Pryzbowski v. U.S. Healthcare, Inc. , 245 F.3d 266 ( 2001 )

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
3-27-2001
Pryzbowski v. US Healthcare Inc.
Precedential or Non-Precedential:
Docket 99-5920
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Filed March 27, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-5920
LINDA PRYZBOWKSI,
Appellant
v.
U.S. HEALTHCARE, INC.; MEDEMERGE, P.A.;
JOHN PILLA, M.D.; CAROL E. SGAMBELLURI, M.D.;
KENT R. ELLIS, M.D.; JANE AND JOHN DOES 1-5;
CORPORATIONS A-Z, such defendants being named
fictitiously to represent individuals and/or
business entities whose actions led to the
delayed performance of surgery upon
Linda Pryzbowski
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 97-cv-03097)
District Judge: Hon. Maryanne Trump Barry
Argued: November 14, 2000
Before: SLOVITER, AMBRO and WEIS, Cir cuit Judges
(Filed: March 27, 2001)
Jerrold D. Goldstein (Argued)
North Plainfield, NJ 07060
Attorneys for Appellant
Edward S. Wardell (Argued)
Kelley, Wardell & Craig
Haddonfield, NJ 08033
Attorney for U.S. Healthcare, Inc.
Melvin Greenberg (Argued)
Greenberg, Dauber Epstein &
Tucker
Newark, NJ 07102
Attorney for Medemerge, P.A.,
John Pilla, M.D., Carol E.
Sgambelluri, M.D., and Kent R.
Ellis, M.D.
Herbert J. Stern
Stern & Greenberg
Roseland, NJ 07068
Attorney for Amicus Curiae-
Appellee The Medical Society of
New Jersey
OPINION OF THE COURT
SLOVITER, Circuit Judge.
Before us is Linda Pryzbowski's appeal of two orders of
the United States District Court for the District of New
Jersey: (1) the December 3, 1997 order dismissing her
claims against U.S. Healthcare for its delay in approving
requested services after determining that those claims were
completely preempted under S 502(a) of the Employee
Retirement Income Security Act ("ERISA"), 29 U.S.C.
S 1132(a)(1)(B); and (2) the September 8, 1999 order
granting summary judgment on the state law claims in
favor of the remaining defendants, Medemer ge, P.A. and Dr.
John Pilla, Dr. Carol E. Sgambelluri, and Dr. Kent R. Ellis
("the physician defendants"), on the gr ound that those
2
claims were expressly preempted byS 514(a) of ERISA, 29
U.S.C. S 1144(a). See Pryzbowski v. U.S. Healthcare, Inc., 64
F. Supp. 2d 361 (D.N.J. 1999).
Our review of the District Court's orders granting
dismissal and summary judgment based on ERISA
preemption is plenary. See Travitz v. Northeast Dep't ILGWU
Health & Welfare Fund, 13 F .3d 704, 708 (3d Cir. 1994).
When reviewing the order granting dismissal, we must
accept as true all the factual allegations in the complaint
and draw all reasonable inferences fr om them. See Banks
v. Wolk, 918 F.2d 418, 419 (3d Cir . 1990). When reviewing
the order granting summary judgment, we must draw all
reasonable inferences in favor of the non-moving party and
may only affirm if there are no genuine issues of material
fact and the moving party is entitled to judgment as a
matter of law. See Travitz, 13 F .3d at 708.
I.
FACTS AND PROCEDURAL POSTURE
Pryzbowski is enrolled in The Health Maintenance
Organization of New Jersey, Inc., a wholly owned subsidiary
of U.S. Healthcare, Inc. (hereafter "U.S. Healthcare"), which
is a health maintenance organization ("HMO") offered by the
employer of Pryzbowski's husband under its employee
benefit plan within the terms of ERISA. On November 10,
1993, Pryzbowski sought treatment from Medemerge, her
primary care provider, for sever e back pains that she had
been experiencing for several days. Medemerge is a
physician practice group under contract with U.S.
Healthcare to provide health care services. Pryzbowski had
previously undergone numerous sur geries for her back, the
most recent having been performed by Dr. Giancarlo
Barolat of Thomas Jefferson University Hospital in
Philadelphia, all of which were covered under her previous
health care plan. At Medemerge, she was treated at
different times by Dr. John Pilla, Dr. Carol E. Sgambelluri,
and Dr. Kent R. Ellis.
A CT scan performed on November 29, 1993 revealed
disc degeneration and a large, extra-dural defect
3
compressing the thecal sac, consistent with disc herniation.
It also showed a previously implanted neur ostimulator.
Medemerge referred Pryzbowski to Dr . Alan Sarokhan, an
orthopedic surgeon. Dr. Sarokhan wrote to Dr. Ellis, stating
that "[s]he certainly needs a neurosur gical evaluation and
needs one promptly. . . . It is my opinion that she will most
likely find that the most recent operating surgeon is the
only one in the area who will be likely to even approach this
with any confidence." App. J, at J-2. On December 9, 1993,
Pryzbowski went to see Dr. Aiden Doyle, a neurosurgeon,
again through a referral from Medemer ge. Dr. Doyle
concluded, "she should go back to the sur geon who put it
in. I have discussed this with them and obviously I really
don't feel that I should be fiddling with that." App. K, at K-
3.
Based on these two reports, Medemerge sent a request to
U.S. Healthcare on December 15, 1993 for a consultation
with Dr. Barolat, who was the neur osurgeon who last
performed surgery on Pryzbowski. Dr. Barolat was not a
participant in the particular plan offer ed by U.S.
Healthcare. Pryzbowski's policy with U.S. Healthcare
required that it give prior written authorization for services
by non-participating providers and facilities. U.S.
Healthcare approved the consultation and Dr. Barolat
examined Pryzbowski on January 19, 1994. He concluded
that surgery was needed and that the following specialists
or specialists' services were requir ed: spinal
instrumentation and fusion by a separate orthopedic
surgeon, pulmonary clearance and follow-up fr om Dr.
Cohen, consultation with the Pain Service, and a
psychological assessment and follow-up. The specialists to
whom he referred were also associated with Thomas
Jefferson University Hospital and outside U.S. Healthcare's
network.
Over the next few months, Pryzbowski sought to get U.S.
Healthcare to approve the recommended surgery by Dr.
Barolat and the related services. In the meantime,
Pryzbowski was seen by in-network specialists, including
Dr. Edward Barrett (a mental health specialist), Dr.
Alexander Levin (a pain management specialist), and Dr.
M.A. Sarraf (a pulmonary specialist) between February 19,
4
1994 and April 18, 1994, and they transmitted their reports
thereafter. It is evident that this was not satisfactory to Dr.
Barolat, because a handwritten note dated May 3, 1994,
headed "Stephanie - Dr. Barolat's office," states "Dr. will not
perform the surgery unless specials [sic] at Jefferson in
consult. USHC will not approve." Appellees' App., Lang
Certification, Ex. A. U.S. Healthcare authorized the out-of-
network specialists' services and the back sur gery on June
30, 1994, and Dr. Barolat perfor med the surgery on
Pryzbowski on July 7, 1994. Unfortunately, Pryzbowski
continued to suffer from severe back pain after the surgery.
Dr. Barolat later opined "that the persistence of the
excruciating pain . . . was most likely caused by the
significant delay that occurred between the onset of the
symptomatology and the surgical intervention." App. M, at
M-4.
Pryzbowski filed a complaint, later amended, against U.S.
Healthcare, Medemerge, and three physicians with
Medemerge in the Superior Court of New Jersey. She
asserts six counts against U.S. Healthcare, which allege
that U.S. Healthcare "negligently and car elessly delayed in
giving its approval for the necessary sur gery which the
plaintiff . . . urgently needed," causing Pryzbowski severe
and permanent injury, emotional distress, and future
expenses for medical care and treatment (Count One); that
U.S. Healthcare's delay was arbitrary and capricious (Count
Two); and that, by delaying its approval for the surgery,
U.S. Healthcare "acted with a willful and wanton disregard
for the harm that would likely result to the plaintiff "
(Count Three). The complaint also asserts that U.S.
Healthcare's delay in approving the sur gery breached its
health insurance contract with Pryzbowski (Count Four);
that the delay in surgery approval was"in bad faith" (Count
Five); and that U.S. Healthcare breached its duty to
"screen, hire, train and employ capable and responsible
individuals . . . to make thoughtful and reasonable
decisions as to healthcare" (Count Seven).
In the five counts Pryzbowski asserts against Medemerge
and/or the physician defendants, she alleges that
Medemerge "negligently and carelessly delayed in
authorizing and/or obtaining authorization fr om U.S.
5
Healthcare" for the surgery (Count Eight); that Medemerge,
in failing to obtain authorization, "acted with a willful and
wanton disregard for the harm that would likely result to
the plaintiff " (Count Nine); that the physician defendants
"negligently and carelessly delayed in authorizing and/or
obtaining authorization" for the back sur gery (Count Ten);
and that they "acted with a willful and wanton disregard" in
delaying authorization (Count Eleven). Another count
alleges that Medemerge breached its duty to "screen, hire
and employ capable and responsible individuals to serve as
its agent, servants, and/or employees" (Count Six).
U.S. Healthcare removed the case to the United States
District Court for the District of New Jersey. On December
3, 1997, the District Court granted U.S. Healthcar e's
motion to dismiss the counts against it (Counts 1-5, 7).
Subsequently, Medemerge and the physician defendants
moved for summary judgment on the remaining counts,
which motion was granted on September 8, 1999.
Pryzbowski now appeals both the December 3, 1997
dismissal and the September 8, 1999 summary judgment
order. We have jurisdiction under 28 U.S.C. S 1291.
II.
DISCUSSION
A. Claims Against U.S. Healthcare
There are two separate but related pr eemption issues
that arise under ERISA, both of which are pr esented in this
case. The application of express preemption, set forth in
S 514(a) of ERISA, arises in connection with Pryzbowski's
claims against Medemerge and the physician defendants.
Her claims against U.S. Healthcare raise the issue of
complete preemption, a jurisdictional concept based on
S 502(a) of ERISA.
We first consider Pryzbowski's challenge to the District
Court's holding that removal was proper and that it had
subject matter jurisdiction over the claims against U.S.
Healthcare because they were completely pr eempted under
S 502(a) of ERISA. Pryzbowski's complaint, originally filed in
6
state court, appeared on its face to allege only state causes
of action and named as defendants parties who wer e not
completely diverse from Pryzbowski, ther eby displaying no
obvious basis for removal to federal court under 28 U.S.C.
S 1441. In Franchise Tax Bd. of Cal. v. Constr. Laborers
Vacation Trust for S. Cal., 463 U.S. 1, 9-10 (1983), the
Supreme Court stated, "where ther e is no diversity of
citizenship between the parties [as in Pryzbowski's case] . . .
the propriety of removal turns on whether the case falls
within the original ``federal question' jurisdiction of the
United States district courts."
Under the "well-pleaded complaint" rule, federal question
jurisdiction exists only when an issue of federal law
appears on the face of the plaintiff 's complaint. The
anticipation that a defendant may raise a federal defense
will not confer federal question jurisdiction. On the other
hand, "any complaint that comes within the scope of [a]
federal cause of action necessarily ``arises under' federal
law" and is therefore completely pr eempted. Franchise Tax
Bd., 463 U.S. at 24. The paradigmatic example of this
extraordinary preemptive force isS 301 of the Labor
Management Relations Act ("LMRA"), 29 U.S.C.S 185. See
Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557 (1968). In
Franchise Tax Board, the Court did not reach the question
of complete preemption under ERISA because the claim
asserted there was not within the original jurisdiction of the
federal courts and therefore could not be removed by
defendant to federal court. See 463 U.S. at 24-25.
It was in Metropolitan Life Ins. Co. v. T aylor, 481 U.S. 58(1987), that the Supreme Court faced the question "whether
or not the Avco principle can be extended to statutes other
than the LMRA in order to recharacterize a state law
complaint displaced by S 502(a)(1)(B) as an action arising
under federal law." Id. at 64. After noting the similarity
between the language of ERISA and that of the LMRA, the
Court concluded that Congress intended thatS 502(a) of
ERISA be given the same extraordinary pr eemptive force as
had been given to S 301 of LMRA. See id. at 65. This
conclusion from the statutory language was confirmed not
only by the statements of one of the sponsors of ERISA but
also by the Conference Report, which stated that all suits
7
"to enforce benefit rights under the plan or to recover
benefits under the plan . . . are to be r egarded as arising
under the laws of the United States in similar fashion to
those brought under section 301 of the Labor -Management
Relations Act of 1947." H.R. Conf. Rep. No. 93-1280, at 327
(1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5107.
Following the decision in Metropolitan Life, there can be no
question that "causes of action within the scope of the civil
enforcement provisions of S 502(a)[are] removable to federal
court." Metropolitan Life, 481 U.S. at 66.
We do not understand Pryzbowski to be challenging the
principle that such claims are completely pr eempted but to
be arguing that the claims she asserts against U.S.
Healthcare were not removable because they did not fit
within S 502(a). Section 502(a) allows a beneficiary or
participant of an ERISA-regulated plan to bring a civil
action "to recover benefits due to him under the terms of
his plan, to enforce his rights under the ter ms 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). UnderS 502(a), a
beneficiary may obtain accrued benefits due, a declaratory
judgment about entitlement of benefits, or an injunction to
require the administrator to pay benefits. See Pilot Life Ins.
Co. v. Dedeaux, 481 U.S. 41, 53 (1987). It follows that if
Pryzbowski's claims fall within the scope of ERISA's civil
enforcement provisions, they are completely preempted.
This court has on several occasions consider ed whether
a plaintiff 's claim against his or her HMO is completely
preempted under ERISA. In Dukes v. U.S. Healthcare, Inc.,
57 F.3d 350 (3d Cir. 1995), we distinguished between
claims directed to the "quality of the benefits [plaintiffs]
received" and claims "that the plans err oneously withheld
benefits due" or that seek "to enfor ce [plaintiffs'] rights
under the terms of their respective plans or to clarify their
rights to future benefits." Id. at 356. We stated that claims
that merely attack the quality of benefits do not fall within
the scope of S 502(a)'s enforcement pr ovisions and are not
completely preempted, whereas claims challenging the
quantum of benefits due under an ERISA-regulated plan
are completely preempted under S 502(a)'s civil enforcement
scheme. See id. at 356-57. We held that, because the
8
plaintiffs in Dukes alleged that the HMO failed to exercise
reasonable care in providing medical treatment, their
claims were not completely preempted. See id. at 358.
Thereafter, in In re U.S. Healthcare, Inc., 193 F.3d 151 (3d
Cir. 1999), we applied the quality-quantity distinction in
determining whether claims by parents against U.S.
Healthcare based on the death of their newbor n baby were
completely preempted. In making that decision, we relied
upon the distinction made in Dukes between"an HMO's
role in ``arranging for medical treatment' rather than its role
as a plan administrator determining what benefits are
appropriate." Id. at 162 (quoting Dukes, 57 F.3d at 360). We
held that U.S. Healthcare's adoption of a policy of
discharging newborn infants within 24 hours after their
delivery was essentially a medical determination that could
be subject to a state-law medical malpractice action. See id.
at 162-63. We also held that the HMO's alleged negligence
in selecting, training, and supervising medical personnel
implicated the quality of medical treatment. See id. at 163-
64. Therefore, we concluded that none of the claims were
completely preempted and we directed that the case be
remanded to state court. See id. at 162-65.
Most recently, in Lazorko v. Pennsylvania Hospital, 237
F.3d 242 (3d Cir. 2000), we again applied the distinction
between claims raising quality of care issues and claims
raising quantity of benefits issues. Lazorko alleged that
financial disincentives imposed by the HMO discouraged
medical providers from hospitalizing a mentally ill
beneficiary who later committed suicide. W e decided that
this was a quality of care claim because "the denial of [the
beneficiary's] request for hospitalization occurred in the
course of a treatment decision, not in the administration of
the [plaintiff 's and beneficiary's] plan generally." Id. at 250.
Thus, we held that the plaintiffs' claim was not completely
preempted under S 502(a).
Though the quality-quantity distinction was helpful in
those cases, we have acknowledged that the distinction
would not always be clear. See Dukes, 57 F.3d at 358. We
recognized that there might be a situation where the quality
of the medical care provided would be so deficient that the
beneficiary essentially would not have received any health
9
care benefit at all. See id. And in In re U.S. Healthcare, we
noted that making the quality-quantity distinction would be
particularly difficult when an HMO has acted as both a
plan administrator and a provider of medical services. See
193 F.3d at 162.
The recent Supreme Court decision in Pegram v.
Herdrich, 530 U.S. 211, 120 S. Ct. 2143 (2000), suggests
preferable terminology. Although that case concerned
fiduciary acts under ERISA and not preemption, the
distinction made there between "eligibility decisions," which
"turn on the plan's coverage of a particular condition or
medical procedure for its treatment," and "treatment
decisions," which are choices in "diagnosing and treating a
patent's [sic] condition," 120 S. Ct. at 2154, is equally
applicable for complete preemption analysis. Regardless of
the language used, the ultimate distinction to make for
purposes of complete preemption is whether the claim
challenges the administration of or eligibility for benefits,
which falls within the scope of S 502(a) and is completely
preempted, or the quality of the medical tr eatment
performed, which may be the subject of a state action.
This court has not had occasion to consider how a claim
that the HMO or plan administrator delayed in the approval
of benefits should be treated under ERISA. It is evident that
a claim alleging that a physician knowingly delayed in
performing urgent surgery on a patient whose appendix
was about to rupture would relate to the quality of care,
and not be subject to removal on the basis of complete
preemption. On the other hand, a claim alleging that an
HMO declined to approve certain requested medical
services or treatment on the ground that they were not
covered under the plan would manifestly be one regarding
the proper administration of benefits. Such a claim, no
matter how couched, is completely preempted and
removable on that basis. See Dukes, 57 F.3d at 356 (noting
that a claim that the plans erroneously withheld benefits
due would be completely preempted); Jass v. Prudential
Health Care Plans, Inc., 88 F.3d 1482, 1488-89 (7th Cir.
1996) (holding that a claim against an HMO's utilization
review decision was completely preempted by ERISA).
10
In analyzing whether a claim falling between these poles
is completely preempted, it is necessary to r efer to S 502(a).
As the Court stated in Metropolitan Life , "Congress has
clearly manifested an intent to make causes of action
within the scope of the civil enforcement pr ovisions of
S 502(a) removable to federal court." 481 U.S. at 66.
Accordingly, we must examine Pryzbowski's claims against
U.S. Healthcare to determine whether they could have been
the subject of a civil enforcement action underS 502(a).
Counts One through Five of Pryzbowski's complaint
allege that U.S. Healthcare negligently and car elessly
delayed approval of her surgery with Dr . Barolat, acted in
an arbitrary and capricious manner in doing the same,
acted in willful and wanton disregard of her health, acted
in bad faith, and breached her health insurance contract.
Underlying these allegations of delay is the policy adopted
by U.S. Healthcare (and many other HMOs) r equiring
beneficiaries either to use in-network specialists or to
obtain approval from the HMO for out-of-network
specialists. These activities fall within the r ealm of the
administration of benefits.
Had Pryzbowski sought to accelerate U.S. Healthcar e's
approval of the use of out-of-network pr oviders, she could
have sought an injunction under S 502(a) to enforce the
benefits to which she was entitled under the plan, thereby
using the provisions of the civil enfor cement scheme
provided by Congress. There have been numerous cases in
which the courts have issued preliminary injunctions under
similar circumstances. See, e.g., Marro v. K-III
Communications Corp., 943 F. Supp. 247 (E.D.N.Y. 1996)
(granting preliminary injunction to compel plan
administrator to precertify high dosage chemotherapy);
Mattive v. Healthsource of Savannah, Inc., 893 F. Supp.
1559 (S.D. Ga. 1995) (granting preliminary injunction
enjoining plan administrator from denying coverage for
high-dose chemotherapy); Dozsa v. Crum & Forster Ins. Co.,
716 F. Supp. 131 (D.N.J. 1989) (granting pr eliminary
injunction enjoining plan administrator from denying
coverage for autologous bone marrow transplant treatment).
Pryzbowski's final claim against U.S. Healthcar e (Count
Seven) alleges that it failed properly to hir e, train, and
11
supervise its employees "to make thoughtful and r easonable
decisions as to healthcare." Amended Complaint, Count 7.
Although ostensibly directed at the provision of medical
treatment, a federal court may "look beyond the face of the
complaint to determine whether a plaintif f has artfully
pleaded his suit so as to couch a federal claim in terms of
state law," Jass, 88 F.3d at 1488; accord Parrino v. FHP,
Inc., 146 F.3d 699, 704 (9th Cir. 1998); cf. Franchise Tax
Bd., 463 U.S. at 22 (noting that "a plaintif f may not defeat
removal [to federal court] by omitting to plead necessary
federal questions in a complaint"). Inasmuch as Pryzbowski
has not alleged that U.S. Healthcare or its employees
engaged in any medical treatment with r egard to her, the
alleged negligence by U.S. Healthcare in the hiring,
training, and supervising of its employees necessarily
concerns the administration of her benefits, U.S.
Healthcare's only role in this case. It follows that Count
Seven is also completely preempted under S 502(a) of
ERISA.
Pryzbowski contends that her claims are analogous to the
claims made in Dukes and In re U.S. Healthcare, where we
held that complete preemption was inapplicable and
removal improper. In both cases, we recognized that the
HMO had assumed the dual role of an administrator of
benefits and a provider of medical services. In In re U.S.
Healthcare, we held that the HMO's policy to discharge
newborn infants within 24 hours was essentially a "medical
determination of the appropriate level of care." 193 F.3d at
163. We also held that the claim that the HMO was
negligent in failing to provide an in-home visit by a
pediatric nurse, despite having given assurances that such
a visit would be provided, was directed at the HMO's
function as medical provider. See id. at 164. Therefore, the
plaintiffs' claims alleged medical malpractice and were not
completely preempted by ERISA. In Dukes, the plaintiffs'
claims centered on "the low quality of the medical
treatment that they actually received." 57 F.3d at 357. They
argued that the HMO was liable under an agency theory
and also directly responsible for negligence in selecting,
retaining, screening, monitoring and evaluating the
personnel who actually provided the medical services. See
id. at 352. We held that those claims did not involve failure
12
to provide benefits due under the ERISA plan and therefore
were not completely preempted.
In the case before us, as we note above, Pryzbowski's
claims against U.S. Healthcare are limited to its delay in
approving benefits, conduct falling squar ely within
administrative function. A holding that Pryzbowski's claims
against U.S. Healthcare are not completely preempted
would open the door for legal challenges to cor e managed
care practices (e.g., the policy of favoring in-network
specialists over out-of-network specialists), which the
Supreme Court eschewed in Pegram. Cf. 120 S. Ct. at
2156-57 (rejecting claims attacking financial incentives
behind HMO structure, in light of congr essional policy of
promoting HMOs). We conclude that the District Court did
not err in holding that the claims Pryzbowski asserts
against U.S. Healthcare are completely pr eempted. It
follows that the District Court properly exer cised subject
matter jurisdiction over the case and dismissed the claims
against U.S. Healthcare.
We are not unaware that our holding that U.S.
Healthcare will not be required to explain or defend the
delay in provision of services to Pryzbowski may leave her,
and other beneficiaries, without effective r elief for the
improper administration of benefits. The delay attendant on
the required preauthorization by HMOs has been a matter
of public concern. In fact, this has led the Department of
Labor recently to publish a long pending final rule that
requires that claims seeking pretr eatment authorization for
medical services must be decided within 15 days and that
imposes other stringent time limits on appeals fr om adverse
decisions. See 65 Fed. Reg. 70,245 (Nov. 21, 2000). While
the new rule applies only to claims filed on or after Jan. 1,
2002, it should serve to give notice to health car e
administrators that ERISA not only provides pr otection
from litigation arising from benefits administration but
imposes certain responsibilities with r espect to such
administration.
B. Claims Against Medemerge and the Physician
Defendants
1. Jurisdiction
Unlike U.S. Healthcare, Medemerge and the physician
defendants do not contend that the claims against them are
13
completely preempted under S 502(a). Neither can their
anticipated defense of express preemption under S 514(a) be
the basis for removal of these claims. See Franchise Tax
Bd., 463 U.S. at 23-27. As we stated in Dukes, "[w]hen the
doctrine of complete preemption does not apply, but the
plaintiff 's state claim is arguably preempted under S 514(a),
the district court, being without removal jurisdiction,
cannot resolve the dispute regarding preemption." Dukes,
57 F.3d at 355. Federal jurisdiction over Pryzbowski's
claims against Medemerge and the physician defendants, if
it is to be sustained, must be based on another gr ound.
In this case, the District Court did not rely on S 502(a)
preemption for its jurisdiction over these defendants but
instead exercised supplemental jurisdiction under 28
U.S.C. S 1367. That section authorizes a district court to
exercise "supplemental jurisdiction over all other claims
that are so related to claims in the action within such
original jurisdiction that they form part of the same case or
controversy under Article III of the United States
Constitution." 28 U.S.C. S 1367(a). W e have interpreted this
provision to require the following: (1) " ``[t]he federal claims
must have substance sufficient to confer subject matter
jurisdiction;' " (2) " ``[t]he state and federal claims must
derive from a common nucleus of operative fact;' " and (3)
" ``the plaintiff 's claims [must be] such that [s/]he would
ordinarily be expected to try them all in one judicial
proceeding.' " In re Prudential Ins. Co. Am. Sales Practices
Litig., 148 F.3d 283, 302 (3d Cir . 1998) (quoting United
Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966), which
sustained the constitutionality of pendent jurisdiction).
We have already determined that the District Court had
subject matter jurisdiction over Pryzbowski's claims against
U.S. Healthcare. Moreover, Pryzbowski's claims against
Medemerge and the physician defendants ar e derived from
the same factual predicate as her claims against U.S.
Healthcare, as all her claims stem from the treatment she
received from all of the defendants in r esponse to her
complaint of back pain and the delay she experienced in
securing the approval for the out-of-network physicians and
services that Dr. Barolat believed wer e necessary. Under
these circumstances, it would be expected that all of
14
Pryzbowski's claims against the defendants would be
combined in one judicial proceeding. Ther efore, the District
Court had the authority for its exercise of supplemental
jurisdiction over the claims against Medemer ge and the
physician defendants.
Pryzbowski argues that once the claims against U.S.
Healthcare were dismissed, the District Court should have
remanded her claims against the other defendants to state
court. That was certainly an option for the District Court
but not one it was obliged to take. In New Rock Asset
Partners, L.P. v. Preferred Entity Advancements, Inc., 101
F.3d 1492, 1506 (3d Cir. 1996), we stated that "where the
jurisdiction-conferring party drops out and the federal court
retains jurisdiction over what becomes a state law claim
between non-diverse parties, the bounds of Article III have
not been crossed." In such situations, district courts have
discretion to continue exercising supplemental jurisdiction.
See id.Pryzbowski's challenge to the District Court's failure to
remand seems to be directed exclusively to a lack of
jurisdiction in the District Court. She has given us no
persuasive reason why the District Court's decision to
exercise supplemental jurisdiction was an abuse of its
discretion. The District Court had become fully familiar
with the factual background and the positions of the
parties, and we see no reason why it should not have
continued to exercise jurisdiction over Pryzbowski's claims
against Medemerge and the physician defendants. We
certainly cannot conclude that its decision was an abuse of
discretion.
2. Summary Judgment
Once the District Court dismissed the claims against U.S.
Healthcare (Counts 1-5 and 7) and Counts 9 and 11 were
dismissed without opposition, see Pryzbowski, 64 F. Supp.
2d at 363 n.2, the parties focused their discovery on
Counts 6 and 8 against Medemerge and Count 10 against
Doctors Pilla and Ellis.1 The r emaining defendants then
_________________________________________________________________
1. The District Court dismissed the claims against Dr. Sgambelluri
because Pryzbowski's brief in that court opposing summary judgment
made no mention of that defendant. See Pryzbowski, 64 F. Supp. 2d at363 n.1. Her brief in this court does not mention that portion of the
District Court's opinion, and we conclude that she does not challenge it.
15
moved for summary judgment. In support of their motion,
defendants filed the certification of their counsel, Joseph R.
Lang, who attached extensive documentary evidence and
references to certain depositions. These documents set
forth Pryzbowski's medical history in connection with her
complaints of back pain and efforts to obtain the necessary
treatment and services.2 The District Court noted that
"plaintiff has not provided this court with any evidence
whatsoever in opposing this motion but merely has
referenced defendants' exhibits fr om time to time," and that
it was "unable to consider unsupported conclusory
allegations." Id. at 364 n.6.
The District Court viewed the defendants' motion for
summary judgment as having two bases. The first was that
Pryzbowski's claims were preempted byS 514(a) of ERISA.
The second was that Pryzbowski failed to state a claim for
which relief can be granted. We consider them in turn.
a. Express Preemption by S 514(a)
Section 514(a), the express preemption pr ovision of
ERISA, provides that ERISA "shall supersede any and all
State laws insofar as they . . . relate to any employee
benefit plan" covered by the statute. 29 U.S.C. S 1144(a).
ERISA also includes a saving clause protecting from
preemption state laws regulating insurance, banking, or
securities. See 29 U.S.C. S 1144(b)(2)(A). As we have
explained, "[u]nlike the scope of S 502(a)(1)(B), which is
jurisdictional and creates a basis for r emoval to federal
court, S 514(a) . . . governs the law that will apply to state
law claims, regardless of whether the case is brought in
state or federal court." Lazorko, 237 F .3d at 248.
In one of the early cases to come before the Supreme
Court concerning the express preemption provision, the
Court stated that a law "relates to" an employee benefit
plan "if it has a connection with or refer ence to such a
plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97
(1983). The Court thereafter recognized that more guidance
_________________________________________________________________
2. They are reviewed in detail in the District Court's opinion granting
summary judgment, see Pryzbowski, 64 F . Supp. 2d at 363-66, and
need not be reprised.
16
was needed in drawing the line between what was
preempted and what was not. It attempted to do that in
New York State Conference of Blue Cr oss & Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) [hereafter
Travelers], where the Court stated that it would inquire into
"the objectives of the ERISA statute as a guide to the scope
of the state law that Congress understood would survive."
Id. at 656. To that end, the Court noted that Congress
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 bur den of
complying with conflicting directives among States or
between States and the Federal Government . . . , [and
to prevent] the potential for conflict in substantive law
. . . requiring the tailoring of plans and employer
conduct to the peculiarities of the law of each
jurisdiction.
Id. at 656-57 (quoting Ingersoll-Rand Co. v. McClendon, 498
U.S. 133, 142 (1990) (citation omitted) (ellipses and
brackets in original)). Thus, the basic objective of the
express preemption provision was"to avoid a multiplicity of
regulation in order to permit the nationally uniform
administration of employee benefit plans." Id. at 657.
In Travelers and several cases ther eafter, the Court held
that the challenged state statutes were not pr eempted
because they were laws of general application that were
neither directed to ERISA plans nor inter fered with their
administration. For example, in Travelers the Court held
that a statute that imposed surcharges on hospital rates for
patients with commercial insurance purchased by ERISA
plans, which was intended to help Blue Cross/Blue Shield
plans, had only an indirect economic ef fect on ERISA plans
and was not expressly preempted by S 514(a). See id. at
658-62; see also California Div. of Labor Standards
Enforcement v. Dillingham Constr., 519 U.S. 316 (1997)
(state prevailing wage law does not "r elate to" employee
benefit plans and is not preempted by ERISA where statute
is indifferent to ERISA coverage); De Buono v. NYSA-ILA
Med. and Clinical Servs. Fund, 520 U.S. 806 (1997)
(generally applicable gross receipts tax on health care
17
facilities not preempted despite some bur den on
administration of ERISA plans); but see Alessi v. Raybestos-
Manhattan, Inc., 451 U.S. 504 (1981) (state compensation
act barring offset of workers' pension benefits by
compensation benefits preempted).
The issue of express preemption arises in other contexts
than challenges to state statutes. One of the most frequent
is the reliance by HMOs and insurance companies on
S 514(a) in defending suits brought by beneficiaries arising
out of the denial of plan benefits. This line of cases stems
from the Supreme Court's decision in Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41 (1987), where a beneficiary of an
ERISA plan sued the insurance company that cover ed his
employer's long-term disability employee benefit plan,
alleging it improperly denied his claim for long-term
disability benefits. He claimed tortious br each of contract,
breach of fiduciary duties, and fraud in the inducement.
Plaintiff sought to avoid preemption under S 514(a) by
trying to fit some of his claims into the saving clause
exception for state laws regulating insurance, but the Court
rejected that effort. Instead, the Court viewed the common
law causes of action raised in plaintiff 's complaint as based
on alleged improper processing of a claim for benefits under
an employee benefit plan, stated that such claims
"undoubtedly meet the criteria for pre-emption under
S 514(a)," and held that the suit could not proceed because
of the "expansive sweep of the pre-emption clause." Id. at
47-48.
Thus, suits against HMOs and insurance companies for
denial of benefits, even when the claim is couched in terms
of common law negligence or breach of contract, have been
held to be preempted by S 514(a). See, e.g., Bast v.
Prudential Ins. Co. of Am., 150 F.3d 1003, 1007-08 (9th Cir.
1998) (holding that S 514(a) preempted, among other
things, a claim alleging bad faith denial of benefits); Tolton
v. American Biodyne, Inc., 48 F.3d 937, 941-43 (6th Cir.
1995) (holding that S 514(a) preempted claims for wrongful
death, medical malpractice, and insurance bad faith based
on a refusal to authorize treatment); Corcoran v. United
HealthCare, Inc., 965 F.2d 1321, 1331-34 (5th Cir. 1992)
(holding that S 514(a) preempted a wr ongful death action
based on the negligent denial of benefits).
18
The rationale for these holdings is that the decision
whether a requested benefit or service is covered by the
ERISA plan falls within the scope of the administrative
responsibilities of the HMO or insurance company, and
therefore "relates to" the employee benefit plan. The same
rationale has been applied by courts holding that suits
against HMOs for delay in authorizing benefits wer e
preempted under S 514(a). For example, in Kuhl v. Lincoln
Nat'l Health Plan of Kan. City, Inc., 999 F .2d 298, 302-03
(8th Cir. 1993), the court considered a claim that the HMO
canceled the beneficiary's surgery in an out-of-network
hospital, thereby delaying his ability to r eceive treatment
and leading to his death. Although the complaint br ought
by his survivors alleged common law claims and
characterized the HMO's actions as malpractice, the court
viewed the claim as based on improper pr ocessing of
medical benefits, and therefore expr essly preempted by
S 514(a). See id. Likewise, in Spain v. Aetna Life Ins. Co., 11
F.3d 129, 131-32 (9th Cir. 1993), the court held that a
wrongful death claim based on the HMO's delay in
authorizing cancer treatment was expressly preempted
because it dealt with the negligent administration of
benefits.
In contrast, claims challenging the quality of car e are not
preempted by S 514(a). As previously discussed, our
decisions in Dukes, In re U.S. Healthcare, and Lazorko
made clear our view that claims based on medical
treatment decisions are still state law claims. In Dukes, we
examined the legislative history of ERISA and found
nothing suggesting that Congress intended "to control the
quality of the benefits received by plan participants[,] . . . a
field traditionally occupied by state regulation." 57 F.3d at
357. We explained that:
When Congress enacted ERISA it was concer ned in
large part with the various mechanisms and
institutions involved in the funding and payment of
plan benefits. That is, Congress was concer ned "that
owing to the inadequacy of current minimum[financial
and administrative] standards, the soundness and
stability of plans with respect to adequate funds to pay
promised benefits may be endangered." S 2, 29 U.S.C.
19
S 1001(a). Thus, Congress sought to assur e that
promised benefits would be available when plan
participants had need of them and S 502 was intended
to provide each individual participant with a r emedy in
the event that promises made by the plan wer e not
kept.
Id. (brackets in original).
We followed that view in In re U.S. Healthcare, 193 F.3d
151, where we held that claims against the HMO resulting
from its adoption of a policy to dischar ge newborns from
the hospital within 24 hours after birth went to the quality
of care provided. They were ther efore to be evaluated as an
ordinary state-law tort claim for medical malpractice. There
is no reason why the distinction between quality of care
issues and benefits administration issues made in those
cases, which arose in the context of complete preemption
under S 502(a), would not be equally applicable to express
preemption under S 514(a).
Moreover, there is a strong suggestion in Pegram that
claims based on medical treatment decisions r emain
outside the preemptive effect of ERISA. In holding that
mixed eligibility/treatment decisions made by an HMO are
not encompassed by the fiduciary duties imposed by
ERISA, the Court made clear its view that ERISA was not
designed to allow plan participants "to bring malpractice
actions in the guise of federal fiduciary br each claims
against HMOs." 120 S. Ct. at 2158. The Court took a dim
view of an interpretation that would lead to ERISA
preemption covering "the subject of a state-law malpractice
claim." 120 S. Ct. at 2158.
The District Court here recognized that a malpractice
claim by Pryzbowski against Medemerge and the physician
defendants would not be preempted. However , that court,
after conducting a comprehensive review of the relevant
cases, concluded that "[i]t is clear that plaintiff 's claims, at
their core, challenge the poor administration of her plan --
the failure to promptly approve the r equest for Dr. Barolat
to perform the surgery -- rather than the quality of care
she received. " 64 F. Supp. 2d at 369. The District Court
also stated that "a claim for negligent delay in the
20
utilization review, or pre-authorization process, even if
alleged as a state law violation against the physician,
would, at the very least, ``relate to' an ERISA plan and, thus,
be preempted." Id. at 367. W e cannot agree that all of
Pryzbowski's claims against Medemerge and the physician
defendants should be characterized as "relating to" the
administration of her plan.
It is true that Pryzbowski has not alleged that the
physician defendants at Medemerge failed to diagnose or
properly treat her back pain. She concedes that those
physicians found that her problem requir ed specialty care
and referred her to an orthopedic sur geon, a neurosurgeon,
and eventually the out-of-network neurosur geon who had
originally performed surgery on Pryzbowski. On the other
hand, Pryzbowski's claims against Medemerge and the
physician defendants are not based on a denial of benefits
and therefore differ from the typical administration of
benefits claims against HMOs. Medemerge and the
physician defendants do not contend that they acted as
U.S. Healthcare's agent in the administration of the plan
that covered Pryzbowski. Admittedly, they did not have the
responsibility to make coverage decisions. Indeed, they
argue in their brief that they had no power to authorize
services by out-of-network physicians and that those
questions -- which have been held to be administrative as
to HMOs -- were always relayed to U.S. Healthcare. As
these defendants disclaim any administrative authority or
responsibility with respect to the plan, it follows that the
preemption afforded by S 514(a) for claims "relating to" a
plan is inapplicable.
Our decisions have not focused on the extent to which
the scope of a physician's responsibility to a patient goes
beyond the mere treatment of that patient's medical
complaint. It remains unclear whether the New Jersey
Supreme Court would include within the physicians' duty
of care the processing of their patients through the office,
including matters such as the completion of for ms, referral
to other physicians, arrangements for laboratory tests, and
other general office procedures that may be necessary for
the complete care of the patient.
21
We note that in Nealy v. U.S. Healthcar e HMO, 93 N.Y.2d
209, 711 N.E.2d 621 (1999), a primary care physician
allegedly delayed in submitting to the HMO a r equest for
authorization for a beneficiary to see an out-of-network
cardiologist. The HMO eventually denied authorization, and
the beneficiary died before seeing an in-network
cardiologist. The New York Court of Appeals held that the
wrongful death and negligence claims br ought by the
beneficiary's wife were not preempted byS 514(a). See id. at
219, 711 N.E.2d at 625. The court stated that "[p]laintiff 's
allegations of negligent medical care do not``relate to' the
administration of an ERISA plan merely because they refer
to [the physician defendant's] delay in submitting the US
Healthcare form seeking a referral to [the out-of-network
cardiologist]. Plaintiff does not allege that [the physician
defendant] is responsible for delay caused by US
Healthcare's decision-making process with respect to
coverage or benefits. Her claim against [the physician
defendant] is that he failed to take timely action to treat her
husband." Id. at 219-20, 711 N.E.2d at 625 (footnote
omitted).
Nealy stands for the proposition that under New York law
the physician's duties in providing car e to his/her patients
may be broader than the mere medical tr eatment decision.
Pryzbowski's complaint may be fairly read to allege that
Medemerge and the physician defendants did not
adequately perform or supervise the per formance of some
of the office functions that may be part of patient care. On
the sparse record before us and in view of the inadequate
briefing on this point before us and in the District Court,
we are not prepared to state as a matter of law that there
is no conceivable malpractice claim against these
defendants under New Jersey law, and hence cannot agree
that all of the claims against them are pr eempted under
S 514(a).3
_________________________________________________________________
3. There are a number of pending motions. The appellees have moved to
dismiss the appeal or in the alternative to strike the appellant's brief
and
appendix because Pryzbowski included in the Joint Appendix excerpts of
the deposition testimony of Dr. Linda Peeno, her medical ethics expert,
Anita McGinley, former HMO coordinator at Medemerge, Sandra Coles-
22
b. Failure to State a Claim
Our decision that Pryzbowski's claims against Medemerge
and the physician defendants are not expr essly preempted
does not mean that they necessarily survive dismissal
under summary judgment. Only after the District Court
determines the scope of New Jersey malpractice law will it
be able to decide whether Pryzbowski has offer ed sufficient
evidence to make a genuine issue of material fact that
Medemerge and the physician defendants failed to meet the
applicable standard.
There is one claim, however, that we ar e in a position to
resolve. The District Court held that Pryzbowski failed to
state a claim for negligence upon which relief can be
granted. The District Court equated the negligence claim
with Pryzbowski's contention that the physician defendants
violated a state common law "duty to advocate" to the HMO
so as to expedite the approval of her sur gery. Although we
read Pryzbowski's negligence claim against Medemerge and
the physician defendants as broader than the claimed duty
to advocate, we agree with the District Court's analysis of
the latter.
The District Court reasoned that a state law claim for
negligence must allege "(1) a duty of car e owed by
defendant to plaintiff; (2) a breach of that duty by
defendant; and (3) an injury to plaintiff pr oximately caused
by defendant's breach." Endre v. Arnold, 300 N.J. Super.
136, 142, 692 A.2d 97, 100 (App. Div. 1997). "Whether a
_________________________________________________________________
Forbes, nurse employed by U.S. Healthcare to r eview out-of-network
authorizations, and Dr. John Pilla of Medemer ge that were not put in the
record developed in the District Court. In turn, Pryzbowski has moved to
expand the record to include portions of the depositions that were not
before the District Court, or, in the alternative, that we ignore the
references to the material at issue. W e have consistently stated that the
courts of appeals can only "review the decision below based on the
record that was before the district court." Federal Ins. Co. v. Richard I
Rubin & Co., Inc., 12 F.3d 1270, 1284 (3d Cir. 1993) (quotation omitted).
Therefore, we have not considered these deposition excerpts in making
our decision. On remand, the District Court can reconsider whether the
excerpts are material to its inquiry. W e deny both the motion to dismiss
the appeal and deny the motion to expand the r ecord.
23
duty exists is solely a question of law to be decided by a
court." Id. The Medical Society of New Jersey filed an
amicus curiae brief in this court to advance its position
that a physician does not, and should not, have a"duty to
advocate" with a patient's health care plan when it denies
or delays treatment the physician has r equested.
Pryzbowski attempts to identify such a duty thr ough her
medical ethics expert, the Hippocratic Oath, and the
American Medical Association's Code of Medical Ethics. The
Medical Society, besides providing the surprising
information that the Hippocratic Oath is not universally
used throughout the medical schools of this country and
that there are at least ten versions of that oath, asserts that
there is no "legal duty that subjects physicians who have
committed no malpractice to liability for injuries r esulting
from delays in benefit determinations by plan
administrators over whom the physicians have no control."
Br. of Medical Society at 8-9 (emphasis in original).
We take no position whether New Jersey, or any other
state, should impose such a duty, as that is not within our
domain. On the issue before us, we agree that physicians,
under existing New Jersey law, have no duty to advocate on
behalf of their patients to an HMO or any health insurance
plan for the timely approval of benefits. Cf. Baxt v. Liloia,
155 N.J. 190, 202, 714 A.2d 271, 277 (1998) (noting that
state disciplinary codes for attorneys "ar e not designed to
establish standards for civil liability"); Pierce v. Ortho
Pharmaceutical Corp., 84 N.J. 58, 76, 417 A.2d 505, 514
(1980) (concluding that the Hippocratic Oath "does not
contain a clear mandate of public policy" upon which a
cause of action may be based). We ther efore agree with the
District Court that Pryzbowski has failed to state a claim on
her duty to advocate allegation.
III.
CONCLUSION
In summary, we hold that the District Court did not err
in holding that Pryzbowski's claims against U.S. Healthcare
were completely preempted; that New Jersey does not
24
recognize a physician's duty to advocate; and that the other
claims asserted by Pryzbowski against Medemer ge and the
physician defendants are not expressly pr eempted as a
matter of law but require additional consideration by the
District Court.
We note that, as a result of the enactment of ERISA and
the substantial changes in the delivery of health care, new
legal issues regarding rights and r esponsibilities have
arisen. The law remains, to some extent, in a state of flux.
It is for Congress and not the courts to decide whether it is
sound policy for our health care system to limit or channel
the relief available or whether ERISA should allow for
broader remedies for beneficiaries in the world of managed
care.
For the reasons set forth above, we will affirm the
December 3, 1997 order dismissing the claims against U.S.
Healthcare. We will affirm that portion of the order of
September 8, 1999 dismissing the claims against
Medemerge and the physician defendants insofar as they
allege duty to advocate, and we will vacate the r emainder of
that order and remand to the District Court for further
proceedings in accordance with this opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
25