_____________ No. 95-4029MN

_____________ Dianne L. Shea, individually * and as trustee for the heirs of * Patrick Joseph Shea, decedent; * individually and derivatively * on behalf of participants in * the Seagate Group Health Plan, * * Appellant, * * Appeal from the United States v. * District Court for the District * of Minnesota. Sidney Esensten; Jeffrey A. * Arenson; Family Medical Clinic, * now known as Fairview Clinics, * a Minnesota non-profit * corporation; Medica, a * Minnesota non-profit * corporation, * * Appellees. *

_____________ Submitted: November 21, 1996 Filed: February 26, 1997

_____________ Before FAGG, WOLLMAN, and HANSEN, Circuit Judges.

_____________ FAGG, Circuit Judge.

After being hospitalized for severe chest pains during an oversea s bus iness trip, Patrick Shea made several visits to his long-time famil y doctor. During these visits, Mr. Shea discussed his extensive famil y history of heart disease, and indicated he was s uffering from chest pains, shortne ss of breath, muscle tingling, and dizziness. Despite all th e warni ng signs, Mr. Shea's doctor said a referral to a cardiologist wa s unnecessary. When Mr . Shea's symptoms did not improve, he offered to pay for the cardiologist himself. At that point, Mr. Shea's doctor persuaded Mr. Shea, who

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was t hen forty years old, that he was too young and did not have enoug h symptom s to justify a visit to a cardiologist. A few months later, Mr

. Shea died of heart failure.
Mr. Shea had been an employee of Seagate Technologies, Inc. (Se agate) for many years. Seagate provided health care be nefits to its employees by contracting with a he alth maintenance organization (HMO) known as Medica. As part of its managed care product, Medica required Seagate's employees to select one of Medica's authorized primary car e doctors. Mr. Shea chose his family doctor, who was on Medica's list of preferred doctors. Under the terms of Medica's policy, Mr. Shea was insured for all of his medicall y
nece ssary care, including cardiac care. Before Mr. Shea could see a spe cialist, however, Medica required Mr. Shea to get a written referra l from his primary care doctor. Unknown to Mr. Shea, Medica's contracts wit h its preferred doctors created financial incentives that were designed to minimize referrals. Specifically, the primary care doctors were rewarded for not making covered referrals to specialists, and were docked a portion of their fees if they made too many. According to Mr. Shea's widow Dianne , if her husband would have known his doctor could earn a bonus for treating less, he would have disregarded his doctor's advice, sought a cardiologist's opinion at his own expense, and w ould still be alive today.
Initially, Mrs. Shea brought a wrongful death action in Minnesot a state court. Mrs. Shea alleged Medica's fraudulent nondisclosure an d misrepresentation about its doctor incentive programs limited Mr. Shea's ability to make an informed choice about his life-saving health care

. Medica removed the case to federal court, contending Mrs. Shea's tor t claims were preempted by the Employee Retirement Income Security Ac t (ERISA), 29 U.S.C. § 1144 (1994). Mrs. Shea fil ed a motion to remand, but the district court denied the motion. Mrs. Shea then amended her complain t to assert Medica's behind-the-scenes efforts to reduce

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covered referrals violated Medica's fiduciary du ties under ERISA. See id. §§ 1 002(21), 1104(a)(1). Believing ERISA does not require an HMO t o disclose its doctor compensation arrangements because they are no t "material facts affecting a beneficiary's interests," the district court dismissed Mrs. Shea's amended complaint for fail ing to state a claim. See Fed. R. Civ. P. 12(b)(6). Mrs. Shea appeals. Having construed the pleade d facts in the light most favorable to Mrs. Shea, we reverse the judgment of the district court. See Alexander v. Peffer , 993 F.2d 1348, 1349 (8th Cir

. 1993).

Becau se our removal jurisdiction is intertwined with the distric t court's preemption ru ling, we must first consider whether ERISA displaces Mrs. She a's tort claims against Medica. See Schroeder v. Phillip s Pet roleumCo. , 970 F.2d 419, 420 (8th Cir. 1992) (per curiam). ERIS A superse des state laws insofar as they "relate to any employee benefi t plan." 29 U .S.C. § 1144(a). To this end, the language of ERISA' s preemption clause sweeps broadly, embracing comm on law causes of action if they have a connection with or a reference to an ERISA plan. See Pilo t Life Ins. Co. v. Dedeaux , 481 U.S. 41, 47-48 (1987). Here, Medic a adminis tered Seagate's employee benefit plan, and Mrs. Shea maintain s Medica wrongfully failed to disclose a major limitation on her husband's hea lth care benefits. Along these lines, we have held that claims o f miscon duct against the administrator of an employer's health plan fal l comfortably within ERISA's broad preemption provision. See Kuhl v. Lincol n Nat'l Health Plan of Kansas City, Inc. , 999 F.2d 298, 301-04 (8th Cir

. 1993); see also Howe v. Varity Corp. , 36 F.3d 746, 752-53 (8th Cir. 1994) (ERISA preempts state fraudulent misrepresentation claims), aff'd , 116 S. Ct. 1065 (1996).

After considering the factors that guide our inquiry, see Arkansa s Blue Cross & Blue Shield v. St. Mary's Hosp., In c. , 947 F.2d 1341, 1344-45 (8th Cir. 1991), we conclude the district court correctly decided tha t ERISA preempts Mrs. Shea's state-law claims.

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The out come of Mrs. Shea's lawsuit would clearly affect how Seagate' s ERISA- regulated benefit plan is administered, and if similar cases ar e brought in state courts across the country, ERIS A plan administrators will inevitably be forced to tailor their plan disclo sures to meet each state's unique requirements. This result would be at odds with Congress's intent to ensure "the nationally uniform administration of employee benefi t plans." New York State Conference of Blue Cross & Blue Shield Plans v

. Travelers Ins. Co. , 1 15 S. Ct. 1671, 1677-78 (1995). Thus, we agree with the district court that Mrs. Shea's case was removable to federal court. See Metropolitan Life Ins. Co. v. Taylor , 481 U. S. 58, 63-64, 66-67 (1987) (ERISA preemption supports removal); Anderson v. Humana, Inc. , 24 F.3d 889 , 891 (7 th Cir. 1994) (plan participant's attacks on HMO's incentiv e structure were both preempted and removable); Rodriguez v. Pacificare of Texas, Inc. , 980 F.2d 1014, 1016-17 (5th Cir. 1993) (state-law claims base d
on HMO's refusal to provide referral letter were properly preempted an d removed).
Having decided Mrs. Shea's case belo ngs in federal court, we turn to Medi ca's contention that Mrs. Shea lacks standing to pursue an ERIS A remedy. ERISA author izes current plan participants to assert a claim for breach of fiduciary duty. See Adamson v. Armco, Inc. , 44 F.3d 650, 65 4 (8th Cir.), cert. den ied , 116 S. Ct. 85 (1995). According to Medica, Mr. Shea was no longer a Seagate plan participant after he died. See 29 U.S.C

. § 1002(7). Contrary to Medica's view, we have held that if the fiduciary' s alleged ERISA violation caused the former employee to lose plan participan t status, the former employee will nonetheless have standing to challenge th e fiduciary violation. See Adamson , 44 F.3d at 654-55; see also Swinney v. General Motors Corp. , 46 F.3d 512, 518-19 (6th Cir. 1995); Vartanian v

. Monsanto Co. , 14 F.3d 697, 702 (1st Cir. 1994). Mrs. Shea contends that, but for Medica's failure to disclose Mr. Shea's doctor's financial stake in discouraging cover ed referrals to specialists, her husband would still be alive and a current plan participant. Stated another way, Mr. Shea did

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not voluntarily relinquish his rights in the Seagate plan. See Adamson , 44 F.3d at 655. We are persuaded that Mrs. Shea , as the representative of Mr. Shea's estate, has standing to assert her hu sband's ERISA claims. Any othe r result would reward Medica for giving its preferred doctors a n incentive to make more money by delivering cheaper care to the detriment of patients like Mr. Shea, and "ERISA should not be construed to permit th e fiduciary to circumvent [its] ERISA-imposed fiduciary duty in this manner. " Swinney , 46 F.3d at 518-19; see also Varity Corp. v. Howe , 116 S. Ct. 1065 , 1068 (1996) (former plan participants tricked by a breach of a fiduciary duty have standing to sue).

With the jurisdictional challenges out of the way, we next consider whether Medica had a duty to disclose its referral-discouraging approach to health care. ERISA requires plan fiduciaries to "discharge [their ] duties with respect to a plan solely in the interest of the participants and beneficiaries." 29 U.S.C. § 1104(a)(1). In addition to ERISA' s express disclosure requirements, see 29 U.S.C. §§ 1021-1031, "`Congres s invoked the common law of trusts to define the general scope of [ a fiduciary's] . . . responsibility.'" Varity Corp. , 116 S. Ct. at 107 0 (quot ing H.R.Rep. No. 93-533, at 3-5, 11-13 (1973)). In affirming ou r decisi on in Varity Corp. , the Supreme Court concluded that ERIS A fiduciaries must comply with the common law duty of loyalty, which include s the obligation to deal fairly and honestly with all plan members. See id. at 1074-75. Although the Supreme Court found it unnecessary to reach the issue, our earlier opinion made clear that the d uty of loyalty requires an ERISA fiduciary to communicate any material facts which could adversel y affect a plan member's interests. See Varity Co rp. , 36 F.3d at 754. "The duty to disclose material information is the core of a fiduciary' s respon sibility, animating the common law of trusts long before th e enactment of ERISA." Eddy v. Colonial Life Ins. Co. of Am. , 919 F.2d 747, 750 (D.C. Cir. 1990).

### -6- Al though the district court acknowledged Medica's duty of loyalty , the court felt the compensation arrangements between Medica and its doctor s
were not m aterial facts requiring disclosure. We disagree. From th e patient's point of view, a financial incentive scheme put in place t o influe nce a treating doctor's referral practices when the patient need s specialized care is c ertainly a material piece of information. This kind of pat ient necessarily relies on the doctor's advice about treatmen t optio ns, and the patient must know whether the advice is influenced b y sel f-serving financial considerations created by the health insuranc e provider. The district court believed Seagate's employees already realize d their doctors' pocketbooks would be adversely af fected by making referrals to outside specialists. Even if the district court is right, Seagate' s employe es still would not have known their doctors were penalized fo r making too many referrals and could earn a bonus by skimping on specialize d
care. Thus, we conclude Mr. Shea had the right to know Medica was offerin g financial incentives that could have colored his doctor's medical judgment about the urgency for a cardiac referral. Health care decisions involve matters of life and d eath, and an ERISA fiduciary has a duty to speak out if it "knows that silence might be harmful." Bixler v. Central Penn

. Teamsters Health & Welfare Fund , 12 F.3d 1292, 1300 (3d Cir. 1993); se e Restatement (Second) Of Trusts § 173 cmt. d (1959). Indeed, in this case the danger to the plan participant's well being was created by th e fiduciary itself. If Mr. Shea had been aware of his doctor's financia l stakes, he could have made a fully informed decision about whether to trus t his do ctor's recommendation that a cardiologist's examination wa s unnecessary.

In sum , we believe Mrs. Shea has stated a claim against Medica fo r breach ing the fiduciary obligation to disclose all the material fact s aff ecting her husband's health care interests. When an HMO's financia l incentives discourage a treating doctor from providing essential healt h care referrals for conditions covered under the

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plan benefit structure, the incentives must be disclosed and the failure to d o so is a breach of ERISA's fiduciary duties. We thus reverse th e district court's order dismissing Mrs. Shea's amended complaint for failur e to state a claim on which relief can be granted and remand the case to the district court for further proceedings. We decl ine Medica's invitation to consid er several remedy-related issues that were not addressed in th e district court's ruling.

A true copy.

Attest:

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