Lancaster v. Kaiser Foundation Health Plan

• Decision Date: 10 April 1997
• Docket Number: Civ. A. No. 97-122-A.
• Citation: 958 F.Supp. 1137
• Court: U.S. District Court — Eastern District of Virginia
• Parties: Paige N. LANCASTER, A Minor, by Barbara L. Lancaster, et al., Plaintiffs, v. KAISER FOUNDATION HEALTH PLAN OF MID-ATLANTIC STATES, INC., et al., Defendants.

958 F.Supp. 1137

Paige N. LANCASTER, A Minor, by Barbara L. Lancaster, et al., Plaintiffs, v. KAISER FOUNDATION HEALTH PLAN OF MID-ATLANTIC STATES, INC., et al., Defendants.

Civ. A. No. 97-122-A.

United States District Court, E.D. Virginia.

April 10, 1997.

Michael J. Miller, Patricia M. Spicer, Miller & Associates, Alexandria, VA, for Plaintiffs.

Anthony J. Trenga, Michael L. Zupan, Carla Blake Hook, Hazel and Thomas, P.C., Alexandria, VA, for Defendants.

MEMORANDUM OPINION

ELLIS, District Judge.

Plaintiffs are a minor child and her mother who filed a state court action alleging: (i) medical malpractice against two primary-care physicians; (ii) vicarious liability and negligence against the Health Maintenance Organization (HMO) and the physicians' professional corporation; and (iii) fraud against all defendants. Defendants promptly removed the action to federal court, arguing that plaintiffs' state law claims triggered the "complete preemption" exception to the "well-pleaded complaint rule." See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). The matter is now before the Court on plaintiffs' motion to remand and defendants' motion to dismiss all claims on preemption grounds. Central to the disposition of these motions is the question whether plaintiffs' claims are preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq. Put another way, the question to be resolved here is whether the complaint is, as defendants see it, merely an ERISA claim for denial of benefits masquerading as a medical malpractice action, or, as plaintiffs see it, simply a state malpractice, negligence, and fraud action that defendants cannot dress up as ERISA claims.

I¹

Plaintiff, Barbara L. Lancaster, filed this action both individually and on behalf of her daughter, Paige N. Lancaster ("Lancaster"). Both are Virginia citizens.

Defendant, Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc. ("Kaiser"), is an HMO licensed to provide health care services in the Commonwealth of Virginia.² Defendant, Mid-Atlantic Permanente Medical Group, P.C. ("Medical Group"), is a professional corporation of physicians that contracts with Kaiser to provide medical services to Kaiser members at Kaiser-owned clinics.³ Defendants, Corder C. Campbell ("Campbell") and L. Pauls ("Pauls"), are Virginia citizens licensed to practice medicine in Virginia and, at all relevant times, were employed by the Medical Group. Lancaster's membership in Kaiser was paid for by an ERISA plan sponsored by her father's employer, Star Enterprises.⁴

The essential facts, as set forth in the complaint, are easily summarized. On September 3, 1991, Lancaster, then eleven years old, visited Kaiser's clinic in Woodbridge, Virginia, complaining of nausea and severe, daily headaches on the right side of her head. Campbell examined Lancaster, treated her as a pediatric patient, but did not pursue further diagnostic testing. From 1991 through 1995, Lancaster repeatedly returned to Kaiser's clinic in Woodbridge for further treatment by Campbell and Pauls of her recurring headaches. Throughout the course of this treatment, Campbell and Pauls prescribed adult strength narcotic pain medication, but never consulted with a neurological specialist. At no time did Campbell and Pauls ever recommend an MRI, CAT scan, EEG, or any other diagnostic test to assess Lancaster's condition.

In May 1996, the school psychologist at Lancaster's high school became concerned about Lancaster's deteriorating academic performance and wrote Campbell and Pauls urging them to perform diagnostic testing to determine the cause and origin of Lancaster's intense, localized headaches, vomiting, and blood-shot eyes. Thereafter, on May 13, 1996, roughly four and one-half years after Lancaster's initial visit to Kaiser's Wood-bridge clinic, Campbell and Pauls recommended that Lancaster undergo both an EEG and MRI. Sadly, the MRI, performed on May 23, 1996, revealed a right frontal tumor and cystic mass that had infiltrated over forty percent of Lancaster's brain. Soon thereafter, on May 31, 1996, Lancaster underwent surgery at Georgetown University Medical Center to remove the tumor. Yet, because of the tumor's large size and maturity, the surgery was not entirely successful. So, two months later, Lancaster returned to Georgetown Hospital for a second operation to remove the remainder of the tumor and cystic mass. This surgery was also not completely successful and, as a consequence, Lancaster has since undergone additional brain surgery, as well as radiation therapy. And it further appears from the complaint's allegations that Lancaster will require future surgery and continuing intensive care as a result of her serious medical condition.

According to the complaint, throughout the nearly five year period Campbell and Pauls treated Lancaster, Kaiser and the Medical Group had in place a financial incentive program ("Incentive Program") whereby physicians receive bonuses for avoiding excessive treatments and tests.⁵ Consistent with an HMO's goal of containing health care costs, the Incentive Program is ostensibly designed to encourage physicians to refrain from prescribing unnecessary and costly medical procedures and tests.⁶ Plaintiffs dispute that the Incentive Program operates as designed, arguing that in fact the program affects the quality of care provided by encouraging physicians to make treatment decisions on other than medical grounds. Thus, plaintiffs label the program a "disincentive program." In any event, the existence of the Incentive Program, which purportedly paid monetary bonuses to Campbell, Pauls, and other Kaiser physicians, is pivotal to the motions at bar.

On December 30, 1996, plaintiffs filed a five count complaint in the Circuit Court of Prince William County, Virginia, which, distilled to its essence, may be briefly summarized as follows:

(i) Count I (negligence) alleges that Campbell "deviated from the accepted standard of medical care" because, among other things, he "failed to create an appropriate and timely differential diagnosis; failed to timely and properly refer the [patient] to a neurologist; fail[ed] to properly and timely order an MRI, CT Scan, EEG and/or other diagnostic testing; ... fail[ed] to timely respond to his patient['s] signs and symptoms of a growing brain tumor; and fail[ed] to prescribe and use appropriate drugs in the appropriate dosages of said drugs to treat his patient."

(ii) Count II (negligence) alleges that Pauls breached his duty to act as a reasonably prudent medical practitioner in the same manner and to the same extent as Campbell.⁷

(iii) Count III (negligence) alleges that Kaiser "is [indirectly] liable [by virtue of] respondeat superior for the negligence of Campbell and Pauls" and directly liable "for the establishment of guidelines and cost standards which worked against the full and prompt diagnostic assessment [of Lancaster's brain tumor] within the accepted standard of care and for its failure to establish policies, protocols, guidelines and standards for an adequate diagnostic assessment and treatment of [Lancaster's] continuing headaches."

(iv) Count IV (negligence) alleges that the Medical Group "is liable for the negligence [of Campbell and Pauls by virtue of] respondeat superior" and "is further negligent for the establishment of guidelines and cost standards which work[ed] against [Lancaster] receiving a proper diagnosis and treatment assessment within the standard of care during the course of her treatment for her headaches and for the failure to establish policies, protocols, guidelines and standards for her diagnostic assessment during her hospitalization."

(v) Count V (actual and constructive fraud) alleges that each defendant "made an actual misrepresentation of a material fact knowingly and intentionally ... with the intent to mislead ... Barbara Lancaster...." Specifically, defendants "represented that they would provide medical care within or exceeding the appropriate standard of care for reasonably prudent practitioners similarly situated ... [and then, despite] that representation, each defendant herein knowingly and intentionally established policies and guidelines which would financially benefit [Campbell and Pauls] for not providing care as reasonably prudent practitioners similarly situated and that bonuses and/or profit incentives were paid to these physicians for not rendering full and adequate care as needed."

On January 28, 1997, defendants removed this case to federal court pursuant to the "complete preemption" exception to the "well-pleaded complaint rule." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). Soon thereafter, defendants moved to dismiss under Rule 12(b)(6), Fed.R.Civ.P. Then, on February 11, 1997, plaintiffs moved to remand this action to state court pursuant to 28 U.S.C. § 1447(c). This Court heard oral argument, took the motions under advisement, and stayed all further proceedings pending resolution of the two motions. Lancaster v. Kaiser Foundation Health Plan of the Mid-Atlantic States, C.A. No. 97-122-A (Order, February 24, 1997). The matter is now ripe for disposition.

II

Removal jurisdiction is the threshold question. If removal was improper, there is no federal jurisdiction and the matter must be promptly remanded to state court without consideration of the pending motion to dismiss. On the other hand, if removal was proper, there is jurisdiction to proceed to consider defendants' motion to dismiss.

The parties' contentions properly frame the issues presented. In their remand motion, plaintiffs contend that removal was improper and that this action should be remanded because their "well-pleaded complaint" alleged solely state common law claims of medical malpractice, vicarious liability, negligence, and fraud. According to pl...