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Atrio Health Plans, Inc. v. Performance Health Technology, Ltd.

United States District Court, D. Oregon

August 13, 2019

ATRIO HEALTH PLANS, INC., an Oregon corporation; MID VALLEY IPA, INC., an Oregon nonprofit corporation dba Health Autho rity; CASC ADE COMPREHENSIVE CARE, INC., an Oregon Corporation; and UMPQUA HEALTH, LLC, an Oregon limited liability company, Plaintiffs,
PERFORMANCE HEALTH TECHNOLOGY, LTD., an Oregon Corporation dba PERFORMANCE HEALTH TECHNOLOGY, INC.; and OPTIMA, LLC, an Oregon limited liability company dba INTELIGENZ Defendants.


          Michael McShane United State District Judge

         This action arises from a contract dispute between Plaintiff ATRIO Health Plans, Inc. (ATRIO) and Defendants Performance Health Technology, Ltd. (PH TECH) and Optima, LLC (Optima). Plaintiff brings breach of contract and negligence claims against Defendants based on alleged actions (or inactions) by Defendants causing Plaintiff to submit incorrect information to the Centers for Medicare and Medicaid Services (CMS). PH TECH removed this action from state court citing federal question jurisdiction. ATRIO moves to remand back to Marion County Circuit Court based on lack of federal jurisdiction. ATRIO's motion to remand, ECF No. 13, is GRANTED.


         ATRIO operates a Medicare Advantage plan in Oregon, providing insurance plans to Medicare beneficiaries within the state. ATRIO works with Service Area Contractors (hereinafter “SACs”), independent physician associations and hospital organizations, to provide medical care for ATRIO's members. ATRIO's SACs include Plaintiffs Mid Valley IPA, Inc., Cascade Comprehensive Care, Inc., and Umpqua Health, LLC. In exchange for providing its members with Medicare benefits, ATRIO receives monthly payments from CMS based on a calculation of certain factors. Compl. ¶ 15. CMS provides a higher payment amount to ATRIO for its enrolled members that meet certain high-risk conditions or are diagnosed with specific serious diseases. Compl. ¶ 16. In order to receive these higher payouts from CMS, ATRIO must submit member medical information to the CMS Risk Adjustment Processing System (“RAPS”). Compl. ¶ 17. If the information submitted to RAPS meets certain criteria, then ATRIO is allotted the more substantial payments to supplement the increased cost of providing care to its higher-risk members.

         Since 2011, ATRIO has contracted with PH TECH to perform administrative duties and to process claims from ATRIO's members. Compl. ¶ 26. Within these contractual duties, PH TECH was responsible for “filtering” claims that did not qualify for risk adjustment based on the RAPS criteria. To synthesize the complaint, ATRIO claims that PH TECH failed to properly perform this filtering responsibility, resulting in misinformation being submitted to CMS. Submission of this misinformation regarding the risk status of some of ATRIO's members resulted in overpayment to ATRIO by CMS of allegedly $30, 791, 181. Compl. ¶ 106. ATRIO alleges similar claims of failure to perform contractual duties against Optima. ATRIO seeks reimbursement from the Defendants for the overpayment amount that is due for repayment to CMS and monetary damages for ATRIO's lost revenue and other harms from Defendants' alleged actions.


         A defendant may remove a civil action from state court to federal district court if the federal court would have had original jurisdiction over the matter. 28 U.S.C. § 1441(a). In other words, when the court lacks diversity jurisdiction, removal is proper only when the court has federal-question jurisdiction over the subject matter of the complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). “The presence or absence of federal-question jurisdiction is governed by the well-pleaded complaint rule, which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.” Id. (internal quotations and citation omitted). In the context of the well-pleaded complaint rule, federal-question jurisdiction means that the complaint itself “establishes that the case ‘arises under' federal law.” Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 10 (1983). In order to arise under federal law, “[a] right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action.” Id. at 10-11 (quoting Gully v. First Nat'l Bank, 299 U.S. 109, 112 (1936)).

         There is a narrow exception to the well-pleaded complaint rule where federal jurisdiction may be asserted over strictly state law claims which pose a disputed federal issue. Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 313-14 (2005). The applicability of this exception is governed by a four-factor test set forth by the Supreme Court in Gunn v. Minton, 568 U.S. 251, 258 (2013). Federal jurisdiction can be exerted over strictly state law claims only if “a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Id.

         If, following removal, the court determines it lacks original jurisdiction, it must remand the matter to state court. 28 U.S.C. § 1447(c); Franchise Tax Bd., 463 U.S. at 8. “Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). “The ‘strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper.” Id. (quoting Nishimoto v. Federman-Bachrach & Assoc., 903 F.2d 709, 712 n.3 (9th Cir. 1990)).


         Plaintiffs bring claims of breach of contract and negligence against Defendants in connection with alleged failures to perform contractual obligations. Although Plaintiffs bring no claims under federal law, Defendants removed this action citing federal question jurisdiction. Federal jurisdiction exists here only if the Plaintiffs' claims fall within the narrow exception to the well-pleaded complaint rule established in Grable. To be within this slim category, the Defendants must show that the claims meet the four factors set forth in Gunn. Failure to meet any of the factors will result in remand.

         I. This Court Lacks Federal Jurisdiction Over Plaintiffs' Claims

         A federal issue is “necessarily raised” if it must be resolved in the determination of the case. Gunn, 568 U.S. at 259.The claims here necessarily raise federal issues. As noted above, ATRIO alleges its contract with PH TECH required PH TECH to comply with certain CMS regulations and federal laws. For example, ATRIO alleges:

125. The Administrative Services Agreements required PH TECH to comply with all applicable Medicare laws, regulations, ...

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