United States District Court, Eastern District of Pennsylvania
January 11, 2000
ROBERT TIEMANN AND THELMA TIEMANN, HIS WIFE, PLAINTIFFS,
U.S. HEALTHCARE INC. AND CORPORATE HEALTH ADMINISTRATORS, INC. AND HEALTH MAINTENANCE ORGANIZATION OF PENNSYLVANIA AND FAMILY MEDICAL ASSOCIATES OF ABINGTON, INC. AND NORMAN M. WERTHER, M.D. AND EVAN KESSLER, D.O. AND ANTHONY G. WYDAN, M.D., DEFENDANTS.
The opinion of the court was delivered by: Van Antwerpen, District Judge.
MEMORANDUM AND ORDER
Plaintiffs Robert Tiemann and Thelma Tiemann, his wife,
originally brought this action in the Court of Common Pleas of
Philadelphia County on June 10, 1999, by the filing of a Praecipe
to Issue Writ of Summons and a Writ of Summons. It was
subsequently removed to the U.S. District Court for the Eastern
District of Pennsylvania. Defendants have filed a motion with
this court to have the action dismissed for failure to state a
claim upon which relief can be granted; Plaintiffs have filed a
motion with this court to have the action remanded to the Court
of Common Pleas.
Between 1991 and 1995, Plaintiff Robert Tiemann was an employee
under a group health insurance plan provided by Defendants U.S.
Healthcare Inc., Corporate Health Administrators, Inc. and Health
Maintenance Organization of Pennsylvania (the "Moving
Defendants")*fn2 through Plaintiff's employment. Moving
Defendants, in exchange for premium payments, provided such group
health insurance coverage to Mr. Tiemann pursuant to a group
health insurance policy (the "Plan"). Complaint, at ¶¶ 9-10.
The other parties defendant, the individual physicians and
Family Medical Associates of Abington, Inc. (the "Physician
Defendants", and, together with the Moving Defendants, the
"Defendants"), were participating physicians and primary health
care providers of the Plan and rendered medical treatment and
health care services to Mr. Tiemann in return for compensation
received from Moving Defendants pursuant to the Plan. Complaint,
at ¶ 11.
During the course of the provision of such services, Defendants
learned, by September of 1991, that Mr. Tiemann suffered from
emphysema and the progression of the emphysematous condition of
his lungs. Plaintiffs allege either the failure of Defendants to
disclose the nature of his medical condition or the
misrepresentation of Mr. Tiemann's condition, or both. Mr.
Tiemann has suffered from a genetic disorder, Alpha-1 antitrypsin
deficiency disorder, a chronic, progressive disease that caused
emphysema and irreversible lung damage in Mr. Tiemann. Complaint,
at ¶¶ 12-13.
In late 1998, Mr. Tiemann was first notified of this diagnosis.
Mr. Tiemann has required and sought out medical treatment,
including Alpha-1 antitrypsin replacement therapy and placement
in a lung transplant program. Complaint, at ¶ 14.
As a result of Defendants' malfeasance and nonfeasance, Mr.
Tiemann's medical condition has deteriorated irreversibly. Early
detection of Mr. Tiemann's genetic disorder
would have permitted the implementation and rendition
of necessary medical treatment, including the
rendition of Alpha-1 antitrypsin replacement therapy
which would have prevented the deterioration of the
condition of [Mr. Tiemann's] lungs and the extent of
irreversible lung damage, which now requires and/or
which in the future will require the rendition of
lung transplantation for survival.
Complaint, at ¶ 15.
Plaintiffs further allege, inter alia, physical pain,
suffering, mental anguish, financial loss, loss of life's
pleasures, and loss of earnings, both now and in the future.
Their Complaint lists counts of negligence, breach of contract
and loss of consortium.
III. PROCEDURAL HISTORY
On June 10, 1999, Plaintiffs filed a Praecipe to Issue Writ of
Summons and a Writ of Summons in the Court of Common Pleas,
Philadelphia County. On June 22, 1999, Moving Defendants were
served by the Sheriff of Montgomery County. The Physician
Defendants were served with original process as well.
As a result, counsel for the Physician Defendants entered their
appearances in this matter from the end of June to mid-August. On
August 25, 1999, the Court of Common Pleas entered a Case
Management Order, which scheduled a case management conference
for October 1, 1999. However, the Moving Defendants had still not
entered their appearances.
On September 9, 1999, Plaintiffs filed their Complaint with the
Prothonotary's Office and forwarded a copy of the filed
Complaint, along with a copy of the Scheduling Order and Case
Management Conference Memorandum to all counsel of record and to
all unrepresented parties (i.e., the Moving Defendants).
On September 27, 1999, Plaintiffs' counsel made certain
discovery requests to Defendants and on October 1, 1999, all
counsel of record attended the case management conference.
Subsequent to the conference, the Court of Common Pleas issued a
Case Management Order. On October 15, 1999, Plaintiffs' counsel
responded to Physician Defendants' discovery requests. These
parties began planning a deposition schedule. The Physician
Defendants filed Preliminary Objections to Plaintiffs' punitive
damages and breach of
contract claims; Plaintiffs filed Replies on November 8 and 12,
On October 26, 1999 Plaintiffs' counsel was telephoned by
Tarleton David Williams, Jr., who identified himself as the
Moving Defendants' attorney in this matter and requested a faxed
copy of the Complaint. Plaintiffs' counsel fulfilled this request
and forwarded all other relevant documentation by overnight
courier. On November 15, 1999, two other attorneys, Charles M.
O'Donnell and Michael A. Bowman, entered their appearances on
behalf of U.S. Healthcare Inc.
On November 23, 1999, Bowman, on behalf of the Moving
Defendants, filed a Notice of Removal of this lawsuit from the
Court of Common Pleas to the U.S. District Court, E.D. of Pa., on
the basis of certain questions of federal law being implicated.
The next day, November 24, 1999, Bowman filed a Praecipe to Enter
the Notice of Removal with the Court of Common Pleas,
Philadelphia County, and followed with the filing in federal
court of "Defendants' U.S. Healthcare Systems, Inc. and Corporate
Health Administrators Inc.'s Motion to Dismiss Plaintiffs'
Complaint", on Rule 12(b)(6) grounds ("Motion to Dismiss"),
claiming federal preemption. "Plaintiffs' Response to Defendants
U.S. Healthcare Systems, Inc. and Corporate health
Administrators, Inc.'s Motion to Dismiss Plaintiffs' Complaint"
("Plaintiffs' Response") was filed on December 16, 1999.
Plaintiffs followed this with a motion of their own: "Plaintiffs'
Motion for Remand and Application of Sanctions", filed December
22, 1999 ("Motion for Remand"). On December 29, 1999, two
physician-defendants filed a "Motion to Dismiss of Defendants,
Evan Kessler, D.O. and Anthony G. Wydan, M.D. for Failure to
State a Claim Upon Which Relief Can Be Granted as to Plaintiffs'
Claim for Punitive Damages". Finally, Moving Defendants filed
Defendants' U.S. Healthcare Systems, Inc. and Corporate Health
Administrators Inc.'s Reply in Support of Their Motion to Dismiss
Plaintiffs' Complaint ("Moving Defendants' Reply"), which was
filed on January 6, 2000.
For the reasons stated below, Defendant's Motion to Dismiss
will be DENIED and Plaintiff's Motion for Remand will be GRANTED
in its entirety. The physician-defendants' Motion to Dismiss will
be DENIED as moot.
IV. STANDARD OF REVIEW
Moving Defendants are before this court with their Motion to
Dismiss Plaintiffs' action pursuant to Federal Rule of Civil
Procedure 12(b)(6). Additionally, Plaintiffs, through their
Motion for Remand, have moved to send this case back to the Court
of Common Pleas, Philadelphia County.
As we find that removal was improper, we shall GRANT
Plaintiffs' Motion for Remand. For the reasons discussed in
connection with our granting of Plaintiffs' Motion for Remand,
infra, we shall also DENY Moving Defendants' Motion to Dismiss
pursuant to Federal Rule of Civil Procedure 12(b)(6).
Nonetheless, we shall briefly review the standard for dismissal
for failure to state a cause of action upon which relief can be
(A) Rule 12(b)(6)
Under Rule 12(b)(6), a defendant bears the burden of
demonstrating that a plaintiff has not stated a claim upon which
relief can be granted. See, e.g., Cohen v. Kurtzman,
45 F. Supp.2d 423, 429 (D.N.J. 1999) (citing Kehr Packages, Inc. v.
Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir.), cert. denied,
501 U.S. 1222, 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991)).
When considering such a motion to dismiss, we must "accept as
true the facts alleged in the complaint and all reasonable
inferences that can be drawn from them. Dismissal under Rule
12(b)(6) . . . is limited to those instances where it is certain
that no relief could be granted under any set of facts that could
be proved." Powell v. Ridge, No. CIV.A. 98-1223, 1998 WL
804727, at *3 (E.D.Pa. Nov.19, 1998) (quoting Markowitz v.
Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990) (citation
Under the present circumstances, Moving Defendants bear the
burden of demonstrating that Plaintiffs have not stated a claim
upon which relief can be granted. Cohen, 45 F. Supp.2d at 429.
Further, we are bound to "accept as true the facts alleged" in
Plaintiffs' Complaint "and all reasonable inferences that can be
drawn from them." Powell, 1998 WL 804727, at *3. Based on the
analysis revealed in our discussion of the lack of ERISA complete
preemption, infra, we do not believe that "no relief could be
granted under any set of facts that could be proved." Id.
Therefore, for reasons that will become eminently clear, we shall
deny Moving Defendants' request for dismissal under Rule
(B) Remand Standard
The statute that prescribes removal procedure states:
[t]he notice of removal of a civil action or
proceeding shall be filed within thirty days after
the receipt by the defendant, through service or
otherwise, of a copy of the initial pleading setting
forth the claim for relief upon which such action or
proceeding is based, or within thirty days after the
service of summons upon the defendant if such initial
pleading has then been filed in court and is not
required to be served on the defendant, whichever
period is shorter.
28 U.S.C. § 1446(b). Under the subsequent section, "Procedure
after removal generally":
[a] motion to remand the case on the basis of any
defect other than lack of subject matter jurisdiction
must be made within 30 days after the filing of the
notice of removal under section 1446(a). If at any
time before final judgment it appears that the
district court lacks subject matter jurisdiction, the
case shall be remanded. An order remanding the case
may require payment of just costs and any actual
expenses, including attorney fees, incurred as a
result of the removal. . . .
28 U.S.C. § 1447(c).
Further, ignoring an exception not apposite to the case at bar,
"[a]n order remanding a case to the State court from which it was
removed is not reviewable on appeal or otherwise. . . ."
28 U.S.C. § 1447(d). The U.S. Supreme Court has clarified this
statutory language in holding that only "remand orders issued
under [28 U.S.C. § 1447(c)] and invoking the grounds specified
therein . . . are immune from review under § 1447(d)." In re
U.S. Healthcare, 159 F.3d 142, 146 (3d Cir. 1998) (quoting
Thermtron Prods. Inc. v. Hermansdorfer, 423 U.S. 336, 346, 96
S.Ct. 584, 46 L.Ed.2d 542 (1976)). In other words, in order for
our decision to remand a case to be immune from review, it would
have to be issued due to a defect in removal procedure or the
lack of subject matter jurisdiction. Of course, it would be for
the Third Circuit Court of Appeals (the "Third Circuit") to
decide this question in any appeal.
We also note that "[r]emoval statutes are strictly construed
and all doubts are resolved in favor of remand." Weinstein v.
Paul Revere Ins. Co., 15 F. Supp.2d 552, 555 (D.N.J. 1998); see
also Batoff v. State Farm Ins., 977 F.2d 848, 851 (3d Cir.
1992); Miller v. Riddle Memorial Hosp., No. 98-392, 1998 WL
272167, at *2 (E.D.Pa. May 28, 1998) (both cited by Weinstein).
We shall not lose sight of this legal standard in our review of
the facts in the case at bar.
There would appear to be a patent defect in removal procedure
in the case at bar. Moving Defendants filed their Notice of
Removal on November 23, 1999, much later than the thirty day
period prescribed by statute. See 28 U.S.C. § 1446(b). One
might conclude that under no interpretation of that statutory
provision could the notice of removal have been proper after
October 11, 1999, the first business day following the date
thirty days after the date the Plaintiffs filed their Complaint
with the Prothonotary's Office and forwarded copies to all
counsel of record and to all unrepresented parties. See
Plaintiffs' Response, at 3; 28 U.S.C. § 1446(b); see also
Plaintiffs, on the other hand, filed their Motion for Remand
within the thirty day window prescribed by Section 1447(c). They
filed their Motion for Remand on December 22, 1999, which was
within thirty days of the date of "the filing of the notice of
removal under section 1446(a)." 28 U.S.C. § 1447(c).
Under this analysis, as it would be the procedure that Moving
Defendants followed that was defective, while Plaintiffs'
procedure was proper, we would be confident that our holding
would not be scrutinized with the lens of detraction. See
28 U.S.C. § 1447(d); Thermtron Prods., 423 U.S. at 346, 96 S.Ct.
However, we shall not rest our holding on these statutory
grounds. We recognize that in Moving Defendants' Reply, they
contest Plaintiffs' assertion that removal was not timely. Moving
Defendants maintain that, contrary to Plaintiffs'
representations, they did not receive a "copy of the initial
pleading setting forth the claim for relief . . .",
28 U.S.C. § 1446(b), until October 26, 1999. See Moving Defendants' Reply,
at 2-3; see also Declaration of Tarleton David Williams, Jr. As
our holding in the case at bar does not rely on a defect in
removal procedure, but rather, on a lack of federal subject
matter jurisdiction, we shall not delve further into this issue
and shall now proceed to the question of ERISA preemption.
(C) ERISA Preemption
Moving Defendants argue in their Motion to Dismiss that
Plaintiffs' claims against Moving Defendants are preempted by
ERISA. Motion to Dismiss, at 3-8. Plaintiffs argue to the
contrary and move to remand the case on the basis of a lack of
federal question subject matter jurisdiction.
(1) Complete Preemption Doctrine
Generally, a federal claim must appear "on the face of a
well-pleaded complaint in order to confer federal question
jurisdiction for removal under section 1441." Weinstein, 15
F. Supp.2d at 555 (citing Dukes v. U.S. Healthcare, Inc.,
57 F.3d 350, 353 (3d Cir. 1995)). However, there is an exception to
this well-pleaded complaint rule, know as the "complete
preemption exception." See Metropolitan Life Ins. Co. v.
Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987).
There, the Supreme Court recognizes that Congress has the
authority to "completely preempt certain causes of action under
state law so that `any civil complaint raising this select group
of claims is necessarily federal in character.'" Weinstein, 15
F. Supp.2d at 555 (quoting Metropolitan Life Ins., 481 U.S. at
63-64, 107 S.Ct. 1542). The question for us to decide is whether
the complete preemption exception would apply in the instant
case, notwithstanding the common law tort and breach of contract
causes of action advanced by Plaintiffs.
We note that the complete preemption doctrine is utilized when
the pre-emptive force of [the federal statutory
provision] is so powerful as to displace entirely any
state cause of action [addressed by the federal
statute]. Any such suit is purely a creature of
federal law, notwithstanding the fact that state law
would provide a cause of action in the absence of
[the federal provision].
Dukes, 57 F.3d at 354 (quoting Franchise Tax Board v.
Construction Laborers Vacation Trust, 463 U.S. 1, 23, 103 S.Ct.
2841, 77 L.Ed.2d 420 (1983)).
To begin with, we shall assume that the Plan in question here
falls within ERISA's
coverage. Where ERISA is concerned, the complete preemption
exception applies to state law causes of action that fall within
ERISA's civil enforcement mechanism, which is described at
29 U.S.C. § 1132. See Metropolitan Life Ins., 481 U.S. at 66-67,
107 S.Ct. 1542.
The civil enforcement provision of the ERISA statute allows
plan participants or beneficiaries to bring an action "to recover
benefits due to [a participant or beneficiary] under the terms of
[such person's] plan, or to clarify . . . rights to future
benefits under the terms of the plan. . . ."
29 U.S.C. § 1132(a)(1)(B) (ERISA section 502(a)(1)(B)). Therefore, "[s]tate
law claims which fall outside the scope of ERISA section
502(a)(1)(B) are still governed by the well-pleaded complaint
rule and, therefore, are not removable under the
complete-preemption principles. . . ." Dukes, 57 F.3d at 355.
(2) Preemption vs. Removal
That the complete-preemption exception may apply in a given
circumstance, namely, "for state law claims which fit within the
scope of § 502[,] by no means implies that all claims preempted
by ERISA are subject to removal." Id. "Removal and preemption
are two distinct concepts." Id. (quoting Warner v. Ford Motor
Co., 46 F.3d 531, 535 (6th Cir. 1995)). That is because there is
another provision within ERISA that deals with preemption more
generally, which covers a broader swatch of the ERISA fabric, but
does not have the effect of overturning the well-pleaded
complaint rule. That rule is nullified only by complete
preemption, under ERISA's civil enforcement mechanism.
29 U.S.C. § 1132(a)(1)(B). As Dukes goes on to state:
Section 514 of ERISA defines the scope of ERISA
preemption, providing that ERISA supersede[s] any and
all State laws insofar as they may now or hereafter
relate to any employee benefit plan described in [§
4(a) of ERISA] and not exempt under [§ 4(b) of
ERISA]. The Metropolitan Life complete-preemption
exception, on the other hand, is concerned with a
more limited set of state laws, those which fall
within the scope of ERISA's civil enforcement
provision, § 502. State law claims which fall outside
of the scope of § 502, even if preempted by § 514(a),
are still governed by the well-pleaded complaint rule
and, therefore, are not removable under the
complete-preemption principles established in
Dukes, 57 F.3d at 355 (internal quotations and related
Dukes continues its detailed discussion of the distinctions
between these two ERISA provisions:
The difference between preemption and complete
preemption is important. When the doctrine of
complete preemption does not apply, but the
plaintiff's state claim is arguably preempted under §
514(a), the district court, being without removal
jurisdiction, cannot resolve the dispute regarding
preemption. It lacks power to do anything other than
remand to the state court where the preemption issue
can be addressed and resolved. Franchise Tax Bd.,
463 U.S. at 4, 27-28[103 S.Ct. 2841, 77 L.Ed.2d 420
(1983)] . . .; Allstate, 879 F.2d at 94; Warner,
46 F.3d at 533-35; Lupo, 28 F.3d at 274.
Dukes, 57 F.3d at 355. In other words, where preemption is
based only on § 514, we are without removal jurisdiction and must
remand to the state court for resolution of the dispute.
Moving Defendants maintain that Plaintiffs' state law claims
fall within the scope of 29 U.S.C. § 1132(a)(1)(B), thus allowing
the complete-preemption doctrine to permit removal. We are not
inclined to agree.
Dukes assumed, without deciding, that the plan benefits are
not merely "the plan participants' or beneficiaries' memberships
in the respective HMOs . . . [, but rather, that the plan
benefits encompassed] the medical care provided . . . for the
purposes of ERISA." Dukes, 57 F.3d at 356. We, too, shall
assume that Moving Defendants arrange for the delivery of Plan
benefits, such that "removal jurisdiction would exist if the
plaintiffs were alleging that the [Moving Defendants] refused to
provide the services to which membership entitled them." Id.
As in Dukes, we, too, conclude nevertheless that removal was
improper here. Where, as here, the Plaintiffs' claims (a) attack
the quality of benefits received, and not the quantity
(i.e., a "claim that the plan erroneously withheld benefits
due", id.) of benefits received, (b) do not ask for the
enforcement of their rights under the terms of the plan, and (c)
do not ask for clarification of their rights to future benefits,
we shall find that Plaintiffs' claims have fallen outside the
scope of ERISA's civil enforcement provision and we shall remand
to the Court of Common Pleas, Philadelphia County. See id.;
29 U.S.C. § 1132(a)(1)(B). As we do not believe that either item (b)
or (c) listed above is implicated in the instant case, and Moving
Defendants do not appear to argue for anything other than item
(a) (alleging that Plaintiffs' claims attack the quantity of
benefits received), our analysis shall focus on item (a).
(A) No Claim of Failure to Provide Benefits Due
As in Dukes, there is no allegation in Plaintiffs' Complaint
that Plan benefits due were erroneously withheld. Nearly all of
the claims made in Plaintiffs' Complaint concerning the Moving
Defendants center around common law negligence, resulting either
directly or through agency principles (see Complaint, at ¶¶
24-28), and breach of contract allegations (see Complaint, at
¶¶ 29-32). Plaintiffs do not aver that the Moving Defendants
refused to provide certain tests because the Plan would not pay
for such tests. Nor do they claim that Robert Tiemann's poor
health is the result of the Plan's "refusal to pay for or
otherwise provide for medical services." Dukes, 57 F.3d at 357.
We find the situation in the case at bar closely parallels
Instead of claiming that the welfare plan in any
way withheld some quantum of plan benefits due, the
plaintiffs . . . complain about the low quality of
the medical treatment . . . actually received and
argue that the . . . HMO should be held liable under
agency and negligence principles.
Dukes, 57 F.3d at 357. This kind of claim is not a claim under
the ERISA civil enforcement provision to "recover benefits due .
. . under the terms of [the] plan." Id.; see
29 U.S.C. § 1132(a)(1)(B).
The Third Circuit gives a detailed explanation of the
importance of respecting an existing state regulatory scheme
safeguarding the quality of plan benefits, while recognizing the
strictly federal terrain of deciding whether the benefits due
under a plan were in fact provided:
Nor does anything in the legislative history,
structure, or purpose of ERISA suggest that Congress
viewed § 502(a)(1)(B) as creating a remedy for a
participant injured by medical malpractice. When
Congress enacted ERISA it was concerned in large part
with the various mechanisms and institutions involved
in the funding and payment of plan benefits. That is,
Congress was concerned "that owing to the inadequacy
of current minimum [financial and administrative]
standards, the soundness and stability of plans with
respect to adequate funds to pay promised benefits
may be endangered." § 2, 29 U.S.C. § 1001(a). Thus,
Congress sought to assure that promised benefits
would be available when plan participants had need of
them and § 502 was intended to provide each
individual participant with a remedy in the event
that promises made by the plan were not kept. We find
nothing in the legislative
history suggesting that § 502 was intended as a part
of a federal scheme to control the quality of the
benefits received by plan participants. Quality
control of benefits, such as the health care benefits
provided here, is a field traditionally occupied by
state regulation and we interpret the silence of
Congress as reflecting an intent that it remain such.
See, e.g., Travelers Ins. Co., at 659, 115 S.Ct. at
1678-79 (noting that while quality standards and work
place regulations in the context of hospital services
will indirectly affect the sorts of benefits an ERISA
plan can afford, they have traditionally been left to
the states, and there is no indication in ERISA that
Congress chose to displace general health care
regulation by the states).
Dukes, 57 F.3d at 357.
(B) Complaint ¶¶ 27(c)-(d), 31(c)
We recognize that a few of Plaintiffs' claims in their
Complaint do, indeed, present a much closer question for us.
Specifically, Plaintiffs aver that Moving Defendants' negligence
consisted, inter alia, of:
[t]he promulgation of rules, regulations and
standards for participating physicians and health
care providers that penalized participating
physicians and/or health care providers for referring
patients for additional required medical treatment,
where the [Moving] Defendants knew and/or should have
known that the enforcement of the stated rules,
regulations and/or standards would lead to the
rendition of substandard medical care and deviations
from the applicable standard of care with resulting
patient injuries [and][t]he promulgation of rules,
regulations and standards for participating
physicians and health care providers that rewarded
participating physicians and health care providers
for decreasing and/or minimizing required medical
services, treatments, diagnostics and referrals to
specialists where the [Moving] Defendants knew and/or
should have known that the enforcement of such rules,
regulations and/or standards would lead to the
rendition of substandard medical care and deviations
from the applicable standard of care with resulting
patient injuries. . . .
Complaint, at ¶ 27(c)-(d). Further, Plaintiffs also claimed that
Moving Defendants "breached their contractual obligation to
provide medical and primary care services" by, inter alia:
[p]romulgating, implementing and/or following a
schedule of rules, regulations and/or standards in
the rendition of medical and primary care services
that violated applicable industry standards and
Id. at ¶ 31(c).
Specifically, Moving Defendants refer to these paragraphs of
Plaintiffs' Complaint in their Motion to Dismiss, maintaining
that by their nature "these claims are completely preempted by
the civil enforcement mechanism set forth in Section 502(a) of
ERISA." Motion to Dismiss, at ¶¶ 15-16.
(1) § 514 Preemption Analysis
Moving Defendants would have been more likely to persuade this
court to accept its position that Plaintiffs' claims should be
preempted by ERISA, had this case been brought during the 1980s
or early 1990s. During that period, there were several Supreme
Court cases that gave the ERISA preemption provision a broad
reach. The words of that provision
were to be given their "broad common-sense meaning,
such that a state law `relate[s] to' a benefit plan
in the normal sense of the phrase, if it has a
connection with or reference to such a plan."
Pappas v. Asbel, 555 Pa. 342, 724 A.2d 889, 892 (1998)
(quoting Metropolitan Life Ins. Co. v. Massachusetts,
471 U.S. 724
, 739, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985)); see also Pilot
Life Ins. Co. v. Dedeaux, 481 U.S. 41
, 46, 107 S.Ct. 1549, 95
L.Ed.2d 39 (1987); Shaw v. Delta Air Lines, Inc., 463 U.S. 85
96, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). In most of the Supreme
cases during that period that dealt with ERISA preemption, the
Supreme Court found that the state law claims "had some
`connection with' or `reference to' the ERISA plan." Pappas,
724 A.2d at 892 (quotations in the original).
Here, we are dealing with a question of Section 514 of ERISA,
rather than Section 502(a), which is the complete-preemption
exception. Nonetheless, we find the shift in this area that came
in the mid-1990s not to be without significance in the
complete-preemption context. See infra.
The Supreme Court altered its previous approach in New York
State Conference of Blue Cross & Blue Shield Plans v. Travelers
Ins. Co., 514 U.S. 645, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995).
As Pappas relates:
The Court recognized that "[i]f `relate to' were
taken to extend to the furthest stretch of its
indeterminacy, then for all practical purposes
pre-emption would never run its course, for
`[r]eally, universally, relations stop nowhere.'"
Id. at 655, 115 S.Ct. 1671. . . . The Court
reasoned that the language of the preemption
provision is so extensive that if the Court were to
look merely to the bare language of the provision,
the provision would for all intents and purposes be
without limit — an intent which the Court would not
ascribe to Congress.
Pappas, 724 A.2d at 892 (citing the Travelers case).
Importantly for us, "[p]re-emption does not occur . . . if the
state law [i.e., negligence/breach of contract] has only a
tenuous, remote, or peripheral connection with covered plans, as
in the cases with many laws of general applicability."
Travelers, 514 U.S. at 661, 115 S.Ct. 1671. The Supreme Court
noted that "nothing in the language of [ERISA] or in the context
of its passage indicates that Congress chose to displace general
health care regulation, which historically has been a matter of
local concern." Id.
Subsequent Supreme Court cases have solidified the Travelers
approach. See, e.g., California Division of Labor Standards
Enforcement v. Dillingham Construction, NA., Inc., 519 U.S. 316,
117 S.Ct. 832, 136 L.Ed.2d 791 (1997); De Buono v. NYSA-ILA
Medical and Clinical Services Fund, 520 U.S. 806, 117 S.Ct.
1747, 138 L.Ed.2d 21 (1997). For this reason, Pappas concluded
that negligence claims against an HMO do not "relate to" an ERISA
plan and thus are not preempted by ERISA. Pappas, 724 A.2d at
893. "As noted by Travelers, Congress did not intend to preempt
state laws which govern the provision of safe medical care."
Id. (citing Travelers, 514 U.S. at 661, 115 S.Ct. 1671). In
Claims that an HMO was negligent when it provided
contractually-guaranteed medical benefits in such a
dilatory fashion that the patient was injured
indisputably are intertwined with the provision of
safe medical care. We believe that it would be highly
questionable for us to find that these claims were
preempted when the United States Supreme Court has
stated that there was no intent on the part of
Congress to preempt state laws concerning the
regulation of the provision of safe medical care.
Pappas, 724 A.2d at 893. We find the situation in the instant
case closely, though not entirely, related to the Pappas
Further, we note that based on
Travelers and its progeny, Moving Defendants' reliance on
Kearney v. U.S. Healthcare, Inc., 859 F. Supp. 182 (E.D.Pa.
1994), is misplaced.
(2) § 502 Complete Preemption Analysis
As we discussed, supra, Pappas did not directly deal with the
complete preemption doctrine of ERISA § 502(a), but rather with §
514, which defines ERISA preemption outside ERISA's civil
enforcement context. However, a recent Third Circuit decision,
In re U.S. Healthcare, Inc., 193 F.3d 151 (3d Cir. 1999),
touches on precisely the question we are facing in the instant
suit: namely, how far Dukes' quantity versus quality of
benefits distinction will take us.
In U.S. Healthcare, participants in an ERISA plan brought a
state court medical malpractice action against an HMO after the
death of their newborn child. The HMO removed the action to the
U.S. District Court, District of New Jersey, where one count was
dismissed and the remaining counts were remanded to state court.
Both parties appealed. The Third Circuit held that none of
plaintiffs' claims was completely preempted by ERISA and remanded
all counts to the state court.
U.S. Healthcare is instructive in clarifying that the
particular role an HMO assumes will determine whether the
complete preemption provision of ERISA is implicated. As a
complicating matter, an HMO "may have assumed both the role as a
plan administrator and the separate role as a provider of medical
services." Id. at 162. It is necessary as a preliminary matter
to determine which role an HMO assumed in order to determine
whether complete preemption is found. The Third Circuit provides
much guidance in solving this problem:
As an administrator overseeing an ERISA plan, an
HMO will have administrative responsibilities over
the elements of the plan, including determining
eligibility for benefits, calculating those benefits,
disbursing them to the participant, monitoring
available funds, and keeping records. As we held in
Dukes, claims that fall within the essence of the
administrator's activities in this regard fall within
section 502(a)(1)(B) and are completely preempted.
In contrast, as noted by the Secretary, when the
HMO acts under the ERISA plan as a health care
provider, it arranges and provides medical treatment,
directly or through contracts with hospitals,
doctors, or nurses. See Dukes, 57 F.3d at 361; see
also Corcoran v. United HealthCare, Inc.,
965 F.2d 1321, 1329-34 (5th Cir. 1992) (recognizing that HMOs
act as both health care providers and plan
administrators). In performing these activities, the
HMO is not acting in its capacity as a plan
administrator but as a provider of health care,
subject to the prevailing state standard of care. For
obvious reasons, U.S. Healthcare contends that all of
the Baumans' claims against it fall into the
administrative category, which are completely
preempted, and that therefore the remand of the three
counts to state court was erroneous.
U.S. Healthcare, 193 F.3d at 162. The Third Circuit found it
"significant that none of these three counts as pled alleges a
failure to provide or authorize benefits
under the plan, and the Baumans do not claim anywhere in these
counts that they were denied any of the benefits that were due
under the plan." Id. We find, likewise, that Plaintiffs have
not claimed that they were denied any of the benefits that were
due under the Plan in the case at bar.
The count in U.S. Healthcare that deals with the HMO's policy
of presumptively discharging newborns within twenty-four hours
"charges U.S. Healthcare with both direct negligence for the
adoption and implementation of the policy and with vicarious
liability for the negligence of [the doctor and the hospital]."
Id. This count, like all the others in U.S. Healthcare, was
held to have been not completely preempted by ERISA. We do not
see how the situation in U.S. Healthcare differs in any
material way from what the Tiemanns have alleged in paragraphs
27(c) and (d) and 31(c) of their Complaint. There, Plaintiffs
charge Moving Defendants with
promulgati[ng] rules, regulations and standards . . .
that [discouraged physicians and participating health
care providers from] referring patients for
additional required medical treatment [and encouraged
them to] decreas[e] and/or minimiz[e] required
medical services, treatments, diagnostics and
referrals to specialists where the [Moving]
Defendants knew and/or should have known that the
enforcement of such rules, regulations and/or
standards would lead to the rendition of substandard
medical care and deviations from the applicable
standard of care with resulting patient injuries
[i.e., negligence/medical malpractice].
Complaint, at ¶ 27(c)-(d). The breach of contract count of
Plaintiffs' Complaint is of a similar nature, alleging:
[p]romulgating, implementing and/or following a
schedule of rules, regulations and/or standards in
the rendition of medical and primary care services
that violated applicable industry standards and
applicable law. . . .
Id., at ¶ 31(c).
The Third Circuit explains its holding in U.S. Healthcare
with respect to the twenty-four hour discharge policy:
With respect to the direct negligence claim, the
Baumans' challenge to U.S. Healthcare's
twenty-four-hour discharge policy is directed at the
HMO's actions in what we characterized in Dukes as
an HMO's role in "arranging for medical treatment"
rather than its role as a plan administrator
determining what benefits are appropriate. Dukes,
57 F.3d at 360. Thus, it is the HMO's essentially
medical determination of the appropriate level of
care that the Baumans claim contributed to the death
of their daughter. This is not a claim that a certain
benefit was requested and denied. As the Secretary
points out, under the facts as pleaded in the
complaint, U.S. Healthcare's policy and incentive
structure were such that "the Baumans never had the
option of making an informed decision as to whether
to pay for the hospitalization themselves," as would
occur in a situation in which coverage is sought and
denied. . . . Accordingly, this claim fits squarely
within the class of claims that we identified in
Dukes as involving the quality of care. Here, as in
Dukes, "the plaintiffs . . . are attempting to hold
the HMO liable for [its] role as the arranger of
their [decedent's] medical treatment." Dukes, 57
F.3d at 361.
U.S. Healthcare, 193 F.3d at 162-163. We believe that, as in
U.S. Healthcare, Moving Defendants were acting in their role as
an arranger of medical treatment, rather than as plan
administrator "determining what benefits are appropriate." Id.
at 162 (citing Dukes, 57 F.3d at 360). Further, as in U.S.
Healthcare, we find that Moving Defendants' "policy and
incentive structure were such that [Plaintiffs] never had the
option of making an informed decision [regarding treatment], as
would occur in a situation in which coverage is sought and
denied." See id. at 163. Thus, we, too, conclude that
Plaintiffs' claims — even those most subject to challenge on
complete preemption grounds — are claims that go to the quality
of care received under the Dukes standard.
To the extent that Plaintiffs allege that Moving Defendants
acted with knowledge or reckless indifference to the possibility
that their policies would result in substandard medical care, our
conclusion is not affected. Like the negligence claim, this
allegation "goes to the quality of care . . . received rather
than an administrative decision as to whether certain benefits
were covered by the plan." See id. These charges "do not raise
the failure of [Moving Defendants] to pay for a benefit or
process a claim for benefits as the basis for the injury
suffered." Id. Therefore, they are not completely preempted by
The similarities between U.S. Healthcare and the case at bar
are placed in further relief by a claim of plaintiffs in U.S.
Healthcare that the Third Circuit identified as demonstrating
that HMO's role as a provider or arranger of medical services, as
opposed to a plan administrator role:
[a]s the Baumans allege, the HMO adopted policies
that "encouraged, pressured, and/or directly or
indirectly required" their participating physicians
to discharge newborn infants and that also
discouraged physicians to readmit newborn infants
when the appropriate standard of care required
otherwise under state law. . . . Assuming these
allegations are true, as we must when considering a
motion to dismiss, the Baumans seek recovery for
decisions that U.S. Healthcare made in providing and
arranging medical services, decisions that adversely
influenced the medical judgment of its participating
Id. Our Plaintiffs have essentially made the same allegations
regarding the Moving Defendants as the plaintiffs made of their
HMO in U.S. Healthcare. Therefore, we are compelled to reach
the same conclusion with regard to complete preemption as the
Third Circuit reached in U.S. Healthcare. We find that there is
no complete preemption here.
(C) Beyond Rejection of Complete Preemption
Interestingly, the court in U.S. Healthcare goes beyond
accepting the well-pleaded complaint rule, which it held was not
usurped by the complete preemption exception. In one instance,
the Third Circuit appears to permit plaintiffs to recharacterize
an ambiguously-worded count that the district court had held was
completely preempted and had therefore dismissed. There,
plaintiffs alleged that the HMO was negligent in "not providing
for [an in-home] visit by a participating provider [a pediatric
nurse], despite assurances under its L'il Appleseed program that
such a visit would be provided and despite a telephone call . . .
from the Baumans requesting this service, which the district
court interpreted as stating a claim that fits under section
502(a)." Id. at 164 (internal quotations omitted).
We have no analogous claim by Plaintiffs in the instant case.
Our Plaintiffs' Complaint nowhere alleges that Plaintiffs
requested a service that was denied them. Rather, the gravamen of
their Complaint is one of failure to timely diagnose and disclose
Mr. Tiemann's medical condition, thus allowing his physical
deterioration. Nonetheless, we find it instructive to see the
extent to which the Third Circuit went in order to avoid trumping
plaintiffs' state law causes of action. The Third Circuit
declared, "[w]e cannot say that the District Court was
unreasonable in so holding [that plaintiffs' claim was completely
preempted,]" id., but nonetheless accepted plaintiffs'
interpretation of their complaint. Their interpretation was that
the complaint stated a cause of action "for violating a tort duty
to provide [plaintiffs] adequate medical care, rather than a
violation of a [contractual] promise . . . made to
them in their ERISA plan." Id. (internal quotations omitted).
The Third Circuit went beyond anything we are called upon to do
in the instant case, as seen in their discussion, below:
The mere fact that [plaintiffs] referred in their
complaint to a benefit promised by their health care
plan does not automatically convert their state-law
negligence claim into a claim for benefits under
section 502. If, as [plaintiffs] contend, U.S.
Healthcare failed to meet the standard of care
required of health care providers by failing to
arrange for a pediatric nurse in a timely manner,
[this count] sets forth an ordinary state-law tort
claim for medical malpractice.
Id. Ours is not even as close a case. Our Plaintiffs aver that
they did not know of the actual nature of Mr. Tiemann's illness,
due to the Defendants' alleged negligence. Thus, Plaintiffs'
Complaint does not allege that they requested a particular
service for which they were subsequently rejected by Moving
U.S. Healthcare also deals with preemption under ERISA
section 514(a). The Third Circuit concludes that it is up to the
state court to decide that question, as the district court is
without jurisdiction to make such a determination, based upon
After it concluded that it had subject matter
jurisdiction over Count Six, the District Court
dismissed that count as expressly preempted by
section 514(a), 29 U.S.C. S 1144(a), on the force of
its determination that the count was completely
preempted. Inasmuch as we conclude that Count Six was
not completely preempted, the District Court did not
have subject matter jurisdiction over the complaint
and should have remanded it to state court under
28 U.S.C. § 1447(c). As we stated in Dukes, "[w]hen
the doctrine of complete preemption does not apply,
but the plaintiff's state claim is arguably preempted
under § 514(a), the district court, being without
removal jurisdiction, cannot resolve the dispute
regarding preemption." Dukes, 57 F.3d at 355.
Id. at 165. In keeping with this line of cases, we conclude
that the Court of Common Pleas shall be the arbiter of this
For all of the reasons set forth above, Moving Defendants'
Motion to Dismiss will be DENIED and Plaintiffs' Motion for
Remand will be GRANTED in its entirety. To the extent that we
have not dealt directly with those counts in Moving Defendants'
Motion to Dismiss that do not concern ERISA preemption —
specifically, failure to exhaust ERISA's mandatory grievance
procedure and an ERISA bar against punitive damages —, we find
that in light of our analysis regarding ERISA preemption, these
counts do not require our further review. The Motion to Dismiss
of the physician-defendants will be DENIED AS MOOT. The parties
shall bear their own costs. An appropriate order follows.
AND NOW, this 11th day of January, 2000, upon consideration of
Defendants' U.S. Healthcare Systems, Inc. and Corporate Health
Administrators Inc.'s Motion to Dismiss Plaintiffs' Complaint and
Memorandum of Law Supporting Their Motion to Dismiss Plaintiffs'
Complaint and Exhibits thereto, filed on December 2, 1999;
Plaintiffs' Response to Defendants U.S. Healthcare Systems, Inc.
and Corporate Health Administrators, Inc.'s Motion to Dismiss
Plaintiffs' Complaint and Memorandum of Law Contra Defendants'
Motion to Dismiss Plaintiffs' Complaint and Exhibits thereto,
filed on December 16, 1999; Plaintiffs' Motion for Remand and
Application for Sanctions, filed on December 22, 1999; Motion to
Dismiss of Defendants, Evan Kessler, D.O. and Anthony G. Wydan,
M.D. for Failure to State a Claim Upon Which Relief Can Be
Granted as to Plaintiffs' Claim for Punitive Damages, and
Memorandum of Law in Support of
Their Motion to Dismiss for Failure to State a Claim Upon Which
Relief Can Be Granted and Exhibits thereto, filed December 29,
1999; and Defendants' U.S. Healthcare Systems, Inc. and Corporate
Health Administrators Inc.'s Reply in Support of Their Motion to
Dismiss Plaintiffs' Complaint and Exhibit thereto, filed on
January 6, 2000; it is hereby ORDERED consistent with the
foregoing Memorandum that:
(1) Defendants' Motion to Dismiss, filed December 2,
1999, is DENIED without prejudice in its entirety.
(2) Plaintiffs' Motion for Remand, filed December 22,
1999, is GRANTED; however, the application for
sanctions is DENIED.
(3) This matter is REMANDED to the Court of Common
Pleas, Philadelphia County, where the parties shall
continue to proceed in the case commenced on June 10,
(4) The Motion to Dismiss of Defendants, Evan
Kessler, D.O. and Anthony G. Wydan, M.D. for Failure
to State a Claim Upon Which Relief Can Be Granted as
to Plaintiffs' Claim for Punitive Damages, filed
December 29, 1999, is DENIED without prejudice AS
(5) This case is closed.