Cromwell v. Equicor-Equitable HCA Corp.

Decision Date11 September 1991
Docket NumberEQUICOR-EQUITABLE,No. 90-3564,90-3564
Parties14 Employee Benefits Cas. 1235 Robert CROMWELL, et al., Plaintiffs-Appellants, v.HCA CORP., Defendant-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

Sanford J. Berger (briefed), Robert M. Fertel (argued), Berger & Fertel, Cleveland, Ohio, for plaintiffs-appellants.

Gregory V. Mersol (argued and briefed), Michael C. Zellers, Arter & Hadden, Cleveland, Ohio, for Equicor-Equitable HCA Corp.

Jaime Lebovitz, Miller, Stillman & Bartel, Cleveland, Ohio, for Lawrence C. and Brenda Reinke.

Before JONES and SUHRHEINRICH Circuit Judges, and FEIKENS, Senior District Judge. *


FEIKENS, Senior District Judge.

This appeal is from the district court's orders dismissing appellants' state law claims as preempted and granting appellee's motion for summary judgment. The issues before us are whether the trial court correctly held that appellants' state law claims are preempted by the Employee Retirement Income Security Act ("ERISA"); whether the trial court correctly held that appellants' breach of contract claim arose under ERISA; and whether the trial court correctly held that appellants lack of standing under ERISA did not retroactively defeat jurisdiction and require that the case be remanded to state court. Because we conclude that the district court's holdings are correct, we AFFIRM.


Lawrence Reinke ("Reinke") was employed by Beckman Industries through July 1985. During his employment, Reinke was a participant in the employee benefit plan for Beckman Industries ("the Beckman plan"). In November 1986, Lawrence Reinke's wife, Brenda, suffered a stroke, requiring the Reinkes to seek home health care for her. Appellants, Robert Cromwell and Heterodox Health Systems, Inc. formerly doing business together as Alternative Home Health Care ("appellants"), are home health care providers. Prior to agreeing to provide care to Mrs. Reinke, appellants contacted Appellee Equicor-Equitable Reinke, acting on Mrs. Reinke's behalf, signed an "Assignment of Insurance Benefits" clause authorizing "[p]ayment directly to ... [appellants] of any and all sums of money otherwise payable to me under the terms of the home health provisions of said group policy or contract." Appellants provided care to Mrs. Reinke from January 1, 1987 to June 24, 1987. Equicor paid appellants for care rendered to Mrs. Reinke through April 15, 1987. Equicor consistently denied appellants' claims for payment for services rendered thereafter.

                ("Equicor"), the administrator of the Beckman plan, by phone, to verify that the provision of such care to Mrs. Reinke would be covered by the Beckman plan.   Allegedly, Equicor did verify this.   Based on Equicor's assurance of coverage, appellants agreed to provide home health care to Mrs. Reinke

Equicor claims that prior to May 1987, it was unaware that Reinke had terminated his employment with Beckman in 1985, and therefore was no longer entitled to any benefits from the Beckman plan. Upon discovering this, Equicor stopped paying appellants' claims. Equicor did not notify appellants that their services would no longer be covered by the Beckman plan until June 23, 1987, when appellants called to inquire why the claims were being denied. At that time, appellants were allegedly informed that coverage was being denied because of a dispute between Lawrence Reinke and his employer regarding the insurance coverage.

The outstanding balance for the care appellants provided to Mrs. Reinke is $22,700.08. Equicor, for reasons we do not know, issued a check in that amount directly to the Reinkes to settle all claims they had or might have against the Beckman plan. Equicor did not make the check payable to appellants, claiming it lacked legal authority or obligation to do so. 1

Appellants filed suit in state court alleging breach of contract, promissory estoppel, negligence and breach of good faith based on their reasonable reliance on Equicor's oral assurances of coverage 2. Equicor removed the suit to federal court on federal question grounds. The district court found that appellants' complaint stated a cause of action arising under ERISA since the substance of appellants' breach of contract claim was for benefits payable under an employee health insurance plan. In its order of July 14, 1989, the district court dismissed appellants' state law claims as preempted by ERISA. Equicor then moved for summary judgment on the ERISA claim. On April 14, 1990, the district court granted Equicor's motion, concluding that since appellants were neither "participants" nor "beneficiaries" as defined by ERISA, they lacked standing to bring an ERISA claim.


1. Preemption of Appellants' State Law Claims

Appellants argue that the district court erred in finding that ERISA preempts their state law claims. According to appellants, because these claims arise under state laws of general application with only a tenuous or peripheral effect on an ERISA plan, they are not preempted by ERISA. We disagree.

ERISA preempts state law and state law claims that "relate to" any employee benefit plan as that term is defined therein. 29 U.S.C. § 1144(a). Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). The Beckman plan is an ERISA employee benefit plan. The phrase "relate to" is given broad meaning such that a state law cause of action is preempted if "it has connection with or reference to that plan." Metropolitan Life Ins. Co. v. Mass., 471 U.S. 724, 730, 732-33, 105 S.Ct. 2380, 2385-86, 85 The United States Supreme Court has held that Congress' intent in enacting ERISA was to completely preempt the area of employee benefit plans and to make regulation of benefit plans solely a federal concern. Pilot Life, 481 U.S. at 41, 107 S.Ct. at 1549. See also Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550 (6th Cir.1987). The Court consistently emphasizes the broad scope of preemption under ERISA. See, e.g., Pilot Life, 481 U.S. at 41, 107 S.Ct. at 1549; Metropolitan Life v. Mass., 471 U.S. at 730, 105 S.Ct. at 2384; Shaw, 463 U.S. at 85, 103 S.Ct. at 2890. Thus, only those state laws and state law claims whose effect on employee benefit plans is merely tenuous, remote or peripheral are not preempted. This circuit, too, has repeatedly recognized that virtually all state law claims relating to an employee benefit plan are preempted by ERISA. See, e.g., Ruble v. UNUM Life Ins. Co., 913 F.2d 295 (6th Cir.1990); Davis v. Kentucky Finance Cos. Retirement Plan, 887 F.2d 689 (6th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 1924, 109 L.Ed.2d 288 (1990); McMahan v. New England Mut. Life Ins. Co., 888 F.2d 426 (6th Cir.1989); Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550 (6th Cir.1987). It is not the label placed on a state law claim that determines whether it is preempted, but whether in essence such a claim is for the recovery of an ERISA plan benefit. See, e.g., Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th Cir.1985).

                L.Ed.2d 728 (1985);  Shaw v. Delta Airlines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983).   Such claims are preempted if they "relate to" an ERISA plan whether or not they were so designed or intended.  Daniel v. Eaton Corp., 839 F.2d 263 (6th Cir.), cert. denied, 488 U.S. 826, 109 S.Ct. 76, 102 L.Ed.2d 52 (1988).   Nor is it relevant to an analysis of the scope of federal preemption that appellants may be left without remedy.  Caterpillar Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987)

Appellants' complaint alleged promissory estoppel, breach of contract, negligent misrepresentation, and breach of good faith as grounds for the recovery of benefits from the Beckman plan for health care services rendered to the Reinkes. Thus, appellants' state law claims are at the very heart of issues within the scope of ERISA's exclusive regulation and, if allowed, would affect the relationship between plan principals by extending coverage beyond the terms of the plan. Clearly, appellants' claims are preempted by ERISA. See, e.g., Pilot Life, 481 U.S. at 41, 107 S.Ct. at 1549 (breach of contract and bad faith claims arising out of a failure to provide benefits under the insurance contract are preempted by ERISA); Daniel v. Eaton Corp., 839 F.2d 263 (6th Cir.), cert. denied, 488 U.S. 826, 109 S.Ct. 76, 102 L.Ed.2d 52 (1988) (state law breach of contract and promissory estoppel claims are preempted by ERISA); Davis, 887 F.2d at 689 (equitable estoppel claims are not recognized by ERISA itself and state law estoppel claims are preempted by ERISA); and Hermann Hosp. v. MEBA Medical & Benefits Plan, 845 F.2d 1286 (5th Cir.1988) (claims for breach of fiduciary duty, negligence, estoppel, breach of contract and fraud brought by a health care provider were preempted by ERISA). See also Comprehensive Care Corp. v. Doughtry, 682 F.Supp. 516 (S.D.Fla.1988) (tort and breach of contract claims arising from alleged misrepresentation of coverage to mother prior to admittance of son to hospital preempted by ERISA); and Richland Hosp., Inc. v. Ralyon, 33 Ohio St.3d 87, 516 N.E.2d 1236 (1987) (claim for willful and malicious misrepresentation of benefits preempted). 3

2. The District Court's Jurisdiction

Appellants present us with two issues relating to the district court's jurisdiction: 1) whether the district court properly granted Equicor's petition for removal; and 2) whether the district court's ultimate determination that appellants lacked standing under ERISA required it to remand the entire case to state court.

A. Removal to Federal Court

Appellants argue that removal of their action to federal court was improper because they were not seeking benefits under an ERISA plan but, rather, damages for Equicor's misconduct under general state law. We disagree.

A federal district court has removal jurisdiction over any cause of action in a state...

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