2001 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-27-2001

Pryzbowski v. US Healthcare Inc.

Precedential or Non-Precedential:

Docket 99-5920

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Recommended Citation

"Pryzbowski v. US Healthcare Inc." (2001). 2001 Decisions. Paper 62.

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Filed 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 orders of 

the United States District Court for the District of New 

Jersey: (1) the December 3, 1997 order dismissing her 

claims against U.S. Healthcare for its delay in approving 

requested services after determining that those claims 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 order 

granting summary judgment on the state law claims in 

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 those 

 2 
claims 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. 1994). 

When reviewing the order granting dismissal, we must 

accept as true all the factual allegations in the complaint 

and draw all reasonable inferences fr om them. See Banks 

v. Wolk, 918 F.2d 418, 419 (3d Cir . 1990). When reviewing 

the order granting summary judgment, we must draw all 

reasonable inferences in favor of the non-moving party and 

may only affirm if there are no genuine issues of material 

fact and the moving party is entitled to judgment as 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 subsidiary 

of U.S. Healthcare, Inc. (hereafter "U.S. Healthcare"), which 

is a health maintenance organization ("HMO") offered 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, her 

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. Pryzbowski had 

previously undergone numerous sur geries for her back, the 

most recent having been performed by Dr. Giancarlo 

Barolat of Thomas Jefferson University Hospital in 

Philadelphia, all of which were covered under her previous 

health care plan. At Medemerge, she was treated at 

different times by Dr. John Pilla, Dr. Carol E. Sgambelluri, 

and Dr. Kent R. Ellis. 

A CT scan performed on November 29, 1993 revealed 

disc degeneration and a large, extra-dural defect 

 3 
compressing the thecal sac, consistent with disc herniation. 

It also showed a previously implanted neur ostimulator. 

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 evaluation 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 approach this 

with any confidence." App. J, at J-2. On December 9, 1993, 

Pryzbowski went to see Dr. Aiden Doyle, a neurosurgeon, 

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." App. K, at K3. 

Based on these two reports, Medemerge sent a request to 

U.S. Healthcare on December 15, 1993 for a consultation 

with Dr. Barolat, who was the neur osurgeon who last 

performed surgery on Pryzbowski. Dr. Barolat was not a 

participant in the particular plan offer ed by U.S.

Healthcare. Pryzbowski's policy with U.S. Healthcare 

required that it give prior written authorization for services 

by non-participating providers and facilities. U.S.

Healthcare approved the consultation and Dr. Barolat 

examined Pryzbowski on January 19, 1994. He concluded 

that surgery was needed and that the following specialists 

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 specialists to 

whom he referred were also associated with Thomas 

Jefferson University Hospital and outside U.S. Healthcare'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, including 

Dr. Edward Barrett (a mental health specialist), Dr. 

Alexander Levin (a pain management specialist), and Dr. 

M.A. Sarraf (a pulmonary specialist) between February 19, 

 4 
1994 and April 18, 1994, and they transmitted their reports 

thereafter. It is evident that this was not satisfactory to Dr. 

Barolat, because a handwritten note dated May 3, 1994, 

headed "Stephanie - Dr. Barolat's office," states "Dr. will not 

perform the surgery unless specials [sic] at Jefferson in 

consult. USHC will not approve." Appellees' App., Lang 

Certification, Ex. A. U.S. Healthcare authorized the 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, Pryzbowski 

continued to suffer from severe back pain after the surgery. 

Dr. Barolat later opined "that the persistence of the 

excruciating pain . . . was most likely caused by the 

significant delay that occurred between the onset of the 

symptomatology and the surgical intervention." App. M, at 

M-4. 

Pryzbowski filed a complaint, later amended, against 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 allege 

that U.S. Healthcare "negligently and car elessly delayed in 

giving its approval for the necessary sur gery which the 

plaintiff . . . urgently needed," causing Pryzbowski severe 

and permanent injury, emotional distress, and future 

expenses for medical care and treatment (Count One); that 

U.S. Healthcare's delay was arbitrary and capricious (Count 

Two); and that, by delaying its approval for the surgery, 

U.S. Healthcare "acted with a willful and wanton disregard 

for the harm that would likely result to the plaintiff " 

(Count Three). The complaint also asserts that U.S.

Healthcare's delay in approving the sur gery breached its 

health insurance contract with Pryzbowski (Count Four); 

that the delay in surgery approval was"in bad faith" (Count 

Five); and that U.S. Healthcare breached its duty to 

"screen, hire, train and employ capable and responsible 

individuals . . . to make thoughtful and reasonable

decisions as to healthcare" (Count Seven). 

In the five counts Pryzbowski asserts against Medemerge 

and/or the physician defendants, she alleges that 

Medemerge "negligently and carelessly delayed in 

authorizing and/or obtaining authorization fr om U.S. 

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

in failing to obtain authorization, "acted with a willful and 

wanton disregard for the harm that would likely result to 

the plaintiff " (Count Nine); that the physician defendants 

"negligently and carelessly delayed in authorizing and/or 

obtaining authorization" for the back sur gery (Count Ten); 

and that they "acted with a willful and wanton disregard" in 

delaying authorization (Count Eleven). Another count 

alleges that Medemerge breached its duty to "screen, hire 

and employ capable and responsible individuals to serve as 

its agent, servants, and/or employees" (Count Six).

U.S. Healthcare removed the case to the United States 

District Court for the District of New Jersey. On December 

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 defendants 

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 judgment 

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 issues 

that arise under ERISA, both of which are pr esented in this 

case. The application of express preemption, set forth in 

S 514(a) of ERISA, arises in connection with Pryzbowski's 

claims against Medemerge and the physician defendants. 

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 District 

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, originally filed in 

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

of action and named as defendants parties who wer e not 

completely diverse from Pryzbowski, ther eby displaying no 

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

S 1441. In Franchise Tax Bd. of Cal. v. Constr. Laborers 

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 question 

jurisdiction exists only when an issue of federal law 

appears on the face of the plaintiff 's complaint. The 

anticipation that a defendant may raise a federal defense 

will not confer federal question jurisdiction. On the 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. Franchise Tax 

Bd., 463 U.S. at 24. The paradigmatic example of this 

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 (1968). In 

Franchise Tax Board, the Court did not reach the question 

of complete preemption under ERISA because the claim 

asserted there was not within the original jurisdiction of the 

federal courts and therefore could not be removed by 

defendant to federal court. See 463 U.S. at 24-25. 

It was in Metropolitan Life Ins. Co. v. T aylor, 481 U.S. 58 

(1987), that the Supreme Court faced the question "whether 

or not the Avco principle can be extended to statutes other 

than the LMRA in order to recharacterize a state law 

complaint displaced by S 502(a)(1)(B) as an action arising 

under federal law." Id. at 64. After noting the similarity 

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 force as 

had been given to S 301 of LMRA. See id. at 65. This 

conclusion from the statutory language was confirmed not 

only by the statements of one of the sponsors of ERISA but 

also by the Conference Report, which stated that all suits 

 7 
"to enforce benefit rights under the plan or to recover 

benefits under the plan . . . are to be r egarded as arising 

under the laws of the United States in similar fashion to 

those brought under section 301 of the Labor -Management 

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 to federal 

court." Metropolitan Life, 481 U.S. at 66. 

We do not understand Pryzbowski to be challenging the 

principle that such claims are completely pr eempted 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 beneficiary or 

participant of an ERISA-regulated plan to bring a civil 

action "to recover benefits due to him under the terms of 

his plan, to enforce his rights under the ter ms of the plan, 

or to clarify his rights to future benefits under the terms of 

the plan." 29 U.S.C. S 1132(a)(1)(B). UnderS 502(a), a 

beneficiary may obtain accrued benefits due, a declaratory 

judgment about entitlement of benefits, or an injunction to 

require the administrator to pay benefits. See Pilot 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 preempted. 

This court has on several occasions consider ed whether 

a plaintiff 's claim against his or her HMO is completely 

preempted under ERISA. In Dukes v. U.S. Healthcare, Inc., 

57 F.3d 350 (3d Cir. 1995), we distinguished between 

claims directed to the "quality of the benefits [plaintiffs] 

received" and claims "that the plans err oneously withheld 

benefits due" or that seek "to enfor ce [plaintiffs'] rights 

under the terms of their respective plans or to clarify their 

rights to future benefits." Id. at 356. We stated that claims 

that merely attack the quality of benefits do not fall within 

the scope of S 502(a)'s enforcement pr ovisions and are not 

completely preempted, whereas claims challenging the 

quantum of benefits due under an ERISA-regulated plan 

are completely preempted under S 502(a)'s civil enforcement 

scheme. See id. at 356-57. We held that, because the 

 8 
plaintiffs in Dukes alleged that the HMO failed to exercise 

reasonable care in providing medical treatment, their 

claims were not completely preempted. See id. at 358. 

Thereafter, in In re U.S. Healthcare, Inc., 193 F.3d 151 (3d 

Cir. 1999), we applied the quality-quantity distinction in 

determining whether claims by parents against U.S. 

Healthcare based on the death of their newbor n baby were 

completely preempted. In making that decision, we relied 

upon the distinction made in Dukes between"an HMO's

role in `arranging for medical treatment' rather than its role 

as a plan administrator determining what benefits are 

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 their 

delivery was essentially a medical determination that could 

be subject to a state-law medical malpractice action. See id. 

at 162-63. We also held that the HMO's alleged negligence 

in selecting, training, and supervising medical personnel 

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 distinction 

between claims raising quality of care issues and claims 

raising quantity of benefits issues. Lazorko alleged that 

financial disincentives imposed by the HMO discouraged 

medical providers from hospitalizing a mentally ill

beneficiary who later committed suicide. W e decided that 

this was a quality of care claim because "the denial of [the 

beneficiary's] request for hospitalization occurred in the 

course of a treatment decision, not in the administration of 

the [plaintiff 's and beneficiary's] plan generally." Id. at 250. 

Thus, we held that the plaintiffs' claim was not completely 

preempted under S 502(a). 

Though the quality-quantity distinction was helpful in 

those cases, we have acknowledged that the distinction 

would not always be clear. See Dukes, 57 F.3d at 358. We 

recognized that there might be a situation where the quality 

of the medical care provided would be so deficient that the 

beneficiary essentially would not have received any health 

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

noted that making the quality-quantity distinction would be 

particularly difficult when an HMO has acted as both a 

plan administrator and a provider of medical services. See 

193 F.3d at 162. 

The recent Supreme Court decision in Pegram v. 

Herdrich, 530 U.S. 211, 120 S. Ct. 2143 (2000), suggests 

preferable terminology. Although that case concerned 

fiduciary acts under ERISA and not preemption, the 

distinction made there between "eligibility decisions," which 

"turn on the plan's coverage of a particular condition or 

medical procedure for its treatment," and "treatment 

decisions," which are choices in "diagnosing and treating a 

patent's [sic] condition," 120 S. Ct. at 2154, is equally 

applicable for complete preemption analysis. Regardless of 

the language used, the ultimate distinction to make for 

purposes of complete preemption is whether the claim 

challenges the administration of or eligibility for benefits, 

which falls within the scope of S 502(a) and is completely 

preempted, or the quality of the medical tr eatment

performed, which may be the subject of a state action. 

This court has not had occasion to consider how a claim 

that the HMO or plan administrator delayed in the approval 

of benefits should be treated under ERISA. It is evident that 

a claim alleging that a physician knowingly delayed in 

performing urgent surgery on a patient whose appendix 

was about to rupture would relate to the quality of care, 

and not be subject to removal on the basis of complete 

preemption. On the other hand, a claim alleging that 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 regarding 

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 benefits 

due would be completely preempted); Jass v. Prudential 

Health Care Plans, Inc., 88 F.3d 1482, 1488-89 (7th Cir. 

1996) (holding that a claim against an HMO's utilization 

review decision was completely preempted by ERISA).

 10 
In 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 , "Congress has 

clearly manifested an intent to make causes of action 

within the scope of the civil enforcement pr ovisions of 

S 502(a) removable to federal court." 481 U.S. at 66. 

Accordingly, we must examine Pryzbowski's claims against 

U.S. Healthcare to determine whether they could have been 

the subject of a civil enforcement action underS 502(a). 

Counts One through Five of Pryzbowski's complaint 

allege that U.S. Healthcare negligently and car elessly 

delayed approval of her surgery with Dr . Barolat, acted in 

an arbitrary and capricious manner in doing the same, 

acted in willful and wanton disregard of her health, acted 

in bad faith, and breached her health insurance contract. 

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 ealm 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, she 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 scheme 

provided by Congress. There have been numerous cases in 

which the courts have issued preliminary injunctions under 

similar circumstances. See, e.g., Marro v. K-III 

Communications Corp., 943 F. Supp. 247 (E.D.N.Y. 1996) 

(granting preliminary injunction to compel plan 

administrator to precertify high dosage chemotherapy); 

Mattive v. Healthsource of Savannah, Inc., 893 F. Supp. 

1559 (S.D. Ga. 1995) (granting preliminary injunction 

enjoining plan administrator from denying coverage for 

high-dose chemotherapy); Dozsa v. Crum & Forster Ins. Co., 

716 F. Supp. 131 (D.N.J. 1989) (granting pr eliminary 

injunction enjoining plan administrator from denying 

coverage for autologous bone marrow transplant treatment). 

Pryzbowski's final claim against U.S. Healthcar e (Count 

Seven) alleges that it failed properly to hir e, train, and 

 11 
supervise its employees "to make thoughtful and r easonable 

decisions as to healthcare." Amended Complaint, Count 7. 

Although ostensibly directed at the provision of medical 

treatment, a federal court may "look beyond the face of the 

complaint to determine whether a plaintif f has artfully 

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. Franchise Tax 

Bd., 463 U.S. at 22 (noting that "a plaintif f may not defeat 

removal [to federal court] by omitting to plead necessary 

federal questions in a complaint"). Inasmuch as Pryzbowski 

has not alleged that U.S. Healthcare or its employees 

engaged in any medical treatment with r egard to her, the 

alleged negligence by U.S. Healthcare in the hiring, 

training, and supervising of its employees necessarily 

concerns the administration of her benefits, U.S. 

Healthcare's only role in this case. It follows that Count 

Seven is also completely preempted under S 502(a) of 

ERISA. 

Pryzbowski contends that her claims are analogous to the 

claims made in Dukes and In re U.S. Healthcare, where 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 of 

benefits and a provider of medical services. In In re U.S. 

Healthcare, we held that the HMO's policy to discharge 

newborn infants within 24 hours was essentially a "medical 

determination of the appropriate level of care." 193 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 that such 

a visit would be provided, was directed at the HMO's 

function as medical provider. See id. at 164. Therefore, the 

plaintiffs' claims alleged medical malpractice and were not 

completely preempted by ERISA. In Dukes, the plaintiffs' 

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 theory 

and also directly responsible for negligence in selecting, 

retaining, screening, monitoring and evaluating the

personnel who actually provided the medical services. See 

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

 12 
to provide benefits due under the ERISA plan and therefore 

were not completely preempted. 

In the case before us, as we note above, Pryzbowski's 

claims against U.S. Healthcare are limited to its delay in 

approving benefits, conduct falling squar ely within 

administrative function. A holding that Pryzbowski's claims 

against U.S. Healthcare are not completely preempted 

would open the door for legal challenges to cor e managed 

care practices (e.g., the policy of favoring in-network 

specialists over out-of-network specialists), which the 

Supreme Court eschewed in Pegram. Cf. 120 S. Ct. at

2156-57 (rejecting claims attacking financial incentives 

behind HMO structure, in light of congr essional policy of 

promoting HMOs). We conclude that the District Court did 

not err in holding that the claims Pryzbowski asserts 

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 defend the 

delay in provision of services to Pryzbowski may leave her, 

and other beneficiaries, without effective r elief for the 

improper administration of benefits. The delay attendant on 

the required preauthorization by HMOs has been a matter 

of public concern. In fact, this has led the Department of 

Labor recently to publish a long pending final rule that 

requires that claims seeking pretr eatment authorization for 

medical services must be decided within 15 days and that 

imposes other stringent time limits on appeals fr om adverse 

decisions. See 65 Fed. Reg. 70,245 (Nov. 21, 2000). While 

the new rule applies only to claims filed on or after Jan. 1, 

2002, it should serve to give notice to health car e 

administrators that ERISA not only provides pr otection 

from litigation arising from benefits administration but 

imposes certain responsibilities with r espect to such 

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 them are 

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

anticipated defense of express preemption under S 514(a) be 

the basis for removal of these claims. See Franchise 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 under S 514(a), 

the district court, being without removal jurisdiction, 

cannot resolve the dispute regarding preemption." Dukes, 

57 F.3d at 355. Federal jurisdiction over Pryzbowski's 

claims against Medemerge and the physician defendants, 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 defendants but 

instead exercised supplemental jurisdiction under 28 

U.S.C. S 1367. That section authorizes a district court 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 same case or 

controversy under Article III of the United States 

Constitution." 28 U.S.C. S 1367(a). W e have interpreted this 

provision to require the following: (1) " `[t]he federal claims 

must have substance sufficient to confer subject matter 

jurisdiction;' " (2) " `[t]he state and federal claims 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 judicial 

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), which 

sustained the constitutionality of pendent jurisdiction). 

We have already determined that the District Court had 

subject matter jurisdiction over Pryzbowski's claims against 

U.S. Healthcare. Moreover, Pryzbowski's claims against 

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 treatment she 

received from all of the defendants in r esponse to her 

complaint of back pain and the delay she experienced in 

securing the approval for the out-of-network physicians and 

services that Dr. Barolat believed wer e necessary. Under 

these circumstances, it would be expected that all of 

 14 
Pryzbowski's claims against the defendants would be

combined in one judicial proceeding. Ther efore, the District 

Court had the authority for its exercise of supplemental 

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 should have 

remanded her claims against the other defendants to state 

court. That was certainly an option for the District Court 

but not one it was obliged to take. In New Rock Asset 

Partners, L.P. v. Preferred Entity Advancements, Inc., 101 

F.3d 1492, 1506 (3d Cir. 1996), we stated that "where the 

jurisdiction-conferring party drops out and the federal 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 courts have 

discretion to continue exercising supplemental jurisdiction. 

See id. 

Pryzbowski's challenge to the District Court's failure to 

remand seems to be directed exclusively to a lack of 

jurisdiction in the District Court. She has given us 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 familiar 

with the factual background and the positions of the 

parties, and we see no reason why it should not have 

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 against U.S. 

Healthcare (Counts 1-5 and 7) and Counts 9 and 11 were 

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 against 

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 summary 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 that portion of the 

District Court's opinion, and we conclude that she does not challenge it. 

 15 
moved for summary judgment. In support of their motion, 

defendants filed the certification of their counsel, Joseph R. 

Lang, who attached extensive documentary evidence and 

references to certain depositions. These documents set 

forth Pryzbowski's medical history in connection with her 

complaints of back pain and efforts to obtain the necessary 

treatment and services.2 The District Court noted that 

"plaintiff has not provided this court with any evidence 

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 for 

summary judgment as having two bases. The first was that 

Pryzbowski's claims were preempted byS 514(a) of ERISA. 

The second was that Pryzbowski failed to state a claim for 

which relief can be granted. We consider them in turn. 

a. Express Preemption by S 514(a) 

Section 514(a), the express preemption pr ovision of 

ERISA, provides that ERISA "shall supersede any and all 

State laws insofar as they . . . relate to any employee 

benefit plan" covered by the statute. 29 U.S.C. S 1144(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 have 

explained, "[u]nlike the scope of S 502(a)(1)(B), which is 

jurisdictional and creates a basis for r emoval to federal 

court, S 514(a) . . . governs the law that will apply to state 

law claims, regardless of whether the case is brought in 

state or federal court." Lazorko, 237 F .3d at 248.

In one of the early cases to come before the Supreme 

Court concerning the express preemption provision, the 

Court stated that a law "relates to" an employee benefit 

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 guidance 

_________________________________________________________________ 

2. They are reviewed in detail in the District Court's opinion granting 

summary judgment, see Pryzbowski, 64 F . Supp. 2d at 363-66, and 

need not be reprised. 

 16 
was 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 Shield 

Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) [hereafter 

Travelers], where the Court stated that it would inquire into 

"the objectives of the ERISA statute as a guide to the scope 

of the state law that Congress understood would survive." 

Id. at 656. To that end, the Court noted that Congress 

intended: 

 to ensure that plans and plan sponsors would be 

 subject to a uniform body of benefits law; the 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 substantive law 

 . . . requiring the tailoring of plans and employer 

 conduct to the peculiarities of the law of each 

 jurisdiction. 

Id. at 656-57 (quoting Ingersoll-Rand Co. v. McClendon, 498 

U.S. 133, 142 (1990) (citation omitted) (ellipses and 

brackets in original)). Thus, the basic objective of the 

express preemption provision was"to avoid a multiplicity of 

regulation in order to permit the nationally uniform 

administration of employee benefit plans." Id. at 657. 

In Travelers and several cases ther eafter, the Court held 

that the challenged state statutes were not pr eempted 

because they were laws of general application that were 

neither directed to ERISA plans nor inter fered with their 

administration. For example, in Travelers the Court held 

that a statute that imposed surcharges on hospital rates for 

patients with commercial insurance purchased by ERISA 

plans, which was intended to help Blue Cross/Blue Shield 

plans, had only an indirect economic ef fect on ERISA 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 (1997) 

(state prevailing wage law does not "r elate to" employee 

benefit plans and is not preempted by ERISA where statute 

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 

 17 
facilities not preempted despite some bur den on 

administration of ERISA plans); but see Alessi v. RaybestosManhattan, Inc., 451 U.S. 504 (1981) (state compensation 

act barring offset of workers' pension benefits by 

compensation benefits preempted). 

The issue of express preemption arises in other contexts 

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 beneficiaries arising 

out of the denial of plan benefits. This line of cases 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 plan, 

alleging it improperly denied his claim for long-term 

disability benefits. He claimed tortious br each of contract, 

breach of fiduciary duties, and fraud in the inducement. 

Plaintiff sought to avoid preemption under S 514(a) by 

trying to fit some of his claims into the saving clause 

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 complaint as based 

on alleged improper processing of a claim for benefits under 

an employee benefit plan, stated that such claims 

"undoubtedly meet the criteria for pre-emption under 

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 for 

denial of benefits, even when the claim is couched in terms 

of common law negligence or breach of contract, have 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 benefits); Tolton 

v. American Biodyne, Inc., 48 F.3d 937, 941-43 (6th Cir. 

1995) (holding that S 514(a) preempted claims for wrongful 

death, medical malpractice, and insurance bad faith based 

on a refusal to authorize treatment); Corcoran v. United 

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). 

 18 
The rationale for these holdings is that the decision 

whether a requested benefit or service is covered by the 

ERISA plan falls within the scope of the administrative 

responsibilities of the HMO or insurance company, and 

therefore "relates to" the employee benefit plan. The same 

rationale has been applied by courts holding that suits 

against HMOs for delay in authorizing benefits wer e 

preempted under S 514(a). For example, in Kuhl v. Lincoln 

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-network 

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 of 

medical benefits, and therefore expr essly preempted 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 that a 

wrongful death claim based on the HMO's delay in 

authorizing cancer treatment was expressly preempted 

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 Lazorko 

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 control the 

quality of the benefits received by plan participants[,] . . . a 

field traditionally occupied by state regulation." 57 F.3d at 

357. We explained that: 

 When Congress enacted ERISA it was concer ned in 

 large part with the various mechanisms and 

 institutions involved in the funding and payment of 

 plan benefits. That is, Congress was concer ned "that 

 owing to the inadequacy of current minimum[financial 

 and administrative] standards, the soundness and 

 stability of plans with respect to adequate funds to pay 

 promised benefits may be endangered." S 2, 29 U.S.C. 

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

 promised benefits would be available when plan 

 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 resulting 

from its adoption of a policy to dischar ge newborns from 

the hospital within 24 hours after birth went to the quality 

of care provided. They were ther efore to be evaluated as an 

ordinary state-law tort claim for medical malpractice. There 

is no reason why the distinction between quality of care 

issues and benefits administration issues made in those 

cases, which arose in the context of complete preemption 

under S 502(a), would not be equally applicable to express 

preemption under S 514(a). 

Moreover, there is a strong suggestion in Pegram that 

claims based on medical treatment decisions r emain

outside the preemptive effect of ERISA. In holding that 

mixed eligibility/treatment decisions made by an HMO 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 malpractice 

actions in the guise of federal fiduciary br each claims 

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 malpractice 

claim." 120 S. Ct. at 2158. 

The District Court here recognized that a malpractice 

claim by Pryzbowski against Medemerge and the physician 

defendants would not be preempted. However , that court, 

after conducting a comprehensive review of the relevant 

cases, concluded that "[i]t is clear that plaintiff 's claims, at 

their core, challenge the poor administration of her plan -- 

the failure to promptly approve the r equest for Dr. Barolat 

to perform the surgery -- rather than the quality of care 

she received. " 64 F. Supp. 2d at 369. The District Court 

also stated that "a claim for negligent delay in the 

 20 
utilization review, or pre-authorization process, even if 

alleged as a state law violation against the physician, 

would, at the very least, `relate to' an ERISA plan and, thus, 

be preempted." Id. at 367. W e cannot agree that all of 

Pryzbowski's claims against Medemerge and the physician 

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 diagnose or 

properly treat her back pain. She concedes that those 

physicians found that her problem requir ed specialty care 

and referred her to an orthopedic sur geon, a neurosurgeon, 

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 benefits 

and therefore differ from the typical administration 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 the plan 

that covered Pryzbowski. Admittedly, they did not have the 

responsibility to make coverage decisions. Indeed, they 

argue in their brief that they had no power to authorize 

services by out-of-network physicians and that those 

questions -- which have been held to be administrative as 

to HMOs -- were always relayed to U.S. Healthcare. As 

these defendants disclaim any administrative authority or 

responsibility with respect to the plan, it follows that the 

preemption afforded by S 514(a) for claims "relating to" a 

plan is inapplicable. 

Our decisions have not focused on the extent to which 

the scope of a physician's responsibility to a patient goes 

beyond the mere treatment of that patient's medical

complaint. It remains unclear whether the New Jersey 

Supreme Court would include within the physicians' duty 

of care the processing of their patients through the office, 

including matters such as the completion of for ms, referral 

to other physicians, arrangements for laboratory tests, and 

other general office procedures that may be necessary for 

the complete care of the patient. 

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

209, 711 N.E.2d 621 (1999), a primary care physician 

allegedly delayed in submitting to the HMO a r equest for 

authorization for a beneficiary to see an out-of-network 

cardiologist. The HMO eventually denied authorization, and 

the beneficiary died before seeing an in-network 

cardiologist. The New York Court of Appeals held that the 

wrongful death and negligence claims br ought by the 

beneficiary's wife were not preempted byS 514(a). See id. at 

219, 711 N.E.2d at 625. The court stated that "[p]laintiff '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-network 

cardiologist]. Plaintiff does not allege that [the physician 

defendant] is responsible for delay caused by US 

Healthcare's decision-making process with respect to 

coverage or benefits. Her claim against [the physician 

defendant] is that he failed to take timely action to treat her 

husband." Id. at 219-20, 711 N.E.2d at 625 (footnote 

omitted). 

Nealy stands for the proposition that under New York law 

the physician's duties in providing car e to his/her patients 

may be broader than the mere medical tr eatment decision. 

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 inadequate 

briefing on this point before us and in the District Court, 

we are not prepared to state as a matter of law that there 

is no conceivable malpractice claim against these 

defendants under New Jersey law, and hence cannot agree 

that all of the claims against them are pr eempted under 

S 514(a).3 

_________________________________________________________________ 

3. There are a number of pending motions. The appellees have moved to 

dismiss the appeal or in the alternative to strike the appellant's brief 

and 

appendix because Pryzbowski included in the Joint Appendix excerpts of 

the deposition testimony of Dr. Linda Peeno, her medical ethics expert, 

Anita McGinley, former HMO coordinator at Medemerge, Sandra Coles- 

 22 
b. Failure to State a Claim 

Our decision that Pryzbowski's claims against Medemerge 

and the physician defendants are not expr essly preempted 

does not mean that they necessarily survive dismissal 

under summary judgment. Only after the District Court 

determines the scope of New Jersey malpractice law will it 

be able to decide whether Pryzbowski has offer ed sufficient 

evidence to make a genuine issue of material fact that 

Medemerge and the physician defendants failed to meet the 

applicable standard. 

There is one claim, however, that we ar e in a position to 

resolve. The District Court held that Pryzbowski failed 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 defendants 

violated a state common law "duty to advocate" to the HMO 

so as to expedite the approval of her sur gery. Although we 

read Pryzbowski's negligence claim against Medemerge and 

the physician defendants as broader than the claimed duty 

to advocate, we agree with the District Court's analysis 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 by 

defendant; and (3) an injury to plaintiff pr oximately caused 

by defendant's breach." Endre v. Arnold, 300 N.J. Super. 

136, 142, 692 A.2d 97, 100 (App. Div. 1997). "Whether a 

_________________________________________________________________ 

Forbes, nurse employed by U.S. Healthcare to r eview out-of-network 

authorizations, and Dr. John Pilla of Medemer ge that were not put in the 

record developed in the District Court. In turn, Pryzbowski has moved to 

expand the record to include portions of the depositions that were not 

before the District Court, or, in the alternative, that we ignore the 

references to the material at issue. W e have consistently stated that the 

courts of appeals can only "review the decision below 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 reconsider 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 ecord. 

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

court." Id. The Medical Society of New Jersey filed an 

amicus curiae brief in this court to advance its position 

that a physician does not, and should not, have a"duty 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 ough her 

medical ethics expert, the Hippocratic Oath, and the 

American Medical Association's Code of Medical Ethics. The 

Medical Society, besides providing the surprising 

information that the Hippocratic Oath is not universally 

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 who have 

committed no malpractice to liability for injuries r esulting 

from delays in benefit determinations by plan 

administrators over whom the physicians have no control." 

Br. of Medical Society at 8-9 (emphasis in original). 

We take no position whether New Jersey, or any other 

state, should impose such a duty, as that is not within our 

domain. On the issue before us, we agree that physicians, 

under existing New Jersey law, have no duty to advocate on 

behalf of their patients to an HMO or any health insurance 

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 designed 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 which 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. Healthcare 

were completely preempted; that New Jersey does not

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

claims asserted by Pryzbowski against Medemer ge and the 

physician defendants are not expressly pr eempted as 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 care, 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 whether 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 against U.S. 

Healthcare. We will affirm that portion of the order of 

September 8, 1999 dismissing the claims against 

Medemerge and the physician defendants insofar as they 

allege duty to advocate, and we will vacate the r emainder of 

that order and remand to the District Court for further 

proceedings in accordance with this opinion. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 25