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CORTEZ v. MICHAEL REESE HEALTH PLAN

October 7, 1997

HERMAN CORTEZ and SONIA CORTEZ, Plaintiffs,
v.
MICHAEL REESE HEALTH PLAN, INC. and HEALTH COST CONTROLS OF ILLINOIS, INC., Defendants.



The opinion of the court was delivered by: BUCKLO

 The plaintiffs, Herman and Sonia Cortez, brought suit in the Circuit Court of Cook County, seeking a declaratory judgment against defendants, Michael Reese Health Plan, Inc. ("MRHP") and Health Cost Controls of Illinois, Inc. ("HCC"). Mr. and Ms. Cortez claim that MRHP and HCC are not entitled to reimbursement, from their uninsured motorist recovery, of the value of medical services provided by MRHP. The Circuit Court certified a class of similarly situated persons. MRHP and HCC then removed the action to this Court, claiming that the federal court has jurisdiction under the doctrine of complete preemption. I ordered the parties, sua sponte, to address the issue of why this case should not be remanded to state court based on Washington v. Humana Health Plan, Inc., 883 F. Supp. 264 (N.D. Ill. 1995). For the reasons set forth below, this action will remain in federal court.

 Background

 In October 1989, Mr. and Ms. Cortez were involved in an automobile accident. As a result of the accident, they were injured and received health benefits from MRHP as participants in and/or beneficiaries of the health benefit plan sponsored and maintained by the Chicago Transit Authority ("CTA").

 At the time of the accident, Mr. Cortez's automobile was insured by him through Allstate Insurance Company ("Allstate"). Subsequently, Mr. and Ms. Cortez settled their personal injury claims with Allstate. MRHP and HCC filed a lien against all proceeds paid by Allstate, seeking reimbursement for medical payments made to Mr. and Ms. Cortez pursuant to a reimbursement provision in CTA's health benefit plan.

 In 1991, Mr. and Ms. Cortez brought suit in state court, seeking a declaratory judgment that MRHP and HCC were not entitled to any reimbursement from the personal injury settlement. The state court, in 1996, entered an order that certified a class of similarly situated persons. MRHP and HCC then removed the case to this Court, claiming that federal courts had jurisdiction pursuant to the doctrine of complete preemption under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq.

 MRHP and HCC assert that federal jurisdiction exists because the certified class includes ERISA plan participants who seek adjudication of the meaning of MRHP's reimbursement provision. MRHP and HCC argue that interpreting the reimbursement provision falls within Section 502(a)(1)(B) of ERISA.

 Federal Removal Jurisdiction

 Under 28 U.S.C. § 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States . . . ." In this case, removal is proper if there is a federal question, i.e., if the case arises "under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.

 The plaintiff's well-pleaded complaint ordinarily determines whether there is a federal question. "It is long settled law that a cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 95 L. Ed. 2d 55, 107 S. Ct. 1542 (1987). Presenting a federal question as a defense to the plaintiff's complaint is insufficient to establish jurisdiction for removal to federal court. Id.

 However, the Supreme Court in Avco Corp. v. Aero Lodge No. 735, Int'l Ass'n of Machinists, 390 U.S. 557, 559-61, 20 L. Ed. 2d 126, 88 S. Ct. 1235 (1968), created the doctrine of complete preemption as an exception to the well-pleaded complaint rule in the context of Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185. This doctrine was applied to ERISA in Taylor. 481 U.S. 58 at 64-66, 95 L. Ed. 2d 55, 107 S. Ct. 1542. A plaintiff's common law claims are completely preempted under ERISA if they fall within the scope of Section 502(a)(1)(B). *fn1" Id. Once preempted, the plaintiff's state law claim is "properly 'recharacterized' as one arising under federal law," thus creating federal question jurisdiction for removal purposes. Rice v. Panchal, 65 F.3d 637, 640 (7th Cir. 1995) (citing Taylor, 481 U.S. at 64). Thus, the key question is whether or not plaintiff's claim is within the scope of Section 502(a), and thus completely preempted. Rice, 65 F.3d at 641.

 In Washington, the district court held that the plaintiff's claim was not within the scope of Section 502(a). The plaintiff was injured in an automobile collision and received benefits from her employer's health benefit plan. Washington, 883 F. Supp. at 265. She later obtained an award from her automobile insurance carrier for the injuries she sustained. The administrators of the health benefit plan sought reimbursement for the medical payments she had received. The plaintiff then sought a declaratory judgment that she was not required to reimburse the plan. The case was removed to federal court. Id.

 The court in Washington held that plaintiff's action was not one to "recover benefits" or to "clarify [her] right to future benefits" within the scope of Section 502(a). Id. at 266. It was a closer question as to whether or not the action was one to "enforce [her] rights under the terms of the plan," but the court rejected that claim as well. Id. at 266-67. Therefore, the doctrine of complete preemption did not apply, and the case was remanded to state court.

 Subsequent to the Washington decision, the Seventh Circuit in Rice v. Panchal reviewed the doctrine of complete preemption. In particular, the Court made a distinction between Section 502(a) of ERISA and Section 514(a). Rice, 65 F.3d at 639-40 (reviewing 29 U.S.C. §§ 1132(a) and 1144(a)). It held that Section 502(a) provides the basis for complete preemption while Section 514(a) is only the basis for conflict preemption. Rice, 65 F.3d at 639-40. The distinction is important because the former is an exception to the ...


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