Albert Einstein Medical Center v. Nat. Ben. Fund

• Decision Date: 19 December 1989
• Docket Number: Civ. A. No. 89-5931.
• Citation: 740 F. Supp. 343
• Parties: ALBERT EINSTEIN MEDICAL CENTER, et al. v. NATIONAL BENEFIT FUND FOR HOSPITAL AND HEALTH CARE EMPLOYEES.
• Court: U.S. District Court — Eastern District of Pennsylvania

740 F. Supp. 343

ALBERT EINSTEIN MEDICAL CENTER, et al. v. NATIONAL BENEFIT FUND FOR HOSPITAL AND HEALTH CARE EMPLOYEES.

Civ. A. No. 89-5931.

United States District Court, E.D. Pennsylvania.

December 19, 1989.

COPYRIGHT MATERIAL OMITTED

Ira P. Tiger, Schnader, Harrison, Segal & Lewis, Kenneth L. Klothen, Philadelphia, Pa., for plaintiffs.

Miriam L. Gafni, Freedman & Lorry, P.C., Philadelphia, Pa., for defendant.

MEMORANDUM OPINION AND ORDER

VANARTSDALEN, Senior District Judge.

On September 29, 1989, in a Memorandum Opinion and Order, I dismissed plaintiffs' claims for lack of federal subject matter jurisdiction. Upon reconsideration of my previous decision, I now hold that federal subject matter jurisdiction does exist over plaintiffs' complaint. I will therefore also address the merits of defendant's earlier motion to dismiss the complaint because it is preempted by ERISA and because plaintiffs fail to state a complaint upon which relief can be granted under ERISA. For the reasons discussed herein, plaintiffs' complaint will be dismissed.

Plaintiffs are twelve hospitals located in the Philadelphia area. Plaintiffs brought this action to collect $1,292,643.00 allegedly owed them by defendant National Benefit Fund for Hospital and Health Care Employees (the Fund), as well as interest, costs, and attorney's fees. This action was originally filed in the Court of Common Pleas of Philadelphia County and was removed to this court by defendants.

In a sixty-count complaint (five separate counts for each of the twelve plaintiffs), plaintiffs assert claims under five theories: (1) breach of contract; (2) unjust enrichment; (3) quantum meruit; (4) promissory estoppel; and (5) as a third party beneficiary of the contract between defendant and members of the Hospital and Health Care Employees Union, who are participants in the defendant Fund (Fund Participants). See Complaint. The claims arise from hospital and health care the plaintiffs provided to certain Fund Participants belonging to the Hospital and Health Care Employees Union. See plaintiffs' brief in opposition to defendant's motion to dismiss, at 1-2. (Plaintiffs' Opposition).

The Fund is a welfare benefit plan within the meaning of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq.¹

The Summary Plan Description (SPD) of the Fund, which is annexed to the Complaint as an exhibit, states: "The Fund will pay the hospital directly for all services covered by the plan." SPD, exhibit A to Complaint, at 10, ¶ 6.1. The SPD defines "Eligible Charges" as "a maximum amount that the Fund will recognize as a reasonable charge for the services rendered." Id. at 5. The SPD also provides that no benefits are payable for charges "to the extent that they are unreasonable." Id. at 27-28, ¶¶ 14.1 and 14.6. The SPD also states that "the final decision as to the interpretation and meaning of any provision of the S.P.D. and the Plan can only be made by the Trustees." Id. at 2.

Plaintiffs and Independence Blue Cross are parties to an agreement that governs, inter alia, payment for hospital services rendered by plaintiffs to participants in health care plans underwritten by Independence Blue Cross. See Complaint, ¶ 22. The 1985 Philadelphia Blue Cross Agreement provides for reimbursement to hospitals at rates lower than the hospitals' billed charges. Id. Beginning sometime in 1986, defendant Fund began to withhold payments to plaintiffs for hospital services rendered by plaintiffs to Fund Participants. Id., ¶ 23. On May 1, 1987, Independence Blue Cross declared to plaintiffs that it was offering inpatient hospital care coverage for Fund Participants and that, on behalf of the Fund, Independence Blue Cross would pay claims for hospital services rendered by plaintiffs to Fund Participants and unpaid as of May 1, 1987 (including claims already submitted by plaintiffs to defendant) only in accordance with the terms of the 1985 Philadelphia Blue Cross Agreement, i.e., at rates lower than the hospitals' billed charges. Id., ¶ 26.

Plaintiffs seek to recover the difference between their billed charges for services rendered to Fund Participants and the amounts actually paid to them by the Fund. On August 21, 1989, defendant filed a motion to dismiss plaintiffs' Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendant argued that plaintiffs' claims were preempted by ERISA, that under ERISA the terms of the plan define the rights and obligations of the parties, and that the terms of the Fund plan do not allow plaintiffs to recover additional compensation for the services they rendered to Fund Participants. See defendant's brief in support of motion to dismiss, at 1-4 (Defendant's Motion). On August 31, 1989, plaintiffs filed a brief in opposition to defendant's motion to dismiss and on September 29, 1989, plaintiffs filed a reply brief in support of their motion to dismiss. Neither party directly addressed the issue of whether this court properly has subject matter jurisdiction over this action.

On September 28, 1989, I filed a Memorandum Opinion and Order dismissing the Complaint for lack of removal jurisdiction over plaintiffs' claims. Specifically, I held that the decisions of the United States Court of Appeals for the Third Circuit in Allstate Insurance Co. v. The 65 Security Plan, 879 F.2d 90 (3d Cir.1989) and Northeast Dept. ILGWU v. Teamsters Local Union No. 229, 764 F.2d 147 (3d Cir.1985) precluded this court from exercising removal jurisdiction in this matter. However, upon reconsideration of my earlier opinion, I believe that Allstate and Northeast Dept. should not be read so restrictively so as to preclude this court from exercising removal jurisdiction. Before addressing the removal issue, however, I will address defendant's original argument that plaintiffs' claims are preempted by ERISA. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 1544-45, 95 L.Ed.2d 55 (1987) ("The question presented by this case is whether these state common law claims are not only pre-empted by ERISA, but also displaced by ERISA's civil enforcement provision ..., 29 U.S.C. § 1132(a)(1)(B), to the extent that complaints filed in state courts purporting to plead such state common law causes of action are removable to federal court under 28 U.S.C. § 1441(b)."). I will then further address the merits of defendant's 12(b)(6) motion to dismiss.

ERISA PREEMPTION

ERISA's preemption provision, 29 U.S.C. § 1144(a), provides in relevant part that ERISA's provisions "shall supersede any and all State laws insofar as they may now or they may now hereafter relate to any employee benefit plan...." Id. The Supreme Court in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), held that ERISA's preemption provision is to be construed broadly. Id. 107 S.Ct. at 1553. A state law "`relates to' an employee benefit plan `in the normal sense of the phrase, if it has a connection with or reference to such a plan.'" Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728 (1985) (quoting Shaw v. Delta Airlines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983)).

There is no question that the provisions of ERISA preempt plaintiffs' third party beneficiary claims against the Fund. Resolution of these claims requires reference to the terms of the ERISA plan itself, because the plaintiffs are claiming that the terms of the plan require payment for the services they rendered. See Albert Einstein Medical Center v. Action Mfg. Co., 697 F.Supp. 883, 884 (E.D.Pa.1988).

The remaining four counts brought by each plaintiff against the Fund present a closer question on the ERISA preemption issue. These four counts — breach of contract, unjust enrichment, quantum meruit, and promissory estoppel — might appear to "make reference to" or "relate to" the Fund's ERISA plan under the broad standard the Supreme Court set forth in Shaw, Metropolitan Life, and Pilot Life. To the extent that plaintiffs are attempting to assert by these claims any rights under the terms of the plan, these claims do relate to the terms of the plan. For example, if plaintiffs attempt to make reference to the terms of the Fund plan to prove the terms of their alleged direct contracts in their breach of contract claims, then these claims are preempted.

However, to the extent that plaintiffs are claiming an independent right to payment, apart from the terms of the plan, then these claims are not preempted. For instance, if plaintiffs attempt to prove that a direct independent contractual relationship existed between the plaintiffs and the Fund, for example, that an implied contract arose between the parties through a course of dealing, independent of the benefits payable under the plan, then ERISA would not preempt such a claim.

Judge Pollak's decision in Albert Einstein Medical Center v. Action Mfg. Co., 697 F.Supp. 883 (E.D.Pa.1988) and my opinion in Friends Hospital v. Shaw, No. 87-1593, slip op., 1987 WL 12755 (E.D.Pa. June 18, 1987) provide some guidance in this matter.

In Einstein, Judge Pollak held that ERISA did not preempt a hospital's action to recover the cost of medical services rendered to a beneficiary of defendant's employee benefit plan brought under a common-law estoppel theory. 697 F.Supp. at 884. Judge Pollak stated:

The plaintiff's cause of action does not in any sense turn on an interpretation of the rights of a beneficiary under the plan. Rather, the complaint alleges that the agents of defendant's employee benefit plan misrepresented that the plan would cover the expenses of one of its beneficiaries. The estoppel claim is thus independent of the defendant's actual obligations under the benefit plan.

Id. (emphasis in original). Similarly, in Friends Hospital, I held that an action brought by a hospital against a patient to recover uninsured hospital charges was not preempted by E...