A group of medical providers brought suit in state court against Blue Cross, which removed the case to federal court. Following removal, the providers amended their complaint to set out certain state law claims for misrepresentation, fraud, and unfair trade practices. The providers admitted that some of the insurance agreements at issue constituted ERISA plans.
Nonetheless, the providers moved to remand the case to state court. The issue was whether the state law claims were subject to complete preemption by ERISA and therefore supported federal question removal jurisdiction.
The court noted that the gravamen of the claims was “the difference between the rates paid to out-of-network providers and the representations made to the employers that purchased policies from Defendants.” The court concluded that these claims “were directly related to the terms of the plans themselves.”
The providers relied on the distinction between “rate of payment” cases and “right of payment” cases. Cases addressing the former issue are sometimes determined not to be removable to federal court, because the amount of payment (versus the right to payment) may be dependent upon the terms of provider contracts, rather than the terms of the plan itself.
The court, however, determined that this distinction “is irrelevant in cases involving out-of-network providers because a ‘rate of payment’ dispute is governed by the provider agreement.” Here, the providers were not “in-network providers and thus do not hold a provider agreement with Defendants.”
The court also concluded that resolution of the claims would “necessarily require examining the contract between Defendants and Plaintiff’s patients.” In addition, it “would be difficult, if not impossible, to determine the amount of damages without considering the plan documents.”
The court denied the motion to remand. The court further concluded that it could exercise supplemental jurisdiction under 28 U.S.C. § 1367 as to state law claims that were not preempted by ERISA, because they arose out of the “same common nucleus of operative fact.”
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