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Choice Healthcare v. Kaiser Foundation: Member Choices Don't Create Jurisdiction Over Health Insurer

August 11th, the Fifth Circuit released Choice Health Care Inc. v. Kaiser Health Plan of Colorado (pdf) in which it upheld the dismissal of a foreign health insurer/HMO for lack of personal jurisdiction.  The court rejected an attempted extension of the "stream of commerce" theory of minimum contacts in an opinion written by Circuit Judge Davis

After the break, analysis and details of the opinion.

 

In Choice Health Care, Kaiser contracted with an intermediary (Multiplan) to gain discounted access for it's members when they needed health care in a number of jurisdictions outside the Kaiser service area.  Multiplan had separate contracts with providers all over the country. 

Some of Kaiser's members happened to be in Louisiana when they needed services.  A Louisiana provider later claimed it was paid the wrong rate and sued Kaiser.  Kaiser, having paid some of the related charges, argued that it was nonetheless not subject to jurisdiction in Louisiana because the charges themselves resulted from the unpredictable and unilateral choices of the members, not purposeful availment by Kaiser.

The court noted:

In the instant case, no evidence was presented that Choice obtained advance approval from Kaiser prior to treatment. We are satisfied, however, that Kaiser’s payment of a limited number of claims for treatment of Kaiser’s insureds, based on the unilateral decisions of those insureds who sought treatment in Louisiana, does not establish purposeful contact between the individual Kaiser defendants and the State of Louisiana. The individual Kaiser defendants covered their respective insureds for treatment in HMOs in the area where the insureds lived and worked. This is where Kaiser directed their insureds for treatment. Kaiser only provided out-of-area coverage for limited treatment to insureds based on emergency care or other urgent health care needs. Viewed in this light, Kaiser’s payment to Choice for urgent or emergency treatment of its insureds who visited Louisiana and fortuitously required such treatment cannot qualify as commercial activity purposefully directed toward Louisiana. In making these payments, Kaiser was not attempting to expand sales to Louisiana or otherwise develop commercial activity in Louisiana. Kaiser
made the payments because its insureds independently and without encouragement from Kaiser presented to a Louisiana hospital for urgent care
while visiting Louisiana.

For similar reasons, the Court rejected the provider's attempt to argue a "stream of commerce" theory of personal jurisdiction.  Health care members are not like products placed in the stream of commerce with the knowledge and intention that they will eventually marketed in the forum.  Said the court:

The facts of this case simply do not fit the stream of commerce model . . . . Unlike the cases where the stream of commerce theory has been applied, this is not a products liability case or similar case where a defendant places a product in the stream of commerce as part of a sales or distribution network designed to market its products nationwide (or at least outside of its home state) where it would derive financial benefit from sales in the forum. . . . Deriving revenue from such commercial activity is the quid pro quo for requiring the defendant to suffer a suit in the foreign forum. . . . Additionally, the independent action of the insureds in traveling to the forum state to seek treatment outside of their coverage area . . .  unrelated to any marketing scheme by Kaiser, is inconsistent with the notion that Kaiser made purposeful commercial contact with Louisiana for the purpose of increasing its revenue

So, the commercial realities and contractual structure at issue was key to the decision in Choice Health Care.  (Go here for a prior post in which the nature of the contracting and commercial relationships also controlled the outcome of a jurisdictional question.)

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume , Number 228
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About this Author

Kendall M. Gray, Antitrust Litigation Attorney, Andrews Kurth Law Firm
Partner

Kendall is a board certified civil appellate specialist who has represented clients in state and federal appellate courts such as the U.S. Supreme Court, the U.S. Courts of Appeal for the Fifth, Ninth, Tenth and Federal Circuits, the Supreme Court of Texas and many intermediate courts of appeal. His practice includes a variety of complex commercial, medical malpractice and toxic tort matters, as well as a particular focus in disputes involving employee benefits, managed care and ERISA. The disputes commonly require complex written and oral advocacy on such topics as ERISA preemption,...

713-220-3981
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