[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
Dec. 30, 2009
No. 08-15268 THOMAS K. KAHN
________________________ CLERK
D. C. Docket Nos. 02-22026-CV-FAM
00-01334 MD-FAM
CONNECTICUT STATE DENTAL
ASSOCIATION,
Plaintiff-Appellant,
versus
ANTHEM HEALTH PLANS, INC.,
d.b.a. Anthem Blue Cross &
Blue Shield of CT,
Defendant-Appellee.
____________________
No. 08-15277
_____________________
D. C. Docket Nos. 02-22065-CV-FAM
00-01334 MD-FAM
DDS MARTIN J. RUTT,
DDS MICHAEL EGAN,
Plaintiffs-Appellants,
versus
ANTHEM HEALTH PLANS, INC.,
d.b.a. Anthem Blue Cross &
Blue Shield of CT,
Defendants-Appellee.
________________________
Appeals from the United States District Court
for the Southern District of Florida
_________________________
(December 30, 2009)
(As Amended 1/11/2010)
Before BARKETT and HULL, Circuit Judges, and QUIST,* District Judge.
QUIST, District Judge:
These consolidated appeals require us to decide whether § 502(a)(1)(B) of the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §
1132(a)(1)(B), completely preempts one or more of Plaintiffs’ state law claims, thus
providing a basis for federal question jurisdiction. Plaintiffs, Martin J. Rutt (“Rutt”)
D.D.S., Michael Egan (“Egan”), D.D.S., and Connect State Dental Association
(“CSDA”), filed separate complaints in Connecticut state court, and Defendant,
Anthem Health Plans, Inc. (“Anthem”), removed the cases on the basis of ERISA
*
Honorable Gordon J. Quist, United States District Judge for the Western District of
Michigan, sitting by designation.
2
preemption. The district court denied Plaintiffs’ motions to remand. For the
following reasons, we conclude that ERISA completely preempts at least some
portions of Rutt and Egan’s state law claims but does not preempt CSDA’s state law
claim. We also conclude that the district court abused its discretion in denying Rutt
and Egan’s motion to vacate or amend the judgment. Therefore, we affirm in part
and reverse in part the order denying Plaintiffs’ motions to remand, reverse the order
denying Rutt and Egan’s motion to vacate or amend, and remand.
I. BACKGROUND
Rutt and Egan are dentists who practice in Connecticut. CSDA is a
membership organization comprised of Connecticut dentists, including Rutt and
Egan. Anthem offers and administers managed health and dental plans to employers
and employer groups which provide coverage to employees and their eligible
dependents. Many of these plans are “employee welfare benefit plans” governed by
ERISA. See 29 U.S.C. § 1002(1).
Rutt and Egan participate in Anthem’s network of dentists who provide
services to individuals enrolled in Anthem’s plans. They became participating
dentists by entering into contracts with Anthem (“Provider Agreement”), pursuant to
which they agreed to provide professional services in exchange for compensation in
“the amount specified in the Comprehensive Schedule of Professional Services, or the
3
Usual, Customary and Reasonable allowable determination.”1
On April 15, 2002, Rutt and Egan filed a five-count class action complaint
against Anthem in Connecticut state court, alleging claims for breach of contract,
breach of the duty of good faith and fair dealing, violation of the Connecticut Unfair
Trade Practices Act (“CUTPA”), negligent misrepresentation, and unjust enrichment.
The crux of the allegations was that Anthem employed a number of practices, such
as “improper downcoding” and “improper bundling,” as a means of underpaying
participating dentists for services they performed. CSDA also sued Anthem in state
court, alleging in a single count that Anthem violated the CUTPA. The factual
allegations mirrored those in Rutt and Egan’s complaint.
Anthem removed the cases to the United States District Court for the District
of Connecticut on the basis that Plaintiffs’ state law claims are completely preempted
by ERISA. Plaintiffs filed motions to remand, but before the motions were decided,
the cases were transferred by the Joint Judicial Panel on Multi-District Litigation as
“tag along” cases in the multi-district litigation titled In re: Managed Care, pending
in the Southern District of Florida. The Florida federal district court eventually
denied Plaintiffs’ motions to remand in brief orders, citing only its previous decision
1
The Provider Agreements at issue were entered into by Anthem’s predecessor in interest,
Blue Cross & Blue Shield of Connecticut, Inc.
4
on a motion to remand in another case as the basis for denying Plaintiffs’ motions.2
The district court stayed Plaintiffs’ tag-along cases from August 2003 to April
2008, while it addressed the cases and matters on the main track. Prior to the stay,
Anthem filed motions to dismiss, and Plaintiffs filed responses. The district court
never ruled on these motions. Instead, twice it denied the motions without prejudice
but directed Anthem to refile them. Anthem refiled its motions as instructed in
November 2007 and again in April 2008. Plaintiffs responded to the November 2007
motions but, due to an error of counsel, failed to respond to the April 2008 motions.
The district court thus granted Anthem’s motions based on Plaintiffs’ failure to
respond. Plaintiffs then moved to vacate or amend the orders granting Anthem’s
motions, but the district court denied the motions, concluding that Plaintiffs had not
shown excusable neglect. Plaintiffs timely appealed.
II. STANDARDS OF REVIEW
We review de novo denials of motions to remand as well as preemption
determinations. Henderson v. Wash. Nat’l Ins. Co., 454 F.3d 1278, 1281 (11th Cir.
2006); Anderson v. H & R Block, Inc., 287 F.3d 1038, 1041 (11th Cir. 2002). “We
have jurisdiction to consider denial of a motion to remand upon the entry of a final
2
The district court simply referred to a previous decision “regarding Dr. Sutter’s motion
to remand” but failed to explain why that decision controlled the outcome of Plaintiffs’ motions.
5
order,” which occurred in this case on June 6, 2008, when the district court granted
Anthem’s motions to dismiss. Bailey v. Janssen Pharmaceutica, Inc., 536 F.3d 1202,
1205 (11th Cir. 2008).
We review the district court’s denial of the motions to vacate or amend
judgment for an abuse of discretion. Lockard v. Equifax, Inc., 163 F.3d 1259, 1267
(11th Cir. 1998).
III. MOTION TO REMAND
On a motion to remand, the removing party bears the burden of showing the
existence of federal subject matter jurisdiction. Pacheco de Perez v. AT&T Co., 139
F.3d 1368, 1373 (11th Cir. 1998). The test ordinarily applied for determining
whether a claim arises under federal law is whether a federal question appears on the
face of the plaintiff’s well-pleaded complaint. Louisville & Nashville R.R. v.
Mottley, 211 U.S. 149, 152, 29 S. Ct. 42, 43 (1908). “As a general rule, a case arises
under federal law only if it is federal law that creates the cause of action.” Diaz v.
Sheppard, 85 F.3d 1502, 1505 (11th Cir. 1996) (citing Franchise Tax Bd. v. Constr.
Laborers Vacation Trust, 463 U.S. 1, 8-10, 103 S. Ct. 2841, 2846 (1983)). Because
Plaintiffs’ complaints allege only state law claims, there is no jurisdiction under the
well-pleaded complaint rule.
Complete preemption is a narrow exception to the well-pleaded complaint rule
6
and exists where the preemptive force of a federal statute is so extraordinary that it
converts an ordinary state law claim into a statutory federal claim. Caterpillar, Inc.
v. Williams, 482 U.S. 386, 393, 107 S. Ct. 2425, 2430 (1987). See also Butero v.
Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1212 (11th Cir. 1999) (“When
Congress comprehensively occupies a field of law, ‘any civil complaint raising this
select group of claims is necessarily federal in character’ and thus furnishes subject-
matter jurisdiction under 28 U.S.C. § 1331.”) (quoting Metro. Life Ins. Co. v. Taylor,
481 U.S. 58, 63-64, 107 S. Ct. 1542, 1546 (1987)). Because federal jurisdiction turns
on ERISA preemption, we briefly review the two types of ERISA preemption.
A. ERISA Preemption
ERISA is one of only a few federal statutes under which two types of
preemption may arise: conflict preemption and complete preemption.3
Conflict preemption, also known as defensive preemption, is a substantive
defense to preempted state law claims. Jones v. LMR Int’l, Inc., 457 F.3d 1174, 1179
(11th Cir. 2006). This type of preemption arises from ERISA’s express preemption
provision, § 514(a), which preempts any state law claim that “relates to” an ERISA
3
Besides ERISA, complete preemption has been recognized in only a few contexts,
including the area of labor contracts under the Labor Management Relations Act of 1947, 29
U.S.C. § 185, et seq., and usury claims against federally-chartered banks under the National Bank
Act, 12 U.S.C. § 85, et seq. See Fayard v. Northeast Vehicle Servs., LLC, 533 F.3d 42, 45 (1st
Cir. 2008).
7
plan.4 29 U.S.C. § 1144(a). Because conflict preemption is merely a defense, it is not
a basis for removal. Gully v. First Nat’l Bank, 299 U.S. 109, 115-16, 57 S. Ct. 96, 99
(1936); see also Ervast v. Flexible Prods. Co., 346 F.3d 1007, 1012 n.6 (11th Cir.
2003) (stating that “defensive preemption . . . provides only an affirmative defense
to state law claims and is not a basis for removal”).
Complete preemption, also known as super preemption, is a judicially-
recognized exception to the well-pleaded complaint rule. It differs from defensive
preemption because it is jurisdictional in nature rather than an affirmative defense.
Jones, 457 F.3d at 1179 (citing Ervast, 346 F.3d at 1014). Complete preemption
under ERISA derives from ERISA’s civil enforcement provision, § 502(a), which has
such “extraordinary” preemptive power that it “converts an ordinary state common
law complaint into one stating a federal claim for purposes of the well-pleaded
complaint rule.” Taylor, 481 U.S. at 65-66, 107 S. Ct. at 1547. Consequently, any
“cause[] of action within the scope of the civil enforcement provisions of § 502(a) [is]
removable to federal court.” Id. at 66, 107 S. Ct. at 1548.
4
ERISA § 514(a) provides:
Except as provided in subsection (b) of this section, the provisions of this title and
title IV shall supersede any and all State laws insofar as they may now or hereafter
relate to any employee benefit plan described in section 4(a) and not exempt under
section 4(b).
29 U.S.C. § 1144(a).
8
Although related, complete and defensive preemption are not coextensive:
Complete preemption is [] narrower than “defensive” ERISA
preemption, which broadly “supersede[s] any and all State laws insofar
as they . . . relate to any [ERISA] plan.” ERISA § 514(a), 29 U.S.C. §
1144(a) (emphasis added). Therefore, a state-law claim may be
defensively preempted under § 514(a) but not completely preempted
under § 502(a). In such a case, the defendant may assert preemption as
a defense, but preemption will not provide a basis for removal to federal
court.
Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1281 (11th Cir. 2005); accord
Ervast, 346 F.3d at 1012 n.6 (“Super preemption is distinguished from defensive
preemption, which provides only an affirmative defense to state law claims and is not
a basis for removal.”).
Because the propriety of removal is at issue, our analysis concerns complete
preemption.
For a number of years, this Court has applied the four-part test for ERISA
complete preemption set forth in Butero v. Royal Maccabees Life Insurance Co., 174
F.3d 1207 (11th Cir. 1999): (1) “there must be a relevant ERISA plan,” (2) “the
plaintiff must have standing to sue under that plan,” (3) “the defendant must be an
ERISA entity,” and (4) “the complaint must seek compensatory relief akin to that
available under § [502(a)]; often this will be a claim for benefits due under a plan.”
Id. at 1212. A few years after Butero was decided, the Supreme Court set forth the
9
following inquiry for complete preemption:
[I]f an individual brings suit complaining of a denial of coverage for
medical care, where the individual is entitled to such coverage only
because of the terms of an ERISA-regulated employee benefit plan, and
where no legal duty (state or federal) independent of ERISA or the plan
terms is violated, then the suit falls within the scope of ERISA §
502(a)(1)(B). In other words, if an individual, at some point in time,
could have brought his claim under ERISA § 502(a)(1)(B), and where
there is no other independent legal duty that is implicated by a
defendant’s actions, then the individual’s cause of action is completely
pre-empted by ERISA § 502(a)(1)(B).
Aetna Health Inc. v. Davila, 542 U.S. 200, 210, 124 S. Ct. 2488, 2496 (2004). The
Davila test thus requires two inquiries: (1) whether the plaintiff could have brought
its claim under § 502(a); and (2) whether no other legal duty supports the plaintiff’s
claim.
While similar to the Butero test, Davila refines Butero by inquiring about the
existence of a separate legal duty, which is not a consideration under Butero.
Moreover, a number of other circuits have recognized Davila’s two-part test as the
proper test for complete preemption under ERISA. See Marin Gen. Hosp. v. Modesto
& Empire Traction Co., 581 F.3d 941, 946-47 (9th Cir. 2009); Lone Star OB/GYN
Assocs. v. Aetna Health Inc., 579 F.3d 525, 529-30 (5th Cir. 2009); Franciscan
Skemp Healthcare, Inc. v. Cent. States Joint Bd. Health & Welfare Trust Fund, 538
F.3d 594, 597 (7th Cir. 2008); Negron-Fuentes v. UPS Supply Chain Solutions, 532
10
F.3d 1, 7 (1st Cir. 2008); Thurman v. Pfizer, Inc., 484 F.3d 855, 860 (6th Cir. 2007);
Pascack Valley Hosp., Inc. v. Local 464A UFCW Welfare Reimbursement Plan, 388
F.3d 393, 400 (3d Cir. 2004). In accordance with the Supreme Court’s directive, we
too apply Davila.5
In Davila, the plaintiffs, a participant and a beneficiary, sued their respective
ERISA plan administrators in state court alleging that they violated the Texas Health
Care Liability Act (“THCLA”) by failing to exercise “ordinary care” in denying their
claims for health care benefits under the plans. The defendants removed the cases to
federal district court, arguing that the plaintiffs’ claims fell within the scope of
ERISA § 502(a) and were thus completely preempted. Davila, 542 U.S. at 205, 124
5
We recognize that in Cotton v. Massachusetts Mutual Life Insurance Co., 402 F.3d 1267
(11th Cir. 2005), decided after Davila, this Court, sua sponte, conducted a complete preemption
analysis of the plaintiffs’ original complaint under the Butero test rather than the Davila test. Id.
at 1280-1291. The Court’s complete preemption analysis in Cotton, however, was dicta and,
therefore, our analysis today is not in conflict with Cotton. The plaintiffs in Cotton originally
filed only state law claims, but amended their complaint to add a claim for breach of fiduciary
duty under ERISA after Massachusetts Mutual (“Mass Mutual”) removed the case to federal
court. The district court entered a default judgment in favor of the plaintiffs due to Mass
Mutual’s violation of a discovery order. Id. at 1270. This Court concluded that no relief was
available to the plaintiffs under ERISA because Mass Mutual was not acting as an ERISA
fiduciary for any purpose relevant to the alleged misconduct, and reversed and remanded with
instructions that the plaintiffs’ ERISA claims be dismissed with prejudice. Id. at 1280, 1294.
The Court then undertook a complete preemption analysis of the plaintiffs’ claims in the original
complaint only “because it helps to clarify that Mass Mutual was not wearing its fiduciary hat
when it allegedly misled the plaintiffs regarding future benefits under their policies.” Id. at 1280.
Because the plaintiffs had amended their complaint after removal to add an ERISA claim, this
Court had jurisdiction over the claim regardless of whether the original claims were completely
preempted and removal was improper. Id. at 1280.
11
S. Ct. at 2493. The Court first considered whether the plaintiffs’ claims were among
the types of actions that fall within the scope of ERISA § 502(a)(1)(B) by
“examin[ing] [the plaintiffs’] complaints, the statute on which their claims are based
(the THCLA), and the various plan documents.” Id. at 211, 124 S. Ct. at 2496. In
both instances, the plaintiff’s claim was based solely on the plan’s denial of benefits
under the plan, and the defendant’s only relationship with the plaintiff was the
administrator of the plaintiff’s employer’s ERISA plan. The Court concluded that the
plaintiffs could have brought their claims under ERISA § 502(a)(1)(B) because they
“complain[ed] only about denials of coverage promised under the terms of ERISA-
regulated employee benefit plans” and could have resorted to their remedies under
ERISA by filing a claim for benefits and/or seeking a preliminary injunction. Id. at
211-12, 124 S. Ct. at 2497.
The Court then turned to the second part of the test – the existence of an
independent duty – and concluded that the duty upon which the plaintiffs’ claims
were based did not arise independently of the plans. The plaintiffs argued that the
duty of ordinary care imposed under the THCLA was a duty independent of any duty
imposed by ERISA or the plan terms and, thus, was not a duty implicated by ERISA’s
civil enforcement provision. Not so, the Court reasoned. It noted that while the
THCLA does impose a duty on managed care entities to use “ordinary care” in
12
making health care decisions, if a plan correctly concluded that a particular treatment
was not covered, “the failure of the plan itself to cover the requested treatment would
be the proximate cause” of any injuries arising from the denial. Id. at 212-13, 124 S.
Ct. at 2497 (footnote omitted). Moreover, the Court observed, because the THCLA
does not obligate a managed health care entity to provide any particular coverage,
“interpretation of the terms of [the plaintiffs’] benefit plans forms an essential part of
their THCLA claim . . . and liability would exist [] only because of [the defendants’]
administration of ERISA-regulated benefit plans.” Id. at 213, 124 S. Ct. at 2498. In
other words, the Court explained, the defendants’ “potential liability under the
THCLA in these cases . . . derives entirely from the particular rights and obligations
established by the benefit plans.” Id.
B. Rutt and Egan’s Complaint
Before turning to the preemption analysis of Rutt and Egan’s complaint, we
make some general observations regarding complete preemption of healthcare
provider claims under ERISA.
First, healthcare provider claims are usually not subject to complete preemption
because “[h]ealthcare providers . . . generally are not considered ‘beneficiaries’ or
‘participants’ under ERISA.”6 Hobbs v. Blue Cross Blue Shield of Ala., 276 F. 3d
6
A “participant” includes
13
1236, 1241 (11th Cir. 2001) (citing Cagle v. Bruner, 112 F.3d 1510, 1514 (11th Cir.
1997)); see also Pascack Valley Hosp., 388 F.3d at 400 (“We conclude that the
Hospital could not have brought its claims under § 502(a) because the Hospital does
not have standing to sue under that statute.”); In re Managed Care Litig., 298 F. Supp.
2d 1290 (S.D. Fla. 2003) (noting that only two categories of individuals – participants
and beneficiaries – are authorized to sue for benefits under § 502(a)(1)(B)).
Moreover, such claims often are not the type of claims that could be brought under
§ 502(a) because they do not “duplicate[], supplement[], or supplant[] the ERISA
civil enforcement remedy.” Davila, 542 U.S. at 209, 124 S. Ct. at 2495. For
example, a healthcare provider’s claims of negligent misrepresentation and estoppel
based on a plan’s oral misrepresentations are not ERISA claims because they do not
arise from the plan or its terms.7 Franciscan Skemp, 538 F.3d at 597.
any employee or former employee of an employer, or any member or former
member of an employee organization, who is or may become eligible to receive a
benefit of any type from an employee benefit plan which covers employees of
such employer or members of such organization, or whose beneficiaries may be
eligible to receive any such benefit.
29 U.S.C. § 1002(7). A “beneficiary is “a person designated by a participant, or by the terms of
an employee benefit plan, who is or may become entitled to a benefit thereunder.” 29 U.S.C. §
1002(8).
7
In the context of defensive preemption, this Court has similarly concluded that
healthcare provider claims for negligent misrepresentation are not preempted. Lordmann Enters.,
Inc. v. Equicor, Inc., 32 F.3d 1529, 1533 (11th Cir. 1994); see also Transitional Hosps. Corp. v.
Blue Cross & Blue Shield of Texas, Inc., 164 F.3d 952, 954 (5th Cir. 1999) (noting in the context
of defensive preemption that “ERISA does not preempt state law when the state-law claim is
14
Second, it is well-established in this and most other circuits that a healthcare
provider may acquire derivative standing to sue under ERISA by obtaining a written
assignment from a “participant” or “beneficiary” of his right to payment of medical
benefits. Hobbs, 276 F.3d at 1241 (citing Cagle, 112 F.3d at 1512-16). Claims for
benefits by healthcare providers pursuant to an assignment are thus within the scope
of § 502(a).
Finally, a provider that has received an assignment of benefits and has a state
law claim independent of the claim arising under the assignment holds two separate
claims. In such a case, the provider may assert a claim for benefits under ERISA, the
state law claim, or both. See Franciscan Skemp, 538 F.3d at 598 (“Franciscan Skemp
could bring ERISA claims in Romine’s shoes as a beneficiary for the denial of
benefits under the plan; but it has not. . . . Franciscan Skemp is basing its claims on
a conversation to which Romine was not even a party.”) (emphasis in original); Marin
Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 947 (9th Cir. 2009)
(noting that the plaintiff-hospital’s instant claim was based on a telephone
conversation in which the plan had agreed to pay 90% of the patient’s charges and
that the hospital had already been paid part of the charges pursuant to an assignment
brought by an independent, third-party health care provider (such as a hospital) against an insurer
for its negligent misrepresentation regarding the existence of health care coverage”).
15
from the patient). Thus, so long as the provider’s state law claim does not fall within
§ 502(a), the existence of the assignment is irrelevant to complete preemption if the
provider asserts no claim under the assignment. Sheridan Healthcorp., Inc. v.
Neighborhood Health P’ship, Inc., 459 F. Supp. 2d 1269, 1274 (S.D. Fla. 2006).
The Third, Fifth, and Ninth Circuits have applied these principals to determine
the line of demarcation between ERISA and state law claims in actions brought by
healthcare providers.
In Blue Cross of California v. Anesthesia Care Associates Medical Group, Inc.,
187 F.3d 1045 (9th Cir. 1999), the Ninth Circuit held that healthcare providers’
claims for breach of their provider agreements with Blue Cross were not completely
preempted, even though they had received assignments from patients who were
beneficiaries of ERISA plans. The providers’ agreements with Blue Cross required
Blue Cross to identify providers in the information it distributed to members of the
plan and to direct members to those providers. Id. at 1048. In return, the providers
agreed to accept payment from Blue Cross for the services they rendered pursuant to
specified fee schedules. Id. After Blue Cross changed the fee schedules, the
providers filed a class action in state court alleging that Blue Cross breached the
provider agreements by improperly amending the fee schedules and by violating its
implied duty of good faith and fair dealing under California law. Blue Cross
16
thereafter removed the case to federal court. The federal district court remanded the
case to state court.
On appeal, the Ninth Circuit held that the providers’ breach of contract claims
were not within the scope of § 502(a)(1)(B) because the providers’ breach of contract
claims arose solely out of their provider agreements. In other words, the claims were
not claims for benefits that could be asserted by the patients-assignors. Id. at 1050.
The Ninth Circuit differentiated the breach of provider contract claims from
assignment-based ERISA claims as follows:
[T]he Providers are asserting contractual breaches, and related
violations of the implied duty of good faith and fair dealing, that their
patient-assignors could not assert: the patients simply are not parties to
the provider agreements between the Providers and Blue Cross. The
dispute here is not over the right to payment, which might be said to
depend on the patients’ assignments to the Providers, but the amount, or
level, of payment, which depends on the terms of the provider
agreements.
Id. at 1051 (emphasis in original). Because the providers’ state law claims arose out
of separate agreements with Blue Cross that governed their provision of goods and
services to plan members, the assignments were irrelevant to preemption. Id. at 1052.
The Third Circuit, in Pascack Valley Hospital, Inc. v. Local 464A UFCW
Welfare Reimbursement Plan, 388 F.3d 393 (3d Cir. 2004), a post-Davila case, found
no preemption under facts similar to those in Anesthesia Care. In Pascack Valley, the
plaintiff hospital entered into a “Network Hospital Agreement” with MagNet, an
17
independent consultant that had organized a provider network to provide services at
discounted rates to beneficiaries of group health plans in exchange for the plans’
promises to encourage beneficiaries to use network providers. Id. at 396. There were
two contracts, the agreement between the hospital and MagNet and the agreement
between MagNet and the plan, or subscriber (“Subscriber Agreement”). The
Subscriber Agreement required the plan to pay the hospital within a certain time,
otherwise the plan would forfeit the discounted rate. The hospital submitted claims
for services provided to two ERISA beneficiaries. The defendant plan paid the
claims, but the hospital asserted that the payment was untimely and the plan had
forfeited the discounted rate. Id. The hospital sued the plan in state court alleging
that it was a third party beneficiary of the Subscriber Agreement, and the plan
removed to federal court.
Applying Davila, the Third Circuit concluded the hospital’s claims were not
completely preempted because the hospital lacked standing to sue under § 502(a). Id.
at 400. More specifically, the court found that the plan, as the removing party, failed
to meet its burden of showing that the hospital had obtained an assignment – a
requisite of derivative standing.8 Id. at 401. Although this conclusion was
8
The Third Circuit did not reach the question of whether derivative standing can be
obtained by assignment under ERISA. Pascack Valley Hosp., Inc., 388 F.3d at 401 n.7.
Previously, the Third Circuit in dicta expressed doubt as to the validity of assignments under
ERISA. Northeast Dep’t ILGWU Health & Welfare Fund v. Teamsters Local Union No. 229
Welfare Fund, 764 F.2d 147, 153-54 & n.6 (3d Cir. 1985).
18
dispositive, the court went on to observe that even if the hospital had an assignment,
its claims would not be preempted under Davila because they were based on a
separate duty independent of ERISA. While it acknowledged that the hospital’s
claims existed only because of an ERISA plan, the court observed that claims at issue
did not implicate the plan:
Coverage and eligibility . . are not in dispute. Instead the
resolution of this lawsuit requires interpretation of the Subscriber
Agreement, not the Plan. The Hospital’s right to recover, if it exists,
depends entirely on the operation of third-party contracts executed by
the Plan that are independent of the Plan itself.
Id. at 403 (citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 107 S. Ct. 2425 (1987)).
The court also identified a number of compelling similarities between that case and
Anesthesia Care: (1) the hospital’s claims arose from an agreement independent of
the plan; (2) participants and beneficiaries of the plan were apparently not parties to
the Subscriber Agreement; and (3) the dispute was unrelated to assignments or the
plan terms because it involved the amount of payment under the Subscriber
Agreement, not the right to payment, which might require interpretation of the plan.
Id. at 403-404 (quoting Anesthesia Care, 187 F.3d at 1051).
In a recent decision, Lone Star OB/GYN Associates v. Aetna Health Inc., 579
F.3d 525 (5th Cir. 2009), the Fifth Circuit adopted the Ninth Circuit’s “rate of
payment” versus “right of payment” test for distinguishing a provider’s state law
19
contract-based claims from a claim for benefits under ERISA. The plaintiff, Lone
Star, entered into a provider agreement with Aetna, an insurer that administered
ERISA plans. Lone Star sued Aetna in state court under the Texas Prompt Pay Act
(“TPPA”), alleging that Aetna had not paid Lone Star’s claims for services at the rates
set forth in the provider agreement. Lone Star attached a list of the disputed claims
to its complaint. Aetna removed the case, citing certain payment claims it argued
were preempted because coverage had been denied. The district court granted Lone
Star leave to amend its pleadings to remove the claims that were denied for lack of
coverage and then granted Lone Star’s motion to remand on the basis that all of the
remaining claims had been partially paid. Id. at 528.
Because Lone Star’s standing was not at issue, the Fifth Circuit’s preemption
analysis under Davila turned on whether Lone Star’s allegation that Aetna failed to
pay claims at the rate established in the provider agreement was based on a duty
independent of the ERISA plan at issue. While acknowledging that the provider
agreement and the plan cross-referenced each other and it might be necessary to refer
to the plan in order to determine the correct payment rate, the court held that Lone
Star’s claims arose independently of the plan:
Though the plan and the Provider Agreement cross-reference each other,
the terms of the plan - in particular, those related to coverage - are not
at issue in a dispute over whether Aetna paid the correct rate for covered
services as set out in the Provider Agreement. While Aetna is correct
20
that any determination of benefits under the terms of a plan - i.e., what
is “medically necessary” or a “Covered Service” - does fall within
ERISA, Lone Star’s claims are entirely separate from coverage and arise
out of the independent legal duty contained in the contract and the
TPPA.
Id. at 530-31. Notwithstanding this conclusion, the court recognized that Lone Star’s
claims may still be at least partially preempted because Aetna asserted that some of
the partially paid claims actually reflected partial denials of services that were not
covered. Lone Star disputed this characterization, but the record was insufficient to
allow the court to resolve the factual issue. In order to guide the district court on
remand, the Fifth Circuit held that while claims involving only underpayment are not
preempted, claims that were partially denied because coverage was not afforded for
all the submitted procedures may be preempted. Id. at 533.
We agree with these courts that the “rate of payment” and “right of payment”
distinction is a useful means for assessing preemption of healthcare provider claims
based upon a breach of an agreement separate from an ERISA plan and thus apply it
in considering Rutt and Egan’s claims.
1. First Davila Inquiry
The first inquiry is whether Rutt and Egan, “at some point in time, could have
brought [their] claim under ERISA § 502(b)(1)(B).” Davila, 542 U.S. at 210, 124 S.
Ct. at 2496. This part of the test is satisfied if two requirements are met: (1) the
21
plaintiff’s claim must fall within the scope of ERISA; and (2) the plaintiff must have
standing to sue under ERISA. Id. at 211-12, 124 S. Ct. at 2496-97; Marin Gen.
Hosp., 581 F.3d at 947-49. We first consider whether the claims are within the scope
of § 502(a)(1)(B), because if they are not, standing to assert them is irrelevant.
Rutt and Egan argue that their claims are not cognizable under § 502(a)
because the relief they seek is unavailable under ERISA. They stress that they are not
seeking benefits under an ERISA plan, but instead seek to collect unpaid amounts
they are owed under their Provider Agreements as a result of Anthem’s use of
improper payment methods, such as downcoding and bundling, under the guise of
utilization review. Moreover, they assert, their state law claims are the types of
claims federal courts have consistently held are not even defensively preempted under
ERISA § 514. The Court emphasized in Davila, however, that merely referring to
labels affixed to claims to distinguish between preempted and non-preempted claims
is not helpful because doing so “would ‘elevate form over substance and allow parties
to evade’ the pre-emptive scope of ERISA.” Davila, 542 U.S. at 214, 124 S. Ct. at
2498 (quoting Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 211, 105 S. Ct. 1904,
1911 (1985)).
The factual allegations of the complaint do support Rutt and Egan’s argument
22
that their claims involve the “rate of payment” under their Provider Agreements.9
Yet, a closer look discloses more. Plaintiffs’ allegations implicate not only the “rate
of payment” under their Provider Agreements, but also the “right of payment.” For
example, in paragraph 10(a) under Class Allegations, Rutt and Egan allege that
Anthem breached its contractual obligations by engaging in various acts, including
“systematically denying and/or reducing Dentists’ reimbursement for medically
necessary services through (i) improper denials.” And, in paragraph 10(b), Rutt and
Egan allege that Anthem denied “medically necessary claims through the use of so-
called ‘guidelines’ which do not comply with accepted medical/dental treatment
standards.” As the Fifth Circuit observed in Lone Star, such allegations concern
coverage issues that fall within ERISA. Lone Star, 579 F.3d at 531. Finally,
paragraphs 10(g) and (h) complain that Anthem committed ERISA procedural
violations by “failing to provide an adequate explanation for the denial of claims for
reimbursement” and “failing to ensure that procedures exist to properly consider
plaintiffs’ and members of the class’ claims for reimbursement, both initially and in
the appeals process.” Significantly, the Provider Agreements say nothing about
Anthem’s obligations to provide an explanation when it denies a claim for
9
Although Plaintiffs reference their amended complaints in their briefs, we consider the
original complaints because removal jurisdiction is determined at the time of removal, and
“events occurring after removal . . . do not oust the district court’s jurisdiction.” Poore v. Am.-
Amicable Life Ins. Co., 218 F.3d 1287, 1290-91 (11th Cir. 2000). Even so, Plaintiffs state that
their amended complaints did not affect any substantive changes in their pleadings.
23
reimbursement or to provide procedures for reviewing claims for reimbursement.
Rather, ERISA § 503 imposes those obligations. 29 U.S.C. § 1133(1) and (2)
(requiring every ERISA plan to “provide adequate notice in writing to any participant
or beneficiary whose claim for benefits . . . has been denied” and to “afford a
reasonable opportunity . . . for a full and fair review” of denied claims). Rutt and
Egan repeated these same allegations in paragraphs 21(a), (g) and (h) as part of their
general Factual Allegations and again in paragraphs 26(a), (g) and (h) as part of their
breach of contract claim.10
What we have, then, is really a hybrid claim, part of which is within § 502(a)
and part of which is beyond the scope of ERISA. Because Rutt and Egan complain,
at least in part, about denials of benefits and other ERISA violations, their breach of
contract claim implicates ERISA.
Rutt and Egan must have had standing to assert ERISA claims, and because
they are providers, they could only have derivative standing through assignments.
Thus, unlike Anesthesia Care, supra, the existence of assignments does matter in this
case. In the district court, Anthem presented claim forms that Rutt and Egan
submitted to Anthem for reimbursement for dental services. Lynn Appicelli, a Project
10
The claims for breach of the duty of good faith and fair dealing and violation of the
CUTPA in Counts 2 and 3 contain allegations similar to the breach of contract allegations
implicating ERISA.
24
Manager in Anthem’s Government Programs division, confirmed in an affidavit that
the attached forms were typical of claim forms that Anthem receives from
Connecticut dentists. The claim forms contain the following language: “I hereby
authorize payment of the dental benefits otherwise payable to me directly to the
below named dental entity.” Anthem contends that these claim forms suffice to show
an assignment of benefits by Rutt’s and Egan’s patients. We agree.
Rutt and Egan contend that the claim forms cannot be valid assignments for
two reasons, both of which we reject.11 First, they point out that each of the three
sample plan documents Anthem submitted preclude assignments. For example, they
note that the first plan states: “The Member or Covered Person may not assign
benefits to a provider, except when parents are divorced.” Citing Physicians
Multispecialty Group v. Health Care Plan of Horton Homes, Inc., 371 F.3d 1291
(11th Cir. 2004), in which this Court held that an unambiguous anti-assignment
provision renders an assignment ineffective, Rutt and Egan contend that any
purported assignment by their patients was invalid. As Anthem notes, however, each
11
Rutt and Egan also contend that the assignments are not valid under Connecticut law.
Because they raised this argument for the first time in their reply brief, we treat this argument as
waived. United States v. Evans, 473 F.3d 1115, 1120 (11th Cir. 2006) (arguments first raised in
reply brief are deemed not properly preserved). In any event, even though the claim forms do not
contain the names and signatures of the patients, Rutt and Egan represented that the signatures
are on file in their offices and there is sufficient information on the forms to match the patient
with the particular employer plan under which the right to payment has been assigned.
25
of the sample plans also contains an exception specifically permitting the assignment
of dental benefits: “Notwithstanding the terms of any provision regarding the
payment of benefits . . . a Member may assign the benefits to a Dentist or oral surgeon
. . . in accordance with the Connecticut Laws concerning Assignment of Benefits to
a Dentist or oral surgeon.” Thus, the plans specifically authorized the assignments
to Rutt and Egan.
Rutt and Egan also contend that the claim forms are ineffective to create
standing because they convey only the right to receive payment of benefits and not
the patient’s right to file an action under § 502(a). They cite a number of unreported
district court cases holding that an assignment of the right to payment of benefits that
does not include the right to pursue litigation is not an unequivocal assignment that
creates derivative ERISA standing. See North Jersey Ctr. for Surgery, P.A. v.
Horizon Blue Cross Blue Shield of N.J., Inc., No. 07-4812 (HAA), 2008 WL
4371754, at *8 (D.N.J. Sept. 18, 2008) (“The scope of the assignment is essential to
establishing derivative standing as courts have made distinctions between
assignments that only give the provider the right to reimbursement for medical
services - which are not ERISA claims - and assignments that give the provider a full
assignment of benefits, which are ERISA claims.”) (citing Cooper Hosp. Univ. Med.
Ctr. v. Seafarers Health & Benefits Plan, No. 05-5941, 2007 WL 2793372, at *3
26
(D.N.J. Sept. 25, 2007), and Touro Infirmary v. Am. Mar. Officer, No. 07-1441, 2007
WL 4181506, at *3-6 (E.D. La. Nov. 21, 2007)); Somerset Orthopedic Assocs., P.A.
v. Aetna Life Ins. Co., No. 06-867 (MLC), 2007 WL 432986, at *2 (D.N.J. Feb. 2,
2007) (holding that the defendant failed to show an assignment sufficient for ERISA
preemption purposes, “as the assignment authorizes nothing more than direct payment
to the plaintiff”). We find these cases unpersuasive and decline to follow them. Our
own cases confirm that assignment of the right to payment is enough to create
standing. “Healthcare providers may acquire derivative standing . . . by obtaining a
written assignment from a ‘beneficiary’ or ‘participant’ of his right to payment of
benefits under an ERISA-governed plan.” Physicians Multispecialty Group, 371 F.3d
at 1294 (citing Hobbs, 276 F.3d at 1241); see also HCA Health Servs. of Ga., Inc. v.
Employers Health Ins. Co., 240 F.3d 982, 989, 991 (11th Cir. 2001) (recognizing
standing based on an assignment authorizing payment of insurance benefits directly
to the provider). Moreover, as noted in Cagle v. Bruner, 112 F.3d 1510 (11th Cir.
1997), in which this Court first recognized derivative standing, an assignment furthers
ERISA’s purposes only if the provider can enforce the right to payment.
Of course, an assignment will not facilitate a plan participant’s or
beneficiary’s receipt of benefits if the plan does not pay the benefits it
owes, and provider-assignees are not permitted to sue on the
participant’s or beneficiary’s behalf. If provider-assignees cannot sue
the ERISA plan for payment, they will bill the participant or beneficiary
directly for the insured medical bills, and the participant or beneficiary
27
will be required to bring suit against the benefit plan when claims go
unpaid. On the other hand, if provider-assignees can sue for payment of
benefits, an assignment will transfer the burden of bringing suit from
plan participants and beneficiaries to “providers[, who] are better
situated and financed to pursue an action for benefits owed for their
services.”
Id. at 1515 (citations omitted) (alteration in original). See also I.V. Servs. of Am.,
Inc. v. Inn Dev. & Mgmt., Inc., 7 F. Supp. 2d 79, 84 (D. Mass. 1998) (“An
assignment to receive payment of benefits necessarily incorporates the right to seek
payment. As Plaintiff argues, the right to receive benefits would be hollow without
such enforcement capabilities.”). Finally, as the Seventh Circuit observed in
Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir. 1991),
cited with approval in Cagle, all one needs for standing under ERISA is a colorable
claim for benefits, and “[t]he possibility of direct payment is enough to establish
subject matter jurisdiction.” Id. at 700-01. Rutt’s and Egan’s rights to direct payment
of benefits are thus sufficient to confer standing.
We conclude that Anthem has carried its burden of showing that Rutt and Egan
received valid assignments from their ERISA patients. Furthermore, although
Anthem did not link any particular assignment to a particular ERISA plan, the
Appicelli affidavit sufficiently demonstrates that the submitted assignments in the
claim forms are representative of assignments Rutt and Egan received for services
they rendered, which would necessarily include patients covered by ERISA plans
28
administered by Anthem.
2. Second Davila Inquiry
The second inquiry is whether Rutt’s and Egan’s claims are predicated on a
legal duty that is independent of ERISA. Our analysis above answers this question.
Rutt and Egan argue that their claims are based on a separate legal duty arising from
their Provider Agreements. This is true to the extent their claims implicate only the
amount they were owed under their Provider Agreements. But, as noted, their claims
stray from the boundaries of their Provider Agreements into ERISA territory by
asserting improper denials of medically necessary claims and violations of ERISA
procedural requirements. Consequently, portions of their claims arise solely under
ERISA or ERISA plans and not from any independent legal duty.
As for the remaining claims, where removal jurisdiction exists over a
completely preempted claim, the district court has jurisdiction over any claims joined
with the preempted claim. Butero, 174 F.3d at 1215 (citing 28 U.S.C. § 1441(c)).
Therefore, the district court may exercise jurisdiction over Rutt’s and Egan’s non-
preempted state law claims, including those claims for payment in connection with
non-ERISA patients.
C. CSDA’s Complaint
CSDA’s allegations in its single-count complaint are essentially the same as
29
those of Egan and Rutt, in that they assert Anthem violated the CUTPA through
improper denials of necessary services and failing to comply with ERISA’s
procedural requirements. The question, then, is whether CSDA, as an association, has
standing under ERISA. CSDA contends that it lacks standing because it provided no
services and thus could not have obtained derivative standing through an assignment.
Anthem argues that CSDA need not obtain assignments or provide medical services
to obtain standing because it has associational standing though the assignments that
some of its members (Rutt and Egan) have obtained.
Although this Court has not considered the issue, other courts have concluded
that a trade group may obtain statutory standing under ERISA through associational
standing. See Pa. Psychiatric Soc’y v. Green Spring Health Servs., Inc., 280 F.3d
278, 284-87 (3d Cir. 2002) (holding that an association of psychiatrists may have
associational standing to assert claims on behalf of its members against managed care
organizations); Self-Ins. Inst. of Am., Inc. v. Korioth, 993 F.2d 479, 484-85 (5th Cir.
1993) (concluding that a trade group of employers and plan sponsors had statutory
standing because its members were fiduciaries who would have standing to sue in
their own right); So. Ill. Carpenters Welfare Fund v. Carpenters Welfare Fund of Ill.,
326 F.3d 919, 922 (7th Cir. 2003) (holding that a union had standing to sue if its
members were participants in the ERISA plan being challenged).
30
A trade association has standing to sue on behalf of its members when three
requirements are met: (a) its members would otherwise have standing to sue in their
own right; (b) the interests it seeks to protect are germane to the organization’s
purpose; and (c) neither the claim asserted nor the relief requested requires the
participation of individual members in the lawsuit. Hunt v. Wash. State Apple Adver.
Comm’n, 432 U.S. 333, 343, 97 S. Ct. 2434, 2441 (1977). Even if CSDA met the
first two requirements for associational standing, it cannot meet the last one.
Generally, an association seeking damages on behalf of its members cannot claim
associational standing. See United Food & Commercial Workers Union Local 751
v. Brown Group, Inc., 517 U.S. 544, 554, 116 S. Ct. 1529, 1535 (1996). Damage
claims are incompatible with associational standing because such claims usually
require “individualized proof.” Warth v. Seldin, 422 U.S. 490, 515-16, 95 S. Ct.
2197, 2214 (1975). Although CSDA seeks both declaratory and injunctive relief,
which are normally appropriate relief for associational standing, it also seeks
compensatory and punitive damages on behalf of its members, which will require
individualized proof of harm. Thus, CSDA could not establish all the requirements
for associational standing. Consequently, CSDA’s claim is not completely preempted
because it lacks standing to sue under ERISA.
IV. MOTION TO AMEND JUDGMENT
31
When the instant cases were transferred to the Southern District of Florida, they
were docketed as tag along cases to the main case, No. 00-MD-1334 (the “1334
docket”). In July 2002, the district court administratively closed the tag along cases.
Over the next five and one-half years, all motions and pleadings pertaining to the tag
along cases were filed solely on the 1334 docket. During this time, Plaintiffs’ counsel
filed various motions, briefs, reports, and other documents on the 1334 docket.
Anthem filed motions to dismiss on July 16, 2003, and Plaintiffs filed
responses to these motions. On August 21, 2003, the district court stayed all tag
along cases. In October 2007, the district court denied all pending motions without
prejudice with instructions to refile. Anthem refiled its motions to dismiss on
November 9, 2007, and Plaintiffs filed responses.
On January 26, 2008, the district court entered an order on both the 1334
docket and in the tag along cases directing the parties in tag along cases to file all
documents only on the docket of the tag along case. On February 7, 2008, the court
entered an order on the 1334 docket directing all counsel to file an appearance in the
docket of all tag along cases in which they were involved. Plaintiffs’ counsel did not
file appearances in the tag along cases as directed. On February 19, 2008, the court
entered an order on both the 1334 docket and in the tag along cases denying all
pending motions and directing counsel to file status reports on the dockets of the tag
32
along cases. Plaintiffs’ counsel received the order by electronic notification through
the 1334 docket, but erroneously filed status reports on the 1334 docket rather than
in the tag along case. Finally, on April 14, 2008, the court entered an order in the tag
along cases reopening the cases and setting a briefing schedule for motions to be filed
in those cases. Because Plaintiffs’ counsel had not filed an appearance in the tag
along cases, Plaintiffs’ counsel did not receive electronic notice of this order.
Anthem refiled its motions to dismiss for a for a third time on April 30, 2008.
Plaintiffs’ counsel did not receive electronic notification of the motion, but they did
receive a paper copy of the motion, which Anthem served by mail. When Plaintiffs
failed to respond to Anthem’s motions, the district court entered an order granting the
motions and dismissing the case.
Plaintiffs filed motions to vacate the judgment on June 16, 2008, ten days after
the district court entered the orders of dismissal. Plaintiffs argued that their failure
to respond to Anthem’s motions was excusable neglect due to their counsels’ belief
that they were receiving all electronic filings from both the 1334 docket and the tag
along dockets and were unaware that Anthem had refiled its motion to dismiss.
Plaintiffs explained that they mistakenly believed that prior appearances and a motion
to appear pro hac vice had functioned as appearances in the tag along cases.
The district court denied the motion. It reasoned that Plaintiffs failed to
33
comply with the January 26, February 7, February 19, and April 14 orders and failed
to respond to Anthem’s motion, even though Plaintiffs’ counsel received three of the
orders electronically and received a paper copy of the motion by mail. The court
concluded that these circumstances did not constitute excusable neglect.
Rule 60(b)(1) of the Federal Rules of Civil Procedure authorizes a court to
relieve a party from a final judgment or order upon a showing of “mistake,
inadvertence, surprise, or excusable neglect.” “Rule 60(b) motions are directed to the
sound discretion of the district court, and we will set aside the denial of relief from
such motion only for abuse of that discretion.” Cheney v. Anchor Glass Container
Corp., 71 F.3d 848, 849 n.2 (11th Cir. 1996).
Excusable neglect is generally an “equitable inquiry” based upon the particular
circumstances of the case. Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship,
507 U.S. 380, 395, 113 S. Ct. 1489, 1495 (1993). In Pioneer, the Court held that an
attorney’s inadvertent failure to timely file a proof of claim can constitute excusable
neglect under Bankruptcy Rule 9006(b)(1). Looking to other rules for guidance on
the meaning of “excusable neglect,” the Court considered Rule 60(b)(1) and observed
that “for purposes of Rule 60(b), ‘excusable neglect’ is understood to encompass
situations in which the failure to comply with a filing deadline is attributable to
negligence.” Id. at 394, 113 S. Ct. at 1497. The Court identified four factors pertinent
34
to the determination: “the danger of prejudice to the [opposing party], the length of
the delay and its potential impact on the judicial proceedings, the reason for the delay,
including whether it was within the reasonable control of the movant, and whether
the movant acted in good faith.” Id. at 395, 113 S. Ct. at 1498.
This Court applied the Pioneer factors in Cheney v. Anchor Glass Container
Corp., 71 F.3d 848 (11th Cir. 1996), holding that the plaintiff’s counsel’s late filing
of a request for a trial de novo following a non-binding arbitration award was
excusable neglect. The delayed filing resulted from a miscommunication between the
plaintiff’s lead counsel and his associate who handled the arbitration while the lead
counsel was on vacation – each had assumed that the other had filed a demand for
trial de novo. Id. at 849. The court held that the district court abused its discretion
in failing to find excusable neglect. We noted that the Pioneer factors weighed in
favor of excusable neglect because the defendant was not prejudiced by the late filing.
Id. at 850. We also observed that although the error was within counsel’s control, the
miscommunication was attributable solely to negligence. Id. Finally, there was no
indication that the delay was the result of bad faith, i.e., an attempt to gain a tactical
advantage through the late filing. Id.
In this case, the district court abused its discretion because it did not even
consider the Pioneer factors. See Cheney, 71 F.3d at 850. Instead, the district court
35
concluded that Plaintiffs’ counsel’s error was not excusable because counsel failed
to comply with a series of orders. But as Plaintiffs note, their failure to respond to
Anthem’s motions was a result of their single failure to file appearances on the tag
along dockets as directed by the February 7 order. In other words, while it is true that
Plaintiffs violated the January 26 and February 19 orders by filing their status reports
on the 1334 docket rather than in the tag along case, those violations did not lead to
Plaintiffs’ lack of knowledge that Anthem had refiled its motions. Through an
affidavit of counsel, Plaintiffs explained to the district court that they had filed
several previous appearances and mistakenly believed that they were receiving ECF
notifications for filings in all cases, including the tag along cases. It was counsel’s
erroneous assumption, rather than purposeful disregard of the district court’s order,
that led to the failure to respond.12
Anthem argues that the district court properly denied Plaintiffs’ motion because
counsel failed to read or understand the district court’s orders. While it is true that
this circuit recognizes that an attorney’s misinterpretation of the law does not
constitute excusable neglect, see Advanced Estimating Sys., Inc. v. Riney, 130 F.3d
12
Regarding the paper copies of the motions that Anthem mailed to Plaintiff’s counsel,
counsel explained in his affidavit that his law firm’s staff placed the motions in a pile of paper
documents to be filed in the case. Paper copies of the motions were also mailed to Plaintiffs’
local counsel in Florida, but Plaintiffs contend that local counsel assisted with filings only, and
relied on Plaintiffs’ counsel in Connecticut to litigate the case.
36
996, 998 (11th Cir. 1997) (holding that “attorney’s misunderstanding of the plain
language of a [court] rule cannot constitute excusable neglect such that a party is
relieved of the consequences of failing to comply with a statutory deadline”);
Cavaliere v. Allstate Ins. Co., 996 F.2d 1111, 1115 (11th Cir. 1993) (concluding that
the district court did not abuse its discretion in denying the plaintiff’s motion where
counsel’s interpretation of Fed. R. Civ. P 6(e) was contrary to case law), Plaintiffs’
counsel’s error is properly characterized as a mistake of fact rather than a mistake of
law. For that reason, the facts in this case are more like those in Cheney, where “[t]he
reason for the delayed filing was a failure in communication between the associate
attorney and the lead counsel,” 71 F.3d at 850, than those in Advanced Estimating
System, Inc. or Cavaliere.
Turning to the Pioneer factors, we conclude that they all weigh in favor of
granting Plaintiffs relief. First, in spite of Anthem’s arguments to the contrary, there
is no discernable prejudice to Anthem as a result of the delay. The delay was brief.
Plaintiffs filed their motions only ten days after the district court entered the orders
granting Anthem’s motions to dismiss and only seven days after counsel first learned
of the district court’s order. Anthem contends that it is prejudiced because it expected
to win the motions, which would have concluded the litigation. But the inquiry is
whether prejudice results from the delay, not from having to continue to litigate the
37
case. See Walter v. Blue Cross & Blue Shield United of Wisc., 181 F.3d 1198, 1202
(noting that “Blue Cross of Wisconsin admitted that it had not suffered any prejudice
from Walter’s delay”); Lacy v. Sitel Corp., 227 F.3d 290, 293 (5th Cir. 2000) (“There
is no prejudice to the plaintiff where the setting aside of the default has done no harm
to plaintiff except to require it to prove its case.”). Second, there is no reason to
conclude that allowing Plaintiffs to file their untimely response to Anthem’s motion
would adversely affect the judicial proceedings or impose an additional burden on the
district court. As noted, Anthem filed its motion three times and Plaintiffs responded
twice. Given Plaintiffs’ record, it was to be expected that Plaintiffs would respond
to Anthem’s third motion and that the district court would eventually rule on the
merits. Anthem incorrectly states that the district court would have had to adjudicate
the motion for a third time, but the district court never addressed the merits; instead,
it dismissed the motions without prejudice. Certainly the district court would have
to commit resources to deciding Anthem’s motion if it considered Plaintiffs’ late
response, but this is typically the case for any motion for relief from judgment. Third,
the reason for the delay was counsel’s erroneous assumption that its previous
appearances had been filed in the tag along cases and that it was receiving all ECF
filings as well as local counsel’s failure to notify Plaintiffs’ Connecticut counsel that
they had received the motion by mail, presumably due to the same erroneous
38
assumption that Plaintiffs’ Connecticut counsel was receiving the ECF filings and
saw the motions. While counsel certainly could have done more, there is no
indication that they acted willfully. Finally, there is no suggestion in the record that
Plaintiffs exhibited a lack of good faith in failing to file an appearance on the tag
along dockets or in not responding to Anthem’s motion. On the contrary, Plaintiffs’
active record in the litigation clearly shows that Plaintiffs’ counsel intended to
respond to all of Anthem’s motions and that its failure to do so was careless, but
excusable, conduct.
Accordingly, the district court abused its discretion by not finding excusable
neglect under the Pioneer factors and failing to grant Plaintiffs’ motion.
V. CONCLUSION
For the foregoing reasons, we: (1) affirm that portion of the district court’s
order, dated August 26, 2003, denying Rutt and Egan’s motion to remand, but
reverse that portion of the order denying CSDA’s motion to remand, and (2)
reverse the district court’s order, dated August 19, 2008, denying Rutt and Egan’s
motion to vacate or amend judgment (the judgment being the district court's prior
order dated June 6, 2008 dismissing Rutt's and Egan's case against Anthem). We
remand Case No. 08-15268 to the district court with instructions to remand
CSDA’s complaint to state court. We remand Case No. 08-15277 for further
39
proceedings on the merits of Rutt’s and Egan’s claims.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
40