Kidneigh v. Unum Life Ins. Co of America

• Decision Date: 03 October 2003
• Docket Number: No. 02-1282.,No. 02-1277.,02-1277.,02-1282.
• Citation: 345 F.3d 1182
• Parties: Jon F. KIDNEIGH, Plaintiff/Cross-Appellee, and Barbara Kidneigh, Plaintiff-Appellant/Cross-Appellee, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, a Maine Corporation, Defendant-Appellee/Cross-Appellant. Colorado Trial Lawyers Association, Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1182

345 F.3d 1182

Jon F. KIDNEIGH, Plaintiff/Cross-Appellee, and Barbara Kidneigh, Plaintiff-Appellant/Cross-Appellee, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, a Maine Corporation, Defendant-Appellee/Cross-Appellant Colorado Trial Lawyers Association, Amicus Curiae.

No. 02-1277.

No. 02-1282.

United States Court of Appeals, Tenth Circuit.

Filed October 3, 2003.

Stephen C. Kaufman, Denver, CO, for Plaintiffs-Appellants/Cross-Appellees.

Michael S. Beaver, Holland & Hart, L.L.P., Greenwood Village, CO, (Marcy G. Glenn and Jack M. Englert, Jr., Holland & Hart, L.L.P., Denver, CO, with him on the briefs), for Defendant-Appellee/Cross-Appellant.

Michael J. Rosenberg and Bradley A. Levin, Roberts, Levin & Patterson, P.C., Denver, CO, for Amicus Curiae Colorado Trial Lawyers Association.

Before KELLY, HENRY, and HARTZ, Circuit Judges.

PAUL KELLY, JR., Circuit Judge.

Plaintiff/Cross-Appellee Jon Kidneigh and Plaintiff-Appellant/Cross-Appellee Barbara Kidneigh brought suit seeking disability benefits pursuant to 29 U.S.C. §§ 1132(a)(1)(B) and (g), the Employment Retirement Income Security Act of 1974 ("ERISA"), along with state law claims for bad faith and loss of consortium. We have jurisdiction under 28 U.S.C. § 1292(b), and we affirm in part and reverse in part.

Background

Plaintiff Jon Kidneigh brought a claim against UNUM Life Insurance Co. ("UNUM") seeking disability benefits pursuant to §§ 1132(a)(1)(B) and (g) of the Employment Retirement Income Security Act of 1974 ("ERISA"). UNUM is the claims administrator of a long-term disability plan covering employees of the law firm of Kidneigh & Kaufman, P.C. Though UNUM paid disability benefits to Mr. Kidneigh after a series of back and hernia surgeries, UNUM stopped paying benefits on March 31, 1999, after determining that Mr. Kidneigh was physically capable of performing his job as an attorney.

Mr. Kidneigh also brought a state law claim for bad faith along with the direct ERISA claim seeking continued benefits, and his wife brought a state law claim for loss of consortium. UNUM moved to dismiss Mr. Kidneigh's bad faith claim and Mrs. Kidneigh's loss of consortium claim on the grounds that both are preempted by ERISA. The district court denied the motion with respect to Mr. Kidneigh but granted the motion with respect to Mrs. Kidneigh. The district court granted an unopposed motion for interlocutory appeal brought pursuant to Fed.R.Civ.P. 52(b), finding that the issue "involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b). Both Mrs. Kidneigh and UNUM appeal from the district court's order; Mrs. Kidneigh appeals from the dismissal of her loss of consortium claim, and UNUM appeals from the denial of the motion to dismiss Mr. Kidneigh's bad faith claim.

Discussion

Because the scope of ERISA preemption is a question of law, the district court's decision is subject to de novo review. Conover v. Aetna U.S. Health Care, Inc., 320 F.3d 1076, 1077 (10th Cir.2003).

"[A]ny court forced to enter the ERISA preemption thicket sets out on a treacherous path." Gonzales v. Prudential Ins. Co., 901 F.2d 446, 451-52 (5th Cir.1990). In this case we must resolve whether a Colorado state law bad faith claim against an employment disability insurance provider is preempted by ERISA. A secondary issue is whether a spouse's derivative loss of consortium claim is also preempted by ERISA.

The issue here is one that frequently confronts the federal courts due to ERISA's "statutory complexity." Metro. Life Ins. Co. v. Mass., 471 U.S. 724, 740, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). ERISA's preemption clause broadly states that "[e]xcept as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). What Congress took away with one hand, however, it gave back with the other as contained in ERISA's saving clause: "Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities." Id. § 1144(b)(2)(A). Subparagraph (B) (the deemer clause), in turn, provides:

Neither an employee benefit plan ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.

Id. § 1144(b)(2)(B). As summarized by the Supreme Court:

If a state law "relate[s] to ... employee benefit plan[s]," it is pre-empted. The saving clause excepts from the pre-emption clause laws that "regulat[e] insurance." The deemer clause makes clear that a state law that "purport[s] to regulate insurance" cannot deem an employee benefit plan to be an insurance company.

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (citations omitted). The Supreme Court has further noted that "[t]he pre-emption clause is conspicuous for its breadth," FMC Corp. v. Holliday, 498 U.S. 52, 58, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990), and that "the express pre-emption provisions of ERISA are deliberately expansive, and designed to `establish pension plan regulation as exclusively a federal concern.'" Pilot Life, 481 U.S. at 45-46, 107 S.Ct. 1549.

In addition to Congress's power to "define explicitly the extent to which its enactments pre-empt state law," a state law can also be preempted "to the extent that it actually conflicts with federal law." English v. Gen. Elec. Co., 496 U.S. 72, 78-79, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990). Where a state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," then the state law is preempted. Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941). State law causes of action, then, are preempted under ERISA both when they are expressly preempted by the terms of the statute as well as when the state law provides remedies beyond those contained in ERISA itself. See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 143-44, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990); Pilot Life, 481 U.S. at 54, 107 S.Ct. 1549 ("The deliberate care with which ERISA's civil enforcement remedies were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERISA's civil enforcement remedies were intended to be exclusive."). The Supreme Court has noted that a distinction can be drawn between cases involving an "additional claim or remedy," such as Pilot Life, and cases "bear[ing] a resemblance to the claims-procedure rule" sustained in UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 368, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999). Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 380, 122 S.Ct. 2151, 153 L.Ed.2d 375 (2002). Cases on the former side of the distinction fall within "Pilot Life's categorical preemption." Id.

We hold that Colorado bad faith claims are preempted by ERISA because they conflict with ERISA's remedial scheme. State law bad faith claims such as the Colorado claim in this case — insofar as they provide an "additional claim" to plaintiffs — clearly fall on the former side of the distinction drawn in Rush Prudential and "fit within the category of state laws Pilot Life had held to be incompatible with ERISA's enforcement scheme" by "provid[ing] a form of ultimate relief in a judicial forum that add[s] to the judicial remedies provided by ERISA." Id. at 379, 122 S.Ct. 2151.

As this court explained recently, "Nowhere does [ERISA] allow consequential or punitive damages. Damages are limited to the recovery of `benefits due ... under the terms of the plan.'" Conover, 320 F.3d at 1080 (alteration in original). The Oklahoma bad faith claim in Conover, like the Colorado bad faith claim here, "allows plan participants to obtain `consequential and, in a proper case, punitive, damages' for breach of good faith and fair dealing by an insurer." Id. Where such damages are available, they "provide[] a cause of action excluded from [ERISA's] civil enforcement scheme and would therefore `pose an obstacle to the purposes and objectives of Congress.'" Id. (quoting Gaylor v. John Hancock Mut. Life Ins. Co., 112 F.3d 460, 466 (10th Cir.1997)); see also Moffett v. Halliburton Energy Servs., Inc., 291 F.3d 1227, 1237 (10th Cir.2002).

The Supreme Court has strongly indicated in dicta that a state law falling within ERISA's savings clause ("nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance," 29 U.S.C. § 1144(b)(2)(A)) would still be preempted merely by providing remedies beyond those prescribed in ERISA. See Rush Prudential, 536 U.S. at 377, 122 S.Ct. 2151 (2002) ("Although we have yet to encounter a forced choice between the congressional policies of exclusively federal remedies and the `reservation of the business of insurance to the States,' we have anticipated such a conflict, with the state insurance regulation losing out if it allows plan participants `to obtain remedies ... that Congress rejected in ERISA.'") (citations omitted). In addition to being preempted due to conflict with ERISA's remedial scheme, we are persuaded that — in the alternative — the Colorado bad faith claim in this case does not fall within ERISA's savings clause, and as such is expressly preempted.

It is undisputed that the Kidneighs' claims "relate" to an employee benefit plan, and so our inquiry on this aspect of preemption moves...