Nealy v. US Healthcare HMO

• Citation: 93 N.Y.2d 209,711 N.E.2d 621,689 N.Y.S.2d 406
• Parties: , 711 N.E.2d 621, 1999 N.Y. Slip Op. 2630 Susan NEALY, Individually and as Administratrix of the Estate of Glenn Nealy, Deceased, Appellant, v. US HEALTHCARE HMO et al., Defendants, and Ralph Yung, Respondent.
• Decision Date: 25 March 1999
• Court: New York Court of Appeals

Page 406

689 N.Y.S.2d 406

93 N.Y.2d 209, 711 N.E.2d 621, 1999 N.Y. Slip Op. 2630

Susan NEALY, Individually and as Administratrix of the Estate of Glenn Nealy, Deceased, Appellant, v. US HEALTHCARE HMO et al., Defendants and Ralph Yung, Respondent.

Court of Appeals of New York.

March 25, 1999.

Oxman Natale Friedman Geiger & Tulis, P.C., Hawthorne (Marc S. Oxman and Susan F. Gibralter of counsel), for appellant.

Peltz & Walker, New York city (Bhalinder L. Rikhye and Denise A. Rubin of counsel), for respondent.

G. William Scott, Henry L. Solano, Marc I. Machiz and Karen L. Handorf, of the District of Columbia Bar, admitted pro hac vice, for the Secretary of Labor, amicus curiae.

Eliot Spitzer, Attorney General, New York City (Peter H. Schiff, M. Patricia Smith and Pamela Jarvis of counsel), for the State of New York amicus curiae.

OPINION OF THE COURT

Chief Judge KAYE.

The novel question presented by this appeal is whether the Employee Retirement Income Security Act (ERISA) preempts plaintiff's medical malpractice, breach of contract and breach of fiduciary duty claims against a primary care physician who allegedly delayed in submitting a specialist's referral form for approval by a health maintenance organization (HMO) governed by ERISA. Concluding that ERISA does not preempt plaintiff's claims, we reverse the Appellate Division's dismissal order and reinstate the complaint against the doctor.

In January 1992, plaintiff's husband, Glenn Nealy, then 37 years old, was diagnosed with coronary arteriosclerosis and a coronary artery lesion. As a result, Mr. Nealy took disability leave from his job at Photocircuits Corporation and was treated for his condition by a cardiologist, Dr. Stephen Green. His treatment, which included an angioplasty performed by Dr. Green in March 1992, was in large part covered by Blue Cross/Massachusetts Mutual, the carrier selected by Photocircuits to provide employee medical insurance. Around the time of Mr. Nealy's angioplasty, Photocircuits replaced its carrier with a choice of three HMOs, including U.S. Healthcare, and informed its employees that coverage would become effective April 1, 1992. Mr. Nealy promptly enrolled in the U.S. Healthcare Versatile Plus HMO, which allowed its members to see non-participating physicians, and paid his first monthly premium.

On April 2, and again on April 3, Mr. Nealy visited the offices of defendant, Dr. Ralph Yung, whom he had selected as his primary care provider under the U.S. Healthcare HMO. ¹ He experienced renewed chest pain and also required follow-up care as a result of the angioplasty. On his first visit, Mr. Nealy was denied an appointment because he had not yet received a U.S. Healthcare identification number. The next day, he spoke with a U.S. Healthcare representative who told him that a copy of his enrollment form could be presented in lieu of an identification number, and he made a second attempt to visit Dr. Yung. Again he was turned away--this time because his enrollment form bore the wrong primary physician number.

On April 10, 1992--having received his U.S. Healthcare identification card the previous day--Mr. Nealy was examined by Dr. Yung. During that visit, Dr. Yung took a patient history that noted a history of angina and angioplasty, performed a routine new-patient physical examination, and renewed all the medications that had been prescribed by Dr. Green. At Dr. Yung's request, Mr. Nealy returned on April 13 to provide blood and urine samples for laboratory analysis. When Dr. Yung informed him during one or both of these visits that he should see a cardiologist, Mr. Nealy requested a referral to Dr. Green, who was not a participating U.S. Healthcare provider. Dr. Yung allegedly assured his patient that he would submit a request to U.S. Healthcare to approve an out-of-plan referral and do what he could to secure approval of the request. It was not until approximately April 20, however, that Dr. Yung completed a non-participating provider request form and submitted it for approval to U.S. Healthcare. ²

On May 4th, Mr. Nealy received a copy of a letter from U.S. Healthcare addressed to Dr. Yung denying the request for a referral to Dr. Green. The reason given was that U.S. Healthcare had a participating provider in the area. After the referral to Dr. Green was denied, Mr. Nealy decided to accept a referral to Dr. Carl Spivak, a participating U.S. Healthcare cardiologist. He obtained the referral to Dr. Spivak on May 18 and promptly made an appointment for the next day. Tragically, however, on May 18 Mr. Nealy suffered a massive myocardial infarction and died.

Seeking to recover damages for her husband's death, plaintiff commenced this action in Supreme Court asserting breach of contract, breach of fiduciary duty, wrongful death, negligence and other claims against defendants Dr. Yung, Dr. Richard H. Bernstein (Vice President and Director of U.S. Healthcare), U.S. Healthcare and two subsidiaries. Plaintiff also asserted medical malpractice claims against Dr. Yung and Dr. Bernstein. Dr. Bernstein and U.S. Healthcare successfully sought removal of the case to Federal court, where the claims were dismissed on the ground that they were preempted by ERISA (844 F.Supp. 966 [SDNY] ), and no appeal was taken to determine the correctness of that decision. Because Dr. Yung--who had not yet been served with the summons and complaint--did not take part in the removal motion, the Federal court remanded the case against him, as the sole remaining defendant, to Supreme Court.

After service of process and discovery, Dr. Yung moved for summary judgment seeking dismissal of the complaint, alleging that ERISA preempted plaintiff's claims against him as well. Supreme Court denied the motion. The Appellate Division, however, reversed and dismissed the complaint, concluding that ERISA preempted plaintiff's claims. We disagree and now reinstate plaintiff's complaint against Dr. Yung.

Discussion

Concerned with employee pension plan abuses and mismanagement, Congress in 1974 enacted ERISA, a comprehensive statute "designed to promote the interests of employees and their beneficiaries in employee benefit plans" (Aetna Life Ins. v. Borges, 869 F.2d 142, 144 [2d Cir.], cert. denied 493 U.S. 811, 110 S.Ct. 57, 107 L.Ed.2d 25; see also, 29 USC § § 1001, 1001a, 1001b). ERISA subjects employee benefit plans to participation, funding and vesting requirements as well as rules regarding reporting, disclosure and fiduciary responsibility (29 USC §§ 1021, et seq.; see also, Shaw v. Delta Air Lines, 463 U.S. 85, 90-91, 103 S.Ct. 2890, 77 L.Ed.2d 490). By imposing these requirements, Congress sought "to insure against the possibility that the employee's expectation of * * * benefit[s] would be defeated through poor management by the plan administrator" (Massachusetts v. Morash, 490 U.S. 107, 115, 109 S.Ct. 1668, 104 L.Ed.2d 98). In aid of its goal of protecting plan participants and their beneficiaries, ERISA facilitates the development of a uniform national law governing employee benefit plans, and a standard system to guide the processing of claims and disbursement of benefits (New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656-657, 115 S.Ct. 1671, 131 L.Ed.2d 695 [Travelers ] ).

ERISA's preemption provision is central to achievement of its statutory purposes. The provision reads that ERISA "shall supersede any and all State laws insofar as they * * * relate to any employee benefit plan" covered by ERISA, and it applies to both State statutes and common law (§ 514 [a], 29 USC § 1144[a]; id., at § 514[c], 29 USC § 1144[c]; Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 95 L.Ed.2d 39). Although the language of the preemption clause is "deliberately expansive," there is a presumption that Congress does not intend to supplant State law, and a claim traditionally within the domain of State law will not be superseded by Federal law "unless that was the clear and manifest purpose of Congress" (Travelers, 514 U.S., at 654-655, 115 S.Ct. 1671).

The issue before us is whether ERISA's preemption clause bars plaintiff's medical malpractice, breach of contract and breach of fiduciary duty claims against her husband's primary care physician, Dr. Yung. All of these claims fall within the traditional domain of State regulation. Dr. Yung, therefore, bears the "considerable burden" of overcoming the presumption that Congress did not intend to preempt them (DeBuono v. NYSA-ILA Medical and Clinical Svcs. Fund, 520 U.S. 806, 117 S.Ct. 1747, 1752, 138 L.Ed.2d 21). In an attempt to surmount that formidable hurdle, Dr. Yung alleges that ERISA preempts these claims because they "relate to" the administration of the U.S. Healthcare HMO. The Appellate Division agreed, holding that he was protected by ERISA preemption because he had acted in a "purely administrative" capacity, and not as an "actual provider of medical care" (251 A.D.2d 144, 144, 674 N.Y.S.2d 332). We conclude that plaintiff's claims against Dr. Yung do not "relate to" an employee benefit plan.

The simple statutory words "relate to" have been the subject of significant scholarly comment and litigation, including considerable attention from the United States Supreme Court (see, DeBuono, supra, 117 S.Ct., at 1749, n. 1; see also, Peter D. Jacobson and Scott D. Pomfret, Form, Function, and Managed Care Torts: Achieving Fairness and Equity in ERISA Jurisprudence, 35 Hous L Rev 985 [1998]; Catherine L. Fisk, The Last Article About the Language of ERISA Preemption?: A Case Study of the Failure of Textualism, 33 Harv J on Legis 35 [1996]; Larry J. Pittman, ERISA's Preemption Clause and the Health Care Industry: An Abdication of Judicial Law-Creating Authority, 46 Fla L Rev 355 [1994] ). On the one hand, virtually any State law may be said to "relate to" an employee benefit plan, for "universally, relations stop nowhere" (Travelers, supra, ...