154 F.3d 362 (7th Cir. 1998), 97-1070, Herdrich v. Pegram

Docket Nº:97-1070.
Citation:154 F.3d 362
Party Name:Cynthia HERDRICH, Plaintiff-Appellant, v. Lori PEGRAM, M.D., Carle Clinic Association, and Health Alliance Medical Plans, Incorporated, Defendants-Appellees.
Case Date:August 18, 1998
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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154 F.3d 362 (7th Cir. 1998)

Cynthia HERDRICH, Plaintiff-Appellant,


Lori PEGRAM, M.D., Carle Clinic Association, and Health

Alliance Medical Plans, Incorporated, Defendants-Appellees.

No. 97-1070.

United States Court of Appeals, Seventh Circuit

August 18, 1998

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

Argued Dec. 2, 1997.

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James P. Ginzkey (argued), Hayes, Hammer, Miles, Cox & Ginzkey, Bloomington, IL, for Plaintiff-Appellant.

Peter W. Brandt (argued), Livingston, Barger, Brandt & Schroeder, Bloomington, IL, for Defendants-Appellees.

Before WOOD, JR., COFFEY and FLAUM, Circuit Judges.

COFFEY, Circuit Judge.

The defendants-appellees, Carle Clinic Association, P.C. ("Carle"), Health Alliance Medical Plans, Inc. ("HAMP"), and Carle Health Insurance Management Co., Inc., operate a pre-paid health insurance plan which provides medical and hospital services. The plaintiff-appellant, Cynthia Herdrich ("Herdrich"), was covered under a plan subscription through her husband's employer, State Farm Insurance Company, an Illinois corporation. In March of 1992, Herdrich's appendix ruptured as the result of alleged improper medical treatment while she was in the care of Dr. Lori Pegram ("Pegram"), a physician who practiced under the plan. 1 On October 21, 1992, Herdrich filed a two-count complaint, alleging medical negligence against the health plan operators. Herdrich later added counts III and IV, alleging state law fraud. The defendants, in response, contended that the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., preempted counts III and IV, and successfully removed the case to federal court. They subsequently filed a motion for summary judgment as to counts III and IV. The trial judge granted the summary judgment motion on count IV only, and gave Herdrich leave to amend count III. In accordance with the court's instructions, Herdrich amended count III to allege that the defendants had breached their fiduciary duty to plan participants, in violation of ERISA. The defendants moved to dismiss the amended count III for failure to state a claim upon which relief could be granted. The court agreed and granted the motion. The remaining two medical negligence counts (I and II) went to trial before a jury. Herdrich prevailed on both of them. Thereafter, she filed a notice of appeal as to the trial court's dismissal of her amended count III. We reverse and remand this case to the district court (on count III) for a trial.


This appeal arises out of a complaint filed by Herdrich in the Circuit Court of McLean County, Illinois, on October 21, 1992, against Lori Pegram, M.D. and Carle Clinic Association. Counts I and II of the plaintiff's complaint were based upon a theory of professional medical negligence. Specifically, Herdrich alleged that she suffered a ruptured appendix and, in turn, contracted peritonitis

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due to Pegram's negligence in failing to provide her with timely and adequate medical care. On February 18, 1994, Herdrich was granted leave to amend the complaint. In her amended complaint, she added two counts (III and IV) of state law fraud against Carle and Health Alliance Medical Plans, Inc. 2 The defendants removed the case to federal court, asserting that the two new counts were preempted by ERISA, and thereafter filed a motion for summary judgment as to counts III and IV only. The court granted summary judgment against Herdrich on count IV "to the extent [she] relies on § 502(a)(3)(B) [of ERISA] as a basis for monetary relief, as opposed to equitable relief," and that provision does not provide for extra-contractual damages. While the trial judge denied the defendants' summary judgment motion as to count III, he did conclude ERISA preempted that count, and granted Herdrich "leave to submit an amended Count III which clearly sets forth her basis for proceeding under ERISA, including the applicable civil enforcement provision." On September 1, 1995, Herdrich filed her amended count III in accordance with the court's instructions. In it, she averred that the defendants breached their fiduciary duty to plan beneficiaries by depriving them of proper medical care and retaining the savings resulting therefrom for themselves. 3

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The defendants thereafter moved, pursuant to Rule 12 of the Federal Rules of Civil Procedure, to dismiss Herdrich's amended count III for failure to state a claim upon which relief could be granted.

By agreement, the case--including the defendants' motion to dismiss--was assigned to a magistrate judge, who recommended that the amended count III be dismissed because, in his opinion, "[t]he plaintiff fail[ed] to identify how any of the defendants is involved as a fiduciary to the Plan." He did, however, recommend that the court afford Herdrich "one last opportunity" to re-plead her claim under ERISA. Herdrich promptly filed a Rule 72 objection to the magistrate's recommendation. Less than two weeks later, on April 15, 1996, the district court denied that objection and adopted the magistrate's recommendation as to count III. In so doing, it gave Herdrich 21 days from the entry of the order to re-plead her claim. Herdrich chose not to re-plead and stood on count III as amended.

The remaining counts, I and II, went to trial in early December 1996, and the jury returned a verdict in Herdrich's favor on both counts, awarding her $35,000 in compensatory damages. She then appealed the district court's earlier dismissal of her amended count III.


On appeal, Herdrich contends that the district court erred in dismissing the amended count III of her complaint for failing to sufficiently state a claim for breach of a fiduciary duty under ERISA. The defendants contend that we lack jurisdiction to hear this case due to Herdrich's failure to file a timely notice of appeal from the order of dismissal, entered April 15, 1996. The defendants further argue that Herdrich's request for damages is inappropriate insofar as beneficiaries under an ERISA benefits plan may not recover "anything other than the benefits provided expressly in the plan."


  1. Jurisdiction

    As an initial matter, we are called upon to determine whether or not we have jurisdiction to hear this appeal. The defendants contend that Herdrich's failure to file a notice of appeal within thirty days from the district court's April 15, 1996, order of dismissal leaves us without jurisdiction. See Fed. R.App. P. 4(a)(1) ("[I]n a civil case in which an appeal is permitted by law as of right from a district court to a court of appeals the notice of appeal ... must be filed with the clerk of the district court within 30 days after the date of entry of the judgment or order appealed from."). Alternatively, the defendants urge that jurisdiction is improper because the April 15 order was not a "final decision" for purposes of appealability, as required by 28 U.S.C. § 1291. We disagree and think it clear that Carle and HAMP have misconstrued the law in relation to both of their arguments.

    This court has jurisdiction to hear appeals from the "final decisions" of the federal district courts. 28 U.S.C. § 1291. A "final" decision is defined as one that terminates the litigation. See Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945). 28 U.S.C. § 1292 also gives us jurisdiction over appeals from specified interlocutory orders. 4 Generally speaking,

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    interlocutory appeals are disfavored, and appellate courts are reluctant to exercise their discretion to grant such requests, as they all too frequently cause unnecessary delays in lower court proceedings and waste the resources of an already overburdened judicial system. See Coopers & Lybrand v. Livesay, 437 U.S. 463, 473-74, 98 S.Ct. 2454, 2460-61, 57 L.Ed.2d 351 (1978). For these reasons, the preferred practice is to defer appellate review until the entry of a final judgment in order that we might rule on all issues at one time. See 437 U.S. at 475, 98 S.Ct. at 2461. "[E]ven if the district judge certifies the order under § 1292(b), the appellant still has the burden of persuading the court of appeals that exceptional circumstances justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment." Id. (citation and internal quotation omitted).

    A trial court's order dismissing a complaint is not a final judgment for purposes of appeal under 28 U.S.C. § 1291 because it does not terminate the litigation. See Paganis v. Blonstein, 3 F.3d 1067, 1070 (7th Cir.1993) ("The dismissal of a complaint does not end the litigation.... In contrast, a dismissal of the entire action ends the litigation and forces the plaintiff to choose between appealing the judgment or moving to reopen the judgment and amend the complaint pursuant to Fed.R.Civ.P. 59 or Rule 60.... Therefore, if a judgment entry dismisses only the complaint, it is not a final judgment.") (internal citations and quotations omitted). This is particularly true when one or more counts of a multiple count complaint and/or indictment are dismissed for whatever reason, and others are left intact. In such cases, an interlocutory appeal of the dismissal order is available only after the order is certified by the district court under section 1292(b), supra, or by entry of a partial final judgement under Rule 54 of the Federal Rules of Civil Procedure. See Principal Mut. Life Ins. Co. v. Cincinnati TV 64 Ltd. Partnership, 845 F.2d 674, 676 (7th Cir.1988) (district court order granting judgment on one count but dismissing nine other counts without prejudice and expressly providing plaintiff right to reinstate seven counts was not final appealable order because it did not "terminate the litigation"). Just because the district court failed to take either of these two...

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