Summary
In Providence Hospital, the court held that a breach of contract claim was pre-empted by the provisions of ERISA. It was the case there, as here, that the defendant raised the pre-emption argument belatedly.
Summary of this case from Baker Hospital v. IsaacOpinion
Docket No. 93298.
Decided August 3, 1987.
Law Offices of Sullivan Leavitt, P.C. (by Martin J. Leavitt and Karen L. Faber), for plaintiff.
Zweig Lane, P.C. (by Timothy R. Van Dusen), for defendant.
Providence Hospital filed suit in Wayne Circuit Court on November 2, 1983, against Health and Welfare Plans, Inc., which is not a party to this appeal, alleging that Health and Welfare Plans, Inc., was contractually bound to pay health benefits to plaintiff's assignors and has a duty to pay plaintiff as an assignee. On May 31, 1984, plaintiff's first amended complaint was filed which alleged that the defendant in this case, National Labor Union Health and Welfare Fund, had breached its contractual obligation to pay for services rendered by plaintiff.
Plaintiff provided health care to certain individuals who were beneficiaries under a multi-employer/employee welfare benefit plan administered by the defendant. The fund is an employee welfare benefit plan within the meaning of the Employee Retirement Income Security Act, 29 U.S.C. § 1002(1). Plaintiff alleged that prior to rendering the services it confirmed with the defendant or its agents that the beneficiaries were covered under the plan and that the services to be provided were covered services. Upon receiving confirmation, plaintiff rendered the services to the beneficiaries and then sought payment from defendant.
Subsequent to plaintiff's rendition of covered services, and after considering all potential available alternatives, on December 23, 1983, the trustees of the fund unilaterally adopted a "plan of arrangement" whereby the trustees determined that, with respect to benefits for services previously provided, the fund would delay making payment until the trustees determined that the fund had sufficient assets. This action was taken in response to a financial crisis experienced by the fund, and was allegedly taken pursuant to the National Labor Union and Welfare Fund Agreement and Declaration of Trust.
The "plan of arrangement" was submitted to providers under the plan, but plaintiff rejected the arrangement and filed the complaint giving rise to this litigation. At oral argument, this Court was informed that the amounts billed had been paid in full but plaintiff sought interest which had been accruing since the trial judge, on February 24, 1986, entered a summary disposition order under MCR 2.116(C)(10) against defendant National Labor Union Health and Welfare Fund only. The amount prayed for in the first amended complaint was $81,467.85.
On May 23, 1986, a stipulation and order of dismissal was entered on the counts against codefendant Health and Welfare Plans, Inc. On March 17, 1986, defendant filed a motion for amendment of judgment alleging that plaintiff's cause of action was preempted by ERISA and that a review of the trustees' decision to modify the method of payment of benefits presented a material issue of fact which was not a proper subject for summary disposition. Finding that the motion, which was nothing more than a motion for rehearing on plaintiff's motion for summary disposition, was untimely, the trial court denied defendant's motion and an order was entered on April 10, 1986. On June 13, 1986, defendant filed a claim of appeal from the April 10, 1986, order. We reverse.
Defendant first raised the preemption question in the motion for amendment of judgment, and because the trial court denied the motion for untimeliness it did not address the preemption issue. Generally, this Court will not review issues that were not raised and decided by the trial court. MCR 7.203; Bajis v City of Dearborn, 151 Mich. App. 533; 391 N.W.2d 401 (1986), lv den 426 Mich. 874 (1986). However, there are exceptions to this general rule. This Court will review issues not raised below if a miscarriage of justice will result from a failure to pass on them, American Way Service Corp v Comm'r of Ins, 113 Mich. App. 423; 317 N.W.2d 870 (1982), or if the question is one of law and all the facts necessary for its resolution have been presented, Kahn-Reiss, Inc v Detroit Northern Savings Loan Ass'n, 59 Mich. App. 1; 228 N.W.2d 816 (1975), or where necessary for a proper determination of the case, Loper v Cascade Twp, 135 Mich. App. 106; 352 N.W.2d 357 (1984).
Although the complaint does not mention ERISA, 29 U.S.C. § 1001 et seq., or specifically allege a violation thereof, the parties do not dispute that the fund, as defined in the trust agreement, is an employee welfare benefit plan as defined in 29 U.S.C. § 1002(1), and is therefore regulated by ERISA.
Defendant, both in brief and in argument, claims that the federal act entirely preempts state law. Defendant asserts that there is no basis for a common-law action as defined under Michigan law that can stand in view of the Congressional intent, and that the proper review of this case by the trial judge should have been as to whether the trustees violated their duties as defined in ERISA.
The preemption provision of ERISA is found in 29 U.S.C. § 1144, which provides:
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in [ 29 U.S.C. § 1003(a)] and not exempt under [ 29 U.S.C. § 1003(b)]. This section shall take effect on January 1, 1975.
* * *
For purposes of this section:
(1) the term "State law" includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. . . . .
The state law at issue need not specifically concern subjects covered by ERISA to be preempted. Alessi v Raybestos-Manhattan, Inc, 451 U.S. 504; 101 S Ct 1895; 68 L Ed 2d 402 (1981). Instead, even a state's general common law will be preempted by ERISA if, in its present application, the common law "relates to" an employee benefit plan. Dependahl v Falstaff Brewing Corp, 653 F.2d 1208 (CA 8, 1981), cert den 454 U.S. 968; 102 S Ct 512; 70 L Ed 2d 384 (1981).
In its appellate brief, plaintiff states that it has never asserted that its claim does not arise under ERISA and that its claim is based upon the civil enforcement provision of ERISA, specifically, 29 U.S.C. § 1132(a)(1)(B), which permits plan participants to bring a cause of action for benefits due under the terms of a plan. We find that the plaintiff is correct in arguing that its claim may be based upon the civil enforcement provision of ERISA, but we also find that the plaintiff has relied upon common law within the State of Michigan to enforce its claim against defendant, which is not permitted. Claims under subsection (a)(1)(B) of 29 U.S.C. § 1132 may be brought either in state courts of competent jurisdiction or district courts of the United States, the act giving concurrent jurisdiction. 29 U.S.C. § 1132(e)(1). In Authier v Ginsberg, 757 F.2d 796 (CA 6, 1985), cert den ___ US ___; 106 S Ct 208; 88 L Ed 2d 177 (1985), the United States Court of Appeals for the Sixth Circuit, in ruling on a decision of Judge Cook in the United States District Court for the Eastern District of Michigan, found that the fiduciary suing in that case asserted a cause of action under Michigan law and because the fiduciary's alleged compliance with ERISA had a connection with or reference to an employee benefit plan, it was fully preempted by federal law. In two recent companion cases decided by the United States Supreme Court, Metropolitan Life Ins Co v Taylor, 481 US ___; 107 S Ct 1542; 95 L Ed 2d 55 (1987), and Pilot Life Ins Co v Dedeaux, 481 US ___; 107 S Ct 1549; 95 L Ed 2d 39 (1987), it was held that ERISA preempts state common law tort and contract actions where there was an assertion of improper processing of a claim for benefits under an insured employee benefit plan.
In the Metropolitan case, supra, the plaintiff had filed suit in state court. Defendants in the state suit removed the suit to federal court alleging federal question jurisdiction under ERISA and pendent jurisdiction over the remaining state claims. The district court found the case properly removable and granted the defendants summary judgment on the merits. 588 F. Supp. 562 (ED Mich, 1984). The Court of Appeals reversed on the ground that the district court lacked removal jurisdiction. 763 F.2d 216 (CA 6, 1985). The Court of Appeals found that the complaint stated only state-law causes of action subject to the federal defense of ERISA preemption and that the "well-pleaded complaint" rule precluded removal on the basis of a federal defense. 763 F.2d 216, 219 (CA 6, 1985). The United States Supreme Court subsequently reversed. Justice O'Connor, speaking for a unanimous Court, stated:
Federal pre-emption is ordinarily a federal defense to the plaintiff's suit. As a defense, it does not appear on the face of a well-pleaded complaint, and, therefore, does not authorize removal to federal court. Gully v First National Bank, [ 229 U.S. 109; 57 S Ct 96; 81 L Ed 70 (1936)]. One corollary of the well-pleaded complaint rule developed in the case law, however, is that Congress may so completely pre-empt a particular area, that any civil complaint raising this select group of claims is necessarily federal in character. For 20 years, this Court has singled out claims pre-empted by § 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, for such special treatment. [ 95 L Ed 2d 63.]
Justice O'Connor noted that the language of § 502(a)(1)(B), of ERISA 29 U.S.C. § 1132(a)(1)(B), closely parallels the preemptive language of § 301 of the Labor Management Relations Act, 29 U.S.C. § 185. Following what she labeled "extraordinary preemptive power," Justice O'Connor found that the suit, though it purports to raise only state-law claims, is necessarily federal in character by virtue of the clearly manifested intent of Congress and therefore was removable to the federal court by the defendants.
The Pilot Life case, supra, dealt with the issue whether a Mississippi insurance provision was one that "regulates insurance" and thus would not be subject to ERISA even though it was clearly an employee benefit plan. In Pilot Life, supra, 95 L Ed 2d 48, Justice O'Connor noted that "the express pre-emption provisions of ERISA are deliberately expansive, and designed to `establish pension plan regulation as exclusively a federal concern.' Alessi v Raybestos-Manhattan, Inc, 451 U.S. 504, 523; 101 S Ct 1895; 68 L Ed 2d 402 (1981)." She found, in looking at Congressional intent, that Congress did not intend to authorize other remedies, pointing out that in § 502(a) of the ERISA statute Congress provided for six carefully integrated civil enforcement provisions. Justice O'Connor further stated:
The deliberate care with which ERISA'S civil enforcement remedies were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERISA'S civil enforcement remedies were intended to be exclusive. This conclusion is fully confirmed by the legislative history of the civil enforcement provision. The legislative history demonstrates that the pre-emptive force of § 502(a) was modeled after § 301 of the Labor-Management Relations Act of 1947 (LMRA), 29 U.S.C. § 185." [ Pilot Life, supra, 95 L Ed 2d 52.]
While Michigan courts do not rely upon a legislator's present recollection of what was intended at the time of passage of a bill as evidence of legislative intent, see City of Williamston v Wheatfield Twp, 142 Mich. App. 714; 370 N.W.2d 325 (1985), the United States Supreme Court relies very heavily upon statements made during debate as carried in the Congressional Record. Justice O'Connor noted that during the arguments on adoption of ERISA, Senator Javits stated:
"It is also intended that a body of Federal substantive law will be developed by the courts to deal with issues involving rights and obligations under private welfare and pension plans." [ Pilot Life, supra, 95 L Ed 2d 53.]
Justice O'Connor concluded that the expectation that a federal common law of rights and obligations under ERISA-regulated plans would develop would make little sense if the remedies available to ERISA participants and beneficiaries could be supplemented or supplanted by varying state laws.
As noted above, plaintiff claims that defendant did not properly raise the issue of preemption and should be deemed to have waived the claim. Judge Philip Pratt of the United States District Court for the Eastern District of Michigan in Ogden v Michigan Bell Telephone Co, 595 F. Supp. 961 (ED Mich, 1984), dealt with a similar issue under FR Civ P 12(b)(6). In that case plaintiffs were arguing that the motion filed by defendants was an untimely motion for reconsideration and that the court had already passed upon the propriety of the count involved in the case in an earlier opinion. The trial court found both of these contentions meritless. Rule 12(b) is similar to MCR 2.116(C). MCR 2.116(D)(3) provides that "[t]he grounds listed in subrule (C)(4), (8), (9), and (10) may be raised at any time." We believe that defendant has properly raised the issue under MCR 2.116(C)(4) which provides that the court lacked jurisdiction over the subject matter. We find that under the proper interpretation of ERISA the court, on the pleadings filed by plaintiff, lacked jurisdiction over the subject matter and accordingly the defendant has raised the question in a timely fashion by raising it on what amounted to a motion for reconsideration.
The decision of the trial court is reversed and this matter is remanded to the trial court for a determination under the provisions of ERISA. Any court costs, attorney fees, and interest assessed under the previous finding must be reviewed based upon this opinion.
Reversed and remanded.