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In re O.D.

United States District Court, Fifth Circuit

September 27, 2013

IN THE MATTER OF O.D., A MINOR, Plaintiff,
v.
THE ASHLEY HEALTHCARE PLAN, Defendant.

MEMORANDUM OPINION

SHARION AYCOCK, District Judge.

Defendant The Ashley Healthcare Plan (AHP) removed this action from the Chancery Court of Pontotoc County on the grounds that Plaintiff's state court claim is preempted by the civil enforcement provision in the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a). Plaintiff has filed a Motion to Remand. For the following reasons, Plaintiff's motion is GRANTED:

Factual and Procedural Background

Michael Dillard is an employee of Ashley Furniture Industries, Inc., and a participant in the self-funded Ashley Healthcare Plan (AHP). Michael and his wife, Kimberly, have been appointed Guardians of their minor child by the Pontotoc County Chancery Court in order to pursue a claim on her behalf for personal injuries sustained as a result of a motor vehicle accident. As guardians for their child, the Dillards engaged in settlement negotiations with the insurers and were offered the policy limits of both the negligent driver's motor vehicle insurance as well as their own uninsured/underinsured motorist carrier. In order to effectuate that settlement, Plaintiffs filed a Petition for Authority to Settle Doubtful Claim of Minor with the Chancery Court of Pontotoc County pursuant to the Mississippi Code, which requires Chancery Court approval of all settlements on behalf of minors. The Petition acknowledges that the Ashley Healthcare Plan paid approximately $33, 683.58 toward the minor's medical bills and requests an adjudication of the validity and extent of the lien asserted by AHP.

AHP was served with notice of the Petition for Authority to Settle and hearing set for that matter, however, on the date of the hearing, AHP filed a Notice of Removal asserting the state court action fell within the scope of ERISA's civil enforcement statutes, thereby preempting Plaintiff's claims.

Plaintiff has filed a Motion to Remand [7] asserting that ERISA does not preempt Mississippi law requiring court approval of a minor's settlement.

Discussion and Analysis

Under the removal statute, "any civil action brought in a State court of which the district courts have original jurisdiction, may be removed by the defendant" to federal court. 28 U.S.C. § 1441(a); see Arana v. Ochsner Health Plan , 338 F.3d 433, 437 (5th Cir. 2003) (en banc). The type of original jurisdiction at issue here is federal question jurisdiction, which covers cases "arising under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331. Courts typically ascertain the existence of federal-question jurisdiction by applying the "well-pleaded complaint" rule, under which "a case [generally] will not be removable if the complaint does not affirmatively allege a federal claim." Beneficial Nat'l Bank v. Anderson , 539 U.S. 1, 6, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003). An exception to the well-pleaded complaint rule exists for federal statutes that "so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metro. Life Ins. Co. v. Taylor , 481 U.S. 58, 63-64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). Among those completely preempted claims are state-law claims seeking relief within the scope of § 502(a)(1)(B) of ERISA. Arana , 338 F.3d at 437; Aetna Health Inc. v. Davila , 542 U.S. 200, 209, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). Where complete preemption applies, federal subject matter jurisdiction exists. Arana , 338 F.3d at 435 (vacating remand order upon finding complete preemption).

ERISA's preemption clause states that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." 29 U.S.C. § 1144(a) (expressly excepting two situations not applicable here). As the court has previously observed: A state cause of action relates to an employee benefit plan whenever it has "a connection with or reference to such plan." Hubbard v. Blue Cross & Blue Shield Assoc. , 42 F.3d 942, 945 (5th Cir. 1995) (citations omitted). To determine whether a claim is preempted by ERISA, the Fifth Circuit has directed application of a two-prong test, which asks: "(1) whether the claim addresses areas of exclusive federal concern and not of traditional state authority, such as the right to receive benefits under the terms of an ERISA plan, and (2) whether the claim directly affects the relationship among traditional ERISA entities-the employer, the plan and its fiduciaries, and the participants and beneficiaries." Hobson v. Robinson , 75 F.Appx. 949, 953, (5th Cir. 2003).

Plaintiff's Petition for Authority to Settle and Compromise Doubtful Claim of Minor [6] seeks the following relief: (1) that after hearing AHP's assertions regarding its subrogation lien toward the Minor's proceeds, the Court will approve the payment of the sum of $75, 000 for the exclusive use and benefit of the Minor; and (2) that after paying the attorney, the court will authorize the Guardians to execute a full Release to the insurance companies and deposit the settlement proceeds into a trust account established for the benefit of the Minor.

Mississippi Code Section 93-13-59 grants authority to guardians "empowered by the Court" to compromise claims of minors. The Mississippi Constitution further gives full jurisdiction of minor's business to the chancery courts of the State. See MISS. CODE art. 6, § 159(d). Plaintiff argues that because the United States Supreme Court has frequently noted that in enacting ERISA "Congress [did] not intend to preempt areas of traditional state regulation" such as domestic relations, the claim at issue here is not preempted and the matter should be remanded. See FMC Corp. v. Holliday , 498 U.S. 52, 62, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990). Indeed, Plaintiff cites three Northern District of Mississippi cases in which the court has affirmatively held that ERISA does not preempt Mississippi law requiring chancery court approval of minor's settlements. See Clardy v. ATS, Inc. Employee Welfare Benefit Plan , 921 F.Supp. 394 (N.D. Miss. 1996); Bauhaus USA, Inc. v. Copeland , 2001 WL 1524373 (N.D. Miss. Mar. 9, 2001); Estate of Ashmore v. Healthcare Recoveries, Inc., 1998 WL 211778 (N.D. Miss. Mar. 25, 1998).

In Clardy, a state court action to recover a minor's medical expenses under the ERISAgoverned plan was removed to the federal court. 921 F.Supp. at 396. The minor's parents filed suit to challenge the Plan's refusal to pay the minor's medical expenses based on an exclusion for expenses resulting from the participation in the commission of a felony or illegal activity. Id . n.2. No remand was filed, but the Plan filed a motion for partial summary judgment alleging that the separate subrogation agreement signed by the minor's parents entitled the Plan to a set off from the settlement proceeds if the court ultimately ruled in plaintiff's favor. Id. at 397.

The Court denied the partial summary judgment holding that the "reimbursement agreement" signed by the minor's parents on his behalf was invalid, as it was not approved by the chancery court. Id . Because Mississippi law requires chancery court approval of an assignment of a minor's right to insurance proceeds, the defendants argued that the state law claim was preempted by ERISA. The Court examined ERISA's broad preemption clause, as well as United States Supreme Court precedence, and held that "Mississippi law requiring a Chancellor's approval before a parent may contract away a minor's legal rights is not preempted by ERISA in this case." Id. at 397-99, 401. The Court found that the area of domestic relations was an area traditionally governed by state law, and preemption of state laws concerning domestic relations was uncommon, even under ERISA. Id. at 398. The district court observed that "federal law will only preempt a state law pertaining to domestic relations if: 1) Congress has positively expressed its intent to preempt the state law and 2) the state law does major damage to the clear and substantial federal interest." Id . (citing Boggs v. Boggs , 849 F.Supp. 462, 465 (E.D. La. 1994); Hisquierdo v. Hisquierdo , 439 U.S. 572, 581, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979)). Finding that neither applied with respect to ERISA and protections for minor's rights in the state statute, the Court concluded that the lack of federal interest in the subrogation of an ERISA plan or administrator precludes preemption. The Court further opined that "[t]he administration of a minor's estate is entirely a matter of state law, and is law of general application which affects a broad range of matters entirely unrelated to ERISA plans...." Id. at 399. Therefore, the statute is but a "state law of general application which has only an incidental effect upon an ERISA plan." Id.

This Court again faced the issue of subrogation of a minor's settlement in Estate of Ashmore v. Healthcare Recoveries, Inc., 1998 WL 211778 (N.D. Mar. 25, 1998). That case differs from the facts here in that the subrogation lien asserted was not an express provision in the ERISA plan, but an implied right of reimbursement by the plan. The court found no preemption "since adjudication does not require construing the ERISA plan." Id. at *2. However, the court further opined that "[e]ven if the parties' ERISA plan contained an express subrogation clause, Mississippi law requiring prior chancery court approval of assignment of a minor's rights to insurance proceeds would not be preempted by ERISA." Id . (citing Methodist Hosp. of Memphis v. Marsh , 518 So.2d 1227, 1228 (Miss. 1988) (written agreement executed by minor's mother not enforceable without ...


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