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holding that loss of consortium claim "related to the processing of [plaintiff's] ERISA benefits" and thus was preempted
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Civil Action No. 96-6020 (JEI).
February 20, 1997
WESTMORELAND, VESPER SCHWARTZ By: Thomas J. Vesper, Esq. West Atlantic City, NJ, Attorneys for Plaintiffs.
LUM, DANZIS, DRASCO, POSITAN KLEINBERG, L.L.C. By: Dennis J. Drasco, Esq. Kevin J. O'Connor (On the brief) Roseland, NJ, Attorneys for the Defendants The Guardian Life Insurance Company of America, Shirley Jones and Regina Oplinger.
OPINION
This matter was removed from state court and appears before us on plaintiffs' motion to remand and on defendants' motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6). Because we find that plaintiffs' claims arise under a federal statute, the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1002, et seq., we will deny the motion to remand We also find that counts two through eighteen of plaintiffs' complaint are preempted by federal law. To the extent that count one asserts a state law claim, it is also preempted. However, to the extent that it asserts an ERISA claim, we will deem the complaint amended to include that federal claim. Accordingly, we will grant in part and deny in part defendants' motion to dismiss.
I. FACTS
This case involves a dispute between plaintiff Janice LaMonica ("LaMonica") and her group health insurance plan, Guardian Life Insurance ("Guardian"). This group plan provides major medical insurance benefits to employees of Cape May Canners and their eligible dependents. LaMonica's husband, Peter, was a Cape May Canners employee, thus making LaMonica eligible to receive benefits under the plan. Plaintiffs' claims arise from breast reduction surgery performed on LaMonica last February. Plaintiffs contend that the surgery was medically necessary because of continuing neck and back problems allegedly caused by the excessive weight of LaMonica's breasts. Defendants argue that the surgery was entirely cosmetic and is therefore excluded from coverage.
On February 8, 1996, Dr. John Gatti ("Dr. Gatti") performed breast reduction surgery on LaMonica. Defendants state that plaintiff also underwent lyposuction of her abdomen, flanks, legs, and neck. Def. Br. Opp'n Motion to Remand, at 3. On November 11, 1995, Dr. Gatti wrote to Guardian for pre-approval of LaMonica's surgery. See Pl. Ex. A. Shirley Jones ("Jones"), Guardian's Group Claim Approver, responded via letter dated January 16, 1996, and informed Dr. Gatti that benefits were not payable for cosmetic procedures. The letter further explained that "final approval would be based on [the] Medical Department's review of the operative report, pathology report, pre-operative photos and the doctor's statement as to what percentage of the surgery is cosmetic and/or functional." See Pl, Ex. B. Plaintiffs allege that the surgery was performed in reliance on this letter.
After the surgery, LaMonica forwarded the relevant documents and medical bills to Guardian. Guardian denied benefits by letter dated April 18, 1996. See Pl. Ex. C. Dr. Gatti wrote to Guardian requesting an explanation and seeking an appeal of the decision. See Pl. Ex. D. The doctor told Guardian that the procedure was medically necessary and that he had performed the surgery based on Jones' pre-approval letter, He also enclosed a copy of the operative report. On May 21, 1996, Regina Oplinger ("Oplinger"), Guardian Group Claim Approver, denied the appeal and stated that Guardian had determined that the surgery was entirely cosmetic and therefore not covered under LaMonica's plan. See Pl. Ex.
By letter dated May 29, 1996, Denise Moran ("Moran"), of Gary Woods Associates, Inc., the insurance agents who sold the Guardian policy to Cape May Canners, wrote to Guardian, requesting a second appeal. See Pl. Ex. F. Moran asked that LaMonica's case be reviewed by an independent physician. On May 31, 1996, Guardian informed Dr. Gatti that LaMonica's medical records had been forwarded to an independent consultant for review. See Pl. Ex. G. On June 28, 1996, Guardian informed Dr. Gatti that the second appeal had been denied. See Pl. Ex. H.
At the request of LaMonica's attorney, Richard DeMichele, Jr., Esq., Jones agreed to forward LaMonica's records to a second independent consultant. See Pl. Ex. I. Nevertheless, Guardian denied benefits a second time, stating that the surgery was wholly cosmetic and not medically necessary. See Pl. Ex. J.
On October 16, 1996, plaintiffs filed a complaint in the Superior Court of New Jersey, Cape May County, Law Division, against Guardian, alleging state claims as follows: (1) nonpayment of medical benefits, (2) tort of bad faith against Guardian, (3) tort of bad faith against Jones, (4) tort of bad faith against Oplinger, (5) tort of bad faith against John Doe ("Doe"), (6) tort of deceit against Guardian, (7) tort of deceit against Jones, (8) tort of deceit by Oplinger, (9) tort of deceit against Doe, (10) violation of bad faith statute by Guardian, (11) violation of bad faith statute by Jones, (12) violation of bad faith statute by Oplinger, (13) violation of bad faith statute by Doe, (14) negligent/intentional infliction of emotional distress against Guardian, (15) negligent/intentional infliction of emotional distress against Jones, (16) negligent/intentional infliction of emotional distress against Oplinger, (17) negligent/intentional infliction of emotional distress against Doe, and (18) loss of consortium. On December 20, 1996, defendants filed a petition for removal to this Court pursuant to 28 U.S.C. § 1441. See Pl. Ex. L. The instant motion to remand followed.
II. DISCUSSION
In support of their motion to remand, plaintiffs argue that their claims do not arise under federal law because the federal question does not appear on the face of the complaint. Instead, plaintiffs contend that their claims arise under state common law. Plaintiffs also maintain that because state and federal courts have concurrent jurisdiction over ERISA claims, removal is improper. Defendants argue that plaintiffs' claims arise under and are related to ERISA, and are therefore properly removable, Further, defendants argue that the state law claims in plaintiffs' complaint should be dismissed because they are preempted by federal law.
A. Motion to Remand
A civil action may be removed if the district court would have had "original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States." 28 U.S.C. § 1441; Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). The "well-pleaded complaint rule" is used to determine whether a claim "arises under" federal law. See Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 10 (1983) ("Whether a case is one arising under the Constitution or a law or treaty of the United States . . . must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill of declaration."). Generally, a defense raising a federal question is inadequate to confer federal jurisdiction. Louisville Nashville R. Co. v. Mottley, 211 U.S. 149 (1908).
One corollary of the well-pleaded complaint rule, however, is the complete preemption doctrine: if Congress has so completely preempted a particular area, any complaint raising claims in that area, is necessarily federal in character. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987); Goepel v. National Postal Mail Handlers Union, 36 F.3d 306, 309-13 (3d Cir. 1994),cert. denied, 115 S.Ct. 1691 (1995). The Supreme Court has determined that Congress intended the complete-preemption doctrine to apply to state law claims that fit within the scope of ERISA's civil enforcement provisions. See Metropolitan Life, 481 U.S. at 64. One of ERISA's civil enforcement mechanisms provides that a participant or beneficiary of an ERISA plan may bring a civil action to "recover benefits due to him under the terms of his plan." 29 U.S.C. § 1132(a)(1)(B).
Plaintiffs rely on the "well-pleaded complaint rule" in urging remand Plaintiffs argue that the complaint does not satisfy the well-pleaded complaint rule because it did not include ERISA claims. Defendants allege, however, that because plaintiffs claims "relate to" an employee benefit plan, they are governed by ERISA and are removable. By operation of the complete preemption doctrine, raising ERISA as a defense confers federal jurisdiction and removal is appropriate.See Charter Med. Corp. v. Hartford Life Ins. Co., 732 F. Supp. 1160, 1163 (N.D. Ga. 1989) (holding that patient's state law claim for failure to pay insurance benefits was "related to" an employee benefit plan such that claim fell under ERISA's preemption clause and was thereby removable); Garred v. General Am. Life Ins. Co., 723 F. Supp. 1325, 1327 (W.D. Ark. 1989) (finding that complaint filed by spouse of employee covered by group health insurance policy, seeking recovery for medical bills, was removable because ERISA conferred federal jurisdiction). Therefore, the well-pleaded complaint rule is no barrier to removal and does not provide grounds for remand
Plaintiffs rely on Pan Am. Petroleum Corp. v. Superior Court, 366 U.S. 656 (1961) for the proposition that federal courts respect the plaintiff's choice of forum (state court) and refuse to exercise jurisdiction even if the plaintiff could also recover under federal law on the same facts. See Pl. Br. at 9. This characterization misconstrues the holding of Pan Am., Pan Am. held that plaintiffs' claims were traditional state common law claims that did not lose their character simply because of the existence of a federal regulation scheme. In Pan Am., unlike here, the state law claims were unrelated to an area of law covered by a Congressional preemption scheme.
Alternatively, plaintiffs argue that because state and federal courts have concurrent jurisdiction over ERISA benefits claims,see 29 U.S.C. § 1132(e)(1), removal is inappropriate. Plaintiffs ground their argument in the removal statute's provision that: "[e]xcept as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants." 28 U.S.C. § 1441(a) (emphasis added). Plaintiffs argue that ERISA's provision for concurrent jurisdiction qualifies as an Act of Congress that precludes removal. We disagree.
The ERISA provision that plaintiffs rely on does notexpressly limit or restrict a defendant's right to remove an action. By itself, the grant of concurrent jurisdiction is insufficient to bar removal. See Casey v. Goodness, 9 F.3d 1550, CIV.A. No. 92-16807, 1993 WL 461252, **1 (9th Cir. Nov. 4, 1993) (holding that in determining whether removal is proper, "[i]t does not matter that the state court could adjudicate the federal claims in the absence of removal."); Dorsey v. City of Detroit, 858 F.2d 338, 341 (6th Cir. 1988) ("The weight of judicial authority supports the conclusion that "a Congressional grant of concurrent jurisdiction in a statute does not imply that removal is prohibited."); Mahmoud v. Mahmoud, CIV. A. No. 96-4165, 1997 WL 43524, *1 (E.D.N.Y. Jan. 24, 1997) ("The general rule is that `absent an express provision to the contrary, the removal right should be respected when there is concurrent jurisdiction.'" (citing Johnson v. First Unum Life Ins. Co., 914 F. Supp. 51, 52 (S.D.N.Y. 1996))); Nguyen v. U.S. Dept. of Agriculture, CIV.A. No. 96-2574, 1996 WL 492310, *1 (E.D. La. Aug. 12, 1996) ("The law is clear that a grant of concurrent jurisdiction between federal and state courts does not render an action filed in state court nonremovable); Stevo v. CSX Transp. Inc., 940 F. Supp. 1222, 1224 (N.D. Ill. 1996) ("Clearly, in a majority of jurisdictions, absent a specific statutory language to the contrary, concurrent jurisdiction does not bar removal.");State v. 777 N. White Station Road. Memphis. Tenn., 937 F. Supp. 1296, 1301-02 (W.D. Tenn. 1996) ("`The mere fact that concurrent jurisdiction exists under the statute does not prohibit a defendant from properly removing a case to federal court so long as the main requirement under the federal removal statute, 28 U.S.C. § 1441(a) is met; namely, that the district court have original jurisdiction over the matter, regardless of which court the complainant initiated the action first.'" (citing Spencer v. South Florida Water Management, 657 F. Supp. 66, 67 (S.D. Fla. 1986))).
The cases that plaintiffs cite in support of their argument are either inapposite, outdated, have been appropriately criticized as illogical. First, plaintiffs rely on Lederman v. Pacific Mutual Life Ins. Co., 494 F. Supp. 1020, 1021 (C.D. Cal. 1980) (holding that although insurance plan was part of employee welfare benefit plan within meaning of ERISA, suit by participant based on insurer's refusal to pay certain medical expenses was not governed by ERISA and did not fall within jurisdiction of the federal court), and Austin v. General American Life Ins. Co., 498 F. Supp. 844 (N.D. Ala. 1980) (finding that where a defendant insurer's only relationship to an ERISA plan is to provide contractual benefits, there is no federal jurisdiction). Both of these decisions predate the Supreme Court's rulings in Pilot Life and Metropolitan Life, which established the breadth of ERISA preemption.
Plaintiffs also rely on Dedeaux v. Pilot Life Ins. Co., 770 F.2d 1311 (5th Cir. 1985), which was reversed by the Supreme Court. See Pilot Life, 481 U.S. 41 (1987).
Further, the Lederman court's reasoning has been deservingly criticized by several courts. See Warren v. United States, 738 F. Supp. 212, 213 (E.D. Ky. 1990) ("Lederman's conclusion, that in cases of concurrent jurisdiction the plaintiff's choice of forum is to be honored, must be rejected without an express statement of congressional intent supporting the honoring of such a choice."), aff'd, 932 F.2d 582 (6th Cir. 1991); Mercy Hosp. Associates v. Miccio, 604 F. Supp. 1177, 1180 (E.D.N.Y. 1985) ("With due respect to the Lederman Court, its construction is incorrect. The federal removal statutes explicitly contemplate concurrent jurisdiction in all cases eligible for removal . . . That 29 U.S.C. § 1132(e)(1) excepts actions under Subsection 1132(a)(1)(B) from exclusive federal jurisdiction cannot reasonably be construed to mean that it bestows on plaintiff irrevocable choice of forum."); McConnell v. Marine Engineers Beneficial Ass'n, 526 F. Supp. 770, 773 (N.D. Cal. 1981) (noting that the Lederman court based its conclusion on a non sequitur, that its reasoning was unsound, and that the relevant ERISA provisions are entirely devoid of an express prohibition against removal as required by 1441(a)). Finally, the Austin decision does not even purport to shed light on whether ERISA preempts state law claims for benefits under insured employee benefit plans. As such, its relevance to this case is tenuous at best.
Plaintiffs also rely on the Third Circuit's statement that just because the Supreme Court has recognized a limited exception to the well-pleaded complaint rule for state law claims which fit within the scope of the ERISA civil enforcement provisions by no means implies that "all claims preempted by ERISA are subject to removal." Dukes v. U.S. Healthcare, 57 F.3d 350, 355 (3d Cir.) (holding that because plaintiff's medical malpractice and negligence claims fell outside the scope of ERISA provision granting right to recover benefits, complete preemption doctrine did not permit removal), cert. denied, 116 S.Ct. 564 (1995). Nevertheless, plaintiffs fail to point out the Duke court's very relevant explanation of its quoted statement. The court noted that a claim can fall within ERISA's preemption provision and still fall outside of its civil enforcement provision, thereby making it non-removable. That is not the situation here. Not only do the LaMonica claims "relate to" an employee benefit plan as required by the preemption provisions, but they are also brought by a beneficiary "to recover benefits due to him" as provided by the civil enforcement provision. Thus, the Third Circuit's holding does not support plaintiffs' argument for remand Accordingly, plaintiffs motion for remand is denied.
B. Motion to Dismiss
Defendants move for dismissal pursuant to Fed.R.Civ.P. 12(b)(6). Defendants argue that the complaint asserts state law claims that are preempted by ERISA and therefore fails to state a claim upon which relief can be granted. As to counts two through eighteen, we agree. Count one, however, a claim for nonpayment of medical benefits, shall remain as we deem it amended to assert an ERISA claim.
ERISA contains a sweeping preemption clause, which states that ERISA shall "supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The term "State law" includes "all laws, decisions, rules, regulations, or other State action having the effect of law." 29 U.S.C. § 1144(c)(1). There are two steps for determining whether plaintiffs' state law claims are preempted. First, we must determine if the defendant had an ERISA benefit plan. See Pane v. RCA Corp., 667 F. Supp. 168, 170 (D.N.J. 1987),aff'd, 868 F.2d 631 (3d Cir. 1989). Second, we must analyze whether the state laws "relate to" that plan. See id.
In the case at bar, neither party disputes that the Guardian plan is governed by ERISA. In fact, the first two sentences of the plaintiffs' brief concede that medical insurance plans are covered by ERISA. Plaintiffs do not even argue that the Guardian plan is somehow excluded from the medical plans that are covered. Thus, the first prong of the test is easily satisfied. The second prong, whether or not the state laws "relate to" the ERISA plan, is the core of our analysis.
The ERISA preemption clause is not limited to "`state laws specifically designed to affect employee benefit plans.'" Pilot Life, 481 U.S. at 48 (quoting Shaw v. Delta Airlines, 463 U.S. 85, 98 (1983)). A state common law cause of action that is based on the alleged improper processing of a claim for benefits under an ERISA plan will be preempted unless the claims fall under an exception to the ERISA preemption clause. See Pilot, 481 U.S. at 47-48. Several exceptions are listed in the ERISA saving clause, which provides: "[N]othing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities." 29 U.S.C. § 1144(b)(2)(B). Thus, unless plaintiffs' claims fall into one of the categories specified in § 1144(b)(2)(B), the claims are preempted by ERISA and must be dismissed.
1. Count One
The first count of plaintiffs' complaint seek damages for nonpayment of medical benefits against Guardian in alleged breach of its contract with plaintiffs. This count seeks a remedy — recovery of benefits under an ERISA plan — that is available only through the civil enforcement provisions of ERISA. See 29 U.S.C. § 1132(a)(1)(B). Therefore, we will dismiss this count to the extent it seeks relief pursuant to state contract law. However, we will deem the complaint amended to include an ERISA claim for nonpayment of benefits pursuant to 29 U.S.C. § 1132(a) (1)(B). Thus, to the extent that the ERISA claim survives, defendants' motion to dismiss is denied.
2. Counts Two Through Eighteen
The second, third, fourth, and fifth counts of plaintiffs' complaint allege that the defendants' denial of benefits amount to a tort of bad faith on the part of Guardian, Jones, Oplinger, and Doe. This tort claim is based on the alleged improper processing of LaMonica's claim for benefits for her breast reduction surgery. Thus, the claim is directly related to the denial of benefits under an ERISA medical insurance plan. Accordingly, the claim could only survive preemption if it were specifically exempted by ERISA's saving clause. Common law tort claims for bad faith do not fall within the saving clause. See Pilot Life, 481 U.S. at 51. Therefore, counts two through five of the complaint must be dismissed.
The next four counts of plaintiffs' complaint allege that Guardian, Jones, Oplinger, and Doe committed a tort of deceit by knowingly allowing an allegedly unqualified person to serve as the independent consultant who reviewed LaMonica's claims for coverage. Plaintiffs allege that the "independent consultant" was not qualified to determine whether LaMonica's surgery was medically necessary because he/she was not a licensed physician. See Complaint ¶¶ 33-35. Again, these claims are directly related to the alleged improper processing of LaMonica's benefits and are therefore preempted. See Pilot Life, 481 U.S. at 48. Furthermore, courts have specifically held that state law claims for fraud or deceit are preempted by ERISA.See Davidian v. Southern California Meat Cutters Union, 859 F.2d 134, 135 (9th Cir. 1988); Reilly v. Blue Cross Blue Shield United of Wisconsin, 846 F.2d 416, 426 (7th Cir. 1988). Therefore, counts six, seven, eight, and nine are preempted by ERISA and are hereby dismissed.
Defendants point out that the facts as pled are insufficient to satisfy the elements of the tort of "deceit" because plaintiffs fail to allege misrepresentation, intent to cause reliance, actual reliance or reasonable reliance. See Def. Br. at 10 n. 2. Nevertheless, because the deceit claim would be preempted — even if its elements were satisfied — we need not examine in detail whether such a claim could be sustained under the facts as they appear in the complaint.
Counts ten through thirteen allege that the denial of LaMonica's benefits violates the New Jersey bad faith statute. These claims are related to the administration of the ERISA benefits plan and are preempted for the same reasons as the common law bad faith claims. "State law" preemption under ERISA applies with equal force to claims brought under state "laws" or state "decisions." See 29 U.S.C. § 1144(c)(1). Accordingly, counts ten through thirteen are hereby dismissed.
Counts fourteen through seventeen of the complaint seek recovery for plaintiffs' alleged emotional distress that resulted from the denial of benefits. Again, these claims are state common law tort claims that are related to benefits receivable under an ERISA plan and are therefore preempted. See Pilot Life, 481 U.S. at 48. The Third Circuit has specifically held that "[s]tate law claims of emotional distress arising out of the administration of an ERISA employee benefit plan are also preempted." Pane, 968 F.2d at 635. Therefore, counts fourteen through seventeen must be dismissed.
The final count of plaintiffs' complaint is for loss of consortium, allegedly resulting from LaMonica's injuries. LaMonica's injuries were allegedly caused by the defendants' failure to pay her medical benefits. This claim, therefore, is related to the processing of her ERISA benefits and is preempted.See Pilot Life, 481 U.S. at 48. Accordingly, count eighteen of the complaint is dismissed.
3. Jury Demand
Plaintiffs' demand a jury trial. In a suit for recovery of benefits under an ERISA employee benefit plan, a majority of the circuit courts of appeal have held that a litigant is not entitled to a jury trial. See, e.g., Pane v. RCA Corp., 868 F.2d 631, 636 (3d Cir. 1989) (citing cases from seven other circuit courts of appeal).
III. CONCLUSION
We find that plaintiffs' claims "arise under" ERISA. Therefore, federal jurisdiction exists and removal is proper pursuant to 28 U.S.C. § 1441. Accordingly, plaintiffs' motion for remand is hereby denied. To the extent counts one through eighteen of the complaint assert state law claims, they are preempted by ERISA are hereby dismissed. We deem the complaint amended to assert an ERISA claim for nonpayment of benefits. An appropriate order will issue on even date herewith.