Opinion ID: 768141
Heading Depth: 2
Heading Rank: 2

Heading: Common Law Defenses

Text: 9 Although we have determined that Trustmark's action for recovery of ERISA benefits should be resolved in a federal forum, we must next determine the validity of UCH's defenses based on common law principles. UCH argues the defenses of breach of contract and promissory estoppel. We will review each claim in order to determine whether such common law principles are applicable under ERISA. We note, given the particular circumstances, that the law of the case doctrine does not foreclose consideration of these issues. 10 This circuit has already determined that all common law concepts are not automatically inapplicable in the ERISA context. Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 647 (7th Cir. 1993). In passing ERISA, Congress expected that a federal common law of rights and obligations under ERISA-regulated plans would develop. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987). Courts may develop a federal common law where ERISA itself does not expressly address the issue.... Thomason, 9 F.3d at 647 (citation omitted). State common law may be used as a basis in constructing a federal common law that implements the policies underlying ERISA where it is not inconsistent with congressional policy concerns. Id. (citations omitted).
11 UCH's primary argument is that the letter from Trustmark promising payment constitutes a private contract which bypasses the Plan. After careful scrutiny of the district court record, we find that UCH has waived this argument as it was not raised at the district court level. See Mouton v. Vigo County, 150 F.3d 801, 803 (7th Cir. 1998) (citations omitted). Although UCH repeatedly discussed the contractual arrangements between Mrs. Fuja and itself (as pertaining to the deductible and copayment waiver), there was never any assertion or discussion that the statements or letter created an independent contractual arrangement, implied or explicit, between UCH and Trustmark. Throughout the district court proceedings, UCH described itself as an independent third party who provided the HDC/ABMT treatment at the direct behest of Mrs. Fuja. UCH repeatedly insisted it had no knowledge of the dispute between Mrs. Fuja and Trustmark. UCH did assert on several occasions that it had relied upon Trustmark's promise to pay, but did not, at any time, describe that promise as creating an independent contractual agreement nor did UCH argue there was an implied contract. UCH also failed to present a breach of contract argument at any point. However, even if UCH had preserved this issue, we find it would fail. 12 This circuit refused to recognize a breach of contract claim in an ERISA setting. See Buckley Dement, Inc. v. Travelers Plan Administrator of Illinois, Inc., 39 F.3d 784, 789-90 (7th Cir. 1994). We are also reluctant to create a cause of action which supersedes the civil enforcement provisions already enumerated in 29 U.S.C. sec. 1132(a), noting that the Supreme Court has made it clear that those detailed enforcement provisions provide strong evidence that Congress did not intend to authorize other remedies. Mertens v. Hewitt Assocs., 508 U.S. 248, 254 (1993) (citation omitted). The panel in Neurobehavioral Assocs. found that a welfare fund action to recover a mistaken overpayment made to a medical care provider may not be characterized as a dispute involving only the fiduciary's interest in collecting a debt from a third party. 53 F.3d at 173. ERISA preemption is... not limited to displacement of state laws affecting employee benefit plans,... but rather extends to any state cause of action that has a 'connection or reference to' an ERISA plan. Id. (citing Pilot Life Ins. Co., 481 U.S. at 47). 13 In its breach of contract argument, UCH characterizes itself as a third party who received payment after entering into an independent contract with the fiduciary. Neurobehavioral Assocs. refused to acknowledge this type of claim involving a medical care provider who had been directed by the insured as an assignee in receiving plan benefits. 53 F.3d at 173. 14 UCH relies on The Meadows v. Employers Health Ins. Corp., 47 F.3d 1006 (9th Cir. 1995), to argue that ERISA does not preempt a health care provider's state claims for breach of contract, estoppel, and negligent misrepresentation arising out of an insurer's alleged misrepresentation concerning whether patients were covered by the insurer's policy. In The Meadows, the Ninth Circuit found that the insurer had made mistaken assurances of coverage. Id. This case and several others UCH relies upon, all from other circuits, are based upon mistaken assurances of coverage. See In Home Health, Inc. v. Prudential Ins. Co., 101 F.3d 600 (8th Cir. 1996); Lordmann Enters., Inc. v. Equicor, Inc., 32 F.3d 1529 (11th Cir. 1994); Hospice of Metro Denver, Inc. v. Group Health Ins., Inc., 944 F.2d 752 (10th Cir. 1991); Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir. 1990). The Meadows, In Home Health, Lordmann, Hospice of Metro Denver, and Memorial Hospital System are all distinguished from the present case in that they were state law claims brought in state court by the medical care providers who had never been paid after receiving repeated assurances of coverage by the insurer. After being removed to the district court by the defendants, these cases were all dismissed in federal court and remanded to the state courts. In addition, these cases are distinguished from the present case in that there was no mistaken assurance of coverage. Trustmark had been enjoined from denying coverage and stated that payment was guaranteed so as to comply with the court's order. 15 UCH asserts that Trustmark made a promise to pay which created an independent contract. However, as stated in the letter from Trustmark's executive, Benefit Trust Life Insurance Company will comply with the court's order and will cover charges for Mrs. Fuja's ABMT treatment. (emphasis added). UCH maintains that because Trustmark did not condition its payment pending an appeal, it created an independent contract. Although we agree that Trustmark did not place conditions on its payment, we do not believe the elements of a contract--offer, acceptance, and consideration--are present when one party is compelled by a court order to provide payment, as is the case here. In addition, even UCH concedes in its brief that Trustmark would want to appeal the district court's order to pay for the treatment as it created an unfavorable precedent that would obligate it to pay for similar kinds of treatment in future cases under the same or similar ERISA plans. As noted in Neurobehavioral Assocs., this disruption of the Plan and the potential effect on the pension rights of others fundamentally involves ERISA. 53 F.3d at 175. For these reasons, we cannot recharacterize the circumstances of the instant case as a breach of contract issue.
16 This circuit has recognized that estoppel principles can be applied to certain ERISA actions. Black v. TIC Inv. Corp., 900 F.2d 112, 115 (7th Cir. 1990), reaffirmed by Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 650 (7th Cir. 1993); see also Coker v. Trans World Airlines, Inc., 165 F.3d 579, 584 (7th Cir. 1999) (finding that estoppel claim based on misrepresentations of insurer arises under the federal common law of ERISA). Black expressly limited the application of equitable estoppel principles to claims for benefits under ERISA unfunded, single-employer welfare benefit plans. 900 F.2d at 115. We note that Trustmark, as far as we can ascertain from the record, is an unfunded, single-employer welfare benefit plan. 17 Although the definition and elements of estoppel in the ERISA context have been varied, the court in Coker noted that four elements must always be present: (1) a knowing representation, (2) made in writing, (3) with reasonable reliance on that misrepresentation by the plaintiff, (4) to her detriment. 165 F.3d at 585; Black, 900 F.2d at 115. Where all four elements are present, the promise will be enforced in order to avoid injustice. See Evans v. Fluor Distributor Co., Inc., 799 F.2d 364, 366 (7th Cir. 1986) (citing Bank of Marion v. Robert Chick Fritz, Inc., 311 N.E.2d 138 (Ill. 1974)). In Coker, the court found that factual questions such as whether [the defendant] misrepresented (either intentionally or negligently) to the Cokers any material facts about their coverage and whether the Cokers reasonably relied to their detriment on such misrepresentations, could not be resolved by interpreting an existing plan (in that case, a collective bargaining agreement). 165 F.3d at 584. The court determined that the estoppel case arose under federal common law of ERISA, not the collective bargaining agreement. Id. 18 The factual question in this case involves the reasonable reliance of UCH in receiving payment for the medical services provided. In addition, the written confirmation from Trustmark satisfies the rule which requires modification of ERISA plans to be in writing. 29 U.S.C. sec. 1102(a)(1). UCH asserts that it would not have accepted the financial risk of providing HDC/ABMT treatment to Mrs. Fuja had Trustmark not provided a guarantee, but would have sought alternative means to ensure that it would receive payment for services before rendering them. We find that the claim is properly before us, although we reemphasize the narrow scope of such claims. See Coker, 165 F.3d at 585. 19 Summary judgment is reviewed de novo. Feldman v. American Memorial Life Ins. Co., 196 F.3d 783, 789 (7th Cir. 1999) (citation omitted). Summary judgment will be affirmed when, after viewing the record in the light most favorable to the nonmoving party, there is no genuine issue of material fact. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). 20 UCH maintains that Trustmark is estopped from recovering the monies paid for Mrs. Fuja's HDC/ABMT treatment because of Trustmark's written (and oral) statements guaranteeing payment. Trustmark clearly promised payment notwithstanding the fact that it was paid under court order. It is also logical that Trustmark knew or should have known that its promise to pay would induce action on the part of UCH, particularly based on the urgency of Mrs. Fuja's medical condition. 21 In determining whether an employer was entitled to a refund of payments in a restitution claim, the court in UIU Severance Pay Trust Fund v. United Steelworkers of America, 998 F.2d 509, 513 (7th Cir. 1993), stated that several factors should be considered: (1) were the unauthorized contributions the sort of mistaken payments that equity demands be refunded, i.e., was it a good faith mistake or the result of unauthorized activity? (2) has the employer delayed in bringing the action? (3) has the employer somehow ratified past payments? (4) can the employer demonstrate that the party from whom it seeks payment would be unjustly enriched if recovery were denied? Although we may find in favor of Trustmark in answering questions two and three, as to question one, it would have been easy for Trustmark to have made the payment conditional, stating that payment would be made subject to appellate review. However, in failing to do so, Trustmark misled UCH. As to question four, the matter of UCH's unjust enrichment is of great importance. 22 As discussed in Restatement of Restitution sec. 1, restitution is a device to avoid unjust enrichment. See also Central States, Southeast and Southwest Areas Health & Welf. Fund v. Pathology Labs., 71 F.3d 1251, 1254 (7th Cir. 1995) (hereinafter Pathology Labs.). In Pathology Labs., we noted that [a] provider of medical care is not unjustly enriched by being paid the market fee for its services. Id. Although we recognize that Trustmark always insisted coverage for the HDC/ ABMT treatments was denied under the Plan, and paid for the treatments under court order, we cannot say that UCH does not have an honest claim to the money. UCH provided services at the market rate, was paid for those services, and was not unjustly enriched. 23 In addition, we agree with the analysis in Rehabilitation Institute v. Group Adm's, 844 F. Supp. 1275, 1282 (N.D. Ill. 1994), particularly when applied to the health care sector, which stated that the risk of loss from misstatement in the commercial arena ought to lie with the putative promisor, rather than with the party who justifiably relies on the erroneous promise. We find that Trustmark is estopped from seeking recovery of the unconditional payment made for Mrs. Fuja's HDC/ABMT treatment.