Provience v. Valley Clerks Trust Fund

• Decision Date: 28 December 1984
• Citation: 163 Cal.App.3d 249,209 Cal.Rptr. 276
• Court: California Court of Appeals Court of Appeals
• Parties: , 6 Employee Benefits Cas. 1153 John A. PROVIENCE, Plaintiff and Appellant, v. VALLEY CLERKS TRUST FUND, et al., Defendants and Respondents. Civ. 23589.

Page 276

209 Cal.Rptr. 276

163 Cal.App.3d 249, 6 Employee Benefits Cas. 1153

John A. PROVIENCE, Plaintiff and Appellant, v. VALLEY CLERKS TRUST FUND, et al., Defendants and Respondents.

Civ. 23589.

Court of Appeal, Third District, California.

Dec. 28, 1984.

[163 Cal.App.3d 253] Jerry L. Rowley, Loomis, for plaintiff and appellant.

McLaughlin & Irvin, Ralph J. Scalzo, Davis, Cowell & Bowe, and J. Thomas Bowen, San Francisco, for defendants and respondents.

SIMS, Associate Justice.

In this case, we hold that tort claims for fraud, bad faith denial of benefits, and intentional infliction of emotional distress, asserted by an employee against an employee benefit plan subject to ERISA, ¹ are preempted by ERISA and may not be litigated in the state courts of California.

FACTUAL AND PROCEDURAL BACKGROUND

In June 1978 plaintiff obtained employment with Raley's Markets. Raley's offered plaintiff participation in one of two medical payment plans as a benefit of his employment. Plaintiff chose Valley Clerks Trust Fund (Fund), an employee benefit plan subject to regulation under ERISA.

At the first union meeting plaintiff attended, some discussion of the Fund's benefits occurred and a pamphlet describing those benefits was presented to him. No representatives of the Fund were present.

In September and October 1979 plaintiff sustained physical injuries in two motor vehicle accidents. Following the second accident plaintiff submitted a number of claims to the Fund for payment of medical expenses. Prior to payment of plaintiff's claims, the Fund requested that he execute an "Agreement to Reimburse" as required by a rule duly enacted by the Fund's trustees. The rule is similar to that described in Molina v. Retail Clerks Unions etc. Benefit Fund (1980) 111 Cal.App.3d 872 at page 876, 168 Cal.Rptr. 906 and essentially provides that the Fund is entitled to reimbursement from proceeds obtained from Before executing the agreement plaintiff requested that he be allowed the opportunity to discuss its contents with an attorney; the Fund agreed. Plaintiff's attorney informed plaintiff that the agreement required plaintiff to forfeit valuable legal rights to which he was entitled and advised him not to sign it. After a period of negotiations in August 1980 (approximately 10 months after plaintiff submitted his claims), the Fund agreed to modify the terms of the agreement. Unwilling to settle for receipt of benefits, plaintiff instituted this lawsuit in September 1980.

third parties who are liable for injuries sustained by a person covered by the Fund.

On October 8, 1980, plaintiff filed his first amended complaint.

The first cause of action contained two legally separate claims. It alleged that defendants misrepresented the benefits available to Fund members and fraudulently induced plaintiff to elect to participate in the Fund instead of the other medical plan offered by his employer. The first cause of action also alleged defendants acted in bad faith in refusing to pay plaintiff's claim until he executed the "Agreement to Reimburse." ²

The second cause of action alleged defendants intentionally inflicted emotional distress upon plaintiff by their response to his claim for benefits.

The third cause of action alleged defendants violated certain federal regulations in failing to establish a reasonable claims procedure.

The fourth cause of action alleged defendants violated provisions of California law (Civ.Code, § 1770 and Bus. and Prof.Code, §§ 17200 and 17500).

On November 10, 1980, defendants removed the action to the United States District Court for the Eastern District of California. Defendants then moved to dismiss (Fed.Rules of Civ.Proc., rules 12(b)(6), 12(f)) each of the four causes of action arguing that each of plaintiff's causes of actions were preempted by ERISA. The district court, in a published order, held that plaintiff's first two causes of action were not preempted by ERISA because they were brought under state law of general application which furthers an important state interest and does not conflict with ERISA. (Provience v. Valley Clerks Trust Fund (E.D.Cal.1981) 509 F.Supp. 388, 391-392.) The court further held that plaintiff's third cause of action was expressly permitted by ERISA. Concluding plaintiff's fourth cause of action was clearly preempted by ERISA, the court dismissed it. (Id., at p. 392.) The court expressly exercised its discretion to retain jurisdiction over plaintiff's pendent state causes of action (1 and 2).

Thereafter, both parties moved for summary judgment on the remaining three causes of action. (Fed.Rules Civ.Proc., Rule 56.) The district court found that defendants' handling of plaintiff's claim did not violate federal regulations as alleged and granted defendants' motion for summary judgment as to plaintiff's third cause of action. ³

Defendants again argued in their summary judgment motion that plaintiff's state claims were preempted by ERISA. The district court noted that it possessed discretion to entertain jurisdiction over plaintiff's pendent state claims even though no federal claim remained. It decided to do so in order again to reject defendants' preemption arguments. Having decided the preemption issue, the district court remanded the action to state court on September 23, 1982.

Upon remand defendants brought a motion for summary judgment on plaintiff's remaining claims (fraud, bad faith denial of claim, and infliction of emotional distress), arguing that ERISA preempted plaintiff's state law claims and that, even if not preempted, no triable issue of fact existed as to those claims.

The trial court granted summary judgment from which plaintiff appeals.

DISCUSSION

I

As best we understand it, plaintiff's principal contention is that his claims for fraud, bad faith denial of benefits, and emotional distress are not preempted by ERISA.

A

Plaintiff first argues that the doctrine of "law of the case" required the trial court (and requires this court) to abide by the federal district court's ruling that his claims were not preempted by ERISA.

"The doctrine of 'law of the case' deals with the effect of the first appellate decision on the subsequent retrial or appeal: The decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case." (6 Witkin, Cal.Procedure (2d ed. 1971) Appeal, § 633, p. 4552, emphasis in original; see People v. Shuey (1975) 13 Cal.3d 835, 120 Cal.Rptr. 83, 533 P.2d 211.)

The doctrine of "law of the case" is inapplicable here for two reasons. First, "The doctrine that a previous ruling has become law of the case has no application except as to the decisions of appellate Courts." (Lawrence v. Ballou (1869) 37 Cal. 518, 521; People v. Apodaca (1978) 76 Cal.App.3d 479, 488, 142 Cal.Rptr. 830; 6 Witkin, op. cit. supra, § 634, p. 4553.) Therefore, the doctrine does not require adherence to the ruling of the district court--a trial court--in the same case. Second, the doctrine of "law of the case" does not apply where the controlling rules of law have been altered or clarified by a decision intervening between the first and second judicial determinations. (People v. Ramos (1984) 37 Cal.3d 136, 146, 207 Cal.Rptr. 800, 689 P.2d 430; DiGenova v. State Board of Education (1962) 57 Cal.2d 167, 178-180, 18 Cal.Rptr. 369, 367 P.2d 865.) In the instant case, both Shaw v. Delta Air Lines, supra, 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 and Russell v. Mass. Mut. Life Ins. Co., supra, 722 F.2d 482 were decided after the district court's rulings on preemption. To the extent these cases promulgate rules of law different from those applied by the district court--a matter we discuss in more detail post--these cases are controlling.

B

Plaintiff next contends section 1144 ⁴ makes clear that his claims are not preempted by ERISA. We reach the opposite conclusion.

Section 1144(a) provides in pertinent part that, with certain statutory exceptions, ERISA "shall supercede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan ...." In 1983, in Shaw v. Delta Air Lines, Inc., supra, 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 the United States Supreme Court endeavored to eliminate much of the conflict among various state and federal courts as to the scope of the preemptive language of section 1144(a). (Id., at pp. ---- - ----, 103 S.Ct. at pp. 2898-2899, 77 L.Ed.2d at pp. 499-500.) Noting that it had previously described section 1144(a) as a " 'virtually unique pre-emption provision' " (id., at p. ----, fn. 15, 103 S.Ct. at p. 2900, fn. 15, 77 L.Ed.2d at p. 501, fn. 15) the Supreme Court interpreted the section expansively: "Section 514(a) of ERISA, 29 USC § 1144(a) [29 USCS § 1144(a) ], preempts 'any and all State laws insofar as they may now or hereafter relate to any employee benefit plan' covered by ERISA." (Id., at p. ----, 103 S.Ct. at p. 2897, 77 L.Ed.2d at p. 497, fn. omitted.)

Shaw held that "A law 'relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan. Employing this definition, the [New York] Human Rights Law, which prohibits employers from structuring their employee benefit plans in a manner that discriminates on the basis of pregnancy, and the [New York] Disability Benefits Law, which requires employers to pay employees specific benefits, clearly 'relate to' benefit plans." (Id., at p. ----, 103 S.Ct. at p. 2900, 77 L.Ed.2d at p. 501, fns. omitted.)

In Russell v. Mass. Mut. Life Ins. Co., supra, 722 F.2d 482 the Ninth Circuit applied the Supreme Court's construction of section 1144(a) to facts similar to those of the instant case. The plaintiff in Russell brought suit against her employer for, inter alia, breach of the statutory covenant of good faith and...