Giles v. NYLCare Health ( 1999 )

                                 FOR THE FIFTH CIRCUIT
                                         No. 97-20840
                             BRIDGETT GILES,
           Individually and as the Personal Representative of
              the Estate of Alex Giles, a Minor, Deceased,
                 NYLCARE HEALTH PLANS, INCORPORATED, et al.,
           Formerly Known as Sanus Health Plan, Incorporated,
                 Appeal from the United States District Court
                      for the Southern District of Texas
                                        April 9, 1999
    Before DAVIS, SMITH, and WIENER, Circuit Judges.
    JERRY E. SMITH, Circuit Judge:
         After    her    son    Alex    died   while    under   a   provider's   care,
    Bridgett Giles sued her health maintenance organization (“HMO”)
    alleging,    inter    alia,    vicarious      liability     and    negligence   in
    selecting the plan's providers.   After removal, the district court
    remanded to state court.   We affirm.
         Giles brought this medical malpractice case on behalf of Alex
    against NYLCare Health Plans of the Gulf Coast, Inc. (“NYLCare”),
    an HMO; the two doctors who treated Alex; and OneCare, the medical
    group that employs one of the doctors.   At the time of treatment,
    Alex and his mother were enrolled in a health plan offered by
    NYLCare through an employee benefit plan provided by Giles's
    employer, Sanus of Texas, Inc. (now known as NYLCare of Texas,
    Inc.).   The underlying basis of Giles's complaint is that one of
    the doctors failed to diagnose Alex's heart defect, resulting in
         Giles originally sued NYLCare in state court for negligence,
    vicarious liability, breach of contract, misrepresentation, and
    breach of warranty. NYLCare removed to federal court on the ground
    that the Employee Retirement Income Security Act of 1974 (“ERISA”),
    29 U.S.C. §§ 1001 et seq., preempts the claims.         Giles then
    amended, dropping the breach of contract, misrepresentation, and
    breach of warranty claims that she admitted were preempted, and
    moved for remand.   Relying primarily on Dukes v. U.S. Healthcare,
    57 F.3d 350
     (3d Cir. 1995), the district court, noting that
    ERISA did not preempt Giles's remaining vicarious liability and
    negligence claims, granted the motion, stating that “this is an
    appealable order because the basis of my ruling is an exercise of
    discretion to remand pendent state law claims.”
          Before reaching the merits, we must examine the basis of our
    appellate jurisdiction and, if there is doubt, we must address it,
    sua sponte if necessary.        See Castaneda v. Falcon, 
    166 F.3d 799
    801 (5th Cir. 1999); Jones v. Collins, 
    132 F.3d 1048
    , 1051 (5th
    Cir. 1998).    We begin with 28 U.S.C. § 1447(d), which provides, “An
    order remanding a case to State court from which it was removed is
    not reviewable on appeal or otherwise . . . .”           Interpreted in pari
    materia with § 1447(c), this indicates that an appellate court
    lacks jurisdiction to review a remand under § 1447(c); conversely,
    remands on other grounds may be reviewed.1
          A § 1447(c) remand may not be reviewed even if the district
    court's order was erroneous.           See Thermtron, 423 U.S. at 351;
    Angelides, 117 F.3d at 836.        Reviewable non-§ 1447(c) remands are
    a narrow class of cases, meaning we review a remand order only if
    the district court “clearly and affirmatively” relies on a non-
    § 1447(c) basis.      See Soley, 923 F.2d at 409; see also Tillman v.
    CSX Transp., Inc., 
    929 F.2d 1023
    , 1027 (5th Cir. 1991).
          The record plainly demonstrates that the district court did
    not remand under § 1447(c).          The court specifically noted that
    “this is an appealable order because the basis of my ruling is an
            See Things Remembered, Inc. v. Petrarca, 
    516 U.S. 124
    , 127-28 (1995);
    Thermtron Prods., Inc. v. Hermansdorfer, 
    423 U.S. 336
    , 345-46 (1976); see also,
    e.g., Angelides v. Baylor College of Med., 
    117 F.3d 833
    , 835-36 (5th Cir. 1997);
    Soley v. First Nat'l Bank of Commerce, 
    923 F.2d 406
    , 407-08 (5th Cir. 1991).
    exercise of discretion to remand pendent state law claims.”                                Thus,
    the court affirmatively stated a non-§ 1447(c) reason for remanding
    and gave no indication that it believed it lacked subject matter
    jurisdiction.        In these circumstances, § 1447(d) does not deprive
    us of jurisdiction, and we review the district court's exercise of
    discretion to remand supplemental (formerly termed “pendent”) state
    law claims.2
          A lack of subject matter jurisdiction may be raised at any
    time,3 which means we can examine the district court's jurisdiction
    for the first time on appeal.               Furthermore, a court sua sponte must
    raise     the    issue        if   it     discovers         it    lacks     subject      matter
    jurisdiction.4 A well-pleaded complaint raising a federal question
    provides one basis for subject matter jurisdiction.5
            Cf. Bogle, 24 F.3d at 762 (5th Cir. 1994) (dismissing appeal of remand
    that discussed discretionary factors, because the district court had indicated
    its lack of a federal claim, and noting that “[t]he critical distinction for
    determining appealability is the presence of federal subject matter jurisdiction
    prior to the order of remand”).
            See Bank One Tex., N.A. v. United States, 
    157 F.3d 397
    , 399 (5th Cir. 1998),
    petition for cert. filed (Mar. 22, 1999) (No. 98-1534); Sealed Appellant v. Sealed
    130 F.3d 695
    , 697 (5th Cir.), cert. denied, 
    118 S. Ct. 1523
             See, e.g., Free v. Abbott Labs., Inc., 
    164 F.3d 270
    , 272 (5th Cir. 1999);
    FED. R. CIV. P. 12(h)(3) (providing that district court “shall dismiss the action”
    whenever “it appears by suggestion of the parties or otherwise that the court
    lacks jurisdiction of the subject matter”).
              See   28   U.S.C.    §   1331   (“The       district   courts   shall   have   original
          As we recently explained in McClelland v. Gronwaldt, 
    155 F.3d 507
     (5th Cir. 1998), there are two types of preemption under ERISA.
    First, ERISA may occupy a particular field, resulting in complete
    preemption under § 502(a), 29 U.S.C. § 1132(a).             See Metropolitan
    Life Ins. Co. v. Taylor, 
    481 U.S. 58
    , 66 (1987); McClelland,
    155 F.3d at 516-17.6      This functions as an exception to the well-
    pleaded complaint rule; “Congress may so completely pre-empt a
    particular area that any civil complaint raising this select group
    of claims is necessarily federal in character.” Metropolitan Life,
    481 U.S. at 64-65.      Section 502, by providing a civil enforcement
    cause of action, completely preempts any state cause of action
    seeking the same relief, regardless of how artfully pleaded as a
    state action.
          Furthermore, because such a claim presents a federal question,
    it provides grounds for a district court's exercise of jurisdiction
    upon removal.7    If the plaintiff moves to remand, all the defendant
    jurisdiction of all civil actions arising under the Constitution, laws, or
    treaties of the United States.”); see also Louisville & Nashville R.R. v.
    211 U.S. 149
    , 152-54 (1908) (explaining well-pleaded complaint rule).
            As in McClelland, we make no comment on the breadth of ERISA's complete
    preemption under § 502(a). See McClelland, 155 F.3d at 517 n.34.
            See 28 U.S.C. § 1441 (providing for exercise of removal jurisdiction
    whenever district court could have exercised original jurisdiction); 29 U.S.C.
    § 1132(f) (conferring federal jurisdiction over ERISA civil enforcement claims);
    see also, e.g., Anderson v. Electronic Data Sys. Corp., 
    11 F.3d 1311
    , 1315 (5th
    Cir. 1994) (holding that state claim that falls within § 502 civil enforcement
    has to do is demonstrate a substantial federal claim, e.g., one
    completely preempted by ERISA, and the court may not remand.                Once
    the court has proper removal jurisdiction over a federal claim, it
    may exercise supplemental jurisdiction over state law claims, see
    28 U.S.C. § 1367, even if it dismisses or otherwise disposes of the
    federal claim or claims.
          Alternatively, ERISA might preempt a state law cause of action
    by way of conflict-preemption (also known as ordinary preemption)
    under § 514.      See 29 U.S.C. § 1144.      “State law claims [that] fall
    outside the scope of ERISA's civil enforcement provision, § 502,
    even if preempted by § 514(a), are still governed by the well-
    pleaded complaint rule and, therefore, are not removable under the
    complete-preemption principles established in Metropolitan Life.”
    Dukes v. U.S. Healthcare, Inc., 
    57 F.3d 350
    , 355 (3d Cir. 1995).8
         The presence of conflict-preemption does not establish federal
    question jurisdiction. Rather than transmogrifying a state cause
    of   action  into   a   federal   oneSSas  occurs   with   complete
    preemptionSSconflict preemption serves as a defense to a state
    provision is a federal claim, creating removal jurisdiction).
             See also Franchise Tax Bd. v. Constr. Laborers Vacation Trust,
    463 U.S. 1
    , 23-27 (1983) (holding that preemption under § 514(a) does not permit
    removal when the plaintiff's state claim falls without the scope of ERISA's civil
    remedy provisions); McClelland, 155 F.3d at 516.
              See Soley, 923 F.2d at 408-09 (relying on distinction between complete
          When the doctrine of complete preemption does not apply,
          but the plaintiff's state claim is arguably preempted
          under § 514(a), the district court, being without removal
          jurisdiction, cannot resolve the dispute regarding
          preemption. It lacks power to do anything other than
          remand to the state court where the preemption issue can
          be addressed and resolved.
    Dukes,     57   F.3d    at   355   (citing   Franchise     Tax   Bd.,   463   U.S.
    at 27-28).10
          Hence, when a complaint raises state causes of action that are
    completely preempted, the district court may exercise removal
    jurisdiction.          When a complaint contains only state causes of
    action that the defendant argues are merely conflict-preempted, the
    court must remand for want of subject matter jurisdiction.                When a
    complaint raises both completely-preempted claims and arguably
    conflict-preempted           claims,   the   court   may     exercise    removal
    jurisdiction over the completely-preempted claims and supplemental
    jurisdiction (formerly known as “pendent jurisdiction”) over the
    remaining claims.11
    preemption and preemption defense and holding that the defense does not confer
    removal jurisdiction); see also Rice v. Panchal, 
    65 F.3d 637
    , 639-40 (7th Cir.
    1995) (noting that if issue is “merely” conflict analysis, it serves only as a
    defense, and the complaint is not recharacterized as federal).
             See also Soley, 923 F.2d at 409 (holding that, because remand after
    rejection of complete preemption is jurisdictional, district court's comments on
    preemption defense are irrelevant); 28 U.S.C. § 1447(c) (stating that “[i]f at
    any time before final judgment it appears that the district court lacks subject
    matter jurisdiction, the case shall be remanded”).
             See, e.g., Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 
    904 F.2d 236
    , 241 (5th Cir. 1990) (ensuring that § 502 preemption of one claim provides
    basis for jurisdiction, and then addressing conflict preemption of supplemental
          We face one complication: Burks v. Amerada Hess Corp., 
    8 F.3d 301
    , 304 (5th Cir. 1993).       As NYLCare contends, we ostensibly held
    in Burks that a court cannot remand without first deciding that the
    claims are not conflict-preempted.12         We stated that
          [a]lthough the district court ostensibly exercised its
          discretion to remand a case in which federal jurisdiction
          has disappeared, a district court has no discretion to
          remand a matter in which a federal law claim still
          exists. Because the first and second amended complaints
          contain a claim that is preempted by federal law, the
          district court could not decline to hear the removed
    Id. (citations omitted).
          The   only   preemption   we   addressed    in   Burks   was   §   514(a)
    conflict preemption; we did not address complete preemption.13
    Apparently, we mistakenly held, contrary to Supreme Court precedent
    and Soley, that conflict preemption, rather than serving as merely
    a defense, transforms the cause of action into “a federal law
    claim” that the district court has no discretion to remand, thus
    serving as a “defense” to a remand motion.
             In a few cases, we have addressed the merits of conflict preemption
    where it appeared that that was the sole basisSShowever erroneousSSfor subject
    matter jurisdiction. See Cypress Fairbanks Med. Ctr., Inc. v. Pan-American Life
    Ins. Co., 
    110 F.3d 280
    , 283 (5th Cir.), cert. denied, 
    118 S. Ct. 167
    Cefalu v. B.F. Goodrich Co., 
    871 F.2d 1290
    , 1295 (5th Cir. 1989). Even though
    subject matter jurisdiction can be raised sua sponte, we take nothing away from
    our failure to do so in these cases.
             It is possible that the district court originally had before it
    completely preempted claims, allowing an exercise of supplemental jurisdiction
    over the claims discussed on appeal; but the opinion makes no mention of that.
    Giles explains Burks as a denial of benefits case, which would bring it under
    § 502 preemption; but we did not treat it as such.
          We now clarify that a district court has discretion to remand
    a case involving solely arguably conflict-preempted causes of
    action. To the extent it holds otherwise, Burks is not the binding
    law of this circuit, because it directly conflicts with both our
    precedent and Supreme Court precedent that hold that ERISA conflict
    preemption does not make a state cause of action federal.14
          Giles originally alleged both claims that may have been
    completely preempted and putatively conflict-preempted claims. The
    former     provide   a   basis    for   the   district   court    to   exercise
    jurisdiction over the entire case. Ordinarily, after deciding that
    certain claims are, in fact, completely preempted, it could dismiss
    those.     It then either could exercise its discretion to remand the
    putatively conflict-preempted state causes of action, or continue
    with the remaining claims.
          But Giles moved, in federal district court, to amend her
    complaint to eliminate the completely-preempted claims.                The court
    granted the motion, so           only arguably conflict-preempted claims
             See United States v. Abrego, 
    141 F.3d 142
    , 151 n.1 (5th Cir.) (“It has
    long been the rule of this court that no panel of this circuit can overrule a
    decision previously made by another.”) (internal quotation marks omitted), cert.
    119 S. Ct. 182
     (1998); Goodwin v. Johnson, 
    132 F.3d 162
    , 175-76 (5th Cir.
    1997) (noting that we must rely on the prior panel's decision when later cases
    are inconsistent with its analysis); Harvey v. Blake, 
    913 F.2d 226
    , 228 n.2 (5th
    Cir. 1990) (“When two panel opinions appear in conflict, it is the earlier which
    remain.15   Then, after it assured itself that it had no completely-
    preempted claims and that comity favored remanding the state common
    law actions, the court exercised its discretion to remand.16
          We review a discretionary remand of supplemental state law
    claims for abuse of discretion.17           Concluding that the district
    court acted within its discretion, we affirm.
          A district court, in its discretion, may remand supplemental
    state law claims when it has dismissed the claims that provide the
    basis for original jurisdiction.            See Carnegie-Mellon Univ. v.
    484 U.S. 343
    , 352 (1988).          When deciding whether to remand
    supplemental claims, a court should examine economy, fairness,
    convenience, and comity.      See id. at 353.     Here, the district court
    concluded that economy, fairness, and convenience offer no reason
    to retain jurisdiction. The parties do not dispute that on appeal,
    nor do we.
          The court found that comity also favors remand.           Aside from a
    potential    conflict-preemption      defense,    state   law   governs    the
             NYLCare has not argued on appeal that ERISA completely preempts the
    remaining claims.
             In fact, pressed by NYLCare's plausible but erroneous interpretation of
    circuit law, based on Burks, that the court could not remand the claims if an
    ordinary preemption defense remained, the court stated that it was “persuaded that
    under complete or conflict preemption, the allegations in the plaintiff's amended
    complaint does [sic] not relate to an ERISA plan,” and then it remanded. As
    explained above, the court did not need to resolve the preemption defense issue
    before remanding and, as we discuss below, the court's one-line statement neither
    resolves the issue nor precludes NYLCare from raising the defense in state court.
             See Metro Ford Truck Sales, Inc. v. Ford Motor Co., 
    145 F.3d 320
    , 326
    (5th Cir. 1998), cert. denied, 
    119 S. Ct. 798
     (1999); Eastus v. Blue Bell
    Creameries, L.P., 
    97 F.3d 100
    , 104 (5th Cir. 1996).
    remainder of the case.            Giles has brought state common law causes
    of   action    that,      in   their    instant     application,     relate      to   the
    regulation        of     health      careSSan      area    of    traditional      state
    regulation.18          NYLCare does raise a federal law defense of ERISA
    preemption.       But state courts, being of equal dignity with federal
    courts, are equally competent to address that potential defense.19
    NYLCare     has    offered      no   other    reason      why   comity   might    favor
    retaining federal jurisdiction.20                  On the basis of the Carnegie-
    Mellon factors, the district court did not abuse its discretion in
          In affirming this remand, we do not reach the merits of the
    conflict-preemption            defense,      nor    is    NYLCare   precluded         from
    asserting it in state court.21                The issue was not raised in the
    district court until NYLCare filed its last pleading, and then only
    briefly and under the erroneous view that conflict-preemption
             Indeed, for this very reason the Supreme Court has cautioned, in the
    ERISA context, that we do not lightly infer preemption of state law unless “that
    was the clear and manifest purpose of Congress.” New York State Conference of
    Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 
    514 U.S. 645
    , 655 (1995)
    (citation omitted).
             See Tafflin v. Levitt, 
    493 U.S. 455
    , 458 (1990) (“Under this system of
    dual sovereignty, we have consistently held that state courts have inherent
    authority, and are thus presumptively competent, to adjudicate claims arising
    under the laws of the United States.”); Robb v. Connolly, 
    111 U.S. 624
    , 637
    (1884) (Harlan, J.); Marathon Oil Co. v. Ruhrgas, 
    145 F.3d 211
    , 216 (5th Cir.)
    (en banc), cert. granted, 
    119 S. Ct. 589
             NYLCare relies solely on Burks's apparent requirement that a federal
    court retain jurisdiction despite a conflict-preemption defense because the
    defense transforms the cause of action into a federal one; NYLCare offers no
    other justification for exercising jurisdiction.
               We make no comment on the viability of such a defense.
    barred remand.      Giles did not discuss the issue in the district
    court, instead focusing on complete preemption.                  The district
    court's order simply commands remand, and the court did not issue
    an opinion addressing conflict-preemption, but mentioned it only in
    the one sentence quoted above, that it was “persuaded that under
    complete or conflict preemption, the allegations in the plaintiff's
    amended complaint does [sic] not relate to an ERISA plan.”22                Yet,
    the court never gave any explanation for this statement.
          To the contrary, the court's reliance on Dukes, a complete-
    preemption case, as the case “that accurately decides this issue,”
    indicates that the court did not fully consider the conflict-
    preemption issue.       Any thought the court did give to conflict-
    preemption was entertained under the mistaken belief that circuit
    precedent required resolution of that issue before it could remand.
    The   parties    did   not   fully    litigate     conflict-preemption,       so
    restraint and comity indicate we should reserve the issue for
    resolution in the first instance by the state court.23
             The court also summarily rejected an overly broad conflict-preemption
    argument, but the rejection of one argument does not resolve the issue.
             We recognize that judicial economy might support resolving the conflict-
    preemption argument now, because the parties have briefed it on appeal.
    Nonetheless, the district court did not abuse its discretion in remanding, even
    absent resolution of the ordinary-preemption issue, and that issue was not fully
    litigated in the district court; therefore, we reserve it for the state court.
          Comity and the presumption that the state courts are equally capable of
    addressing federal law solicit restraint when we remand. As a matter of course,
    we should decide no more than necessary to determine whether remand is
    appropriate, and we should leave it to the state court, free of preclusion, to
    resolve the balance of the case. Cf. Marathon, 145 F.3d at 215-16, 218 (holding
          NYLCare contends that, irrespective of whether ERISA preempts
    the causes of action, the district court abused its discretion when
    it remanded, because Giles is engaging in forum manipulation.                     We
    disagree.         In   Burks,    we     rebuked    the     plaintiff    for    forum
    manipulation, observing that Burks “has tried and failed to delete
    all of the federal claims from his complaint in order to get the
    district court to remand. In Carnegie-Mellon, 484 U.S. at 350, the
    Court urged lower federal courts to guard against such manipulation
    by denying motions to remand where appropriate.”                     Burks, 8 F.3d
    at 306.
          Giles     appears     to   have    attempted     a   similar     feat.     She
    simultaneously moved to amend to delete her completely-preempted
    federal claims and moved for remand.              Her obvious objective was to
    change the forum by getting back into state court.                   We do not see
    this as forum manipulation, but rather as a legitimate attempt to
    try her state law claims in the forum of her choice.                   She did not
    move to eliminate valid causes of action simply to defeat federal
    jurisdiction,      but    only   deleted      causes     of   action   that    ERISA
    completely preempted anyway.            If she had not moved to amend, the
    district court likely would have dismissed the preempted causes of
    action eventually, at which time she could have moved to remand
    that, in a removal posture, a district court should address subject matter
    jurisdiction before personal jurisdiction because a determination of the latter
    would improperly wrest the decision from the state court).
    without being guilty of forum manipulation.
         As the district court concluded and we already have agreed,
    comity favors remand.   The order of remand is AFFIRMED.

Document Info

DocketNumber: 97-20840

Filed Date: 4/9/1999

Precedential Status: Precedential

Modified Date: 12/21/2014

Authorities (27)

Angelides v. Baylor Clge of Medc , 117 F.3d 833 ( 1997 )

United States v. Abrego , 141 F.3d 142 ( 1998 )

Castaneda v. Falcon , 166 F.3d 799 ( 1999 )

Robb v. Connolly , 111 U.S. 624 ( 1884 )

Louisville & Nashville R. Co. v. Mottley , 211 U.S. 149 ( 1908 )

Thermtron Products, Inc. v. Hermansdorfer , 423 U.S. 336 ( 1976 )

Franchise Tax Bd. of Cal. v. Construction Laborers Vacation ... , 463 U.S. 1 ( 1983 )

Metropolitan Life Ins. Co. v. Taylor , 481 U.S. 58 ( 1987 )

Carnegie-Mellon Univ. v. Cohill , 484 U.S. 343 ( 1988 )

Tafflin v. Levitt , 493 U.S. 455 ( 1990 )

New York State Conference of Blue Cross & Blue Shield Plans ... , 514 U.S. 645 ( 1995 )

Things Remembered, Inc. v. Petrarca , 516 U.S. 124 ( 1995 )

Roy A. Cefalu v. B.F. Goodrich Company , 871 F.2d 1290 ( 1989 )

Memorial Hospital System v. Northbrook Life Insurance ... , 904 F.2d 236 ( 1990 )

53 Fair empl.prac.cas. 1625, 54 Empl. Prac. Dec. P 40,289 ... , 913 F.2d 226 ( 1990 )

David E. Tillman v. Csx Transportation, Inc. & Marler L. ... , 929 F.2d 1023 ( 1991 )

Thomas H. Burks v. Amerada Hess Corporation and Alan Fuller , 8 F.3d 301 ( 1993 )

George Raymond Anderson, A/K/A Andy Anderson v. Electronic ... , 11 F.3d 1311 ( 1994 )

cecilia-dukes-trustee-ad-litem-of-the-estate-of-darryl-dukes-deceased-v , 57 F.3d 350 ( 1995 )

David Rice v. Kanu Panchal, M.D., Rodrigo Sotillo, M.D., ... , 65 F.3d 637 ( 1995 )

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