2:24-cv-00774
M.D. Ala.Jul 8, 2025Background
- Baptist Health sued UnitedHealthcare in Alabama state court for breach of contract relating to payment obligations under agreements for healthcare services.
- The agreements incorporated by reference federal § 340B drug pricing, and at issue was United's alleged failure to pay the contractually required rates after a federal regulatory change and subsequent Supreme Court ruling found CMS's rate methodology unlawful.
- UnitedHealthcare removed the case to federal court, asserting that the breach of contract dispute involved a substantial, disputed question of federal law (the impact of CMS's action and correction process on the contract).
- No diversity of citizenship existed; federal jurisdiction was alleged solely on the presence of a federal question.
- Baptist Health moved to remand back to state court and sought costs, including attorneys' fees, arguing no federal jurisdiction existed and removal was unreasonable.
- The district court examined recent decisions from other jurisdictions addressing similar removal efforts in contract disputes over incorporation of federal payment rates.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Federal jurisdiction over the contract claim | Dispute is solely governed by contract and state law despite reference to federal payment rates | Incorporation of federal rates creates a substantial, disputed federal question | No federal jurisdiction; remanded to state court |
| Presence of a substantial disputed federal issue | Federal law's rate-setting has already been decided; contract terms and state law control | Impact of federal law on contract requires determination of federal standards | Federal law not determinative on contract enforcement |
| Attorney’s fees and costs for improper removal | United’s removal was objectively unreasonable, given adverse recent district decisions | No controlling precedent against removal at the time; removal was objectively reasonable | Attorney’s fees and costs denied |
| Effect of CMS’s retroactive remedy on agreement | Correction of rates under federal law compels payment per contract, not new federal adjudication | Federal correction raises federal question for court to resolve | Remedial question is a contract issue, not federal law |
Key Cases Cited
- Gunn v. Minton, 568 U.S. 251 (2013) (establishes federal question test for state law claims incorporating federal issues)
- Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006) (federal jurisdiction only arises for special, small category of state claims involving substantial federal issues)
- Am. Tobacco Co. v. Univ. of S. Ala., 168 F.3d 405 (11th Cir. 1999) (all doubts about federal jurisdiction resolved in favor of remand)
- Beneficial Nat’l Bank v. Anderson, 539 U.S. 1 (2003) (well-pleaded complaint rule for federal question jurisdiction)
- Am. Hospital Ass’n v. Becerra, 596 U.S. 724 (2022) (CMS’s 2018 and 2019 § 340B rates found unlawful)