BCBSM, Inc. v. I.B.E.W. 292 Health Care Plan

Background

BCBSM, Inc., doing business as Blue Cross and Blue Shield of Minnesota, served I.B.E.W. 292 Health Care Plan with a Minnesota state-court complaint. BCBSM alleged that the Plan breached an agreement concerning payment of medical claims for Plan beneficiaries. BCBSM sought a declaration that the Plan had to defend and indemnify BCBSM, along with monetary damages.

The agreement gave the Plan access to BCBSM’s medical-provider network and stated that the Plan retained final authority to decide eligibility and adjudicate claims. After Fairview Health Services provided services to a Plan beneficiary, the Plan’s claims administrator denied Fairview’s claims, and Fairview lost its appeal. Fairview then notified BCBSM of arbitration. BCBSM demanded that the Plan defend and indemnify it under the agreement, but the Plan denied that demand.

The Plan removed the case to federal court, arguing that ERISA completely preempted BCBSM’s state-law claims and created federal-question jurisdiction. The Plan then moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of jurisdiction and under Rule 12(b)(6) for failure to state a claim. BCBSM moved to remand the case to state court and requested attorney fees and costs arising from the removal.

Motion to Remand

The court explained that federal-question jurisdiction ordinarily must appear on the face of the plaintiff’s properly pleaded complaint. A federal defense, including ordinary preemption, generally does not create federal jurisdiction. Complete preemption is an exception that converts certain state-law claims into federal claims when federal law supplies the exclusive cause of action and remedies.

The court found that BCBSM’s complaint pleaded only Minnesota contract and declaratory-judgment claims. It rejected the Plan’s argument that BCBSM had merely disguised an ERISA claim for denied medical benefits. BCBSM was not a Plan beneficiary and was not seeking benefits under the Plan. Instead, it sought defense and indemnification under a separate agreement between BCBSM and the Plan.

The court also applied the two-part test for complete preemption under ERISA section 502(a)(1)(B). That test asks whether the plaintiff could have brought the claim under ERISA and whether the defendant’s conduct implicated no independent legal duty. The court held that the first requirement was not met because BCBSM was not a Plan participant or beneficiary, was not seeking benefits or enforcement of rights under the Plan, and sought defense, indemnification, and related costs rather than Plan benefits. The court also held that the second requirement was not met because the alleged duty arose from the separate agreement, not from the ERISA Plan documents.

The court separately rejected preemption under ERISA section 502(a)(3), which allows certain participants, beneficiaries, and fiduciaries to enforce an ERISA plan’s terms. BCBSM sought to enforce the separate agreement’s defense-and-indemnification provision, not the terms of the ERISA Plan. The court therefore concluded that ERISA did not completely preempt BCBSM’s claims and that the federal court lacked subject-matter jurisdiction.

Attorney Fees

The court denied BCBSM’s request for attorney fees and costs. It explained that fees may be awarded after remand when the removing party lacked an objectively reasonable basis for removal. Although the Plan’s removal was erroneous, the court found that ERISA preemption is complicated, the factual situation was uncommon, and the Plan’s arguments raised novel issues. The removal therefore was not objectively unreasonable.

Motion to Dismiss and Disposition

Because the court lacked subject-matter jurisdiction and was remanding the case, it stated that it could not evaluate the Plan’s motion to dismiss. The court denied that motion as moot.

Judge John R. Tunheim ordered: (1) BCBSM’s motion to remand was granted; (2) BCBSM’s motion for attorney fees was denied; and (3) the Plan’s motion to dismiss was denied as moot. The opinion did not decide whether the Plan ultimately owed BCBSM a defense or indemnification under the agreement.