Community Health v. Mosser

Opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Community Health Plan No. 01-4095 ELECTRONIC CITATION: 2003 FED App. 0372P (6th Cir.) of Ohio v. Mosser File Name: 03a0372p.06 _________________ UNITED STATES COURT OF APPEALS COUNSEL FOR THE SIXTH CIRCUIT ARGUED: J. Gerard Swank, SWANK & ASSOCIATES, _________________ Newark, Ohio, for Appellant. Daran P. Kiefer, KREINER & PETERS, Cleveland, Ohio, for Appellee. ON BRIEF: COMMUNITY HEALTH PLAN X J. Gerard Swank, SWANK & ASSOCIATES, Newark, OF OHIO , - Ohio, William F. Goodrich, GOODRICH, GOODRICH & Plaintiff-Appellee, - LAZZARA, Pittsburgh, Pennsylvania, for Appellant. - No. 01-4095 Daran P. Kiefer, Ted M. Traut, KREINER & PETERS, - Cleveland, Ohio, for Appellee. v. > , _________________ - JOSEPH J. MOSSER, - OPINION Defendant-Appellant. - _________________ - N GWIN, District Judge. With this appeal, we examine Appeal from the United States District Court whether the district court erred when it granted Plaintiff- for the Southern District of Ohio at Columbus. Appellee Community Health Plan of Ohio (“CHPO”) No. 99-00961—George C. Smith, District Judge. summary judgment on its claims for specific performance and restitution against Defendant-Appellant Joseph J. Argued: February 6, 2003 Mosser (“Mosser”).

Decided and Filed: October 21, 2003 In reviewing Mosser’s appeal, we first consider whether the federal courts have jurisdiction over this case. Under Before: SILER and ROGERS, Circuit Judges; GWIN, the recent United States Supreme Court decision in Great- District Judge.* West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S. Ct. 708, 151 L. Ed. 2d 635 (2002), federal subject matter jurisdiction does not exist in this matter, and therefore, this case is not properly before the federal courts. Finding that the district court did not have jurisdiction over this case, we REVERSE and REMAND this case with directions that the district court dismiss this case for lack of subject matter jurisdiction. * The Ho norable James S. Gwin, United States District Judge for the Northern District of Ohio, sitting by designation.

1 No. 01-4095 Community Health Plan 3 4 Community Health Plan No. 01-4095 of Ohio v. Mosser of Ohio v. Mosser

This case arises from efforts by an insurance company, “Plan”). In this case, CHPO sued Mosser, a Plan CHPO, to enforce its plan’s subrogation provision. The participant, in the U.S. District Court for the Southern subrogation provision requires those insured by CHPO to District of Ohio, requesting specific performance and cooperate with CHPO in its efforts to recover amounts restitution. With its lawsuit, CHPO sought to recover CHPO paid on the insured’s behalf. Although the medical benefits that CHPO paid on Mosser’s behalf. subrogation provision states no explicit obligation to Mosser incurred the medical expenses as a result of injuries reimburse the insurer for monies received from tortfeasors, he sustained in an automobile accident. CHPO says such a duty should be found in the subrogation provision. CHPO claimed that the Plan’s provision titled “Subrogation” gave CHPO the right to recover the money Appellant Mosser says that under the Supreme Court’s paid on Mosser’s behalf because Mosser recovered money recent holding in Great-West Life, the district court, and in a settlement with the alleged tortfeasor. Responding to this court, do not have jurisdiction to entertain this action. CHPO’s complaint, Mosser asserted a counterclaim for bad Arguing that federal courts are courts of limited faith. Both parties moved for summary judgment. The jurisdiction, not courts of general jurisdiction, Mosser says district court granted CHPO summary judgment on its that district courts are empowered to hear only those cases claim for specific performance and restitution, and denied that the Constitution and Congress have given them Mosser summary judgment on his bad faith claim. Mosser jurisdiction over. Insurance Corp. of Ireland, Ltd. v. appeals the district court’s grant of the defendant’s motion Compagnie des Bauxites de Guinee, 456 U.S. 694, 701, 102 for summary judgment. He does not appeal the district S. Ct. 2099, 72 L. Ed. 2d 492 (1982); Sweeton v. Brown, 27 court’s denial of his motion for summary judgment on the F.3d 1162, 1167 (6th Cir. 1994) (“Federal courts are courts bad faith claim. of limited jurisdiction and are empowered to hear only such cases as are within the judicial power of the United States In his appeal, Mosser claims that Pennsylvania law as defined in Article III, § 2 of the Constitution.”). applies to this matter and prohibits CHPO from obtaining subrogation or reimbursement from Mosser. Mosser also While Mosser denies that the district court had claims that the Plan precludes CHPO from recovering the jurisdiction over this action, Mosser says that even if the funds it paid Mosser because the Plan’s “Subrogation district court had jurisdiction, it incorrectly found the Provision” is both ambiguous and not a reimbursement subrogation provision required reimbursement. In addition, provision. CHPO claims it is entitled to recover the funds Mosser says the district court wrongly found that the because Ohio law applies to this matter and the applicable subrogation provision gave explicit notice that CHPO Ohio law is preempted by ERISA. CHPO further argues claimed a priority right to proceeds recovered from third- that the plan’s subrogation provision is not ambiguous and party tortfeasors and that CHPO claimed this right even is, in fact, also a reimbursement provision. when the injured insured had not been made whole for his damages. History

CHPO, an Ohio company, insures the Licking Memorial On October 1, 1995, Joseph J. Mosser, an Ohio resident, Hospital through its Employee Health Benefit Plan (the was involved in an automobile accident in Murrysville, No. 01-4095 Community Health Plan 5 6 Community Health Plan No. 01-4095 of Ohio v. Mosser of Ohio v. Mosser

Westmoreland County, Pennsylvania. A negligent On August 30, 2001, the district court awarded CHPO Murrysville police officer caused the accident when he ran summary judgment on its claims against Mosser. Mosser a red light. As a result of the accident, Mosser sustained filed a timely notice of appeal. severe personal injury. Standard of Review At the time of the accident, CHPO insured Mosser as a Licking Memorial Employee Health Benefit Plan covered We review the district court’s summary judgment participant. As a covered participant, CHPO paid most of decision de novo. Flint v. Kentucky Dep’t of Corr., 270 Mosser’s hospital and medical expenses. CHPO says it F.3d 340 , 346 (6th Cir. 2001). Summary judgment is paid $261,267.27 in medical expenses on Mosser’s behalf. proper where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Mosser later settled his claims against the City of Fed. R. Civ. P. 56(c). In considering such a motion, the Murrysville (the “Murrysville Settlement”). After the court must view the evidence and draw all reasonable Murrysville Settlement, Mosser did not reimburse CHPO inferences in favor of the nonmoving party. Matsushita for the monies that CHPO had paid on his behalf. In Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, September 1999, CHPO filed a breach of contract claim 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). The central issue against Mosser requesting specific performance and is “whether the evidence presents a sufficient disagreement restitution for medical payments made by CHPO on to require submission to a jury or whether it is so one-sided Mosser’s behalf. that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 91 L. Ed. 2d CHPO based its specific performance and restitution 202, 106 S. Ct. 2505 (1986). claims on a provision within the CHPO Plan which states: Analysis SUBROGATION Defendant-Appellant Mosser raised the issue of subject CHPO has a right of recovery against any person, firm matter jurisdiction for the first time in his reply brief. We or organization for medical, hospital or other health generally will not hear issues raised for the first time in a services provided by the Plan to you or your reply brief. United States v. Crozier, 259 F.3d 503, 517 Dependents. This applies to any money recovered by (6th Cir. 2001). “Court decisions have made it clear that suit, settlement or otherwise. You must cooperate with the appellant cannot raise new issues in a reply brief, he can the plan in all actions necessary to do this. If legal only respond to arguments raised for the first time in collection costs are incurred on a contingency fee appellee’s brief.” Id. (quoting United States v. Jerkins, 871 basis, these costs will be deducted before the F.2d 598, 602 n.3 (6th Cir. 1989)). remaining sum is distributed to the Plan and the Enrollees. Despite the general rule that we will not hear issues raised for the first time in a reply brief, “[t]he existence of subject matter jurisdiction, moreover, is an issue that may be raised at any time, by any party or even sua sponte by No. 01-4095 Community Health Plan 7 8 Community Health Plan No. 01-4095 of Ohio v. Mosser of Ohio v. Mosser

the court itself.” Ford v. Hamilton Inv., Inc., 29 F.3d 255, To be authorized under § 1132(a)(3), CHPO’s claim must 257 (6th Cir. 1994). Any court may address the issue of be one “(A) to enjoin any act or practice which violates any subject matter jurisdiction at any time, with or without the provision of this subchapter or the terms of the plan, or (B) issue being raised by a party to the action. In re Millers to obtain other appropriate equitable relief (i) to redress Cove Energy Co., Inc., 128 F.3d 449, 450 (6th Cir. 1997). such violations or (ii) to enforce any provisions of this Therefore, we will hear Mosser’s subject matter jurisdiction subchapter or the terms of the plan.” Cmty. Ins. Co. v. issue despite the fact that he raised it for the first time in his Morgan, No. 99-6669, 2002 WL 31870325 at *11 (6th Cir. reply brief. Dec. 20, 2002). The Employee Retirement Income Security Act CHPO, like Great-West in Knudson, does not seek (“ERISA”) does not authorize actions brought by ERISA equitable relief, but rather “seek[s] legal relief – the plan fiduciaries against plan beneficiaries to enforce plan imposition of . . . liability on respondents for a contractual reimbursement provisions through money damages. Great- obligation to pay money.” Knudson, at 221; see also Cmty. West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, Ins. at *12. In Knudson, the Supreme Court noted that “the 122 S. Ct. 708, 151 L. Ed. 2d 635 (2002). In Knudson, an term ‘equitable relief’ in [29 U.S.C. § 1132(a)(3)] must ERISA plan fiduciary brought an action against a plan refer to ‘those categories of relief that were typically beneficiary to enforce a reimbursement provision in the available in equity. . . .’” Id. at 210 (quoting Mertens v. plan and to compel that beneficiary to make restitution to Hewitt Assoc., 508 U.S. 248, 256 (1993)). the plan from a recovery that she obtained from a third-party tortfeasor. Id. The Supreme Court held that Mosser, like the petitioners in Knudson, seeks restitution. when a fiduciary seeks to impose personal liability on a Id. at 212. In determining that the insurer’s restitution plan beneficiary for a contractual obligation to pay money, claim was not cognizable under § 1132(a)(3), the Supreme the action is an action at law, not an action in equity. Id. at Court in Knudson distinguished between restitution in 209-10. Since 29 U.S.C. § 1132(a)(3) only authorizes equity and restitution at law. Id. at 212-15. As the Court actions seeking equitable relief, ERISA does not provide noted, “whether [restitution] is legal or equitable depends jurisdiction for fiduciaries seeking to enforce a contract’s on ‘the basis for [the plaintiff’s] claim’ and the nature of reimbursement provisions through money damages. Id. at the underlying remedies sought.” Id. at 213 (second 209-10.1 alteration in original) (quoting Reich v. Cont’l Cas. Co., 33 F.3d 754, 756 (7th Cir. 1994)).

1 See also Cmty. Ins. Co. v. Morgan, No. 99-6669, 2002 WL 31870325 (6th C ir. Dec. 20, 200 2). Comm unity Insurance involved an W e hold that Community, like Great-West, does not seek Administrator of a motorist's health insurance plan filing suit under equitable relief, but rather “seek[s] legal relief – the imposition ERISA against the mo torist, the tortfeaso r, and the mo torist's autom obile of . . . liability on respondents for a contractual obligation to pay insurer. Id. at *2. The Ad ministrato r sought reimb ursem ent for b enefits mon ey.” Knudson, 122 S. Ct. at 719. For that reason, as was the paid by plan to motorist to cover his medical expenses resulting from case with Great-W est, § 1132 (a)(3) does not authorize this injuries he incurred in the moto r vehicle accident. Id. In deciding action. Comm unity Insurance, this Court held: Id. at *12. No. 01-4095 Community Health Plan 9 10 Community Health Plan No. 01-4095 of Ohio v. Mosser of Ohio v. Mosser

At oral argument, CHPO argued that subrogation is an remedies contemplated a situation in which “money or equitable remedy, and therefore, its personal liability suit property identified as belonging in good conscience to the against Mosser is justified. CHPO’s claim, however, plaintiff could clearly be traced to particular funds or cannot be considered a subrogation claim. Equitable property in the defendant’s possession.” Knudson, 534 subrogation, also known as legal subrogation, is an U.S. at 213. CHPO did not, in its complaint, allege that it equitable remedy that prevents the unjust enrichment of a had given certain funds to Mosser, trace those funds to the defendant-obligor. Restatement (First) of Restitution § 162 settlement funds from Murraysville, allege that Mosser was (1937); 1 Dan B. Dobbs, Law of Remedies § 4.3(4) (2d ed. unjustly enriched by retaining the settlement funds, and 1993) (hereinafter Dobbs). Unjust enrichment is prevented seek the return of the settlement funds in Mosser’s by granting the plaintiff a right to exercise those remedies possession.4 Rather, CHPO sought “restitution from the that the obligee had before the obligation was discharged. Defendant for all covered services.” (R.1, Complaint, ¶ 13, See Restatement (First) of Restitution § 162 cmt. a; 1 J.A. at 9). Thus, the basis of CHPO’s claim was not an Dobbs § 4.3(4). Applying that remedy here, CHPO would assertion of the right to possess certain settlement funds, be granted Mosser’s rights against the city of Murraysville, but essentially a claim in contract (actual or implied) to not a judgment of personal liability against Mosser.2 Thus, impose personal liability on Mosser. Such a claim is the nature of equitable subrogation as a remedy, and the restitution at law and is not within the scope of § parties involved, would not justify judgment against 1132(a)(3). Knudson, 534 U.S. at 212-13. Mosser under § 1132(a)(3).3 As CHPO’s claim is outside the scope of § 1132(a)(3), Nor would CHPO’s restitution claim be cognizable under subject matter jurisdiction is not proper under § 1132(e). § 1132(a)(3) as a claim for either a constructive trust or an See 29 U.S.C. § 1132. CHPO’s claim did not implicate any equitable lien. As the Knudson court noted, at equity these other ERISA subsection that would permit this action, and federal question jurisdiction does not exist under 28 U.S.C. § 1331 if ERISA does not authorize the suit.5 See Bauhaus 2 CH PO attemp ts to blur the line between equitable subrogation and USA, Inc. v. Copeland, 292 F.3d 439, 442 n.6 (5th Cir. reimbursement to fit its claim within the scope of § 1132(a)(3). As we 2002); see also Unicare Life & Health Ins. Co. v. Saiter, have noted in discussing conventional subrogation, the two doctrines are No. 00-3856, 2002 WL 1301574, at **1-2 (6th Cir. June distinct. See Hiney Printing Co. v. Brantner, 243 F.3d 95 6, 959 (6th Cir. 10, 2002). Finally, as the parties are not diverse, 2001).

3 Even if this were a true sub rogation claim, it is not clear whether such a claim would be eq uitable for the p urpo ses of § 113 2(a)(3). See 4 Restatement (Third) of Restitution Un just En richment § 2 6 cm t. a W e need not decide whether or in what circumstance such a (Tentative Draft No . 2, 2002) (“Neither the fact that the remedy of restitution claim could result in the imposition of a constructive trust or subrogation is equitable in o rigin, nor the fact that a claim under this an eq uitable lien as a remed y. Section will freque ntly be identified as a claim to ‘equitable subrogation’ 5 should be taken as establishing that a claim under this Section is Subsection 1132(a)(3) is one subsection of three that permits a civil necessarily ‘equitable’ rather than ‘legal.’ . . . So long as the claimant action under ERISA by a plan fiduciary such as CHPO. 29 U.S.C. seeks only money judgment against the defendant . . . a claim with § 26 § 1132. The other two subsections, § 1132(a)(2) and § 1132(a)(9), are not . . . draws on sources that are at least as much legal as equitable.”). implicated by CHPO’s claim. No. 01-4095 Community Health Plan 11 of Ohio v. Mosser

jurisdiction is not proper under 28 U.S.C. § 1332. See 28 U.S.C. § 1332. Conclusion For the foregoing reasons, we conclude that the district court lacked subject matter jurisdiction over this matter, and therefore we REMAND with instructions to DISMISS this matter for lack of jurisdiction.