No removal in Medicare suit; preemption left open

An Alabama federal district court remanded to state court common law claims arising from alleged fraud in the sale of Medicare insurance plans, holding that the preemption clause of the Medicare Prescription Drug, Improvement and Modernization Act (MMA), 42 U.S.C. § 1395w-26(b)(3), did not completely preempt such claims so as to warrant removal to federal court. Harris v. Pacificare Life & Health Ins. Co., 514 F.Supp.2d 1280 (M.D. Ala. Sep. 28, 2007) (No. 2:06cv956-ID).

The court took pains to distinguish complete preemption from ordinary preemption, and “express[ed] no opinion” as to whether the Act might create a preemption defense to the suit in state court.

 

Harris and six other plaintiffs are enrollees in Pacificare’s Medicare Advantage plan. They allege that Pacificare and its agents contacted all Medicare recipients in Bullock County, Alabama, and misrepresented that they “were required to enroll” in Pacificare’s plan under the new Medicare prescription drug program. The plaintiffs sued in Bullock County court, alleged that as a result of these misrepresentations their benefits and coverage were “drastically reduced,” causing physical, mental, and economic injury. Their claims sound in fraud, unjust enrichment, and negligent or reckless infliction of emotional distress. Pacificare sought removal on the basis of the complete preemption doctrine, and the district court rejected the plaintiffs’ argument that the removal was procedurally defective.

 

Outlining the complete preemption doctrine, the court described it as a “narrow exception” to the rule that federal subject matter jurisdiction is normally determined only with reference to the “well-pleaded allegations of the complaint” and not with respect to potential defenses. Although often confused with ordinary conflict preemption, complete preemption is much narrower doctrine, applying only when it is “manifest in the clearly expressed intent of Congress.” Quoting Geddes v. Amer. Airlines, 321 F.3d 1349, 1353 (11th Cir. 2003). The court noted that the Supreme Court had found complete preemption under only three statutes to date: the Labor Management Relations Act, the Employee Retirement Income Security Act (ERISA), and the National Bank Act.

 

Though “separate and distinct,” ordinary and complete preemption are often confused, the court observed, because lower court decisions under the three aforementioned laws have merged the two doctrines in their analysis. This merging is proper where, as in those cases, it has been conclusively determined that Congress intended those statutes to have preemptive force, and all that is necessary is to apply that force in specific lawsuits. But where a determination of complete preemption has not already been conclusively made – as with the MMA – a distinct and narrower inquiry is necessary. Thus, the court distinguished as inapposite several cases cited by Pacificare, which found preemption of state law claims by the MMA but were brought directly in federal court and did not address the removal issue. See Uhm v. Humana, Inc., 2006 WL 1587443 (W.D.Wash.2006); First Med. Health Plan, Inc. v. Vega, 406 F.Supp.2d 150 (D.P.R. 2005), rev'd on other grounds, 479 F.3d 46 (1st Cir.2007) (summary here).

 

In a footnote, the court specifically disagreed with a recent decision by a different Alabama district, Dial v. Healthspring of Alabama, Inc., 501 F.Supp.2d 1348 (S.D.Ala.2007) (summary here), faulting that court for approving removal of a similar tort suit on the basis of ordinary preemption by the MMA without conducting the narrower complete preemption analysis.

 

The complete preemption inquiry, the court noted, focuses on “whether the statute at issue provides the exclusive cause of action for the claim asserted,” and also considers whether the statute “set[s] forth procedures and remedies governing” such a cause of action. It noted that the Supreme Court had found unambiguous intent to provide an exclusive cause of action in the legislative histories of the National Bank Act and ERISA, and found no such clear intent in the history of the MMA. Also unlike those other statutes, the MMA “does not provide any private civil enforcement mechanisms.”

 

To the extent that MMA regulations, 42 C.F.R. §§ 422.560-422.612, and statements in the Federal Register by the Centers for Medicare & Medicaid Services, 70 Fed. Reg. 4194-01, indicate that some but not all of Plaintiffs’ claims may be preempted, the court observed – a point on which the court “express[ed] no opinion” – this is inconsistent with a finding of complete preemption.