Shea v. Esensten
| Decision Date | 18 November 1999 |
| Docket Number | No. 99-1388,NON-PROFIT,N-PROFIT,99-1388 |
| Citation | 208 F.3d 712,2000 WL 336674 |
| Parties | (8th Cir. 2000) DIANNE L. SHEA, APPELLANT, v. SIDNEY ESENSTEN; JEFFREY A. ARENSON; FAMILY MEDICAL CLINIC, P.A., A MINNESOTACORP., FAMILY MEDICAL CLINIC; FAIRVIEW, A MINNESOTACORP.; MEDICA, A MINNESOTACORP.; UNITED HEALTHCARE, UNITED HEALTHCARE CORP., A MINNESOTACORP.; SECRETARY OF LABOR; ALLINA HEALTH SYSTEM CORP., APPELLEES. SECRETARY OF LABOR, AMICUS ON BEHALF OF APPELLANT. Submitted: |
| Court | U.S. Court of Appeals — Eighth Circuit |
Appeal from the United States District Court for the District of Minnesota. [Copyrighted Material Omitted]
Before Bowman, Lay, and Hansen, Circuit Judges.
Dianne L. Shea brought this wrongful death suit in state court after her husband's death due to heart failure, and the case now has been twice removed to federal court. In this latest removal proceeding, the district court dismissed the tort claim of count III (alleging negligent misrepresentation for the failure of Mr. Shea's physicians to disclose a conflict of interest) as preempted by ERISA.1 The district court also dismissed a corporate party (Fairview) on statute of limitations grounds. Mrs. Shea appeals the preemption issue, joined by the Secretary of Labor as amicus curiae,2 and the defendants move to dismiss the appeal as moot. We affirm in part, reverse in part, and deny the motion to dismiss the appeal.
Patrick Shea died of a heart attack at the age of 40 after being assured by his family doctors that a referral to a cardiologist was unnecessary given his age and symptoms. Although Mr. Shea offered to pay for the referral himself when his symptoms did not seem to be improving, his physicians persuaded him to trust their judgment that neither his age nor his symptoms justified a visit to a cardiologist. Following her husband's death due to heart failure, Mrs. Shea initially brought a wrongful death action in state court against two physicians (Sidney Esensten and Jeffrey Arenson); the Family Medical Clinic, now known as Fairview Clinics (the Clinic); and Medica (her husband's health maintenance organization (HMO), with whom his employer contracted to provide employee health care). Dianne Shea alleged in her suit that certain financial incentives built into Medica's contract with Mr. Shea's physicians were designed to minimize referrals to specialists. She further alleged that if her husband had known of these incentives, he would not have trusted his physicians' medical advice so completely but would have sought out the life-saving opinion of a specialist at his own expense.
Medica initially removed the case to federal court, contending that Mrs. Shea's tort claims were preempted by ERISA, 29 U.S.C. § 1144. Mrs. Shea then amended her claim to state that Medica breached its fiduciary duties under ERISA by not disclosing to plan participants the financial incentives designed to reduce referrals that it included in its physician contracts. The district court dismissed Medica, concluding that Mrs. Shea's state tort claims against Medica as the plan administrator were preempted by ERISA and that the amended complaint asserting a breach of fiduciary duty failed to state a claim, see Fed. R. Civ. P. 12(b)(6). The district court remanded to state court the remaining state law claims.
Mrs. Shea appealed to this court. We reversed the district court's Rule 12(b)(6) dismissal of Medica, concluding that Mrs. Shea's amended complaint adequately stated a claim of breach of fiduciary duty against Medica. See Shea v. Esensten, 107 F.3d 625 (8th Cir.) (Shea I), cert. denied, 522 U.S. 914 (1997). Specifically, we held that a plan administrator has a fiduciary duty to disclose all material facts affecting a plan participant's health care interests, including financial incentives that might discourage a treating physician from providing essential referrals for covered conditions. See id. at 629. Medica ultimately settled the claim against it.
Meanwhile, the remanded state tort action proceeded against the doctors and the Clinic in state court. Mrs. Shea moved to amend her complaint to add as a defendant Fairview, a Minnesota non-profit corporation that owns and operates the Clinic. The second amended complaint included count I, alleging medical negligence; count II, alleging breach of contract; count III, alleging fraud and negligent misrepresentation based on the doctors' failure to disclose the conflict of interest created by their contractual incentives; count IV, alleging the joint and several liability of Fairview for damages awarded in counts I through III; and count V, seeking punitive damages against all defendants.
Before the state court ruled on the motion to amend, Fairview removed the second amended complaint to federal court. The doctors and the Clinic then moved the federal district court for a partial dismissal. The district court dismissed count II, the breach of contract claim, without resistance by Mrs. Shea, and it is not at issue in this appeal. The district court dismissed count III, the fraud and negligent misrepresentation claim, as preempted by ERISA after concluding that the claim relates to the ERISA plan because it involves an administrative denial of benefits, not a medical decision. Fairview moved for and received a complete dismissal on statute of limitations grounds. The district court then remanded to state court the remaining negligence claim against the doctors and the Clinic as stated in count I. A state court jury ruled in favor of the doctors and the Clinic on that medical negligence claim.
Mrs. Shea now appeals the district court's conclusions on ERISA preemption and the statute of limitations. The defendants move to dismiss the appeal as moot.
We begin by addressing the pending motion to dismiss. After this appeal was filed, Mrs. Shea's medical negligence claim of count I was brought to trial in state court where a jury resolved the claim in favor of the defendants, specifically finding that the doctors did not provide Mr. Shea with negligent care or treatment. The doctors and the Clinic then moved to dismiss the present appeal as moot, asserting that after the jury verdict, Mrs. Shea would not be able to prove that her husband was denied appropriate care, which they assert is an essential element of Mrs. Shea's remaining claim of fraud and negligent misrepresentation. Mrs. Shea resists the motion, asserting the appeal is not moot because the state jury verdict has yet to be tested by post trial motions and state appellate procedures. She further contends that even if the jury verdict withstands post trial and appellate scrutiny, her negligent misrepresentation claim does not automatically fail in light of the jury's determination that the physicians provided adequate care because the negligent misrepresentation claim carries its own, independent injury.
Doe v. Lafleur, 179 F.3d 613, 615 (8th Cir. 1999) (internal quotations omitted). If this case is indeed moot, we must dismiss the appeal to avoid rendering a merely advisory opinion. See id. However, we agree with Mrs. Shea's assertion that the appeal is not moot. The state court judgment is not yet final. Also, in spite of the jury's conclusion in favor of the doctors on the negligent treatment claim, we believe that a jury could nevertheless consistently conclude that the defendants are liable on the independent negligent misrepresentation claim of count III.
Count III asserts a claim of negligent misrepresentation based on the physicians' failure to disclose a financial incentive to minimize referrals to specialists, which she asserts amounts to a conflict of interest. In Minnesota, the tort of negligent misrepresentation occurs when a person making a representation "ha[s] not discovered or communicated certain information that the ordinary person in his or her position would have discovered or communicated." Safeco Inc. Co. of America v Dain Bosworth Inc., 531 N.W.2d 867, 870 (Minn. Ct. App. 1995). State professional ethics standards for physicians mandate disclosure of conflicts of interest, and the Minnesota courts have noted that "a physician's advice about treatment options should be free from self-serving financial considerations." D.A.B. v. Brown, 570 N.W.2d 168, 172 (Minn. Ct. App. 1997). "It is well accepted that patients deserve medical opinions about treatment plans and referrals unsullied by conflicting motives." Id. at 170. Minnesota law indicates that the breach of a doctor's state-imposed ethical duty to disclose financial incentives is a medical malpractice claim, requiring a showing of actual harm to state a cause of action. See id. at 171.
In count III, Mrs. Shea asserts that Mr. Shea's physicians negligently or fraudulently failed to disclose a financial conflict of interest in violation of state professional ethics and that this failure to disclose adversely influenced his decision to seek the advice of a specialist. She asserts that regardless of the quality of the actual treatment rendered by Mr. Shea's physicians (already adjudicated in state court to have been adequate), their failure to disclose a financial incentive caused Mr. Shea the independent injury of having been prevented from making an informed choice of whether to seek what might have been a life-saving referral at his own expense. Because Mrs. Shea's negligent misrepresentation claim of count III asserts a distinct and independent injury from the negligent treatment claim asserted and adjudicated in count I, the state jury verdict in favor of the physicians on count I does not necessarily preclude a finding in favor of...
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