ERISA-Ninth Circuit Reverses The District Court’s Decisions Dismissing State Law Claims Based On ERISA Preemption

In Hansen v. Group Health Cooperative, No. 16-35684 (9th Cir. 2018), a panel for the Ninth Circuit Court of Appeals (the “Panel”) reversed the district court’s exercise of subject matter jurisdiction in dismissing state law claims brought by mental health providers against an insurance company, and remanded for the entirety of the dispute to be returned to the state court from which it had been removed.

The mental health providers filed a class action complaint in state court, alleging violation of the Washington Consumer Protection Act in defendant’s use of certain screening criteria for mental healthcare coverage.  Defendant removed the case to federal court on the ground that the providers had been assigned benefits by patients who were insured under health plans governed by ERISA, which, defendant asserted, therefore completely preempted the providers’ claims.  The district court dismissed in part, concluding that the providers’ claims were subject to conflict and express preemption to the extent that they concerned defendant’s business practices in administering ERISA plans.  The district court declined to exercise supplemental jurisdiction over the providers’ claims as to defendant’s administration of non-ERISA plans, and it remanded that part of the case to Washington state court.

The Panel held that the providers’ claims did not fall within the scope of, and so were not completely preempted by, ERISA section 502(a)(1)(B).  There was no dispute that the providers’ claim for wrongfully licensing allegedly biased mental health coverage guidelines was based on an independent duty to refrain from engaging in unfair and deceptive business practices.  The Panel held that there also was not complete preemption of a claim that defendant used its treatment guidelines to avoid complying with Washington’s Mental Health Parity Act, or of a claim that defendant unfairly competed in the marketplace by discouraging its patients from seeking treatment by rival practitioners.  The Panel concluded that all three of the providers’ claims for unfair and deceptive business practices were based on independent duties beyond those imposed by their patients’ ERISA plans.

The Panel reversed the district court’s exercise of subject matter jurisdiction in dismissing the providers’ claims, and it remanded with instructions for the district court to return the entirety of the action to the Washington state court.


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