2004 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

11-1-2004

Pascack Valley Hosp v. Local 464A UFCW

Precedential or Non-Precedential: Precedential

Docket No. 03-4196

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1

PRECEDENTIAL

UNITED STATES COURT OF

APPEALS

FOR THE THIRD CIRCUIT

__________

No. 03-4196

__________

PASCACK VALLEY HOSPITAL,

INC.;

COMMUNITY MEDICAL CENTER,

(LAWRENCE TAYLOR, DEBRA

SAVERINO)

v.

LOCAL 464A UFCW WELFARE

REIMBURSEMENT PLAN

Pascack Valley Hospital, Inc.,

 Appellant

 

On Appeal From The United States

District Court

For The District Of New Jersey

(D.C. Civil Nos. 02-cv-05974

& 03-cv-02813)

District Judge: The Honorable Dennis

M. Cavanaugh

__________

Argued June 16, 2004

__________

Before: ALITO, SMITH, and

WALLACE, Circuit Judges*

(Filed: November 1, 2004)

Shea H. Lukacsko

Keith R. McMurdy (Argued)

Grotta, Glassman & Hoffman

75 Livingston Avenue

Roseland, NJ 07068

John Sydlar

Maloof, Lebowitz, Connahan & Oleske

127 Main Street

Chatham, NJ 07928

Counsel for Appellant

John M. Agnello

Kerrie R. Heslin

Carella, Byrne, Bain, Gilfillan,

 Cecchi, Stewart & Olstein

5 Becker Farm Road

Roseland, NJ 07068

Michael T. Anderson (Argued)

Davis, Cowell & Bowe

1701 K Street, N.W.

Suite 210

Washington, DC 20006

Counsel for Appellee

 

*

 The Honorable J. Clifford Wallace,

Senior Circuit Judge for the United

States Court of Appeals for the Ninth

Circuit, sitting by designation.
1

 

OPINION

 

SMITH, Circuit Judge.

This case presents a question of

jurisdiction under the civil enforcement

provision of the Employee Retirement

Income Security Act (“ERISA”), 29

U.S.C. § 1132(a). Pascack Valley Hospital

(the “Hospital”) sued the United Food and

Commercial Workers International Union

Local 464A, AFL-CIO Grou p

Reimbursement Welfare Plan (the “Plan”)

in state court for breach of contract. The

Plan removed the case to federal district

court and moved for summary judgment.

The Hospital moved to remand. The

District Court held that the Hospital’s

breach of contract claims against the Plan

were completely pre-empted by ERISA

and therefore raised a federal question

supporting removal under 28 U.S.C. §

1441(a). We hold that, under the wellpleaded complaint rule, the Hospital’s

complaint does not present a federal

question that would support removal. We

further hold that the Hospital’s state law

breach of contract claims are not

completely pre-empted by ERISA’s civil

enforcement provision because the

Hospital could not have brought its claims

under ERISA. We will therefore vacate

the judgment of the District Court and

remand to that court with instructions that

it, in turn, remand these proceedings to the

state court whence they came. 

I.

The Plan is an “employee welfare

benefit plan” as defined by ERISA. 29

U.S.C. § 1002(1).

1

 The Plan is a

reimbursement plan only; it reimburses

participants and beneficiaries for out-ofpocket medical expenses but does not

itself provide medical care. 

MagNet, Inc. is an independent

consultant. MagNet has organized a

network of hospitals that have agreed to

accept discounted payment for medical

services provided to beneficiaries of group

health plans in return for the plans’

promise to encourage beneficiaries to use

network hospitals. Network hospitals do

not contract directly with the plans.

Instead, MagNet enters into separate

contracts with individual plans, and

separate contracts with individual

hospitals. 

Around 1995, the Plan entered into

 

1

 An ERISA Plan is a legal entity that

can sue and be sued. 29 U.S.C. §

1132(d)(1). Accordingly, the term

“Plan” refers not only to the defendant in

the underlying lawsuit and the appellee

before this Court, but also to the

underlying “[r]ules governing collection

of premiums, definition of benefits,

submission of claims, and resolution of

disagreements over entitlement to

services” that make up an employee

welfare plan. Pegram v. Herdrich, 530

U.S. 211, 223 (2000).
2

a “Subscriber Agreement” with MagNet.

In 1996, the Hospital entered into a

“Network Hospital Agreement” with

MagNet. Section 2.1 of the Subscriber

Agreement governs “Hospital payment,”

and provides that the discounted rate

offered by the Hospital will be forfeited

unless claims are timely paid:

Subscriber . . . shall pay

Network Hospitals for

Covered Services furnished

to Eligible Persons.

Pursuant to a valid

assignment from Eligible

Person, Subscriber . . . shall

directly pay Network

Hospitals for Covered

Serv ices provided to

Eligible Persons within

thirty (30) days after date of

receipt of submitted Clean

Claims. . . . 

For other non-clean claims,

payment shall be made

within thirty (30) days of

receipt of all records and

other information necessary

for prop er cla i m s

adjudication.

. . . 

Wh ere obligated, if

Subscriber fails to pay

within the appropriate time

frame, the Subscriber

acknowledges that it will

lose the benefit of the

M a gNet disco unte d

reimbursement rate and that

Network Hospital is then

entitled to bill and collect

from Sub scrib er and

Eligib l e Person its

customary rate for services

rendered. If Subscriber fails

to make the payment, the

Network Hospital may

p ursue any remed ie s

available against Subscriber

and Eligible Person.

In 1999, the Hospital provided

medical services to Kimberly Rovetto and

Betty Psaras. Both Psaras and Rovetto

were “Eligible Persons” under the

Subscriber Agreement, and the medical

services provided to Psaras and Rovetto

were “Covered Services” under the

Subscriber Agreement. The Hospital

alleges that the Plan failed to pay the

Hospital for the services rendered to

Psaras and Rovetto according to the terms

of the Subscriber Agreement. The

Hospital contends that claims for those

services were properly submitted on April

15, 1999, and October 5, 1999. The

Hospital further contends that it received

payment on these claims at the discounted

rate on June 8, 1999, and November 22,

1999, respectively. According to the

Hospital’s interpretation of § 2.1 of the

Subscriber Agreement, the Plan’s failure

to pay these claims within thirty days of

receipt effected a forfeiture of the

discounted rate provided in the Network

Hospital Agreement. The Hospital

therefore seeks to recover the allegedly

forfeited discount from the Plan. 
3

On October 23, 2002, the Hospital

filed suit in the Superior Court of New

Jersey. 

The Complaint alleges that the Hospital is

a third-party beneficiary to the Subscriber

Agreement between MagNet and the Plan,

under which the Plan “became obligated to

pay [the Hospital] for eligible medical

services provided by [the Hospital],” and

“was required to comply with certain terms

and conditions of [the Hospital’s] contract

with MagNet [i.e., the Network Hospital

Agreement], requiring payment in the time

period specified in said contract.” The

two-count complaint alleges that the Plan

breached this contract by improperly

taking a discount on the services provided

to Psaras and Rovetto despite the Plan’s

failure to make timely payment under the

Subscriber Agreement.2

The Plan removed the case to the

District Court. Thereafter, the Plan moved

for summary judgment and the Hospital

cross-moved to remand the case to state

court. The parties’ motions focused on

whether, under the doctrine of “complete

pre-emption,” the Hospital’s state law

breach of contract claims raised a federal

question. The District Court heard oral

argument on the parties’ motions on

September 25, 2003. The next day, on

September 26, 2003, the District Court

issued an Opinion and Order granting the

Plan’s motion for summary judgment,

denying the Hospital’s cross-motion to

remand, and dismissing the complaint

without prejudice. The District Court’s

two-page Opinion and Order states in

relevant part:

Defendant believing

that Plaintiff’s state law

claims are completely

preempted by [ERISA] in

that Plaintiff now stands in

the shoes of the Plan’s

beneficiaries as assignee,

and therefore Defendant

believes the facts show it is

entitled to judgment as a

matter of law; and

Plaintiff believing the

action is not preempted by

ERISA since Plaintiff is not

a participant or beneficiary

under ERISA and therefore

there is no federal law

claim, and therefore the

matter should be remanded

to the state court; and

This Court being in

agreement with and adopts

the reasoning of counsel for

Defendant as stated on the

record, and further rejects

the arguments put forth by

counsel for Plaintiff; and 

 

2

 The Plan incorrectly states that

“[t]he Hospital’s complaint only claims

unjust enrichment.” Appellee’s Br. at 2,

21-22. Although the Complaint does

allege that the Plan “has been unjustly

enriched to the detriment of [the

Hospital],” the Complaint explicitly

alleges that the Plan “breached” its

contractual obligations to the Hospital.
4

This Court agrees

with and adopts the analysis

and holding as set forth in

Charter Fairmount Institute,

Inc. v. Alta H ealt h

Strategies, 835 F. Supp.

233; and 

This Court being

satisfied that [the doctrine of

com plete preem ption ]

having been met in this

case; and 

As this case falls

with in the “complete

preemption” exception to

the well pleaded complaint

doctrine, removal to federal

court was proper, and

remand to state court would

be inappropriate . . . . 

(Footnote omitted). The Hospital filed a

timely notice of appeal on October 22,

2003. 

II.

Before turning to the District

Court’s removal jurisdiction, we must first

address our own appellate jurisdiction.

Although the District Court purported to

grant summary judgment in favor of the

Plan, the District Court actually dismissed

the Hospital’s complaint without

prejudice. That disposition allowed the

Hospital, which emphatically disavows an

ERISA claim for benefits, to replead its

complaint under ERISA’s civil

enforcement provision. The Hospital

declined to do so and instead filed this

appeal. 

28 U.S.C. § 1291 provides this

Court with jurisdiction over a final order

dismissing a complaint as completely

pre-empted. DiFelice v. Aetna U.S.

Healthcare, 346 F.3d 442, 445 (3d Cir.

2003). “Generally, an order which

dismisses a complaint without prejudice is

neither final nor appealable because the

deficiency may be corrected by the

plaintiff without affecting the cause of

action.” Borelli v. City of Reading, 532

F.2d 950, 951 (3d Cir. 1976) (per curiam).3

If the plaintiff elects to stand on the

dismissed complaint, however, the order of

dismissal is final and appealable. Id. at

951-52. At oral argument, counsel for the

Hospital declared the Hospital’s intention

to forego any ERISA claim it may have

and to stand on its complaint. Counsel’s

declaration is sufficient to render the

District Court’s order final and appealable.

Remick v. Manfredy, 238 F.3d 248, 254

(3d Cir. 2001). This Court exercises

plenary review over a district court’s

exercise of jurisdiction and order of

dismissal. DiFelice, 346 F.3d at 445;

 

3

 That the District Court also denied

the Hospital’s motion to remand does not

make the court’s order appealable. 

Caterpillar Inc. v. Lewis, 519 U.S. 61, 74

(1996) (“An order denying a motion to

remand, ‘standing alone,’ is ‘[o]bviously

. . . not final and [immediately]

appealable’ as of right.” (quoting

Chicago, R.I. & P.R. Co. v. Stude, 346

U.S. 574, 578 (1954)). 
5

Pryzbowski v. U.S. Healthcare, Inc., 245

F.3d 266, 268 (3d Cir. 2001).

III. 

A civil action filed in a state court

may be removed to federal court if the

claim is one “arising under” federal law.

28 U.S.C. §§ 1331, 1441(a). Under the

“well-pleaded complaint” rule, the plaintiff

is ordinarily entitled to remain in state

court so long as its complaint does not, on

its face, affirmatively allege a federal

claim. Beneficial Nat’l Bank v. Anderson,

539 U.S. 1, 6 (2003). To support removal,

“‘[a] right or immunity created by the

Constitution or laws of the United States

must be an element, and an essential one,

of the plaintiff’s cause of action.’”

Franchise Tax Bd. of Cal. v. Constr.

Laborers Vacation Trust for S. Cal., 463

U.S. 1, 10-11 (1983) (quoting Gully v.

First Nat’l Bank in Meridian, 299 U.S.

109, 112 (1936)). Federal pre-emption is

ordinarily a defense to a plaintiff’s suit

and, as such, does not appear on the face

of a well-pleaded complaint. Anderson,

539 U.S. at 6; Franchise Tax Bd., 463 U.S.

at 12.

On its face, the Hospital’s

complaint does not present a federal

question. Rather, the complaint asserts

state common law claims for breach of

contract. The complaint does not

expressly refer to ERISA and the rights or

immunities created under ERISA are not

elements, let alone essential elements, of

the plaintiff’s claims. The possibility—or

even likelihood—that ERISA’s preemption provision, 29 U.S.C. § 1144(a),

may pre-empt the Hospital’s state law

claims is not a sufficient basis for removal.

Franchise Tax Bd., 463 U.S. at 12.4

The Plan argues that the Hospital’s

claims arise under “the federal common

law” of ERISA. On several occasions, we

have predicated jurisdiction on a plaintiff’s

invocation of the federal common law of

ERISA. Bollman Hat Co. v. Root, 112

 

4

 Pre-emption under § 514(a) of

ERISA, 29 U.S.C. § 1144(a), must be

distinguished from complete pre-emption

under § 502(a) of ERISA, 29 U.S.C. §

1132(a). Only the latter permits removal

of what would otherwise be a state law

claim under the well-pleaded complaint

rule. Under § 514(a), ERISA supersedes

state laws that “relate to” an ERISA plan. 

29 U.S.C. § 1144(a). Unlike the scope of

§ 502(a), which is jurisdictional and

creates a basis for removal to federal

court, § 514(a) merely governs the law

that will apply to state law claims,

regardless of whether the case is brought

in state or federal court. Lazorko v. Pa.

Hosp., 237 F.3d 242, 248 (3d Cir. 2000). 

Section 514(a), therefore, does not

permit removal of an otherwise wellpleaded complaint asserting only state

law claims. Pryzbowski, 245 F.3d at 275

(“[W]hen the doctrine of complete

preemption does not apply, but the

plaintiff’s state claim is arguably

preempted under § 514(a), the district

court, being without removal jurisdiction,

cannot resolve the dispute regarding

preemption.” (internal quotation

omitted)).
6

F.3d 113, 115 (3d Cir. 1997); Airco Indus.

Gases, Inc. Div. of the BOC Group, Inc. v.

Teamsters Health & Welfare Pension

Fund, 850 F.2d 1028, 1033-34 (3d Cir.

1988); N.E. Dep’t ILGWU Health &

Welfare Fund v. Teamsters Local Union

No. 229 Welfare Fund, 764 F.2d 147, 154-

55 (3d Cir. 1985) (Becker, J., writing for

himself). These cases, however, do not

support the Plan’s argument that removal

is proper because “suits between plans and

third parties implicating ben efits

administration ‘arise under’ ERISA’s

federal common law.” Appellee’s Br. at

54. Instead, the plaintiffs in these cases

deliberately invoked federal ERISA

jurisdiction. See Bollman Hat, 112 F.3d at

115 (lawsuit seeking to enforce

subrogation provision in ERISA plan);

Airco, 850 F.2d at 1031 (amended

complaint asserting cause of action for

unjust enrichment under ERISA); ILGWU,

764 F.2d at 150, 154-55 (lawsuit seeking

declaratory relief regarding the meaning of

terms in an ERISA plan). As such, their

well-pleaded complaints necessarily arose

under federal law. Here, the Hospital’s

complaint asserts a state law claim for

breach of contract, and the federal

common law of ERISA does not provide

an element—essential or otherwise—of

such a claim. The Plan may be correct

that, in interpreting the Subscriber

Agreement, the federal common law of

ERISA displaces state law. Nevertheless,

potential defenses, even when anticipated

in the complaint, are not relevant under the

well-pleaded complaint rule. Franchise

Tax Bd., 463 U.S. at 10-12.

IV.

Although the we ll-pleaded

complaint rule would ordinarily bar the

removal of an action to federal court where

federal jurisdiction is not presented on the

face of the plaintiff’s complaint, the action

may be removed if it falls within the

narrow class of cases to which the doctrine

of “complete pre-emption” applies. Aetna

Health Inc. v. Davila, 542 U.S. __, No. 02-

1845, slip op. at 5 (June 21, 2004); Metro.

Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64

(1987). As a “corollary of the

well-pleaded complaint rule,” complete

pre-emption recognizes “that Congress

may so completely pre-empt a particular

area that any civil complaint raising this

select group of claims is necessarily

federal in character.” Taylor, 481 U.S. at

63-64; accord Anderson, 539 U.S. at 8

(“When the federal statute completely

pre-empts the state-law cause of action, a

claim which comes within the scope of

that cause of action, even if pleaded in

terms of state law, is in reality based on

federal law.”). 

ERISA’s civil enforcement

mechanism, § 502(a), “is one of those

provisions with such ‘extraordinary

pre-emptive power’ that it ‘converts an

ordinary state common law complaint into

one stating a federal claim for purposes of

the well-pleaded complaint rule.’” Davila,

slip op. at 7 (quoting Taylor, 481 U.S. at

65-66). As a result, state law causes of

action that are “within the scope of . . . §

502(a)” are completely pre-empted and

therefore removable to federal court.

Taylor, 481 U.S. at 66; DiFelice, 346 F.3d
7

at 446. The Supreme Court has recently

clarified the inquiry in such cases:

It follows that if an

individual brings suit

complaining of a denial of

coverage for medical care,

where the individual is

entitled to such coverage

only because of the terms of

a n ER ISA-r e g ulate d

employee benefit plan, and

where no legal duty (state or

federal) independent of

ERISA or the plan terms is

violated, then the suit falls

within the scope of ERISA §

502(a)(1)(B). In other

words, if an individual, at

some point in time, could

have brought his claim

under ERI SA §

502(a)(1)(B), and where

there is no o the r

independent legal duty that

i s implicate d by a

defendant’s actions, then the

individual’s cause of action

is completely pre-empted by

ERISA § 502(a)(1)(B).

Davila, slip op. at 8 (internal quotation and

citation omitted). 

Accordingly, this case is removable

only if (1) the Hospital could have brought

its breach of contract claim under § 502(a),

and (2) no other legal duty supports the

Hospital’s claim. Id. “[A] federal court

may look beyond the face of the complaint

to determine whether a plaintiff has

artfully pleaded his suit so as to couch a

federal claim in terms of state law.”

Pryzbowski, 245 F.3d at 274 (internal

quotation omitted). 

A.

We conclude that the Hospital

could not have brought its claims under §

502(a) because the Hospital does not have

standing to sue under that statute. Section

502(a) of ERISA allows “a participant or

beneficiary” to bring a civil action, inter

alia, “to recover benefits due to him under

the terms of his plan, to enforce his rights

under the terms of the plan, or to clarify

his rights to future benefits under the terms

of the plan.” 29 U.S.C. § 1132(a)(1)(B).5

By its terms, standing under the statute is

limited to participants and

beneficiaries.6 Franchise Tax Bd., 463

 

5

 Section 502(a) provides other causes

of action not relevant on this appeal. The

Plan makes no argument that the

Hospital could have brought this action

under any other provision of § 502(a).

 

6

 A participant is defined as

any employee or former

employee of an employer,

or any member or former

member of an employee

organization, who is or

may become eligible to

receive a benefit of any

type from an employee

benefit plan which covers
8

U.S. at 27 (“ERISA carefully enumerates

the parties entitled to seek relief under §

502 . . . .”). The parties agree that the

Hospital is nether a participant nor a

beneficiary, and that the Hospital does not

have standing under ERISA to sue in its

own right. 

The parties dispute whether, under

the law of this Circuit, the Hospital can

obtain standing under § 502(a) by virtue of

an assignment of a claim from a

participant or beneficiary.7 We need not

resolve this dispute, however, because

there is nothing in the record indicating

employees of such

employer or

members of such

organization, or

whose beneficiaries

may be eligible to

receive any such

benefit.

29 U.S.C. § 1002(7). A beneficiary is “a

person designated by a participant, or by

the terms of an employee benefit plan,

who is or may become entitled to a

benefit thereunder.” Id. § 1002(8). 

 

7

 In particular, the parties disagree

over whether this Court’s opinion in

ILGWU forecloses derivative standing

under § 502(a). Though the ILGWU

Court denied the claimant’s plan federal

question jurisdiction to sue to recoup

paid medical benefits from a second

plan, 764 F.2d at 153, part of the Court’s

rationale was that the claimant had not,

in fact, assigned her claim to her plan. 

Id. at 154 n.6. Therefore, while the

ILGWU Court expressed “serious doubts

whether [the claimant] could assign

along with her substantive rights her

right to sue in federal court,” id., the

Court could not so hold.

 District courts in this Circuit have

disagreed over the scope of ILGWU. 

Compare Allergy Diagnostics Lab. v.

The Equitable, 785 F. Supp. 523, 526-27

& n.3 (W.D. Pa. 1991) (citing Footnote 6

of ILGWU for the proposition that

assignees of beneficiaries do not have

standing to sue under § 502(a)), and

Health Scan, Ltd. v. Travelers Ins. Co.,

725 F. Supp. 268, 269-70 (E.D. Pa.

1989) (same), with Commonwealth of

Pa. Dep’t of Public Welfare v. Quaker

Med. Care & Survivors Plan, 836 F.

Supp. 314, 317 (W.D. Pa. 1993)

(observing that given the facts of

ILGWU, Footnote 6 is non-binding dicta

in cases involving an actual assignment),

and Charter Fairmount Inst., Inc. v. Alta

Health Strategies, 835 F. Supp. 233, 238

(E.D. Pa. 1993) (same). 

Almost every circuit to have

considered the question has held that a

health care provider can assert a claim

under § 502(a) where a beneficiary or

participant has assigned to the provider

that individual’s right to benefits under

the plan, see e..g., Tango Transport v.

Healthcare Fin. Servs., 322 F.3d 888,

891 (5th. Cir. 2003) (collecting cases),

but as the issue is not squarely before us,

we express no opinion on it.
9

that Psaras and Rovetto did, in fact, assign

any claims to the Hospital.

As the party seeking removal, the

Plan bore the burden of proving that the

Hospital’s claim is an ERISA claim.

DiFelice, 346 F.3d at 452. Accordingly,

the Plan bore the burden of establishing

the existence of an assignment. Hobbs v.

Blue Cross Blue Shield of Ala., 276 F.3d

1236, 1242 (11th Cir. 2001). The Plan

concedes that the record contains no

evidence of an express assignment,

whether oral or written, from either Psaras

or Rovetto to the Hospital. Instead, the

Plan argues that “[t]he MagNet contract

itself establishes the Hospital’s claim as an

assignment from the participant.”

Appellee’s Br. at 25. Essentially, the Plan

argues that (1) under the Subscriber

Agreement, “[the Hospital’s] only right to

demand money from the Plan comes from

the participant’s assignment of her right to

reimbursement,” Appellee’s Br. at 16, 24;

(2) therefore, the Hospital must be suing

on an assignment from Psaras and Rovetto.

The Plan’s argument is a non

sequitur. Whether the Subscriber

Agreement requires the Hospital to obtain

an assignment in order to demand payment

from the Plan says nothing about whether

an assignment was in fact made. Because

neither Psaras nor Rovetto are parties to

the Subscriber Agreement, that document

cannot, in and of itself, establish an

assignment of their claims. At best, the

Plan’s interpretation of the Subscriber

Agreement provides an affirmative

defense to the Hospital’s breach of

contract claims, i.e., that the Plan has no

contractual liability absent a valid

assignment. The Plan’s argument may

therefore entitle it to judgment on the

Hospital’s breach of contract claims in a

court of competent jurisdiction. It does

not, however, convert those breach of

contract claims into derivative claims for

benefits under § 502(a).8

Nor can we find an actual

assignment based on any other documents

in the record.

Section 5 of the Summary Plan

Description, entitled “How Benefits Will

Be Paid,” provides: “If you qualify for

hospital care and are entitled to

reimbursement, and the hospital has sent

in an assignment executed by you, we will

 

8

 The parties vigorously dispute

whether the Subscriber Agreement

requires the Hospital to obtain an

assignment before the Plan is obligated

to make payment. We express no

opinion on the merits of this dispute. 

Nor do we express any opinion on other

disputes regarding the interpretation of

the Subscriber Agreement. For example,

the Plan argues that there is no direct

contractual relationship between itself

and the Hospital. The question on appeal

is whether the Hospital could have

brought its claim under § 502(a). If it

could not, then removal was improper,

and the Plan’s arguments on the merits,

including its argument that no contract

exists, can only be adjudicated in state,

not federal, court. 
10

pay the hospital directly . . . .” Thus, the

Plan itself contemplates an independent act

by which a participant or beneficiary

assigns his or her claim to the Hospital.

The record contains no evidence that

Psaras or Rovetto undertook such an act.

The Plan offers the certification of

Kathy Pridmore, the Plan’s Director of

Medical Benefits, to support a finding of

an assignment. Pridmore broadly declares

that, in her experience, the Plan has

“consistently followed the claims and

claim review procedures” contained in the

Summary Plan Description. The Plan

argues that Pridmore’s declaration

constitutes evidence of “routine practice”

that supports an inference of an

assignment. See Fed. R. Evid. 406. We

disagree. Pridmore does not declare that

the Plan routinely receives assignments

prior to payment. In her recitation of the

Plan’s “standard procedure for processing

claims,” she does not even mention the

execution of assignments by Plan

participants or beneficiaries. As such,

Pridmore’s certification cannot establish a

routine practice relevant to this appeal, let

alone satisfy the Plan’s burden of

establishing federal subjec t-matter

jurisdiction by a preponderance of the

evidence. 

Because the Plan has failed to

demonstrate that the Hospital obtained an

assignment from Psaras and Rovetto, we

do not reach the “standing-by-assignment

of claim” issue. Therefore, the Plan

cannot demonstrate that the Hospital has

standing to sue under § 502(a). As a

result, the Hospital’s state law claims

could not have been brought under the

scope of § 502(a) and are not completely

pre-empted by ERISA. E.g., Hobbs, 276

F.3d at 1243; Ward v. Alternative Health

Delivery Sys., Inc., 261 F.3d 624, 627 (6th

Cir. 2001); Harris v. Provident Life &

Accident Ins. Co., 26 F.3d 930, 933-34

(9th Cir. 1994).

B.

We further conclude that the

Hospital’s state law claims are predicated

on a legal duty that is independent of

ERISA. See Davila, slip op. at 8. The

Hospital’s claims, to be sure, are derived

from an ERISA plan, and exist “only

because” of that plan. Id. at 11. The crux

of the parties’ dispute is the meaning of

Section 2.1 of the Subscriber Agreement,

which governs payment for “Covered

Services furnished to Eligible Persons.”

Were coverage and eligibility disputed in

this case, interpretation of the Plan might

form an “essential part” of the Hospital’s

claims. Id.

Coverage and eligibility, however,

are not in dispute. Instead, the resolution

of this lawsuit requires interpretation of

the Subscriber Agreement, not the Plan.

The Hospital’s right to recovery, if it

exists, depends entirely on the operation of

third-party contracts executed by the Plan

that are independent of the Plan itself. Cf.

Caterpillar Inc. v. Williams, 482 U.S. 386

(1987) (suit for breach of individual

employment contract, even if defendant’s

action also constituted a breach of an

entirely separate collective bargaining

agreement, not pre-empted by § 301 of the
11

Labor Management Relations Act).

We find instructive the Ninth

Circuit’s opinion in Blue Cross of

California v. Anesthesia Care Associates

Medical Group, Inc., 187 F.3d 1045 (9th

Cir. 1999). In that case, the court held that

claims asserted by health care providers

against a health care plan for breach of

their provider agreements were not

completely pre-empted under ERISA. Id.

at 1051-52. The court reached this

conclusion notwithstanding “the fact that

these medical providers obtained

assignments of benefits from beneficiaries

of ERISA-covered health care plans.” Id.

at 1047, 1052. 

The litigation in Anesthesia Care

arose from a fee dispute between four

health care providers and Blue Cross. Id.

at 1048. Blue Cross had entered into

“provider agreements” with physicians in

which Blue Cross agreed to identify the

providers in the information it distributed

to beneficiaries of the plan and to direct

beneficiaries to those providers. In return,

the providers agreed to accept payment for

services rendered to beneficiaries

according to specified fee schedules.

When Blue Cross attempted to change the

fee schedules, the providers filed a class

action in state court alleging a breach of

the provider agreements. Id. at 1049. 

The Ninth Circuit held that “the

Providers’ claims, which arise from the

terms of their provider agreements and

could not be asserted by their patientassignors, are not claims for benefits under

the terms of ERISA plans, and hence do

not fall within § 502(a)(1)(B).” Id. at

1050. The court explained:

[T] he Providers are

asserting c o n tractu a l

breaches . . . that their

patient-assignors could not

assert: the patients simply

are not parties to the

p r ovider agreements

between the Providers and

Blue Cross. The dispute

here is not over the right to

payment, which might be

said to depend on the

patients’ assignments to the

Providers, but the amount,

or level, of payment, which

depends on the terms of the

provider agreements. 

Id. at 1051 (first emphasis added).

Because the Providers asserted “state law

claims arising out of separate agreements

for the provision of goods and services,”

the court found “no basis to conclude that

the mere fact of assignment converts the

Providers’ claims into claims to recover

benefits under the terms of an ERISA

plan.” Id. at 1052.9 

 

9

 The reasoning in Anesthesia Care

was followed in Orthopaedic Surgery

Associates of San Antonio, P.A. v.

Prudential Health Care Plan, Inc., 147

F. Supp. 2d 595 (W.D. Tex. 2001). The

facts in Orthopaedic Surgery are nearly

identical to this case. In Orthopaedic

Surgery, health care providers entered
12

The facts of this case are similar to

Anesthesia Care in important respects: (1)

the Hospital’s claims in this case arise

from the terms of a contract—the

Subscriber Agreement—that is allegedly

independent of the Plan; (2) the

participants and beneficiaries of the Plan

do not appear to be parties to the

Subscriber Agreement; and (3) “[t]he

dispute here is not over the right to

payment, which might be said to depend

on the patients’ assignments to the

[Hospital], but the amount, or level, of

payment, which depends on the terms of

the [Subscriber Agreement].” Id. at 1051.

C.

We have not overlooked the

apparent convergence between the

Hospital’s breach of contract claim and a

claim for benefits under § 502(a). Because

the Plan is a reimbursement plan, the

payments made to the Hospital are the

benefits received by Psaras and Rovetto

under the Plan. As a result, it would

appear that any claims the Hospital could

have obtained by assignment from Psaras

and Rovetto would be for the same amount

as the breach of contract claims that are

the subject of this appeal. Moreover, had

the Hospital successfully sued Psaras and

Rovetto for the payments due, it would

appear that any claims for reimbursement

that Psaras and Rovetto would have

against the Plan would be claims for

benefits under § 502(a). Indeed, one of the

principal reasons why courts have allowed

participants and beneficiaries to assign

their claims under § 502(a) is to avoid the

necessity of providers suing patients in the

first instance. See Cagle, 112 F.3d at

1515. 

Nevertheless, the absence of an

assignment is dispositive of the complete

pre-emption question. Although the

Hospital “may not defeat removal by

omitting to plead necessary federal

questions in a complaint,” Franchise Tax

Bd., 463 U.S. at 22, it is clear that the

Hospital is asserting a claim that could not

be asserted under the civil enforcement

into contracts with a healthcare plan,

Prudential. Under the contracts,

Prudential agreed to pay the providers for

services rendered to beneficiaries of the

plan. When Prudential allegedly paid the

providers less than the agreed upon

amount, the providers sued for breach of

the physician agreements. Orthopaedic

Surgery, 147 F. Supp. 2d at 597. The

District Court in Orthopaedic Surgery

remanded the case to state court,

concluding that § 502(a) did not

completely pre-empt the providers’

claims. Citing Anesthesia Care, the

court characterized the providers’ claims

as “claim[s] for the amount or level of

payment and not the right to payment.” 

Id. at 601. The court rejected

Prudential’s argument that, since the

medical services that were allegedly

unpaid were provided to participants or

beneficiaries of ERISA plans, the

providers’ claims sought benefits payable

under the terms of those plans.
13

provision of ERISA. It may very well be

that the Hospital’s breach of contract claim

against the Plan will fail under state law,

or that the Hospital’s state law claims are

pre-empted under § 514(a). These matters,

however, go to the merits of the Hospital’s

breach of contract claim, which can only

be adjudicated in state court. 

IV.

Under the well-pleaded complaint

rule, the Hospital’s complaint does not

present a federal question that would

support removal. The complaint does not

expressly refer to ERISA or the federal

common law of ERISA, and the rights or

immunities created under ERISA are not

elements, let alone essential elements, of

the plaintiff’s claims. Moreover, the

Hospital’s state law breach of contract

claims are not completely pre-empted by

ERISA’s civil enforcement provision,

because the Hospital could not have

brought its claims under that provision.

Accordingly, removal in this case was

improper, and the order of the District

Court denying remand will be vacated.

We will remand this case to the District

Court with instructions that the District

Court, in turn, remand to the Superior

Court of New Jersey. 

Pascack Valley Hospital, Inc. v. Local

464A

No. 03-4196

ALITO, Circuit Judge, concurring in the

judgment.

I concur in the judgment based on

the decision in N.E. Dept’t ILGWU

Health & Welfare Fund v. Teamsters

Local Union No. 229 Welfare Fund, 764

F.2d 147 (3d Cir. 1985). Although there is

now substantial contrary authority, we are

bound by prior panel decisions of our

Court until they are overruled. 

The Court avoids the question

whether an assignee can assert a claim

under Section 502(a)(1)(B) of ERISA, 29

U.S.C. § 1132(a)(1)(B), by holding that

there is insufficient evidence to support a

finding that there were assignments in this

case. I disagree. While the summary

judgment record does not contain any

express assignments of the claims at issue,

there is ample evidence to support a

finding that the claims were assigned to

the Hospital. What happened here is very

common. Participants of a health care

plan received treatment from a provider;

the participants did not pay for those

services but instead gave the provider the

information needed to bill their plan; the

provider then billed the plan pursuant to a

contract obligating the plan to pay the

provider on the assigned claims of

participants; and the plan paid, albeit at a

discounted rate. These facts are more than

sufficient to prove that the claims were

implicitly assigned to the provider. In

holding that the summary judgment record
14

is insufficient to prove assignments, the

Court ignores the obvious reality of the

situation.