Zuniga v. Blue Cross and Blue Shield of Michigan

• Decision Date: 02 May 1995
• Docket Number: Nos. 93-1536,93-1872,s. 93-1536
• Citation: 52 F.3d 1395
• Parties: , 19 Employee Benefits Cas. 1273, Pens. Plan Guide P 23908S Jorge S. ZUNIGA; Jorge S. Zuniga, M.D., P.C., Plaintiffs-Appellees, Cross-Appellants, v. BLUE CROSS AND BLUE SHIELD OF MICHIGAN, a Michigan non-profit corporation, Defendant-Appellant, Cross-Appellee, Preferred Health Care, Limited, a Delaware Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1395

52 F.3d 1395

63 USLW 2733, 19 Employee Benefits Cas. 1273,

Pens. Plan Guide P 23908S

Jorge S. ZUNIGA; Jorge S. Zuniga, M.D., P.C. Plaintiffs-Appellees, Cross-Appellants, v. BLUE CROSS AND BLUE SHIELD OF MICHIGAN, a Michigan non-profit corporation, Defendant-Appellant, Cross-Appellee Preferred Health Care, Limited, a Delaware Corporation Defendant-Appellee.

Nos. 93-1536, 93-1872.

United States Court of Appeals Sixth Circuit.

Argued Aug. 9, 1994.

Decided May 2, 1995.

John A. Michalsen (argued and briefed), Alan T. Rogalski (briefed), Frimet & Michalsen, Southfield, MI, for Jorge S. Zuniga, Jorge S. Zuniga, M.D., P.C.

Edward W. Fisher (argued and briefed), Debra A. Spicer (briefed), Detroit, MI, for Blue Cross & Blue Shield of Michigan.

Vivian Perry-Johnston, Bloomfield Hills, MI, for Preferred Health Care, Ltd.

Before: MARTIN, NELSON, and DAUGHTREY, Circuit Judges.

MARTIN, J., delivered the opinion of the court, in which DAUGHTREY, J., joined. NELSON, J. (pp. 1402-1406), delivered a separate opinion concurring in part and dissenting in part.

BOYCE F. MARTIN, Jr., Circuit Judge.

In this appeal, Blue Cross and Blue Shield of Michigan and Jorge Zuniga both challenge the district court's decisions regarding the preemption of Zuniga's state law claims under the Employee Retirement Income Security Act, 29 U.S.C. Sec. 1001, et seq. Blue Cross appeals the district court's finding that ERISA did not preempt two of Zuniga's claims based on Michigan statutory law. Zuniga, in turn, cross-appeals the district court's decision that ERISA did preempt his breach of contract claim. For the following reasons, we find that Blue Cross's appeal is not reviewable by this Court and affirm the district court's decision regarding Zuniga's breach of contract claim.

I.

Zuniga is a certified psychiatrist who has been involved in a long-running feud with Blue Cross of Michigan. Their dispute dates back to 1979, when Zuniga was "departicipated" from Blue Cross, meaning that Blue Cross would no longer directly pay him as a participating physician for treating covered patients. Blue Cross alleged that Zuniga overutilized medical procedures and performed unnecessary procedures. Zuniga filed suit, and after nine years reached a Settlement Agreement with Blue Cross in July 1988. Pursuant to this agreement, Zuniga became a participating physician again, Blue Cross agreed that in the future Zuniga would not be treated differently than any other provider, and Blue Cross agreed to pay Zuniga $250,000.00 for personal injuries.

Blue Cross and Preferred Health Care, Ltd., administer various psychiatric managed care programs. Preferred Health Care, Ltd., administers health care programs at General Motors and other companies. These programs rejected Zuniga as a preferred provider. However, Preferred Health Care is not a party before this court as it did not appeal the district court's decision. In 1988, Blue Cross began Pilot Managed Health Care Programs at both Chrysler and Ford. These programs were established following collective bargaining agreements, between Chrysler and Ford and the United Auto Workers, with the goal of containing costs. These programs are health care benefit plans established for the benefit of Chrysler and Ford employees and retirees. As such, each meets the definition of an "employee welfare benefit plan" under ERISA, 29 U.S.C. Sec. 1002(1) (1988). In order for a doctor to be fully compensated by Blue Cross, these plans require that certain mental health services be provided by a panel of approved providers. Zuniga applied for preferred provider status with the Chrysler plan, but was rejected due to overutilization. Subsequently, he was removed from the Ford plan's panel of preferred providers for similar reasons, overutilization and excessive cost generation. Zuniga then brought suit in state court.

Zuniga filed two Verified Complaints, which have since been consolidated, alleging that Blue Cross's and Preferred Health Care's actions in denying him access to the preferred provider panels were arbitrary and illegal. Specifically, Zuniga's first complaint, naming only Blue Cross as a defendant, had five counts: Count I alleged a breach of contract involving the 1988 Settlement Agreement; Count II alleged a denial of Due Process under both the Michigan and United States Constitutions; Count III alleged a violation of the Michigan Non-Profit Health Care Corporation Act, Mich. Comp. Laws Sec. 550.1501 et seq.; Count IV alleged that Zuniga had and would continue to suffer irreparable injury; and Count V alleged a violation of the Prudent Purchaser Act, Mich. Comp. Laws Sec. 550.53. When Zuniga learned that Preferred Health Care was involved in the selection of preferred providers, he filed a second complaint adding Preferred Health Care as a defendant and alleging a conspiracy between Preferred Health Care and Blue Cross to commit a tortious interference with an advantageous business relationship. In that complaint, Zuniga also claimed that this was done to retaliate against him for asserting his First Amendment rights, among others, in seeking a remedy for wrongs allegedly committed by Blue Cross.

Preferred Health Care and Blue Cross removed this case to the district court, alleging ERISA preemption as a basis for jurisdiction. Zuniga filed a motion to remand which was denied, as was a motion for a preliminary injunction. On September 16, 1991, Blue Cross moved to dismiss the case, pursuant to Fed.R.Civ.P. 12(b)(6), based on ERISA preemption. Blue Cross argued that Zuniga's state law claims "related to" an employee benefit plan, and were thus preempted by ERISA. The district court granted in part and denied in part this motion on February 6, 1992. It denied the motion to dismiss as to Count II, the Due Process claim, and granted it as to Count IV, the tortious interference with business relationships claim. The court's decision as to these counts has not been challenged. Therefore, on appeal we are only concerned with Counts I, III, and V.

The district court dismissed Count I, alleging breach of contract. The court found that ERISA preempted that claim because it related to an ERISA plan. However, the court held that Counts III and V, which alleged violations of Michigan statutory laws, were not preempted by ERISA. Therefore, it denied the motion to dismiss as to these counts and remanded them to state court. In doing so, the court found that both counts stated causes of action governed by state insurance laws and any connection to ERISA was "peripheral at best." Thus, in the district court's order, as amended April 3, Counts I and IV were dismissed, Counts III and V were remanded to the state court, and only Count II, the Due Process claim, remained before the court.

On March 6, Blue Cross appealed the court's denial of its motion to dismiss as to Counts III and V. Zuniga cross-appealed the court's dismissal of Count I on March 19. This Court found that it was without jurisdiction to hear these appeals and dismissed them sua sponte. Zuniga v. Blue Cross, No. 92-1315/1348 (6th Cir. Sept. 30, 1992) (unpublished order). Unfortunately for Blue Cross, it failed to meet the requirements of an interlocutory appeal. 28 U.S.C. Sec. 1292(b) (1988). Because the appeal was not certified as an interlocutory appeal under Section 1292 or Fed.R.Civ.P. 54(b), and the order disposed of less than all the claims involved, this Court found it was nonappealable. Zuniga, No. 92-1315/1348 at 2 (citing William B. Tanner Co. v. United States, 575 F.2d 101, 102 (6th Cir.1978)). Also, the district court's order was not a final judgment at that time because the Due Process claim was yet to be resolved.

In the district court, Blue Cross moved for summary judgment on the Due Process claim, arguing that it was not a state actor subject to Constitutional Due Process requirements. On April 5, 1993, the district court granted summary judgment for Blue Cross and dismissed Zuniga's complaint. Blue Cross then filed a Notice of Appeal on April 7, challenging the district court's ruling on its motion to dismiss regarding Counts III and V. After receiving an extension of time to file an appeal, Zuniga cross-appealed from the same Amended Order's ruling that Count I was preempted by ERISA. Preferred Health Care has not filed an appeal to this Court, and the underlying action has been completely dismissed by the district court. Thus, just as they previously attempted to do, both parties on appeal now are challenging the district court's Amended Order Granting in Part, Denying in Part and Remanding in Part Defendant Blue Cross and Blue Shield of Michigan's and Preferred Health Care, Ltd.'s Motions to Dismiss.

II.

Of initial concern to this court is whether this case was properly removed to the district court in light of our recent decision in Warner v. Ford Motor Co., 46 F.3d 531 (6th Cir.1995) (en banc ). On August 22, 1991, Preferred Health Care filed a Notice of Removal, pursuant to 28 U.S.C. Secs. 1331, 1441, and 1446, in which Blue Cross joined. In its Notice, Preferred Health Care argued that the district court had original jurisdiction under 28 U.S.C. Sec. 1331 (federal question jurisdiction) and/or 28 U.S.C. Sec. 1343, which confers original jurisdiction over civil rights actions. Although the Notice states that Zuniga's complaint alleged retaliation for exercising his First Amendment rights, it also states that ERISA governs the health care programs involved, and Zuniga's state law claims are therefore preempted.

As we noted in Warner, this raises a concern because "pre-emption is ordinarily a federal defense to the plaintiff's suit. As a defense, it does not appear on the face of a well-pleaded complaint, and, therefore does not authorize removal to federal court." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). However, Metropolitan Life recognized a narrow exception to this...