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Milby v. Liberty Life Assurance Co., of Boston

United States District Court, W.D. Kentucky

April 30, 2015


For Samatha Milby, Plaintiff, Counter Defendant: Michael D. Grabhorn, LEAD ATTORNEY, Grabhorn Law Office, PLLC, Louisville, KY.

For Liberty Life Assurance Company of Boston, Defendant, Counter Claimant: Jason Renzelmann, Kyle D. Johnson, Susan C. Lonowski, LEAD ATTORNEYS, Frost Brown Todd LLC - Louisville, Louisville, KY.

For University Medical Center, Inc., Interested Party: Bethany A. Breetz, Stites & Harbison, PLLC - Louisville, Louisville, KY.


Charles R. Simpson III, Senior United States District Judge.

This matter is before the Court on three motions. Plaintiff Samantha Milby filed a motion to remand (DN 8) and a motion for a hearing and oral argument (DN 43). Defendant Liberty Life Assurance Co. of Boston (" Liberty" ) submitted a motion for leave to file a surreply (DN 39). For the following reasons, the Court will deny Plaintiff's motion to remand (DN 8) and her motion for a hearing and oral argument[1] (DN 43), and it will grant Liberty's motion for leave to file a surreply[2] (DN 39).


University Medical Center, Inc., (" UMC" ) employed Plaintiff as a registered nurse at University of Louisville Hospital (" U of L Hospital" ). (Compl., DN 1-1, ¶ 9.) Through that employment, Plaintiff obtained coverage under a long-term disability (" LTD" ) insurance policy, which provided monthly benefits to eligible employees. (Compl., DN 1-1, ¶ ¶ 11-12.) Liberty issued and underwrote that LTD policy. (Compl., DN 1-1, ¶ 11.)

On September 10, 2011, Plaintiff began receiving LTD benefits under the policy. (Compl., DN 1-1, ¶ 14.) But, after an eligibility review, Liberty determined that Plaintiff was no longer disabled within the terms of the policy. (Compl., DN 1-1, ¶ ¶ 14-15.) On February 21, 2013, Liberty terminated her LTD benefits. (Compl., DN 1-1. ¶ 15.)

On April 17, 2013, Plaintiff filed this lawsuit in Jefferson County Circuit Court to challenge Liberty's denial of LTD benefits. (Compl., DN 1-1.) On its face, Plaintiff's Complaint alleges only state law claims, including breach of contract, common law and statutory bad faith, and negligence per se based on violations of Kentucky's medical licensing statutes. (Compl., DN 1-1, Cls. for Relief A--E.)

On May 13, 2013, Liberty removed the case to this Court. (Notice of Removal, DN 1.) Liberty contends that the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1001 et seq., completely preempts Plaintiff's state law claims, creating a federal question over which subject matter jurisdiction may be exercised.[3] Plaintiff, in turn, argues that the LTD policy is exempt from ERISA, and she moves to remand this case to state court for lack of subject matter jurisdiction. (Pl.'s Mot. to Remand, DN 8.)

The nature of UMC's relationship with the Commonwealth of Kentucky arose as the crucial issue in resolving this jurisdictional matter. Therefore, the Court will briefly set out the facts surrounding UMC's origins and its connections to the state. In 1995, the University of Louisville (" U of L" )--a state institution, see KRS 164.810 et seq. --issued a request for proposals for an organization to assume operation and management of U of L Hospital and related facilities, which served as vital teaching grounds for U of L's medical school. (Req. for Proposal, DN 11-7.) In response, Henry C. Wagner, President and Chief Executive Officer (" CEO" ) of Jewish Hospital and Healthcare Services (" Jewish" ), and Stephen A. Williams, President and CEO of Alliant Health System, Inc. (" Alliant" ), formed UMC as a private, nonprofit corporation. (Arts. of Incorp., DN 11-2, art. 5.) Wagner and Williams incorporated UMC pursuant to Kentucky's general nonprofit corporation statutes, KRS 273.161 et seq. (Arts. of Incorp., DN 11-2, art. 2, § B.) UMC's original bylaws provided for an eleven-member Board of Directors (" Board" ), consisting of three members appointed by Alliant, three members appointed by Jewish, and five members appointed by U of L. (Original Bylaws, DN 11-4, art. III, § 3.01.)

U of L ultimately accepted UMC's proposal. In February 1996, UMC began overseeing U of L Hospital in accordance with two major contracts. (Taylor Aff., DN 11-8, ¶ 2.) First, UMC leased U of L Hospital from U of L and Kentucky, which owns the relevant property for U of L's use and benefit. (Lease Agreement, DN 11-6.) Second, an affiliation agreement between UMC, U of L, and Kentucky established guidelines for the operation and management of the facilities. ( See Req. for Proposal, DN 11-7; Taylor Aff., DN 11-8, ¶ 2.)

In 2007, Alliant, which had become Norton Healthcare, Inc. (" Norton" ), and Jewish withdrew from UMC. The withdrawal of those entities necessitated contractual changes and changes within UMC itself. As a result, UMC entered into a new affiliation agreement with U of L and Kentucky. (Affiliation Agreement, DN 11-5.) On January 29, 2008, UMC's Board also adopted a set of amended bylaws. (Am. Bylaws, DN 11-3.) The Court will discuss those amended bylaws in detail throughout its legal analysis. For now, it suffices to say that the amended bylaws expanded the role played by U of L, or individuals associated with U of L, in UMC's governance structure.

Though UMC and U of L hold close ties, UMC displays characteristics of an independent, private entity. UMC keeps its budget and assets separate from U of L. (Taylor Aff., DN 11-8, ¶ 4.) UMC's employees are not considered employees of U of L. (Taylor Aff., DN 11-8, ¶ 5.) The employees of UMC are not placed on U of L's payroll, nor do they have access to public employee benefits. (Taylor Aff., DN 11-8, ¶ 5.) In fact, UMC negotiates and maintains its own employee benefit plans, including the LTD policy at issue here. (Taylor Aff., DN 11-8, ¶ 9.)

In February 2013, UMC ceased overall operation and management of U of L Hospital. (Taylor Aff., DN 11-8, ¶ 2.) UMC now runs only the Center for Women and Infants. (Taylor Aff., DN 11-8, ¶ 2.) A different entity, which is not a party to this litigation, assumed responsibility for the remainder of U of L Hospital. (Taylor Aff., DN 11-8, ¶ 2.)


When considering a motion to remand, the Court looks to " whether the action was properly removed in the first place." Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 453 (6th Cir. 1996). The general removal statute allows the defendant or defendants to remove a civil action from state court to federal district court when that action could have been brought originally in federal district court. 28 U.S.C. § 1441(a). But, as frequently noted, the federal district courts are " courts of limited jurisdiction. They possess only that power authorized by Constitution and statute." Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)) (internal quotation marks omitted). Therefore, if the Court lacks original subject matter jurisdiction over a removed action, it must remand that action to state court. 28 U.S.C. § 1447(c). " All doubts as to the propriety of removal are resolved in favor of remand." Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999).

Liberty argues that the Court holds subject matter jurisdiction over this case based on the presence of a federal question. Federal question jurisdiction exists in " all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. " Ordinarily, determining whether a particular case arises under federal law turns on the 'well-pleaded complaint' rule." Aetna Health Inc. v. Davila, 542 U.S. 200, 207, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 9-10, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)). The well-pleaded complaint rule recognizes the plaintiff as the master of the complaint. Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 943 (6th Cir. 1994). When the wrong asserted could be addressed under state or federal law, the plaintiff possesses the right to choose the law upon which he will rely. Id. The Court may exercise federal question jurisdiction only in those cases where " a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief ...

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