ERISA, as the claim is about benefits denied under the Plan. However, “ERISA pre-emption [of a state claim], without more, does not convert a state claim into an action arising under federal law.” Darcangelo v. Verizon Commc'ns, Inc., 292 F.3d 181, 187 (4th Cir. 2002). The Fourth Circuit has held that the “only state law claims properly removable to federal court are those that are “completely preempted” by ERISA's civil enforcement provision, § 502(a).” Sonoco Prod. Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 371 (4th Cir. 2003). Therefore, the court must also determine whether Speights's breach of contract claim “fits within” the scope of § 502(1), and if it is properly “converted into [a federal claim].” Darcangelo v. Verizon Commc'ns, Inc., 292 F.3d 181, 186 (4th Cir. 2002). While the jurisprudence about whether a claim is preempted under ERISA under the doctrines of conflict and complete preemption is somewhat convoluted, it is clear that a court addressing preemption of a state law claim under ERISA should determine whether the claim is subject to conflict preemption under § 514, and therefore barred. The court must then also determine whether the claim is subject to complete preemption under § 502 and therefore should be converted to a federal claim. Gross v. St. Agnes Health Care, Inc., 2013 WL 4925374, at *9 (D. Md. Sept. 12, 2013) (citing Marks v. Watters, 322 F.3d 316, 323 (4th Cir. 2003)).

         1. Preemption under ...


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