532 F.3d 940 (9th Cir. 2008), 06-55916, Sgro v. Danone Waters of North America, Inc.

Docket Nº:06-55916.
Citation:532 F.3d 940
Party Name:Mitchell SGRO, Plaintiff-Appellant, v. DANONE WATERS OF NORTH AMERICA, INC.; Metropolitan Life Insurance Company, Defendants-Appellees.
Case Date:July 02, 2008
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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532 F.3d 940 (9th Cir. 2008)

Mitchell SGRO, Plaintiff-Appellant,


DANONE WATERS OF NORTH AMERICA, INC.; Metropolitan Life Insurance Company, Defendants-Appellees.

No. 06-55916.

United States Court of Appeals, Ninth Circuit.

July 2, 2008

Argued and Submitted Feb. 6, 2008.

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[Copyrighted Material Omitted]

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Gary S. Soter , Clifford H. Pearson and Daniel L. Warshaw , Pearson, Soter, Warshaw & Penny, LLP, Sherman Oaks, CA, for the plaintiff-appellant.

Gail E. Cohen , Andrew S. Williams and Misty A. Murray , Barger & Wolen LLP, Los Angeles, CA, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California; Manuel L. Real , District Judge, Presiding. D.C. No. CV-05-05110-R.

Before: ALEX KOZINSKI , Chief Judge, DIARMUID F. O'SCANNLAIN and W. FLETCHER , Circuit Judges.

KOZINSKI , Chief Judge:

We consider a variety of procedural issues that relate to Employee Retirement Income Security Act (ERISA) claims, including whether an ERISA plan must reimburse its beneficiaries for the cost of photocopying medical records.


Mitchell Sgro worked for defendant Danone Waters until he became disabled, at which point he applied for disability benefits from MetLife, the company that makes benefits determinations for Danone Waters's ERISA plan. But, according to Sgro, MetLife refused to consider his claim because he didn't provide copies of his medical records. Sgro objected to paying for photocopying the records and demanded that MetLife do so, but MetLife refused. Sgro eventually paid $412 for the copies, and MetLife thereupon considered and denied his claim. Sgro then asked for copies of all of MetLife's documents pertaining to his claim. MetLife complied with this request in part, but Sgro claims the company held back the notes kept by its claims personnel.

Sgro sued MetLife and Danone Waters in federal court, seeking unpaid benefits, reimbursement of his copying costs, an injunction ordering defendants to pay such costs in the future and statutory penalties for defendants' failure to turn over the notes kept by MetLife's personnel. Sgro asserted causes of action under state and federal law. The district court dismissed his state-law claims with prejudice, and his federal claims without prejudice. The parties have since settled Sgro's claim for unpaid disability benefits, but Sgro appeals the dismissal of his other claims.



Sgro claims that Danone Waters's disability benefits plan isn't governed by ERISA because it falls within the “safe harbor" created by 29 C.F.R. § 2510.3-1(j) . For Sgro to prevail on this point, he would have to prove that the plan meets four separate requirements of the regulation, including that the employer make “[n]o contributions" to the plan. Id. § 2510.3-1(j)(1) .1 Sgro does allege that

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Danone Waters pays none of the plan's supplemental “buy-up" benefits, which employees may purchase to augment the “core" benefits. But, even if true, this wouldn't bring the plan within the safe harbor. So long as Danone Waters pays for some benefits, ERISA applies to the whole plan, even if employees pay entirely for other benefits. See Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1345 (11th Cir.1994) ; see also Crull v. GEM Ins. Co., 58 F.3d 1386, 1390 (9th Cir.1995) (“[A]n employer's payment of a portion of the insurance premium [is] a significant factor for determining the existence of an ERISA plan." ).

We therefore affirm the district court's dismissal of Sgro's state-law claims. But the district court abused its discretion when it dismissed these claims with prejudice. On remand, Sgro may amend his complaint; if he is able to allege in good faith that Danone Waters pays nothing, he would then be entitled to discovery as to whether the safe harbor applies. If the trier of fact ultimately determines that the plan isn't governed by ERISA, then the district court must reconsider Sgro's state-law claims.


Sgro claims that a California insurance regulation requires defendants to reimburse him for the cost of copying the medical records that MetLife requested. Cal.Code Regs. tit. 10, § 2695.11(g) (implementing Cal. Ins.Code § 10123.131 ). But if the plan is governed by ERISA, then section 1144 of that statute preempts the California regulation. Section 1144 preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan," 29 U.S.C. § 1144(a) , unless those laws “regulate[ ] insurance," id. § 1144(b)(2)(A) . There's no dispute that the California regulation does “relate" to this “employee benefit plan." The closer question is whether the regulation is saved from preemption because it “regulates insurance."

In Kentucky Association of Health Plans, Inc. v. Miller, 538 U.S. 329, 123 S.Ct. 1471, 155 L.Ed.2d 468 (2003) , the Supreme Court held that a state law “regulates insurance" -and is therefore saved from ERISA preemption under section 1144 -if the law is “specifically directed toward" the insurance industry and “substantially affect[s] the risk pooling arrangement between the insurer and the insured." Id. at 342, 123 S.Ct. 1471. 2 The California regulation certainly meets the first part of this test because it is “specifically directed toward" the insurance industry; by its very terms the regulation pertains only to “insurers."

The more difficult issue is whether the California regulation also “substantially affect[s] the risk pooling arrangement between the insurer and the insured." We conclude it does not. The regulation doesn't require insurers to insure against additional risks. Cf. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 730, 758, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985) (state law that requires health insurers to insure against mental health problems “regulates insurance" ). Nor does the regulation require insurers to offer

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their insureds additional benefits in the event that the insureds take ill. Cf. Kentucky Ass'n, 538 U.S. at 338, 123 S.Ct. 1471 (state law that requires health insurers to permit their insureds to see “any willing provider" in the state “regulates insurance" ). Nor does the regulation substantially affect the likelihood that a disputed claim will ultimately be deemed valid. Cf. Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 361, 122 S.Ct. 2151, 153 L.Ed.2d 375 (2002) (state law requiring HMOs to offer participants the option of having an independent physician review a denial of coverage “regulates insurance" ); UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 364, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999) (state law requiring insurers to accept late-filed claims unless the delay prejudiced them “regulates insurance" ).

There is one way that the California regulation could affect insurers' risks: By requiring insurers to pay copying costs, the regulation does make it slightly easier for insureds to file claims. If that causes more insureds to file claims, and if...

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