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August 2010

Choice Healthcare, Inc. v. Kaiser Foundation Health Plan of Colorado ? No Personal Jurisdiction Over Out-Of-State Insurance Company That Pays Only A Small Number Of Claims In The Forum State.

Fifth Circuit Affirms Dismissal Of Lawsuit Against Insurance Company That Paid Fifty-Three Claims Over Three-Year Period.

(5th Cir., August 11, 2010) ___ F.3d ___

In this lawsuit between a Louisiana health care provider and an out-of-state insurer, the United States Court of Appeals for the Fifth Circuit affirmed the District Court for the Eastern District of Louisiana's decision to grant the defendant-insurer's motion to dismiss.  The Fifth Circuit held the insurer's payment of fifty-three claims for emergency or urgent care services within the state over a three-year period was an insufficient basis for personal jurisdiction.

The out-of-state insurer only accepts and enrolls insureds living within its service areas, which does not include Louisiana.  It owns no property in Louisiana, pays no taxes in the state, and does not conduct or solicit business there.  Between 2002 and 2005, fifty-three of its insureds sought emergency or urgent care from the plaintiff while in Louisiana.  Unaware that it was part of the same PPO as the insurer, the plaintiff charged these patients its customary rates.  When the plaintiff submitted these claims to the insurer, the insurer processed them at the discounted PPO rate.  The plaintiff brought suit in the Eastern District of Louisiana to recover the difference.  The insurer moved for dismissal based on a lack of personal jurisdiction, which the district court granted.

On appeal, the Fifth Circuit held the insurer's fifty-three payments over three years did not constitute "continuous and systematic" contact with the forum to confer general jurisdiction.  The Fifth Circuit also held the district court did not have specific jurisdiction over the insurer because it did not purposefully avail itself of the forum state.  According to the Fifth Circuit, the insurer's payment "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."  The insurer was not trying to develop commercial activity in Louisiana, but only made such payments "because its insureds independently and without
encouragement. . . presented to a Louisiana hospital for urgent care while visiting Louisiana."

Nor did the insurer purposefully avail itself of the forum by contracting with the PPO, which separately contracted with the plaintiff.  The Fifth Circuit held the PPO is a national organization that contracts with more than half a million health care providers.  By joining the PPO, the insurer sought to obtain processing in all of its member states.  Importantly, however, the insurer did not contract directly with the plaintiff.  Thus, it did not purposefully avail itself of the benefits and privileges of Louisiana.

Finally, the Fifth Circuit rejected the plaintiff's argument the insurer should be subject to personal jurisdiction in Louisiana pursuant to the stream of commerce doctrine.  Under Fifth Circuit law, a court may exercise personal jurisdiction over a foreign defendant if the defendant places a product in the stream of commerce as part of a sales or distribution network so as to derive financial benefit from sales in the forum state.  The Fifth Circuit concluded the stream of commerce doctrine did not apply in this case, because the medical services rendered by the plaintiff were unrelated to any marketing scheme by the insurer.

This opinion may be cited as precedent now.  The result in this case could change, however, if a subsequent petition for rehearing or a petition for certiorari to the United States Supreme Court is granted.

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