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holding that there was "no reason to except the plaintiff's state law claims for detrimental reliance and misrepresentation from preemption, since they meet both prongs of the test."
Summary of this case from Meyers v. Texas Health ResourcesOpinion
CIVIL ACTION NO. 02-236, SECTION "C" (5).
July 9, 2003.
ORDER AND REASONS
This matter comes before the Court to determine the law applicable to the plaintiff's claims. Having considered the record, the memoranda of counsel and the law, the Court has determined that the plaintiff's claims are preempted by the Employee Retirement Income Security Act, 29 U.S.C. § 1001 ("ERISA") for the following reasons.
The plaintiff, Bank of Louisiana ("BOL"), filed this diversity suit against Aetna US Healthcare, Inc. and Aetna Life Insurance Company (collectively "Aetna") seeking the reimbursement of funds for claims made by BOL employees under an Aetna policy. In its complaint, BOL made four state law claims: (1) misrepresentation; (2) detrimental reliance; (3) breach of contract; and (4) breach of fiduciary duty. The issue of ERISA preemption was briefed on order of the Court. In its memoranda, the plaintiff identifies an additional claim under La. Rev. Stat. 22:657, which has never been pleaded, and claims that it is a viable claim along with the claims for detrimental reliance and/or negligent misrepresentation. (Rec. Doc. 64, Rec. Doc. 70, p. 2).
The plaintiff has indicated its intention to withdraw the claim for breach of fiduciary duty. (Rec. Doc. 64, p. 3, fn. 2). The plaintiff does not mention the state law breach of contract claim in the memoranda, and the Court deems this claims abandoned.
The plaintiff has pled in an amended complaint a claim under 22:658 and 22:1220, which it does not discuss in its memoranda. (Rec. Doc. 3). The Court assumes that the plaintiff intends to abandon such claims; in the event it intends to present the same argument as made with regard to La. Rev. Stat. 22:657, those claims would be preempted for the reasons set forth hereinafter.
There are two types of ERISA preemption: complete preemption under 29 U.S.C. § 1132 ("Section 502") and conflict preemption under 29 U.S.C. § 1144 ("Section 514"). Roark v. Humana, Inc., 307 F.3d 298, 305 (5th Cir. 2002). Complete preemption exists where the state law duplicates or falls within the scope of an ERISA § 502 remedy; it can provide subject matter jurisdiction in this Court. Id. Conflict preemption under Section 514 is provided where state laws "relate to" ERISA plans, but serves only as a defense and does not confer original or removal jurisdiction in federal court. Id. The plaintiff and the defendant appear to agree that this case does not present claims under Section 502. Therefore, the Court's preemption analysis turns to Section 514.
Subject matter jurisdiction is not an issue here, in light of the existence of diversity jurisdiction.
The "general preemption clause" of Section 514(a) provides that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" governed by ERISA. This definition receives broad jurisprudential interpretation. CIGNA Healtplan of Louisiana, Inc. v. State of Louisiana, 82 F.2d 642 (5th Cir.), cert. Denied, 519 U.S. 964 (1996). In order to "relate to" a plan, a state law claim must have "a connection with or reference to such plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85 96-97 (1983); Rozzell v. Security Services, Inc., 38 F.3d 819, 821 (1994). There is no real issue that the claims made by BOL against Blue Cross "relate to" a covered plan for present purposes.
The parties apparently agree that the Blue Cross policy was an employee benefit plan covered by ERISA.
In order to be preempted by ERISA, the state law claim must also (1) address an area of exclusive federal concern, and (2) directly affect the relationship between the traditional ERISA entities: the employer, the plan and its fiduciaries, and the participants and beneficiaries. Reliable Home Health Care v. Union Central Insurance Co., 295 F.3d 505, 515 (5th Cir. 2002). The Court finds that all of the plaintiff's state law claims set forth in the complaint are preempted under Section 514(a). The parties are two traditional ERISA entities: the employer and the plan insurer. The claims all pertain to the terms of an ERISA-governed plan and will require the examination of plan terms. Such plan interpretation has been found to be sufficient to warrant ERISA preemption. Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1218 (5th Cir.), cert. denied, 506 U.S. 820 (1992). The necessary examination of policy language or amendment terms warrant preemption in light of the expansiveness of Section 514(a); "[t]he underlying conduct alleged by [plaintiff] cannot be severed from its connection to the Plan."Reliable, 295 F.3d at 516.
This conclusion comports with the rule that "preempted state law includes any state law cause of action as it relates to an employee benefit plan, even if it arises under a general law which in and of itself has no connection to employee benefit plans." Christopher, 950 F.2d at 1219. Specific state law claims which have been preempted include fraud, civil conspiracy, breach of contract, interference with contract rights, negligence, gross negligence, Christopher, supra, fraud and negligent misrepresentation, Lee v. E. I. DuPont de Nemours Co., 894 F.2d 755 (5th Cir. 1990).
The Court finds no reason to except the plaintiff's state law claims for detrimental reliance and misrepresentation from preemption, since they meet both prongs of the test. In arguing against preemption, the plaintiff erroneously relies on the rule established in cases where an independent third-party provider sues the plan for misrepresenting the insured status of a patient prior to providing medical services. See e.g.,Jefferson Parish Hospital v. Principal Health Care of Louisiana, 934 F. Supp. 206 (E.D.La. 1996); Jefferson Parish Hospital v. Central States Southeast Southwest Areas Health Welfare Fund, 814 F. Supp. 25 (E.D.La. 1993). A health care provider is not a "traditional ERISA entity" for purposes of the preemption analysis.
In its memoranda, the plaintiff singles out a claim for damages under La. Rev. Stat. 22:657 for consideration under the "savings clause" in Section 514(b)(2)(A). That clause provides that nothing in ERISA "shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities." The Supreme Court recently restated the test which determines whether a state law qualifies for saving from ERISA preemption. "First, the state law must be specifically directed toward entities engaged in insurance. . . . Second, as explained above, the state law must substantially affect the risk pooling arrangement between the insurer and the insured. Kentucky Ass'n of Health Plans, Inc. v. Miller, ___ U.S. ___, 123 S.Ct. 1471, 1479 (2003).
Section 22:657 provides for a penalty double the amount of benefits due plus attorney's fees for an insurer's unreasonable failure to pay a claim within 30 days from receipt of written notice and proof of claim.
Here, there is no dispute that La. Rev. Stat. § 22:657 is directed toward entities engaged in insurance for purposes of the first prong of the Kentucky test. The Supreme Court explained the second element:
We emphasize that conditions on the right to engage in the business of insurance must also substantially affect the risk pooling arrangement between the insurer and the insured to be covered by ERISA's savings clause. Otherwise any state law aimed at insurance companies could be deemed a law that "regulates insurance," contrary to out interpretation.Kentucky, 123 S.Ct. at 1477. Here, the Court can not find that Section 22:657 "substantially affect[s] the risk pooling arrangement between insurer and insured" for purposes of the savings clause. The statute merely provides additional penalties for late payment. This finding is in conformity with the caselaw: "[a]lmost all of the cases addressing the issue hold that 22:657 is subject to ordinary preemption under ERISA section 514. . . . Notably, many of these cases specifically find that Section 22:657 is preempted because it creates an alternative remedy that is not authorized under ERISA's civil enforcement scheme." Arana v. Ochsner Health Plan, 302 F.3d 462, 473 (5th Cir. 2002), reh'g en banc granted, 319 F.3d 205 (2003) (internal citations omitted). See also, Anderson v. Business Men's Assurance Co., 2003 WL 21305335 (E.D.La.) (J. Fallon); Clancy v. Employer's Health Insurance Co., 101 F. Supp. 463 (E.D.La. 200) (J. Clement).
This Court agrees that, in addition, Section 22:657 would be among the state laws that are incompatible with ERISA because it adds a judicial remedy that is not available under ERISA. Such supplementation has been found to "patently violates ERISA's policy of inducing employers to offer benefits by assuring a predictable set of liabilities, under uniform standards of primary conduct and a uniform regime of ultimate remedial orders and awards when a violation has occurred." Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 379 (2002).
Accordingly,
IT IS ORDERED that the plaintiff's state law claims for (1) misrepresentation, (2) detrimental reliance, and (3) violation of La. Rev. Stat. § 22:657 are DISMISSED as PREEMPTED by ERISA, and the plaintiff's claims for (4) breach of contract, (5) violations of La. Rev. Stat. § 22:658 and § 22:1220, and (5) breach of fiduciary duty are DISMISSED as abandoned. This dismissal shall take effect in ten days, in order to allow the plaintiff an opportunity to amend its complaint, if appropriate.
The parties are encouraged to pursue amicable resolution.