Court: District Court, S.D. Florida; February 8, 2016; Federal District Court
Plaintiff Sheridan Healthcorp, Inc. filed a breach of contract action in the Seventeenth Judicial Circuit Court of Florida on May 29, 2015, against health insurers Aetna Health Inc., Aetna Life Insurance Co., and Coventry Health Care entities. The complaint alleges that Defendants failed to reimburse Sheridan for covered health care services at the agreed-upon rates, violating contractual obligations. The dispute centers on the "rate of payment" rather than the right to payment under the Federal Employee Health Benefits Act (FEHBA) or the Employee Retirement Income Security Act (ERISA). Sheridan seeks declaratory relief and damages based on three agreements: 1) the Aetna Hospital Based Physician Group Agreement (2005), 2) implied contracts for services to Aetna Members post-termination of the Aetna HBP Agreement, and 3) implied contracts for services to Coventry Members post-expiration of the Coventry Agreement (2010). Sheridan argues that the Continuing Offers, which defined service terms, formed new contracts upon Defendants' acceptance. The Court granted Sheridan's Motion to Remand, determining that the case does not raise a federal question warranting federal jurisdiction.
Aetna has accepted the Continuing Offer since March 25, 2015, allowing its Members to obtain services from Sheridan's providers without disclosing the terms and conditions of this offer. Sheridan seeks a declaration that the payments made upon the termination of provider agreements were unreasonable and claims entitlement to reimbursement at specified fixed prices for services rendered to Aetna’s Members. Following Sheridan's Complaint on May 29, 2015, Defendants requested discovery to identify specific medical claims related to the lawsuit. On November 13, 2015, Sheridan produced four Excel spreadsheets, totaling 87,000 claims, which included detailed medical claim information and highlighted columns indicating Sheridan's asserted damages. Defendants noted that some claims showed expected payments where coverage was denied, and one claim raised concerns regarding Aetna's handling of FEHBA claims. Defendants assert they timely removed the case to federal court based on Sheridan's disclosures indicating disputes under ERISA and FEHBA plans as of December 10, 2015. The legal framework for removal to federal court emphasizes that federal courts have limited jurisdiction and that removal is appropriate when a case falls under federal question or diversity jurisdiction. The burden lies with the removing party to establish the propriety of removal, and claims can be removed if they relate to federal law due to complete pre-emption by federal statutes, such as ERISA.
The procedure for removal to federal court is outlined in 28 U.S.C. § 1446. A notice of removal must be filed within thirty days of the defendant's receipt of the initial pleading, as per § 1446(b)(1). If the initial pleading does not permit removal, a defendant may file a notice within 30 days of receiving an amended pleading, motion, order, or other document indicating that the case has become removable, according to § 1446(b)(2). The term "other paper" is interpreted broadly and can include various communications, such as responses to requests for admissions and settlement offers, as established in case law.
The burden of proof for establishing complete preemption lies with the removing party, and the Eleventh Circuit favors remanding cases where jurisdiction is unclear. It is emphasized that removal statutes should be narrowly construed, with any doubts resolved in favor of remand. A defendant must provide factual justification for removal and, if seeking late removal based on "other papers," must demonstrate that the case has become removable due to changed circumstances.
The analysis of whether to remand the case revolves around two main issues: the timeliness of the notice of removal and whether the state law claims invoke federal law, thus justifying removal. These issues are interrelated; the timeliness of the notice hinges on whether Sheridan’s Spreadsheets indicated changed circumstances that meet the "unambiguous" requirement for removal under § 1446(b). If the Spreadsheets do not implicate federal law, they cannot substantiate a basis for altered circumstances. The plaintiff contends that the removal was untimely since it occurred over 30 days after service of the Complaint and that the Spreadsheets did not affect jurisdiction. Additionally, the plaintiff asserts that the defendants engaged in efforts to establish a removal basis by selectively using discovery documents produced during the state court proceedings.
Sheridan’s Spreadsheets, which include five line items highlighted by the Defendants, were produced along with sworn discovery responses indicating that Sheridan is not asserting claims for denied care. Defendants argue that Sheridan’s characterization of the suit as focused on “rate of pay” rather than “right to pay” is misleading, asserting that the claims involve denials of benefits under self-funded ERISA plans and coverage determinations by Aetna under FEHBA. Consequently, they assert that the Notice of Removal was timely and appropriate.
The discussion then shifts to whether ERISA preemption applies. If an individual could have brought a claim under ERISA §502(a)(1)(B) without implicating any independent legal duty, then the claim is fully preempted by ERISA. The statute allows for civil actions by participants or beneficiaries to recover or enforce benefits under the terms of their plans. The Eleventh Circuit distinguishes between claims related to the “rate of payment” under provider-insurer agreements and those regarding the “right to payment” under ERISA plans. A challenge to “right of payment” implicates ERISA, whereas a “rate of payment” challenge does not necessarily do so.
In this case, the claim appears to be hybrid, partly falling under ERISA due to allegations of benefit denials. Defendants argue that additional amounts owed for certain medical claims challenge ERISA plan benefit denials. Conversely, Sheridan maintains that it is solely pursuing a breach of contract claim without asserting any ERISA violations. The Court concurs with Sheridan, stating that no interpretation of the ERISA-regulated plan is necessary to resolve the case.
The Court previously rejected a similar argument in South Broward Hospital District v. Coventry Health and Life Insurance, where the plaintiff's claims involved inappropriate retroactive denial of claims, implicating ERISA due to the need to analyze covered services and the right to payment. In contrast, Sheridan’s Complaint lacks any allegations of seeking damages for denied health care benefits, focusing instead on independent provider-insurer contract disputes such as downcoding and bundling, which do not implicate ERISA.
Regarding standing under ERISA § 502(a)(1)(B), healthcare providers typically do not qualify as ‘participants’ or ‘beneficiaries’ but can gain derivative standing through a written assignment from a beneficiary. Sheridan does not confirm the existence of such assignments but asserts that any assignment is irrelevant. Defendants argue that Sheridan lacks standing because it does not act as an assignee of a plan beneficiary. Sheridan cites Rocky Mountain Holdings, where the court ruled that simply having an assignment does not guarantee ERISA preemption if the provider's claims are independent of patient rights. Thus, even if assignments were proven, it would not make Sheridan a beneficiary, as its claims do not attempt to stand in the patients' shoes nor relate to their rights.
Plaintiff is pursuing a breach of contract claim under Florida state law, which is independent of the health plan's terms, thereby precluding standing under ERISA. The claim does not establish federal subject matter jurisdiction as it relies on contractual agreements with Defendants rather than ERISA. Specifically, Sheridan asserts breaches related to Health Benefit Plan (HBP) contracts and Continuing Offers that do not pertain to ERISA benefit plans. The evaluation of these claims necessitates only the examination of contract formation elements and any material breaches. Under Florida law, a breach of contract requires proving a valid contract, a material breach, and resulting damages. Sheridan’s claims regarding implied contracts also stem from separate legal obligations rather than ERISA plan interpretations. Furthermore, state law claims that do not reference ERISA are not subject to preemption.
Defendants additionally invoke the Federal Officer Removal Statute (28 U.S.C. § 1442), arguing that Sheridan’s claims challenge coverage determinations under Federal Employees Health Benefits Act (FEHBA) plans, which they administer on behalf of the Office of Personnel Management (OPM). This statute allows removal of state-court actions involving individuals acting under U.S. government directives, facilitating federal court jurisdiction even if such jurisdiction is not explicit in the complaint.
A defendant can remove a case to federal court under 28 U.S.C. § 1442(a)(1) if two conditions are met: (1) the defendant must present a "colorable defense" related to their duty to enforce federal law, and (2) there must be a causal connection between the defendant's actions under official authority and the claims against them. The requirement for a "colorable" defense means the defendant does not need to prove they will win the case.
In the case of Baptist Hospital of Miami, the court found that Humana's removal of a lawsuit concerning healthcare contracts was inappropriate because the claims did not arise from actions taken under federal authority. The plaintiffs were suing based on independent contractual claims, not actions related to federal officer duties. Similarly, in the current action involving Sheridan, the claims are based on separate agreements regarding reimbursement rates that do not reference or incorporate any federal health plans such as FEHBA.
Sheridan's claims are for breaches of these contracts and do not allege any rights to payment or coverage under government-sponsored programs. The court concluded that the case does not warrant federal jurisdiction due to lack of connection to federal law or programs, and therefore, the motion to remand to state court is granted. The case will be returned to the Seventeenth Judicial Circuit Court of Florida.
