Grimo v. Blue Cross/Blue Shield of Vermont, 1745

Citation34 F.3d 148
Decision Date09 September 1994
Docket NumberD,No. 1745,1745
Parties18 Employee Benefits Cas. 2140 Gerald GRIMO and Gerald Grimo, Special Administrator of the Estate of Diana Grimo bnf Diana Grimo, Plaintiffs-Appellants, v. BLUE CROSS/BLUE SHIELD, OF VERMONT, Defendant-Appellee. ocket 93-9269.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Eric R. Benson, Burlington, VT (Bloomberg, Oettinger & O'Hara, of counsel), for plaintiffs-appellants.

Nancy J. Creswell, Montpelier, VT (Bernard D. Lambek, Paterson & Walke, P.C., of counsel), for defendant-appellee.

Before: VAN GRAAFEILAND, WINTER, and ALTIMARI, Circuit Judges.

WINTER, Circuit Judge:

Gerald Grimo, in his personal capacity and as the special administrator of Diana Grimo's estate, appeals from Judge Billings's grant of summary judgment in favor of Blue Cross/Blue Shield of Vermont ("Blue Cross"). Grimo had a health insurance policy with Blue Cross. After Blue Cross denied coverage of certain medical expenses incurred by his wife, Grimo filed a complaint in Vermont state court, asserting six state law claims against Blue Cross. Blue Cross subsequently removed the case to the district court on the grounds that Grimo's policy was part of an ERISA plan. Although summary judgment was granted on the merits, the dispositive issue on this appeal is the district court's denial of Grimo's motion to remand the case to state court. Because the factual record is insufficient to sustain the district court's denial of that motion, we vacate the judgment and remand.

BACKGROUND

Whether the Grimos' policy with Blue Cross is an ERISA plan turns on the structure and funding of the program under which the policy was offered. The record regarding that structure and funding is sparse and consists almost entirely of an informal and equivocal admission. Nonetheless, it does reveal the following. Diana and Gerald Grimo were both employees of Twin State Typewriter, Inc. ("Twin State") of White River Junction, Vermont. 1 Twin State came to subscribe, through the Small Business Service Bureau, to a multiple-employer trust ("MET") that offered health insurance from Blue Cross to Twin State's employees. Diana Grimo was covered as a dependent under a Blue Cross medical benefit policy issued to Gerald. Although the parties dispute both the structure and funding of the program under which the policy was obtained, they made no formal proffer of evidence on this issue. 2

As discussed more fully infra, the role played by an employer in the obtaining of health insurance is important to a determination of whether that insurance is an ERISA plan. The only evidence before the district court when it denied Grimo's motion to remand the case to state court was an apparent admission by Grimo's counsel concerning Twin State's contribution to the costs of its employees' health insurance. At oral argument on February 19, 1993, Grimo's counsel appeared to concede that, at least for the "principals" of the corporation, Twin State had paid 50% of the cost of the health insurance for a period of a year or two ending roughly a year before the hearing. Grimo's counsel further stated that he "believe[d]" that Twin State, again at least for its principals, had paid 100% of the costs of the insurance in the first year it was offered. 3 He also appeared to claim, however, that at the time of the hearing, all employees of Twin State were paying the full costs of their insurance.

Other relevant events are more clearly disclosed in the record. Diana Grimo suffered from a medical condition that manifested itself as a severe intolerance to food. The parties sharply disputed the proper diagnosis and treatment of Diana Grimo's affliction. In the fall of 1992, Diana Grimo contacted Blue Cross regarding her plans to seek treatment from Dr. William J. Rea, a physician with privileges at Tri-City Hospital in Dallas, Texas. Blue Cross approved three days of in-patient care, and Diana Grimo was admitted to Tri-City Hospital on October 27, 1992.

At the conclusion of the three-day period, Dr. Rea apparently determined that Diana Grimo should receive additional treatment at the hospital. On that day, Dr. William E. Allard, Jr., Blue Cross's medical director, spoke with one of Dr. Rea's colleagues and advised him that Blue Cross would not cover Diana Grimo's continued in-patient care. The Grimos were subsequently notified by letter from Blue Cross that Blue Cross was denying continued in-patient coverage after October 30, 1992 on the grounds that such treatment was not "medically necessary."

The Grimos exercised their right to request a formal review of this decision with Blue Cross's Claim Appeal Committee. After several hearings, the committee upheld the denial of benefits based upon the exclusions in Grimo's policy for services that are "not medically necessary," "experimental/investigative in nature," and "for inpatient confinement for environmental change." The Grimos then filed the present action in Vermont state court, pleading six state law claims against Blue Cross based on the denial of coverage. Blue Cross, pursuant to 28 U.S.C. Sec. 1441, removed the case to federal court on the ground that Gerald Grimo's policy with Blue Cross was part of an ERISA plan. The district court, after conducting a brief hearing at which no witnesses were called, denied Grimo's motion to remand the case to state court, concluding that Gerald Grimo's policy was part of an "employee welfare benefit plan" under ERISA, 29 U.S.C. Sec. 1002.

The district court subsequently denied Grimo's request for injunctive relief, dismissed five of the six state law claims on the ground of ERISA preemption, construed Grimo's sixth claim as an ERISA claim, and granted Blue Cross summary judgment on this claim on the grounds that Blue Cross's denial of benefits under the policy was not arbitrary or capricious. This appeal followed. 4

DISCUSSION

As a preliminary matter, we observe that on the present record, it seems clear that Ms. Grimo was a desperately sick woman who, even if she had sought conventional care, would have required hospitalization and extensive professional attention. It also seems clear that some portion of the cost of her stay at Tri-City was conventional care, or the equivalent thereof, that she would have received in the course of any hospitalization for a serious illness and a denial of reimbursement for any part of such cost may be inconsistent with the Blue Cross policy. Neither the Blue Cross Appeal Committee nor the district court made an effort to apportion costs, however. We proffer no view on this issue, other than to flag it for consideration should this matter remain in federal court. Although Grimo raises a number of arguments on appeal, we need consider only his threshold contention that the district court erred in denying his motion to remand the case to state court. The district court denied the motion to remand based on the court's finding that Grimo's policy was part of an "employee welfare benefit plan," as that term is defined in ERISA, 29 U.S.C. Sec. 1002(1) (1988). Civil suits by beneficiaries to recover benefits under an ERISA plan can be brought only under the civil enforcement provision of ERISA, 29 U.S.C. Sec. 1132(a). 29 U.S.C. Sec. 1144(a) (1988); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56, 107 S.Ct. 1549, 1557, 95 L.Ed.2d 39 (1987); Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 62-63, 107 S.Ct. 1542, 1545-46, 95 L.Ed.2d 55 (1987). Assertion of ERISA preemption permits removal of the beneficiary's case from state court, even if the complaint has pleaded only state law claims. See Metropolitan Life Ins. Co., 481 U.S. at 63-67, 107 S.Ct. at 1546-48; Smith v. Dunham-Bush, Inc., 959 F.2d 6, 10 (2d Cir.1992). In such instances, however, the defendant bears the burden of demonstrating the propriety of removal. Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 492 n. 4 (9th Cir.), cert. denied, 492 U.S. 906, 109 S.Ct. 3216, 106 L.Ed.2d 566 (1989); Jones v. General Tire & Rubber Co., 541 F.2d 660, 664 (7th Cir.1976); Thomas v. Burlington Indus., 763 F.Supp. 1570, 1576 (S.D.Fla.1991); Isaacs v. Group Health, Inc., 668 F.Supp. 306, 311 (S.D.N.Y.1987).

ERISA defines an "employee welfare benefit plan" as:

any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer ... to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, ... medical, surgical, or hospital care or benefits....

29 U.S.C. Sec. 1002(1) (1988). The term "employer" includes "a group or association of employers," such as a MET, acting on behalf of its members. 29 U.S.C. Sec. 1002(5) (1988).

"[A] 'plan, fund, or program' under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits." Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir.1982) (en banc ); see also Randol v. Mid-West Nat'l Life Ins. Co. of Tennessee, 987 F.2d 1547, 1550 (11th Cir.), cert. denied, --- U.S. ----, 114 S.Ct. 180, 126 L.Ed.2d 139 (1993). However, the "plan, fund, or program" need not be a formal written document. Donovan, 688 F.2d at 1372-73. In fact, "[s]ome essentials of a plan, fund, or program can be adopted, explicitly or implicitly, from sources outside the plan, fund, or program--e.g., an insurance company's procedure for processing claims...." Id. at 1373 (citations omitted); see, e.g., Randol, 987 F.2d at 1550-51 (employer "maintained" plan through contributions to premiums notwithstanding absence of documentation specifying employer as applicant or beneficiary).

Where an employee receives medical benefits through an insurance policy purchased through a MET and the employer's practice and the policy...

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