Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-01323/USCOURTS-ca10-90-01323-0/pdf.json

Parties Involved:
Group Health Insurance of Oklahoma, Inc.
Appellee
Hospice of Metro Denver, Inc.
Appellant

Document Text:

PUBLISH 

FILED 

Unital States Court of Ap~cr.b Tent.lt Circuit 

SE? 10 1991 

ROBERT L. HOECKER 

UNITED STATES COURT OF APPEALS Clerk 

TENTH CIRCUIT 

HOSPICE OF METRO DENVER, INC., a 

Colorado corporation, 

Plaintiff-Appellant, 

v. 

GROUP HEALTH INSURANCE OF OKLAHOMA, 

INC., doing business as Blue Cross & 

Blue Shield of Oklahoma, 

Defendant-Appellee. 

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No. 90-1323 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 90-F-1452) 

Submitted on the briefs: 

Robert Lynn New, Englewood, Colorado, for Plaintiff-Appellant. 

Frank R. Kennedy of Cooper & Kelley, P.C., Denver, Colorado, for 

Defendant-Appellee. 

Before LOGAN, MOORE, and BALDOCK, Circuit Judges.* 

* After exam~n~ng the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); lOth Cir. R. 34.1.9. The case therefore is ordered 

submitted without oral argument. 

Appellate Case: 90-1323 Document: 01019294806 Date Filed: 09/10/1991 Page: 1 
PER CURIAM. 

Plaintiff-appellant Hospice of Metro Denver, Inc. (Hospice) 

appeals from the dismissal of its promissory estoppel claim 

against defendant Group Health Insurance of Oklahoma, Inc., d/b/a 

Blue Cross and Blue Shield of Oklahoma (Blue Cross). The district 

court dismissed the claim as preempted by the Employee Retirement 

Income Security Act of 1975, 29 u.s.c. § 1001 to§ 1461 (ERISA). 

On appeal, Hospice argues that there is no ERISA preemption as to 

its state common law claim of promissory estoppel. Additionally, 

Hospice requests sanctions, attorney's fees, and costs. We agree 

that Hospice's state law claim is not preempted by ERISA. 

Accordingly, we reverse the district court and remand for 

proceeding in accordance with this opinion. Hospice's requests 

for attorney's fees, sanctions, and costs are denied. 

The infant son of Mr. and Mrs. Michael Samsel underwent two 

surgeries. Following the second surgery, he was admitted to 

Hospice in order to receive around-the-clock care. The infant 

remained in the hospice for approximately four months. Mr. 

Samsel's employer, Anchor Paint and Manufacturing Company, 

provides group health care benefits from Blue Cross for its 

employees. Hospice alleges that it contacted Blue Cross, prior to 

admitting the infant, about insurance coverage, and was informed 

that coverage was available. Hospice further alleges that during 

the course of the infant's care, Blue Cross repeatedly assured it 

that the care was covered, and payment would be forwarded. 

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Appellate Case: 90-1323 Document: 01019294806 Date Filed: 09/10/1991 Page: 2 
Following the infant's discharge from the hospice, Blue Cross 

denied coverage and payment relying on the policy's preexisting 

conditions provisions. 

Hospice sued Blue Cross in state court alleging ( 1) 

detrimental reliance (later changed to promissory estoppel), 1 (2) 

quantum meruit and (3) claims as a third-party beneficiary. Blue 

Cross removed the action to federal district court, and filed a 

motion to dismiss all claims as preempted by section 514(a) of 

ERISA, 29 U.S.C. § 1144(a). The district court granted the 

motion, holding that Hospice's first two claims were preempted 

under ERISA. The district court further concluded that although 

Hospice's third claim was actionable under ERISA, Hospice was not 

a participant, beneficiary, or fiduciary of the plan pursuant to 

29 U.S.C. § 1132(a)(l), and therefore, did not have standing to 

b . . "1 •t 2 r1ng a C1V1 SU1 . 

We review a dismissal under Fed. R. Civ. P. 12(b)(6) de novo 

and "accept all factual allegations of the complaint as true, and 

draw all reasonable inferences in favor of the plaintiff." Zilkha 

Energy Co. v. Leighton, 920 F.2d 1520, 1523 (lOth Cir. 1990). 

1 In its complaint, Hospice designated its first claim as 

"detrimental reliance." It discussed the claim in its response to 

the motion to dismiss and in its opening brief as one for 

promissory estoppel. Although Blue Cross draws our attention to 

this change, it does not claim prejudice. Therefore, we will 

treat Hospice's claim as one for promissory estoppel. 

2 There is no evidence that Samsel, as a participant of the 

plan, had assigned his rights under the plan to the Hospice. 

Therefore, there is no issue of derivative standing. See Hermann 

Hoso. v. MEBA Medical & Benefits Plan, 845 F.2d 1286, 1289 (5th 

Cir. 1988) • 

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Appellate Case: 90-1323 Document: 01019294806 Date Filed: 09/10/1991 Page: 3 
Dismissal of a case pursuant to Fed. R. Civ. P. 12(b)(6) requires 

the legal determination that the plaintiff can prove no set of 

facts in support of his claim to entitle him to relief. Conley v. 

Gibson, 355 u.s. 41, 45-46 (1957); Morgan v. City of Rawlins, 792 

F.2d 975, 978 (lOth Cir. 1986). 

Colorado has adopted the promissory estoppel doctrine in the 

Restatement (Second) of Contracts § 90 (1981) 3 Vigoda v. Denver 

Urban Renewal Auth., 646 P.2d 900, 905 (Colo. 1982). Although the 

facts alleged state a promissory estoppel claim, the issue is 

whether Hospice's promissory estoppel claim is preempted by ERISA 

§ 514(a), 29 u.s.c. § 1144(a). Section 514(a) states that 

"[e]xcept as provided in subsection (b) of this section, the 

provisions of this subchapter and subchapter III of this chapter 

shall supersede any and all State laws insofar as they may now or 

hereafter relate to any employee benefit plan . 

§ 1144(a)(emphasis added). 4 

II 29 u.s.c. 

We must decide whether § 514(a) preempts a state cause of 

action by a third-party health care provider against a plan 

encompassed by ERISA. The Supreme Court has interpreted the 

phrase "relate[d] to any employer benefit plan" in its broad 

3 

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The Restatement (Second) of Contracts § 90, states in part: 

(1) A promise which the promisor should reasonably 

expect to induce action or forbearance on the part of 

the promisee or a third person and which does induce 

such action or forbearance is binding if injustice can 

be avoided only by enforcement of the promise. The 

remedy granted for breach may be limited as justice 

requires. 

The exceptions to § 1144(a) do not apply in this case. 

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Appellate Case: 90-1323 Document: 01019294806 Date Filed: 09/10/1991 Page: 4 
sense, including any law that has a "connection with or reference 

to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 

96-97 (1983). The Court also has held that ERISA preempts state 

common law tort and contract actions for improper processing of 

claims under ERISA regulated employee benefit plans. Pilot Life 

Ins. Co. v. Dedeaux, 481 U.S. 41, 48 (1987). After considering 

congressional intent, the Court determined that ERISA's preemption 

provision was broad enough to become the "'sole power to regulate 

the field of employee benefit plans.'" Id. at 46 (quoting 120 

Cong. Rec. 29197 (1974)(statement of Rep. Dent)). However, state 

actions which affect plans in "too tenuous, remote, or peripheral 

a manner," will not be preempted as a law relating to the plan. 

Shaw v. Delta Air Lines, Inc., 463 u.s. at 100 n.21, Uselton v. 

Commercial Lovelace Motor Freight, Inc., Nos. 88-1253, 88-1750, 

slip op. at 37 n.19 (lOth Cir. July 12, 1991)[1991 WL 124738]. 

"ERISA does not preempt claims that are only tangentially involved 

with a benefit plan." Settles v. Golden Rule Ins. Co., 927 F.2d 

505, 509 (lOth Cir. 1991). The Second Circuit, in deciding 

whether a state statute was preempted, considered when a cause of 

action "related" to the plan. When a state law "does not affect 

the structure, the administration, or the type of benefits 

provided by an ERISA plan, the mere fact that the [law] has some 

economic impact on the plan does not require that the [law] be 

invalidated." Rebaldo v. Cuomo, 749 F.2d 133, 139 (2d Cir. 1984), 

cert. denied, 472 u.s. 1008 (1985). 

Blue Cross argues that Hospice specifically "refers to the 

plan" in its complaint, and that these references automatically 

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Appellate Case: 90-1323 Document: 01019294806 Date Filed: 09/10/1991 Page: 5 
relate the claim to the ERISA plan. Appellee's Answer Brief at 5. 

We do not agree. Blue Cross's denial of payment to Hospice was a 

mere consequence of its denial of coverage to Samsel. Hospice 

does not claim any rights under the plan, and does not claim any 

breach of the plan contract. The promissory estoppel claim does 

not seek to enforce or modify the terms of the plan, nor is there 

any "threat of conflicting and inconsistent State and local 

regulation." Shaw v. Delta Air Lines, Inc., 463 u.s. at 99 

(quoting 120 Cong. Rec. 29197 (1974)(statement of Rep. Dent)). 

Hospice's references in its complaint to the preexisting condition 

provision are not offered to support Hospice's claim. Rather 

those references provide a background factual explanation of Blue 

Cross's decision to deny benefits to Samsel. Samsel is not a 

party to this action, and his right to receive benefits under the 

plan is not at issue. 

In Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 

236 (5th Cir. 1990), the court addressed the preemption question 

relative to an ERISA plan's refusal to pay hospital expenses after 

the plan had orally represented coverage to the hospital. The 

court stated: 

If a patient is not covered under an insurance policy, 

despite the insurance company's assurances to the 

contrary, a provider's subsequent civil recovery against 

the insurer in no way expands the rights of the patient 

to receive benefits under the terms if the health care 

plan. . . . A provider's state law action under these 

circumstances would not arise due to the patient's 

coveraae under an ERISA plan, but precisely because 

there is no ERISA plan coverage. 

Id. at 246 (emphasis added). The court stressed the importance of 

considering the "commercial realities" of a preemption decision in 

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Appellate Case: 90-1323 Document: 01019294806 Date Filed: 09/10/1991 Page: 6 
this factual setting, stating that if health care providers have 

no recourse under ERISA or under state law, there will be 

reluctance on the part of health care providers to extend care 

without prepayment. Id. at 247. We agree. 

A preemption decision would shield Blue Cross from liability 

and leave the Hospice without recourse. We are aware that 

preemption normally is not dependent upon the availability of 

ERISA remedies. See Pilot Life Ins. Co., 481 u.s. at 54; Lister 

v. Stark, 890 F.2d 941, 946 (7th Cir. 1989)("[T]he availability of 

a federal remedy is not a prerequisite for federal preemption."), 

cert. denied, 111 S. Ct. 579 (1990); but see Perry v. P*I*E 

Nationwide Inc., 872 F.2d 157, 162 (6th Cir. 1989)(preemption only 

applies where Congress has provided an adequate remedy), cert. 

denied, 110 s. Ct. 1166 (1990). In Pilot Life, the Supreme Court 

stated that "[t]he policy choices reflected in the inclusion of 

certain remedies and the exclusion of others under the federal 

scheme would be completely undermined if ERISA-plan participants 

and beneficiaries were free to obtain remedies under state law 

that Congress rejected in ERISA." Pilot Life Ins. Co., 481 U.S. 

at 54. Hospice, however, is not a participant or a beneficiary as 

enumerated in the Supreme Court opinion or in the statute itself, 

and, therefore, its lack of alternate remedies in the event of 

preemption is deserving of consideration. 

Hospice has not alleged any conduct on the part of Blue Cross 

which relates to the administration of the plan, to the processing 

of any covered claim, or which impinges on any employee's ERISA 

rights. See Clark v. Coats & Clark, Inc., 865 F.2d 1237, 1243-44 

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Appellate Case: 90-1323 Document: 01019294806 Date Filed: 09/10/1991 Page: 7 
(11th Cir. 1989)(tort claim which had no effect on the 

administration of an employee benefit plan not preempted); 

Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1404 (9th Cir. 

1988)("ERISA preempts only those state law claims that arise out 

of the administration of a covered plan"); but see St. Mary 

Medical Center v. Cristiano, 724 F. Supp. 732, 739 (C.D. Cal. 

1989)(state common law claims for misrepresentation preempted by 

ERISA where misrepresentation is related to entitlements under 

employee health benefit plan). 

If Hospice prevails, merely because its damages would be 

based upon the amount of potential plan benefits does not 

implicate the administration of the plan, and is not consequential 

enough to connect the action with, or relate the action to, the 

plan. See Memorial Hosp. Sys., 904 F.2d at 247. The payment of 

the judgment would be a one time, lump-sum amount and would not 

further burden the plan, either financially or administratively. 

See Totton v. New York Life Ins. Co., 685 F. Supp. 27, 31 (D. 

Conn. 1987). 

We recognize the unlimited "relate to" language of ERISA'S 

preemption provision and the expansive interpretation given the 

phrase by the courts. ERISA'S legislative history decidedly 

points to Congress' intent that the act be broad and expansive. 

Cefalu v. B.F. Goodrich Co., 871 F.2d 1290, 1293 (5th Cir. 

1989)(citing 120 Cong. Rec. 29197 (1974)). However, the "ultimate 

touchstone" in determining preemption is the Congressional purpose 

in enacting ERISA. Fort Halifax Packing Co. v. Coyne, 482 u.s. 1, 

8 (1987). The Act states its purpose as, 

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Appellate Case: 90-1323 Document: 01019294806 Date Filed: 09/10/1991 Page: 8 
[T]o protect . . . participants in employee benefit 

plans and their beneficiaries, by requiring the 

disclosure and reporting to participants and 

beneficiaries of financial and other information with 

respect thereto, by establishing standards of conduct, 

responsibility, and obligation for fiduciaries of 

employee benefit plans, and by providing for appropriate 

remedies, sanctions, and ready access to the Federal 

courts. 

29 U.S.C. § lOOl(b). See also Shaw v. Delta Air Lines, Inc., 463 

u.s. at 90 (purpose is "to promote the interests of employees and 

their beneficiaries in employee benefit plans"); Massachusetts 

Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985)(purpose is 

"to protect contractually defined benefits"). 

To this end, we have held that ERISA preempts state law 

claims by plan participants or beneficiaries for bad faith denial 

of benefits, Carland v. Metropolitan Life Insurance Co., 935 F.2d 

1114, ____ (lOth Cir. 1991)[1991 WL 90951], breach of contract and 

wrongful death, Settles v. Golden Rule Insurance Co., 927 F.2d 

505, and negligent misrepresentation, Straub v. Western Union 

Telegraph Co., 851 F.2d 1262 (lOth Cir. 1988). However, we 

conclude that a state law claim which does not affect the 

"relations among the principal ERISA entities, the employer, the 

plan, the plan fiduciaries, and the beneficiaries" as such, is not 

preempted by ERISA. Memorial Hasp. Sys., 904 F.2d at 249; Perkins 

v. Time Ins. Co., 898 F.2d 470, 473 (5th Cir. 1990). Denying a 

third-party provider a state law action based upon 

misrepresentation by the plan's insurer in no way furthers the 

purposes of ERISA. 

An action brought by a health care provider to recover 

promised payment from an insurance carrier is distinct from an 

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• 

action brought by a plan participant against the insurer seeking 

recovery of benefits due under the terms of the insurance plan. 

Preemption in this case would stretch the "connected with or 

related to" standard too far. Therefore, we hold that Hospice's 

action is not preempted by ERISA. 

The judgment of the United States District Court for the 

District of Colorado is REVERSED and the case is REMANDED to the 

district court with instructions to remand to the state court of 

Colorado for determination of the state claims originally filed in 

that court. 

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