Geweke Ford v. St. Joseph's Omni Preferred Care Inc.

Decision Date10 December 1997
Docket NumberNo. 95-16586,95-16586
Citation130 F.3d 1355
Parties21 Employee Benefits Cas. 2222, 97 Cal. Daily Op. Serv. 9236, 97 Daily Journal D.A.R. 14,907, Pens. Plan Guide (CCH) P 23939O GEWEKE FORD, Plaintiff-Appellant, v. ST. JOSEPH'S OMNI PREFERRED CARE INCORPORATED; Alden Risk Management Services, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Lisa S. Serebin and R. Bradford Huss, Trucker Huss, San Francisco, CA, for plaintiff-appellant.

William A. Helvestine, Epstein, Becker & Green, San Francisco, CA, for defendant-appellee St. Joseph's Omni Preferred Care, Inc.

Robert D. Phillips, Jr., Bowles & Verna, Walnut Creek, CA, for defendants-appellees John Alden Life Insurance Company and Alden Risk Management Services.

Appeal from the United States District Court for the Eastern District of California; Lawrence K. Karlton, Chief Judge, Presiding. D.C. No. CV-95-00211-LKK.

Before: FLETCHER, WIGGINS and T.G. NELSON, Circuit Judges.

WIGGINS, Circuit Judge:

Plaintiff filed suit in state court alleging that the third party administrator and the excess liability insurer of its health benefit plan failed to perform their contractual duties to repay it for expenses arising from a payment under the plan. The defendants presented an ERISA-based defense and removed to federal court. The district court dismissed the complaint under Rule 12(b)(6), holding that ERISA preempted the state claims, yet provided no remedy itself. This court has jurisdiction under 28 U.S.C. § 1291. We AFFIRM-IN-PART and REVERSE-IN-PART.


Geweke Ford ("Geweke") is a private California employer which established and sponsored the Geweke Ford Employee Health Care Plan ("Plan"), a self-funded employee benefit plan subject to ERISA. Geweke contracted with St. Joseph's Omni Preferred Care, Inc. ("Omni") to provide administrative services for the Plan. Geweke remained the ultimate Plan Administrator, but Omni was to manage the day-to-day operations of the Plan, including claims processing. Geweke contracted for excess loss coverage from John Alden Life Insurance Company and Alden Risk Management Services (collectively, "Alden"). The excess loss policy required Alden to reimburse Geweke for payments made under the Plan above a certain deductible in a given year.

Geweke sued Omni and Alden in California state court to recover for sums paid by it for a Plan beneficiary's claim. The complaint alleged that Omni failed to administer and process benefit claims covered under the Plan and that Alden failed to reimburse Geweke for benefits paid through the Plan. Geweke's claims were for state-law breach of contract and for declaratory relief.

Alden and Omni removed the case to federal court in the Eastern District of California, based on an ERISA preemption defense. The district court then dismissed the lawsuit without leave to amend because Geweke failed to state a claim upon which relief could be granted. The court stated that it did not believe the state claims should be preempted by ERISA, but felt compelled by Kyle Railways v. Pacific Admin. Servs., 990 F.2d 513 (9th Cir.1993), to find preemption. This appeal followed. 1


We review questions of subject-matter jurisdiction de novo. Valdez v. United States, 56 F.3d 1177, 1179 (9th Cir.1995). Similarly, review of a dismissal under Rule 12(b)(6) for failure to state a claim is de novo. Kyle Railways v. Pacific Admin. Servs., 990 F.2d 513, 515-16 (9th Cir.1993). Our review assumes all of the complaint's allegations are true. Id. at 516.

I. Jurisdiction

The DOL argues that federal courts lack subject matter jurisdiction in this case and that removal was thus improper under 28 U.S.C. § 1441(b). Questions of jurisdiction and removal are generally determined from the face of a "well-pleaded" complaint. Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 9-12, 103 S.Ct. 2841, 2846-47, 77 L.Ed.2d 420 Geweke's state law claims are preempted by ERISA only if they fall within the scope of ERISA's civil enforcement provision, 29 U.S.C. § 1132(a). See Harris v. Provident Life & Accident Ins. Co., 26 F.3d 930, 934 (9th Cir.1994). In Part II, we hold that the contractual relationships of the parties are not connected to ERISA's regulatory scheme, and thus, ERISA did not completely preempt the state law claims. Hence, federal subject-matter jurisdiction was lacking. Absent federal subject-matter jurisdiction, removal was improper. See Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1393 (9th Cir.1988). The district court lacked jurisdiction to dismiss the complaint under Rule 12(b)(6), and instead should have remanded the case to state court. Id. at 1405.

(1983). An independent corollary to the well-pleaded complaint rule is the "complete preemption" doctrine. ERISA's preemptive provision is "so complete that an ERISA preemption defense provides a sufficient basis for removal ... notwithstanding the traditional limitation imposed by the 'well-pleaded complaint' rule." Ingersoll-Rand v. McClendon, 498 U.S. 133, 145, 111 S.Ct. 478, 485, 112 L.Ed.2d 474 (1990). Thus, defendants can establish federal subject-matter jurisdiction in this case if, but only if, ERISA preempts the state causes of action.

II. State Law Claims

ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" governed by ERISA, with exceptions not relevant to this case. 29 U.S.C. § 1144(a). A law "relates to" an employee benefit plan "if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-900, 77 L.Ed.2d 490 (1983).

The Supreme Court recently cautioned that "relate to" should not be "taken to extend to the furthest stretch of its indeterminacy." New York Conf. of Blue Cross v. Travelers, 514 U.S. 645, 655, 115 S.Ct. 1671, 1676, 131 L.Ed.2d 695 (1995). Rather, courts should look to the Congressional objectives of ERISA as a guide to the scope of state law that Congress understood would be preempted. Id. at 656, 115 S.Ct. at 1677. In doing so, we start with the presumption that Congress did not intend to supplant state law in fields of traditional state regulation. Id. at 661, 115 S.Ct. at 1679.

Thus, although ERISA's express preemption is "deliberately expansive," Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987), the preemption does not extend to state claims that affect employee benefit plans in "too tenuous, remote, or peripheral a manner," Shaw, 463 U.S. at 100 n. 21, 103 S.Ct. at 2901 n. 21. See also Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 833, 108 S.Ct. 2182, 2187, 100 L.Ed.2d 836 (1988) (stating that ERISA does not preempt "run-of-the-mill state-law claims," even though such suits obviously affect and involve the plan).

The Ninth Circuit has formulated a "relationship test" to determine the limits of ERISA's preemption. A state law claim is preempted if it "encroaches on the relationships regulated by ERISA." General Am. Life Ins. Co. v. Castonguay, 984 F.2d 1518, 1522 (9th Cir.1993) (finding that ERISA preempts state law claims against ERISA trustees). ERISA does not preempt regulation of those relationships "where a plan operates just like any other commercial entity-for instance the relationship between the plan and its own employees, or the plan and its insurers or creditors." Id. at 1522. Under Castonguay, the key issue is whether the parties' relationships are ERISA-governed relationships. Id.

The district court believed that this court had implicitly determined in Kyle Railways v. Pacific Admin. Servs., 990 F.2d 513, 519 (9th Cir.1993), that ERISA preempts state law claims against a third party administrator and an excess liability insurer, notwithstanding that ERISA provides no federal Because we conclude that Kyle did not decide the preemption question, we reverse the district court. Kyle involved ERISA claims against a Plan's third party administrator and its excess liability insurer for failure to process and pay claims in a timely manner. Id. at 515. We held that the third party administrator was not an ERISA fiduciary, as it performed ministerial, nondiscretionary functions. Id. at 516. The insurer also was not an ERISA fiduciary, where it audited the payments made by the administrator "for the sole purpose of determining whether the terms of the excess loss insurance policy had been met" and did not have the authority to grant, deny, or review denied claims. Id. at 518. Because neither defendant was a fiduciary, and no prohibited transactions were alleged, the plaintiff failed to state an ERISA claim. At the end of its opinion, Kyle briefly rejected the plaintiff's challenge that ERISA's preemption of any state claims against the defendants was "arbitrary and irrational" or violated due process.

remedy. The district court stated that if writing on a clean slate, it would find the claims in this case were not preempted. It held for defendants because it believed it was constrained by Kyle.

Kyle did not actually hold that state law claims would be preempted, but rather it assumed for purposes of the plaintiff's constitutional challenge that the claims would be preempted. We held that if ERISA did preempt the claims, due process was not implicated. Kyle did not analyze whether specific state claims were preempted because the plaintiff conceded that its state law claims would be preempted, and therefore it requested only federal relief under ERISA or a determination that ERISA's preemption violated due process. The Kyle court made no findings about what the potential state law claims were or whether they would actually be preempted by ERISA. Kyle lacked the analysis of relationships that is required by Castonguay. As a result, Kyle did not...

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