### 2001 D e c i sion s O p inion s of the U nit e d

S t a t e s C our t of Appe al s for the Thir d C ir c uit

3-27-2001 

# P r y z b o w sk i v . U S H e althc a r e I nc.

P r e c e de n t i al or N on-P r e c e de n t i al :

D ock e t 99-5920

F o l lo w thi s a nd a dd it ion al w ork s a t : h tt p://d i g it alc ommon s .l a w

. v i l l a no v a

. e du/thir dc ir c uit_2001

Thi s de c i sion i s br ou gh t t o y ou for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit a t V i l l a no v a

U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. I t h as be e n a c c e pt e d for inclusion in 2001 D e c i sion s b y a n a uthor i z e d a dmini s tr a t or of V i l l a no v a

U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. F or mor e infor m a t ion, p le as e c on t a ct Be n j a min

. C a rl s on@l a

w

. v i l l a no v a

. e du

. 

### R e c omme nde d C it a t ion

" P r y z bo w sk i v . U S H e althca r e I nc

. " (2001). 2001 D e cisio n s

. P a pe r 62.

h tt p://d i g it alc ommon s .l a

w

. v i l l a no v a

. e du/thir dc ir c uit_2001/62Filed March 27, 2001

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 99-5920

LINDA PRYZBOWKSI, Appellant

v.

U.S. HEALTHCARE, INC.; MEDEMERGE, P.A.;
JOHN PILLA, M.D.; CAROL E. SGAMBELLURI, M.D.; KENT R. ELLIS, M.D.; JANE AND JOHN DOES 1-5; CORPORATIONS A-Z, such defendants being named fictitiously to represent individuals and/or

business entities whose actions led to the delayed performance of surgery upon Linda Pryzbowski

On Appeal from the United States District Court for the District of New Jersey (D.C. No. 97-cv-03097) District Judge: Hon. Maryanne Trump Barry

Argued: November 14, 2000

Before: SLOVITER, AMBRO and WEIS, Cir cuit Judges

(Filed: March 27, 2001)Jerrold D. Goldstein (Argued)

North Plainfield, NJ 07060

Attorneys for Appellant

Edward S. Wardell (Argued) Kelley, Wardell & Craig Haddonfield, NJ 08033

Attorney for U.S. Healthcare, Inc.

Melvin Greenberg (Argued) Greenberg, Dauber Epstein &

Tucker Newark, NJ 07102

Attorney for Medemerge, P.A., John Pilla, M.D., Carol E. Sgambelluri, M.D., and Kent R. Ellis, M.D.

Herbert J. Stern Stern & Greenberg Roseland, NJ 07068

Attorney for Amicus Curiae- Appellee The Medical Society of

New Jersey

OPINION OF THE COURT

SLOVITER, Circuit Judge.

Before us is Linda Pryzbowski's appeal of two order s of

the United States District Court for the District o f New Jersey: (1) the December 3, 1997 order dismissing h er claims against U.S. Healthcare for its delay in app roving requested services after determining that those cla ims were completely preempted under S 502(a) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. S 1132(a)(1)(B); and (2) the September 8, 1999 orde r granting summary judgment on the state law claims i n favor of the remaining defendants, Medemer ge, P.A. and Dr. John Pilla, Dr. Carol E. Sgambelluri, and Dr. Kent R. Ellis ("the physician defendants"), on the gr ound that t hose

2claims were expressly preempted byS 514(a) of ERISA , 29

U.S.C. S 1144(a). See Pryzbowski v. U.S. Healthcare , Inc., 64 F. Supp. 2d 361 (D.N.J. 1999).

Our review of the District Court's orders granting dismissal and summary judgment based on ERISA preemption is plenary. See Travitz v. Northeast Dep 't ILGWU Health & Welfare Fund, 13 F .3d 704, 708 (3d Cir. 1 994). When reviewing the order granting dismissal, we mus t accept as true all the factual allegations in the c omplaint

and draw all reasonable inferences fr om them. See Banks v. Wolk, 918 F.2d 418, 419 (3d Cir . 1990). When re viewing the order granting summary judgment, we must draw a ll reasonable inferences in favor of the non-moving pa rty and may only affirm if there are no genuine issues of m aterial fact and the moving party is entitled to judgment a s a matter of law. See Travitz, 13 F .3d at 708.

I.

FACTS AND PROCEDURAL POSTURE

Pryzbowski is enrolled in The Health Maintenance Organization of New Jersey, Inc., a wholly owned su bsidiary of U.S. Healthcare, Inc. (hereafter "U.S. Healthcar e"), which is a health maintenance organization ("HMO") offere d by the employer of Pryzbowski's husband under its employee benefit plan within the terms of ERISA. On November 10, 1993, Pryzbowski sought treatment from Medemerge, h er primary care provider, for sever e back pains that she had been experiencing for several days. Medemerge is a physician practice group under contract with U.S. Healthcare to provide health care services. Pryzbow ski had previously undergone numerous sur geries for her ba ck, the most recent having been performed by Dr. Giancarlo Barolat of Thomas Jefferson University Hospital in Philadelphia, all of which were covered under her p revious health care plan. At Medemerge, she was treated at different times by Dr. John Pilla, Dr. Carol E. Sga mbelluri,

and Dr. Kent R. Ellis.

A CT scan performed on November 29, 1993 revealed disc degeneration and a large, extra-dural defect

3compressing the thecal sac, consistent with disc he rniation.

It also showed a previously implanted neur ostimula tor. Medemerge referred Pryzbowski to Dr . Alan Sarokhan , an orthopedic surgeon. Dr. Sarokhan wrote to Dr. Ellis , stating that "[s]he certainly needs a neurosur gical evalua tion and needs one promptly. . . . It is my opinion that she will most likely find that the most recent operating surgeon is the only one in the area who will be likely to even app roach this with any confidence." App. J, at J-2. On December 9 , 1993, Pryzbowski went to see Dr. Aiden Doyle, a neurosurg eon, again through a referral from Medemer ge. Dr. Doyle concluded, "she should go back to the sur geon who put it in. I have discussed this with them and obviously I really don't feel that I should be fiddling with that." Ap p. K, at K3.

Based on these two reports, Medemerge sent a reques t to U.S. Healthcare on December 15, 1993 for a consulta tion with Dr. Barolat, who was the neur osurgeon who las t performed surgery on Pryzbowski. Dr. Barolat was no t a participant in the particular plan offer ed by U.S. Healthcare. Pryzbowski's policy with U.S. Healthcar e required that it give prior written authorization f or services by non-participating providers and facilities. U.S. Healthcare approved the consultation and Dr. Barola t examined Pryzbowski on January 19, 1994. He conclud ed that surgery was needed and that the following spec ialists or specialists' services were requir ed: spinal instrumentation and fusion by a separate orthopedic surgeon, pulmonary clearance and follow-up fr om Dr

. Cohen, consultation with the Pain Service, and a psychological assessment and follow-up. The special ists to

whom he referred were also associated with Thomas Jefferson University Hospital and outside U.S. Heal thcare's

network.

Over the next few months, Pryzbowski sought to get U.S. Healthcare to approve the recommended surgery by Dr

. Barolat and the related services. In the meantime, Pryzbowski was seen by in-network specialists, incl uding Dr. Edward Barrett (a mental health specialist), Dr

. Alexander Levin (a pain management specialist), and Dr. M.A. Sarraf (a pulmonary specialist) between Februa ry 19,

41994 and April 18, 1994, and they transmitted their reports

thereafter. It is evident that this was not satisfa ctory to Dr. Barolat, because a handwritten note dated May 3, 19 94, headed "Stephanie - Dr. Barolat's office," states " Dr. will not perform the surgery unless specials [sic] at Jeffer son in consult. USHC will not approve." Appellees' App., L ang Certification, Ex. A. U.S. Healthcare authorized th e out-ofnetwork specialists' services and the back sur gery on June 30, 1994, and Dr. Barolat perfor med the surgery on Pryzbowski on July 7, 1994. Unfortunately, Pryzbows ki continued to suffer from severe back pain after the surgery. Dr. Barolat later opined "that the persistence of t he excruciating pain . . . was most likely caused by t he significant delay that occurred between the onset o f the symptomatology and the surgical intervention." App. M, at

M-4.

Pryzbowski filed a complaint, later amended, agains t U.S. Healthcare, Medemerge, and three physicians with Medemerge in the Superior Court of New Jersey. She asserts six counts against U.S. Healthcare, which a llege that U.S. Healthcare "negligently and car elessly d elayed in giving its approval for the necessary sur gery whic h the plaintiff . . . urgently needed," causing Pryzbowsk i severe and permanent injury, emotional distress, and futur e expenses for medical care and treatment (Count One) ; that U.S. Healthcare's delay was arbitrary and capriciou s (Count Two); and that, by delaying its approval for the su rgery, U.S. Healthcare "acted with a willful and wanton di sregard for the harm that would likely result to the plaint iff " (Count Three). The complaint also asserts that U.S. Healthcare's delay in approving the sur gery breach ed its health insurance contract with Pryzbowski (Count Fo ur); that the delay in surgery approval was"in bad faith " (Count Five); and that U.S. Healthcare breached its duty t o "screen, hire, train and employ capable and respons ible individuals . . . to make thoughtful and reasonable decisions as to healthcare" (Count Seven).

In the five counts Pryzbowski asserts against Medem erge and/or the physician defendants, she alleges that Medemerge "negligently and carelessly delayed in authorizing and/or obtaining authorization fr om U. S.

5Healthcare" for the surgery (Count Eight); that Med emerge,

in failing to obtain authorization, "acted with a w illful and wanton disregard for the harm that would likely res ult to the plaintiff " (Count Nine); that the physician de fendants "negligently and carelessly delayed in authorizing and/or obtaining authorization" for the back sur gery (Cou nt Ten); and that they "acted with a willful and wanton disr egard" in delaying authorization (Count Eleven). Another coun t alleges that Medemerge breached its duty to "screen , hire and employ capable and responsible individuals to s erve as its agent, servants, and/or employees" (Count Six).

U.S. Healthcare removed the case to the United Stat es District Court for the District of New Jersey. On D ecember 3, 1997, the District Court granted U.S. Healthcar e's motion to dismiss the counts against it (Counts 1-5 , 7). Subsequently, Medemerge and the physician defendant s moved for summary judgment on the remaining counts, which motion was granted on September 8, 1999. Pryzbowski now appeals both the December 3, 1997 dismissal and the September 8, 1999 summary judgmen t order. We have jurisdiction under 28 U.S.C. S 1291.

II.

DISCUSSION

A. Claims Against U.S. Healthcare

There are two separate but related pr eemption issu es that arise under ERISA, both of which are pr esente d in this case. The application of express preemption, set fo rth in S 514(a) of ERISA, arises in connection with Pryzbo wski's claims against Medemerge and the physician defendan ts. Her claims against U.S. Healthcare raise the issue of complete preemption, a jurisdictional concept based on S 502(a) of ERISA.

We first consider Pryzbowski's challenge to the Dis trict Court's holding that removal was proper and that it had subject matter jurisdiction over the claims against U.S. Healthcare because they were completely pr eempted under S 502(a) of ERISA. Pryzbowski's complaint, original ly filed in

6state court, appeared on its face to allege only st ate causes

of action and named as defendants parties who wer e not completely diverse from Pryzbowski, ther eby displa ying no

obvious basis for removal to federal court under 28 U.S.C.

S 1441. In Franchise Tax Bd. of Cal. v. Constr. Lab orers Vacation Trust for S. Cal., 463 U.S. 1, 9-10 (1983) , the Supreme Court stated, "where ther e is no diversity of citizenship between the parties [as in Pryzbowski's case] . . . the propriety of removal turns on whether the case falls within the original `federal question' jurisdiction of the

United States district courts."

Under the "well-pleaded complaint" rule, federal qu estion jurisdiction exists only when an issue of federal l aw appears on the face of the plaintiff 's complaint. The anticipation that a defendant may raise a federal d efense will not confer federal question jurisdiction. On t he other hand, "any complaint that comes within the scope of [a] federal cause of action necessarily `arises under' federal law" and is therefore completely pr eempted. Franch ise Tax Bd., 463 U.S. at 24. The paradigmatic example of th is extraordinary preemptive force isS 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C.S 185. See Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557 (196 8). In Franchise Tax Board, the Court did not reach the qu estion of complete preemption under ERISA because the clai m asserted there was not within the original jurisdic tion of the

federal courts and therefore could not be removed b y defendant to federal court. See 463 U.S. at 24-25.

It was in Metropolitan Life Ins. Co. v. T aylor, 48 1 U.S. 58 (1987), that the Supreme Court faced the question " whether or not the Avco principle can be extended to statut es other

than the LMRA in order to recharacterize a state la w complaint displaced by S 502(a)(1)(B) as an action arising under federal law." Id. at 64. After noting the sim ilarity between the language of ERISA and that of the LMRA, the Court concluded that Congress intended thatS 502(a) of ERISA be given the same extraordinary pr eemptive f orce as had been given to S 301 of LMRA. See id. at 65. Th is conclusion from the statutory language was confirme d not only by the statements of one of the sponsors of ER ISA but also by the Conference Report, which stated that al l suits

7"to enforce benefit rights under the plan or to rec over

benefits under the plan . . . are to be r egarded a s arising

under the laws of the United States in similar fash ion to those brought under section 301 of the Labor -Manag ement Relations Act of 1947." H.R. Conf. Rep. No. 93-1280 , at 327 (1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5107. Following the decision in Metropolitan Life, there can be no question that "causes of action within the scope of the civil enforcement provisions of S 502(a)[are] removable t o federal court." Metropolitan Life, 481 U.S. at 66.

We do not understand Pryzbowski to be challenging t he principle that such claims are completely pr eempte d but to be arguing that the claims she asserts against U.S. Healthcare were not removable because they did not fit within S 502(a). Section 502(a) allows a beneficiar y or participant of an ERISA-regulated plan to bring a c ivil

action "to recover benefits due to him under the te rms of his plan, to enforce his rights under the ter ms of the plan, or to clarify his rights to future benefits under t he terms of the plan." 29 U.S.C. S 1132(a)(1)(B). UnderS 502(a) , a beneficiary may obtain accrued benefits due, a decl aratory judgment about entitlement of benefits, or an injun ction to require the administrator to pay benefits. See Pilo t Life Ins. Co. v. Dedeaux, 481 U.S. 41, 53 (1987). It follows that if Pryzbowski's claims fall within the scope of ERISA' s civil enforcement provisions, they are completely preempt ed.

This court has on several occasions consider ed whe ther a plaintiff 's claim against his or her HMO is comp letely preempted under ERISA. In Dukes v. U.S. Healthcare, Inc., 57 F.3d 350 (3d Cir. 1995), we distinguished betwee n claims directed to the "quality of the benefits [pl aintiffs] received" and claims "that the plans err oneously w ithheld benefits due" or that seek "to enfor ce [plaintiffs '] rights under the terms of their respective plans or to cla rify their rights to future benefits." Id. at 356. We stated t hat claims that merely attack the quality of benefits do not f all within the scope of S 502(a)'s enforcement pr ovisions and are not completely preempted, whereas claims challenging th e quantum of benefits due under an ERISA-regulated pl an are completely preempted under S 502(a)'s civil enf orcement scheme. See id. at 356-57. We held that, because th e

8plaintiffs in Dukes alleged that the HMO failed to exercise

reasonable care in providing medical treatment, the ir claims were not completely preempted. See id. at 35 8.

Thereafter, in In re U.S. Healthcare, Inc., 193 F.3 d 151 (3d Cir. 1999), we applied the quality-quantity distinc tion in determining whether claims by parents against U.S.

Healthcare based on the death of their newbor n bab y were completely preempted. In making that decision, we r elied upon the distinction made in Dukes between"an HMO's role in `arranging for medical treatment' rather th an its role as a plan administrator determining what benefits a re appropriate." Id. at 162 (quoting Dukes, 57 F.3d at 360). We held that U.S. Healthcare's adoption of a policy of discharging newborn infants within 24 hours after t heir delivery was essentially a medical determination th at could be subject to a state-law medical malpractice actio n. See id. at 162-63. We also held that the HMO's alleged negl igence in selecting, training, and supervising medical per sonnel implicated the quality of medical treatment. See id . at 163- 64. Therefore, we concluded that none of the claims were completely preempted and we directed that the case be

remanded to state court. See id. at 162-65.

Most recently, in Lazorko v. Pennsylvania Hospital, 237 F.3d 242 (3d Cir. 2000), we again applied the disti nction between claims raising quality of care issues and c laims raising quantity of benefits issues. Lazorko allege d that financial disincentives imposed by the HMO discoura ged medical providers from hospitalizing a mentally ill beneficiary who later committed suicide. W e decide d that this was a quality of care claim because "the denia l of [the beneficiary's] request for hospitalization occurred in the course of a treatment decision, not in the administ ration of the [plaintiff 's and beneficiary's] plan generally ." Id. at 250. Thus, we held that the plaintiffs' claim was not co mpletely preempted under S 502(a).

Though the quality-quantity distinction was helpful in those cases, we have acknowledged that the distinct ion would not always be clear. See Dukes, 57 F.3d at 35 8. We recognized that there might be a situation where th e quality of the medical care provided would be so deficient that the beneficiary essentially would not have received any health

9care benefit at all. See id. And in In re U.S. Heal thcare, we

noted that making the quality-quantity distinction would be particularly difficult when an HMO has acted as bot h a plan administrator and a provider of medical servic es. See

193 F.3d at 162.

The recent Supreme Court decision in Pegram v. Herdrich, 530 U.S. 211, 120 S. Ct. 2143 (2000), sug gests preferable terminology. Although that case concerne d fiduciary acts under ERISA and not preemption, the distinction made there between "eligibility decisio ns," which "turn on the plan's coverage of a particular condit ion or medical procedure for its treatment," and "treatmen t decisions," which are choices in "diagnosing and tr eating a patent's [sic] condition," 120 S. Ct. at 2154, is e qually applicable for complete preemption analysis. Regard less of the language used, the ultimate distinction to make for purposes of complete preemption is whether the clai m challenges the administration of or eligibility for benefits, which falls within the scope of S 502(a) and is com pletely preempted, or the quality of the medical tr eatment performed, which may be the subject of a state acti on.

This court has not had occasion to consider how a c laim that the HMO or plan administrator delayed in the a pproval

of benefits should be treated under ERISA. It is ev ident that a claim alleging that a physician knowingly delayed in performing urgent surgery on a patient whose append ix was about to rupture would relate to the quality of care, and not be subject to removal on the basis of compl ete preemption. On the other hand, a claim alleging tha t an HMO declined to approve certain requested medical services or treatment on the ground that they were not covered under the plan would manifestly be one rega rding the proper administration of benefits. Such a claim , no matter how couched, is completely preempted and removable on that basis. See Dukes, 57 F.3d at 356 (noting that a claim that the plans erroneously withheld be nefits due would be completely preempted); Jass v. Prudent ial Health Care Plans, Inc., 88 F.3d 1482, 1488-89 (7th Cir. 1996) (holding that a claim against an HMO's utiliz ation review decision was completely preempted by ERISA).

10In analyzing whether a claim falling between these poles

is completely preempted, it is necessary to r efer to S 502(a). As the Court stated in Metropolitan Life , "Congres s has clearly manifested an intent to make causes of acti on within the scope of the civil enforcement pr ovisio ns of S 502(a) removable to federal court." 481 U.S. at 6 6. Accordingly, we must examine Pryzbowski's claims ag ainst U.S. Healthcare to determine whether they could hav e been the subject of a civil enforcement action underS 50 2(a).

Counts One through Five of Pryzbowski's complaint allege that U.S. Healthcare negligently and car ele ssly delayed approval of her surgery with Dr . Barolat, acted in an arbitrary and capricious manner in doing the sam e, acted in willful and wanton disregard of her health , acted in bad faith, and breached her health insurance con tract. Underlying these allegations of delay is the policy adopted by U.S. Healthcare (and many other HMOs) r equiring beneficiaries either to use in-network specialists or to obtain approval from the HMO for out-of-network specialists. These activities fall within the r eal m of the

administration of benefits.

Had Pryzbowski sought to accelerate U.S. Healthcar e's approval of the use of out-of-network pr oviders, s he could have sought an injunction under S 502(a) to enforce the benefits to which she was entitled under the plan, thereby using the provisions of the civil enfor cement sche me provided by Congress. There have been numerous case s in which the courts have issued preliminary injunction s under similar circumstances. See, e.g., Marro v. K-III Communications Corp., 943 F. Supp. 247 (E.D.N.Y. 19 96) (granting preliminary injunction to compel plan administrator to precertify high dosage chemotherap y); Mattive v. Healthsource of Savannah, Inc., 893 F. S upp. 1559 (S.D. Ga. 1995) (granting preliminary injuncti on enjoining plan administrator from denying coverage for high-dose chemotherapy); Dozsa v. Crum & Forster In s. Co., 716 F. Supp. 131 (D.N.J. 1989) (granting pr elimina ry injunction enjoining plan administrator from denyin g coverage for autologous bone marrow transplant trea tment).

Pryzbowski's final claim against U.S. Healthcar e ( Count Seven) alleges that it failed properly to hir e, tr ain, and

11supervise its employees "to make thoughtful and r e asonable

decisions as to healthcare." Amended Complaint, Cou nt 7. Although ostensibly directed at the provision of me dical treatment, a federal court may "look beyond the fac e of the complaint to determine whether a plaintif f has art fully pleaded his suit so as to couch a federal claim in terms of state law," Jass, 88 F.3d at 1488; accord Parrino v . FHP, Inc., 146 F.3d 699, 704 (9th Cir. 1998); cf. Franch ise Tax Bd., 463 U.S. at 22 (noting that "a plaintif f may not defeat removal [to federal court] by omitting to plead nec essary federal questions in a complaint"). Inasmuch as Pry zbowski has not alleged that U.S. Healthcare or its employe es engaged in any medical treatment with r egard to he r, the alleged negligence by U.S. Healthcare in the hiring

, training, and supervising of its employees necessar ily concerns the administration of her benefits, U.S. Healthcare's only role in this case. It follows tha t Count Seven is also completely preempted under S 502(a) o f

ERISA.

Pryzbowski contends that her claims are analogous t o the claims made in Dukes and In re U.S. Healthcare, whe re we held that complete preemption was inapplicable and removal improper. In both cases, we recognized that the

HMO had assumed the dual role of an administrator o f benefits and a provider of medical services. In In re U.S. Healthcare, we held that the HMO's policy to discha rge newborn infants within 24 hours was essentially a " medical determination of the appropriate level of care." 19 3 F.3d at

163. We also held that the claim that the HMO was negligent in failing to provide an in-home visit by a pediatric nurse, despite having given assurances th at such a visit would be provided, was directed at the HMO' s function as medical provider. See id. at 164. There fore, the plaintiffs' claims alleged medical malpractice and were not completely preempted by ERISA. In Dukes, the plaint iffs' claims centered on "the low quality of the medical treatment that they actually received." 57 F.3d at 357. They argued that the HMO was liable under an agency theo ry and also directly responsible for negligence in sel ecting, retaining, screening, monitoring and evaluating the personnel who actually provided the medical service s. See

id. at 352. We held that those claims did not invol ve failure

12to provide benefits due under the ERISA plan and th erefore

were not completely preempted.

In the case before us, as we note above, Pryzbowski 's claims against U.S. Healthcare are limited to its d elay in approving benefits, conduct falling squar ely withi n administrative function. A holding that Pryzbowski' s claims against U.S. Healthcare are not completely preempte d would open the door for legal challenges to cor e m anaged care practices (e.g., the policy of favoring in-net work specialists over out-of-network specialists), which the Supreme Court eschewed in Pegram. Cf. 120 S. Ct. at 2156-57 (rejecting claims attacking financial incen tives behind HMO structure, in light of congr essional po licy of promoting HMOs). We conclude that the District Cour t did not err in holding that the claims Pryzbowski asser ts against U.S. Healthcare are completely pr eempted. It follows that the District Court properly exer cised subject matter jurisdiction over the case and dismissed the claims against U.S. Healthcare.

We are not unaware that our holding that U.S. Healthcare will not be required to explain or defen d the delay in provision of services to Pryzbowski may le ave her, and other beneficiaries, without effective r elief for the improper administration of benefits. The delay atte ndant on the required preauthorization by HMOs has been a ma tter of public concern. In fact, this has led the Depart ment of Labor recently to publish a long pending final rule that requires that claims seeking pretr eatment authoriz ation for medical services must be decided within 15 days and that imposes other stringent time limits on appeals fr o m adverse decisions. See 65 Fed. Reg. 70,245 (Nov. 21, 2000). While the new rule applies only to claims filed on or aft er Jan. 1, 2002, it should serve to give notice to health car e administrators that ERISA not only provides pr otec tion from litigation arising from benefits administratio n but imposes certain responsibilities with r espect to s uch

administration.

B. Claims Against Medemerge and the Physician

Defendants

1. Jurisdiction

Unlike U.S. Healthcare, Medemerge and the physician defendants do not contend that the claims against t hem are

13completely preempted under S 502(a). Neither can th eir

anticipated defense of express preemption under S 5 14(a) be

the basis for removal of these claims. See Franchis e Tax Bd., 463 U.S. at 23-27. As we stated in Dukes, "[w] hen the doctrine of complete preemption does not apply, but the plaintiff 's state claim is arguably preempted unde r S 514(a), the district court, being without removal jurisdict ion, cannot resolve the dispute regarding preemption." D ukes, 57 F.3d at 355. Federal jurisdiction over Pryzbowsk i's claims against Medemerge and the physician defendan ts, if it is to be sustained, must be based on another gr ound.

In this case, the District Court did not rely on S 502(a) preemption for its jurisdiction over these defendan ts but instead exercised supplemental jurisdiction under 2 8

U.S.C. S 1367. That section authorizes a district c ourt to exercise "supplemental jurisdiction over all other claims

that are so related to claims in the action within such original jurisdiction that they form part of the sa me case or controversy under Article III of the United States Constitution." 28 U.S.C. S 1367(a). W e have interp reted this provision to require the following: (1) " `[t]he fe deral claims must have substance sufficient to confer subject ma tter jurisdiction;' " (2) " `[t]he state and federal cla ims must derive from a common nucleus of operative fact;' " and (3) " `the plaintiff 's claims [must be] such that [s/] he would ordinarily be expected to try them all in one judic ial proceeding.' " In re Prudential Ins. Co. Am. Sales Practices Litig., 148 F.3d 283, 302 (3d Cir . 1998) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966), wh ich sustained the constitutionality of pendent jurisdic tion).

We have already determined that the District Court had subject matter jurisdiction over Pryzbowski's claim s against U.S. Healthcare. Moreover, Pryzbowski's claims agai nst Medemerge and the physician defendants ar e derived from the same factual predicate as her claims against U. S. Healthcare, as all her claims stem from the treatme nt she received from all of the defendants in r esponse to her complaint of back pain and the delay she experience d in securing the approval for the out-of-network physic ians and services that Dr. Barolat believed wer e necessary. Under these circumstances, it would be expected that all of

14Pryzbowski's claims against the defendants would be

combined in one judicial proceeding. Ther efore, th e District Court had the authority for its exercise of supplem ental jurisdiction over the claims against Medemer ge and the physician defendants.

Pryzbowski argues that once the claims against U.S. Healthcare were dismissed, the District Court shoul d have remanded her claims against the other defendants to state court. That was certainly an option for the Distric t Court but not one it was obliged to take. In New Rock Ass et Partners, L.P. v. Preferred Entity Advancements, In c., 101 F.3d 1492, 1506 (3d Cir. 1996), we stated that "whe re the jurisdiction-conferring party drops out and the fed eral court retains jurisdiction over what becomes a state law claim between non-diverse parties, the bounds of Article III have not been crossed." In such situations, district cou rts have discretion to continue exercising supplemental juri sdiction.

See id.

Pryzbowski's challenge to the District Court's fail ure to remand seems to be directed exclusively to a lack o f jurisdiction in the District Court. She has given u s no persuasive reason why the District Court's decision to exercise supplemental jurisdiction was an abuse of its discretion. The District Court had become fully fam iliar with the factual background and the positions of th e parties, and we see no reason why it should not hav e continued to exercise jurisdiction over Pryzbowski' s claims against Medemerge and the physician defendants. We certainly cannot conclude that its decision was an abuse of

discretion.

2. Summary Judgment

Once the District Court dismissed the claims agains t U.S. Healthcare (Counts 1-5 and 7) and Counts 9 and 11 w ere dismissed without opposition, see Pryzbowski, 64 F. Supp. 2d at 363 n.2, the parties focused their discovery on Counts 6 and 8 against Medemerge and Count 10 again st Doctors Pilla and Ellis.1 The r emaining defendants then

___________________________________________________ ______________

1. The District Court dismissed the claims against Dr. Sgambelluri because Pryzbowski's brief in that court opposing s ummary judgment made no mention of that defendant. See Pryzbowski, 64 F. Supp. 2d at

363 n.1. Her brief in this court does not mention t hat portion of the District Court's opinion, and we conclude that she does not challenge it.

15moved for summary judgment. In support of their mot ion,

defendants filed the certification of their counsel , Joseph R. Lang, who attached extensive documentary evidence a nd references to certain depositions. These documents set forth Pryzbowski's medical history in connection wi th her complaints of back pain and efforts to obtain the n ecessary treatment and services.2 The District Court noted t hat "plaintiff has not provided this court with any evi dence whatsoever in opposing this motion but merely has referenced defendants' exhibits fr om time to time, " and that it was "unable to consider unsupported conclusory allegations." Id. at 364 n.6.

The District Court viewed the defendants' motion fo r summary judgment as having two bases. The first was that Pryzbowski's claims were preempted byS 514(a) of ER ISA. The second was that Pryzbowski failed to state a cl aim for which relief can be granted. We consider them in tu rn.

a. Express Preemption by S 514(a)

Section 514(a), the express preemption pr ovision o f ERISA, provides that ERISA "shall supersede any and all State laws insofar as they . . . relate to any empl oyee benefit plan" covered by the statute. 29 U.S.C. S 1 144(a). ERISA also includes a saving clause protecting from preemption state laws regulating insurance, banking , or securities. See 29 U.S.C. S 1144(b)(2)(A). As we ha ve explained, "[u]nlike the scope of S 502(a)(1)(B), w hich is jurisdictional and creates a basis for r emoval to federal court, S 514(a) . . . governs the law that will app ly to state law claims, regardless of whether the case is broug ht in state or federal court." Lazorko, 237 F .3d at 248.

In one of the early cases to come before the Suprem e Court concerning the express preemption provision, the Court stated that a law "relates to" an employee be nefit plan "if it has a connection with or refer ence to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983). The Court thereafter recognized that more g uidance

___________________________________________________ ______________

2. They are reviewed in detail in the District Cour t's opinion granting summary judgment, see Pryzbowski, 64 F . Supp. 2d a t 363-66, and need not be reprised.

16was needed in drawing the line between what was

preempted and what was not. It attempted to do that in

New York State Conference of Blue Cr oss & Blue Shi eld Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) [h ereafter Travelers], where the Court stated that it would in quire into "the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would sur vive." Id. at 656. To that end, the Court noted that Congr ess intended:

to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; t he goal was

to minimize the administrative and financial bur den of complying with conflicting directives among States or

between States and the Federal Government . . . , [and to prevent] the potential for conflict in su bstantive law . . . requiring the tailoring of plans and e mployer conduct to the peculiarities of the law of e ach jurisdiction.

Id. at 656-57 (quoting Ingersoll-Rand Co. v. McClen don, 498 U.S. 133, 142 (1990) (citation omitted) (ellipses a nd brackets in original)). Thus, the basic objective o f the express preemption provision was"to avoid a multipl icity of regulation in order to permit the nationally unifor m administration of employee benefit plans." Id. at 6 57.

In Travelers and several cases ther eafter, the Cou rt held that the challenged state statutes were not pr eemp ted because they were laws of general application that were neither directed to ERISA plans nor inter fered wit h their administration. For example, in Travelers the Cour t held that a statute that imposed surcharges on hospital rates for patients with commercial insurance purchased by ERI SA plans, which was intended to help Blue Cross/Blue S hield plans, had only an indirect economic ef fect on ERI SA plans and was not expressly preempted by S 514(a). See id . at 658-62; see also California Div. of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316 (19 97) (state prevailing wage law does not "r elate to" em ployee benefit plans and is not preempted by ERISA where s tatute is indifferent to ERISA coverage); De Buono v. NYSA -ILA Med. and Clinical Servs. Fund, 520 U.S. 806 (1997) (generally applicable gross receipts tax on health care

17facilities not preempted despite some bur den on

administration of ERISA plans); but see Alessi v. R aybestosManhattan, Inc., 451 U.S. 504 (1981) (state compens ation act barring offset of workers' pension benefits by compensation benefits preempted).

The issue of express preemption arises in other con texts than challenges to state statutes. One of the most frequent is the reliance by HMOs and insurance companies on S 514(a) in defending suits brought by beneficiarie s arising out of the denial of plan benefits. This line of ca ses stems from the Supreme Court's decision in Pilot Life Ins . Co. v. Dedeaux, 481 U.S. 41 (1987), where a beneficiary of an ERISA plan sued the insurance company that cover ed his employer's long-term disability employee benefit pl an, alleging it improperly denied his claim for long-te rm disability benefits. He claimed tortious br each of contract, breach of fiduciary duties, and fraud in the induce ment. Plaintiff sought to avoid preemption under S 514(a) by trying to fit some of his claims into the saving cl ause exception for state laws regulating insurance, but the Court rejected that effort. Instead, the Court viewed the common law causes of action raised in plaintiff 's complai nt as based on alleged improper processing of a claim for benef its under an employee benefit plan, stated that such claims "undoubtedly meet the criteria for pre-emption unde r S 514(a)," and held that the suit could not proceed because of the "expansive sweep of the pre-emption clause." Id. at

47-48.

Thus, suits against HMOs and insurance companies fo r denial of benefits, even when the claim is couched in terms of common law negligence or breach of contract, hav e been held to be preempted by S 514(a). See, e.g., Bast v

. Prudential Ins. Co. of Am., 150 F.3d 1003, 1007-08 (9th Cir. 1998) (holding that S 514(a) preempted, among other things, a claim alleging bad faith denial of benefi ts); Tolton v. American Biodyne, Inc., 48 F.3d 937, 941-43 (6th Cir. 1995) (holding that S 514(a) preempted claims for w rongful death, medical malpractice, and insurance bad faith based on a refusal to authorize treatment); Corcoran v. U nited HealthCare, Inc., 965 F.2d 1321, 1331-34 (5th Cir. 1992) (holding that S 514(a) preempted a wr ongful death action based on the negligent denial of benefits).

18The rationale for these holdings is that the decisi on

whether a requested benefit or service is covered b y the ERISA plan falls within the scope of the administra tive responsibilities of the HMO or insurance company, a nd therefore "relates to" the employee benefit plan. T he same rationale has been applied by courts holding that s uits against HMOs for delay in authorizing benefits wer e preempted under S 514(a). For example, in Kuhl v. L incoln Nat'l Health Plan of Kan. City, Inc., 999 F .2d 298 , 302-03 (8th Cir. 1993), the court considered a claim that the HMO canceled the beneficiary's surgery in an out-of-net work hospital, thereby delaying his ability to r eceive treatment and leading to his death. Although the complaint br ought by his survivors alleged common law claims and characterized the HMO's actions as malpractice, the court viewed the claim as based on improper pr ocessing o f medical benefits, and therefore expr essly preempte d by S 514(a). See id. Likewise, in Spain v. Aetna Life Ins. Co., 11 F.3d 129, 131-32 (9th Cir. 1993), the court held th at a wrongful death claim based on the HMO's delay in authorizing cancer treatment was expressly preempte d because it dealt with the negligent administration of

benefits.

In contrast, claims challenging the quality of car e are not preempted by S 514(a). As previously discussed, our decisions in Dukes, In re U.S. Healthcare, and Lazo rko

made clear our view that claims based on medical

treatment decisions are still state law claims. In Dukes, we examined the legislative history of ERISA and found nothing suggesting that Congress intended "to contr ol the quality of the benefits received by plan participan ts[,] . . . a field traditionally occupied by state regulation." 57 F.3d at 357. We explained that:

When Congress enacted ERISA it was concer ne d in large part with the various mechanisms and institutions involved in the funding and pay ment of plan benefits. That is, Congress was concer ned "that owing to the inadequacy of current minimum[f inancial and administrative] standards, the soundness and stability of plans with respect to adequate funds to pay promised benefits may be endangered." S 2, 2 9 U.S.C.

19S 1001(a). Thus, Congress sought to assur e that

promised benefits would be available when pl an participants had need of them and S 502 was intended to provide each individual participant with a r emedy in the event that promises made by the plan wer e not kept.

Id. (brackets in original).

We followed that view in In re U.S. Healthcare, 193 F.3d 151, where we held that claims against the HMO resu lting from its adoption of a policy to dischar ge newborn s from the hospital within 24 hours after birth went to th e quality of care provided. They were ther efore to be evalua ted as an ordinary state-law tort claim for medical malpracti ce. There is no reason why the distinction between quality of care issues and benefits administration issues made in t hose cases, which arose in the context of complete preem ption under S 502(a), would not be equally applicable to express preemption under S 514(a).

Moreover, there is a strong suggestion in Pegram th at

claims based on medical treatment decisions r emain outside the preemptive effect of ERISA. In holding that mixed eligibility/treatment decisions made by an HM O are not encompassed by the fiduciary duties imposed by ERISA, the Court made clear its view that ERISA was not designed to allow plan participants "to bring malpr actice actions in the guise of federal fiduciary br each c laims against HMOs." 120 S. Ct. at 2158. The Court took a dim view of an interpretation that would lead to ERISA preemption covering "the subject of a state-law mal practice

claim." 120 S. Ct. at 2158.

The District Court here recognized that a malpracti ce claim by Pryzbowski against Medemerge and the physi cian defendants would not be preempted. However , that c ourt, after conducting a comprehensive review of the rele vant cases, concluded that "[i]t is clear that plaintiff 's claims, at their core, challenge the poor administration of he r plan -- the failure to promptly approve the r equest for Dr . Barolat to perform the surgery -- rather than the quality o f care she received. " 64 F. Supp. 2d at 369. The District Court also stated that "a claim for negligent delay in th e

20utilization review, or pre-authorization process, e ven if

alleged as a state law violation against the physic ian, would, at the very least, `relate to' an ERISA plan and, thus, be preempted." Id. at 367. W e cannot agree that al l of Pryzbowski's claims against Medemerge and the physi cian defendants should be characterized as "relating to" the administration of her plan.

It is true that Pryzbowski has not alleged that the physician defendants at Medemerge failed to diagnos e or properly treat her back pain. She concedes that tho se physicians found that her problem requir ed special ty care and referred her to an orthopedic sur geon, a neuro surgeon, and eventually the out-of-network neurosur geon who had originally performed surgery on Pryzbowski. On the other hand, Pryzbowski's claims against Medemerge and the physician defendants are not based on a denial of b enefits and therefore differ from the typical administratio n of benefits claims against HMOs. Medemerge and the physician defendants do not contend that they acted as U.S. Healthcare's agent in the administration of th e plan that covered Pryzbowski. Admittedly, they did not h ave the responsibility to make coverage decisions. Indeed, they argue in their brief that they had no power to auth orize services by out-of-network physicians and that thos e questions -- which have been held to be administrat ive as to HMOs -- were always relayed to U.S. Healthcare. As these defendants disclaim any administrative author ity or responsibility with respect to the plan, it follows that the preemption afforded by S 514(a) for claims "relatin g to" a plan is inapplicable.

Our decisions have not focused on the extent to whi ch the scope of a physician's responsibility to a pati ent goes beyond the mere treatment of that patient's medical complaint. It remains unclear whether the New Jerse y Supreme Court would include within the physicians' duty of care the processing of their patients through th e office, including matters such as the completion of for ms, referral to other physicians, arrangements for laboratory te sts, and other general office procedures that may be necessa ry for the complete care of the patient.

21We note that in Nealy v. U.S. Healthcar e HMO, 93 N .Y.2d

209, 711 N.E.2d 621 (1999), a primary care physicia n allegedly delayed in submitting to the HMO a r eque st for authorization for a beneficiary to see an out-of-ne twork cardiologist. The HMO eventually denied authorizati on, and the beneficiary died before seeing an in-network cardiologist. The New York Court of Appeals held th at the wrongful death and negligence claims br ought by th e beneficiary's wife were not preempted byS 514(a). S ee id. at 219, 711 N.E.2d at 625. The court stated that "[p]l aintiff 's allegations of negligent medical care do not`relate to' the administration of an ERISA plan merely because they refer to [the physician defendant's] delay in submitting the US Healthcare form seeking a referral to [the out-of-n etwork cardiologist]. Plaintiff does not allege that [the physician defendant] is responsible for delay caused by US Healthcare's decision-making process with respect t o coverage or benefits. Her claim against [the physic ian defendant] is that he failed to take timely action to treat her husband." Id. at 219-20, 711 N.E.2d at 625 (footnot e omitted).

Nealy stands for the proposition that under New Yor k law the physician's duties in providing car e to his/he r patients may be broader than the mere medical tr eatment dec ision. Pryzbowski's complaint may be fairly read to allege that Medemerge and the physician defendants did not adequately perform or supervise the per formance of some of the office functions that may be part of patient care. On the sparse record before us and in view of the inad equate briefing on this point before us and in the Distric t Court, we are not prepared to state as a matter of law tha t there is no conceivable malpractice claim against these defendants under New Jersey law, and hence cannot a gree that all of the claims against them are pr eempted under S 514(a).3

___________________________________________________ ______________

3. There are a number of pending motions. The appel lees have moved to dismiss the appeal or in the alternative to strike the appellant's brief

and appendix because Pryzbowski included in the Joint A ppendix excerpts of the deposition testimony of Dr. Linda Peeno, her me dical ethics expert, Anita McGinley, former HMO coordinator at Medemerge , Sandra Coles-

22b. Failure to State a Claim

Our decision that Pryzbowski's claims against Medem erge and the physician defendants are not expr essly pre empted does not mean that they necessarily survive dismiss al under summary judgment. Only after the District Cou rt determines the scope of New Jersey malpractice law will it be able to decide whether Pryzbowski has offer ed s ufficient evidence to make a genuine issue of material fact t hat Medemerge and the physician defendants failed to me et the applicable standard.

There is one claim, however, that we ar e in a posi tion to resolve. The District Court held that Pryzbowski fa iled to state a claim for negligence upon which relief can be granted. The District Court equated the negligence claim with Pryzbowski's contention that the physician def endants violated a state common law "duty to advocate" to t he HMO so as to expedite the approval of her sur gery. Alt hough we read Pryzbowski's negligence claim against Medemerg e and the physician defendants as broader than the claime d duty to advocate, we agree with the District Court's ana lysis of

the latter.

The District Court reasoned that a state law claim for negligence must allege "(1) a duty of car e owed by defendant to plaintiff; (2) a breach of that duty b y defendant; and (3) an injury to plaintiff pr oximat ely caused by defendant's breach." Endre v. Arnold, 300 N.J. S uper. 136, 142, 692 A.2d 97, 100 (App. Div. 1997). "Wheth er a

___________________________________________________ ______________

Forbes, nurse employed by U.S. Healthcare to r evie w out-of-network authorizations, and Dr. John Pilla of Medemer ge th at were not put in the record developed in the District Court. In turn, Pr yzbowski has moved to expand the record to include portions of the deposi tions that were not before the District Court, or, in the alternative, that we ignore the

references to the material at issue. W e have consi stently stated that the courts of appeals can only "review the decision bel ow based on the

record that was before the district court." Federal Ins. Co. v. Richard I Rubin & Co., Inc., 12 F.3d 1270, 1284 (3d Cir. 1993 ) (quotation omitted). Therefore, we have not considered these deposition excerpts in making our decision. On remand, the District Court can rec onsider whether the excerpts are material to its inquiry. W e deny both the motion to dismiss the appeal and deny the motion to expand the r ecor d.

23duty exists is solely a question of law to be decid ed by a

court." Id. The Medical Society of New Jersey filed an amicus curiae brief in this court to advance its po sition that a physician does not, and should not, have a"d uty to advocate" with a patient's health care plan when it denies or delays treatment the physician has r equested. Pryzbowski attempts to identify such a duty thr oug h her medical ethics expert, the Hippocratic Oath, and th e American Medical Association's Code of Medical Ethi cs. The Medical Society, besides providing the surprising information that the Hippocratic Oath is not univer sally used throughout the medical schools of this country and that there are at least ten versions of that oath, asserts that there is no "legal duty that subjects physicians wh o have committed no malpractice to liability for injuries r esulting from delays in benefit determinations by plan administrators over whom the physicians have no con trol." Br. of Medical Society at 8-9 (emphasis in original ).

We take no position whether New Jersey, or any othe r state, should impose such a duty, as that is not wi thin our domain. On the issue before us, we agree that physi cians, under existing New Jersey law, have no duty to advo cate on behalf of their patients to an HMO or any health in surance plan for the timely approval of benefits. Cf. Baxt v. Liloia, 155 N.J. 190, 202, 714 A.2d 271, 277 (1998) (noting that state disciplinary codes for attorneys "ar e not de signed to establish standards for civil liability"); Pierce v . Ortho Pharmaceutical Corp., 84 N.J. 58, 76, 417 A.2d 505, 514 (1980) (concluding that the Hippocratic Oath "does not contain a clear mandate of public policy" upon whic h a cause of action may be based). We ther efore agree with the District Court that Pryzbowski has failed to state a claim on her duty to advocate allegation.

III.

CONCLUSION

In summary, we hold that the District Court did not err in holding that Pryzbowski's claims against U.S. He althcare were completely preempted; that New Jersey does not

24recognize a physician's duty to advocate; and that the other

claims asserted by Pryzbowski against Medemer ge an d the physician defendants are not expressly pr eempted a s a matter of law but require additional consideration by the

District Court.

We note that, as a result of the enactment of ERISA and the substantial changes in the delivery of health c are, new legal issues regarding rights and r esponsibilities have arisen. The law remains, to some extent, in a state of flux. It is for Congress and not the courts to decide whe ther it is sound policy for our health care system to limit or channel

the relief available or whether ERISA should allow for

broader remedies for beneficiaries in the world of managed

care.

For the reasons set forth above, we will affirm the December 3, 1997 order dismissing the claims agains t U.S. Healthcare. We will affirm that portion of the orde r of September 8, 1999 dismissing the claims against Medemerge and the physician defendants insofar as t hey allege duty to advocate, and we will vacate the r e mainder of

that order and remand to the District Court for fur ther proceedings in accordance with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

25