[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________________
No. 97-6250 ________________________________
D.C. Docket No. CV-96-L-3363-M
DENISE HALL,
Plaintiff-Appellant,
versus
BLUE CROSS/BLUE SHIELD OF ALABAMA,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court for the Northern District of Alabama _________________________________________________________________
(February 4, 1998)
Before HATCHETT, Chief Judge, FAY and FARRIS*, Senior Circuit Judges.
__________________________________ * Honorable Jerome Farris, Senior U.S. Circuit Judge for the Ninth Circuit, sitting by designation.
2 HATCHETT, Chief Judge:
The principal issue in this appeal is whether the Employee Retirement Income
Security Act of 1974 (ERISA) preempts a state law fraudulent inducement claim. We
affirm the district court's ruling that the claim is preempted.
BACKGROUND
When appellant Denise Hall learned that she would need to have an ovarian mass
surgically removed, she consulted appellee Blue Cross Blue Shield of Alabama (Blue
Cross), the insurer of her employer-provided health benefits plan. Blue Cross informed
Hall that it would deny any insurance claim arising out of the surgery. After Hall
proceeded with the surgery and incurred over $10,000 in medical expenses, she filed suit
in the Circuit Court of Marshall County, Alabama, claiming that agents of Blue Cross
fraudulently induced her to enroll in its plan based on material misrepresentations about
the scope of insurance coverage for preexisting conditions. Blue Cross removed the case
to the United States District Court for the Northern District of Alabama, asserting that
Hall’s state law fraud claims were preempted under ERISA. The district court dismissed
Hall’s case on preemption grounds.
Hall worked as Dr. Joseph Kendra’s office manager. She was responsible for
making decisions about the insurance carrier for the employees' health benefits plan. In
December 1994, Blue Cross agents approached Hall and Dr. Kendra to discuss changing
the employees' medical insurance coverage from Aetna Casualty & Surety Company (Aetna) to Blue Cross. Apparently concerned about coverage for her diabetic son, Hall
inquired about the general scope of Blue Cross’s coverage for preexisting conditions.
The Blue Cross agents allegedly represented that known preexisting conditions, such as
Hall’s son’s diabetes, and any pregnancy-related conditions, would not be covered for a
period of 270 days after the effective date of the Blue Cross policy. The agents allegedly
told Hall that Blue Cross would be responsible for medical care associated with all other
conditions that might arise. Based on these representations, Dr. Kendra, Hall and the staff
decided to drop the existing insurance coverage with Aetna and to contract with Blue
Cross, without securing overlapping coverage during the 270-day waiting period. Blue
Cross's group health plan, which is an ERISA-governed employee welfare benefits plan,
went into effect on January 1, 1995.
After a regular gynecological examination in April 1995, Hall was diagnosed with
a mass on her right ovary. Before this diagnosis, Hall did not have any medical status or
symptoms that would have indicated that she suffered from this condition. Blue Cross
denied Hall’s claim for the costs she incurred in having the mass surgically removed
because the treatment was rendered during the 270-day waiting period for preexisting
conditions.
Hall’s state court complaint against Blue Cross asserted three counts: (1) “fraud in
or around December, 1994"; (2) “suppression”; and (3) “fraud in the inducement.” Hall
alleged that because of Blue Cross's misrepresentations she did not secure other coverage
during the 270-day exclusion period and did not request that Blue Cross modify its offer
4 so as to cover unknown preexisting conditions. She sought compensatory and punitive
damages.
After timely removing the case to the district court, Blue Cross filed a motion to
dismiss or, in the alternative, for summary judgment on the grounds that Hall’s state
claims were preempted under ERISA and that Hall had failed to exhaust her
administrative remedies as required under Blue Cross’s plan. Hall moved to remand the
case to state court and declined the district court’s grant of leave to file an amended
complaint incorporating claims under ERISA. After entertaining oral argument on the
motions, the district court denied Hall’s motion to remand and granted Blue Cross’s
motion to dismiss, without prejudice.
DISCUSSION
The issue in this case is whether the district court erred in holding that ERISA
preemption applies to Hall’s claims based on fraudulent inducement. Hall contends that
her claims arise solely under state law fraud doctrines. Blue Cross contends that Hall’s
claims implicate ERISA. We review de novo the district court’s ERISA preemption
analysis. O’Reilly v. Ceuleers, 912 F.2d 1383, 1385 (11th Cir. 1990).
Ordinarily, a cause of action does not arise under federal law unless the plaintiff’s
“well-pleaded complaint” presents a federal question. Kemp v. International Bus. Machs.
Corp., 109 F.3d 708, 712 (11th Cir. 1997). Although Hall’s complaint purports to rely
exclusively on state law, she cannot avoid federal jurisdiction if her allegations involve an
area of law that federal legislation has preempted. Caterpillar Inc. v. Williams, 482 U.S.
5 386, 393 (1987). Through ERISA, Congress specifically preempted “any and all State
laws insofar as they may now or hereafter relate to any employee benefit plan . . . .” 29
U.S.C. § 1144(a) (1994). Moreover, in ERISA’s civil enforcement section, Congress
expressly provides the exclusive cause of action for the recovery of benefits governed
under an ERISA plan. See Kemp, 109 F.3d at 712 (citing ERISA’s civil enforcement
provision, 29 U.S.C. § 1132(a)). Accordingly, if state law claims implicate ERISA’s
preemption clause and fall within the scope of ERISA’s civil enforcement section, then
they are converted into federal claims. Brown v. Connecticut Gen. Life Ins. Co., 934
F.2d 1193, 1196 (11th Cir. 1991).
The Supreme Court has broadly interpreted the phrase “relate to” in ERISA’s
preemption clause so as to include any state law claim having “‘a connection with or
reference to’” an employee benefits plan. New York Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995) (quoting Shaw v. Delta Air
Lines, Inc., 463 U.S. 85, 96-97 (1983)). This court has further instructed that state law
claims “relate to” an ERISA plan for preemption purposes “whenever the alleged conduct
at issue is intertwined with the refusal to pay benefits.” Garren v. John Hancock Mut.
Life Ins. Co., 114 F.3d 186, 187 (11th Cir. 1997); see also Variety Children’s Hosp., Inc.
v.
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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________________
No. 97-6250 ________________________________
D.C. Docket No. CV-96-L-3363-M
DENISE HALL,
Plaintiff-Appellant,
versus
BLUE CROSS/BLUE SHIELD OF ALABAMA,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court for the Northern District of Alabama _________________________________________________________________
(February 4, 1998)
Before HATCHETT, Chief Judge, FAY and FARRIS*, Senior Circuit Judges.
__________________________________ * Honorable Jerome Farris, Senior U.S. Circuit Judge for the Ninth Circuit, sitting by designation.
2 HATCHETT, Chief Judge:
The principal issue in this appeal is whether the Employee Retirement Income
Security Act of 1974 (ERISA) preempts a state law fraudulent inducement claim. We
affirm the district court's ruling that the claim is preempted.
BACKGROUND
When appellant Denise Hall learned that she would need to have an ovarian mass
surgically removed, she consulted appellee Blue Cross Blue Shield of Alabama (Blue
Cross), the insurer of her employer-provided health benefits plan. Blue Cross informed
Hall that it would deny any insurance claim arising out of the surgery. After Hall
proceeded with the surgery and incurred over $10,000 in medical expenses, she filed suit
in the Circuit Court of Marshall County, Alabama, claiming that agents of Blue Cross
fraudulently induced her to enroll in its plan based on material misrepresentations about
the scope of insurance coverage for preexisting conditions. Blue Cross removed the case
to the United States District Court for the Northern District of Alabama, asserting that
Hall’s state law fraud claims were preempted under ERISA. The district court dismissed
Hall’s case on preemption grounds.
Hall worked as Dr. Joseph Kendra’s office manager. She was responsible for
making decisions about the insurance carrier for the employees' health benefits plan. In
December 1994, Blue Cross agents approached Hall and Dr. Kendra to discuss changing
the employees' medical insurance coverage from Aetna Casualty & Surety Company (Aetna) to Blue Cross. Apparently concerned about coverage for her diabetic son, Hall
inquired about the general scope of Blue Cross’s coverage for preexisting conditions.
The Blue Cross agents allegedly represented that known preexisting conditions, such as
Hall’s son’s diabetes, and any pregnancy-related conditions, would not be covered for a
period of 270 days after the effective date of the Blue Cross policy. The agents allegedly
told Hall that Blue Cross would be responsible for medical care associated with all other
conditions that might arise. Based on these representations, Dr. Kendra, Hall and the staff
decided to drop the existing insurance coverage with Aetna and to contract with Blue
Cross, without securing overlapping coverage during the 270-day waiting period. Blue
Cross's group health plan, which is an ERISA-governed employee welfare benefits plan,
went into effect on January 1, 1995.
After a regular gynecological examination in April 1995, Hall was diagnosed with
a mass on her right ovary. Before this diagnosis, Hall did not have any medical status or
symptoms that would have indicated that she suffered from this condition. Blue Cross
denied Hall’s claim for the costs she incurred in having the mass surgically removed
because the treatment was rendered during the 270-day waiting period for preexisting
conditions.
Hall’s state court complaint against Blue Cross asserted three counts: (1) “fraud in
or around December, 1994"; (2) “suppression”; and (3) “fraud in the inducement.” Hall
alleged that because of Blue Cross's misrepresentations she did not secure other coverage
during the 270-day exclusion period and did not request that Blue Cross modify its offer
4 so as to cover unknown preexisting conditions. She sought compensatory and punitive
damages.
After timely removing the case to the district court, Blue Cross filed a motion to
dismiss or, in the alternative, for summary judgment on the grounds that Hall’s state
claims were preempted under ERISA and that Hall had failed to exhaust her
administrative remedies as required under Blue Cross’s plan. Hall moved to remand the
case to state court and declined the district court’s grant of leave to file an amended
complaint incorporating claims under ERISA. After entertaining oral argument on the
motions, the district court denied Hall’s motion to remand and granted Blue Cross’s
motion to dismiss, without prejudice.
DISCUSSION
The issue in this case is whether the district court erred in holding that ERISA
preemption applies to Hall’s claims based on fraudulent inducement. Hall contends that
her claims arise solely under state law fraud doctrines. Blue Cross contends that Hall’s
claims implicate ERISA. We review de novo the district court’s ERISA preemption
analysis. O’Reilly v. Ceuleers, 912 F.2d 1383, 1385 (11th Cir. 1990).
Ordinarily, a cause of action does not arise under federal law unless the plaintiff’s
“well-pleaded complaint” presents a federal question. Kemp v. International Bus. Machs.
Corp., 109 F.3d 708, 712 (11th Cir. 1997). Although Hall’s complaint purports to rely
exclusively on state law, she cannot avoid federal jurisdiction if her allegations involve an
area of law that federal legislation has preempted. Caterpillar Inc. v. Williams, 482 U.S.
5 386, 393 (1987). Through ERISA, Congress specifically preempted “any and all State
laws insofar as they may now or hereafter relate to any employee benefit plan . . . .” 29
U.S.C. § 1144(a) (1994). Moreover, in ERISA’s civil enforcement section, Congress
expressly provides the exclusive cause of action for the recovery of benefits governed
under an ERISA plan. See Kemp, 109 F.3d at 712 (citing ERISA’s civil enforcement
provision, 29 U.S.C. § 1132(a)). Accordingly, if state law claims implicate ERISA’s
preemption clause and fall within the scope of ERISA’s civil enforcement section, then
they are converted into federal claims. Brown v. Connecticut Gen. Life Ins. Co., 934
F.2d 1193, 1196 (11th Cir. 1991).
The Supreme Court has broadly interpreted the phrase “relate to” in ERISA’s
preemption clause so as to include any state law claim having “‘a connection with or
reference to’” an employee benefits plan. New York Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995) (quoting Shaw v. Delta Air
Lines, Inc., 463 U.S. 85, 96-97 (1983)). This court has further instructed that state law
claims “relate to” an ERISA plan for preemption purposes “whenever the alleged conduct
at issue is intertwined with the refusal to pay benefits.” Garren v. John Hancock Mut.
Life Ins. Co., 114 F.3d 186, 187 (11th Cir. 1997); see also Variety Children’s Hosp., Inc.
v. Century Med. Health Plan, Inc., 57 F.3d 1040, 1042 (11th Cir. 1995) (“Where state law
claims of fraud and misrepresentation are based upon the failure of a covered plan to pay
benefits, the state law claims have a nexus with the ERISA plan and its benefits
system.”).
6 Hall contends that her fraudulent inducement claims arise out of the manner in
which Blue Cross “marketed” its insurance policy prior to her becoming a beneficiary of
the Blue Cross plan. She claims that ERISA does not govern the sale of insurance, but
instead governs only the administration of insurance. Hall's principal argument is that her
fraudulent inducement claims are entirely independent of the existence of Blue Cross’s
plan because she can prove her case in state court without ever referencing the plan’s
terms and provisions. Hall claims that she can state a prima facie case of fraudulent
inducement merely upon showing that Blue Cross’s denial of coverage was inconsistent
with its agents’ representations, and she detrimentally relied on those misrepresentations.
At no time, Hall argues, would she have to compare the agents’ oral representations to
Blue Cross’s written policy.
Hall fails to consider the practical consequences of litigating her claims in state
court. Ultimately, no court will be able to determine whether Hall has been fraudulently
induced without resorting to the written policy and assessing the truth of the agents’
representations. Because the terms of Blue Cross’s ERISA-governed policy are critical to
the resolution of Hall’s fraudulent inducement claims, her cause of action is sufficiently
related to an employee benefits plan to fall within ERISA’s preemptive scope.
Under similar facts, this court reached the same conclusion in Franklin v. QHG of
Gadsden, Inc., 127 F.3d 1024 (11th Cir., 1997). While working for Goodyear Tire and
Rubber Company, Linda Franklin participated in an ERISA plan under which her
husband, Ronia Franklin, was a beneficiary. Due to a series of strokes and other ailments,
7 Mr. Franklin was bedridden and received 24-hour home nursing care that was covered
under his wife’s benefits plan with Goodyear. When Baptist Memorial Hospital (BMH)
extended an employment offer to Mrs. Franklin, she accepted the position conditioned
upon BMH’s assurance that her husband would receive the same level of care that he was
receiving under Goodyear’s plan. The defendant, QHG of Gadsden (QHG), later
purchased BMH and decided to modify the insurance plan to exclude coverage for 24-
hour nursing care. The Franklins filed suit against QHG in state court alleging that Mrs.
Franklin was fraudulently induced to leave her employment with Goodyear through
misrepresentations regarding the medical coverage that would be provided to her husband
if she accepted BMH’s offer of employment. Arguing that ERISA preempted the
Franklins’ claim, QHG removed the case to district court and moved for summary
judgment. Franklin, 127 F.3d at 1025-27.
In affirming the district court’s summary judgment ruling in QHG’s favor, this
court reasoned that “a determination of the merits of appellants’ state law [fraud] claims
will require a court to compare the benefits available under the ERISA plans provided by
BMH and QHG with those provided to its employees by Goodyear.” Franklin, 127 F.3d
at 1029. The court thus concluded that the Franklins’ claims were preempted because
they had “a direct connection to the administration of medical benefits under an ERISA
plan.” Franklin, 127 F.3d at 1029.
Likewise, substantiating Hall’s allegation that Blue Cross misrepresented the scope
of its coverage for preexisting conditions ultimately requires a comparison between the
8 agents’ statements and the written policy. This necessary resort to the terms and
provisions of Blue Cross’s employee benefits plan plainly implicates ERISA. Hall’s state
law fraudulent inducement claims are therefore related to Blue Cross’s administration of
an ERISA-governed plan and, as such, are preempted.
For the foregoing reasons, we affirm the judgment of the district court.
AFFIRMED.