United States Court of Appeals 

### FOR THE EIGHTH CIRCUIT

___________ No. 96-3114 No. 96-3454

___________ Ana Painter, *
* Plaintiff - Appellant, *
* Appeals from the United States v. * District Court for the
* Eastern District of Missouri. Golden Rule Insurance Company, *
* Defendant - Appellee. *

___________ Submitted: April 14, 1997 Filed: August 14, 1997

___________ Before LOKEN, JOHN R. GIBSON, and MAGILL, Circuit Judges.

___________ LOKEN, Circuit Judge.

Ana Painter claimed health insurance benefits under a conversio n pol icyissued by Golden Rule Insurance Company (“Golden Rule”). Golde n Rule denied coverage on the ground that Painter’s cancer treatments were experimental and not medically necessary. The resulting dispute has now spawned two appeals without resolving the

## The HONORABLE GEORGE F. GUNN, J R., United States District Judge for 1 

## the Eastern District of Missouri. The Consolidated Omnibus Budget Reconciliation Act of 1985 amended ERISA 2 

## to req uire most sponsors of ERISA group health plans to provide “continuatio n coverage” upon termination of employment, se e 29 U.S.C. §§ 1161-63, and to provide “the option of enrollment under a c onversion health plan otherwise generally available [to emplo yees] under the plan,” § 1162(5). The parties assume that M.D. Care wa s requiredto provide Painter’s continuation and conversion benefits. That assumption does not affect our resolution of the issues presented by these appeals. See Glass v. United of Omaha Life Ins. Co. , 33 F.3d 1341, 1343-45 (11th Cir. 1994).
-2- coverage q uestion. In No. 96-3114, Painter appeals the district court’s 1 dismissal of her stat e law claims for malicious prosecution and breach of fiduciary duty as preempted by the Employee Reti rement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001 et seq. In No. 96-3454, Painter appeals the amount of attorney’s fees awarded after Golden R ule’s declaratory judgment action was dismissed because the parties had not exhausted thei r contractual remedies. We affirm both decisions.
I. Background.
In 1991, Golden Rule paid Painter’s claims for ovarian cancer m edical treatments under a group policy purchased by her employer, M.D. Care, Inc. The group policy was part of an employee welfare benefit plan governed by ERISA. After Painter’s cancer went into remissi on, she requested that the group policy cover high dose chemotherapy and peripheral stem cell infusio n treatments. Golden Rule denied that request. Painter’s employment with M.D. Care terminated in August 1992; her continuation coverage under the group policy terminated in February 1993, when M.D. Care canceled the grou p policy. At that point, Painter exercised her “h ealth insurance conversion privilege” under the group policy and purchased an individual “Conversion Policy” from Golden Rule. 2

## -3- The First Lawsuit. Painter then proceeded with high dos e chemot herapycancer treatment and submitted a claim for those expense s under the Conversion Policy. Golden Rule denied coverage on the groun d tha t this treatment was experimental and not medically necessary. Whe n Painter threatened to assert a variety of legal claims, Golden Rul e commen ced a declaratory judgment action in federal court, seeking a declaration that it is not obligated under the Conversion Policy to pa y Painte r’s claims for these additional cancer treatments. After Painte r moved to dismiss on a variety of grounds, Golden Rule conceded that th e parties had not exhausted the Conversion Policy’s procedure for determinin g medica l necessity. The district court then dismissed the declarator y judgment action without prejudice, ordering Golden Rule to pay Painter’s “reasonable attorney’ s fees and costs incurred in defending this action.” Paint er applied for an award of $102,619.75 in attorney’s fees and no w appeals the district court’s award of $37,493.35 (our case No. 96-3454).

The Second Lawsuit. In December 1995, without exhausting th e Conv ersion Policy’s medical necessity procedures, Painter commenced a n action in state court, seeking compensatory and punitive damages unde r state law on the theory that Golden Rule’s actio ns in denying coverage and commencing the declaratory judgment action constituted maliciou s prosecution and breach of fiduciary duty. After Golden Rule removed the action , the district court granted Golden Rule’s motion to dismiss , concluding that “a conversion policy obtained by an employee pursuant to an ERISA plan is with in the scope of ERISA, and state law claims relating to the conversion policy are subject to ERISA’s preemption provision. ” Paint er appeals (our case No. 96-3114). We review an ERISA preemptio n ruling de novo

. See Arkansas Blue Cross & Blue Shield v. St. Mary’s Hosp. , Inc

. , 947 F.2d 1341, 1344 (8th Cir. 1991), cert. denied , 504 U.S. 95 7 (1992).

## -4- II. No. 96-3114 -- The ERISA Preemption Issue.

Painter a rgues that ERISA does not preempt her state law claim s because the Conversion Policy is an individual contract that does no t implicate administration of M.D. Care’s group health plan. After M.D. Car e terminated the group policy, Golden Rule had no relationship with M.D. Car e or its ERISA plan. T herefore, Painter concludes, her state law claims do not “ relate to” M.D. Care’s plan within the meaning of ERISA’s expres s preemption provision, 29 U.S.C. § 1144(a), and those claims should avoid ERISApreemption like the malicious prosecution claim in Nill v. Esse x Group, Inc. , 844 F. Supp. 1313, 1318-20 (N.D. Ind. 1994).

The Supreme Court has decided sixteen ERISA preemption cases sinc e the st atute was enacted in 1974. See California Div. of Labor Stds

. Enforce ment v. Dillingham Constr., N.A., Inc. , 117 S. Ct. 832, 842-4 3 (1997) (Scalia, J., concurring). Most involved the proper scope of “relat e to” preemption under § 1144(a), and the Court has struggled, particularly in its mor e recent decisions, with the inherent vagueness of that ke y statutory phrase. Compare New York State Conf. of Blue Cross & Blue Shiel d Pla ns v. Travelers Ins. Co. , 115 S. Ct. 1671, 1676-80 (1995), wit h Metropolitan Life Ins. Co. v. Massachusetts , 471 U.S. 724, 739 (1985)

. Howeve r, some ERISA cases involve the distinct question of conflic t preemption -- whether a state law is preempted because it conflicts with a specific portion of the complex ERISA statute. If there is a conflict, state law is preempted, whether or not “the statutory phrase ‘relate to’ provides further and additional support for the pre-emption claim.” Boggs
v. Boggs , 117 S. Ct. 1754, 1761 (1997). In our view, this is a case o f conflict preemption. To define the conflict between ERISA and Painter’s state law claims,
we must address an underlying legal issue -- if Golden Rule denie s Painter’s claim for medical benefits after the Conversion Policy’ s contrac tual remedies have been exhausted, would a suit by Painter fo r wrongful denial of benefits be governed by ERISA’s remedial

## -5-

provisions? In Pilot Life Ins. Co. v. Dedeaux , 481 U.S. 41, 43 (1987), th e Supreme Court held th at ERISA remedies preempt “state common law tort and contra ct actions asserting improper processing of a claim for benefit s under an insured employee benefit plan.” The Court explained:

The delibera te care with which ERISA’s civil enforcement remedies were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERI SA’s civil enforcement remedies were intended to b e exc lusive. This conclusion is fully confirmed by th e legislative history of the civil enforcement provision.

Id. at 54. See also Ingersoll-Rand Co. v. McCle ndon , 498 U.S. 133, 142-45 (1990); K uhl v. Lincoln Nat’l Health Plan of Kansas City , 999 F.2d 298 , 302-04 (8th Cir. 1993), cert. denied , 510 U.S. 1 045 (1994). Thus, if ERISA provid es Painter remedies for the wrongful denial of Conversion Polic y benefits, then her state law claims for tortious mishandling of her benefi t claim are conflict-preempted.

We conclude that Painter’s claim for benefits under the Conversio n Po licyis governed by ERISA. The issue turns on three statutor y provisions. First, the ERISA provision governing claims for plan benefits , 29 U.S.C. § 1132(a)(1)(B), provides that an ERISA “participant” may sue “t o recover benefits due to him under the terms of his plan.” Second, th e definition of “partic ipant” in 29 U.S.C. § 1002(7) includes “any employee
orformer employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan.” (Emphasis added.) In other words, a former employee such as Painter may be an ERISA participant entitled to sue for benefits under § 1132(a)(1)(B).
That leaves the question whether Painter’s Conversion Policy be nefits
are “due [her] under the terms of [her] plan” within the meaning o f § 1132(a)(1)(B). ERISA defines an “employee welfare benefit plan,” such as M.D. Care’s group health plan, to

## -6-

mean “an y plan, fund, or program . . . established or maintained by a n empl oyer . . . for the purpose of providing for its participants . .

. through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits.” 29 U.S.C. § 1002(1) . The group health policy M.D. Care purchased from Golden Rule either was itself an ERISA plan, or
was part of a broader plan if M.D. Care’s total plan or program included other components. A suit to recover benefits du e Painter under that group policy, including continuation benefits due her as a former employee, woul d be governed by § 1132(a)(1)(B). Here, of course, the group policy ha s expire d, and Painter is seeking medical benefits under Golden Rule’ s separate Conversion P olicy. But the Conversion Policy came into being as a result of Painter e xercising her right under the group policy to obtain this specific insurance policy. Thus, the right to a Conversion Policy
was part of the plan or program “established” by M.D. Care to provid e medi cal benefits for its current and former employees. As such, th e Conversi on Policy is a component of M.D. Care’s ERISA plan. A suit t o recover Conversion Policy benefits is governed by § 1132(a)(1)(B). Because Painter’s underlying claim f or Conversion Policy benefits is gover ned by ERISA, her state law claims for Golden Rule’s allege d mishandling of that claim are preempted under Pi lot Life . This conclusion is consistent with the overwhelming majority of preemption decision s involving conversion policies and the ERISA plans which gave them birth. See Peterson v. Ameri can Life & Health Ins. Co. , 48 F.3d 404, 407-08 (9th Cir.), cert. denied , 116 S. Ct. 377 (1995); Glas s v. United of Omaha Life , 33 F.3d at 1346-47; G reany v. Western Farm Bureau Life Ins. Co. , 973 F.2d 812, 817 (9th Cir. 19 92); Howard v. Gleason Corp. , 901 F.2d 1154, 1157-58 (2d Cir. 1990); Reynolds v. Massachusetts Cas. Ins. Co. , 900 F. Supp. 915 , 922 (E.D. Tenn. 1995), rev’d on other grounds , 113 F.3d 1450 (6th Cir

. 1997); Klosterman v. Western Gen. Mgmt., Inc. , 805 F. Supp. 570, 573-7 4 (N.D. Ill. 1992); Beal v. Jefferson-Pilot Life I ns. Co. , 798 F. Supp. 673, 677 (S.D. Ala. 1992); Nechero v. Provident Life & Accident Ins. Co. , 795 F. Supp. 374, 379-80 (D.N.M. 1992); Mays v. Unum Life Ins. Co. of America , 1995 WL 317102, 3 (N. D. Ill. 1995); but see Mimbs v. Commercial Life Ins.

## Though this issue is not before us, we refer the interested reader to the thorough 3 

## discussion and contrary conclusion in Connecticut Gen. Life Ins. Co. v. Cole , 821 F. Supp. 193, 196-98 (S.D.N.Y. 1993).
-7- Co. , 818 F. Supp. 1556, 1562-63 (S.D. Ga. 1993). The district cour t correctly concluded that ERISA preempts Painter’s state law claims.

III. No . 96-3454 -- The Attorney Fee Issue.
When Golden Rule filed its declaratory judgment action, Painter moved to di smiss on many grounds, including (i) ERISA does not govern claim s under the Conversion Policy, (ii) in any event, ERISA does not affor d Golden Rule standing to seek a declaratory judgment construing th e Conversion Policy, and (iii) failure to exhaust the Policy’s p rocedure for 3 an independent determ ination of what is medically necessary. Golden Rule promptl yadmitted lack of exhaustion and moved to stay or voluntaril y dismiss its declaratory judgment action for this purpose. Painter instead urged the court to dismiss for lack of subject matter jurisdiction.

After mov ing the case toward trial for one year, the district court referred the pending stay and dismissal motions to a magistrate judge, who recommended that the court (i) voluntarily dismiss the action under Fed. R. Ci v. P. 41(a)(2) for failure to exhaust contract remedies, and (ii ) order G olden Rule to pay Painter’s reasonable costs and attorney fee s because it had filed a premature declaratory judgment action. The distric t court adopted that recommendation, granted Golden Rule’s voluntar y dismissal motion, dismissed the case without pre judice, and ordered Golden Rul e to pay Painter’s “reasonable attorney’s fees and costs incurred i n def ending this action.” However, while the court’s Order dismissed th e action pursuant to Rule 41(a)(2), its accompanying Memorandum declared tha t it “la cks subject matter jurisdiction over this case, as applicabl e [contract] remedies have not been exhausted.”

## -8- Counsel f or Painter then applied for an award of $102,619.75 i n attorne yfees. Golden Rule argued that the court had no power to awar d attorn eyfees after dismissing for lack of subject matter jurisdiction

. Reco gnizing its prior error, the court ruled that failure to exhaus t
con tract remedies is not a jurisdictional defect depriving the court o f power to condition voluntary dismissal on the payment of Painter’ s reasonable attorney fees. After soliciting further billing informatio n from Painter’s attorneys, the court concluded th at much of the fee request
was excessive under Rule 41(a)(2) standards. See generally Kern v. TX O Pro d. Corp. , 738 F.2d 968, 972-73 (8th Cir. 1984). The court awarde d Painter fees of $37,493.35. She appeals that award.

Pa inter’s argument on appeal is virtually incoherent. Apparently , she argues that the district court’s initial vol untary dismissal order was
a final order making Painter a prevailing party under ERISA, that the orde r stated she would be paid all her attorney fees, that she therefore gave up her right to appeal the order, and that the district court’s subsequen t order reducing her fees was contrary to this law of the case. The argumen t has m any fatal flaws. First, it is not clear from the record on appea l tha t the district court’s initial voluntary dismissal order was a fina l ord er, and Painter made no effort to clarify that issue, then or now

. Second, Painter was not a prevailing party under ERISA. As Part II of thi s opinion makes clear, the district court properly denied her motion t o dismi ss for lack of ERISA subject matter jurisdiction. We also rejec t Painter’s suggestion that dismissal of Golden Rule’s declaratory judgment action was inevitable . The district court never considered Golden Rule’s altern ative motion to stay the action while contract remedies wer e exhausted; had Golden Rule pressed that point after the court corrected it s subjec t matter jurisdiction ruling, a stay might have been granted

. Finally, the district court’s initial order expressly stated that it was dismissing under Rule 41(a)(2); if Painter’s attorneys construed that orde r as authorizing a fee award on some other basis, they have only themselves to blame.

For th ese reasons, we find no error of law in the district court’ s analysis of the Rule 41(a)(2) attorney fee issue . After careful review of the record, we conclude that

## Painter’s challenge to Golden Rule’s declaratory judgment action is one of many 4


## roa dblocks her attorneys have erected to avoid prompt resolution of the Conversio n Policy coverage issue that is the core of this dispute. We think it deplorable that the coverage issue is not yet ripe for decision. But because this is the result of Painter’s litigation strategy, we will refrain from attacking the resulting impasse sua sponte

. -9- the court did not abu se its considerable discretion in reducing Painter’s initial fee request.

IV. Conclusion.

Painter concludes her brief in No. 9 6-3114 by suggesting that if her state law claims are preempted by ERISA, the district court erred in not granting her leave to amend her complaint to assert new claims under ERISA

. Painter never made this request to the district court, either before o r after t hat court ruled on the preemption issue. Even now, she does no t advise this court what ERISA claims she wishes to assert. In the firs t lawsuit, Painter fought Golden Rule’s declaratory judgment action in the district court for nearly three years without asserting ERISA claims of he r own. We ordinarily do not consider issues raised for the first time o n

4 appeal. See Miller v. Federal Emergency Mgmt. Agency , 57 F.3d 687, 68 9 (8th Cir. 1995). Pai nter has given us no good reason to depart from this practice here.
The judgments of the district court are affirmed.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.