MDPhysicians & Associates, Inc. v. State Bd. of Ins.

• Decision Date: 01 April 1992
• Docket Number: No. 91-1469,91-1469
• Parties: , 15 Employee Benefits Cas. 1007 MDPHYSICIANS & ASSOCIATES, INC., Plaintiff-Appellant, v. STATE BOARD OF INSURANCE, A Body Politic of the State of Texas, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 178

957 F.2d 178

60 USLW 2659, 15 Employee Benefits Cas. 1007

MDPHYSICIANS & ASSOCIATES, INC., Plaintiff-Appellant, v. STATE BOARD OF INSURANCE, A Body Politic of the State of

Texas, et al., Defendants-Appellees.

No. 91-1469.

United States Court of Appeals,

Fifth Circuit.

April 1, 1992.

Richard C. Titus, Raleigh, N.C., for plaintiff-appellant.

Fred I. Lewis, Sedora Rosetta Jefferson, Asst. Attys. Gen., Dan Morales, Atty. Gen., Austin, Tex., for defendants-appellees.

Tess J. Ferrara, Atty., Dept. of Labor, Plan Benefits Sec. Div., Washington, D.C., for amicus curiae Secretary of Labor.

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

Before GOLDBERG, JOLLY, and WIENER, Circuit Judges.

GOLDBERG, Circuit Judge:

This case involves the definition of an "employee welfare benefit plan" found in the Employee Retirement Income Security Act of 1974. We confess that the parties seemed "bewitched, bothered and bewildered" ¹ in attempting to apply the statute to the facts of this case at oral argument--the outset of our journey through ERISA. The statutory map, along with statements of legislative purpose by Congress, the map-maker, enables us to answer the issue presented: Whether the MDPhysicians & Associates, Inc. Employee Benefit Plan constituted an "employee welfare benefit plan" within the meaning of ERISA. We hold that the plan is not an "employee welfare benefit plan" and affirm the district court's dismissal for lack of subject matter jurisdiction.

I.

MDPhysicians, Inc. ("MDPhysicians," also known as MDPhysicians of Amarillo, Inc.) is an independent physician practice association of over 130 doctors who work in the Amarillo, Texas area. MDPhysicians, a Texas corporation, contracts its professional services to health care providers. In 1988, MDPhysicians formed an entity called MDPhysicians & Associates, Inc. ("MDP") and created the MDPhysicians and Associates, Inc. Employee Benefit Plan ("MDP Plan" or "Plan"). MDP adopted the Plan, served as Plan Administrator, and funded the Plan through a trust established by itself and three physicians. The same three doctors who control MDPhysicians, the practice association, also control the MDP entity and the MDP Plan--not only are these three doctors officers of MDP, but they also serve as trustees of the Plan. MDP entered into a service agreement with a third-party administrator to provide administrative claims services. The Plan is self-funded, which simply means that it is not fully insured. Rather, it purchased stop-loss insurance to protect the Plan only from losses exceeding a certain amount per beneficiary.

The MDP Plan operated in the following manner. Through the broadcast and print media, MDP advertised the Plan to employers located in the Texas panhandle. Over 100 disparate employers ("Subscribing Employers") subscribed to the MDP Plan by executing an Application and Subscription Agreement, paying a one-time fee, and paying a small, monthly, per-employee fee. MDP administered the Plan under the Trust Agreement and Summary Plan Description to provide medical and health benefits to the Subscribing Employers' employees and the employees' dependents (collectively, the "Employees"). An Employee who needed medical or health care could choose to obtain treatment from a network medical service provider and pay only 10% of the medical expense or seek treatment from a non-network provider and pay 20% of the charge. Under the Plan, then, the Employees had a financial incentive to pursue treatment from a network medical service provider, which included physicians in the physicians practice association that formed MDP.

MDP sued the Texas State Board of Insurance ("Board"), seeking a declaratory judgment that the Board's attempts to regulate MDP and the MDP Plan were inconsistent with the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 ("ERISA"), and a permanent injunction restraining the Board from regulating MDP and the MDP Plan. The Secretary of the United States Department of Labor ("DOL"), as amicus curiae, filed a brief in the district court and issued several opinions concerning the MDP Plan's status under ERISA and its susceptibility to regulation by the Board. DOL Op. No. 90-18a (July 2, 1990); DOL Op. No. 90-10a (May 3, 1990).

The district court concluded that the MDP Plan did not constitute an "employee welfare benefit plan" under ERISA, and, in dicta, noted that even if it did, ERISA did not preempt the application of a Texas law requiring a certificate of authority as a Texas insurance company because the regulation was not inconsistent with Title I of ERISA. After finding that the Plan was not an "employee welfare benefit plan" under ERISA, the court granted the Board's motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). MDPhysicians & Assocs. Inc. v. Wrotenbery, 762 F.Supp. 695 (N.D.Tex.1991).

Appellant MDP argues that the federal district court had jurisdiction over this case because the MDP Plan qualified as an "employee welfare benefit plan" within the meaning of ERISA. If the MDP Plan did not constitute an "employee welfare benefit plan," however, the district court properly dismissed the case for lack of subject matter jurisdiction. See Hansen v. Continental Ins. Co., 940 F.2d 971, 976 (5th Cir.1991). We conclude that the Plan is not an "employee welfare benefit plan" under ERISA and affirm the district court.

II.

Since a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) concerns the court's "very power to hear the case ... the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case." Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.) (quoting Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3rd Cir.1977)), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981). The district court dismissed the case for lack of subject matter jurisdiction based on the complaint, supplemented by undisputed facts and the court's resolution of disputed facts. ² The court relied in part "on its own determination of disputed factual issues" in resolving the challenge to its jurisdiction; therefore, "we must then review those findings as we would any other district court resolution of factual disputes--we must accept the district court's findings unless they are 'clearly erroneous.' " Id. (citations omitted).

A. The ERISA Map

Before we embark on our journey, we comment that our task as judicial travellers is confined to following the ERISA map charted by the Congressional cartographers. We travel to determine whether the landmark called "MDP Plan" is located within that jurisdiction marked "employee welfare benefit plan." Our logical path is dotted with definitional markers, which we discuss in the order in which we encountered them.

The parties do not disagree that the MDP Plan is a "multiple employer welfare arrangement" as defined by ERISA, commonly referred to as a "MEWA." See DOL Op. No. 90-10A (May 3, 1990). The term "MEWA" includes all arrangements "established or maintained for the purpose of offering or providing" certain benefits "to the employees of two or more employers ... or to their beneficiaries." 29 U.S.C. § 1002(40)(A) (defining MEWA and listing exceptions irrelevant to this appeal). But ERISA does not automatically govern all MEWAs. Congress's notion of a MEWA is broader than its concept of an "employee welfare benefit plan" ("EWBP"). The statutory definition of a MEWA encompasses both EWBPs and arrangements "other than ... employee welfare benefit plan[s]." Id. Some MEWAs locate themselves in the jurisdiction known as "employee welfare benefit plans," while others remain outside the borders of ERISA.

The parties disagree whether the MDP Plan, admittedly a MEWA, constitutes an EWBP under ERISA. Not only does resolution of the ERISA coverage issue decide whether this case belongs in federal court, but, if resolved against ERISA coverage, determines whether the Texas State Board of Insurance can regulate MDP and the MDP Plan. We detour from our course to explain this phenomena. Only MEWAs that also constitute statutory EWBPs are governed by and regulated under federal law--ERISA. These EWBP-MEWAs qualify for the limited preemption from state insurance regulations found in ERISA. 29 U.S.C. § 1144(b)(6)(A)(ii) (preempting application of state insurance regulations "inconsistent with" Title 1 of ERISA). ³ Non-EWBP MEWAs, however, are subject to state regulation. See Wisconsin Educ. Ass'n Ins. Trust v. Iowa State Bd., 804 F.2d 1059, 1061 (8th Cir.1986). We thus make no diversion to the path marked "possible ERISA preemption of state law" unless we first decide that the MDP Plan constitutes an EWBP-MEWA within the meaning of ERISA.

The driving force of our journey remains whether this lawsuit belonged in federal court or whether the district court properly dismissed it for lack of subject matter jurisdiction. ERISA extends federal jurisdiction to cases brought by a "fiduciary" of an "employee welfare benefit plan" to enforce the provisions of ERISA. 29 U.S.C. 1132(a)(3). We assume, without deciding, that MDP qualifies as a "fiduciary" under ERISA with respect to the MDP Plan. ⁴ See 29 U.S.C. § 1002(21)(A). We must discover, then, whether the multiple employer welfare arrangement, the MDPlan, constitutes an "employee welfare benefit plan" under ERISA, giving the district court original jurisdiction over the action as one "arising under the ... laws of the United States." 28 U.S.C. § 1331. Whether the MDPlan constituted an "employee welfare benefit plan" is a question of fact. Hansen v. Continental Ins. Co., 940 F.2d 971, 976 (5th Cir.1991) (citing Gahn v. Allstate Life Ins. Co., 926 F.2d 1449, 1451 (5th Cir.1991)).

We continue to traverse the lexicographic topography charted by Congress. ERISA...