Hall v. Blue Cross/Blue Shield of Alabama

• Decision Date: 04 February 1998
• Docket Number: No. 97-6250,97-6250
• Citation: 134 F.3d 1063
• Parties: 11 Fla. L. Weekly Fed. C 1013 Denise HALL, Plaintiff-Appellant, v. BLUE CROSS/BLUE SHIELD OF ALABAMA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1063

134 F.3d 1063

11 Fla. L. Weekly Fed. C 1013

Denise HALL, Plaintiff-Appellant, v. BLUE CROSS/BLUE SHIELD OF ALABAMA, Defendant-Appellee.

No. 97-6250.

United States Court of Appeals Eleventh Circuit.

Feb. 4, 1998.

Donald R. Rhea, Rhea, Boyd & Rhea, Gadsden, AL, for Plaintiff-Appellant.

Cavender C. Kimble, Leigh Anne Hodge, Balch & Bingham, Birmingham, AL, for Defendant-Appellee.

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

Before HATCHETT, Chief Judge, and FAY and FARRIS ^*, Senior Circuit Judges.

HATCHETT, Chief Judge:

The principal issue in this appeal is whether the Employee Retirement Income Security Act of 1974 (ERISA) preempts a state law

fraudulent inducement claim. We affirm the district court's ruling that the claim is preempted.

BACKGROUND

When appellant Denise Hall learned that she would need to have an ovarian mass surgically removed, she consulted appellee Blue Cross Blue Shield of Alabama (Blue Cross), the insurer of her employer-provided health benefits plan. Blue Cross informed Hall that it would deny any insurance claim arising out of the surgery. After Hall proceeded with the surgery and incurred over $10,000 in medical expenses, she filed suit in the Circuit Court of Marshall County, Alabama, claiming that agents of Blue Cross fraudulently induced her to enroll in its plan based on material misrepresentations about the scope of insurance coverage for preexisting conditions. Blue Cross removed the case to the United States District Court for the Northern District of Alabama, asserting that Hall's state law fraud claims were preempted under ERISA. The district court dismissed Hall's case on preemption grounds.

Hall worked as Dr. Joseph Kendra's office manager. She was responsible for making decisions about the insurance carrier for the employees' health benefits plan. In December 1994, Blue Cross agents approached Hall and Dr. Kendra to discuss changing the employees' medical insurance coverage from Aetna Casualty & Surety Company (Aetna) to Blue Cross. Apparently concerned about coverage for her diabetic son, Hall inquired about the general scope of Blue Cross's coverage for preexisting conditions. The Blue Cross agents allegedly represented that known preexisting conditions, such as Hall's son's diabetes, and any pregnancy-related conditions, would not be covered for a period of 270 days after the effective date of the Blue Cross policy. The agents allegedly told Hall that Blue Cross would be responsible for medical care associated with all other conditions that might arise. Based on these representations, Dr. Kendra, Hall and the staff decided to drop the existing insurance coverage with Aetna and to contract with Blue Cross, without securing overlapping coverage during the 270-day waiting period. Blue Cross's group health plan, which is an ERISA-governed employee welfare benefits plan, went into effect on January 1, 1995.

After a regular gynecological examination in April 1995, Hall was diagnosed with a mass on her right ovary. Before this diagnosis, Hall did not have any medical status or symptoms that would have indicated that she suffered from this condition. Blue Cross denied Hall's claim for the costs she incurred in having the mass surgically removed because the treatment was rendered during the 270-day waiting period for preexisting conditions.

Hall's state court complaint against Blue Cross asserted three counts: (1) "fraud in or around December, 1994"; (2) "suppression"; and (3) "fraud in the inducement." Hall alleged that because of Blue Cross's misrepresentations she did not secure other coverage during the 270-day exclusion period and did not request that Blue Cross modify its offer so as to cover unknown preexisting conditions. She sought compensatory and punitive damages.

After timely removing the case to the district court, Blue Cross filed a motion to dismiss or, in the alternative, for summary judgment on the grounds that Hall's state claims were preempted under ERISA and that Hall had failed to exhaust her administrative remedies as required under Blue Cross's plan. Hall moved to remand the case to state court and declined the district court's grant of leave to file an amended complaint incorporating claims under ERISA. After entertaining oral argument on the motions, the district court denied Hall's motion to remand and granted Blue Cross's motion to dismiss, without prejudice.

DISCUSSION

The issue in this case is whether the district court erred in holding that ERISA preemption applies to Hall's claims based on fraudulent inducement. Hall contends that her claims arise solely under state law fraud doctrines. Blue Cross contends that Hall's claims implicate ERISA. We review de novo the district court's ERISA preemption analysis. O'Reilly v. Ceuleers, 912 F.2d 1383, 1385 (11th Cir.1990).

Ordinarily, a cause of action does not arise under federal law unless the plaintiff's "well-pleaded complaint" presents a federal question. Kemp v. International Bus. Machs. Corp., 109 F.3d 708, 712 (11th Cir.1997). Although Hall's complaint purports to rely exclusively on state law, she cannot avoid federal jurisdiction if her allegations involve an area of law that federal legislation has preempted. Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 2430, 96 L.Ed.2d 318 (1987). Through ERISA, Congress specifically preempted "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." 29 U.S.C. § 1144(a) (1994). Moreover, in ERISA's civil enforcement section, Congress expressly provides the exclusive cause of action for the recovery of benefits governed under an ERISA plan. See Kemp, 109 F.3d at 712 (citing ERISA's civil enforcement provision, 29 U.S.C. § 1132(a)). Accordingly, if state law claims implicate ERISA's preemption clause and fall within the scope of ERISA's civil enforcement section, then they are converted into federal claims. Brown v. Connecticut Gen. Life Ins. Co., 934 F.2d 1193, 1196 (11th Cir.1991).

The Supreme Court has broadly interpreted the phrase "relate to" in ERISA's preemption clause so as to include any state law claim having " 'a connection with or reference to' " an employee benefits plan. New York Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656, 115 S.Ct. 1671, 1677, 131 L.Ed.2d 695 (1995) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983)). This court has further instructed that state law claims "relate to" an ERISA plan for preemption purposes "whenever the alleged conduct at issue is intertwined with the refusal to pay benefits." Garren v. John Hancock Mut. Life Ins. Co., 114 F.3d 186, 187 (11th Cir.1997); see also Variety Children's Hosp., Inc. v. Century Med. Health Plan, Inc., 57 F.3d 1040, 1042 (11th Cir.1995) ("Where state law claims of...