Lazorko v. PA Hospital

• Decision Date: 26 December 2000
• Docket Number: HMO-PA,NORLIE-LAZORKO,Nos. 98-1776,A,NORLIE-LAZORK,RLIE-LAZORKO,RLIE-LAZORK,s. 98-1776
• Citation: 237 F.3d 242
• Parties: (3rd Cir. 2000) JONATHAN LAZORKO, Administrator of the Estate of PATRICIA NORLIE, a/k/a PATRICIA; JONATHAN LAZORKO, Personal Representative of PATRICIA v. PENNSYLVANIA HOSPITAL; INSTITUTE OF PENNSYLVANIA; DAVID E. NICKLIN, M.D.; UNIVERSITY CITY FAMILY MEDICINE; U.S. HEALTHCARE, t/a/ JONATHAN LAZORKO, Administrator of the Estate of PATRICIA NORLIE, a/k/a PATRICIA; JONATHAN LAZORKO, Personal Representative of PATRICIA, Appellants v. PENNSYLVANIA HOSPITAL; INSTITUTE OF PENNSYLVANIA; DAVID E. NICKLIN, M.D.; UNIVERSITY CITY FAMILY MEDICINE; U.S. HEALTH CARE, t/a/ JONATHAN LAZORKO, Administrator of the Estate of PATRICIA NORLIE, a/k/a PATRICIA; JONATHAN LAZORKO, Personal Representative of PATRICIA v. PENNSYLVANIA HOSPITAL; INSTITUTE OF PENNSYLVANIA; DAVID E. NICKLIN, M.D.; UNIVERSITY CITY FAMILY MEDICINE; U.S. HEALTH CARE, t/a//1777/1790
• Court: U.S. Court of Appeals — Third Circuit

Page 242

237 F.3d 242 (3rd Cir. 2000)

JONATHAN LAZORKO, Administrator of the Estate of PATRICIA NORLIE, a/k/a PATRICIA NORLIE-LAZORKO; JONATHAN LAZORKO, Personal Representative of PATRICIA NORLIE-LAZORKO v. PENNSYLVANIA HOSPITAL; INSTITUTE OF PENNSYLVANIA; DAVID E. NICKLIN, M.D.; UNIVERSITY CITY FAMILY MEDICINE; U.S. HEALTHCARE, t/a/ HMO-PA

JONATHAN LAZORKO, Administrator of the Estate of PATRICIA NORLIE, a/k/a PATRICIA NORLIE-LAZORKO; JONATHAN LAZORKO, Personal Representative of PATRICIA NORLIE-LAZORKO, Appellants v. PENNSYLVANIA HOSPITAL; INSTITUTE OF PENNSYLVANIA; DAVID E. NICKLIN, M.D.; UNIVERSITY CITY FAMILY MEDICINE; U.S. HEALTH CARE, t/a/ HMO-PA

JONATHAN LAZORKO, Administrator of the Estate of PATRICIA NORLIE, a/k/a PATRICIA NORLIE-LAZORKO; JONATHAN LAZORKO, Personal Representative of PATRICIA NORLIE-LAZORKO v. PENNSYLVANIA HOSPITAL; INSTITUTE OF PENNSYLVANIA; DAVID E. NICKLIN, M.D.; UNIVERSITY CITY FAMILY MEDICINE; U.S. HEALTH CARE, t/a/ HMO-PA

Nos. 98-1776/1777/1790

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued on June 26, 2000

Filed December 26, 2000

Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 96-cv-04858) District Judge: Honorable Louis H. Pollak

[Copyrighted Material Omitted]

John J. O'Brien, III, Esquire (Argued) O'Brien & O'Brien 257 East Lancaster Avenue Suite 201 Wynnewood, PA 19096, Attorney for Appellants/ Cross Appellees

Barbara S. Magen, Esquire Adrian R. King, Sr., Esquire Douglas A. Brockman, Esquire Post & Schell 1800 John F. Kennedy Boulevard 19th Floor Philadelphia, PA 19103, Attorneys for Appellees Pennsylvania Hospital and Institute of Pennsylvania

Rawle & Henderson LLP Carl D. Buchholz, III, Esquire (Argued) Angela M. Heim, Esquire The Widener Building, 16th Floor One South Penn Square Philadelphia, PA 19107, Attorneys for Appellee/Cross Appellant United States Healthcare Systems of Pennsylvania, Inc., t/a/ U.S. Healthcare

Before: ROTH and GARTH, Circuit Judges, STANTON,^* District Judge

OPINION OF THE COURT

ROTH, Circuit Judge:

Patricia Norlie-Lazorko committed suicide in July 1993, allegedly as a consequence of her untreated mental illness. Her husband, Jonathan Lazorko, brought suit in state court against Dr. David Nicklin, Patricia's doctor; University City Family Medicine, Nicklin's employer; Pennsylvania Hospital; the Institute of Pennsylvania; and U.S. Healthcare, Inc., the health maintenance organization (HMO) administering Lazorko's health benefits. After a series of removals of the case to the U.S. District Court and remands to state court, Lazorko appeals the dismissal of his direct claims against U.S. Healthcare and the District Court's award of sanctions against him for including two purportedly frivolous allegations in his complaint. U.S. Healthcare cross-appeals the District Court's remand to state court of the vicarious liability claims against it.

Following our recent decision in In re U.S. Healthcare, Inc., 193 F.3d 151 (3d Cir. 1999), ¹ we will affirm the remand to state court of the vicarious liability claims against U.S. Healthcare. We will, however, reverse the judgment of the District Court, dismissing the direct claims against U.S. Healthcare (Count I of the Complaint), and we will remand these claims to the District Court for remand to the state court. As for sanctions, Lazorko's attorney appealed only the interim decision sanctioning him, not the subsequent award to U.S. Healthcare of a specified amount of attorney's fees. We will therefore dismiss the appeal of sanctions for lack of appellate jurisdiction.

I. Background

Norlie-Lazorko suffered from depression and schizophrenia. In late 1992, she attempted suicide and was hospitalized for six months. She was discharged from the hospital in June 1993 but again began contemplating suicide. Although she asked to be rehospitalized, Dr. Nicklin denied her request. On July 4, 1993, Norlie-Lazorko committed suicide.

Following his wife's death, Jonathan Lazorko, as administrator of her estate, brought suit in Pennsylvania state court. Lazorko alleged as to U.S. Healthcare that under state law it was directly and vicariously liable for his wife's death because the HMO imposed financial disincentives on Dr. Nicklin that discouraged him from recommending her for additional treatment.

Based on this claim, U.S. Healthcare removed the case to federal court in the Eastern District of Pennsylvania, pursuant to 28 U.S.C. S 1446(b). U.S. Healthcare argued that the denial of the hospitalization request was completely preempted by ERISA under S 502(a)(1)(B), which gives a member of an ERISA plan an exclusive federal remedy for claims alleging the denial of benefits guaranteed by that plan. Lazorko moved to remand the case to state court. The District Court rejected Lazorko's motion, construing his direct liability claims as being for the improper denial of benefits, and thus completely preempted under ERISA. Lazorko v. Pennsylvania Hosp., et al., No. 95-CV-6151, slip op. at 2 (E.D. Pa. Nov. 21, 1995) (Lazorko I). In a subsequent decision, the District Court dismissed the claims that were preempted by ERISA's civil remedy and remanded the rest of the case to state court. Lazorko v. Pennsylvania Hosp., et al., No. 95-CV-6151, slip op. at 2-3 (E.D. Pa. Jan. 4, 1996) (Lazorko II).

On this first remand, the state court dismissed four counts of Lazorko's complaint. Three other counts, which alleged intentional misrepresentation, fraud, and violation of the state consumer protection law, were stricken without prejudice to amending. Lazorko did amend, but he left intact his central contention that U.S. Healthcare's financial penalties interfered with Dr . Nicklin's professional judgment, causing Norlie-Lazorko's death.

U.S. Healthcare removed the case to federal court a second time.² In response, Lazorko moved again for a remand. Again, however, the District Court denied the remand motion, concluding as it had previously that Lazorko's direct negligence claims against U.S. Healthcare for denial of hospital benefits were completely preempted by ERISA's S 502(a)(1)(B). The court did grant the motions to dismiss of the other defendants.³ Lazorko v. Pennsylvania Hosp., et al., CA No. 96-4658, slip op. at 8 (E.D. Pa. Mar. 28, 1997) (Lazorko III).

Following the second removal to federal court, Lazorko amended his complaint twice more. Although he added new facts, he did not change his central contention. Moreover, rather than add a new claim, based on ERISA, to his existing claims of direct and vicarious liability, Lazorko instead moved to strike U.S. Healthcare's ERISA defenses, asserting that U.S. Healthcare had not shown that his health plan qualified as an ERISA plan. U.S. Healthcare moved for summary judgment, arguing that, because his state law claims related to an ERISA plan, they were superseded by ERISA's express preemption clause, S 514(a), 29 U.S.C. S 1144(a).

The District Court denied Lazorko's motion to strike U.S. Healthcare's ERISA defenses, reasoning that, under the law of the case, earlier proceedings had established the existence of a plan. Lazorko v. Pennsylvania Hosp., et al., CA No. 96-4858, slip op. at 4-6 (E.D. Pa. June 30, 1998) (Lazorko IV). The District Court then granted summary judgment for U.S. Healthcare on preemption grounds on all of Lazorko's direct liability claims against the HMO, including the claims in Counts II, III and IV for intentional misrepresentation, fraud, and violation of Pennsylvania's consumer protection law.⁴ The court remanded Lazorko's vicarious liability claims against U.S. Healthcare, however, because they alleged medical malpractice, an area of tort law traditionally regulated by the states, which did not implicate the regulation of employer plans and, thus, was outside the scope of ERISA's express preemption.

U.S. Healthcare also moved to sanction Lazorko's attorney, alleging that he had failed to reasonably investigate several of the charges levied against U.S. Healthcare, including the allegations that the company issued sham benefit policies and that it intentionally denied patients treatment so as to maximize profits. The District Court granted U.S. Healthcare's motion in a second June 30, 1998, order, which struck the of fending allegations from the complaint and awarded the costs incurred to defend against the challenged allegations.⁵ On July 24 and 29, Lazorko appealed both of the June 30 orders. U.S. Healthcare cross-appealed the remand to the state court of the vicarious liability claims against it.

Following a hearing on the amount of sanctions, the District Court awarded U.S. Healthcare costs of $2,452.50 in an order filed on August 3, 1998. Lazorko did not appeal this order.

II. Jurisdiction and Standard of Review

The District Court purportedly had removal jurisdiction under 28 U.S.C. S 1441(a) by virtue of ERISA's complete preemption provision, S 502(a)(1)(B), codified at 29 U.S.C. S 1132(a)(1)(B), which satisfies the "arising under" requirement for federal question jurisdiction under 28 U.S.C. S 1331. See Metropolitan Life Ins. Co. v. General Motors Corp., 481 U.S. 58, 64-66 (1987). We have appellate jurisdiction under 28 U.S.C. S 1291. We review the District Court's decision to remand under S 1367(c)(3) for abuse of discretion, but have plenary review of the underlying basis for remand to the extent that question is a legal one. See In re U.S. Healthcare, 193 F.3d at 160 (citing Englehardt v. Paul Revere Life Ins. Co., 139 F.3d 1346, 1351 n.4 (11th Cir. 1998)).

Although the District Court relinquished jurisdiction over this case when it either dismissed or remanded all the claims before it, it still had jurisdiction to order sanctions. Moreover, a district court has jurisdiction to impose Rule 11 sanctions on litigants and attorneys appearing before it even if the court is subsequently determined to have lacked subject matter jurisdiction over the claim in which the...