In re: US Healthcare, Inc. (Bauman v. US Healthcare, Inc. et.al.) ( 1999 )


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  •                                                                                                                            Opinions of the United
    1999 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    9-16-1999
    In re: US Healthcare, Inc. (Bauman vs. US
    Healthcare, Inc. et.al.)
    Precedential or Non-Precedential:
    Docket 98-5222
    Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1999
    Recommended Citation
    "In re: US Healthcare, Inc. (Bauman vs. US Healthcare, Inc. et.al.)" (1999). 1999 Decisions. Paper 257.
    http://digitalcommons.law.villanova.edu/thirdcircuit_1999/257
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    Filed September 16, 1999
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    Nos. 98-5222, 98-5262 and 98-5263
    In re: U.S. HEALTHCARE, INC.,
    Petitioner in No. 98-5222
    STEVEN BAUMAN, MICHELLE BAUMAN, Individually and
    as Administrators ad prosequendum of the Estate of
    MICHELINA BAUMAN, deceased
    v.
    U.S. HEALTHCARE, INC., KENNEDY MEMORIAL
    HOSPITAL, Washington Township Division, KAMILA
    NEMEH, M.D., JOHN DOES (1-5)
    U.S. HEALTHCARE, INC.,
    Appellant in No. 98-5262
    STEVEN BAUMAN, MICHELLE BAUMAN, Individually and
    as Administrators ad prosequendum of the Estate of
    MICHELINA BAUMAN, deceased,
    Appellants in No. 98-5263
    v.
    U.S. HEALTHCARE, INC., KENNEDY MEMORIAL
    HOSPITAL, Washington Township Division, KAMILA
    NEMEH, M.D., JOHN DOES (1-5)
    On Appeal from the United States District Court
    for the District of New Jersey
    (D.C. Civ. No. 97-cv-02905)
    District Judge: Hon. Stanley S. Brotman
    Argued: April 6, 1999
    Before: SLOVITER, ALITO and ALARCON,* Circuit Judges
    (Filed September 16, 1999)
    Joshua M. Spielberg (Argued)
    Tomar, Simonoff, Adourian, O'Brien,
    Kaplan, Jacoby & Graziano
    Cherry Hill, N.J. 08034
    Attorney for Respondents in No.
    98-5222, Appellees in No. 98-5262
    Burt M. Rublin (Argued)
    Ballard, Spahr, Andrews & Ingersoll
    Philadelphia, PA 19103
    Howard J. Bashman
    Richard M. Simins
    Montgomery, McCracken, Walker &
    Rhoads
    Philadelphia, PA 19109
    Edward S. Wardell
    Kelley, Wardell & Craig
    Haddonfield, N.J. 08033
    Attorneys for Petitioner in No.
    98-5222, Attorneys for Appellant
    in 98-5262, Appellee in No. 98-
    5263
    _________________________________________________________________
    * Hon. Arthur L. Alarcon, Senior Circuit Judge for the United States
    Court of Appeals for the Ninth Circuit, sitting by designation.
    2
    Henry L. Solano
    Solicitor of Labor
    Marc I. Machiz
    Associate Solicitor
    Karen L. Handorf
    G. William Scott (Argued)
    United States Department of Labor
    Plan Benefits Security Division
    Washington, D.C. 20003
    Amicus-respondent in No.
    98-5222, Amicus-appellee in No.
    98-5262 & 98-5263
    OPINION OF THE COURT
    SLOVITER, Circuit Judge.
    This case calls upon us to revisit the issue of"complete
    preemption" under the Employee Retirement Income
    Security Act ("ERISA"), 29 U.S.C. S 1132(a), in the context
    of a lawsuit claiming medical malpractice, a question we
    last considered in Dukes v. U.S. Healthcare, Inc., 
    57 F.3d 350
     (3d Cir. 1995).
    The plaintiffs, Steven and Michelle Bauman, brought suit
    in a New Jersey state court for damages arising from the
    death of their newborn daughter, Michelina Bauman. The
    complaint names as defendants Kamilah Nemeh, M.D. (the
    pediatrician responsible for the treatment of Michelina);
    Kennedy Hospital in Washington Township, New Jersey (the
    hospital where Michelina was born); and The Health
    Maintenance Organization of New Jersey, Inc., a subsidiary
    of U.S. Healthcare, Inc. (collectively "the HMO") (the health
    maintenance organization of which the Baumans were
    members). The complaint asserts direct tort claims against
    all three defendants and also alleges vicarious liability on
    the part of Kennedy Hospital and the HMO.
    U.S. Healthcare, joined by the other defendants,filed a
    removal petition, basing federal jurisdiction on the doctrine
    of complete preemption under section 502 of ERISA. U.S.
    3
    Healthcare then moved in the District Court for dismissal
    or, in the alternative, summary judgment on the ground
    that all of the Baumans' claims were subject to express
    preemption under section 514(a) of ERISA. The Baumans
    moved to remand, arguing that there was no federal
    jurisdiction over any of their claims. The District Court
    granted U.S. Healthcare's motion in part, concluding that
    federal jurisdiction exists over Count Six of the Baumans'
    complaint by virtue of the complete preemption doctrine.
    The court further concluded that Count Six was subject to
    express preemption under ERISA section 514(a) and it
    therefore dismissed that count. Having dismissed the only
    count for which it found there was federal jurisdiction, the
    District Court then declined to exercise supplemental
    jurisdiction over the remaining counts against U.S.
    Healthcare and the other defendants and remanded them
    to state court under 28 U.S.C. S 1367(c)(3).
    U.S. Healthcare has filed both a Petition for a Writ of
    Mandamus and a Notice of Appeal from the District Court's
    order. The Baumans have cross-appealed the District
    Court's order dismissing Count Six and denying their
    motion to remand all their claims to New Jersey state court
    under 28 U.S.C. S 1447.
    I.
    Michelle Bauman gave birth to Michelina Bauman at
    Kennedy Hospital in Washington Township, New Jersey, on
    May 16, 1995. In accordance with the health care benefits
    pre-certification provided by the HMO, Dr. Nemeh, an
    independent health care provider contracting with the
    HMO, discharged mother and newborn from the hospital
    after twenty-four hours. On May 18, the day after Michelina
    was discharged and two days after she was born, the
    Baumans noticed that Michelina was ill. They made
    numerous telephone calls to Doctor Nemeh, but she did not
    advise them to bring Michelina back to the hospital. They
    also contacted U.S. Healthcare and requested an in-home
    visit by a pediatric nurse, but no such nurse was provided.
    Michelina contracted a Group B strep infection that was
    undiagnosed and untreated. It developed into meningitis
    and she died that same day.
    4
    The Baumans' complaint was filed in New Jersey
    Superior Court, Camden County, in May 1997. We address
    only the four counts against U.S. Healthcare.1 In Count
    One, the Baumans allege that the U.S. Healthcare policy
    "encouraged, pressured, and/or directly or indirectly
    required" the twenty-four hour pre-certified discharge used
    by the doctor and hospital. App. at 16. In implementing
    this policy, the complaint continues, U.S. Healthcare acted
    "without adequate consideration" for the policy's medical
    appropriateness and "without due care for the health and
    safety" of members and their children. App. at 16. Count
    One also includes a claim for vicarious liability against U.S.
    Healthcare for the negligence of its alleged agents Nemeh
    and Kennedy Hospital in prematurely discharging the
    newborn after only twenty-four hours while the infection
    went undiagnosed.
    Count Two alleges that Michelina did not receive timely
    diagnosis and treatment of the deadly infection. The count
    states that U.S. Healthcare's adoption of the twenty-four-
    hour pre-certified discharge policy, despite U.S.
    Healthcare's knowledge that newborns were at risk for
    developing diseases and that the policy would delay
    diagnosis and treatment, manifested reckless indifference to
    the "health consequences of its policy" and was "motivated
    only by the financial profit" realizable from having to pay
    for only a single day in hospital. App. at 17.
    The Baumans allege in Count Five that U.S. Healthcare
    negligently adopted "policies with respect to hospital
    utilization" that discouraged participating physicians from
    "re-admitting infants to the hospital when health problems"
    arose after discharge. App. at 20. They also allege that U.S.
    Healthcare negligently "fail[ed] to exercise due care in the
    selection, supervision, training, and/or monitoring" of Dr.
    Nemeh. App. at 20. This count includes both a direct
    negligence claim and a vicarious liability claim for the
    failure to diagnose and treat Michelina's infection.
    Count Six alleges that in light of the discharge,
    Michelina's "medically appropriate care" required an in-
    _________________________________________________________________
    1. Neither Nemeh nor Kennedy Hospital is a party to the appeal or the
    petition for writ of mandamus.
    5
    home visit by a pediatric nurse to "ensure [her] health and
    well-being." App. at 21. The Baumans requested such a
    visit in their May 18 phone call and, according to the
    complaint, the plan's L'il Appleseed Program assured such
    visits, which U.S. Healthcare negligently failed to provide in
    this instance. This count also included negligence claims
    against the hospital and doctor for their failure to report
    Michelina's birth to the HMO, which would have supported
    the request for a pediatric nurse.
    On June 12, 1997, U.S. Healthcare removed the action to
    the District Court for the District of New Jersey on the
    ground that section 502(a) of ERISA provides federal
    jurisdiction over the complaint by virtue of the "complete
    preemption" doctrine. A month later, the Baumans moved
    to remand the case to state court. While the case was in the
    District Court, U.S. Healthcare requested dismissal of all
    four counts or claims against it on the basis of section
    514(a) express preemption under ERISA.
    The District Court remanded Counts One, Two and Five,
    but did so pursuant to 28 U.S.C. S 1367(c)(3) rather than
    under 28 U.S.C. S 1447(c) as the Baumans requested. The
    court denied the motion to remand Count Six and, as to
    that count, granted U.S. Healthcare's motion to dismiss.
    In its opinion dated March 30, 1998, the District Court
    explained these rulings as follows: The court held that
    removal was proper because Count Six states a claim that
    fits within the scope of section 502(a) of ERISA (covering
    claims "to recover benefits due" under the terms of the
    plan), and that therefore it had subject matter jurisdiction
    under the doctrine of "complete preemption." It held,
    concomitantly, that Count Six was expressly preempted
    under section 514(a) of ERISA and should be dismissed.
    See Bauman v. U.S. Healthcare, Inc., 
    1 F. Supp. 2d 420
    ,
    425 (D.N.J. 1998). However, the District Court held that the
    other three counts pled against U.S. Healthcare were not
    completely preempted. 
    Id. at 423-24
    . It then exercised its
    discretion and remanded those claims to state court under
    28 U.S.C. S 1367(c)(3), reasoning that the case was
    relatively early in its proceedings and the single dismissed
    claim providing subject matter jurisdiction was relatively
    6
    minor among all the claims asserted against U.S.
    Healthcare. 
    Id. at 426
    .
    On April 1, the District Court amended its original order
    to state that it dismissed Count Six with respect to U.S.
    Healthcare only. The remand of the other counts was not
    changed.
    U.S. Healthcare filed a timely notice of appeal as well as
    a separate petition for a writ of mandamus. The Baumans
    cross-appealed the court's dismissal of Count Six and
    denial of their motion to remand under 28 U.S.C.S 1447(c).
    This court referred the petition for a writ of mandamus to
    a merits panel and directed a consolidated briefing
    schedule for the appeal, cross-appeal, and petition.
    Additionally, we granted the motion of the Secretary of
    Labor to file a brief as amicus curiae in support of the
    Baumans.
    II.
    We must first consider our jurisdiction to hear this case.
    See Collinsgru v. Palmyra Bd. of Educ., 
    161 F.3d 225
    , 228-
    29 (3d Cir. 1998). The District Court held that there was
    federal subject matter jurisdiction pursuant to 28 U.S.C.
    S 1331 after removal, based on its ruling that Count Six
    was completely preempted under ERISA; it also ruled that
    it therefore had supplemental jurisdiction under 28 U.S.C.
    S 1367(a) over the remaining state law counts. Before we
    consider the District Court's subject matter jurisdiction, we
    must decide whether we have appellate jurisdiction. This,
    in turn, depends on whether the District Court's amended
    order dismissing Count Six and remanding the case to state
    court is a final decision, or, if not, whether we should
    exercise mandamus jurisdiction.
    A.
    In the original order dated March 31, 1998, the District
    Court stated, inter alia, that "U.S. Healthcare's Motion to
    Dismiss or, in the Alternative, for Summary Judgment is
    granted in part, and Count Six of Plaintiff's Complaint is
    dismissed." App. at 171. The court proceeded to remand
    7
    Counts One through Five, Seven, and Eight to the state
    court. In the order amended on April 1, the District Court
    modified only the dismissal of Count Six, stating that
    "Plaintiff's Complaint is dismissed as to U.S. Healthcare
    only." Bauman, 
    1 F. Supp. 2d at 426
     (the"Amended Order").2
    However, the District Court's opinion expressly set forth
    its intention to dispose of the entire case. See 
    id.
     ("[T]his
    Court finds that it is proper to remand the remainder of this
    action to state court." (emphasis added)). In the conclusion
    of its opinion, the court stated "[T]his Court will enter an
    appropriate order remanding the remainder of the case" to
    the New Jersey state court. 
    Id.
     (emphasis added). In Ford
    Motor Co. v. Summit Motor Products, Inc., 
    930 F.2d 277
    , 286
    (3d Cir. 1991), we stated, "Should there be ``any ambiguity
    or obscurity or if the judgment fails to express the rulings
    in the case with clarity or accuracy, reference may be had
    to the findings and the entire record for the purpose of
    determining what was decided.' " (quoting Security Mutual
    Casualty Co. v. Century Casualty Co., 
    621 F.2d 1062
    , 1066
    (10th Cir. 1980)).
    _________________________________________________________________
    2. Although the Amended Order failed to dispose expressly of Count Six
    as it applied to the hospital and doctor, counsel for both U.S. Healthcare
    and the Baumans agreed at oral argument that the District Court
    intended to remand all of the remaining claims, and that its failure to do
    so was merely a clerical or technical oversight. Federal Rule of Civil
    Procedure 60(a) provides that clerical or technical errors may be
    corrected at any time, even after an appeal has beenfiled. See In re West
    Tex. Marketing Corp., 
    12 F.3d 497
    , 504 (5th Cir. 1994).
    Remand for this purpose is not always necessary. See 11 Charles Alan
    Wright, Arthur R. Miller & May Kay Kane, Federal Practice and
    Procedure: Civil 2d S 2856, at 251-52 (2d ed. 1995) (Notwithstanding the
    availability of Rule 60(a)'s mechanism for obtaining a correction from the
    district court, appellate courts "have treated clerical errors,
    oversights,
    and omissions as if they had been corrected and have not required the
    formality of a correction by the district court."). For example, in a case
    in which the jury rendered verdicts on both causes of action sued upon,
    but the district court entered only one judgment, this court deemed the
    failure of the district court to enter two judgments an "obvious clerical
    error" and treated the appeal as if two judgments had been entered
    without requiring the parties to return to "a presently very much
    overburdened United States District Court for technical correction."
    Brown v. Moore, 
    247 F.2d 711
    , 714 n.2 (3d Cir. 1957).
    8
    We, therefore, conclude that the District Court intended
    to remand the claims against Kennedy Hospital and Dr.
    Nemeh in Count Six to the state court but, through a
    clerical error, overlooked amending the final paragraph of
    its order to reflect this disposition. In light of our precedent,
    see note 2 supra, we treat the order as one that remanded
    all non-dismissed claims, and one that is accordingly final.
    Consequently, we turn now to the nature of our
    jurisdiction.
    B.
    Following the District Court's holdings that there was
    subject matter jurisdiction over Count Six under 28 U.S.C.
    S 1331 and supplemental jurisdiction over the remaining
    claims, the court invoked its discretionary authority to
    decline to retain supplemental jurisdiction and remanded
    the non-dismissed counts and claims under 28 U.S.C.
    S 1367(c)(3), rather than under 28 U.S.C.S 1447(c), which
    governs remand when subject matter jurisdiction is wholly
    lacking. Had it used the latter statute we would have no
    appellate jurisdiction, as that section precludes review of a
    district court's remand except in limited circumstances not
    applicable here. See 28 U.S.C. S 1447(d) ("an order
    remanding a case to the State court from which it was
    removed is not reviewable on appeal or otherwise. . .").
    Although S 1367 does not contain a similar bar to appellate
    jurisdiction following a discretionary remand, the Baumans
    contend the remand order cannot be reviewed because it is
    not final under 28 U.S.C. S 1291. Indeed, the order that
    U.S. Healthcare appeals from -- an order partially denying
    a motion to dismiss -- is interlocutory in nature and not
    ordinarily appealable under S 1291. See, e.g., Akerly v. Red
    Barn Sys., Inc., 
    551 F.2d 539
    , 543 (3d Cir. 1977).
    U.S. Healthcare counters with substantial authority from
    this court to support reviewability. It cites Hudson United
    Bank v. LiTenda Mortg. Corp., 
    142 F.3d 151
    , 155 (3d Cir.
    1998), as approving appellate jurisdiction of a district
    court's order dismissing the federal counts and then
    exercising its discretionary power under 28 U.S.C.
    S 1367(c)(3) to remand the remaining claims. It also cites
    Carr v. American Red Cross, 
    17 F.3d 671
     (3d Cir. 1994),
    9
    where we accepted appellate jurisdiction under the
    collateral order doctrine after the district court dismissed a
    party and then, using its discretion, remanded the case.
    We find most apt and controlling our decision in
    Pennsylvania Nurses Ass'n v. Pennsylvania State Educ.
    Ass'n, 
    90 F.3d 797
     (3d Cir. 1996). In that case, two labor
    organizations were competing for the right to represent
    nurses in several health care facilities. The Nurses
    Association filed eleven state tort law claims against its
    rival, the Education Association. The district court held
    that nine claims were preempted by federal labor law and
    granted judgment on the pleadings as to those counts, but
    it held that two were not preempted and remanded them to
    the state court. The Nurses Association appealed, and the
    Education Association cross-appealed.
    We held that we had appellate jurisdiction underS 1291
    because a discretionary remand under S 1367(c)(3) divests
    a federal court of "all control over the action." 
    90 F.3d at 801
    ; accord Engelhardt v. Paul Revere Life Ins. Co., 
    139 F.3d 1346
    , 1350 (11th Cir. 1998) (accepting appellate
    jurisdiction after S 1367(c)(3) remand to review district
    court's discretionary order). This is consistent with our
    reasoning in Carr, where we noted that appellate review of
    a discretionary remand under S 1367(c)(3) is appropriate
    because the practical effect of rejecting jurisdiction would
    have been to render a party unable to obtain later review of
    that decision. See Carr, 
    17 F.3d at 678
    .
    We have essentially the same circumstance here:
    preemption of a state-law claim and remand of the
    remaining claims to state court. Following Pennsylvania
    Nurses Association, we conclude that jurisdiction lies under
    S 1291. As a result, U.S. Healthcare's petition for a writ of
    mandamus is moot. See Pennsylvania Nurses Ass'n, 
    90 F.3d at 801
    . Jurisdiction over the Baumans' cross-appeal
    from the dismissal of Count Six raises no issue as it is
    clearly final under S 1291.
    III.
    Turning to the merits of the parties' contentions, we
    review the District Court's decision to remand under
    10
    S 1367(c)(3) for abuse of discretion; however, to the extent
    that the underlying issue giving rise to that remand
    decision, in this case the extent of preemption, is one of
    law, our review is de novo. See Engelhardt, 
    139 F.3d at
    1351 n.4; Zuniga v. Blue Cross & Blue Shield of Mich., 
    52 F.3d 1395
    , 1400 (6th Cir. 1995). U.S. Healthcare argues
    that the District Court erred when it concluded that ERISA
    does not completely preempt Counts One, Two and Five of
    the Baumans' complaint. The Baumans argue that the
    court erred when it ruled Count Six was completely
    preempted.
    A.
    Under the "well-pleaded complaint" rule, federal
    jurisdiction is lacking unless a federal question appears on
    the face of a properly pleaded complaint; a federal defense
    does not confer subject matter jurisdiction. See Franchise
    Tax Bd. of Cal. v. Construction Laborers Vacation Trust for
    S. Cal., 
    463 U.S. 1
    , 9-12 (1983); Louisville & Nashville R.R.
    Co. v. Mottley, 
    211 U.S. 149
    , 152 (1908). There is nothing
    on the face of the Baumans' complaint that reveals any
    federal cause of action, and it is manifest that they have
    not, through "artful pleading," sought to defeat jurisdiction
    that would otherwise be apparent on the face of the
    complaint. See Parrino v. FHP, Inc., 
    146 F.3d 699
    , 704 (9th
    Cir. 1998). Hence, according to the usual operation of the
    well-pleaded complaint rule, federal jurisdiction would be
    lacking where, as here, the complaint is based entirely on
    state law.
    U.S. Healthcare seeks to fall within the narrow exception
    to the well-pleaded complaint rule for instances where
    Congress has expressed its intent to "completely pre-empt"
    a particular area of law such that any claim that falls
    within this area is "necessarily federal in character."
    Metropolitan Life Ins. Co. v. Taylor, 
    481 U.S. 58
    , 63-64
    (1987). Unlike ordinary preemption, which would only arise
    as a federal defense to a state-law claim, complete
    preemption operates to confer original federal subject
    matter jurisdiction notwithstanding the absence of a federal
    cause of action on the face of the complaint. The Supreme
    Court has held that in enacting the civil-enforcement
    11
    provisions of section 502(a) of ERISA, Congress intended to
    completely preempt state law. See, e.g., Pilot Life Ins. Co. v.
    Dedeaux, 
    481 U.S. 41
    , 56 (1987).
    As Professor Wright has noted, "preemption" is used in
    the law in more than one sense. Charles Alan Wright, Law
    of Federal Courts S 238 at 230. It is important to
    distinguish complete preemption under section 502(a) of
    ERISA, which is used in this sense as a jurisdictional
    concept, from express preemption under section 514(a) of
    ERISA, which is a substantive concept governing the
    applicable law. See Joyce v. RJR Nabisco Holdings Corp.,
    
    126 F.3d 166
    , 171-72 (3d Cir. 1997). There are instances in
    which the Supreme Court has implied a congressional
    intent to preempt state law, see, e.g., International Paper
    Co. v. Ovellette, 
    479 U.S. 481
    , 491-92 (1987), but it
    included an express preemption provision in ERISA. Section
    514(a) provides that ERISA "shall supersede any and all
    State laws insofar as they may now or hereafter relate to
    any employee benefit plan. . . ." 29 U.S.C.S 1144(a). State-
    law claims that are subject to express preemption are
    displaced and thus subject to dismissal. See Metropolitan
    Life Ins. Co. v. Massachusetts, 
    471 U.S. 724
    , 739 (1985).
    Claims that are completely preempted are "necessarily
    federal in character," and thus are converted into federal
    claims. See Taylor, 
    481 U.S. at 63
    .
    Consequently, to determine whether any of the claims
    stated in the Baumans' complaint are completely
    preempted, we consider whether they "fall within the scope
    of" ERISA's civil-enforcement provisions. Dukes, 
    57 F.3d at 355
    . U.S. Healthcare argues that the complaint essentially
    seeks recovery under state law for the HMO's denial of
    benefits under a health-benefits plan governed by ERISA. It
    continues, because section 502(a)(1)(B) creates a cause of
    action to recover such benefits, all of the Baumans' claims,
    including those asserted in Counts One, Two and Five,
    come within that section and are therefore completely
    preempted. Under section 502(a)(1)(B), a participant or
    beneficiary may bring an action "to recover benefits due to
    him under the terms of his plan, to enforce his rights under
    the terms of the plan, or to clarify his rights to future
    benefits under the terms of the plan." 29 U.S.C.
    S 1132(a)(1)(B).
    12
    We last considered the operation of this provision in the
    context of medical malpractice actions in Dukes, where we
    reviewed the complaints filed in two consolidated cases. In
    one of these cases, the widow of Darryl Dukes, who had
    been a participant in a U.S. Healthcare HMO, filed an
    action in state court alleging medical malpractice and
    negligence against numerous defendants based on the
    failure of the doctors to perform a blood test that would
    have revealed the patient's high blood sugar levels. The
    complaint also alleged that the HMO was both vicariously
    liable and directly negligent in failing to use reasonable care
    in, inter alia, screening, evaluating, and monitoring the
    providers of the medical services dispensed to beneficiaries.
    See Dukes, 
    57 F.3d at 352
    . In the second case, the
    plaintiffs alleged that the obstetrician who treated the
    expectant mother negligently ignored symptoms of
    preeclampsia, and that this negligence resulted in a
    stillbirth. The plaintiffs also sued the HMO on theories of
    ostensible and actual agency as well as for negligence in its
    "selection, employment, and oversight of the medical
    personnel who performed the actual medical treatment." 
    Id. at 353
    .
    We rejected U.S. Healthcare's complete preemption
    arguments in both cases. Analyzing the gravamen of the
    complaints, we observed that neither one pled state claims
    falling within the scope of ERISA's civil enforcement scheme
    because there was nothing raised regarding a failure"to
    provide benefits due under the plan." The plaintiffs did not
    allege that the failure to perform the tests arose in any way
    from a denial of benefits under the ERISA plan involved.
    See 
    id. at 356-57
    . Rather, both complaints asserted claims
    regarding the quality of the care received. See 
    id. at 357
    .
    We emphasized that the statutory language permitting an
    ERISA action to " ``recover benefits due. . . under the terms
    of [the] plan' is concerned exclusively with whether or not
    the benefits due under the plan were actually provided. The
    statute simply says nothing about the quality of benefits
    received." 
    Id.
     Nor could we find any basis in the legislative
    history for concluding that quality claims, as opposed to
    quantity ones, would be completely preempted. See 
    id.
    Similarly, we rejected U.S. Healthcare's arguments that
    the complaints at issue raised claims regarding"rights
    13
    under the terms of the plan;" we held that the phrase
    applied to such matters as benefit eligibility procedures, as
    opposed to a specific benefit under the plan. See 
    id.
    Moreover, the negligence counts alleged claims under pre-
    existing state law rather than "new ``rights under the terms
    of the plan.' " 
    Id. at 358
    . We observed that "patients enjoy
    the right to be free from medical malpractice regardless of
    whether . . . care is provided through an ERISA plan." 
    Id.
    Perhaps the most significant contribution made by the
    Dukes opinion was the distinction drawn between (1) state-
    law claims directed to the quality of benefits provided,
    which are not completely preempted, and (2) claims"that
    the plans erroneously withheld benefits due" or that seek
    "to enforce [plaintiffs'] rights under their respective plans or
    to clarify their rights to future benefits," which are subject
    to complete preemption. 
    Id. at 356
    . To reiterate, we
    embraced a distinction between claims pertaining to the
    quality of the medical benefits provided to a plan
    participant and claims that the plan participant was
    entitled to, but did not receive, a certain quantum of
    benefits under his or her plan. See 
    id. at 357-58
    .
    There are some cases in which it may be difficult to
    distinguish between claims challenging the quality of
    benefits rather than their quantity. See 
    id.
     ("We recognize
    that the distinction between the quantity of benefits due
    under a welfare plan and the quality of those benefits will
    not always be clear. . . ."). These difficulties arise, at least in
    part, because the same HMO may have assumed both the
    role as a plan administrator and the separate role as a
    provider of medical services.
    As an administrator overseeing an ERISA plan, an HMO
    will have administrative responsibilities over the elements
    of the plan, including determining eligibility for benefits,
    calculating those benefits, disbursing them to the
    participant, monitoring available funds, and keeping
    records. As we held in Dukes, claims that fall within the
    essence of the administrator's activities in this regard fall
    within section 502(a)(1)(B) and are completely preempted.
    In contrast, as noted by the Secretary, when the HMO
    acts under the ERISA plan as a health care provider, it
    14
    arranges and provides medical treatment, directly or
    through contracts with hospitals, doctors, or nurses. See
    Dukes, 
    57 F.3d at 361
    ; see also Corcoran v. United
    Healthcare, Inc., 
    965 F.2d 1321
    , 1329-34 (5th Cir. 1992)
    (recognizing that HMOs act as both health care providers
    and plan administrators). In performing these activities, the
    HMO is not acting in its capacity as a plan administrator
    but as a provider of health care, subject to the prevailing
    state standard of care. For obvious reasons, U.S.
    Healthcare contends that all of the Baumans' claims
    against it fall into the administrative category, which are
    completely preempted, and that therefore the remand of the
    three counts to state court was erroneous.
    In examining the language of Counts One, Two, and Five,
    we conclude that the District Court did not err in holding
    that these counts were not completely preempted. It is
    significant that none of these three counts as pled alleges
    a failure to provide or authorize benefits under the plan,
    and the Baumans do not claim anywhere in these counts
    that they were denied any of the benefits that were due
    under the plan.
    Count One challenges U.S. Healthcare's policy of
    presumptively discharging newborn infants within twenty-
    four hours. This count alleges that the HMO adopted and
    implemented this policy "without adequate consideration
    for whether this policy was medically appropriate." App. at
    16. The count charges U.S. Healthcare with both direct
    negligence for the adoption and implementation of the
    policy and with vicarious liability for the negligence of Dr.
    Nemeh and Kennedy Hospital.
    We have already held in Dukes that a vicarious liability
    claim against U.S. Healthcare for a doctor's malpractice
    does not fall within the scope of section 502(a)(1)(B). In this
    case, the vicarious liability claim arising from Michelina's
    premature discharge, as stated in Count One, is
    indistinguishable in any meaningful way from those that we
    held were not completely preempted in Dukes.
    With respect to the direct negligence claim, the Baumans'
    challenge to U.S. Healthcare's twenty-four-hour discharge
    policy is directed at the HMO's actions in what we
    15
    characterized in Dukes as an HMO's role in "arranging for
    medical treatment" rather than its role as a plan
    administrator determining what benefits are appropriate.
    Dukes, 
    57 F.3d at 360
    . Thus, it is the HMO's essentially
    medical determination of the appropriate level of care that
    the Baumans claim contributed to the death of their
    daughter. This is not a claim that a certain benefit was
    requested and denied. As the Secretary points out, under
    the facts as pleaded in the complaint, U.S. Healthcare's
    policy and incentive structure were such that "the
    Baumans never had the option of making an informed
    decision as to whether to pay for the hospitalization
    themselves," as would occur in a situation in which
    coverage is sought and denied. Secretary of Labor Br. at 19.
    Accordingly, this claim fits squarely within the class of
    claims that we identified in Dukes as involving the quality
    of care. Here, as in Dukes, "the plaintiffs . . . are attempting
    to hold the HMO[ ] liable for [its] role as the arranger[ ] of
    their [decedent's] medical treatment." Dukes, 
    57 F.3d at 361
    .
    Count Two challenges the same actions by the HMO. It
    differs from Count One principally in that it charges
    reckless indifference on the part of U.S. Healthcare. This
    count charges that U.S. Healthcare adopted its twenty-four
    hour presumptive discharge policy "knowing . . . that many
    infants would be put at risk for life-threatening disease
    after leaving the hospital" and that the HMO thus acted
    with reckless indifference to the health consequences of
    this policy. App. at 17. Like the negligence claim based
    upon the discharge policy, this count goes to the quality of
    care that Michelina received rather than an administrative
    decision as to whether certain benefits were covered by the
    plan.
    We reject U.S. Healthcare's characterization of these
    counts as "quintessential" challenges to the quantity of
    benefits due under an ERISA plan. The allegations in
    Counts One and Two do not raise the failure of U.S.
    Healthcare to pay for a benefit or process a claim for
    benefits as the basis for the injury suffered. The counts are
    phrased in terms of the quality of the medical care
    provided.
    16
    In a similar vein, Count Five charges that U.S.
    Healthcare was "negligent in adopting hospital utilization
    policies . . . that discouraged . . . physicians from re-
    admitting infants to the hospital when health problems
    were identified subsequent to [their] discharge from the
    hospital." App. at 20. Additionally, Count Five alleges that
    U.S. Healthcare was negligent in its "selection, supervision,
    training, and/or monitoring of Dr. Nemeh." 
    Id.
    Both aspects of this count also pertain to U.S.
    Healthcare's actions in its role as a provider or arranger of
    medical services. As the Baumans allege, the HMO adopted
    policies that "encouraged, pressured, and/or directly or
    indirectly required" their participating physicians to
    discharge newborn infants and that also discouraged
    physicians to readmit newborn infants when the
    appropriate standard of care required otherwise under state
    law. App. at 16, 20. Assuming these allegations are true, as
    we must when considering a motion to dismiss, the
    Baumans seek recovery for decisions that U.S. Healthcare
    made in providing and arranging medical services,
    decisions that adversely influenced the medical judgment of
    its participating physicians.
    Similarly, the portion of Count Five that alleges
    negligence in the HMO's selection, supervision, training,
    and/or oversight of Dr. Nemeh addresses not plan-
    administration decisions, but rather decisions that the
    HMO allegedly made in the course of arranging for the
    provision of medical services. This claim is
    indistinguishable from the Viscontis' claim in Dukes that
    the HMO was "negligent in its selection, employment, and
    oversight of the medical personnel who performed the
    actual medical treatment," which we held was not subject
    to complete preemption. Dukes, 
    57 F.3d at 353, 358-59
    .
    Such claims do not involve an attempt to recover benefits
    due, enforce rights, or clarify future benefits under a plan,
    but rather seek recovery under "the quality standard found
    in the otherwise applicable [state] law." 
    Id. at 359
    .
    U.S. Healthcare emphasizes that the language in this
    count refers to its adoption of policies "with respect to
    hospital utilization by its participating physicians," and it
    argues that Dukes compels the conclusion that all claims
    17
    regarding "utilization" are necessarily about "refus[al] to
    provide the services to which membership entitled"
    beneficiaries, an administrative rather than health-provider
    function. U.S. Healthcare Reply Br. at 20-21. A fair reading
    of Count Five shows that it is not directed at the"utilization
    review" process referred to in Dukes. The"utilization
    review" to which Dukes was referring is"a cost-containment
    service," which entails prospective and concurrent
    assessments of the appropriateness of medical and hospital
    care. See, e.g., Corcoran, 
    965 F.2d at 1323, 1327
    .
    Utilization review in that sense is unrelated to the claim in
    Count Five that raises the quality-of-care consequences of
    the pre-certification policy, as well as U.S. Healthcare's
    negligent oversight of its doctors when it acted as a medical
    provider. Indeed, U.S. Healthcare's statement at oral
    argument that the twenty-four hour pre-certification policy
    is not a hard and fast rule and can be extended as the
    doctor sees fit only reinforces the view that it is a
    discretionary medical decision rather than an
    administrative one.
    In summary, we conclude that the District Court did not
    err in holding that Counts One, Two, and Five were not
    claims "to recover benefits due . . . under the terms of [the]
    plan, falling within section 502," and hence were not
    completely preempted.
    B.
    In their cross-appeal, the Baumans contend that the
    District Court erred in concluding that Count Six was
    completely preempted. Here, as above, we look to the
    nature of the claims as reflected by the language of the
    count. The District Court read the language of Count Six,
    alleging U.S. Healthcare's negligence in "not providing for
    [an in-home] visit by a participating provider[a pediatric
    nurse], despite assurances under its L'il Appleseed program
    that such a visit would be provided and despite a telephone
    call . . . from the Baumans requesting this service," as
    stating a claim that fits under section 502(a). Therefore, the
    court held that it was completely preempted, and
    subsequently dismissed. We cannot say that the District
    Court was unreasonable in so holding.
    18
    On the other hand, the Baumans urge this court to
    interpret the complaint as a state cause of action for
    violating a tort duty "to provide [the Bauman family]
    adequate medical care, rather than a violation of a
    [contractual] promise . . . made to them in their ERISA
    plan." Bauman Br. at 34. The Secretary concurs with the
    Baumans' position. PAlthough the question as to Count Six
    is a close one, we agree with the Baumans and the
    Secretary that Count Six raises a claim regarding the
    adequacy of the care that Michelina Bauman received and
    is therefore directed toward the HMO's action in its capacity
    as a medical provider, rather than as a benefits
    administrator. As is the case in the earlier counts, Count
    Six raises an issue regarding the inadequacy of the quality
    of care provided under the plan. The mere fact that the
    Baumans referred in their complaint to a benefit promised
    by their health care plan does not automatically convert
    their state-law negligence claim into a claim for benefits
    under section 502. If, as the Baumans contend, U.S.
    Healthcare failed to meet the standard of care required of
    health care providers by failing to arrange for a pediatric
    nurse in a timely manner, Count Six sets forth an ordinary
    state-law tort claim for medical malpractice.
    We recognize that we observed in Dukes that in some
    cases the quality of care may be "so low that the treatment
    received simply will not qualify as health care at all. In
    such a case, it well may be appropriate to conclude that the
    plan participant or beneficiary has been denied benefits due
    under the plan." Dukes, 
    57 F.3d at 358
    . This was plain
    dictum in Dukes, as there were no facts suggesting such
    patently low treatment. As dictum, it does not bind this
    panel. See McGurl v. Trucking Employees of North Jersey
    Welfare Fund, Inc., 
    124 F.3d 471
    , 484 (3d Cir. 1997). We
    note in passing that U.S. Healthcare has not suggested that
    its failure to provide the pediatric nurse was such grossly
    inadequate health care as to fall within the dictum, and so
    we have no occasion to comment on when it would be
    applicable, if at all.
    After it concluded that it had subject matter jurisdiction
    over Count Six, the District Court dismissed that count as
    expressly preempted by section 514(a), 29 U.S.C.S 1144(a),
    19
    on the force of its determination that the count was
    completely preempted. Inasmuch as we conclude that
    Count Six was not completely preempted, the District Court
    did not have subject matter jurisdiction over the complaint
    and should have remanded it to state court under 28
    U.S.C. S 1447(c).3 As we stated in Dukes, "[w]hen the
    doctrine of complete preemption does not apply, but the
    plaintiff's state claim is arguably preempted underS 514(a),
    the district court, being without removal jurisdiction,
    cannot resolve the dispute regarding preemption." Dukes,
    
    57 F.3d at 355
    .
    IV.
    We will affirm the District Court's decision that Counts
    One, Two, and Five are not completely preempted, and we
    will reverse its decision that Count Six is completely
    preempted and reverse its order dismissing Count Six. We
    will therefore remand to the District Court with instructions
    to remand Count Six to the New Jersey state court from
    which it was removed. It is that court that will be in a
    position to decide the express preemption issue, should
    U.S. Healthcare raise it there.
    A True Copy:
    Teste:
    Clerk of the United States Court of Appeals
    for the Third Circuit
    _________________________________________________________________
    3. As a result of our disposition, we need not reach U.S. Healthcare's
    contention that the District Court itself should have decided whether the
    claims were expressly preempted under section 514 of ERISA, rather
    than remanding that issue to the state court.
    20
    

Document Info

Docket Number: 98-5222, 98-5262, 98-5263

Judges: Sloviter, Alito, Alarcon

Filed Date: 9/16/1999

Precedential Status: Precedential

Modified Date: 10/19/2024

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