Summary
holding that ERISA preempts state negligence claim because it "involves the handling of a benefit determination"
Summary of this case from Burgos v. Group Pension Administrators, Inc.Opinion
Case No. 4:02-CV-388
February 7, 2003
William Randell Johnson, Plano, TX, For Plaintiffs
Paige A. Lueking and Gregory Ryan Brenner of Cooper Scully, Dallas, TX, For Defendants.
MEMORANDUM OPINION AND ORDER
This case is before the court on Plaintiff's Motion to Remand (Docket No. 3). After considering the parties' submissions and the applicable law, the Court finds that Plaintiff's Motion to Remand should be DENIED.
BACKGROUND
On October 23, 2002, Plaintiff Sharon D. Jones ("Mrs. Jones"), Individually and as Representative of the Estate of Rodney A. Jones ("Mr. Jones") (collectively "Jones"), Decedent, filed her original petition in the 296th Judicial District Court of Collin County, Texas. On November 25, 2002, Defendants Texas Health Choice, L.C. and Sierra Health and Life Insurance Company, Inc. (collectively "Defendants") filed their Notice of Removal. There is no contention that the action was not timely removed. Removal was based on the alleged existence of an ERISA plan and the preemption of Plaintiff's state law claims in the underlying action.
In Plaintiff's Original Petition, she alleges that her husband, Rodney A. Jones ("Mr. Jones"), was employed with ARCO Southwest Roofing Company ("ARCO") as a project manager. ARCO provided employee group benefits to its employees through Metroplex Employer's Health and Life Plan ("Metroplex Employers"). Metroplex Employers was an association of employers which entered into a group medical and hospital service agreement with Texas Health Choice, L.C. (the "Plan") allowing for the member employers to provide employee group benefits to their respective employees. ARCO was a member-employer of Metroplex Employers. Beginning on October 19, 1999, Mr. and Mrs. Jones were enrolled as insured members under the Plan.
Sierra Health and Life Insurance Company, Inc. is an affiliate insurance company of Texas Health Choice, L.C.
In May or June of 2000, Mr. Jones was hospitalized pursuant to the advice of and under the direction of Defendants' designated case manager, a nurse practitioner. Subsequently, Mr. Jones went into renal failure and was later diagnosed with end state liver failure for which he was told he required a liver transplant. Mr. Jones was informed that he could not "get in line" for a donated liver unless Defendants approved coverage or he came up with alternate funding in the amount of $200,000.00. Initially, the Jones were told the proposed transplant was covered. However, they were later verbally advised that Mr. Jones's transplant and related services were not covered. The Jones requested written confirmation and an explanation of Defendants' denial of coverage but received no response. Thereafter, the Jones hired an attorney and he wrote Defendants on December 12, 2000, and requested written confirmation explaining Defendants' denial and copies of plan documents.
On December 19, 2000, Defendants provided some, but not all, requested documents and promised to complete and review a "member profile for all claims for [Decedent] for the year 2000" and stated that from "this profile, all claims submitted, processed and denied will be reviewed and a written explanation of how these claims processed will be provided to you as requested." The Jones's responded to Defendants December 19th letter stating that the documents provided were incomplete and did not include all the information requested. On January 19, 2001, Defendants agreed to pay for an evaluation of Mr. Jones to determine if he was a suitable candidate but did so only upon a condition that is was not admitting liability or coverage. Mr. Jones died on February 8, 2001. On February 9, 2001, the Defendants provided a written confirmation and explanation of their denial of Mr. Jones's claim.
On October 23, 2002, Plaintiff filed this lawsuit alleging violations of the Texas Deceptive Trade Practices Act ("DTPA"), the Texas Insurance Code, and the Texas Health Maintenance Organization Act. Plaintiff does not distinguish which claims apply to which state cause of action. Instead, she relies on the exact same set of claims to support each of her state law claims. Specifically, Plaintiff's Original Petition provides the following set of claims to support all of her state law claims, in pertinent part:
In her Motion to Remand, Plaintiff asserts that she also stated a violation of the Texas Health Care Liability Act ("THCLA") and the Texas Prompt Payments Act.
(1) Defendants have misrepresented the terms of the plan through their use of deceptive and misleading plan documents and their statements regarding when and to whom their initial denial letter was allegedly sent;
(2) Defendants initially confirmed coverage only to later deny plan benefits;
(3) Defendants failed to timely deny the claim and/or to timely provide written confirmation of said denial together with an explanation of their reasons for denial;
(4) Defendants failed to timely respond to requests for plan documents and for information concerning the terms of the plan;
(5) Defendants failed to provide renewals of coverage with commensurate benefits upon taking over and renewing the plan and thereby reduced the scope of said coverage without first giving reasonable notice to plan members such as Decedent and Decedent's employer;
(6) Defendants canceled the policy and refused payment of covered benefits without reasonable basis or justification;
(7) Defendants allowed medical care, treatment and referrals to be made [by] persons other than medical doctors or that did not otherwise have proper qualifications to supervise, direct or make recommendations regarding medical care, treatment or referrals;
(8) Defendants failed to follow proper procedures in conducting their review of and responding to requests from Plaintiff and Decedent regarding the plan and coverage of liver transplants and related services under the plan;
(9) [Defendants] fail[ed] to take reasonable efforts in the hiring, training and supervision of persons involved in the handling of Decedent's claims and/or in the management of his treatment and benefits under the plan.
Compl. ¶ 19. On December 24, 2002, Plaintiff filed the instant Motion to Remand.
REMOVAL
Removal of a state law action to federal court is proper when the complaint falls within the original jurisdiction of the federal district court. See 28 U.S.C. § 1331. Where, as here, there is no diversity of citizenship between the parties, the propriety of removal depends upon the existence of a federal question, i.e., whether any of plaintiffs' claims "arise under" federal law. See 28 U.S.C. § 1331. An action arises under federal law when the face of the "well pleaded complaint" raises a federal issue. Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 9-12 (1983). The well-pleaded complaint rule is qualified, however, by the complete preemption doctrine. As the Supreme Court stated in Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 62-63 (1987), "Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." The Supreme Court ruled that ERISA is such an area, and that state law claims are preempted by ERISA provided that they "relate to" an ERISA plan. Id.
Defendants removed this action alleging ERISA preempts Plaintiff's various state law claims, thereby conferring this court with original jurisdiction over the action. The Plaintiff raises two separate arguments in her motion to remand for improper removal: (1) the health plan at issue is not subject to ERISA; and (2) the claims do not "relate to" an ERISA plan so as to invoke the doctrine of complete preemption. The court will address each of these arguments in turn.
THE PLAN
Plaintiff first argues that the plan at issue is not governed by ERISA. ERISA covers certain "employee benefit plans," which includes "an employee welfare benefits plan or an employee pension benefit plan or a plan which is both an employee welfare benefit plan and an employee pension benefit plan." An "employee welfare benefit plan" is defined as:
any plan, fund, or program . . . established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, . . . medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment. . . .29 U.S.C. § 1002(1).
Additional pertinent definitions include:
(5) The term "employer" means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employees action for an employer in such capacity.
(6) The term "employee" emans any individual employed by an employer.
(7) The term "participant" means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.
(8) The term "beneficiary" means a person designated by a participant, or by the terms fo an employee benefit plan, who is or may become entitled to a benefit thereunder.29 U.S.C. § 1002(5)-(8).
The decision whether a particular plan or program qualifies as an "employee welfare benefit plan" under ERISA requires that the court determine whether a plan: (1) exists; (2) falls within the safe-harbor provision established by the Department of Labor; and (3) satisfies the primary elements of an ERISA "employee benefit plan" established or maintained by an employer or employee organization intending to benefit employees or members. Meredith v. Time Ins. Co., 980 F.2d 352, 355 (5th Cir. 1993).
i. Does a plan exist?
First, the Court must determine whether a Plan exists. "At the outset, any court confronted with the question whether a particular arrangement constitutes an employee welfare benefit plan under ERISA `must first satisfy itself that there is in fact a plan at all.'" Id. at 355. "A formal document designated as `the Plan' is not required to establish that an ERISA plan exists." Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 240-41 (5th Cir. 1990). Ultimately, the determination of whether or not the arrangement is an "employee welfare benefit plan" is generally a question of fact governed by a set of well established legal standards. See Gahn v. Allstate Life Ins. Co., 926 F.2d 1449 (5th Cir. 1991).
The Court looks to see if there was a "plan" by inquiring whether "from the surrounding circumstances a reasonable person [could] ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits." Memorial Hosp. Sys., 904 F.2d at 240 (quoting Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982) (en banc)). Under this standard, a plan existed. The benefits provided by the Plan were described in the Group Health Certificate of Coverage and the Small Group Evidence of Coverage. It is undisputed that ARCO's employees, including Mr. Jones, were the beneficiaries of the Plan. Additionally, the fact that ARCO paid the premiums, chose to obtain the benefits offered through Metroplex and made enrollment forms available to its employees demonstrates that the employer established the Plan for the purpose of providing benefits to its employees. Based on the record and the applicable law, this Court finds that a plan existed.
ii. Does the Plan fall within the safe harbor provision?
Next, the court must apply the safe-harbor provisions established by the Department of Labor regulations to determine whether the program was exempt from ERISA. See McDonald v. Provident Indemn. Life Ins. Co., 60 F.3d 234, 236 (5th Cir. 1995). The Department of Labor regulations provide that the term "employee welfare benefit plan":
shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which
(1) No contributions are made by an employer or employee organization;
(2) Participation in the program is completely voluntary for employees or members;
(3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs; and
(4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.29 C.F.R. § 2510.3-1(j). If any one of the four factors set out in the regulations is present, the plan is not excluded from ERISA coverage by the safe-harbor provision. The Fifth Circuit has stated "the and connector indicates that the existence of any one of the four criteria listed in the regulation would prevent a group insurance plan, otherwise qualifying as an ERISA plan, from being excluded from coverage under the Act." Memorial Hosp. Sys., 904 F.2d at 241 n. 6. Because ARCO paid the insurance premiums, it was not excluded from ERISA coverage by the safe-harbor provision. Id. at 241 (citing 29 C.F.R. § 2510.3-1(j)).
iii. Is the Plan "established or maintained for the purpose of providing benefits" under the language of ERISA?
Once the court finds the existence of an "employee benefit plan" and determines that the plan is not excluded from ERISA coverage by the Department of Labor regulations, the court must then determine whether the plan meets the criteria adopted by the Fifth Circuit for plans covered by ERISA. Only those "employee welfare benefit plans" that are "established or maintained" by an employer for the "purpose of providing certain benefits to its employees" are covered by ERISA. 29 U.S.C. § 1002(1). Therefore, under this requirement the "two primary elements of an employee benefit plan [are]: (1) whether an employer established or maintained the plan; and (2) whether the employer intended to provide benefits to the employee." Meredith, 980 F.2d at 355. The record reveals that ARCO, Mr. Jones's employer, chose to purchase employee group benefits through Metroplex for the benefit of its employees. Thus, this element is satisfied. Accordingly, the Court finds that the Plan is an employee benefit plan as defined by ERISA.
ERISA PREEMPTION
Defendants argue that Plaintiff's state law claims are preempted by ERISA. "ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137 (1990) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983)). ERISA expressly "supercede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a) (expressly excepting two situations not applicable here). "A state law `relates to' an employee benefit plan `if it has a connection with or reference to such plan.'" Rozzell v. Security Servs., Inc., 38 F.3d 819, 821 (5th Cir. 1994) (quoting Shaw, 463 U.S. at 96-97). It is "well-established that the `deliberately expansive' language of [Section 514(a)] . . . is a signal that it is to be construed broadly." Corcoran v. United HealthCare, Inc., 965 F.2d 1321, 1328 (5th Cir. 1992) (citations omitted). Because of the breadth of the preemption clause and the broad remedial purpose of ERISA "state laws found to be beyond the scope of § 1144(a) are few" Jackson v. Martin Marietta Corp., 805 F.2d 1498, 1499 (11th Cir, 1986).
However, "ERISA preemption is not limitless." Rozzell, 48 F.3d at 821. In particular, the Fifth Circuit has stated that "[o]f course, `some state actions may affect employee benefits plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law `relates to' the plan.'" Bullock v. The Equitable Life Assurance Society, 259 F.3d 395, 399 (quoting Shaw, 463 U.S. at 100 n. 21). In order to ascertain whether a state law claims is preempted by ERISA, the Court must look past the words in the complaint and consider the substance of the claims alleged. Rozzell, 48 F.3d at 822.
ERISA preempts a state law claim "if (1) the state law claim addresses an area of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claim directly affects the relationship between the traditional ERISA entities-the employer, the plan and its fiduciaries, and the participants and beneficiaries." Hubbard v. Blue Cross Blue Shield Ass'n, 42 F.3d 942, 945 (5th Cir. 1995). A suit by a participant or beneficiary to recover benefits from a covered plan falls directly within the civil enforcement provision of ERISA, which provides an exclusive federal cause of action for the resolution of such disputes. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 62-63 (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987). "It is clear that ERISA preempts a state law cause of action brought by an ERISA plan participant or beneficiary alleging improper processing of a claim for plan benefits." Dowden v. Blue Cross Blue Shield of Tex., Inc., 126 F.3d 641, 643 (5th Cir. 1997) (quoting Memorial Hosp. Sys., 904 F.2d at 245). "In short, when beneficiaries seek to recover benefits from a plan covered by ERISA, their exclusive remedy is provided by ERISA, in 29 U.S.C. § 1132(a)(1)(B)." Hansen v. Cont'l Ins. Co., 940 F.2d 971, 979 (5th Cir. 1991).
i. Texas Insurance Code, DTPA, Texas Health Maintenance Organization Act, and Negligence Claims
Accordingly, the Fifth Circuit has found claims brought under Texas law asserting a variety of common law and statutory causes of action arising from the failure to pay or misrepresentations concerning benefits available under an ERISA plan to be preempted by ERISA-breach of contract, negligence, fraud, negligent misrepresentation, breach of fiduciary duty, breach of the duty of good faith and fair dealing, equitable estoppel, intentional infliction of emotional distress, violation of the Texas Deceptive Trade Practices Act, violation of Article 21.21 of the Texas Insurance Code, and violation of the Texas Health Maintenance Organization Act. See, e.g., Hogan v. Kraft Foods, 969 F.2d 142, 144 (5th Cir. 1992); Hermann Hosp. v. MEBA Med. Benefits Plan, 959 F.2d 569, 577-78 (5th Cir. 1992); Hansen, 940 F.2d at 979; Ramirez v. Inter-Continental Hotels, 890 F.2d 760, 763-64 (5th Cir. 1989); Boren v. NL Indus., Inc., 889 F.2d 1463, 1465-66 (5th Cir. 1989), cert. denied, 497 U.S. 1029 (1990); see also Cristantielli v. Kaiser Found. Health Plan of Texas, 113 F. Supp.2d 1055, 1066 (N.D.Tex. 2000). In addition, claims brought under Article 21.55 of the Texas Insurance Code have been found to be preempted by ERISA. See Salmeh v. Provident Life Acc. Ins. Co., 23 F. Supp.2d 704, 718 (S.D.Tex. 1998). Preemption applies when the essence of a claim seeks the recovery of benefits or otherwise relates to an employee benefit plan, even when brought against a third-party, non-fiduciary. See Hubbard, 42 F.3d at 946; Corcoran, 965 F.2d at 1334.
Here, Plaintiff has brought suit against Defendants alleging that her husband was wrongfully denied benefits under an insurance policy. This action, therefore, directly affects the relationship between traditional ERISA entities-a beneficiary and a fiduciary. Moreover, Plaintiff's claims address Mr. Blum's right to receive benefits under the terms of an ERISA plan. Accordingly, Plaintiff's action to recover benefits from the fiduciary of a covered plan falls directly within the civil enforcement provision of ERISA, which provides an exclusive federal cause of action for the resolution of such disputes. Because the essence of his suit seeks the recovery of benefits or otherwise relates to an employee benefit plan, her state law claims brought under the Texas Insurance Code, DTPA, and Texas Health Maintenance Organization Act are preempted by ERISA. Likewise, Plaintiff's negligence claim is preempted by ERISA because it involves the handling of a benefit determination-the denial of the liver transplant. See Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1332 (5th Cir. 1992) (distinguishing claims that focus on the medical decisions of physicians and claims that focus on administrative decisions); see also Person v. Physicians Health Plan, Inc., 20 F. Supp.2d 918, 921 (E.D.Va. 1998) (same).
ii. THCLA Claim
Plaintiff has also alleged a THCLA claim in her complaint. However, Plaintiff cannot circumvent the preemptive reach of ERISA by artful pleading. See Johnson v. Baylor Univ., 214 F.3d 630, 632 (5th Cir. 2000); Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266, 274 (3d Cir. 2001) ("Although ostensibly directed at the provision of medical treatment, a federal court may `look beyond the face of the complaint to determine whether a plaintiff has artfully pleaded his suit so as to couch a federal claim in terms of state law[.]'") (quoting Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1488 (7th Cir. 1996))). When the allegations in Plaintiff's complaint are carefully scrutinized, it is clear that they are complaining in their THCLA claim about administration, not quality, of the medical care that Mr. Jones received.
As the Third Circuit held recently in Pryzbowski:
[T]he ultimate distinction to make for purposes of complete preemption is whether the claim challenges the administration of or eligibility for benefits, which falls within the scope of § 502(a) and is completely preempted, or the quality of the medical treatment performed, which may be the subject of a state action.
Pryzbowski, 245 F.3d at 273. Plaintiff attempts to cast her cause of action as a quality of care claim under the THCLA. She alleges that "Defendants allowed medical care, treatment and referrals to be made [by] persons other than medical doctors or that did not otherwise have proper qualifications to supervise, direct or make recommendations regarding medical care, treatment or referrals." Compl. ¶ 19. She further avers that "Defendants failed to follow proper procedures in conducting their review of and responding to requests from Plaintiff and Decedent regarding the plan and coverage of liver transplants and related services under the plan." Id. Further, she contends that "[Defendants] fail[ed] to take reasonable efforts in the hiring, training and supervision of persons involved in the handling of Decedent's claims and/or in the management of his treatment and benefits under the plan." Id.
The controlling question is whether her THCLA claim, fairly construed, challenges the administration of benefits or the quality of the medical treatment performed. The Court holds that it is the former. The factual predicates in the Complaint reveal that Plaintiff is challenging the administration of benefits, not assailing the quality of the medical care that Mr. Jones received. No complaint is made about the quality of care given except for Plaintiff's assertion that her husband was informed that Defendants' designated case manager was a medical doctor, when in fact, said person was a nurse practitioner. But Plaintiff does not explicitly base her THCLA claim on the quality of care provided by the nurse practitioner. Plaintiff's claims have nothing to do with the nurse's actions and everything to do with Defendants failure to provide coverage for Mr. Jones's liver transplant. In sum, Plaintiff's claim is not the type of medical malpractice cause of action that should be litigated in state court. At bottom, it is about the administration of benefits, not quality of medical treatment. The Court therefore holds that Plaintiff's THCLA claim is completely preempted by ERISA.
CONCLUSION
For the foregoing reasons, the Court finds that the plan at issue is an employee benefit plan as defined by ERISA and Plaintiff's state law claims for violations of the DTPA, Texas Insurance Code, Texas Health Maintenance Organization Act, THCLA, along with her negligence claim, fall within the complete preemption of ERISA § 502. Therefore, these claims arise under federal law within the meaning of 28 U.S.C. § 1331. Accordingly, Defendant's removal was proper. The Court DENIES Plaintiff's Motion to Remand.
IT IS SO ORDERED.