Court Opinion

ID: 9482334
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:46:57.306319+00
Date Added: 2024-06-11T17:48:54.943633
License: Public Domain

WELLFORD, Senior Circuit Judge,
concurring in part and dissenting in part:
I concur in parts I and IIA of Judge Martin’s opinion. I also concur in that *303portion of part IIB that concludes that ERISA pre-empts three of plaintiffs' state law claims.1
I dissent, however, from the conclusion in part IIB that the fourth state claim, “that the conversion policy issued by New York Life did not conform with [Ky.Rev. Stat.] § 304.18-110(5), has merit and survives pre-emption.” This segment of the opinion reverses the district court’s decision after a prior remand in which we stated, “While not disagreeing with the district court’s judgment, we remand ... so that the district court may consider ... this case in light of FMC Corp. v. Holliday, [498 U.S. -, 111 S.Ct. 403, 112 L.Ed.2d 356] (1990), and Ingersoll-Rand v. McClendon, [498 U.S. -], 111 S.Ct. [478, 112 L.Ed.2d 474] (1990).” (Emphasis added). The district court found nothing compelling in either recent Supreme Court decision to change its pre-emption decision. I continue to agree, and I would affirm the defendant’s judgment.
The Supreme Court has indicated that “[ERISA’s] ‘carefully integrated’ civil enforcement scheme ... ‘is one of the essential tools for accomplishing the stated purposes of ERISA.’ ” Ingersoll-Rand, 111 S.Ct. at 482, quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52, 107 S.Ct. 1549, 1555, 95 L.Ed.2d 39 (1987).2 As stated by the majority, “where rights are guaranteed by ERISA, the remedy for such rights under ERISA is exclusive.” This is not to say, however, that enforcement of rights under “a comprehensive statute such as ERISA” need be as extensive or encompassing as a pre-empted state remedy. Ingersoll-Rand, 111 S.Ct. at 482; see Pilot Life, 481 U.S. at 53-54, 107 S.Ct. at 1556 (indicating that ERISA pre-empts a state claim for improper processing even though ERISA, unlike the state claim, does not allow punitive damages).
Under the civil enforcement provisions of § 502(a) [29 U.S.C. § 1132(a)], a plan participant or beneficiary may sue to recover benefits due under the plan, to enforce the participant’s rights under the plan, or to clarify rights to future benefits. Relief may take the form of accrued benefits due, a declaratory judgment on entitlement to benefits, or an injunction against a plan administrator’s improper refusal to pay benefits. A participant or beneficiary may also bring a cause of action for breach of fiduciary duty, and under this cause of action may seek removal of the fiduciary. §§ 502(a)(2), 409. In an action under these civil enforcement provisions, the court in its discretion may allow an award of attorney’s fees to either party.
Pilot Life, 481 U.S. at 53,107 S.Ct. at 1556.
Thus the Pilot Life court implied that although ERISA did not provide for punitive damages, ERISA pre-empted the plaintiffs’ more beneficial state law claims. The Ingersoll-Rand opinion cites Pilot Life no less than five times in holding that a Texas wrongful discharge action would not lie even if the claimed reason for discharge was the “employer’s desire to avoid contributing to or paying benefits under the employee’s pension fund.” Ingersoll-Rand, 111 S.Ct. at 479 (Syllabus).
In this case, plaintiffs may sue under ERISA for “accrued benefits due,” “to enforce [Smith’s] rights under the plan”, “for an injunction [for] improper refusal to pay benefits,” and “for breach of fiduciary duty” as set out in Pilot Life. If successful under ERISA on their wrongful termination of insurance benefits and “improper refusal to pay” claims, then plaintiffs have no need to seek what seem to me to be unclear “conversion” rights under Ky.Rev. Stat. § 304.18-110(5) which the majority holds are not pre-empted:
The insurer shall not be required to issue a converted policy covering any person if such person is or could be cov*304ered by medicare (Title XVIII of the United States Social Security Act as added by the Social Security Amendments of 1965 or as later amended or superseded). Furthermore, the insurer shall not be required to issue a converted policy covering any person if (a) such person is covered for similar benefits by another hospital or surgical or medical expense insurance policy or hospital or medical service subscriber contract or medical practice or other prepayment plan or by any other plan or program or (b) similar benefits are provided for, or available to, such person pursuant to, or in accordance with the requirements of, any statute, and the benefits provided or available under any of the sources referred to in (a) and (b) above for such person, together with the converted policy, would result in over insurance according to the insurer’s standards relating to policies converted from group policies. A converted policy made available pursuant hereto shall provide substantially similar benefits but in no event be less than the minimum standards contained in KRS 304.18-120 if delivery of such converted policy is to be made in this state; and, if delivery of such converted policy is to be made elsewhere, it may be on such form as the insurer may then be offering for such conversion in the jurisdiction where such delivery is to be made and which provides substantially in compliance with that required by KRS 304.18-120.
Ky.Rev.Stat. § 304.18-110(5).3
The majority indicates that because they “cannot fairly assume” that ERISA provides the plaintiffs with a similar remedy, then the claimed conversion rights are not pre-empted. Plaintiffs cite, as a basis for this argument, Perry v. P*I*E Nationwide, Inc., 872 F.2d 157 (6th Cir.1989). Perry, however, involved fraud in the inducement in “obtaining participation” in the plan. Id. at 158. If the claim in Perry were pre-empted, then the plaintiff would not have been able to prove fraud and no plan would have existed justifying, among other things, drastic pay cuts despite preexisting collectively-bargained rates of pay. Perry is not analogous to this case where a plan, unchallenged for many years, was carried out to plaintiff’s great benefit and the issue relates to a right to terminate. Another case relied on by the majority, Michigan United Food & Commercial Workers Unions v. Baerwaldt, 767 F.2d 308 (6th Cir.1985), cert. denied, 474 U.S. 1059, 106 S.Ct. 801, 88 L.Ed.2d 777 (1986), simply held, pursuant to Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), that Michigan’s similar “mandated benefit law” was not pre-empted. The majority concedes that Ky.Rev.Stat. § 304.18-110(5) “does not qualify as a ‘mandated benefit law’.” I find no basis, therefore, to conclude that Metropolitan Life mandates “that the plaintiff’s conversion claim survives pre-emption in spite of Pilot Life." Ingersoll-Rand fully supported the rationale of Pilot Life.
Nor is the majority’s reasoning somehow buttressed by FMC Corp. Plaintiffs’ counsel conceded in a December 14, 1990 letter to the court, “because the employer in FMC was sei/insured, the case did not involve any purchase or regulation of insurance and the result in that case instead turned on ERISA’s ‘deemer’ clause, which all parties recognize is inapplicable here.” (Emphasis in original). FMC holds that “[t]he pre-emption clause is conspicuous for its breadth. It 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.” Id., Ill S.Ct. at 407. That language is *305quoted in Ingersoll-Rand. See Ingersoll-Rand, 111 S.Ct. at 482. FMC held only that the “deemer clause” exempts “self-funded ERISA plans from state laws that ‘regulat[e] insurance’ within the meaning of the saving clause.” FMC, 111 S.Ct. at 409.
Under McMahan v. New England Mut. Life Ins. Co., 888 F.2d 426 (6th Cir.1989), it is a close question whether Ky.Rev.Stat. § 304.18-110(5), unlike the Kentucky law involved in that case, is a law which “regulates insurance within the meaning of ERISA’s saving clause,” id. at 430, but I would conclude that McMahan is not a basis for avoiding ERISA pre-emption of this claim.
I would hold that plaintiffs must proceed on the basis of an ERISA claim to enforce their asserted rights under the policy for the alleged improper refusal to pay and for wrongful termination. I cannot conclude or assume that ERISA provides no potential remedy to plaintiffs on their claim that New York Life failed to make benefit payments under the policy. That ERISA may provide to plaintiffs a lesser remedy than state law, is not a basis to deny pre-emption. Even if the district court were ultimately to decide that the plaintiffs do not have an ERISA claim under the circumstances, that would also not be a basis to allow plaintiffs to proceed on a pre-empted state law claim merely because “we cannot fairly assume the activity Kentucky is regulating through its conversion statute is protected ... by an ERISA remedy.”4 In fact, it appears that New York Life offered plaintiffs a conversion right to a private policy upon termination of the group major medical policy.
In any event, it is clear that plaintiffs cannot claim punitive damages in this case. This is quintessentially a contract case. To the extent vesting of benefits in this dispute must be decided, I would remand that issue to the district court with directions to determine the parties’ intentions in light of the policy language, status of the plaintiffs, commitments made to continue benefits, if any, and the actions of the parties. The district court should consider Armistead v. Vernitron, 944 F.2d 1287 (6th Cir.1991); Anderson v. Alpha Portland Indus., Inc., 836 F.2d 1512 (8th Cir.1988), cert. denied, 489 U.S. 1051, 109 S.Ct. 1310, 103 L.Ed.2d 579 (1989); In re White Farm Equip. Co., 788 F.2d 1186 (6th Cir.1986); Implement Workers v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir.1983), cert. denied, 465 U.S. 1007, 104 S.Ct. 1002, 79 L.Ed.2d 234 (1984).
ERISA divides benefit plans into two classes: “welfare benefit plans” and "pension plans.” See 29 U.S.C. §§ 1002(1) & (2)(A). The group insurance plan in White Farm and the one at issue here are welfare benefits plans. White Farm, 788 F.2d at 1187; Musto v. American General Corp., 861 F.2d 897, 901 n. 2 (6th Cir.1988). Pension plans are subject to statutory vesting requirements, 29 U.S.C. § 1053, but welfare plans are not. The question the White Farm court decided was whether welfare benefits had vested at retirement as a matter of federal common law under ERISA.
Vernitron, at 1293.
On the question of the preliminary injunction discussed in part III, I agree that the injunction should continue, but, on remand to the district court, both parties should have the opportunity for a prompt hearing to determine, in light of present circumstances, whether: (1) “loss of [insurance] funds would adversely affect” Mark Smith’s care; (2) litigation makes “retention of qualified medical caretakers difficult;” (3) other resources for health care are available; and (4) there might be some interruption in necessary care, and, if so, the effect on Mark Smith.
In summary, I concur in the conclusion that this case concerns an ERISA plan and that three of the four stated state law claims are pre-empted. I dissent in respect to the fourth, so-called Kentucky “conver*306sion” right claim, because I conclude it is also pre-empted.
I concur in the remand for a determination, if necessary, whether Smith’s rights under the plan were “vested.” I would also remand for another prompt hearing on the propriety of the preliminary injunction.

. Judge Martin states that ERISA pre-empts: 1) the claim that cancellation of the policy is forbidden "once liability has attached;" 2) "the tort of bad faith in insurance practice;” and 3) the claim of "unfair and deceptive practices in the insurance business.”

. Justice O’Connor was the author of FMC Corp., Ingersoll-Rand, and Pilot Life, the latter holding that state laws on tortious breach of contract and "bad faith” of the insurance carrier, which allowed punitive damages, were pre-empted.

. Ky.Rev.Stat. § 304.18-110(3) provides for conversion of a group "hospital or surgical benefits” policy "if coverage terminates for any reason.” Whether Mark Smith’s policy came within the meaning of the Kentucky statute is unclear. It is likewise unclear whether he is "covered by Medicare” or may have "similar benefits" under another policy or policies. The cost of an individual "converted" policy to provide substantially similar benefits to Mark Smith as covered by the terminated group policy is also unknown. Plaintiffs’ supplemental brief at p. 18, refers to a "conversion policy offered [which] did not provide for 24-hour private duty nursing care at home.” Defendant apparently offered a conversion policy, but plaintiffs question whether it provided substantially similar benefits to the group insurance coverage.

. The plan has provided a New York Life major medical reimbursement policy. It is unclear whether the Kentucky statute relied upon by plaintiffs, and by the majority, applies to such a policy.