Robert Cromwell v. Equicor-Equitable Hca Corp.

944 F.2d 1272, 14 Employee Benefits Cas. (BNA) 1235, 1991 U.S. App. LEXIS 21334, 1991 WL 180098

• Court: Court of Appeals for the Sixth Circuit
• Decided: September 11, 1991
• Docket: 90-3564
• Status: Published

Opinions

AMENDED OPINION

FEIKENS, Senior District Judge.

This appeal is from the district court’s orders dismissing appellants’ state law claims as preempted and granting appel-lee’s motion for summary judgment. The issues before us are whether the trial court correctly held that appellants’ state law claims are preempted by the Employee Retirement Income Security Act (“ERISA”); whether the trial court correctly held that appellants’ breach of contract claim arose under ERISA; and whether the trial court correctly held that appellants lack of standing under ERISA did not retroactively defeat jurisdiction and require that the case be remanded to state court. Because we conclude that the district court’s holdings are correct, we AFFIRM.

BACKGROUND

Lawrence Reinke (“Reinke”) was employed by Beckman Industries through July 1985. During his employment, Reinke was a participant in the employee benefit plan for Beckman Industries (“the Beck-man plan”). In November 1986, Lawrence Reinke’s wife, Brenda, suffered a stroke, requiring the Reinkes to seek home health care for her. Appellants, Robert Cromwell and Heterodox Health Systems, Inc. formerly doing business together as Alternative Home Health Care (“appellants”), are home health care providers. Prior to agreeing to provide care to Mrs. Reinke, appellants contacted Appellee Equicor-Eq-uitable (“Equicor”), the administrator of the Beckman plan, by phone, to verify that the provision of such care to Mrs. Reinke would be covered by the Beckman plan. Allegedly, Equicor did verify this. Based on Equicor’s assurance of coverage, appellants agreed to provide home health care to Mrs. Reinke.

Reinke, acting on Mrs. Reinke’s behalf, signed an “Assignment of Insurance Benefits” clause authorizing “[p]ayment directly to ... [appellants] of any and all sums of money otherwise payable to me under the terms of the home health provisions of said group policy or contract.” Appellants provided care to Mrs. Reinke from January 1, 1987 to June 24, 1987. Equicor paid appellants for care rendered to Mrs. Reinke through April 15, 1987. Equicor consistently denied appellants’ claims for payment for services rendered thereafter.

Equicor claims that prior to May 1987, it was unaware that Reinke had terminated his employment with Beckman in 1985, and therefore was no longer entitled to any benefits from the Beckman plan. Upon discovering this, Equicor stopped paying appellants’ claims. Equicor did not notify appellants that their services would no longer be covered by the Beckman plan until June 23, 1987, when appellants called to inquire why the claims were being denied. At that time, appellants were allegedly informed that coverage was being denied because of a dispute between Lawrence Reinke and his employer regarding the insurance coverage.

The outstanding balance for the care appellants provided to Mrs. Reinke is $22,-700.08. Equicor, for reasons we do not know, issued a check in that amount directly to the Reinkes to settle all claims they had or might have against the Beckman plan. Equicor did not make the check payable to appellants, claiming it lacked legal authority or obligation to do so.¹

Appellants filed suit in state court alleging breach of contract, promissory estop-pel, negligence and breach of good faith based on their reasonable reliance on Equi-cor’s oral assurances of coverage². Equi-cor removed the suit to federal court on federal question grounds. The district court found that appellants’ complaint stated a cause of action arising under ERISA since the substance of appellants’ breach of contract claim was for benefits payable under an employee health insurance plan. In its order of July 14, 1989, the district court dismissed appellants’ state law claims as preempted by ERISA. Equicor then moved for summary judgment on the ERISA claim. On April 14, 1990, the district court granted Equicor’s motion, concluding that since appellants were neither “participants” nor “beneficiaries” as defined by ERISA, they lacked standing to bring an ERISA claim.

ANALYSIS

1. Preemption of Appellants’ State Law Claims

Appellants argue that the district court erred in finding that ERISA preempts their state law claims. According to appellants, because these claims arise under state laws of general application with only a tenuous or peripheral effect on an ERISA plan, they are not preempted by ERISA. We disagree.

ERISA preempts state law and state law claims that “relate to” any employee benefit plan as that term is defined therein. 29 U.S.C. § 1144(a). Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). The Beck-man plan is an ERISA employee benefit plan. The phrase “relate to” is given broad meaning such that a state law cause of action is preempted if “it has connection with or reference to that plan.” Metropolitan Life Ins. Co. v. Mass., 471 U.S. 724, 730, 732-33, 105 S.Ct. 2380, 2385-86, 85 (1985); Shaw v. Delta Airlines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). Such claims are preempted if they “relate to” an ERISA plan whether or not they were so designed or intended. Daniel v. Eaton Corp., 839 F.2d 263 (6th Cir.), cert. denied, 488 U.S. 826, 109 S.Ct. 76, 102 L.Ed.2d 52 (1988). Nor is it relevant to an analysis of the scope of federal preemption that appellants may be left without remedy. Caterpillar Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987).

The United States Supreme Court has held that Congress’ intent in enacting ERISA was to completely preempt the area of employee benefit plans and to make regulation of benefit plans solely a federal concern. Pilot Life, 481 U.S. at 41, 107 S.Ct. at 1549. See also Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550 (6th Cir.1987). The Court consistently emphasizes the broad scope of preemption under ERISA. See, e.g., Pilot Life, 481 U.S. at 41, 107 S.Ct. at 1549; Metropolitan Life v. Mass., 471 U.S. at 730, 105 S.Ct. at 2384; Shaw, 463 U.S. at 85, 103 S.Ct. at 2890. Thus, only those state laws and state law claims whose effect on employee benefit plans is merely tenuous, remote or peripheral are not preempted. This circuit, too, has repeatedly recognized that virtually all state law claims relating to an employee benefit plan are preempted by ERISA. See, e.g., Ruble v. UNUM Life Ins. Co., 913 F.2d 295 (6th Cir.1990); Davis v. Kentucky Finance Cos. Retirement Plan, 887 F.2d 689 (6th Cir.1989), cert. denied, — U.S. -, 110 S.Ct. 1924, 109 L.Ed.2d 288 (1990); McMahan v. New England Mut. Life Ins. Co., 888 F.2d 426 (6th Cir.1989); Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550 (6th Cir.1987). It is not the label placed on a state law claim that determines whether it is preempted, but whether in essence such a claim is for the recovery of an ERISA plan benefit. See, e.g., Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th Cir.1985).

Appellants’ complaint alleged promissory estoppel, breach of contract, negligent misrepresentation, and breach of good faith as grounds for the recovery of benefits from the Beckman plan for health care services rendered to the Reinkes. Thus, appellants’ state law claims are at the very heart of issues within the scope of ERISA’s exclusive regulation and, if allowed, would affect the relationship between plan principals by extending coverage beyond the terms of the plan. Clearly, appellants’ claims are preempted by ERISA. See, e.g., Pilot Life, 481 U.S. at 41, 107 S.Ct. at 1549 (breach of contract and bad faith claims arising out of a failure to provide benefits under the insurance contract are preempted by ERISA); Daniel v. Eaton Corp., 839 F.2d 263 (6th Cir.), cert. denied, 488 U.S. 826, 109 S.Ct. 76, 102 L.Ed.2d 52 (1988) (state law breach of contract and promissory estoppel claims are preempted by ERISA); Davis, 887 F.2d at 689 (equitable estoppel claims are not recognized by ERISA itself and state law estoppel claims are preempted by ERISA); and Hermann Hosp. v. MEBA Medical & Benefits Plan, 845 F.2d 1286 (5th Cir.1988) (claims for breach of fiduciary duty, negligence, estop-pel, breach of contract and fraud brought by a health care provider were preempted by ERISA). See also Comprehensive Care Corp. v. Doughtry, 682 F.Supp. 516 (S.D.Fla.1988) (tort and breach of contract claims arising from alleged misrepresentation of coverage to mother prior to admittance of son to hospital preempted by ERISA); and Richland Hosp., Inc. v. Ralyon, 33 Ohio St.3d 87, 516 N.E.2d 1236 (1987) (claim for willful and malicious misrepresentation of benefits preempted).³

2. The District Court’s Jurisdiction

Appellants present us with two issues relating to the district court’s jurisdiction: 1) whether the district court properly granted Equicor’s petition for removal; and 2) whether the district court’s ultimate determination that appellants lacked standing under ERISA required it to remand the entire case to state court.

A. Removal to Federal Court

Appellants argue that removal of their action to federal court was improper because they were not seeking benefits under an ERISA plan but, rather, damages for Equicor’s misconduct under general state law. We disagree.

A federal district court has removal jurisdiction over any cause of action in a state court complaint that “arises under” federal law, for which it would have had original jurisdiction. 28 U.S.C. § 1441(b). In determining whether a cause of action “arises under” federal law, the court must look to the complaint as it existed at the time the petition for removal was filed to determine whether the position of a plaintiff has any legal substance. Pullman Co. v. Jenkins, 305 U.S. 534, 59 S.Ct. 347, 83 L.Ed. 334 (1939). That a complaint ultimately fails to state a claim upon which relief can be granted is of no relevance to the question of subject matter jurisdiction. Bush v. State Industries, Inc., 599 F.2d 780 (6th Cir.1979).

Clearly appellants’ position as set forth in the complaint was of legal substance and contained allegations sufficient to give the district court jurisdiction. At the time the petition for removal was filed, appellants’ complaint alleged four causes of action: promissory estoppel, breach of contract, negligence and breach of good faith. Examining the allegations of this complaint, appellants did set forth a cause of action arising under ERISA. Appellants claimed to “stand in the shoes” of Reinke vis-a-vis his contractual relationship with Equicor under the Beckman plan, and sought to recover benefits from the plan by way of the assignment of benefits clause executed by the Reinkes. Two of appellants’ four causes of action — those for breach of contract and breach of good faith — were premised exclusively on the assignment of benefits clause. In fact, appellants concede on appeal that they sought relief pursuant to the assignment of benefits clause in counts II and IV of the complaint. Appellants argue however, that since counts I (promissory estoppel)⁴ and III (negligent misrepresentation) allege purely state law claims, the district court lacked jurisdiction over them. Contrary to appellants’ assertions, once the district court properly concluded that appellants’ claim for benefits arose under federal law, it was within its discretion to remove appellants’ state law claims as pendent, since the state law claims arose out of the same operative facts as the ERISA claim. United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

Appellants’ complaint also indicated that they had standing to bring the ERISA claim. A health care provider may assert an ERISA claim as a “beneficiary” of an employee benefit plan if it has received a valid assignment of benefits. Hermann Hospital v. MEBA Medical & Benefits Plan, 845 F.2d 1286 (5th Cir.1988). Appellants alleged that they received a valid assignment of benefits. If the assignment of benefits did actually convey rights under the plan, appellants clearly would have had standing to sue under ERISA. There was nothing in appellants’ complaint indicating that the assignment of benefits was invalid or ineffective. To the contrary, appellants repeatedly relied on the assignment of benefits and their rights “standing in the shoes” of the Reinkes vis-a-vis the health insurance contract.

Appellants alleged that Equicor informed them their claims were being denied because of a dispute between Reinke and his employer regarding coverage. This in no way indicates that the assignment of benefits clause was invalid or ineffective. Nothing in appellants’ allegations at the time of the petition for removal could have alerted the district court that standing would even be at issue in the case. Appellants clearly claimed to be entitled to benefits due them from the Beckman plan as beneficiaries by virtue of the assignment of benefits clause. Thus, appellants have alleged standing sufficient to allow removal.

In addition, in Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987), the Supreme Court held that because Congress intended to completely preempt the field of employee benefits by its adoption of ERISA, common law causes of action filed in state courts that are preempted by ERISA and come within the scope of § 502(a)(1)(B)⁵, 29 U.S.C. § 1132(a)(1)(B), are removable to federal court under 28 U.S.C. § 1441(b). According to Metropolitan Life, Congress so completely preempted this subject area that any complaint raising a claim to benefits under an employee benefit plan is necessarily federal in character. See also Lister v. Stark, 890 F.2d 941 (7th Cir.1989). Appellants' complaint was necessarily federal in character. Thus, we conclude that removal of appellants’ complaint was proper.

B. Lack of Standing and the District Court’s Jurisdiction

Appellants argue that even if the district court did have jurisdiction, that jurisdiction was defeated when the court found that appellants lacked standing to sue under ERISA. In Teagardener v. Republic-Franklin Inc. Pension Plan, 909 F.2d 947 (6th Cir.1990), this circuit held that only “participants” or “beneficiaries” of an employee benefit plan have standing to sue. Since the district court ultimately found that appellants were neither “participants” nor “beneficiaries”, it held that they lacked standing to sue under ERISA. This holding is not disputed. Instead, appellants argue that once the district court discovered that they were neither “participants” nor “beneficiaries” of an ERISA plan, it was required to remand the action — including the preempted state law claims — to state court so that the case could begin anew. We disagree.

It is well settled that jurisdiction is not determined by the outcome of the dispute. That a complaint is ultimately determined not to state a claim upon which relief can be granted does not defeat jurisdiction over the case. Bush v. State Industries, Inc., 599 F.2d 780 (6th Cir.1979). Similarly, plaintiff’s failure to recover the jurisdictional amount in a diversity action does not void the judgment for want of subject matter jurisdiction. See, e.g., Mt. Healthy City Board of Education v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977). Here, the district court’s determination that appellants lacked standing does not void its earlier determination that appellants’ state law claims are preempted.

In addition, to the extent that the district court premised removal on the Supreme Court’s holding in Metropolitan Life v. Taylor, 481 U.S. at 58, 107 S.Ct. at 1542, that under certain circumstances the defense of preemption is sufficient to allow removal of state law claims seeking benefits from an ERISA plan, the district court’s conclusion that appellants’ state law claims were in fact preempted was not mooted by its later determination that appellants lacked standing.

CONCLUSION

We hold that the district court was correct in holding that appellants’ state law claims “relate to an employee benefit plan” and therefore are preempted, that appellants’ breach of contract claim set forth an ERISA claim, and that appellants’ lack of standing did not retroactively defeat removal jurisdiction and require a remand of the entire action, including the preempted state claims, to state court. The decision of the district court is AFFIRMED.

1 . Appellee claims that because the Reinkes had no right to any further benefits under the plan at the time they executed the assignment of benefits clause, no right to payment was conveyed to appellants.

2 . Appellants also named Lawrence and Brenda Reinke as defendants in this action. However, neither is a party to this appeal.

3 . As the district court pointed out, appellants agreed to provide health care services to the Reinkes without requiring proof of insurance or other adequate security. Appellants did not ask to be notified if coverage lapsed, nor did they investigate what circumstances might cause coverage to lapse or whether there was any limit on coverage. They procured an assignment of benefits without ensuring that it conveyed any right to benefits under the plan. In the absence of any legal duty between appellee, the Beckman plan and appellants, ERISA negates appellants’ attempt to make appellee and the plan an after-the-fact insurer of the Reinke’s private debt.

4 . It is important to note that at the time of removal of this action this circuit had not yet determined whether estoppel claims were cognizable under ERISA. Thus, at that time, appellants had at least a colorable estoppel claim under ERISA. That such a claim was later foreclosed by this circuit’s decision in Davis v. Kentucky Finance Cos. Retirement Plan, 887 F.2d 689 (6th Cir.1989), cert. denied, - U.S. -, 110 S.Ct. 1924, 109 L.Ed.2d 288 (1990), is of no consequence in reviewing whether removal was proper, given both the allegations of appellants’ complaint and the status of the law at that time.

5 . This section provides in relevant part: "A civil action may be brought (1) by a participant or beneficiary.... (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”