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

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Precedential or Non-Precedential: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
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Recommended Citation
"In re: US Healthcare, Inc. (Bauman vs. US Healthcare, Inc. et.al.)" (1999). 1999 Decisions. Paper 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 at1351 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