Golas v. HomeView Inc., 96-1696

• Decision Date: 07 November 1996
• Docket Number: No. 96-1696,96-1696
• Citation: 106 F.3d 1
• Parties: Charlene Tagan GOLAS, Individually and as Executrix of the Estate of Donald M. Golas, Plaintiff, Appellant, v. HOMEVIEW INC. and Paul Revere Life Insurance Company, Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1

106 F.3d 1

Charlene Tagan GOLAS, Individually and as Executrix of the Estate of Donald M. Golas, Plaintiff, Appellant, v. HOMEVIEW INC. and Paul Revere Life Insurance Company,

Defendants, Appellees.

No. 96-1696.

United States Court of Appeals, First Circuit.

Heard Nov. 7, 1996.

Decided Feb. 7, 1997.

John J. Weltman, Boston, MA, with whom Lawson & Weitzen was on brief, for plaintiff-appellant.

Joan O. Vorster, Worcester, MA, with whom Joseph M. Hamilton and Mirick, O'Connell, DeMallie & Lougee were on brief, for defendant-appellee Paul Revere Life Insurance Company.

STAHL, Circuit Judge, BOWNES, Senior Circuit Judge, and LYNCH, Circuit Judge.

LYNCH, Circuit Judge.

This is an appeal from the denial of plaintiff's motion to amend her complaint to add Ellen Kaplan, an insurance broker, as a defendant in a suit arising out of Paul Revere Life Insurance Company's refusal to pay disability insurance benefits to plaintiff's late husband when he was suffering from his final illness. In her motion to amend, plaintiff sought to add a new party defendant on a state law claim in an action which the district court was simultaneously dismissing against the original defendants as being preempted by federal law. We review the denial of the motion to amend for abuse of discretion and conclude that there is no such abuse under the circumstances. We need not and do not reach the issue of whether the state law misrepresentation claim is preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA").

In August 1992, plaintiff's husband obtained a disability insurance policy through his employer, HomeView Inc. One month later he was diagnosed with bone cancer and sought disability benefits. His request was denied as being related to a preexisting condition for which he sought treatment during the enrollment period.

After her husband's death, plaintiff brought suit in Massachusetts state court against Paul Revere and HomeView based on state law misrepresentation theories. The complaint alleged that HomeView supplied its employees, including Donald Golas, with a pamphlet, prepared by Paul Revere, explaining the rules governing preexisting conditions. Plaintiff contends that this pamphlet was misleading. It indicated that an insured individual could obtain disability benefits as long as the disability was not caused by a sickness that required him to consult a doctor during the three month enrollment period. Plaintiff claims that, in reliance on this statement, her husband visited a doctor during the enrollment period for administrative purposes only. However, he was not diagnosed with bone cancer at that time. It was this visit, plaintiff alleges, that made him ineligible to receive benefits. Plaintiff argues that, absent the flawed information, her husband would have waited until after the enrollment period ended to visit the doctor and therefore would have been eligible for benefits.

Plaintiff sought damages in state court for her late husband's emotional distress and for her own loss of consortium. Plaintiff simultaneously brought suit in federal court against the same two defendants for benefits allegedly due under the disability policy pursuant to ERISA. That ERISA case continues to be pending in the District of Massachusetts. Defendants removed the state law suit to federal court, arguing that those claims were also governed by ERISA. The two cases were not consolidated.

Once in federal court, Paul Revere moved to dismiss the state law claims, arguing that they were preempted by ERISA. ¹ Plaintiff countered by moving for a remand to state court. While these motions were pending, plaintiff moved to amend the complaint to add Kaplan as a defendant, asserting that, since filing her initial action, she had "discovered that critical misrepresentations upon which her husband relied were made to him by Ellen Kaplan." The complaint alleged that, "[p]rior to accepting disability coverage, Mr. Golas spoke to Ellen Kaplan who made false statements to him regarding his coverage under the disability policy," and that, "[a]s the broker responsible for overseeing the provision of disability insurance from Paul Revere to HomeView employees, Ms. Kaplan owed Mr. Golas a duty to make sure she did nothing to interfere with his obtaining coverage under the policy."

Defendants opposed the motion to add Kaplan as a defendant, arguing that amendment would be futile because the claim against Kaplan would also be preempted by ERISA. Plaintiff argued that a claim against Kaplan would not be preempted by ERISA because Kaplan was not an agent of HomeView or Paul Revere, but an independent insurance broker.

The district court adopted the magistrate's recommendation to grant the motion to dismiss the state law claims against HomeView and Paul Revere based on ERISA preemption. The district court went on to consider whether to adopt the magistrate's recommendation to deny plaintiff's motion to amend the complaint to add Kaplan as a defendant. Having already decided to dismiss the claims against Paul Revere and HomeView, the district court was faced with an anomalous situation. Plaintiff wished to add a defendant to a case which was being dismissed as to the two original defendants. In addition, the ERISA cause of action against Paul Revere and HomeView was pending in the same court but in a different action from the one in which the motion to amend was filed. The district court's ultimate decision to adopt the magistrate's recommendation to deny the motion to amend the complaint must be viewed in this practical and procedural context.

Golas appeals only from the denial of the motion to amend the complaint to add Kaplan as a defendant and not from the dismissal of the underlying action on preemption grounds. Review is for abuse of discretion. Reid v. New Hampshire, 56 F.3d 332, 342 (1st Cir.1995); see also Carlo v. Reed Rolled Thread Die Co., 49 F.3d 790, 792 (1st Cir.1995) (noting that the appeals court will "generally defer to a district court's decision to deny leave to amend where the reason is apparent or declared" (internal quotation marks and citation omitted)). It is well-settled, as the concurring opinion from our respected colleague points out, that, when a district court makes an error of law, by definition it abuses its discretion. However, that is not the issue that concerns us here. The facts and circumstances of the case necessarily influence our evaluation of the denial of the motion to amend the complaint, and here, they make it unnecessary to reach the ERISA preemption issue.

We note that at the time the motion was denied, the two original defendants had been dismissed and there was no diversity jurisdiction over Kaplan. ² Furthermore, a parallel ERISA action was pending against HomeView and Paul Revere in federal court. Federal courts have traditionally been more reluctant to exercise jurisdiction over pendent parties than over pendent claims. See, e.g., Lykins v. Pointer, Inc., 725 F.2d 645, 649 (11th Cir.1984). ³ Under these circumstances, the district court could not have abused its discretion when it denied plaintiff's motion to amend the complaint to add Kaplan as the sole defendant. Even if our review were de novo, as the concurrence suggests, we could affirm on any legal ground supported in the record. See, e.g., Eagan v. United States, 80 F.3d 13, 16 (1st Cir.1996); Levy v. FDIC, 7 F.3d 1054, 1056 (1st Cir.1993).

We therefore uphold the denial of the motion to amend, albeit on different grounds than those relied on by the district court, and thus we express no opinion on the preemption issue. This opinion does not, as the concurrence claims, uphold the district court's preemption decision sub silentio. Plaintiff may decide to attempt to add Kaplan as a defendant in the pending ERISA action. ⁴ The district court's ruling that any claim against Kaplan would be preempted presents no bar. It has no precedential or issue preclusive effect. If a motion is made to add Kaplan to the ERISA action, the court will have the ability to consider the preemption issue anew in light of the facts that have been developed in discovery. Cf. Boston Children's Heart Found., Inc. v. Nadal-Ginard, 73 F.3d 429, 439-40 (1st Cir.1996) (absent precedent on closely related issue, the inquiry as to whether state law is preempted requires the court to look at the facts of the particular case). ⁵

The decision of the district court is affirmed.

BOWNES, Senior Circuit Judge, concurring.

I concur in the result, but, with respect, I do not think that this case can be disposed of by the conclusory assertion that the district court did not abuse its discretion in denying plaintiff's motion to amend her complaint so as to add Ellen Kaplan as a defendant. In his report and recommendation, adopted by the district court, the magistrate judge stated the following reason for denying the motion to amend the complaint:

I find that Plaintiff['s] attempt to add Ellen Kaplan as a party defendant and to assert against her a claim for misrepresentation would be futile because such a claim would be pre-empted by ERISA.

It is clear that the district court's denial of the motion was not an exercise of discretion, but was compelled by its legal ruling that the claim against Kaplan would be preempted by ERISA. Accordingly, the district court's denial of the motion is subject to review de novo, rather than for abuse of discretion. See Carlo v. Reed Rolled Thread Die Co., 49 F.3d 790, 793 (1st Cir.1995). The Supreme Court has stated unequivocally that "[a] district court by definition abuses its discretion when it makes an error of law." Koon v. United States, --- U.S. ----, ----, 116 S.Ct. 2035, 2047, 135 L.Ed.2d 392 (1996) (citation omitted).

To be sure, in the ordinary case, the decision whether to grant or deny a motion to amend the complaint is discretionary with the trial court, and so is normally reviewed for...