LHC Group, Inc. v. Bayer Corp.

Background

LHC Group, Inc. administered a healthcare benefit plan governed by the Employee Retirement Income Security Act of 1974, or ERISA. Under the plan, LHC Group reimbursed members for medical-treatment expenses. The members also assigned LHC Group their rights to bring personal-injury claims against third parties.

LHC Group filed state-law claims on behalf of plan members against Bayer Corp., Bayer HealthCare LLC, Bayer Essure Inc., and Bayer HealthCare Pharmaceuticals, Inc. The claims concerned the manufacture and sale of an allegedly defective birth control product. After LHC Group filed the case in Alameda County Superior Court, the defendants removed it to federal court, arguing that ERISA completely preempted the claims. LHC Group moved to remand, meaning it asked the federal court to return the case to state court.

Complete Preemption Analysis

Federal courts generally cannot hear state-law claims merely because a defendant argues that federal law preempts them. An exception exists for complete preemption, which can convert certain state-law claims into federal claims for jurisdictional purposes. The court applied the two-part test from Aetna Health Inc. v. Davila: complete preemption requires that (1) the plaintiff could have brought the claim under ERISA’s civil-enforcement provision, Section 502(a)(1)(B), and (2) no independent legal duty is implicated by the defendant’s conduct.

For the first part, the defendants argued that LHC Group sought to enforce rights under the ERISA plan because the plan contained a subrogation provision assigning LHC Group the right to sue on behalf of plan members. The court rejected that argument. It explained that the relevant question was whether these particular claims could have been brought under Section 502(a)(1)(B) to obtain benefits or enforce rights under the plan. LHC Group’s claims were instead state-law claims assigned to it to enforce on behalf of plan members, not claims seeking benefits under the plan. The defendants therefore did not satisfy the first part of the test.

The court also held that the claims failed the second part of the test. It rejected the defendants’ argument that the claims were not independent because they could not exist without the ERISA plan. The relevant question was the source of the legal duty, not the claim’s relationship to a healthcare plan. The court found that LHC Group’s claims for negligence, strict products liability, concealment, contract, and unjust enrichment were based on duties independent of the ERISA plan.

Disposition

Because the claims met neither part of the complete-preemption test, the court concluded that ERISA did not completely preempt them and that the federal court lacked subject-matter jurisdiction. The court granted LHC Group’s motion to remand the case to Alameda County Superior Court. It stated that any conflict-preemption defense could be raised in state court, but that defense could not establish federal-question jurisdiction.

The court denied the defendants’ pending motion to dismiss without prejudice as moot. The clerk was directed to remand the case to state court and close the federal file.