Civil Practice – Federal Jurisdiction – Federal Question – HIPAA – Unfair Trade Practices — Remand

McKnight v. Surgical Associates of Myrtle Beach LLC (Lawyers Weekly No. 002-058-11, 11 pp.) (R. Bryan Harwell, J.) D.S.C.

Holding: Even though, as an element of her state-law unfair trade practices claim, plaintiff alleges that defendants violated a federal law – the Health Information Portability and Accountability Act of 1996 (HIPAA) – this allegation alone is insufficient to give this court federal question jurisdiction over plaintiff’s claim.

Plaintiff’s motion to remand to state court is granted.

Plaintiff alleges that defendants violated the S.C. Unfair Trade Practices Act (SCUTPA) by charging her more than HIPAA allows for copies of her healthcare records. Defendants removed to this court based on federal question jurisdiction, and plaintiff moves to remand to state court.

The artful pleading doctrine permits the court to examine whether a plaintiff has attempted to avoid removal jurisdiction by “artfully” casting essentially federal law claims as state law claims.

Here, plaintiff did nothing to conceal any putative federal claim. Her complaint makes clear that she seeks damages under SCUPTA stemming from the violation of a federal statute. The parties concede that HIPAA does not provide a private right of action. Logically then, if the sole federal statute referenced by plaintiff provides no federal cause of action, it can hardly be said that plaintiff is casting a federal law claim. Any such claim would be non-existent.

Further, the Supreme Court has explained, “The artful pleading doctrine allows removal where federal law completely preempts a plaintiff’s state-law claim.” Rivet v. Regions Bank of La., 522 U.S. 470 (1998). By its express terms, HIPAA does not completely preempt state law.

An exception to the well-pleaded complaint rule permits removal where the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law. However, defendants have failed to show that plaintiff’s complaint depends on the resolution of a substantial question of federal law.

State courts have concurrent jurisdiction to decide federal preemption issues. In order for preemption alone to serve as a basis for removal, a plaintiff’s claim must be completely preempted by federal law. As this court has explained, HIPAA does not completely preempt state law.

To the extent preemption issues may arise in an action alleging a SCUPTA violation, a South Carolina state court would be well-equipped to handle those issues.

Plaintiff argues essentially that because defendants failed to follow HIPAA, they committed an unfair trade practice. The HIPAA allegation, then, amounts to little more than a federal element in her state-law claim, which is not enough for plaintiff’s claim to “arise under” federal law.

Questions of causation, damages, and interpretation of SCUPTA still remain questions of state law in this case. Similarly, courts in other jurisdictions have frequently found no substantial federal question where HIPAA violations were brought as part of state-law claims.

Grable & Sons Metal Products v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005), rejected the absolute notion that federal courts could remand a case solely because the federal law at issue, such as HIPAA, provided no private right of action. Still, the lack of a private action can be highly relevant to questions about Congressional intent and the balance between federal and state judicial responsibilities.

To allow the underlying case to proceed in this court would federalize an entire category of state-based unfair trade practice claims when Congress has not indicated any intent to do so. Such a finding would greatly disturb the balance between federal and state judicial responsibilities because almost any litigation within the medical industry would have the potential for the use of medical records requested pursuant to HIPAA.

Remanded.