# United Stat es Court of Appeals For the First C ircuit

No. 01-2313 MARJORIE HOTZ, Plaintiff, Appellant,

v. BLUE CROSS and BLUE SHIELD OF MASSACHUSETTS, INC.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. George A. O'Toole, Jr., U.S. District Judge ]

Before Boudin, Chief Judge , Selya and Lipez, Circuit Judges . Thomas J. Lynch with whom Lynch Associates, LLC was on brief for appellant. Joseph D. Halpern , Blue Cross and Blue Shield of Massachusetts, Inc., Law Department, with whom Sara A. Walker was on brief for appellee.

June 11, 20021 See Hopkins v. Liberty Mut. Ins. Co. , 750 N.E.2d 943, 949-50

(Mass. 2001); Van Dyke v. St. Paul Fire & Marine Ins. Co. , 448 N.E.2d357, 360 ( Mas s. 1983). Chapter 93A is a well-known Massachusetts s t atute that permits private actions for multiple damages andattorney's fees for a broad class of "unfair methods of competition an d u nfair or deceptive acts or practices in the conduct of any trade or commerce." Mass. Gen. Laws ch. 93A, § 2(a). Blue Cross asserts that it is not engaged in trade or commerce but we do not reach that issue. -2- BOUDIN, Chief Judge . In Mar ch 2001, Marjorie Hotz brought suit in state court against her health insurer, Blue Cross andBlue Shield of Massachusetts ("Blue Cross"). Hotz claimed that Blue Cross violateda state law prohibiting unfair claim settlement practices by insurance companies, see Mass. Gen. Laws ch. 176D, § 3(9) (2000), when it waited nearly three months before approving payment for a cou rse of follow-up therapy recommended by her physician after the removal of her cancerous tonsil. Hotz alleged that Blue Cross's delay caused her condition to worsen and sued under Mass. Gen. Laws ch. 93A, § 9(1) (2000), which was amended in 19 79 to extend its private remedies provisions to violations o f chapter 176D, § 3(9) (2000). 1

Hotz's insurance coverage with Blue Cross was part of an employee benefit plan offered and paid for by the law firm where she worked; the plan is governed by the Employee Retirement Income S ecurityAct ("ERISA"), 29 U.S.C. § 1001 et seq. (2000). Blu e Cross removedthe case to federal district court, claiming federal question jurisdiction based on ERISA; it then moved to dismiss on the ground that Hotz's chapter 93A claim fell within ERISA's clause preempting all state laws that "relate to" employee benefit plans, id. § 1144(a).-3- The district court denied Hotz's motion to remand and granted Blue Cross's motion to dismiss, and Hotz now appeals. As required, we assume for this purpose the truth of her factual allegations. Martin v. Applied Cellular Tech., Inc. , 284 F.3d 1, 5-6 (1st Cir. 2002). This is so even though Blue Cross asserts that, if the case were tried, it would show that no undue delay occurredbecause it approved the treatment requested wit hin 48 hours after it received the relevant request. Our review, which is addressed to questions of law, is de novo . Id.

Hotz presses two points on appeal. First, at the threshold, she argues that the dis tric t court lacked removal jurisdiction over her state law claim. Second, she argues that her claimis not preempted because it falls under the so-called "saving clause" exempting from ERISA's preemption provision any state law that "regulates insurance." 29 U.S.C. § 1144(b)(2)(A). We address these issues in the same order and conclude that they are largely governed by existing case law.

Normally, federal defenses including preemption do not by themselves confer federal jurisdiction over a well-pleaded complaint alleging only violations of state law. Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal. , 463 U.S. 1, 9-10, 25-27 (1983). But under the doctrine of "complete preemption," ERISA's civil enfor cemen t provisions, 29 U.S.C. § 1132(a), have been interpreted to es tablish federal removal jurisdiction over any state law cla ims th at in substance seek relief that is otherwise within the scope of those ERISA remedy2 E.g. , I.V. Servs. of Am., Inc. v. Inn Dev. & Mgmt., Inc. , 182

F.3d51, 53 (1st Cir. 1999); Bernstein v. Capitalcare, Inc. , 70 F. 3d 78 3, 784 (4th Cir. 1995); Farleyv. Benefit Trust Life Ins. Co. , 979 F.2d 653, 658 (8th Cir. 1992). -4- provisions. See Metro. Life Ins. Co. v. Taylor , 481 U.S. 58, 63-67 (1987). Pertinently, ERISA permits a federal act ion by a beneficiary"to recover benefits due . . . under the terms of [the] plan, to enforce . . . rights under the terms of the plan, or to clarify . . . rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B).

Hotz denies that her claim involves a "benef it" as the termis used in ERISA; she says that "benefit" mean s only th e b enefit offered directly by the employer to its employees ( i.e. , coverage under the employer's group insurance policy) and not the benefit pr ovidedby the insurance company to the employee ( i.e. , payment for medica l se rvices) pursuant to the employer's policy. Although the distinction is linguistically possible, it would mean that numerous past ERISA suits bro ugh t to secure payment for medical services from third-party providers unde r ERISA plans lacked a legal basis. 2

In any event, Hotz's argument is foreclosed by this court's previous opinion in Danca v. Private Health Care Systems, In c. , 185 F.3d 1 (1st Cir. 1999). There, we found removal jurisdiction over plai ntiff's state tort claim alleging that the defendant insurer was negligent when it appro vedtreatment at a mental hospital di ffer ent from the hospital recommended by the referring physician. Relying on P ilo t Life Insurance Co. v.3 UNUMLife Ins. Co. of Am. v. Ward , 526 U.S. 358, 367-68

(1999) (citing Pilot Life , 481 U.S. at 48-49, and Metro. Life Ins. Co. v. Massachusetts , 471 U.S. 724, 740, 743 (1985)). -5- Dedeaux , 481 U.S. 41 (1987), we sa id t he claim fell within the ambit of 2 9 U.S. C. § 1132(a)(1)(B) because it challenged "the process used to assess a participant's claim for a benefit payment under the plan." 185 F.3d at 6. This ruling governs Hotz's claim against the insurer alleging undue delay in proc essing her physician's referral. See also Pryzbowski v. U.S. Healthcare, Inc. , 245 F.3d 266, 273-74 (3d Cir. 2001).

We turn, then, to the questi on of preemption. Hotz concedes that if what Blue Cross promises to provide is de emed a plan benefit, then her state law claim falls at least initially within 29 U.S.C. § 1144(a). That section broadly preempts any state law claim that "relate[s] to" an employee benefit plan, and it has been applied widely to bar state claims seeking damages for alleged breach of obligations pertaining to an ERISA plan. E.g. , Pilot Life , 481 U.S. at 47-48. Hotz's answer is that sec tion 1144(b)'s saving clause preserves her claim as one brought under a state law that "regulates insurance." 29 U.S.C. § 1144(b)(2)(A).

The Supreme Court has used several formulas to delineate the scope of the saving clause. In a trilogy of cases, it has askedwhether the state law regulates insurance under a "commonsense view" of the term and, separately, whether the practice falls within the phrase "business of insurance" for purpo ses of the M cCarr an-Ferguson Act based on three more technical factors. 3 Finally, in one of the cases, it has separately asked whether-6-

allowing the state-createdrule to govern would interfere with the

un ifor mremedial scheme established by ERISA itself for securing plan benefits. Pilot Life , 481 U.S. at 51-57.

Much of the emphasis in the trilogy is on whether the claimor rule invoked by the plaintiff is exclusive to insurance regulation; in UNU M Life , the Court's decision not to find preemption turned principally on t he fac t that the state rule (involving failure to give notice) was unique to insurance cases. 526 U.S. at 370-71; see also Pilot Life , 481 U.S. at 50-51; Metro. Life , 471 U.S. at 742-43. The underlying notion is that a claim or rule directed only to insurance is one that "regulates insurance" while one that reg ulates insurance along with everything else is not within the quoted phrase.

Exclusivityis an ambiguous label in this case. The substantive prohibition on delay in claim processing in chapter 176D is directed solely at the insurance industry, but the private

a ction for multiple damages and attorney's fees claim brou ght b y Hotz is created by chapter 93A, § 9, which applies to unf air commercial practices in any industry . Yet looking through form to substance, chapter 1 76D, § 3, invoked by Hotz, is (by its own term s) m erely a specification of particular "unfair methods of competition and unfair or deceptive acts or practices"--which are bannedin more general terms, and for all industries, in chapter 93A ( see note 1, above).

On balance, our case seems close r to Pilot Life , where th e Cou rt held to be preempted a punitive damages tort claim for4 Ramirez v. Inter-Cont'l Hotels , 890 F.2d 760, 763-64 (5th

Cir. 1989) (Texas unfair insurance practices statute); Kanne v. Conn. Gen. Life Ins. Co. , 867 F.2d 489, 494 (9th Cir. 1988), cert. denied , 492 U.S. 906 (1989) (California unfair insurance practices statute); In re Life Ins. Co. of N. Am. , 857 F.2d 1190, 1194-95 (8th Cir. 1988) (Missouri statute prohibiting vexatious refusal to payinsurance benefits); see also Custer v. Pan Am. Life Ins. Co. , 12 F.3d 410, 420 (4th Cir. 1993) (West Virginia unfair trade practices statute) ; Anschultz v. Conn. Gen. Life Ins. Co. , 850 F.2d 1467, 1468-69 (11th Cir. 1988) (Florida insurance statute) . -7- egregious nonpayment of benefits under an insurance policy. Under state law, such punitive damages were also available for egregious violations of contracts unrelatedto insurance, just as chapter 93A is available for n on-i nsurance unfair trade practices. In addition, the Court in Pil ot Lif e --quite apart from the "commonsense view" and McCarran-Ferguson tests--emphasized that to allow punitive damages for failure to pay benefits was at odds with Congress's refusal to allow punitive damages for benefit claims under ERISA. 481 U.S. at 53-54.

On this last rationale, other circuits have in a number of cases held claims under various st ate statutes similar to Massachusetts' to be preempted by ERISA despite the saving clause. 4 Possibly UNUM Life betokens a shift of emphasis by the Supreme Court; plainly the law as to the scope of the saving clause is still evolving. But under current Supreme Court precedent, we feel boundby the similarity of Pilot Life to our own c ase and by the close fit of its final rationale to Hotz's chapter 93A claim.

Affirmed .