: : Court Remands Insurer’s Recoupment Claims Against Provider to State Court Applying Davila Test

Here, plaintiff seeks damages in the amount of $226,562.62, which it contends make up the unpaid balance of overpayments to Dr. Gupta. BCBSLA’s complaint does not seek a constructive trust or an equitable lien on particular funds. Rather, it seeks to recover from Dr. Gupta’s assets generally. Thus, the Court finds that plaintiff’s claims are not equitable in nature, and are outside the scope of ERISA § 502(a)(3).
HMO La. Inc. v. Gupta (E.D. La. 2021)

Recoupment litigation against health care providers remains a controversial area in ERISA jurisprudence. The boundaries for plan claims against beneficiaries in recoupment scenarios has settled into the business of advancing (a)(3) claims founded on equitable liens by agreement. But when the plan seeks recovery from a provider it has allegedly overpaid, what manner of claim do we have?

This was the situation before the court in the cited case. The court concluded that the claim did not lie in ERISA as it understood Aetna Health Inc. v. Davila, 542 U.S. 200, 207 (2004). (I’ll refer to the plaintiff as BCBS for ease of reference.)

(The court first declined to find jurisdiction under (a)(1)(B) since Blue Cross was not a participant, beneficiary or assignee – and that argument doesn’t seem very compelling in the first place, so I will move on to the more interesting (a)(3) claim.)

The Davila Test

In order for a district court to exercise removal jurisdiction, complete preemption must exist.

The court turned to the Davila test to frame the issue:

“When the doctrine of complete preemption does not apply, but the plaintiff’s state claim is arguably preempted under § 514(a), the district court, being without removal jurisdiction, cannot resolve the dispute regarding preemption.” Id. State law causes of action are completely preempted by ERISA when: (1) an individual, at some point in time, could have brought the claim under ERISA, and (2) there is no legal duty independent of ERISA or the plan terms that is implicated by the defendant’s actions. Davila, 542 U.S. at 209-210.

Could BCBS have brought its claim against Gupta under ERISA?

The court said no.

Here, plaintiff seeks damages in the amount of $226,562.62, which it contends make up the unpaid balance of overpayments to Dr. Gupta. BCBSLA’s complaint does not seek a constructive trust or an equitable lien on particular funds. Rather, it seeks to recover from Dr. Gupta’s assets generally. Thus, the Court finds that plaintiff’s claims are not equitable in nature, and are outside the scope of ERISA § 502(a)(3).

Since the defendant failed the first test, the removal argument under (a)(3) failed.

Note: The court’s analysis employes a circular logic that fails to address the central question. The issue was whether BCBS was acting as a fiduciary and could BCBS have stated a claim under (a)(3). That BCBS did not state such a claim is beside the point. The court relied heavily on United Healthcare Servs., Inc. v. Sanctuary Surgical Ctr., 5 F. Supp. 3d 1350 (S.D. Fla. 2014) which reached a similar conclusion of non-preemption.

Contrary authority – See, Aflac, Inc. v. Bloom, 948 F.Supp.2d 1374 (M.D.Ga.2013):

It is clear that Plaintiffs seek not only to recoup what they erroneously paid to Dr. Bloom but also seek to “enjoin an[] act or practice which violates” the terms of the Plan and to “obtain other appropriate equitable relief … to redress such violation or … to enforce … provisions of the plan.” 29 U.S.C. § 1132(a)(3). For this reason alone, federal question jurisdiction exists pursuant to § 502(a)(3).