Very Recent Opinion Finds Suit Between BCBS and Hospital Not Pre-empted Under ERISA; Relies Heavily on Stop Loss Case (BCBS v. Sharkey-Issaquena Community Hosp., Southern District of Mississippi, Dec. 13, 2017).

Very Recent Opinion Finds Suit Between BCBS and Hospital Not Pre-empted Under ERISA; Relies Heavily on Stop Loss Case (BCBS v. Sharkey-Issaquena Community Hosp., Southern District of Mississippi, Dec. 13, 2017).

Very Recent Opinion Finds Suit Between BCBS and Hospital Not Pre-empted Under ERISA; Relies Heavily on Stop Loss Case (BCBS v. Sharkey-Issaquena Community Hosp., Southern District of Mississippi, Dec. 13, 2017).

This is a case in which BCBS sued a Hospital and several offsite labs for allegedly reporting charges for lab work as having been done by the Hospital when in fact they were not. BCBS sued in federal court under state law claims for fraud, misrepresentation, breach of contract, and others. BCBS also sought an injunction and a declaratory judgment against all Defendants under ERISA.The Defendants moved to dismiss BCBS’ Complaint, claiming: 1) that the state law claims were preempted by ERISA; 2) that the ERISA claims were not maintainable; 3) the state law claims were defectively plead; 4) the self-funded plans involved are necessary parties; and 5) BCBS can’t sue on behalf of the self-funded plans involved.

At the end of the day, not one of the Defendants’ pentamerous arguments prevailed. fn1

The Court first went off on a lengthy exposition of ERISA preemption law, discussing the distinctions between “complete preemption” and “conflict preemption.” Yawn. Basically, the former occurs where a state law claim is considered to be a federal claim from the get-go. Essentially, complete preemption “transmogrifies” a state law claim into a federal one. [the Court’s word, not mine]. Noting that Defendants had not asked the Court to characterize BCBS’ state law claims as federal, the Court rejected this line of attack.

Next, the Court got “lost in the ERISA funhouse.” See https://stoplosslaw.com/cases-and-commentary/bank-of-louisiana-v-aetna-us-healthcare. And https://stoplosslaw.com/cases-and-commentary/bank-of-louisiana-v-aetna-life-ins

See also, Funhouse>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

 

The Court rejected Defendants’ argument that BCBS’ state law claims were preempted by “conflict preemption” because Defendants had merely alleged that the claims “related to” an ERISA plan and had a “connection” with it. The Court said:
“While the term “relate to” is ‘broadly worded” and “clearly expansive,” it “cannot be taken to extend to the furthest stretch of its indeterminacy, or else for all practical purposes pre-emption would never run it’s course.” (citation omitted).

At this point, the Court relied on the appellate court’s opinion in Bank of La. v. Aetna U.S. Healthcare Inc., 468 F.3d 237 (5th Cir. 2006), the second case linked above, and concluded that the allegations of the Complaint did not relate to any ERISA plans, but were instead merely matters of the contract between BCBS and Hospital. This is the very same conclusion reached in Bank of La., which was a stop loss case concluding that no ERISA plan was sufficiently connected with an action by the employer against the stop loss carrier for breach of contract. That principle is bedrock law everywhere, which keeps us stop loss types out of the funhouse.

Said the Court:
“Here, Blue Cross was not acting as a plan fiduciary with respect to the specific breaches it alleges—claims seeking damages for Blue Cross’s losses in paying claims that it says were not covered by the Contract or were fraudulently submitted.”

This was true, even though BCBS was a fiduciary for the plans in question. Noting that “Defendants argue that Blue Cross “cannot assert federal claims as an ERISA fiduciary and also assert state claims on its own behalf… But the Fifth Circuit has explained that “a party may qualify as an ERISA fiduciary with regard to some claims but not others.” Bank of La., 468 F.3d at 243.”

The Court went on to review whether BCBS’ state law claims were properly plead, and concluded that each one was.

As for the lack of necessary parties argument, the Court disposed of it by noting that Defendants had not even identified which plans should be added to the case. See https://stoplosslaw.com/cases-and-commentary/1434 for a discussion of how the necessary party rule works. Standing proved no issue for the Court, either.

Finally (Are We THERE Yet?), the Court rejected Defendants’ crabbed argument that the case must be sent to arbitration, finding no applicable agreement to arbitrate existed.

Thanks for reading….

fn1 Okay, okay, my use of this pretentious and unfamiliar word was for fun. I just learned it the other day. It means five-part. Use at your next cocktail party. The ladies love it.



  • Thomas A. Croft, Croft Law LLC


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