Connecticut Hosp. Ass'n v. Pogue

• Decision Date: 30 November 1994
• Docket Number: Civ. A. No. 3:94CV1224(AVC).
• Citation: 870 F. Supp. 444
• Parties: The CONNECTICUT HOSPITAL ASSOCIATION, Plaintiff, v. Donald C. POGUE, and Donald F. Miller, Defendants.
• Court: U.S. District Court — District of Connecticut

870 F. Supp. 444

The CONNECTICUT HOSPITAL ASSOCIATION, Plaintiff, v. Donald C. POGUE, and Donald F. Miller, Defendants.

Civ. A. No. 3:94CV1224(AVC).

United States District Court, D. Connecticut.

November 16, 1994.

Order and Judgment November 30, 1994.

COPYRIGHT MATERIAL OMITTED

William J. Doyle, Karen L. Clute, Edward Wood Dunham, Wiggin & Dana, New Haven, CT, for plaintiff.

Phyllis E. Hyman, Attorney General's Office, Hugh Barber, Richard J. Lynch, Attorney General's Office, Health & Human Services, Hartford, CT, for Donald C. Pogue.

Richard K. Greenberg, Attorney General's Office, Finance & Public Utilities, John G. Haines, Attorney General's Office, Hartford, CT, for Donald F. Miller.

RULING ON DEFENDANTS' MOTION TO DISMISS AND PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

COVELLO, District Judge.

This is an action for injunctive relief brought pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. The plaintiff seeks to enjoin the defendants, public officials, from implementing and enforcing sections fourteen through thirty-three of Connecticut Public Act 94-9 ("P.A. 94-9"). The plaintiff now moves for summary judgment pursuant to Federal Rule of Civil Procedure 56 on the grounds that there are no genuine issues of material fact and that as a matter of law, it is entitled to judgment. The defendants simultaneously move to dismiss this action pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) for lack of jurisdiction over the subject matter and for failure to state a claim upon which relief can be granted. The defendants also crossmove for summary judgment. The issue presented is whether P.A. 94-9 relates to "any employee benefit plan" and is therefore preempted by ERISA. The court concludes that P.A. 94-9 is preempted by ERISA and therefore grants the plaintiff's motion for summary judgment. The defendants' motion to dismiss and cross-motion for summary judgment are denied.

FACTS

On February 25, 1994, the court held that Connecticut's Uncompensated Care Pool Act ("UCP act"), P.A. 91-2 and P.A. 92-16, codified at Conn.Gen.Stat. § 19a-168 et seq., was preempted by ERISA. New England Health Care Employees Union District 1199, et al. v. Mount Sinai Hospital, 846 F.Supp. 190 (D.Conn.1994). Subsequent to this ruling, the Connecticut legislature passed P.A. 94-9, "An Act Terminating the Uncompensated Care Pool Act." Public Act 94-9 abolished the "pooling mechanism" component of the UCP act. Sections 14 through 20 of P.A. 94-9, however, retain the same six percent sales tax as the UCP act on all payments received for patient care services. In addition, sections 21 through 25 impose a gross earnings tax on all general hospitals. Furthermore, sections 26 through 33 provide for a hospital net revenue cap, which specifically authorized shifting costs of uncompensated care from government payers to private pay patients.

The plaintiff, Connecticut Hospital Association ("CHA"), a voluntary non-profit association of hospital facilities, consists of thirty-one general hospitals that are the subject of P.A. 94-9. The CHA claims that it is a fiduciary of an ERISA benefit plan that provides medical and hospitalization benefits to its employees and their dependents. The defendant, Donald C. Pogue, is chairman of the Connecticut commission on hospitals and health care and is responsible for the development, implementation and oversight of Connecticut's system of regulating hospital revenues and capital expenditures. The defendant, Donald F. Miller, is commissioner of the Connecticut department of revenue services and is responsible for the administration, collection and enforcement of the sales tax and gross earnings tax established by P.A. 94-9.

STANDARDS

The defendants move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1), alleging that the court lacks subject matter jurisdiction.

In reviewing a motion to dismiss under Rule 12(b)(1), the court construes the complaint broadly and liberally in conformity with the principle set out in Federal Rule of Civil Procedure 8(f). 5A Charles Wright, Arthur Miller, Federal Practice and Procedure § 1350, at 218-19 (1990). The mover and pleader may use affidavits and other materials beyond the pleadings in support of or in opposition to a challenge to the court's subject matter jurisdiction. Land v. Dollar, 330 U.S. 731, 735 n. 4, 67 S.Ct. 1009, 1011 n. 4, 91 L.Ed. 1209 (1947). Once challenged, the burden of establishing subject matter jurisdiction rests on the party asserting jurisdiction. Thomson v. Gaskill, 315 U.S. 442, 446, 62 S.Ct. 673, 675, 86 L.Ed. 951 (1942). Dismissals for lack of subject matter jurisdiction are not predicated on the merits of the claim. Exchange Nat'l Bank of Chicago v. Touche Ross & Co., 544 F.2d 1126, 1130 (2d Cir.1976), cert. denied, 469 U.S. 884, 105 S.Ct. 253, 83 L.Ed.2d 190 (1984).

With respect to the plaintiff's motion for summary judgment, the court notes that summary judgment pursuant to Federal Rule of Civil Procedure 56 is appropriate only when the moving party can establish that there exists no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). The court must decide "whether the evidence ... is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2515, 91 L.Ed.2d 202 (1986). The burden is on the moving party to show that no material facts are in dispute. Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir.1987). The court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities against the moving party. Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987).

DISCUSSION

Motion to Dismiss

The defendants, in support of their motion to dismiss for lack of subject matter jurisdiction, assert that the plaintiff lacks standing to sue because it is not a fiduciary as defined by ERISA. However, the defendants have failed to provide any evidence to rebut the plaintiff's assertion that it is a fiduciary. The plaintiff, on the other hand, has submitted a number of affidavits to support its fiduciary status.

The court in Ostow & Jacobs, Inc. v. Morgan-Jones, Inc., 189 F.Supp. 697, 698 (S.D.N.Y.1960), stated that a defendant "must at least submit some proof that the jurisdictional facts so alleged do not exist." Absent evidence to the contrary, the court finds that the plaintiff has sufficiently satisfied the jurisdictional requirements for ERISA standing. Thus, the defendants' motion to dismiss for lack of subject matter jurisdiction is denied.

The defendant further moves to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The defendant asserts that the plaintiff is bringing this action based on its status as a hospital, not as a fiduciary. The plaintiff responds that it has alleged that it is a fiduciary and is thus entitled to challenge the validity of 94-9 on the grounds that it is preempted by ERISA, and also that it is entitled to injunctive relief to prevent the statute's continued enforcement.

The court will grant a defendant's motion to dismiss under 12(b)(6) only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle it to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). All factual allegations in the complaint must be taken as true and all reasonable inferences from these allegations must be drawn in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

The plaintiff's allegation that it is bringing this action as a fiduciary must be accepted as true. Under ERISA, a fiduciary is entitled to bring an action to challenge a state law or to seek injunctive relief barring its enforcement. 29 U.S.C. § 1132(a)(3) (1988). For these reasons, the defendants motion to dismiss under 12(b)(6) is therefore denied.

Motion for Summary Judgment

In support of its motion for summary judgment, the plaintiff asserts that the material facts in this case are undisputed. Specifically, the plaintiff asserts that three recent cases in the Second Circuit, Travelers Ins. Co. v. Cuomo, 14 F.3d 708 (2d Cir.1993), cert. granted, ___ U.S. ___, 115 S.Ct. 305, 130 L.Ed.2d 217 (1994), NYSA-ILA Medical and Clinical Services Fund v. Axelrod, 27 F.3d 823 (2d Cir.1994), and New England Health Care Employees Union District 1199 v. Mount Sinai Hospital, 846 F.Supp. 190 (D.Conn.1994), confirm that state laws such as P.A. 94-9 are preempted by ERISA.

The defendants respond that ERISA does not preempt P.A. 94-9 because the sales tax and gross earnings tax in P.A 94-9 are taxes of general applicability¹ and do not otherwise substantially impact ERISA plans. The defendants also argue that ERISA preemption cannot be invoked because to do so would impair the operation of the federal Medicaid act.

ERISA preempts state laws "insofar as they may now or hereinafter relate to any employee benefit plan" covered by the statute. 29 U.S.C. § 1144(a). A law "relates to" an ERISA plan "if it has a connection with or reference to such a plan." District of Columbia v. Greater Washington Bd. of Trade, ___ U.S. ___, ___, 113 S.Ct. 580, 588, 121 L.Ed.2d 513 (1992). A state law may relate to an ERISA plan "even if the law is not specifically designed to affect such plans or the effect is only indirect." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990). "Pre-emption does not occur, however, if the state law has only a `tenuous, remote, or...