Cannon v. Group Health Service of Oklahoma, Inc., 94-6451

• Decision Date: 28 February 1996
• Docket Number: No. 94-6451,94-6451
• Citation: 77 F.3d 1270
• Parties: , 19 Employee Benefits Cas. 2864 Jerry CANNON, Individually and on behalf of the Estate of Phyllis Cannon, Deceased, Plaintiff-Appellant, v. GROUP HEALTH SERVICE OF OKLAHOMA, INC., d/b/a Blue Cross & Blue Shield of Oklahoma; GHS Health Maintenance Organization, Inc., d/b/a Blue Lincs HMO, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1270

77 F.3d 1270

64 USLW 2628, 19 Employee Benefits Cas. 2864

Jerry CANNON, Individually and on behalf of the Estate of Phyllis Cannon, Deceased, Plaintiff-Appellant, v. GROUP HEALTH SERVICE OF OKLAHOMA, INC., d/b/a Blue Cross &amp Blue Shield of Oklahoma; GHS Health Maintenance Organization, Inc., d/b/a Blue Lincs HMO, Defendants-Appellees.

No. 94-6451.

United States Court of Appeals Tenth Circuit.

Feb. 28, 1996.

Appeal from the United States District Court for the Western District of Oklahoma, D.C. No. CIV-94-159-A.

Larry Alan Tawwater (Jo L. Slama and Terry T. Wiens with him on the briefs), McCaffrey & Tawwater, Oklahoma City, Oklahoma, for Plaintiff-Appellant.

Mark E. Schmidtke (Page Dobson and J.R. "Randy" Baker, Holloway Dobson Hudson Bachman Alden Jennings Robertson & Holloway, Oklahoma City, Oklahoma, with him on the briefs), J.R. Ebenstein Consultants, Valparaiso, Indiana, for Defendants-Appellees.

Before PORFILIO, and BRORBY, Circuit Judges; and HOLMES, District Judge. ^*

JOHN C. PORFILIO, Circuit Judge.

Jerry Cannon filed this action against Group Health Service of Oklahoma, Inc., d/b/a Blue Cross & Blue Shield of Oklahoma, and GHS Health Maintenance Organization, Inc., d/b/a Blue Lincs HMO (insurers) to recover damages for the death of his wife, Phyllis Cannon. After removal to federal court, the district court granted summary judgment for the insurers, holding Mr. Cannon's claims were preempted by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 to 1461. The district court also denied Mr. Cannon's motion to amend his complaint, holding his new claims could not withstand a motion to dismiss. Mr. Cannon now appeals. Although moved by the tragic circumstances of this case and the seemingly needless loss of life that resulted, we conclude the law gives us no choice but to affirm.

I

Phyllis Cannon was diagnosed with acute myeloblastic leukemia in September of 1991. She was treated with chemotherapy, and her leukemia went into remission. The insurers paid for this medical treatment. Mrs. Cannon's treating physician, Dr. Ruben Saez, recommended she undergo an autologous bone marrow transplant (ABMT), and on August 10, 1992, sought preauthorization from the insurers.

On August 11, 1992, the insurers denied preauthorization for the ABMT, contending the treatment was experimental during a first remission of leukemia. Dr. Saez requested the insurers reconsider his request and submitted medical literature in an attempt to demonstrate his proposed treatment was not experimental. Dr. Saez also informed the insurers his request needed urgent action because it was critical the ABMT be completed prior to any cancer recurrence.

On August 21, 1992, the insurers again denied preauthorization. The Cannons persisted in their request for reconsideration, and on September 21, 1992, the insurers reversed their decision and agreed to authorize ABMT. Unfortunately, Mrs. Cannon was not notified until October 10, 1992, in a letter dated September 28, 1992. By that time, her leukemia had returned and she could no longer beneficially receive ABMT, and none was ever administered. She was admitted into the hospital on October 12, 1992, and died on November 21, 1992.

Mrs. Cannon was insured through her employer, Hendershot Tool Company. She chose health insurance coverage through Blue Lincs HMO, one of three options of Hendershot's health insurance plan. When Mrs. Cannon was first diagnosed with leukemia in September 1991, the Blue Lincs HMO plan provided The following services or procedures are not covered by BlueLincs HMO: .... (13) Organ transplants other than skin, cornea, bone, bone marrow and kidney.

However, four months after Mrs. Cannon's diagnosis, effective January 1, 1992, Blue Lincs HMO issued an "Amendatory Rider" which specified:

Preauthorization will be denied, and benefits will not be provided, for autologous bone marrow transplants.... Such as: acute leukemia in first remission; ....

The insurers claimed the Rider was only a clarification in their policy, not a change in coverage. These facts are not in dispute.

Initially, on December 30, 1992, Mr. Cannon filed suit in Oklahoma state court to recover damages for the death of his wife. He alleged her insurers either negligently or in bad faith refused to authorize the ABMT for seven weeks, at a time when it offered Mrs. Cannon her only chance of a cure for her leukemia. The insurers filed a Notice of Removal to federal court asserting Mrs. Cannon's health insurance plan was an employee welfare benefit plan within the meaning of ERISA providing exclusive federal jurisdiction.

Although Mr. Cannon moved to remand, that motion was denied, and the district court granted the insurers' subsequent motion for summary judgment. The district court concluded Mrs. Cannon's group health insurance coverage was an ERISA plan; and, as such, it preempted all of Mr. Cannon's state common law and statutory claims. Preemption, the court held, was required because the state claims related to the ERISA plan and did not fall within ERISA's savings clause. These conclusions notwithstanding, the district court gave Mr. Cannon the opportunity to file an amended complaint.

Thereafter, the district court denied Mr. Cannon's motion to amend his complaint because his new claims could not withstand a motion to dismiss, making amendment futile. Mr. Cannon's amended complaint stated three claims under ERISA: (1) for benefits under 29 U.S.C. § 1132(a)(1)(B); (2) for equitable relief under 29 U.S.C. § 1132(a)(3); and (3) for breach of fiduciary duty pursuant to 29 U.S.C. § 1132(a)(2). Mr. Cannon's complaint also brought a claim pursuant to the Lanham Trade-Mark Act, 15 U.S.C. §§ 1051 to 1127.

In its holding, the court disposed of Mr. Cannon's claims for benefits and equitable relief under ERISA because Mrs. Cannon never incurred medical expenses nor received ABMT. The court stated:

[It] carefully considered plaintiff's argument but stands unpersuaded that he can sue under subsection 1132(a)(1) or (3) to recover anything other than payment for medical expenses actually incurred, when that is the benefit provided by the plan. Plaintiff cites no legal authority for the proposition that a person may sue to recover the value of a service that would have been a benefit of the plan if the plan's terms had been satisfied.

The court also concluded Mr. Cannon's breach of fiduciary duty claim was unavailing because beneficiaries cannot recover compensatory damages for any such breach, stating: "A fiduciary is liable under ERISA, if at all, to the plan and not to the beneficiary." Finally, the court held Mr. Cannon failed to state a claim under the Lanham Trade-Mark Act. Mr. Cannon has not appealed the district court's decision on this issue; therefore, we deem it abandoned and do not address it.

II

A

Mr. Cannon raises three issues on appeal. First, he argues ERISA does not preempt state causes of action where ERISA does not provide a remedy. Mr. Cannon contends ERISA preemption in this context is inconsistent with the policies behind ERISA, the McCarran-Ferguson Act, and the Tenth Amendment. Second, Mr. Cannon argues application of ERISA to preempt state laws where ERISA provides no remedy violates his fundamental right to access justice. Third, Mr. Cannon maintains the federal common law includes the concept of equitable estoppel allowing him to assert his claim.

This court reviews the district court's interpretation of ERISA de novo. St. Francis Regional Medical Center v. Blue Cross & Blue Shield of Kan., Inc., 49 F.3d 1460, 1462 (10th Cir.1995); National Elevator Indus., Inc. v. Calhoon, 957 F.2d 1555, 1557 (10th Cir.), cert. denied, 506 U.S. 953, 113 S.Ct. 406, 121 L.Ed.2d 331 (1992). Determining whether a particular state law action is preempted by ERISA depends on the interrelationship of three ERISA statutory provisions--the preemption clause, the savings clause, and the deemer clause. The preemption clause, 29 U.S.C. § 1144(a), provides:

Except as provided in subsection (b) of this section [the savings clause], the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan....

The savings clause, 29 U.S.C. § 1144(b)(2)(A), reads:

Except as provided in subparagraph (B) [the deemer clause], nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.

The deemer clause, 29 U.S.C. § 1144(b)(2)(B), states:

Neither an employee benefit plan ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.

The interpretation and analysis of these three provisions has been a recurrent theme in both the Supreme Court and this court.

The seminal Supreme Court ERISA preemption case is Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). In Pilot Life, the Court addressed the appropriate inquiry for determining whether a particular state law claim was preempted under ERISA. A court must analyze whether the state statutory or common law actions asserted in the plaintiff's complaint " 'relate to' an employee benefit plan and therefore fall under ERISA's express pre-emption clause." Id. at 47, 107 S.Ct. at 1552. The Court noted the preemption clause had an "expansive sweep," and must be given its "broad common-sense meaning." Id.

More recently, the Court has elaborated:

The pre-emption clause is conspicuous for its breadth. Its deliberately expansive language was designed to establish pension plan regulation as exclusively a federal...