ERISA-N.J. District Court Rules That In The Absence Of An Assignment Of Benefits, There Is No Complete Preemption By ERISA And No Removal To Federal Court

The question of whether a claim is subject to “complete preemption” by ERISA-making the case removable from state to federal court-has come up a lot recently. Here is the latest:

In Advanced Surgery Center v. Magnacare, No. 10-3778 (MLC) (D. N.J. 2011), the plaintiff, a medical provider (the “Plaintiff”), had brought an action in state court to recover $14,430 for services provided to a participant (the “Participant”) in an employee benefit plan (the “Plan”). The Plaintiff alleged that the Participant had issued an assignment of benefits to the Plaintiff, which assigned all rights and interests she has to receive medical care and payment from the Plan. The defendants sought to remove the case to federal district court. However, the Court raised the following question: is the Plaintiff’s claim completely preempted by ERISA so that removal is proper? The Court indicated that the party requesting removal-the defendants here- has the burden of proving complete preemption.

The Court said that an assignment of benefits will be treated as completely preempted by ERISA when the assignment is shown, by the party requesting removal, to concern the right of a medical provider to payment or a participant’s eligibility for coverage under a plan, and not the amount of a payment sought by a medical provider. This showing has been made by the defendants, since they offered evidence the Plan did not consider the Plaintiff to be eligible for coverage. However, for complete preemption to obtain, an actual document containing an assignment of benefits must be produced by the party requesting removal. The Court said that the defendants did not do this, so there is no complete preemption and no removal of the case to the federal district court.

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