Hartland Lakeside Joint No. 3 School District v. Wea Insurance
2014 U.S. App. LEXIS 12344
7th Cir.2014Background
- WEA administers federal health subsidies (Section 1102 of PPACA) and collected funds from federal subsidies to reduce future premiums.
- State school districts allege WEA must apply receipts to offset districts’ expenses that justified the subsidies, so districts receive the economic benefit.
- WEA removed to federal court arguing federal question present under §18002 and its implementing regulations.
- District court denied remand; magistrate judge certified the issue, but interlocutory appeal was denied.
- The court addresses whether removal was proper, whether Grable governs, and whether state-law ownership/distribution questions control.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal was proper under Grable/Gunn framework | Districts contend federal issue suffices for removal | WEA argues federal law is controlling | Removal not supported under Gunn/Grable |
| Whether Grable's framework applies given mixed state/federal issues | Grable supports removal when a federal issue is central | Grable misapplied; not solely federal issue | Grable framework not satisfied; case stays non-removable |
| Whether federal question arises due to §18002 and ERISA context | Federal subsidies stream create federal issue | ERISA/insurance context does not automatically create federal question | Landmark federal question not established for removal |
| Whether ownership/distribution dispute belongs in state court | Economic benefit and ownership of subsidies should be in state court | Federal issue governs distribution | State-law ownership governs; case belongs in state court |
Key Cases Cited
- Gunn v. Minton, 133 S. Ct. 1059 (U.S. 2013) (federal-question jurisdiction requires a substantial, necessary federal issue without disrupting federal-state balance)
- Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (U.S. 2005) (multi-factor test for substantial federal issue justifying removal)
- Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (U.S. 2006) (federal role in insurance not alone establishing federal jurisdiction)
- Pollitt v. Health Care Service Corp., 558 F.3d 615 (7th Cir. 2009) (federal role in health care not sufficient for removal)
- Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804 (U.S. 1986) (state-law remedy preserved absent federal question)
- Franchise Tax Board of California v. Construction Laborers Vacation Trust, 463 U.S. 1 (U.S. 1983) (ERISA preemption with insurance carve-out left to state law)
- T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir. 1964) (ownership disputes can arise under state law)