Amos v. Blue Cross-Blue Shield of Alabama

• Decision Date: 24 March 1989
• Docket Number: No. 88-7287,CROSS-BLUE,88-7287
• Citation: 868 F.2d 430
• Parties: Harley AMOS and Gail Amos, Plaintiffs-Appellees, v. BLUESHIELD OF ALABAMA and Jan Cullinghan, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 430

868 F.2d 430

Harley AMOS and Gail Amos, Plaintiffs-Appellees, v. BLUE CROSS-BLUE SHIELD OF ALABAMA and Jan Cullinghan,

Defendants-Appellants.

No. 88-7287.

United States Court of Appeals, Eleventh Circuit.

March 24, 1989.

Rehearing and Rehearing In Banc Denied May 5, 1989.

Lange, Simpson, Lawrence B. Clark, Sally S. Reilly, Duncan B. Blair, Robinson & Somerville, Birmingham, Ala., for defendants-appellants.

Robert H. King, Daniel B. King, King & King, Gadsden, Ala., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before FAY and ANDERSON Circuit Judges, and HENDERSON, Senior Circuit Judge.

PER CURIAM:

This action arises out of the alleged wrongful denial of claims for benefits under an employee benefit plan as defined by the Employee Retirement Income Security Act of 1974, 29 U.S.C. Sec. 1001, et seq. (1982) ("ERISA"). The plaintiffs, Harley and Gail Amos, originally brought this action in an Alabama state court against defendants Blue Cross-Blue Shield of Alabama as underwriter of the plan and Jan Cullinghan, an employee of Blue Cross (collectively, "Blue Cross"). The complaint asserted various state law violations including fraud and bad faith refusal to pay and sought extra-contractual compensatory and punitive damages. Blue Cross immediately removed the action to the United States District Court for the Northern District of Alabama.

In November, 1987, Blue Cross filed a motion to strike claims for damages other than the contractual benefits sought in the plaintiffs' amended complaint, alleging that, under ERISA, extra-contractual and punitive damages are not recoverable as a matter of law. The district court denied Blue Cross' motion, 676 F.Supp. 1119, and leave to appeal that order subsequently was denied by this court in February, 1988. On March 9, 1988, Blue Cross filed a motion for reconsideration of the order denying its motion to strike. That motion was denied. 681 F.Supp. 1515. This court, on May 11, 1988, granted Blue Cross' petition for leave to appeal the trial court's interlocutory order denying Blue Cross' motion for reconsideration. The parties agree that this case involves a purely legal question and that there are no facts other than those set forth above which are relevant to the issue on appeal.

The issue in this case is whether the effect of ERISA preemption--which, at least for purposes of removal jurisdiction, converts state law causes of action into federal questions--is to completely eliminate state law causes of action relating to an ERISA plan, or whether ERISA preemption operates to "absorb" state law claims, allowing them to proceed unaffected in substance by the conversion. We hold that ERISA preemption is not a gateway but a barrier to state law causes of action, the effect of which is to completely displace state law claims. Accordingly, we reverse the district court's judgment.

ERISA comprehensively regulates, among other things, employee welfare benefit plans that, "through the purchase of insurance or otherwise," provide such benefits as, for example, insurance coverage for medical, surgical, or hospital care, or the payment of sums in the event of sickness, accident, disability or death. 29 U.S.C. Sec. 1002(1); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44, 107 S.Ct. 1549, 1551, 95 L.Ed.2d 39, 46 (1987). ¹ ERISA contains six civil enforcement provisions, section 1132(a)(1)-(6), which set forth the remedies available to participants, beneficiaries, fiduciaries and the Secretary of Labor against parties that fail to comply with the statute's dictates. However, the various types of relief available to plaintiffs in civil actions brought pursuant to ERISA's civil enforcement scheme do not include extra-contractual or punitive damages. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148, 105 S.Ct. 3085, 3094, 87 L.Ed.2d 96, 107 (1985); Bishop v. Osborn Transp., Inc., 838 F.2d 1173, 1174 (11th Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 90, 102 L.Ed.2d 66 (1988). ² Thus, the plaintiffs cannot obtain the relief they seek here by pursuing a cause of action arising under ERISA. Rather, they are entitled to punitive damages only if some alternative theory of recovery grounded in state law is available to them.

ERISA, however, expressly preempts most state laws dealing with ERISA plans. 29 U.S.C. Sec. 1144. Generally, if a state law relates to employee benefit plans, it is preempted, although a saving clause excepts from the preemption provision state laws which regulate insurance. Dedeaux, 481 U.S. at 45, 107 S.Ct. at 1552, 95 L.Ed.2d at 46. In the instant case, there can be no dispute that the common law causes of action asserted by the plaintiffs--bad faith refusal to pay, fraud and breach of contract--"relate to" an employee benefit plan and therefore fall within ERISA's express preemption clause. See id. at 47, 107 S.Ct. at 1553, 95 L.Ed.2d at 47-48. Also above question is that the plaintiffs' state law causes of action are not excepted from ERISA preemption. See id. at 57, 107 S.Ct. at 1558, 95 L.Ed.2d at 54.

Blue Cross maintains that the effect of ERISA preemption is to wholly eliminate state law claims, leaving plaintiffs only the causes of action expressly provided for in the ERISA civil enforcement provisions. Blue Cross' position would be impregnable were it not for a single sentence in one of this court's opinions. In Belasco v. W.K.P. Wilson & Sons, Inc., 833 F.2d 277, 282 (11th Cir.1987), this court, discussing whether removal was proper where plaintiffs' complaint raised only claims provided by state laws related to an ERISA plan, wrote that "ERISA pre-emption does not act as a defense to a state-law claim, which is the usual effect of federal preemption; instead, ERISA pre-emption converts the related claim into a federal question." In so stating, this court followed the Supreme Court's decision in Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). In that case, the Court held that the preemptive force of ERISA is so powerful that it completely displaces state law claims. As a result, a cause of action which relates to an ERISA plan, though it purports to be grounded in state law, "is necessarily federal in character by virtue of the clearly manifested intent of Congress" and is removable to federal court. Taylor, 481 U.S. at 67, 107 S.Ct. at 1548, 95 L.Ed.2d at 65.

The plaintiffs observe that neither the opinion in Taylor, nor the one in Belasco, addressed the question of the disposition of a state law claim following removal into federal court. They contend that the state law causes of action survive, permitting the recovery of such damages as would be available under the state substantive law. Blue Cross takes the position that the conversion of state law claims into federal...