Court Opinion

ID: 9439922
Source: CourtListenerOpinion
Date Created: 2023-08-03 06:57:22.977195+00
Date Added: 2024-06-11T17:26:46.088233
License: Public Domain

BOWNES, Senior Circuit Judge,
concurring.
I concur in the result, but, with respect, I do not think that this case can be disposed of by the conclusory assertion that the district court did not abuse its discretion in denying plaintiffs motion to amend her complaint so as to add Ellen Kaplan as a defendant. In his report and recommendation, adopted by the district court, the magistrate judge stated the following reason for denying the motion to amend the complaint:
I find that Plaintiff[’s] attempt to add Ellen Kaplan as a party defendant and to assert against her a claim for misrepresentation would be futile because such a claim would be pre-empted by ERISA.
It is clear that the district court’s denial of the motion was not an exercise of discretion, but was compelled by its legal ruling that the claim against Kaplan would be preempted by ERISA. Accordingly, the district court’s denial of the motion is subject to review de novo, rather than for abuse of discretion. See Carlo v. Reed Rolled Thread Die Co., 49 F.3d 790, 793 (1st Cir.1995). The Supreme Court has stated unequivocally that “[a] district court by definition abuses its discretion when it makes an error of law.” Koon v. United States, — U.S. —, —, 116 S.Ct. 2035, 2047, 135 L.Ed.2d 392 (1996) (citation omitted).
To be sure, in the ordinary case, the decision whether to grant or deny a motion to amend the complaint is discretionary with the trial court, and so is normally reviewed for abuse of discretion; but the case before us is not ordinary in this respect. Here it is clear that the motion was denied because of the magistrate’s stated conclusion that the claim against Kaplan was pre-empted as a matter of law, and his unstated but apparent corollary conclusion that, as a result, he was deprived of discretion (by the doctrine of futility) to grant the motion.
Thus, the question before us is not whether the district court abused its discretion in denying plaintiffs motion to amend the complaint, but whether the basis for this ruling was legally correct. If the district court’s ruling was erroneous, as I think it was, then the motion to amend was not “futile” and should not have been denied on that ground. As a consequence, the district court lacks jurisdiction to decide the merits of the state-law misrepresentation claim because, as the majority acknowledges inferentially, the only basis for federal jurisdiction is ERISA preemption. I do not think, therefore, that this appeal can be decided on a principled basis without discussing the scope of ERISA preemption.
The majority purports to “express no opinion on the preemption issue,” and suggests that the plaintiff could still pursue her claim against Kaplan by seeking to amend her pending ERISA complaint so as to add Kap-lan as a defendant. The majority fails to recognize, however, that the practical effect of its disposition of the case is to uphold the district court’s pre-emption ruling sub silen-*5tio, and to leave the plaintiff with no recourse in any forum. A finding of no preemption results in dismissal of the claim for lack of federal jurisdiction and leaves the plaintiff free to seek redress in state court. In contrast, the majority’s refusal to address the merits of the district court’s pre-emption ruling is not only analytically unsound, it also leaves the plaintiff exactly where she started—with her state-court action subject to removal to federal court on the ground of pre-emption and with pre-emption as a bar to recourse in federal court.
For the reasons that follow, I conclude that ERISA does not pre-empt plaintiffs misrepresentation claim against Kaplan and that, therefore, the proper disposition of this case would be to deny plaintiffs motion for lack of federal jurisdiction over the purported state-law claim, leaving the plaintiff free to pursue the claim in the state court.6
I.
I start my analysis with the key words of the statute bearing on pre-emption:
Except as provided in subsection (b) of this section, the provisions of this subchap-ter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan ....
29 U.S.C. § 1144(a) (emphasis added).
For purposes of this section:
(1) The term “State law” includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.
29 U.S.C. § 1144(c)(1).
The Supreme Court teaches that the preemption provision of § 514(a), codified at 29 U.S.C. § 1144(a), was 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 burden of complying with conflicting directives among States or between States and the Federal Government. Otherwise, the inefficiencies created could work to the detriment of plan beneficiaries_ Particularly disruptive is the potential for conflict in substantive law. 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.
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 484, 112 L.Ed.2d 474 (1990) (citations omitted).
In Concluding that plaintiffs misrepresentation claims were pre-empted, the magistrate judge relied on Carlo v. Reed Rolled Thread Die Co., 49 F.3d 790. In Carlo we stated the ERISA pre-emption doctrine as follows:
Section 514 of ERISA supersedes “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan-” 29 U.S.C. § 1144(a) (emphasis added). “The term ‘State Law' includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.” 29 U.S.C. § 1144(c)(1). The Supreme Court has established that “a law ‘relates to’ an employee benefit plan ... if it has a connection with or reference to such a plan.” Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983)). “Under this ‘broad common-sense meaning,’ 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.” Id. (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S.Ct. 1549, 1553, 95 L.Ed.2d 39 (1987)).
Id. at 793 (footnote omitted).
Carlo, a leading case in this circuit on ERISA preemption, see Degnan v. Publicker Indus., Inc., 83 F.3d 27, 29 (1st Cir.1996), held that ERISA pre-empted the state-law *6misrepresentation claims because they had “a connection with-or reference to” an employee benefit plan. Carlo, 49 F.3d at 794-95. But we have never held that Carlo sweeps all state-law misrepresentation claims into the ERISA comer merely because an employee benefit plan exists.
In Boston Children’s Heart Found., Inc. v. Nadal-Ginard, 73 F.3d 429 (1st Cir.1996), we reviewed ERISA preemption cases, including Carlo, and concluded:
State laws that have merely a “tenuous, remote, or peripheral connection with a covered benefit plan” may not be preempted by ERISA. Rosario-Cordero v. Crowley Towing & Transp. Co., 46 F.3d [120,] 123 [(1st Cir.1995)] (citation and internal quotation marks omitted). Such is normally the case with respect to laws of general applicability. See District of Columbia v. Greater Washington Board of Trade, 506 U.S. [125] at 130 n. 1, 113 S.Ct. at [580] 583 n. 1, 121 L.Ed.2d 513 [(1992)]; Rosario-Cordero v. Crowley Towing & Transp. Co., 46 F.3d at 123; Combined Mgt., Inc. v. Superintendent of the Bureau of Insurance, 22 F.3d 1, 3 (1st Cir.), cert. denied, — U.S. —, 115 S.Ct. 350, 130 L.Ed.2d 306 (1994). A court cannot conclude that a state law is one of general applicability, and as such is not preempted by ERISA, based on the form or label of the law, however. See Carlo v. Reed Rolled Thread Die Co., 49 F.3d at 794 n. 3; Zuniga v. Blue Cross and Blue Shield of Michigan, 52 F.3d 1395, 1401 (6th Cir.1995). Absent precedent on a closely related problem, the inquiry into whether a state law “relates to” an ERISA plan or is merely “tenuous, remote, or peripheral” requires a court to look at the facts of [sic] particular case. See Rosario-Cordero v. Crowley Towing & Transp. Co., 46 F.3d at 125 n. 2.
Boston Children’s Heart Found., 73 F.3d at 439-40.
In Johnson v. Watts Regulator Co., 63 F.3d 1129 (1st Cir.1995), we pointed out the consequences that may flow from ERISA pre-emption: It “may cause potential state-law remedies to vanish, or may change the standard of review, or may affect the admissibility of evidence, or may determine whether a jury trial is available.” Id. at 1131-32 (citations omitted).
A recent Supreme Court decision has a direct bearing on the scope of ERISA preemption. In New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., — U.S. —, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995), several commercial insurers, acting as fiduciaries of ERISA, plans they administered, joined, with their trade associations and “[o]n the claimed authority of ERISA’s general preemption provision” brought actions in the United States District Court against state officials to invalidate three hospital surcharge statutes. Id. at —, 115 S.Ct. at 1675. Writing for a unanimous Court, Justice Souter made a number of observations on the scope of ERISA preemption:
Our past cases have recognized that the Supremacy Clause, U.S. Const., Art. VI, may entail pre-emption of state law either by express provision, by implication, or by a conflict between federal and state law. And yet, despite the variety of these opportunities for federal preeminence, we have never assumed lightly that Congress has derogated state regulation, but instead have addressed claims of pre-emption with the starting presumption that Congress does not intend to supplant state law. Indeed, in cases like this one, where federal law is said to bar state action in fields of traditional state regulation, we have worked on the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.
Id. at —, 115 S.Ct. at 1676 (citations and internal quotation marks omitted). The Court commented on the statutory pre-emption language of § 514(a), “all state laws insofar as they ... relate to any employee benefit plan,” pointing out that “[i]f ‘relate to’ were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course.” Id. at —, 115 S.Ct. at 1677. The Court concluded:
*7We simply must go beyond the unhelpful text and the frustrating difficulty of defining its key term, and look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive.

Id.

The Court, in the course of its analysis, stated:
Indeed, to read the pre-emption provision as displacing all state laws affecting costs and charges on the theory that they indirectly relate to ERISA plans that purchase insurance policies or HMO memberships that would cover such services, would effectively read the limiting language in § 514(a) out of the statute, a conclusion that would violate basic principles of statutory interpretation, and could not be squared with our prior pronouncement that [preemption does not occur ... if the state law has only a tenuous, remote, or peripheral connection with covered plans, as is the case with many laws of general applicability.
Id. at —, 115 S.Ct. at 1679-80 (citation and internal quotation marks omitted) (alteration in original).
In discussing the sweep of ERISA preemption the Travelers Court pointed to three categories of state laws that Congress intended to pre-empt: first, “state laws that mandate[] employee benefit structures or their administration,” id. at —, 115 S.Ct. at 1678; second, “state laws providing alternate enforcement mechanisms,” id.; third, state laws that bind plan administrators to a “particular choice and thus function as a regulation of an ERISA plan itself,” id. at —, 115 S.Ct. at 1679. See also Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1468-69 (4th Cir.1996). It is obvious that none of these state-law categories are implicated here.
The Court held that the New York statutory surcharges had only “an indirect economic effect on choices made by insurance buyers, including ERISA plans” and, therefore, there was no pre-emption. Travelers at — —, 115 S.Ct. at 1679-80.
Two other observations about Travelers must be made. First, it was decided seven weeks after Carlo. This means, of course, that the Carlo panel did not have the benefit of the Court’s latest views on ERISA preemption. Second, none of the ERISA preemption cases decided in this circuit subsequent to Travelers have cited it.
I now turn to post-Travelers decisions by other circuits. In a case the Fourth Circuit described as a “gardenvariety professional malpractice claim” the court held:
In light of the Supreme Court’s recent (and narrowing) interpretation of the scope of ERISA preemption in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers, — U.S. —, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995), we hold that Delany’s malpractice claim is not preempted because it does not “relate to” an employee benefit plan within the meaning of ERISA’s preemption provision, 29 U.S.C. § 1144(a).
Coyne & Delany Co., 98 F.3d at 1466-67. Quoting Travelers for the proposition that courts ‘“address claims of preemption with the starting presumption that Congress does not intend to supplant state law,’ ” 98 F.3d at 1467 (citations omitted), the Fourth Circuit added, “[t]his is especially true in cases involving fields of traditional state regulation, including common law tort liability,” id. In the course of its opinion the Fourth Circuit noted that plaintiffs malpractice claim was “not aimed at a plan administrator at all since the defendants [were] sued in their capacities as insurance professionals for actions taken in that capacity.” Id. at 1471. This case is analogous to the one before us.
Morstein v. National Ins. Servs., Inc., 93 F.3d 715 (11th Cir.1996) (en banc), cert. denied, — U.S. —, 117 S.Ct. 769, 136 L.Ed.2d 715 (1997), is even more closely analogous to the case at bar. Plaintiff Mor-stein was president, director, and sole stockholder of a small company. She met with an insurance broker for the purpose of obtaining a replacement policy of major medical insurance for herself and the company’s other employee. The policy was to be administered by National Insurance Services, Inc. At the meeting with the broker, plaintiff informed him that any replacement policy would be unacceptable if it excluded from *8coverage treatment related to any preexisting medical condition. Plaintiff alleged that the broker assured her that the replacement policy would provide the same coverage as her existing policy. Over a year after the replacement policy was issued, plaintiff had total hip replacement surgery. National Insurance Services refused to pay her claim for payment on the ground that the surgery was for a preexisting condition which plaintiff had not disclosed on her application. 93 F.3d at 716-17.
Plaintiff filed an action in state court alleging negligence, malfeasance, misrepresentations, and breach of contract. Defendants removed the case to federal court on the basis of ERISA pre-emption. Id. at 717.
In Morstein, the Eleventh Circuit, sitting en banc, characterized the Supreme Court’s decision in Travelers as having “essentially turned the tide on the expansion of preemption doctrine.” Id. at 721. The holding of the Eleventh Circuit bears quoting:
Allowing preemption of a fraud claim against an individual insurance agent will not serve Congress’s purpose for ERISA. As we have discussed, Congress enacted ERISA to protect the interests of employees and other beneficiaries of employee benefit plans. To immunize insurance agents from personal liability for fraudulent misrepresentation regarding ERISA plans would not promote this objective. If ERISA preempts a beneficiary’s potential cause of action for misrepresentation, employees, beneficiaries, and employers choosing among various plans will no longer be able to rely on the representations of the insurance agent regarding the terms of the plan. These employees, whom Congress sought to protect, will find themselves unable to make informed choices regarding available benefit plans where state law places the duty on agents to deal honestly with applicants.
Id. at 723-24 (citation omitted).
In Central States, Southeast and Southwest Areas Health and Welfare Fund v. Pathology Labs. of Ark., P.A., 71 F.3d 1251, 1253 (7th Cir.1995), cert. denied, — U.S. —, 116 S.Ct. 1876, 135 L.Ed.2d 172 (1996), the Seventh Circuit, citing Travelers, held:
Nothing in ERISA prevents medical professionals from submitting—and state courts from enforcing—bills for services that are not covered by welfare benefit plans. Although ERISA preempts state law that “relates to” plans, 29 U.S.C. § 1144(a), that clause does not annul state laws of general applicability just because they affect the price of medical care.
In Boyle v. Anderson, 68 F.3d 1093 (8th Cir.1995), cert. denied, — U.S. —, 116 S.Ct. 1266, 134 L.Ed.2d 214 (1996), a ease involving a challenge to certain provisions of a Minnesota health care reform statute known as MinnesotaCare, the court relied on Travelers in holding that there was no ERISA pre-emption, stating, “In the context of the MinnesotaCare legislation, Travelers and the other precedents cited in this litigation compel this court not to preempt a state’s effort to serve as a ‘laboratory of democracy’ in the realm of health care.” Id. at 1109.
The Seventh Circuit also relied on Travelers in rejecting an ERISA pre-emption claim in Safeco Life Ins. Co. v. Musser, 65 F.3d 647 (7th Cir.1995). The case was brought by a health insurer who challenged the fees assessed against such insurers to provide health insurance to individuals whose physical and mental conditions prevented them from obtaining insurance in the private market. In a similar case, the Second Circuit, relying on Travelers, inter alia, held that ERISA did not pre-empt a Connecticut statute that imposed surcharges on hospital bills of patients with private health insurance to subsidize medical care for the poor. Connecticut Hosp. Ass’n v. Weltman, 66 F.3d 413 (2d Cir.1995). See also Greenblatt v. Delta Plumbing & Heating Corp., 68 F.3d 561, 573-74 (2d Cir.1995) (noting the limiting gloss put on the broad language of § 514(a) of ERISA by Travelers).
As these cases recognize, Travelers has restricted the scope of ERISA pre-emption.
II.
I turn now to what I consider to be the sole issue before the panel: whether the district court erred in ruling that ERISA *9pre-emption rendered “futile” plaintiffs motion to amend her complaint to add Ellen Kaplan as a defendant. The question of ERISA pre-emption is reviewed de novo. See Degnan v. Publisher Indus., Inc., 83 F.3d at 28-29. I recognize that the standard of review for a district court’s refusal to allow an amendment to the complaint is abuse of discretion. This standard is not applicable here, however, because the root issue—stated by the district court as the basis for its decision—is ERISA pre-emption, a question of law. See Carlo v. Reed Rolled Thread Die Co., 49 F.3d at 792-93. Moreover, if there is no pre-emption, the federal courts are bereft of jurisdiction. Thus, in my view, there is no way of avoiding the pre-emption issue.
Normally in a pre-emption case the starting point is an examination of the facts, but there is not much in the way of facts- here. All we know is derived from the allegations in the purported amended complaint, which must be accepted as true at this stage of the litigation. These allegations can only be construed as stating that Kaplan made misrepresentations to plaintiffs husband, Donald Golas, and/or failed to give him correct information about the conditions of eligibility for participation in the Revere Insurance policy. The amended complaint alleges that Kaplan was an insurance broker. I take that to mean that she “sold” Revere’s insurance policy to HomeView. Although Kaplan is linked to HomeView and Revere as to the alleged misrepresentations, there is no claim that Kaplan acted as agent for or on behalf of either or both of the other two defendants. The amended complaint, broadly construed, alleges a common-law misrepresentation claim against Kaplan individually.
Strictly speaking, the ERISA disability insurance plan is not implicated in plaintiffs misrepresentation claim. Donald Golas nev-er became a covered employee; instead, the complaint focuses on the alleged misrepresentations which plaintiff alleges were the cause of Golas’s being excluded from insurance coverage. Neither the extent of insurance coverage nor the amount of benefits is involved. Even the eligibility requirements themselves are not in dispute; it is only the alleged misrepresentations about those eligibility requirements that give rise to plaintiffs cause of action. Plaintiffs burden of proof thus goes to whether her husband would have been eligible to join the plan if Kaplan had not made misrepresentations as to his eligibility. See Coyne & Delany Co., 98 F.3d at 1462 n. 4.
This case is markedly different from Carlo, 49 F.3d 790. In Carlo, the plaintiff was a former employee of defendant Reed and a participant in its retirement plan. Plaintiff Carlo elected early retirement on the basis of monthly benefits he was told he would receive. The actual monthly benefits he received were twenty percent less than the amount promised him. Defendant apologized for the error and offered to let him continue working at the same position. Carlo did not accept the offer and took early retirement under protest. He subsequently brought suit in Massachusetts state court for breach of contract and negligent misrepresentation. Id. at 792. We found ERISA pre-emption.
In Carlo, plaintiff had been a participant in the plan and one of the issues was the amount of monthly retirement pay due him under the substantive provisions of the plan. Here, by contrast, Donald Golas was not a covered employee and none of the issues implicate the substantive provisions of the insurance plan. The allegations are solely concerned with misrepresentations regarding Golas’s eligibility to become a covered employee.
The analysis used in Boston Children’s Heart Found, v. Nadal-Ginard has much to recommend it. In Boston Children’s Heart Found., 73 F.3d 429, suit was brought in federal district court against defendant, who worked for plaintiff nonprofit corporation as an officer and director. The suit alleged that defendant breached his fiduciary duty by misappropriating plaintiffs funds. The basis of the suit was defendant’s failure to disclose to the other directors of the corporation important information concerning provisions of a severance-benefit plan (the Banks Plan) he had devised. When the plan was terminated on defendant’s initiative, he received more than $4,000,000 in severance benefits. On appeal defendant contended that ERISA spe*10cifically exempted the type of severance benefits plan at issue from its fiduciary duty provisions and pre-empted the application of state fiduciary law. 73 F.3d at 438. We held:
Here, the alleged breach of fiduciary duty relates to Nadal-Ginard’s action in establishing the Banks Plan without disclosing information that a self-interested fiduciary would be required to reveal to his fellow directors. Nadal-Ginard’s misconduct preceded the formal adoption of the plan. The legal determination that Nadal-Gi-nard’s conduct constitutes a fiduciary breach does not require the resolution of any dispute about the interpretation or administration of the plan. Further, the application of state law in this instance does not raise the core concern underlying ERISA preemption. Indeed, the fact that Nadal-Ginard chose an ERISA plan rather than some other form of compensation is peripheral to the underlying claim that Nadal-Ginard breached his corporate responsibilities.
This being the ease, it cannot be said that Massachusetts fiduciary law must be preempted in this instance.
Id. at 440 (emphasis added).
Based upon our own circuit cases, the restriction of the scope of pre-emption under § 514(a) of the statute established in Travelers, and the post-Travelers cases in other circuits, it is evident that ERISA does not pre-empt the misrepresentation claim against Ellen Kaplan. There are eight reasons, gleaned from the cited cases, for this conclusion. (1) No ERISA benefits are sought and no ERISA rights or obligations are asserted. (2) Defendant Kaplan would be personally responsible for any money damages awarded to plaintiff. (3) Defendant Kaplan is not an ERISA entity, nor does the alleged misrepresentation claim affect the relationship between ERISA entities. (4) None of the three categories of state laws that Travelers holds Congress intended to pre-empt are implicated. (5) The common-law claim of misrepresentation is a state law of general application. Moreover, tort law in general is traditionally an area of state regulation. It is therefore unlikely that Congress intended to intrude into this area by pre-emption. (6) Congress did not intend to shield tortfeasors from liability for misrepresentation where ERISA benefits, rights, obligations, and core concerns are not implicated. (7) State common law imposes a duty of care relative to representations made by insurance professionals which does not in any way depend upon ERISA. (8) The alleged misrepresentation occurred prior to the time when the ERISA plan would have taken effect.
I would hold, therefore, that the district court committed reversible error in denying plaintiffs motion to amend on the ground that the claim raised therein “would be preempted by ERISA.”7 Because ERISA does not pre-empt the claim asserted against Ellen Kaplan, and because there is no diversity of citizenship between the parties, nor any other basis for federal jurisdiction, the motion should have been denied for lack of federal jurisdiction. Plaintiff should be left to pursue her misrepresentation claim against Kaplan in the Massachusetts state courts.
Although the majority and I agree on the ultimate result, we disagree as to the proper path to take in reaching it. Because I think that this is a case in which the procedural path is important, I must respectfully concur, rather than join the majority opinion.

. I, of course, intimate no opinion as to the merits of plaintiff's state-law claim.

. I would also hold that the district court erred in adopting the magistrate's recommendation, without considering the application of ERISA to Kaplan as an individual, in light of the differences between her status vis-a-vis ERISA and that of the other defendants. Instead, the magistrate merely said, “For the reason stated ... [regarding Paul Revere and HomeView] ...,” plaintiff's claim against Kaplan would also “be pre-empted by ERISA." He simply assumed that, if ERISA pre-empted the claim against Revere and HomeView, it must likewise pre-empt the claim against Kaplan. Given the distinctions between Kaplan’s status as an ERISA entity and that of the other defendants, this failure to consider the claim against Kaplan on its own merit also constituted legal error.