Richland Hosp., Inc. v. Ralyon
| Decision Date | 18 November 1987 |
| Docket Number | CARTER-JONES,No. 86-1388,86-1388 |
| Citation | 33 Ohio St.3d 87,516 N.E.2d 1236 |
| Parties | RICHLAND HOSPITAL, INC. et al. v. RALYON et al., Appellees. Appeal ofLUMBER CO. et al. |
| Court | Ohio Supreme Court |
Syllabus by the Court
1. State courts have jurisdiction concurrent with that of the federal courts to award benefits due under the terms of a self-insured employee benefit plan adopted pursuant to the Employee Retirement Income Security Act (ERISA).
2. ERISA expressly authorizes state and federal courts, in their discretion, to award reasonable attorney fees and costs to either party in actions brought under ERISA.
3. State courts have no jurisdiction to grant extracontractual punitive damages in actions to recover benefits due under an employee benefit plan adopted pursuant to ERISA.
4. Federal courts have exclusive jurisdiction over ERISA claims for breach of fiduciary duty.
5. A state common-law claim asserting express, willful and malicious misrepresentation against a self-insured employee benefit plan is pre-empted by ERISA.
On October 10, 1983, defendant-appellee, Julia Ralyon, was placed in Richland Hospital and diagnosed as schizophrenic. She and her husband, defendant-appellee Ken Ralyon, were insureds under an employee welfare benefit plan administered by defendant-appellant, Carter Employee Welfare Plan Trust ("Carter Plan"). The Carter Plan was sponsored by Ken's employer, defendant-appellant Carter-Jones Lumber Company ("Carter-Jones"), and was financed primarily by employee payroll deductions with Carter-Jones contributing only as necessary to cover any shortfalls between plan income and expenses. Three trustees, employees of various Carter-Jones companies, administered the Carter Plan. An independent firm, Executive & Employee Benefit Plans, Inc. ("E & E"), processed and determined the payment of claims made by plan participants.
Following verification of medical benefits coverage with a plan trustee, 1 plaintiffs, Richland Hospital and Dr. Roldolfo Vocal, treated Julia Ralyon in the course of her forty-day stay in the hospital. Subsequently, E & E denied the Ralyons' claim for benefits, determining that, because the hospital lacked on-site surgical facilities, it was not a "hospital" within the Carter Plan's definition of a covered hospital. The trustees were further consulted after E & E's denial but again denied the claim. 2 The instant litigation followed.
The hospital and Dr. Vocal filed suit against the Ralyons and Carter-Jones for their fees, $9,459 and $2,115, respectively. The Ralyons filed a cross-complaint against Carter-Jones, seeking indemnification of the payment of their medical bills, punitive damages and attorney fees. In support of their claims, they alleged that Carter-Jones expressly, willfully and maliciously misrepresented to them that the plan would cover their medical and hospital expenses. Carter-Jones filed a third-party complaint against the Carter Plan for indemnification, claiming that the plan was a separate entity and the responsible party.
The hospital and Dr. Vocal were granted judgment against the Ralyons for their fees. In addition, Carter-Jones and the Carter Plan were found jointly and severally liable to indemnify the Ralyons for their medical bills totaling $11,574, and were further assessed punitive damages of $18,000 and attorney fees of $6,000. No appeal was taken from the judgment in favor of the hospital and Dr. Vocal. The court of appeals affirmed all matters raised on appeal.
The cause is now before this court upon the allowance of a motion to certify the record.
Stephen Cockley and David Homer, Mansfield, for appellees.
Holder & Schiavone Co., L.P.A., William P. Holder, Jr. and Elizabeth A. Raies, Akron, for appellants.
This case presents two issues of first impression. The first is whether the concurrent subject matter jurisdiction vested in state courts under the Employee Retirement Security Act ("ERISA"), Section 1001 et seq., Title 29, U.S. Code, includes claims for benefits, punitive damages and attorney fees. Second, we must determine whether ERISA pre-empts a state common-law action asserting express, willful and malicious misrepresentation of benefit coverage under a self-insured employee benefit plan.
To protect plan participants and beneficiaries, ERISA comprehensively regulates employee benefit plans, including those providing medical, surgical, or hospital benefits by requiring the reporting and disclosure of financial and other pertinent information; by establishing uniform standards for fiduciaries of employee benefit plans; and by providing for appropriate remedies in both state and federal courts. Sections 1001(b), 3 1132 and 1144, Title 29, U.S. Code.
Carter-Jones and the Carter Plan properly raise, for the first time in this appeal, the question of the trial court's subject matter jurisdiction to determine the issues upon which it rendered judgment. Baltimore & Ohio RR. Co. v. Hollenberger (1907), 76 Ohio St. 177, 81 N.E. 184; Jenkins v. Keller (1966), 6 Ohio St.2d 122, 35 O.O.2d 147, 216 N.E.2d 379; Civ.R. 12(H)(3).
It is clear from the record that the Carter Plan was organized under ERISA 4 and is subject to its provision regarding the jurisdiction of federal and state courts to hear causes of action brought under the Act. The first question for decision is whether there is concurrent state court jurisdiction of the Ralyons' claims for indemnification (benefits) from Carter-Jones in the amount of their medical bills, punitive damages, and attorney fees. 5
ERISA vests state and federal courts with concurrent subject matter jurisdiction of certain enumerated civil actions brought by participants or beneficiaries against an employee benefit plan. Section 1132(e)(1), Title 29, U.S. Code states:
Subsection (a)(1)(B) provides:
The controlling language of Sections 1132(e)(1) and (a)(1)(B), Title 29, U.S. Code, expressly limits the types of actions that may be brought against benefit plans in state courts to the recovery of benefits due under the plan, the enforcement of rights under the plan, or the clarification of rights to future benefits under the plan. Any action that is not included in subsection (a)(1)(B) falls within the exclusive subject matter jurisdiction of federal courts. The plain language of subsection (a)(1)(B) establishes that state courts clearly have jurisdiction concurrent with that of the federal courts to award benefits due under the terms of a self-insured employee benefit plan adopted pursuant to ERISA. Thus, we conclude that the Ralyons' claim for indemnification for medical benefits allegedly due, but refused after proper demand, was properly filed in the common pleas court.
ERISA expressly authorizes state and federal courts, in their discretion, to award reasonable attorney fees and costs to either party in actions brought under ERISA. Massachusetts Mut. Life Ins. Co. v. Russell (1985), 473 U.S. 134, 147, 105 S.Ct. 3085, 3093, 87 L.Ed.2d 96.
The statutory authority is found in Section 1132(g)(1), Title 29, U.S. Code, which provides in part:
Therefore, the Ralyons' request for attorney fees was properly before the court.
By contrast, however, application of the plain language of Section 1132(a)(1)(B) leads us to further conclude that state courts have no jurisdiction to award extracontractual punitive damages in actions to recover benefits due under an employee benefit plan adopted pursuant to ERISA. Subsection (a)(1)(B) expressly limits the actions cognizable in state courts and only provides for the enforcement of contractual rights as remedies. If available under ERISA, the award of extracontractual punitive damages lies within exclusive federal jurisdiction. While the court in Massachusetts Mut. Life Ins. Co. v. Russell, supra, held that individual beneficiaries and participants could not recover extracontractual punitive damages for breach of fiduciary duty under Section 1109(a), Title 29, U.S. Code, it left unanswered their availability under Section 1132(a)(3), Title 29, U.S. Code. Id. at 139, fn. 5, 105 S.Ct. at 3089, fn. 5. Several lower federal courts have proceeded to recognize the availability of such damages under subsection 1132(a)(3). See Smith v. ABS Industries, Inc. (N.D.Ohio 1986), 653 F.Supp. 94. The trial court, therefore, lacked jurisdiction to consider the Ralyons' claim for extracontractual punitive damages.
Having determined the scope of concurrent jurisdiction vested in state courts, we next apply ERISA's pre-emption provisions to this case.
Section 1144(a), Title 29, U.S. Code, provides that state laws that "relate to" employee benefit plans are superseded by ERISA:
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