Opinion ID: 721469
Heading Depth: 1
Heading Rank: 3

Heading: Dismissal of Jass' Vicarious Liability Claims Against PruCare for Dr. Anderson's Alleged Negligence

Text: 45 We thus have jurisdiction over all claims and may now consider the merits of the dismissal of Jass' vicarious liability claims against PruCare for Dr. Anderson's alleged negligence. In Counts I of her complaint, Jass alleged Dr. Anderson was PruCare's agent, servant, or employee and that therefore PruCare was vicariously liable for his negligence. Count II similarly alleged a claim of vicarious liability against PruCare but based on the alternative theory of ostensible agency. The district court dismissed these two counts as preempted by ERISA, although failing to distinguish between conflict and complete preemption. At issue here however, is the defense of conflict preemption. 8 46 The defense of conflict preemption is contained in section 514(a) of ERISA. That section preempts any and all State laws insofar as they may now or hereafter relate to any employee benefit plan covered by ERISA. 28 U.S.C. § 514(a). The inquiry is thus whether Jass' vicarious liability claims against PruCare relate to any employee benefit plan. 47 The Supreme Court explained in FMC Corp. v. Holliday, 498 U.S. 52, 58, 111 S.Ct. 403, 407-08, 112 L.Ed.2d 356 (1990), that this relate to clause is conspicuous for its breadth and that [i]t establishes as an area of exclusive federal concern the subject of every state law that 'relate[s] to' an employee benefit plan governed by ERISA. Central States v. Neurobehavioral Assoc., 53 F.3d 172, 174 (7th Cir.1995) (The structure and legislative history indicate that the words 'relate to' are intended to apply in their broadest sense.). ERISA preemption is, therefore, not limited to displacement of state laws affecting employee benefit plans, but rather extends to any state cause of action that has a '[c]onnection or reference to' an ERISA plan. Id. (quoting Pilot Life, 481 U.S. 41, 107 S.Ct. 1549). Moreover, a state law may 'relate to' a benefit plan, and thereby be pre-empted, even if the law is not specifically designed to affect such plans, or the effect is only indirect. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990). 48 In this case, both of Jass' vicarious liability claims against PruCare for Dr. Anderson's alleged negligence (Counts I and II) directly relate to the Plan. The Plan listed Dr. Anderson as a physician and provided a higher level of benefits if participants sought treatment from him. If an agency relationship existed between PruCare and Dr. Anderson, as Jass alleged, it was solely as a result of the PruCare's health care plan of which Jass was a participant. Without a benefit plan, PruCare would have no need for a relationship with Dr. Anderson and Jass would probably not have sought treatment from him. Additionally, to determine whether an actual or apparent agency relationship existed between Dr. Anderson and PruCare would require an examination of the health care benefit plan to determine the relationship between Dr. Anderson, PruCare and Jass. In fact, the health benefit plan contains a section entitled relation among parties affected by the group contract, which states that no participating physician is an employee or agent of PruCare. We note this not to resolve the question of agency, but to highlight that Jass' claims relate to the health benefit plan. Ingersoll-Rand Co., 498 U.S. at 139-140, 111 S.Ct. at 483 (state law wrongful discharge action under state tort and contract law related to a benefits plan because the existence of a pension plan is a critical factor in establishing liability under the State's wrongful discharge law.). 49 The specific allegations in this case further support the conclusion that Jass' claims relate to the benefit plan. The alleged negligence of Dr. Anderson underlying the vicarious liability claims against PruCare do not assert his negligent treatment, but his negligent failure to treat. This alleged negligence directly relate[s] to the benefit plan because Dr. Anderson's failure to treat stemmed from Margulis' denial of benefits based on her conclusion, as PruCare's utilization review administrator, that treatment was unnecessary. Spain v. Aetna Life Ins. Co., 11 F.3d 129, 131 (9th Cir.1993) (state cause of action seeking damages for negligently denying authorization of medical procedure relates to benefit plan); First Nat. Life Ins. v. Sunshine-Jr. Food Stores, Inc., 960 F.2d 1546, 1550 (11th Cir.1992) (state law relates to employee benefit plan where claim is founded on failure to adhere to obligations under the plan). 50 Moreover, to allow Jass to proceed against a plan on a vicarious liability theory based on a physician's alleged negligent failure to treat would conflict with Congress' intent in passing ERISA. See Shaw, 463 U.S. at 95, 103 S.Ct. at 2899 (In deciding whether a federal law pre-empts a state statute, our task is to ascertain Congress' intent in enacting the federal statute at issue.). In passing ERISA, Congress included certain remedies and excluded others. Pilot Life, 481 U.S. at 54, 107 S.Ct. at 1556-57. Congress excluded remedies against a plan for compensatory damages resulting from the denial of benefits. [T]he federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA. Id. 51 Such recovery would also conflict with Congress' intent that a plan not be subject to a myriad of state laws applying to employee benefit plans. Safeco Life Ins. Co. v. Musser, 65 F.3d 647, 651 (7th Cir.1995). In Safeco, we explained that [w]hat Congress meant, ... was to eliminate the prospect of conflict among the federal, state, and local laws applying to employee benefit plans by making the regulation of such plans exclusively a federal matter. Id. By establishing benefit plan regulation as exclusively a federal concern, Congress minimized the need for interstate employers to administer their plans differently in each State in which they have employees. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 105, 103 S.Ct. 2890, 2904, 77 L.Ed.2d 490 (1983). Consistent with that purpose, the Court in prior cases had deemed preempted state laws that had the effect of regulating the structure or administration of ERISA plans or providing avenues outside of the ERISA framework to vindicate employees' rights under these plans. Safeco, 65 F.3d at 651-52. To allow a vicarious liability claim against an ERISA Plan for the alleged negligence of a listed physician would require multi-state plans to vary their plan administration to avoid strict vicarious liability under differing state laws. See Corcoran, 965 F.2d at 1332-33 (allowing negligence suit against utilization review service would contravene Congress' intent that plans be subject to a uniform body of law). This has been described by the Supreme Court as particularly disruptive. Ingersoll-Rand, 498 U.S. at 142, 111 S.Ct. at 484. It is foreseeable that state courts, exercising their common law powers, might develop different substantive standards applicable to the same employer conduct, requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction. Such an outcome is fundamentally at odds with the goal of uniformity that Congress sought to implement. Id.; see also, Anderson v. Humana, Inc., 24 F.3d 889, 891 (7th Cir.1994) (holding that employee's claim of violation of state anti-deception laws arising from information provided in benefit literature was related to benefit plan and preempted because one set of rules should apply to all plans). 52 We also find Pacificare of Oklahoma, Inc. v. Burrage, 59 F.3d 151, 154 (10th Cir.1995), distinguishable. 9 In Pacificare, the Tenth Circuit held that ERISA does not preempt a claim that an HMO is vicariously liable for the alleged malpractice of one of its physicians. In its decision, the Tenth Circuit cited the lower court's rationale that a vicarious liability claim against an HMO for medical malpractice does not sufficiently relate to the plan so as to warrant preemption because the issue of the doctor's negligence can be resolved without reference to the benefit plan. In this case, however, Dr. Anderson's alleged negligence is intertwined with the benefits determination because the alleged negligence concerned a failure to treat where the Plan denied payment for the treatment. Pacificare also seems distinguishable because in that case the doctor alleged to have been negligent was one of [the HMO's] physicians, while here Dr. Anderson appears to be a private doctor with whom PruCare entered into an independent contract relationship to provide treatment to participants. 53 In sum, while [s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law 'relates to' the plan, id., that is not the case here. Types of cases considered too tenuous, remote, or peripheral include: a state garnishment of a spouse's pension income to enforce alimony and support orders, Shaw, 463 U.S. at 100 n. 21, 103 S.Ct. at 2901 n. 21 (citing American Tel. and Tel. Co. v. Merry, 592 F.2d 118, 121 (2d Cir.1979)); a defamation lawsuit against a plan by a doctor, Mackey v. Lanier Coll. Agency & Serv., Inc., 486 U.S. 825, 833, 108 S.Ct. 2182, 2187, 100 L.Ed.2d 836 (1988) (citing Abofreka v. Alston Tobacco Co., 288 S.C. 122, 341 S.E.2d 622 (1986)); a suit against an ERISA plan for unpaid rent, Mackey, 486 U.S. at 833, 108 S.Ct. at 2187 (citing Morris v. Local 804, Delivery & Warehouse Employees Health & Welfare Fund, 116 Misc.2d 234, 455 N.Y.S.2d 517 (1982)); or a suit against an ERISA plan for unpaid attorneys' fees, Mackey, 486 U.S. at 833, 108 S.Ct. at 2187 (citing Luxemburg v. Hotel & Restaurant Employees & Bartenders Int'l Union Pension Fund, 91 Misc.2d 930, 398 N.Y.S.2d 589 (1977)). Or as we speculated in Pohl v. National Benefits Consult., Inc., 956 F.2d 126, 128 (7th Cir.1992), a participant who slipped on a banana peel in an plan administrator's office would not be preempted by § 514(a). These cases are all run-of-the-mill tort claims. Mackey, 486 U.S. at 833, 108 S.Ct. at 2187. None involved a suit by a plan participant against a plan. Nor did they concern allegations of negligence based on a failure to treat where the plan denied benefits for the proposed treatment. They also involve relationships arising from something other than a benefit plan, while here the sole basis for any relationship between PruCare and Jass, PruCare and Anderson, and Anderson and Jass arises solely from the health benefit plan PruCare provided Jass.