Stiles v. Memorial Hermann Healthcare Sys.

• Decision Date: 11 January 2007
• Docket Number: No. 01-05-00473-CV.,01-05-00473-CV.
• Citation: 213 S.W.3d 521
• Parties: Mattie STILES, Appellant, v. MEMORIAL HERMANN HEALTHCARE SYSTEM, Appellee.
• Court: Texas Court of Appeals

213 S.W.3d 521

Mattie STILES, Appellant, v. MEMORIAL HERMANN HEALTHCARE SYSTEM, Appellee.

No. 01-05-00473-CV.

Court of Appeals of Texas, Houston (1st Dist.).

January 11, 2007.

Rehearing Overruled February 22, 2007.

Morris Tabak, Law Offices of Lin & Associates, Houston, TX, for Appellant.

Wesley Ralph Ward, Richard P. Colquitt, Fulbright & Jaworski L.L.P., Houston, TX, for Appellee.

Panel consists of Chief Justice RADACK and Justices JENNINGS and ALCALA.

OPINION ON REHEARING

TERRY JENNINGS, Justice.

We grant appellee's motion for rehearing. TEX.R.APP. P. 49.3. We vacate our June 15, 2006 judgment, withdraw our June 15, 2006 opinion, and substitute this opinion in its place.

Appellant, Mattie Stiles, challenges the trial court's order dismissing her breach of contract and fraud suit against appellee, Memorial Hermann Healthcare System ("Memorial"). In her sole issue, Stiles contends that the trial court erred in concluding that it had no subject matter jurisdiction over her claims.

We reverse and remand for proceedings consistent with this opinion.

Factual and Procedural Background

Stiles's action arose out of an injury that she sustained on January 4, 2002, while working at Memorial. Stiles asserts that Memorial agreed to pay her health care expenses related to the incident in consideration of Stiles's releasing Memorial from liability for any negligence on its part. Stiles attached an unsigned "Release of Claims and Covenant not to Sue" to her second amended petition evidencing such an agreement. The release referenced Memorial's Occupational Health Plan (the "Plan") and stated that notwithstanding Stiles's release of her claims against Memorial, Stiles retained her rights to benefits under the Plan. Stiles alleges that Memorial refused to pay her medical bills pursuant to the release.

Memorial answered Stiles's suit with a general denial and argued, among other things, that the trial court lacked subject matter jurisdiction to hear Stiles's claims. Memorial then filed a notice of removal, asserting that Stiles's petition stated an action to recover benefits under the Plan, which qualified under the Employee Retirement Income Security Act of 1974 ("ERISA"),¹ thereby triggering complete preemption under ERISA's civil enforcement provisions.² The case was removed to the United States District Court of the Southern District of Texas. In Stiles's subsequent motion to remand, she contended that it was Memorial's breach and fraud related to the release agreement, distinct from any rights that she held under the Plan, that formed the basis of her lawsuit. The United States District Court remanded the case back to the trial court for lack of federal jurisdiction, stating that "substantial doubt remains as to whether [Stiles's] claim does in fact fall within the preemptive scope of ERISA."

Upon remand, Memorial moved to dismiss the lawsuit, again arguing a lack of subject matter jurisdiction based on ERISA preemption. The trial court granted the motion to dismiss, concluding that Stiles's state law claims for breach of contract and fraud were "addressed by" and "related to" the Plan, that ERISA "completely preempted" Stiles's state law claims, and that it had no subject matter jurisdiction over the claims.

Standard of Review

Subject matter jurisdiction is a question of law, to which we apply a de novo standard of review. Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex.1998). A claim of federal preemption is a challenge to a state court's subject matter jurisdiction and cannot be waived. See Int'l Longshoremen's Ass'n v. Davis, 476 U.S. 380, 392, 106 S.Ct. 1904, 1913, 90 L.Ed.2d 389 (1986). When courts speak of "preemption of jurisdiction," they are not referring to the applicability of federal law; rather, they refer to Congress's ability to require resolution of certain claims exclusively in a federal forum. Mills v. Warner Lambert Co., 157 S.W.3d 424, 427 (Tex. 2005). "In any doubtful case all intendments of the plaintiff's pleading will be in favor of the jurisdiction." Peek v. Equip. Serv. Co. of San Antonio, 779 S.W.2d 802, 804 (Tex.1989).

A trial court's findings of fact have the same weight as a jury's verdict upon special issues and are reviewable for sufficiency of the evidence to support them. Amador v. Berrospe, 961 S.W.2d 205, 207 (Tex. App.-Houston [1st Dist.] 1996, writ denied). A trial court's conclusions of law are reviewed de novo. Material P'ships, Inc. v. Ventura, 102 S.W.3d 252, 257 (Tex App.-Houston [14th Dist.] 2003, pet. denied).

ERISA Preemption

Congress enacted ERISA as a comprehensive system to regulate employee benefit plans "to promote the interests of employees and their beneficiaries in employee benefit plans . . . [and] to protect contractually defined benefits." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989). The act regulates both pension plans and welfare plans that provide benefits for contingencies such as illness, accident, disability, death, or unemployment. Cathey v. Metro. Life Ins. Co., 805 S.W.2d 387, 388 (Tex.1991). While it provides standards and rules governing reporting, disclosure, and fiduciary responsibility for pension and welfare plans, ERISA does not mandate any particular benefits. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90-91, 103 S.Ct. 2890, 2896-97, 77 L.Ed.2d 490 (1983).

ERISA includes expansive preemption provisions, which are intended to ensure that employee benefit plan regulation would be "exclusively a federal concern." Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981). To this end, ERISA "shall supercede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan." Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1144(a) (2005). ERISA preemption applies not only to state laws but to all forms of state action dealing with the subject matters covered by the statute. 29 U.S.C. § 1144(c)(1); see also Shaw, 463 U.S. at 98, 103 S.Ct. at 2900. Accordingly, when a state court suit, alleged in terms of a state common-law or statutory cause of action, relates to an employee welfare benefit plan, ERISA may preempt the state law in favor of federal law. Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-66, 107 S.Ct. 1542, 1546-48, 95 L.Ed.2d 55 (1987); Gorman v. Life Ins. Co. of N. Am., 811 S.W.2d 542, 545 (Tex.1991).

The ERISA preemptive provision is to be broadly construed. See Aetna Health Inc. v. Davila, 542 U.S. 200, 217, 124 S.Ct. 2488, 2500, 159 L.Ed.2d 312 (2004) (stating that Court's understanding of ERISA's preemptive effect is informed by "overpowering federal policy" embodied in ERISA's civil enforcement provision, which was intended to create "an exclusive federal remedy"). However, the Supreme Court has cautioned that "[s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law `relates to' the plan." Shaw, 463 U.S. at 100 n. 21, 103 S.Ct. at 2901 n. 21. To determine whether a state law claim has the forbidden connection to ERISA, we look to both the objectives of ERISA and the effect of the asserted state law on ERISA plans. Egelhoff v. Egelhoff, 532 U.S. 141, 147, 121 S.Ct. 1322, 1327, 149 L.Ed.2d 264 (2001). Because the scheme is deemed to be comprehensive with regard to the remedies provided and excluded, any state law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the Congressional intent to make the ERISA remedy exclusive and is preempted. See Davila, 542 U.S. at 209, 124 S.Ct. at 2495. The Fifth Circuit Court of Appeals has propounded a two-pronged test wherein ERISA preempts a state law claim if "(1) the state law claim addresses an area of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claim directly affects the relationship between the traditional ERISA entities-the employer [in its role as administrator], the plan and its fiduciaries, and the participants and beneficiaries." Hubbard v. Blue Cross & Blue Shield Ass'n, 42 F.3d 942, 945 (5th Cir.1995).

ERISA also contains express jurisdictional provisions. Section 502(a)(1)(B) provides that state courts of competent jurisdiction and district courts of the United States have concurrent jurisdiction of actions by a beneficiary: (1) to recover benefits due under the terms of a plan; (2) to enforce rights under a plan; or (3) to clarify rights to future benefits. 29 U.S.C. § 1132(a), (e). However, state law claims seeking relief within the scope of § 502(a)(1)(B) are completely preempted.³ In instances of complete preemption, a state law claim may be re-characterized as an action to recover benefits under ERISA, thus giving a state court jurisdiction, although the claim may be subject to removal. Arana v. Ochsner Health Plan, 338 F.3d 433, 439 (5th Cir.2003).

Outside the actions contemplated by section 502(a)(1)(B), any other ERISA civil action is within the exclusive jurisdiction of the federal courts. See 29 U.S.C. § 1132(e)(1). That is, if a claim relates to an employee benefit plan governed by ERISA but it is not a claim for benefits due under the policy or a suit to enforce or clarify rights under the policy, it falls within the exclusive jurisdiction of the federal courts.⁴ Accordingly, for state law claims that do not fall within the scope of 29 U.S.C. 1132(a)(1)(B) and (e)(1), an assertion of ERISA preemption is, if successful, jurisdictional. Saks v. Franklin Covey Co., 316 F.3d 337, 349-50 (2d Cir. 2003). In those cases, preemption is not waivable. Id.

Despite ERISA's expansive scope, if a state law claim does not seek to recover or replace benefits under an employee welfare benefit plan and is based on a violation of a legal duty independent of ERISA, it is not preempted by ERISA. Haynes v. Haynes, 178 S.W.3d...