Court Opinion

ID: 9495844
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:11:23.590373+00
Date Added: 2024-06-11T17:57:13.491682
License: Public Domain

CALABRESI, Circuit Judge,
dissenting in part.
How can one object to the result reached by the court in this case? Taking its inspiration from some words in Pegram v. Herdrich, 530 U.S. 211, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000), the majority elegantly skirts the boundary of ERISA preemption to avoid an outrageous outcome. Appellants allege that Mr. Cicio might well have survived, had not the plan administrator negligently denied coverage for Mr. Cicio’s treatment. Under the circumstances, it seems no more than just to allow his widow’s suit for malpractice to proceed in state court, as the majority does. And I certainly share in the majority’s “skepticism of a line of reasoning that would draw from a ‘comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans,’ the elimination of protective standards of professional conduct.” Ante, at 104 (internal citation removed).
Yet in the end I cannot reconcile the majority’s holding with the Supreme Court’s precedents and with the structure of ERISA itself, given those precedents. Nor do I believe that the majority opinion somehow “fixes” the problem with the ERISA caselaw. The conclusion that my colleagues have reached today is a band-aid on a gaping wound. It may provide justice to Mrs. Cicio, and I’m glad for that, but the injury that the courts have done to ERISA will not be healed until the Supreme Court reconsiders the existence of consequential damages under the statute, or Congress revisits the law to the same end.
I.
The country’s leading ERISA scholar, John Langbein, has demonstrated that ERISA § 502(a), the civil remedies section, closely tracks the traditional remedies of trust law. See John H. Langbein, What ERISA Means by “Equitable”: The Supreme Court’s Trail of Error in Russell, Mertens, and Great West, Yale Law & Economics Research Paper No. 269 (Jan. 2003), available at www.ssrn.com. Under traditional precepts, an aggrieved trust beneficiary “may recover (1) for loss incurred, (2) for any profits that the trustee made in breach of trust, and (3) for any gains that would have accrued but for the breach,” i.e., for consequential damages. Id. at 29. Trust beneficiaries may not, however, recover punitive damages. Id. at 59. By setting into motion the development of a body of federal trust law to govern benefit plan administration, and by preempting state laws that would add (or subtract) to the relief provided by § 502, the drafters of ERISA nicely “balanced] the need for prompt and fair claims settlement procedures against the public inter*107est in encouraging the formation of employee benefit plans.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987).
Or so Congress and ERISA beneficiaries fairly could have hoped. What they got instead was the Supreme Court’s “Trail of Error,” in which the Court lumped consequential and punitive damages into the misleading category of “ex-tracontractual relief,” see Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), and disallowed both by dint of an anachronistic (and historically false) law/equity distinction said to be implicit in Congress’s provision for “appropriate equitable relief’ in § 502(a)(3). See Mertens v. Hewitt Assocs., 508 U.S. 248, 255, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993); see generally Langbein, Trail of Error, at 28-75, and especially 62-73. The upshot is that ERISA, despite its ambition, today generally does not “make whole” plan beneficiaries harmed by plan administrators’ misconduct. See ante at 95, n. 8, and sources there cited.
Not surprisingly, there has developed pressure on ERISA’s preemption provisions, so that the states may see to it that plan beneficiaries who under a proper, trust-based reading of § 502(a) would be adequately cared for by ERISA, are otherwise protected ex ante, or compensated ex post, under state law. The Supreme Court’s recent holding in Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 122 S.Ct. 2151, 153 L.Ed.2d 375 (2002), and its discursion on “mixed” eligibility and treatment decision in Pegram, is evidence of that pressure. But the opportunistic attacks on preemption that may result will serve mainly to complicate ERISA and to create anomalous results. Some deserving plaintiffs will be helped out along the way, but many others will obtain no relief, and providers will increasingly have to face that very patchwork of liability risks— differing from state to state — that ERISA’s preemptive scheme was meant to avoid.
Because it is not too late for the Supreme Court to retrace its Trail of Error and start over from the beginning,1 or for Congress to wipe the slate clean, I decline to join in Part V of the majority’s opinion.
II.
A short dissent is not the place to delve deeply into the mysteries of ERISA preemption law.2 Suffice it to say that, after a disastrous flirtation with the notion that any cause of action that was in any way connected to an ERISA contract was preempted by ERISA, the law has moved *108more and more in the direction of barring only those state actions which, if local law were permitted to govern, would expand (or contract) the relief available beyond that provided by § 502(a) of ERISA. See Cal. Div. of Labor Standards Enforcement v. Dillingham Const., N.A., Inc., 519 U.S. 316, 334-36, 117 S.Ct. 832,136 L.Ed.2d 791 (1997) (Scalia, /., concurring) (recognizing problems with the Court’s early ERISA preemption decisions, and calling for a more open acknowledgment of the evolution that has occurred in the ERISA preemption jurisprudence); Rush Prudential, 122 S.Ct. at 2167 (“While independent review under [an Illinois claims-review statute] may well settle the fate of a benefit claim under a particular contract, ... the relief ultimately available[, i.e., coverage of the disputed medical procedure,] would still be what ERISA authorizes in a suit for benefits under [§ 502(a)].”).
Even accepting this more limited — and I believe more sensible — scope of preemption, where does that leave Mrs. Cicio’s suit? The answer lies in whether the suit, in its essence, is to obtain relief for the violation of rights under the terms of the ERISA plan, in which case the state action is preempted, or whether it is a suit for malpractice against a doctor (or the doctor’s employer) as to which the existence of ERISA coverage is only incidental. To put it another way, if ERISA were not there, would this suit essentially be against an insurance provider for negligently failing to give the coverage contracted for, or would the suit be against a medical care provider for negligent failure to treat? Because I think that the current suit is clearly of the first sort, I regretfully conclude that it is barred.
It is, of course, possible that the insurance provider is also the medical care provider. In such cases, in which propriety of treatment and propriety of judgment as to eligibility under an ERISA plan are intertwined, I do not believe that a state-law malpractice suit would be preempted. Such a state-law action cannot be preempted, simply because the treatment decision was made by the same person who made the improper decision as to the scope of coverage under an ERISA plan. The fact that the medical malpractice and the contract misinterpretation involved the exact same error does not make the state tort action in any way dependent on a finding that the ERISA contract has been breached. It therefore would not be barred by ERISA.
There may also be situations in which it is unclear whether the plan provider is the medical provider as well (or is that provider’s employer). Then too, state law may be free from ERISA preemption in ruling on whether what the plan administrator did constituted medical treatment or, what is the same thing, amounted to an employment of medical care providers. And, if state law so determined, once again a state malpractice suit might lie.3
*109The case before us is, unfortunately, not amenable to any such interpretations. Despite the majority’s admirable efforts, the facts, read most favorably to the appellant, are plain. The plan administrators — perhaps because of bad medical judgment, perhaps for other improper reasons — interpreted Mr. Cicio’s ERISA-plan contract not to cover the procedure he and his treating physician sought. The treating physician, however, did not give up and in time the plan administrator relented, in part. By then it was too late.
On these facts it seems to me clear beyond peradventure a) that the plan administrators were not, in any way, acting as Mr. Cicio’s doctors, b) that what they were doing was — perhaps negligently — determining the scope and coverage of an ERISA-plan contract, c) that as a result of that allegedly improper denial of coverage, Mr. Cicio was financially unable to obtain, in time, the treatment he and his treating physician continued to seek, and d) that catastrophic, consequential damages — Mr. Cicio’s death' — flowed from the improper misreading of the ERISA-plan coverage. Mrs. Cicio then sued for those damages. If this is not a paradigmatic suit to remedy the violation of rights under the terms of the plan, I don’t know what is.
The majority tries to make much of the fact that the coverage decision was erroneously made because of a medical error on the plan administrator’s part. That may well be, but that fact seems to me irrelevant. Indeed, its irrelevance shows why, at best, the majority opinion only band-aids a gaping wound.
Improperly erroneous coverage decisions by plan administrators can be made for any number of reasons, medical and non-medical. The result of such denials of coverage, as a practical matter, often will be, as it allegedly was in this case, the source of disastrous consequential injuries. The ERISA beneficiary gets no money and as a result suffers grievous consequential harms. Such harms are not, however, remediable injuries under ERISA, given the Supreme Court’s misguided decision in Mertens, 508 U.S. at 255-62, 113 S.Ct. 2063 (1993) (holding that “appropriate equitable relief’ under ERISA § 502(a)(3) does not encompass compensatory damages). And there is no suggestion in the preemption cases that state suits based on the underlying negligence that gave rise to an erroneous coverage decision can survive under ERISA. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (holding preempted a state-law claim based on allegedly improper processing of benefits).
There is none, that is, except for the unexplained comment in Pegram — on which the majority puts such weight— dealing with medically based errors. But that well intentioned dicta can only make sense where the underlying negligence also plausibly constitutes medical maltreatment by a party who can be deemed to be a treating physician or such a physician’s employer, as was the case in Pegram.4 Where, as here, no such relationship existed, there is no apparent reason, in state or federal law, for treating the unlawful coverage decision any differently from any other unlawful coverage decision that is not based on medical error.
In the end, stretching to avoid preemption in order to allow state actions for consequential damages in cases like this one, in which the wrongful coverage deci*110sion was medically based, will help a few deserving people, like Mrs. Cicio. It will, however, leave unaided all those who suffer identical consequential damages as a result of non-medically based wrongful coverage decisions. And there is nothing in ERISA theory or practice that seems to me to justify such different treatment.
III.
The majority reaches a result that I believe to be just in this case, and I applaud it. Since that result neither fits with the existing structure of ERISA nor — except occasionally and anecdotally — solves the problem caused by the Supreme Court’s denial of consequential damages under ERISA, I respectfully dissent from Part V of the majority’s opinion.

. ERISA is a difficult statute, and the Supreme Court has shown admirable flexibility in its approach to the law. See, e.g., N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995) ("[W]e have to recognize that our prior attempt to construe the phrase ‘relate to' [in ERISA's express preemption section] does not give us much help drawing the line here.'') The Court's willingness to update its initial gloss on ERISA preemption is cause for hope that the Court may yet revisit its disallowance of consequential damages under § 502(a)(3).

. In particular, I do not deem it worthwhile to get into the vagaries of when express preemption under ERISA dictates a result, and when, additionally, complete preemption requires that the case be heard in federal court. It is enough to note that the arguments I make, if valid, require complete preemption in this case. Specifically, permitting this suit to go forward would mean allowing an “alternative enforcement mechanism” to that provided by ERISA’s civil remedies section. See Plumbing Indus. Bd. Local Union No. 1 v. E.W. Howell Co., 126 F.3d 61, 67 (2d Cir. 1997), quoting N.Y. State Conference of Blue Cross & Blue Shield Plans, 514 U.S. at 658 (1995).

. Indeed, a suggestion could even be made that a) where a treating physical fails to attempt to treat simply because the plan administrator denied coverage, and b) that denial was ostensibly made on medical grounds, it may be possible for a state to find that the plan administrators de facto controlled the treating physician and hence were responsible' — as principals — for that doctor’s malpractice as agent. This approach would lead to the seeming paradox that recoveries of consequential damages against the plan administrators might be available when the plaintiff's physician foolishly forwent trying to treat after the administrators denied coverage, while such damages would be precluded when that same physician wisely continued to try to treat and stopped only because the moneys needed for treatment were not available. But the paradox is more apparent than real, since it is always the case that a person who suffers a medical maloccurrence after proper medi*109cal treatment is worse off — in terms of legal damages — than one whose medical maloccur-rence was due to malpractice.

. Pegram, of course, was not a preemption decision.