Giles v. NYLCare Health Plans, Inc. , 172 F.3d 332 ( 1999 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 97-20840
_______________
BRIDGETT GILES,
Individually and as the Personal Representative of
the Estate of Alex Giles, a Minor, Deceased,
Plaintiff-Appellee,
VERSUS
NYLCARE HEALTH PLANS, INCORPORATED, et al.,
Defendants,
NYLCARE HEALTH PLANS, INCORPORATED,
and
NYLCARE HEALTH PLANS OF THE GULF COAST, INC.,
Formerly Known as Sanus Health Plan, Incorporated,
Defendants-Appellants.
_________________________
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.
I.
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
death.
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,
Inc., 57 F.3d 350 (3d Cir. 1995), the district court, noting that
ERISA did not preempt Giles's remaining vicarious liability and
2
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.”
3
II.
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
1
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).
4
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
III.
A.
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
2
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”).
3
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
Appellee, 130 F.3d 695, 697 (5th Cir.), cert. denied, 118 S. Ct. 1523 (1997).
4
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”).
5
See 28 U.S.C. § 1331 (“The district courts shall have original
(continued...)
5
B.
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
5
(...continued)
jurisdiction of all civil actions arising under the Constitution, laws, or
treaties of the United States.”); see also Louisville & Nashville R.R. v.
Mottley, 211 U.S. 149, 152-54 (1908) (explaining well-pleaded complaint rule).
6
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.
7
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
(continued...)
6
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.
C.
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
action.9
7
(...continued)
provision is a federal claim, creating removal jurisdiction).
8
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.
9
See Soley, 923 F.2d at 408-09 (relying on distinction between complete
(continued...)
7
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
9
(...continued)
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).
10
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”).
11
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
claims).
8
D.
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
case.
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.
12
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 (1997);
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.
13
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.
9
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
IV.
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
14
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.
denied, 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
controls.”).
10
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.
Cohill, 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
15
NYLCare has not argued on appeal that ERISA completely preempts the
remaining claims.
16
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.
17
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).
11
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
remanding.
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
18
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).
19
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 (1998).
20
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.
21
We make no comment on the viability of such a defense.
12
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
22
The court also summarily rejected an overly broad conflict-preemption
argument, but the rejection of one argument does not resolve the issue.
23
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
(continued...)
13
V.
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
23
(...continued)
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).
14
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.
15