The Weston Group, Inc. v. Highmark Health Services ( 2017 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
THE WESTON GROUP, INC., : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
v. :
:
HIGHMARK HEALTH SERVICES, :
FORMERLY HIGHMARK, INC., d/b/a :
HIGHMARK BLUE SHIELD AND MODEL :
CONSULTING, INC. : No. 1352 MDA 2016
Appeal from the Order entered May 4, 2016
in the Court of Common Pleas of Cumberland County,
Civil Division, No(s): 13-3622
BEFORE: MOULTON, SOLANO and MUSMANNO, JJ.
MEMORANDUM BY MUSMANNO, J.: FILED SEPTEMBER 27, 2017
The Weston Group, Inc. (“Weston”), appeals from the Order denying
its Motion for Summary Judgment.1 We affirm.
Beginning in August 2007, Highmark Health Services, formerly
1
It is well-settled that “an order denying summary judgment is ordinarily a
non-appealable interlocutory order.” McDonald v. Whitewater
Challengers, Inc., 116 A.3d 99, 104 (Pa. Super. 2015). However, Weston
filed a timely Motion to Certify Interlocutory Order for Appeal pursuant to
Pennsylvania Rule of Appellate Procedure 1311(b), requesting that the trial
court amend the May 4, 2016 Order to include language set forth at 42
Pa.C.S.A. § 702(b) (noting that a trial court may certify an interlocutory
appeal if the “order involves a controlling question of law as to which there is
substantial ground for difference of opinion and that an immediate appeal
from the order may materially advance the ultimate termination of the
matter[.]”). On June 8, 2016, the trial court granted the Motion to Certify
and amended the May 4, 2016 Order to include the relevant language from
section 702(b). Subsequently, this Court granted Weston’s Petition for
Permission to Appeal, see Pa.R.A.P. 1311(b), and accordingly, this appeal is
properly before this panel.
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Highmark, Inc., d/b/a Highmark Blue Shield (collectively “Highmark”), and
Weston, with the aid of its agent, Model Consulting, Inc. (“Model”), entered
into a series of yearly comprehensive healthcare and prescription drug
coverage contracts (“contracts”). Under the terms of the contracts, Weston
agreed to pay Highmark a monthly deposit rate for each employee enrolled
in a health and prescription drug plan. The contracts also specified a
monthly maximum rate for each employee.2 Additionally, as part of the
contracts, Highmark would calculate the total amount paid on claims made
by Weston employees in combination with the specified retention rates
(collectively “total income”). If the claims paid exceeded the monthly
deposit rate, Weston was required to pay the difference between the
monthly maximum rate and the monthly deposit rate at the end of each
contract year.3 If the total income exceeded the total amount paid under
the maximum rate, the difference would be carried over to the following
year, and be due upon termination of the contracts by either party.
Conversely, if the deposit income exceeded the total income, Highmark
would refund the excess amount to Weston.
2
As an example, in the 2007-2008 contract, the monthly deposit rate for an
individual was $300.13, and the monthly maximum rate was $353.09; for a
family, the monthly deposit rate was $859.86, and the monthly maximum
rate was $1,011.60. See Contract, 8/1/07, at 96.
3
For the contract ending in 2008, Weston paid Highmark an annual
settlement of $140,339.96. For the contract ending in 2009, Weston paid
Highmark an annual settlement of $220,067.78. For the contract ending in
2010, Weston paid Highmark an annual settlement of $240,815.85.
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On July 6, 2011, Weston informed Highmark that it was terminating
the 2010-2011 contract, effective August 1, 2011. Thereafter, Highmark
informed Weston that the accumulated deficit over the contract years was
$730,466.78. Despite repeated demands by Highmark, Weston did not
make any payment.
On June 21, 2013, Highmark instituted a Complaint against Weston,
raising claims of breach of contract, unjust enrichment, and account stated.
Weston filed an Answer with New Matter. Subsequently, Weston filed a
Joinder Complaint against Model, which was joined as an additional
defendant. Following discovery, Weston filed a Motion for Summary
Judgment, arguing that the court of common pleas did not have subject
matter jurisdiction over the matter because the Employee Retirement
Income Security Act (“ERISA”) governed the action. Highmark also filed a
Motion for Summary Judgment. The trial court denied both Motions.
Weston filed a timely Notice of Appeal.
On appeal, Weston raises the following questions for our review:
1. Whether [ERISA] preempts all of [Highmark’s] state law
causes of action[?]
2. Whether [ERISA] grants exclusive jurisdiction of this matter
to the federal courts and[,] therefore[,] the Pennsylvania
state courts lack subject matter jurisdiction over this
matter[?]
Brief for Appellant at 4.
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“[W]e review the trial court’s denial of summary judgment for an
abuse of discretion or error of law.” Bezjak v. Diamond, 135 A.3d 623,
627 (Pa. Super. 2016) (citation omitted). “As with all questions of law, our
review is plenary.” Nobles v. Staples, Inc., 150 A.3d 110, 120 (Pa. Super.
2016) (citation omitted).
“Federal preemption is a jurisdictional matter for a state court because
it challenges subject matter jurisdiction and the competence of the state
court to reach the merits of the claims raised.” NASDAQ OMX PHLX, Inc.
v. Pennmont Secs., 52 A.3d 296, 315 (Pa. Super. 2012) (citation and
brackets omitted).
[I]n any preemption case, in determining whether a state
law is preempted by federal law under the Supremacy Clause of
the United States Constitution, we adhere, as we must, to the
principles the United States Supreme Court has articulated. See
Dooner v. DiDonato, 601 Pa. 209, 218, 971 A.2d 1187, 1193
(2009) (citing U.S. CONST. art. VI, cl. 2). The high Court has
repeatedly stated that federal preemption of state law turns on
the intention of Congress and begins with the presumption that
Congress does not intend to supplant state law. See, e.g., New
York State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645, 654, 115 S. Ct. 1671, 131 L.
Ed. 2d 695 (1995). In addition, … the Supremacy Clause may
entail preemption of state law either by express provision, by
implication, or by a conflict between federal and state law, and
has instructed that, in an express preemption case, the analysis
begins “with the text of the provision in question and move[s]
on, as need be, to the structure and purpose of the Act in which
it occurs.” Id. at 655, 115 S. Ct. 1671.
Barnett v. SKF USA, Inc., 38 A.3d 770, 776-77 (Pa. 2012); see also
Aetna Health Inc. v. Davila, 542 U.S. 200, 207 (2004) (noting that while
a case may be removed to federal court where the claims in a plaintiff’s
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complaint arise under federal law, “the existence of a federal defense
normally does not create statutory ‘arising under’ jurisdiction.”).
As Weston’s claims are related, we will address them together.
Weston contends that ERISA preempts Highmark’s causes of action. Brief
for Appellant at 10. Weston argues that ERISA includes broad preemption
provisions, which ensure federal regulation of employee benefit plans,
including all forms of state action dealing with matters covered by ERISA.
Id. at 10-11, 15. Weston asserts that the contracts are subject to the
provisions of ERISA, as Highmark is seeking payments related to the
administration and payment of claims for health services provided to
Weston’s employees. Id. at 11, 13, 14, 17; see also id. at 12, 14, 15
(wherein Weston argues that Highmark manipulated its underwriting
recommendations when it lowered the monthly deposit rates to be paid by
Weston employees to undercut a competitor, which had the result of
increasing the deficit). Weston claims that ERISA is designed to protect the
interests of employees in employee benefit plans, and that Highmark’s
actions directly affected Weston’s employees. Id. at 15. Weston argues
that under ERISA, federal district courts have exclusive jurisdiction over the
matter. Id. at 16-17.
ERISA “is a comprehensive statute designed to promote the interests
of employees and their beneficiaries in employee benefit plans.” Shaw v.
Delta Air Lines, Inc., 463 U.S. 85, 90 (1983); see also Davila, 542 U.S.
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at 208 (noting that “Congress enacted ERISA to protect ... the interests of
participants in employee benefit plans and their beneficiaries by setting out
substantive regulatory requirements for employee benefit plans and to
provide for appropriate remedies, sanctions, and ready access to the Federal
courts.”) (citation, brackets, and quotation marks omitted). “The purpose of
ERISA is to provide a uniform regulatory regime over employee benefit
plans. To this end, ERISA includes expansive pre[]emption provisions, …
which are intended to ensure that employee benefit plan regulation would be
exclusively a federal concern.” Davila, 542 U.S. at 208 (citation and
quotation marks omitted); see also Travelers, 514 U.S. at 654 (noting that
the Supreme Court does not “assum[e] lightly that Congress has derogated
state regulation, but instead ... addresse[s] claims of pre[]emption with the
starting presumption that Congress does not intend to supplant state
law[.]”). ERISA compels preemption under two different methods. See 29
U.S.C.A. §§ 1132, 1144.
The first form of preemption under ERISA allows for complete
preemption under section 502(a). See 29 U.S.C.A. § 1132(a);4 see also
Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Tr. for
S. Cal., 463 U.S. 1, 24 (1983) (stating that “any state action coming within
4
We note that “[w]hen ERISA was enacted in 1974, the Act was codified in
Title 29 of the U.S. Code. However, the section numbers in the original Act
were codified under different numbers in the Code. Many opinions
subsequent to 1974 use the original numbering found in the Act.” Coggins
v. Keystone Foods, LLC, 111 F. Supp. 3d 630, 634 n.2 (E.D. Pa. 2015).
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the scope of § 502(a) of ERISA would be removable to federal district court,
even if an otherwise adequate state cause of action were pleaded without
reference to federal law.”). Section 502(a) enumerates numerous situations
in which an action may be brought under ERISA. See 29 U.S.C.A.
§ 1132(a). The most typical situation, set forth at section 502(a)(1)(B),
permits claims by a participant or beneficiary to enforce present or future
benefits due under the terms of the plan to be completely preempted and
removed from state courts. See id. § 1132(a)(1)(B); Davila, 542 U.S. at
210 (noting that a state law claim is completely preempted “if an individual,
at some point in time, could have brought his claim under ERISA
§ 502(a)(1)(B), and where there is no other independent legal duty that is
implicated by a defendant’s actions[.]”) (citation omitted).
The second form of ERISA preemption, commonly referred to as
conflict or express preemption, provides, in relevant part, as follows: “[T]he
provisions of this title and title IV shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee benefit plan
described in section 1003(a) of this title and not exempt under section
1003(b) of this title.” 29 U.S.C.A. § 1144(a).5 While section 514(a) should
5
An “employee benefit plan” is defined by ERISA as including an “employee
welfare benefit plan” and an “employee pension benefit plan.” 29 U.S.C.A.
§ 1002(3). An “employee welfare benefit plan” is any “plan, fund or
program” which is “established or maintained” by an “employer” or an
“employee organization” for the purpose of providing, inter alia, medical,
hospital care, disability, or vacation benefits. Id. § 1002(1).
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be read broadly, see Barnett, 38 A.3d at 777, the Supreme Court
admonished that “relate to” is to be interpreted practically, by considering
an action’s connection or reference to the subject plan. See Travelers, 514
U.S. at 656.6 Two categories of state law have been found to be preempted
by ERISA: (1) “[w]here a State’s law acts immediately and exclusively upon
ERISA plans ... or where the existence of ERISA plans is essential to the
law’s operation ..., that ‘reference’ will result in pre[]emption;” and (2)
“ERISA pre[]empts a state law that has an impermissible ‘connection with’
ERISA plans, meaning a state law that ‘governs ... a central matter of plan
administration’ or ‘interferes with nationally uniform plan administration.’”
Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 943 (2016) (citations
omitted).
Initially, Weston concedes that section 502(a) does not apply, see
Brief for Appellant at 16, and grounds its preemption claims upon section
6
“[I]n the vast majority of cases concerning ERISA preemption addressed
by the Court [prior to Travelers], the [Supreme] Court concluded without
hesitation that, under [s]ection 514(a), the state laws under review were
preempted because they related to an ERISA plan.” Barnett, 38 A.3d at
777. In Travelers, the Supreme Court recognized that “[i]f ‘relate to’ were
taken to extend to the furthest stretch of its indeterminacy, then for all
practical purposes pre[]emption would never run its course, for ‘[r]eally,
universally, relations stop nowhere.’” Travelers, 514 U.S. at 655 (citation
omitted). Thus, “in order to give effect to both the starting presumption
that Congress does not intend to supplant state law and the words of
limitation Congress included in [s]ection 514(a), the Travelers Court
announced [the above-mentioned] standard for analyzing ERISA
preemption.” Barnett, 38 A.3d at 778.
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514(a). We agree. Consequently, we will address Weston’s claims under
the “relate to” standard as set forth in section 514(a) and Travelers.
In its Complaint, Highmark set forth three causes of action: breach of
contract, unjust enrichment, and account stated, all premised upon Weston’s
failure to properly reimburse the debts owed under the contracts.
Complaint, 6/21/13, at 3-13. The contracts, the purpose of which was to
deliver health and prescription drug plans to Weston’s employees, required
Weston to pay Highmark any difference between the maximum rate and the
deposit rate on a yearly basis, and the maximum rate and total income at
the termination of the contracts.
Thus, while the payments due were for plans covered by ERISA,
Highmark’s causes of action do not “relate to” the subject plans. See Cal.
Div. Of Labor Standards Enf’t v. Dillingham Const. N.A., Inc., 519 U.S.
316, 330 (1997) (stating that Congress did not intend ERISA to preempt
areas of “traditional state regulation” that are “quite remote from the areas
with which ERISA is expressly concerned-reporting, disclosure, fiduciary
responsibility, and the like.”) (citation omitted); see also Pappas v. Asbel,
768 A.2d 1089, 1092 (Pa. 2001) (stating that ERISA “preemption does not
occur … if the state law has only a tenuous, remote, or peripheral connection
with covered plans.” (citation omitted)). In point of fact, adjudication of
Highmark’s claims does not require an interpretation of the ERISA plan, as
the claims do not implicate the employee benefit structure or the
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administration of benefits; bind employers or administrators to specific
procedures; preclude uniform administration of benefit plans; or allow
employees to utilize alternative mechanisms to obtain benefits. See
Gobeille, 136 S. Ct. at 943; Travelers, 514 U.S. at 656. Moreover,
Highmark paid the benefits due to Weston’s employees under the ERISA
plans, and Weston does not dispute the accuracy of the payments or the
benefits received. Finally, preemption of Highmark’s action does not
advance any concerns of Congress in enacting ERISA. See Davila, 542 U.S.
at 208. Accordingly, Highmark’s action is not preempted by ERISA under
section 514(a). See, e.g., Catholic Healthcare W.-Bay Area v.
Seafarers Health & Benefits Plan, 321 F. App’x 563, 564–65 (9th Cir.
2008) (concluding that ERISA did not preempt an action under section
514(a) that was based on a contractual relationship between a hospital and
a health benefits plan as the formation of the contract was completely
independent of the terms of the ERISA plan); Providence Health Plan v.
McDowell, 385 F.3d 1168, 1172–73 (9th Cir. 2004) (holding that a health
plan’s action seeking to recover benefits paid to insureds was not preempted
by ERISA under section 514(a), as the health plan was merely attempting to
enforce the reimbursement provision of the insurance contract); Scripps
Health v. Schaller Anderson, LLC, 2012 WL 2390760, at **3–4 (S.D. Cal.
2012) (concluding that state law causes of action were not preempted by
ERISA under section 514(a), because the action was based upon the failure
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to properly pay claims under the agreements, and were only tangentially
related to the administration of the benefit plan); Immediate Pharm.
Serv., Inc. v. Superior Metal Prod., 732 N.E.2d 417, 420–22 (Ohio App.
1999) (concluding that breach of contract claim between a pharmacy and a
health plan was not preempted by ERISA under section 514(a), as the right
to damages arises only from the contract, not from the ERISA plan).7
Additionally, Weston claims that under the plain terms of the
contracts, Highmark must pursue any legal action under the administrative
provisions of ERISA. Brief for Appellant at 11. However, Weston only cites
to language in the contracts that directs members (Weston’s employees) to
seek legal action under ERISA. Id. (citing General Provisions of Contract at
71). This action does not involve members, but instead involves Weston,
defined as the “the Group” in the contracts, and Highmark, defined as “the
Plan” in the contracts. See, e.g., Contract, 8/1/09, at 1; Contract, 8/1/08,
at 1; Contract, 8/1/07, at 1. Weston does not cite to any place in the
contracts that dictates legal actions involving “the Group” or “the Plan” must
be pursued under the administrative provisions of ERISA. Thus, Weston’s
7
Weston’s reliance upon the holdings in First Nat. Life Ins. Co. v.
Sunshine-Jr. Food Stores, Inc., 960 F.2d 1546 (11th Cir. 1992), and
Washington Nat. Ins. Co. v. Hendricks, 855 F. Supp. 1542, 1545 (W.D.
Wis. 1994), to support its proposition is unavailing. Indeed, our Supreme
Court specifically admonished against relying upon “cases that predate the
shift in ERISA preemption jurisprudence the Supreme Court announced in
1995, in Travelers.” Barnett, 38 A.3d at 782; see also Travelers, 514
U.S. at 655.
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claim is without merit.
Based upon the foregoing, the trial court properly denied Weston’s
Motion for Summary Judgment.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/27/2017
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