Wurtz v. Rawlings Co.
59 Employee Benefits Cas. (BNA) 1081
2d Cir.2014Background
- Plaintiffs (Wurtz and Burnovski) filed a class action in New York state court challenging insurers’ efforts to recover medical benefits from plaintiffs’ tort settlements under N.Y. Gen. Oblig. Law § 5-335 and seeking injunction, declaratory relief, and damages.
- Defendants (Rawlings Co., Oxford Health Plans (NY), UnitedHealth Group) removed to federal court and the district court dismissed under Fed. R. Civ. P. 12(b)(6), holding plaintiffs’ claims were both completely and expressly preempted by ERISA.
- The Second Circuit held that complete ERISA preemption did not apply under the Supreme Court’s Davila test, but federal jurisdiction nonetheless exists under CAFA (28 U.S.C. § 1332(d)).
- On the merits, the Second Circuit concluded § 5-335 is saved from ERISA § 514 express preemption because it "regulates insurance": it is specifically directed at insurers and substantially affects risk pooling.
- The court therefore vacated the district court’s judgment and remanded for further proceedings, holding plaintiffs’ state-law claims may proceed in federal court under CAFA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal subject-matter jurisdiction exists via ERISA complete preemption | § 5-335 claims are independent state-law rights and not ERISA benefit claims | Claims effectively seek to defeat plan reimbursement rights and thus fall under ERISA §502(a)(1)(B) (complete preemption) | Not completely preempted; plaintiffs’ claims do not meet both prongs of Davila |
| Whether federal jurisdiction exists at all | N/A (plaintiffs filed in state court) | CAFA removal is improper / not invoked by plaintiffs | CAFA supplies jurisdiction: numerosity, minimal diversity, and $5M amount in controversy satisfied |
| Whether N.Y. Gen. Oblig. Law § 5-335 is expressly preempted by ERISA §514 | § 5-335 regulates insurance and is saved from express preemption | § 5-335 "relates to" ERISA plans and is preempted | § 5-335 is saved from express preemption as a law that "regulates insurance" |
| Whether plaintiffs’ claims require interpretation of ERISA plan terms (Davila prongs) | Claims arise from independent statutory duty (§ 5-335), not plan terms | Claims implicate plan reimbursement rights, requiring ERISA analysis | Claims do not require plan-term interpretation and invoke an independent state-law duty, so Davila prongs fail |
Key Cases Cited
- Aetna Health Inc. v. Davila, 542 U.S. 200 (establishing two-part test for complete preemption under ERISA)
- Vaden v. Discover Bank, 556 U.S. 49 (complete preemption allows removal by recasting state claim as federal)
- FMC Corp. v. Holliday, 498 U.S. 52 (state antisubrogation statute falls within ERISA’s insurance saving clause)
- Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (state insurance regulations can substantially affect risk pooling and be saved from preemption)
- Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321 (2d Cir.) (discussing Davila and disaggregating first prong of complete preemption test)
- Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941 (9th Cir.) (rejecting complete preemption where state-law claim did not seek benefits under ERISA plan)