argues that the pleading should be stricken because it was not accompanied by Points and Authorities as required by Rule 108, because it did not meet Rule 108's requirement that opposing Points and Authorities be filed "within eleven (11) days of the date of service or at such other time as the court may direct," and because it constitutes an unauthorized additional pleading. In the interests of developing a more complete record, the Court exercises its discretion and denies defendant's motion to strike.
2. CGL's Motion To Dismiss.
A. The Existence of an ERISA "Plan."
Plaintiff PIW contends that CGL's Motion To Dismiss is "premature," because plaintiff has not alleged that the contract of insurance between White and CGL was part of an ERISA "plan," and because the evidence in the record does not conclusively demonstrate that the health insurance benefits in this case were governed by ERISA. Section 1003 of ERISA provides that with limited exceptions, ERISA "shall apply to any employee benefit plan if it is established or maintained - (1) by any employer engaged in commerce or in any industry or activity affecting commerce." 29 U.S.C. § 1003(a)(1). Although PIW's complaint does not explicitly allege the existence of an ERISA plan, plaintiff does allege the existence of a plan of the kind ERISA covers. PIW's complaint alleges that "defendant [CGL] was the health benefits insurer for employees of Comsite, a corporation which is located in Beltsville, Maryland, pursuant to a contract of insurance," and that White was "an employee of Comsite and a participant in the health insurance plan of his employer." Furthermore, the insurance benefits questionnaire completed by CGL and attached to PIW's complaint lists "Comsite" as the "Group Name" for the policy covering White until July 5, 1988, the date on which CGL alleges White's benefits were canceled. In light of PIW's pleadings, the Court concludes that defendant's motion to dismiss is not premature.
B. Claims Against CGL Based on Breach of Insurance Contract.
Counts I and III set forth state law claims alleging that CGL breached its contract of insurance with White. The complaint asserts that CGL is contractually obligated to pay PIW the remaining charges for services rendered to White, due to PIW's status as an assignee of White's healthcare benefits (Count I) or as a third-party beneficiary to White's contract of insurance with CGL (Count III). CGL contends that ERISA preempts these contractual claims arising from state common law, because they "relate to" an employee benefit plan. The Court agrees.
ERISA preempts every state law that "relates to . . . employee benefit plans" classified under § 1003(a), unless the state law "regulates insurance, banking, or securities." 29 U.S.C. §§ 1144(a), 1144(b). "[A] law 'relates to' an employee benefit plan, in the normal sense of the phrase, if it has connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S. Ct. 2890, 2900, 77 L. Ed. 2d 490 (1983); see Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S. Ct. 1549, 1553, 95 L. Ed. 2d 39 (1987). "In order to regulate insurance, a law must not just have an impact on the insurance industry, but must be specifically directed toward that industry." Pilot Life, 481 U.S. at 50, 107 S. Ct. at 1553; see Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S. Ct. 2380, 2389, 85 L. Ed. 2d 728 (1985). Thus, to be exempt from preemption, a law must regulate the "business of insurance," as defined for the purposes of the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq. Metropolitan Life, 471 U.S. at 742-744, 105 S. Ct. at 2390-91 (citing Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S. Ct. 3002, 3008, 73 L. Ed. 2d 647 (1982)).
Ultimately, "'the question whether a certain state action is pre-empted by federal law is one of congressional intent.'" Pilot Life, 481 U.S. at 45, 107 S. Ct. at 1552 (quoting Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 208, 105 S. Ct. 1904, 1909, 85 L. Ed. 2d 206 (1985)); see Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 8, 107 S. Ct. 2211, 2215, 96 L. Ed. 2d 1 (1987). Congress intended ERISA to provide a comprehensive and exclusive civil enforcement scheme that would protect the interests and contractually-defined benefits of ERISA-plan participants and beneficiaries. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113, 109 S. Ct. 948, 955, 103 L. Ed. 2d 80 (1989); Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148, 105 S. Ct. 3085, 3093, 87 L. Ed. 2d 96 (1985); Shaw, 463 U.S. at 90, 103 S. Ct. at 2896. Congress also intended to protect employers from the burden of accommodating diverse and conflicting state laws regulating the administration of employee benefit plans. Fort Halifax, 482 U.S. at 10-11, 107 S. Ct. at 2217. To accomplish these ends, Congress replaced the original, limited preemption clause, contained in the bill that became ERISA, with "deliberately expansive" provisions. Pilot Life, 481 U.S. at 46, 107 S. Ct. at 1552. Section 502(a) of ERISA contains "'six carefully integrated civil enforcement provisions [which] . . . provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.'" Pilot Life, 481 U.S. at 54, 107 S. Ct. at 1556 (quoting Massachusetts Mut. Life, 473 U.S. at 146, 105 S. Ct. at 3092).
State law contract claims brought by plan participants and by health care providers that have rendered services to plan participants are preempted by ERISA because they "relate to" employee benefit plans and are not based on state laws "which regulate insurance." Thayer v. Group Hospitalization and Medical Servs. Inc., 674 F. Supp. 924, 925 (D.D.C. 1987).
PIW's state law contract claims not only "relate" to an employee benefit plan, they depend on an employee benefit plan. Alleging a breach of the insurance contract between CGL and White, PIW seeks to recover the healthcare benefits provided under the contract. PIW's allegations and requested relief are centrally "connected to the concerns addressed by ERISA," Hartle v. Packard Elec., 877 F.2d 354, 356 (5th Cir. 1989), and directly "affect relations among principal ERISA entities - the employer, the plan fiduciaries, the plan, and the beneficiaries - as such." Sommers Drug Stores Co. Employee Profit Sharing Trust v. Corrigan Enters., Inc., 793 F.2d 1456, 1470 (5th Cir. 1986), cert. denied, 479 U.S. 1034, 107 S. Ct. 884, 93 L. Ed. 2d 836 (1987), and cert. denied, 479 U.S. 1089, 107 S. Ct. 1289 (1987).
Allowing providers to bring state law contract claims against insurers of ERISA plans would undermine Congress's goal of promulgating uniform standards for establishing and administering employee benefit plans. Congress intended ERISA to make plan regulation an exclusively federal domain.
Due to the relationship between Counts I and III and the ERISA plan alleged in this case, the Court holds that ERISA preempts plaintiff's contract claims against CGL and mandates their dismissal.
Nevertheless, plaintiff retains the right to amend Counts I and III of its original complaint. "It is common ground that Rule 15 embodies a generally favorable policy toward amendments." Davis v. Liberty Mut. Ins. Co., 276 App. D.C. 394, 871 F.2d 1134, 1137 (D.C. Cir. 1989). Consequently, the Court dismisses Counts I and III without prejudice to plaintiff's right to amend the complaint to state a claim for which relief may be granted under ERISA.
The facts alleged indicate that PIW would have standing to state a contract claim against CGL under ERISA. A healthcare provider designated as an assignee of an employee's health benefit contract has derivative standing to sue the employee's insurer under ERISA. Hermann Hosp., 845 F.2d at 1289-1290; Misic v. Bldg. Serv. Employees Health & Welfare Trust, 789 F.2d 1374, 1377-78 (9th Cir. 1986).
However, healthcare providers do not have independent standing to sue under ERISA, because they are "non-enumerated" parties. 29 U.S.C. § 1132(a); Hermann Hosp., 845 F.2d at 1289; see also Grand Union Co. v. Food Employers Labor Relations, 257 App. D.C. 171, 808 F.2d 66, 71 (D.C. Cir. 1987) (employers do not have standing to sue under Title I of ERISA, because they are non-enumerated parties under 29 U.S.C. § 1132(a)); Pressroom Unions-Printers League Income Sec. Fund v. Continental Assurance Co., 700 F.2d 889, 892 (2d Cir. 1983), cert. dismissed, 463 U.S. 1233, 104 S. Ct. 26 (1983), and cert. denied, 464 U.S. 845, 104 S. Ct. 148 (1983) (as non-enumerated parties, pension funds do not have standing to sue under ERISA).
But see Fentron Indus. v. National Shopmen Pension Fund, 674 F.2d 1300, 1304 (9th Cir. 1982) (certain non-enumerated parties do have standing to sue under ERISA).
Federal common law and statutory law govern when state law causes of action are preempted. Misic, 789 F.2d at 1377 (citing Sola Elec. Co. v. Jefferson Elec. Co., 317 U.S. 173, 176, 63 S. Ct. 172, 173, 87 L. Ed. 165 (1942)). Under federal common law, an assignee has the right to bring the claims of his assignor. Misic, 789 F.2d at 1378.
Thus, although a healthcare provider does not have independent standing to sue under ERISA, a healthcare provider in PIW's position has derivative standing to sue as an assignee of an ERISA plan participant or beneficiary.
Granting standing to healthcare providers under ERISA is consistent with Congress's intent to promote employee interests and to protect their "contractually defined benefits." Massachusetts Mut. Life, 473 U.S. at 148, 105 S. Ct. at 3093; Hermann Hosp., 845 F.2d at 1289 n.13. As an assignee, the healthcare provider "stands in the shoes" of plan participants, parties whom ERISA was designed to protect and who "are expressly authorized by section 1132(a)(1)(B) to sue to recover benefits due under a plan." Misic, 789 F.2d at 1378.
Furthermore, denying providers standing under § 1132(a) would discourage them from admitting individuals unable to pay for services "upfront" and prompt providers to check patient solvency before treatment. Misic, 789 F.2d at 1377. Such a verification process would burden employees seeking treatment, exacerbate the problem of rising healthcare costs, and thwart Congress's aim 'of safeguarding employees' interests in health and welfare benefits. Hermann Hosp., 845 F.2d at 1289 n.13; Misic, 789 F.2d at 1378-1379. Thus, although this Court grants defendant's motion to dismiss with respect to Counts I and III, plaintiff retains the right to amend those claims and would have standing to state a contract claim against CGL under ERISA.
C. Promissory Estoppel Claim Against CGL.
Count IV of PIW's complaint asserts a claim of promissory estoppel against CGL. PIW argues that it provided services to White in reliance on statements by CGL employees confirming the availability of benefits covering the services proposed by PIW. PIW alleges that as a result of its reliance on the verification of coverage provided by CGL, PIW rendered $ 14,388.15 in services for which it has not been compensated. Although state law claims of equitable estoppel brought by healthcare providers against insurers of ERISA plans are preempted by ERISA, defendant's motion to dismiss this claim of promissory estoppel is denied. Plaintiff states a claim for which relief can be granted under the federal common law governing actions preempted, but not specifically addressed, by ERISA.
Employees and healthcare providers have a federal common law cause of action against insurers who have provided an oral interpretation of ambiguous ERISA plan provisions. See Kane v. Aetna Life Ins., 893 F.2d 1283, 1285 (11th Cir. 1990), cert. denied, 112 L. Ed. 2d 192, 111 S. Ct. 232 (1990).
Although ERISA provides explicitly for contract claims, it does not provide for promissory estoppel claims.
Nevertheless, ERISA preempts plaintiff's state law promissory estoppel claim for the same reasons it preempts plaintiff's state law contract claims. See Kane, 893 F.2d at 1285; Hermann Hosp., 845 F.2d at 1290.
But see Memorial, 904 F.2d at 245. 14 "Federal courts possess the authority . . . to develop a body of federal common law to govern issues in ERISA actions not covered by the act itself." Kane, 893 F.2d at 1285. Congress intended that the courts use this authority to develop ""a body of Federal substantive law . . . to deal with issues involving rights and obligations under private welfare and pension plans."" Firestone, 489 U.S. at 110-111, 109 S. Ct. at 954 (quoting Franchise Tax, 463 U.S. at 24 n.26, 103 S. Ct. at 2854 n.26 (quoting remarks of Sen. Javits, 129 Cong. Rec. 29942 (1974)).
A federal common law cause of action for promissory estoppel effectuates Congress's intent "to promote the interest of employees and their beneficiaries in employee benefit plans." Shaw, 463 U.S. at 90, 103 S. Ct. at 2896.
To protect employee interests, healthcare providers like PIW must have legal recourse against insurers who falsely or negligently provide them with an oral interpretation of a prospective patient's benefit plan. The statutory scheme embodied in ERISA indicates that Congress did not intend to insulate insurers from such liability for mistaken plan interpretation. If providers could not hold insurers accountable for such oral interpretations, they would likely expend significant time and resources obtaining written copies of plans and verifying the solvency of prospective patients. Providers might then be prone to turn away patients who are unable to pay for services "upfront" or to demonstrate an ability ultimately to pay. The consequences of denying providers a cause of action for promissory estoppel would undercut dramatically Congress's goal of promoting employees' interests through ERISA. See Misic, 789 F.2d at 1377.
Based on the statutory framework and legislative history of ERISA, the Court recognizes plaintiff's promissory estoppel claim as a federal common law cause of action and denies defendant's motion to dismiss with regard to Count IV.
D. Claim Against White Based on Breach of Medical Services Contract.
Count II of PIW's complaint is a breach of contract claim against the individual defendant White. This claim contends that White entered into a service contract with PIW and remains liable for the charges he incurred as a patient at PIW, despite his assignment of benefits to PIW.
This state law contract claim against White is not preempted by ERISA, because it is only "peripherally" related to an ERISA employee benefit plan. Hartle, 877 F.2d at 356. This claim is not a suit to recover benefits under a plan and it does not involve claims processing or the administration of a benefits plan. Consequently, recognizing this state law claim does not threaten to undermine Congress's goal of "affording employers the advantages of a uniform set of administrative procedures governed by a single [federal] set of regulations." Ft. Halifax, 482 U.S. at 11, 12, 107 S. Ct. at 2216, 2217.
State common law governing contracts between patients and healthcare providers is "a law of general application" which applies to all patients regardless of whether they are or ever have been participants in an ERISA welfare benefit plan and to all providers regardless of whether they are assignees of an ERISA plan beneficiary. Sommers, 793 F.2d at 1470. Therefore, this law "does not affect relations among the principal ERISA entities - the employer, the plan fiduciaries, the plan, and the beneficiaries, as such." Id. Application of state contract law to this claim affects these parties only in their "independent capacities" as patients and healthcare providers, and therefore does not threaten the interests of the employees and beneficiaries ERISA was intended to protect. Id. The motion to dismiss Count II of PIW's complaint is denied, as plaintiff states a valid state claim over which this Court has pendent jurisdiction, based on the valid federal claim of promissory estoppel stated in Count IV of PIW's complaint.
The Court denies defendant's motion to strike plaintiff's "Reply" in the interest of permitting a more complete record in this case, although assuredly superfluous pleadings are discouraged. The Court grants defendant's motion to dismiss with respect to Counts I and III, but denies defendant's motion to dismiss with respect to Counts II and IV. Counts I and III are invalid state law contract claims preempted by ERISA, but plaintiff retains the right to amend the complaint to assert federal common law claims within 30 days. Count IV states a valid claim of equitable estoppel under the federal common law, and Count II asserts a valid state law contract claim which may be addressed by this Court as a pendent claim attached to Count IV. An appropriate Order accompanies this opinion.
EDITOR'S NOTE: The following court-provided text does not appear at this cite in 780 F. Supp 24.
Stanley S. Harris
United States District Judge
Date: January 3, 1992
ORDER - January 3, 1992, Filed
This matter is before the Court on defendant Connecticut General Life Insurance Company's motion to dismiss and motion to strike. On consideration of the entire record, for the reasons stated in the accompanying Opinion, it hereby is
ORDERED, that defendant's motion to strike is denied. It hereby further is
ORDERED, that defendant's motion to dismiss is denied as to Counts II and IV of the complaint. It hereby further is
ORDERED, that defendant's motion to dismiss is granted as to Counts I and III of the complaint, without prejudice to plaintiff's right to amend the complaint to set forth federal common law claims within 30 days of the date of this Order.
Stanley S. Harris
United States District Judge