Lind v. Aetna Health, Inc.

• Court: Court of Appeals for the Tenth Circuit
• Decided: October 31, 2006
• Docket: 05-5055
• Status: Published

Opinion

F I L E D United States Court of Appeals Tenth Circuit PUBLISH October 31, 2006 UNITED STATES CO URT O F APPEALS Elisabeth A. Shumaker Clerk of Court TENTH CIRCUIT

JA M ES D . LIN D and LIN D A STILLW E LL-LIN D ,

Plaintiffs-Appellants, v. No. 05-5055 AETNA HEALTH, IN C.,

Defendant-Appellee.

A PPE AL FR OM T HE UNITED STATES DISTRICT COURT FO R TH E NO RTH ERN DISTRICT O F O K LAH O M A (D .C . N O. 04-C V-494-K )

Jason B. Aamodt of M iller Keffer Bullock Pedigo, Tulsa, Oklahoma, and M orris D. Bernstein, Tulsa, Oklahoma, for Appellants.

Timothy A. Carney of G able and G otwals, Tulsa, Oklahoma, for Appellees.

Before BR ISC OE, M cCO NNELL, and SILER, * Circuit Judges.

M cCO NNELL, Circuit Judge.

The Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001,

can be a fruitless and thorny ground for plaintiffs, and many seek to avoid it

* The H onorable Eugene E. Siler, Senior Circuit Judge, United States Court of Appeals for the Sixth Circuit, sitting by designation. entirely by bringing their insurance claims under state law. The Supreme Court

has increasingly circumscribed such state-law claims, however, finding the pre-

emptive sweep of ERISA to be so “extraordinary” that it bars all claims of close

relation. M etropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987).

Nonetheless, James D. Lind (“Lind”) and Linda Stillwell-Lind sought to bring

claims against their insurer, Aetna Health, Inc. (“Aetna”), under Oklahoma

comm on law. The Linds believe that their tort and contract claims are not pre-

empted by ERISA , because they challenge not the insurance plan itself, but

actions by Aetna that Appellants claim are outside the scope of that plan. In the

alternative, the Linds seek leave to amend their complaint to include claims under

ERISA for compensatory and punitive damages. The private-action provisions of

ERISA have been narrowly construed, however, to exclude most forms of make-

whole relief.

The Linds fall in a long – and growing – line of plaintiffs who find

themselves squeezed between the broad preemptive sweep of ERISA and narrow

construction of remedies under the Act itself. W e find that the Linds have viable

claims neither inside ERISA nor outside it, and we AFFIRM the district court’s

grant of summary judgement and denial of leave to amend the claim.

I. Facts and Procedural Background

James D . Lind, a construction manager, was covered by Aetna under his

wife’s health insurance plan. In July 2002, he was diagnosed with M ultiple

-2- Sclerosis (“M S”). His symptoms, including recurrent and severe headaches,

dizziness, and depression, left him unable to w ork. Shortly after the diagnosis,

Aetna referred M r. Lind to Dr. Jorge Gonzalez, a neurologist, for treatment. Dr.

Gonzalez prescribed a three-drug regime – Copaxone, Provigil, and Klonopin –

which successfully reversed M r. Lind’s symptoms, allowing him to return to

work.

In February 2003, M r. Lind went to a pharmacy to pick up his Provigil

renewal, only to be told by the pharmacist that no further renewals had been

authorized. M r. Lind informed Dr. Gonzalez of the denial, who in turn informed

Aetna of his vigorous objections to the change. Aetna told D r. Gonzalez that M r.

Lind must first try Ritalin, a “step drug,” before the company would authorize

payment for further Provigil prescriptions. Dr. Gonzalez, after protesting, wrote

M r. Lind a prescription for Ritalin. M r. Lind filled the prescription, began taking

the drug, and almost immediately experienced a renewal of his symptoms. Aetna

re-authorized payment for Provigil several days later, but the new symptoms

proved irreversible, and M r. Lind remains disabled and unable to work. * *

On M ay 21, 2004, the Linds filed a petition in the District Court of Tulsa

County, Oklahoma, against Aetna, alleging medical negligence, medical

** Appellants also raise claims stemming from a second alleged incident of misconduct by Aetna, two months later. Because those claims were never before the lower court, we decline to examine them here. In re Walker, 959 F.2d 894, 896 (10th Cir. 1992).

-3- negligence under respondeat superior, tortious interference with doctor/patient

relationship, reckless endangerment, loss of consortium, and punitive damages.

Aetna removed the action to the United States D istrict Court for the N orthern

D istrict of O klahoma pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1446(a). On

June 21, 2004, the day Aetna’s answer w as due, the U nited States Supreme Court

issued its decision in Aetna Health, Inc. v. Davila, 542 U.S. 200 (2004), which

reaffirmed a broad interpretation of ERISA ’s preemptive scope. Aetna filed a

motion to dismiss, based largely on Davila, and the Linds moved to amend their

complaint to include claims under ERISA. The district court granted A etna’s

motion and denied the Linds’. The Linds appeal both rulings.

II. Preemption of state-law claims

W e begin by addressing whether the Linds’ state-law claims are barred by

ERISA , which preempts all state laws that “relate to” employee benefit plans. 29

U.S.C. § 1144(a). It is undisputed that the Linds’ original claims are based on

state law and that Aetna’s plan is an employee benefit plan; the issue is whether

the claims “relate to” the A etna plan. This court reviews the district court’s

determination of preemption de novo. Airparts Co. v. Custom Benefit Servs. of

Austin, Inc., 28 F.3d 1062, 1064 (10th Cir. 1994).

Both the language of the statute and its legislative history indicate that

Congress intended ERISA to sw eep with broad force. The Act’s stated purpose is

to protect the participants in employee benefit plans by “providing for

-4- appropriate remedies, sanctions, and ready access to the Federal courts.” 29

U.S.C. § 1001(b). The conference report shows that such language was intended

to parallel that of the Labor-M anagement Relations Act of 1947, which

“pre-empts any ‘state-law claim [whose resolution] is substantially dependent

upon the analysis of the terms of an agreement made between the parties in a

labor contract.’” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55 (1987) (quoting

Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 220 (1985)). As a result, the

Supreme Court has found ERISA to preempt nearly all state claims relating to

causes of action against covered health insurers, even when “the elements of the

state cause of action [do] not precisely duplicate the elements of an ERISA

claim.” Davila, 542 U.S. at 216.

Appellants face an unenviable task in distinguishing their case from

Davila, in which the Supreme Court found preemption on similar claims and

nearly identical facts. Juan Davila’s treating physician prescribed Vioxx to

remedy M r. Davila’s arthritis, but Aetna refused to authorize payment until M r.

Davila tried a “step drug,” Naprosyn, first. Davila, 542 U.S. at 205; Roark v.

Humana, Inc., 307 F.3d 298, 303 (5th Cir. 2002). W hen M r. Davila began taking

Naprosyn, he suffered a severe reaction that required extensive treatment and

hospitalization. Davila, 542 U.S. at 205. He brought claims to recover his

medical costs against Aetna under the Texas Health Care Liability Act, which

provided for broader remedies than did ERISA. Id. The Court held that M r.

-5- Davila’s claims were entirely pre-empted: “[A]ny state-law cause of action that

duplicates, supplements, or supplants the ERISA civil enforcement remedy

conflicts with the clear congressional intent to make the ERISA remedy exclusive

and is therefore pre-empted.” Id. at 209.

The Linds make several attempts to distinguish their case from Davila,

none of which we find persuasive. First, they argue that this case is distinct

because, rather than deny coverage within the plan’s rules, Aetna misapplied, or

“acted outside of” the plan when it did not follow appropriate notification

procedures in declining to renew M r. Lind’s prescription. That, however, is a

distinction without a difference. Davila is clear that ERISA applies whenever

“respondents complain . . . about denials of coverage promised under the terms of

ERISA -regulated employee benefit plans,” or “to rectify a wrongful denial of

benefits.” Id. at 211, 214. The language of ERISA itself makes clear that it

includes civil actions “to recover benefits due . . . under the terms of [the] plan.”

29 U.S.C. § 1132(a)(1)(B). ERISA applies to denials of coverage that are either

proper under the plan’s rules or improper under the plan’s rules.

Appellants also argue that their claims for medical negligence and

respondeat superior are outside the scope of Davila. They claim that a Dr. Jane

Doe, employed by Aetna, “made the determination that Ritalin rather than

Provigil was the appropriate drug to treat Lind’s M S. Aetna then imposed this

determination upon Lind’s treating physician.” Appellants’ Br. 10. In support of

-6- this claim, the Linds cite Pacificare of Oklahoma, Inc. v. Burrage, 59 F.3d 151

(10th. Cir 1995), in which a patient sued his doctor for medical malpractice and

included a claim for respondeat superior against the doctor’s employer, a health

maintenance organization. Id. at 153. The Pacificare Court found for the

plaintiff, holding that respondeat superior claims against insurer-employers for

medical malpractice survive ERISA. Id. at 155. Pacificare carves out a very

narrow exception, however. The Court made clear that its holding was based on

the fact that “the present claim does not involve the administration of benefits or

the level or quality of benefits promised by the plan; the claim alleges negligent

care by the doctor and an agency relationship between the doctor and the HM O.”

Id. This type of claim arises “when an HM O plan elects to directly provide

medical services or leads a participant to reasonably believe that it has, rather

than simply arranging and paying for treatment.” Id. (quoting Haas v. Group

Health Plan, Inc., 875 F.Supp. 544, 548 (S.D. Ill. 1994)). Such is not the case

here. Dr. Jane Doe was not acting as a treating physician, nor is M r. Lind

alleging medical negligence against his actual treating physician, Dr. G onzalez.

M oreover, there is no agency relationship between Dr. Gonzalez – an outside

provider – and Aetna for the purposes of prescribing medication. In fact, the

Linds’ claims are specifically precluded by the language of Pacificare itself,

which allows for claims only where “the administration of benefits” is not

-7- involved. Id. Appellants’ medical negligence claim is unavoidably linked to, and

is therefore preempted by, ER ISA.

III. ERISA claims

W e now turn to whether the Linds were properly denied leave to amend

their complaint to include ERISA claims. W e have held that, under Fed. R. Civ.

P. 15(a), “leave to amend shall be given freely,” although “the district court may

deny leave to amend w here amendment would be futile. A proposed amendment

is futile if the complaint, as amended, would be subject to dismissal.” Bradley v.

J.E. Val-M ejias, 379 F.3d 892, 901 (10th Cir. 2004) (quoting Jefferson County

Sch. Dist. v. M oody’s Investor’s Serv., 175 F. 3d 848, 859 (10th Cir. 1999)). W e

review a denial of permission to amend a complaint for abuse of discretion. See

Foman v. Davis, 371 U.S. 178, 182 (1962).

The Linds’ proposed amended complaint included claims for equitable

relief under ERISA § 502(a)(3). That provision mandates that any relief granted

be “equitable,” 29 U.S.C. § 1132(a)(2), which the Supreme Court has found to

preclude most forms of make-whole monetary restitution. In Great-West Life &

Annuity Ins. v. Knudson, 534 U.S. 204 (2002), the Court held that the restitution

of tort proceeds to an insurer w as not an equitable form of relief. Id. at 214. In

the process, the Court laid out a framework for such determinations: “In the days

of the divided bench, restitution was available in certain cases at law , and in

certain others in equity.” Id. at 212. “[F]or restitution to lie in equity, the action

-8- generally must seek not to impose personal liability on the defendant, but to

restore to the plaintiff particular funds or property in the defendant's possession.”

Id. at 214.

Justice Ginsburg and others have noted the lopsided results this

interpretation produces: “Because the Court has coupled an encompassing

interpretation of ERISA ’s preemptive force with a cramped construction of the

equitable relief allow able under § 502(a)(3), a regulatory vacuum exists:

[V]irtually all state law remedies are preempted but very few federal substitutes

are provided.” Davila, 542 U.S. at 222 (Ginsburg, J., concurring) (internal

quotation marks omitted). She goes on to suggest the remedy that the Appellants

here seek: a broader interpretation of equitable relief under § 502(a)(3). She

notes that the respondents in Davila “declined the opportunity to amend their

complaints to state claims for relief under § 502(a),” but offers that such a course

would be “an effective remedy others similarly circumstanced might fruitfully

pursue.” Id. at 223-24.

Notwithstanding this suggestion, our interpretation of § 502(a) has

continued to follow the narrow path laid out by Great-West. In M illsap v.

M cDonnell D ouglas Corp., 368 F.3d 1246 (10th Cir. 2004), we held that while

equitable monetary relief may take the form of accrued benefits due, it could not,

as requested by the plaintiffs, include back-pay: “Backpay is compensatory

because the award is measured by an employee’s loss rather than an employer's

-9- gain.” Id. at 1253. In Callery v. U.S. Life Ins., 392 F.3d 401 (10th Cir. 2004), w e

held that equitable relief does not encompass a claim for proceeds of a life-

insurance policy. These holdings also accord with our pre-Great-West

interpretation of § 502(a)(3). See Sage v. Automation, Inc. Pension Plan & Trust,

845 F.2d 885, 888 n. 2 (10th Cir. 1988) (punitive damages not an appropriate

form of equitable relief); Lafoy v. HM O Colo., 988 F.2d 97, 99-101 (10th Cir.

1993) (compensatory damages not equitable).

The claims here mirror those in Great-West, M illsap, and Callery. The

Linds are seeking compensatory damages for restitution of lost wages,

exacerbation of M r. Lind’s medical condition, and pain and suffering, as well as

punitive damages. These claims do not seek “to restore to the plaintiff particular

funds or property in the defendant's possession,” but rather “to impose personal

liability.” Great-West, 534 U.S. at 214. As such, they fall squarely within the

category of legal remedies and cannot be entertained in this action under §

502(a)(3).

This is not to say that the Linds, or similarly situated individuals, are

entirely without remedy. Had the Linds paid for the Provigil out of pocket, they

could have then sued for reimbursement or a reinstatement of coverage. Callery

suggests that, under some circumstances, policyholders might also have an

actionable claim for the refund of insurance premiums. Callery, 392 F.3d at 406.

-10- But the claims appellants wished to raise in their proposed amended complaint

are entirely legal in nature, and thus are not actionable under the statute.

IV. Conclusion

The Linds’ original claims are entirely preempted by ERISA, and we

A FFIR M their dismissal by the district court. Because appellants offered no

new, non-frivolous claims, we AFFIRM the district court’s denial of leave to

amend the complaint.

-11-