Corcoran v. United HealthCare, Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 91-3322
_____________________
FLORENCE B. CORCORAN
Wife of/and WAYNE D. CORCORAN,
Plaintiffs-Appellants,
v.
UNITED HEALTHCARE, INC.,
and BLUE CROSS and BLUE SHIELD
OF ALABAMA, INC.,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________________________________________________
(June 26, 1992)
Before THORNBERRY, KING, and DeMOSS, Circuit Judges.
KING, Circuit Judge:
This appeal requires us to decide whether ERISA pre-empts a
state-law malpractice action brought by the beneficiary of an
ERISA plan against a company that provides "utilization review"
services to the plan. We also address the availability under
ERISA of extracontractual damages. The district court granted
the defendants' motion for summary judgment, holding that ERISA
both pre-empted the plaintiffs' medical malpractice claim and
precluded them from recovering emotional distress damages. We
affirm.
I. BACKGROUND
The basic facts are undisputed. Florence Corcoran, a long-
time employee of South Central Bell Telephone Company (Bell),
became pregnant in early 1989. In July, her obstetrician, Dr.
Jason Collins, recommended that she have complete bed rest during
the final months of her pregnancy. Mrs. Corcoran applied to Bell
for temporary disability benefits for the remainder of her
pregnancy, but the benefits were denied. This prompted Dr.
Collins to write to Dr. Theodore J. Borgman, medical consultant
for Bell, and explain that Mrs. Corcoran had several medical
problems which placed her "in a category of high risk pregnancy."
Bell again denied disability benefits. Unbeknownst to Mrs.
Corcoran or Dr. Collins, Dr. Borgman solicited a second opinion
on Mrs. Corcoran's condition from another obstetrician, Dr. Simon
Ward. In a letter to Dr. Borgman, Dr. Ward indicated that he had
reviewed Mrs. Corcoran's medical records and suggested that "the
company would be at considerable risk denying her doctor's
recommendation." As Mrs. Corcoran neared her delivery date, Dr.
Collins ordered her hospitalized so that he could monitor the
fetus around the clock.1
Mrs. Corcoran was a member of Bell's Medical Assistance Plan
(MAP or "the Plan"). MAP is a self-funded welfare benefit plan
which provides medical benefits to eligible Bell employees. It
1
This was the same course of action Dr. Collins had
ordered during Mrs. Corcoran's 1988 pregnancy. In that
pregnancy, Dr. Collins intervened and performed a successful
Caesarean section in the 36th week when the fetus went into
distress.
2
is administered by defendant Blue Cross and Blue Shield of
Alabama (Blue Cross) pursuant to an Administrative Services
Agreement between Bell and Blue Cross. The parties agree that it
is governed by ERISA.2 Under a portion of the Plan known as the
"Quality Care Program" (QCP), participants must obtain advance
approval for overnight hospital admissions and certain medical
procedures ("pre-certification"), and must obtain approval on a
continuing basis once they are admitted to a hospital
("concurrent review"), or plan benefits to which they otherwise
would be entitled are reduced.
QCP is administered by defendant United HealthCare (United)
pursuant to an agreement with Bell. United performs a form of
cost-containment services that has commonly become known as
"utilization review." See Blum, An Analysis of Legal Liability
in Health Care Utilization Review and Case Management, 26 Hous.
L. Rev. 191, 192-93 (1989) (utilization review refers to
"external evaluations that are based on established clinical
criteria and are conducted by third-party payors, purchasers, or
health care organizers to evaluate the appropriateness of an
episode, or series of episodes, of medical care."). The Summary
Plan Description (SPD) explains QCP as follows:
The Quality Care Program (QCP), administered by United
HealthCare, Inc., assists you and your covered dependents in
securing quality medical care according to the provisions of
the Plan while helping reduce risk and expense due to
unnecessary hospitalization and surgery. They do this by
providing you with information which will permit you (in
2
Employee Retirement Income Security Act of 1974, Pub. L.
93-406, 88 Stat. 829, 29 U.S.C. §§ 1001-1461.
3
consultation with your doctor) to evaluate alternatives to
surgery and hospitalization when those alternatives are
medically appropriate. In addition, QCP will monitor any
certified hospital confinement to keep you informed as to
whether or not the stay is covered by the Plan.
Two paragraphs below, the SPD contains this statement: When
reading this booklet, remember that all decisions regarding your
medical care are up to you and your doctor. It goes on to
explain that when a beneficiary does not contact United or follow
its pre-certification decision, a "QCP Penalty" is applied. The
penalty involves reduction of benefits by 20 percent for the
remainder of the calendar year or until the annual out-of-pocket
limit is reached. Moreover, the annual out-of-pocket limit is
increased from $1,000 to $1,250 in covered expenses, not
including any applicable deductible. According to the QCP
Administrative Manual, the QCP penalty is automatically applied
when a participant fails to contact United. However, if a
participant complies with QCP by contacting United, but does not
follow its decision, the penalty may be waived following an
internal appeal if the medical facts show that the treatment
chosen was appropriate.
A more complete description of QCP and the services provided
by United is contained in a separate booklet. Under the heading
"WHAT QCP DOES" the booklet explains:
Whenever your doctor recommends surgery or hospitalization
for you or a covered dependent, QCP will provide an
independent review of your condition (or your covered
dependent's). The purpose of the review is to assess the
need for surgery or hospitalization and to determine the
appropriate length of stay for a hospitalization, based on
nationally accepted medical guidelines. As part of the
review process, QCP will discuss with your doctor the
4
appropriateness of the treatments recommended and the
availability of alternative types of treatments -- or
locations for treatment -- that are equally effective,
involve less risk, and are more cost effective.
The next paragraph is headed "INDEPENDENT, PROFESSIONAL REVIEW"
and states:
United Health Care, an independent professional medical
review organization, has been engaged to provide services
under QCP. United's staff includes doctors, nurses, and
other medical professionals knowledgeable about the health
care delivery system. Together with your doctor, they work
to assure that you and your covered family members receive
the most appropriate medical care.
At several points in the booklet, the themes of "independent
medical review" and "reduction of unnecessary risk and expense"
are repeated. Under a section entitled "THE QUALITY CARE
PROGRAM...AT A GLANCE" the booklet states that QCP "Provides
independent, professional review when surgery or hospitalization
is recommended -- to assist you in making an enlightened decision
regarding your treatment." QCP "provides improved quality of
care by eliminating medically unnecessary treatment," but
beneficiaries who fail to use it "may be exposed to unnecessary
health risks. . . ." Elsewhere, in the course of pointing out
that studies show one-third of all surgery may be unnecessary,
the booklet explains that programs such as QCP "help reduce
unnecessary and inappropriate care and eliminate their associated
costs." Thus, "one important service of QCP will help you get a
second opinion when your doctor recommends surgery."
The booklet goes on to describe the circumstances under
which QCP must be utilized. When a Plan member's doctor
recommends admission to the hospital,
5
[i]ndependent medical professionals will review, with the
patient's doctor, the medical findings and the proposed
course of treatment, including the medically necessary
length of confinement. The Quality Care Program may require
additional tests or information (including second opinions),
when determined necessary during consultation between QCP
professionals and the attending physician.
When United certifies a hospital stay, it monitors the continuing
necessity of the stay. It also determines, for certain medical
procedures and surgeries, whether a second opinion is necessary,
and authorizes, where appropriate, certain alternative forms of
care. Beneficiaries are strongly encouraged to use QCP to avoid
loss of benefits: "'fully using' QCP means following the course
of treatment that's recommended by QCP's medical professionals."
In accordance with the QCP portion of the plan, Dr. Collins
sought pre-certification from United for Mrs. Corcoran's hospital
stay. Despite Dr. Collins's recommendation, United determined
that hospitalization was not necessary, and instead authorized 10
hours per day of home nursing care.3 Mrs. Corcoran entered the
hospital on October 3, 1989, but, because United had not pre-
certified her stay, she returned home on October 12. On October
25, during a period of time when no nurse was on duty, the fetus
went into distress and died.
Mrs. Corcoran and her husband, Wayne, filed a wrongful death
action in Louisiana state court alleging that their unborn child
died as a result of various acts of negligence committed by Blue
Cross and United. Both sought damages for the lost love, society
3
The record does not reveal the name of the person or
persons at United that made the decision concerning Mrs.
Corcoran.
6
and affection of their unborn child. In addition, Mrs. Corcoran
sought damages for the aggravation of a pre-existing depressive
condition and the loss of consortium caused by such aggravation,
and Mr. Corcoran sought damages for loss of consortium. The
defendants removed the action to federal court on grounds that it
was pre-empted by ERISA4 and that there was complete diversity
among the parties.
Shortly thereafter, the defendants moved for summary
judgment. They argued that the Corcorans' cause of action,
properly characterized, sought damages for improper handling of a
claim from two entities whose responsibilities were simply to
administer benefits under an ERISA-governed plan. They contended
that their relationship to Mrs. Corcoran came into existence
solely as a result of an ERISA plan and was defined entirely by
the plan. Thus, they urged the court to view the claims as
"relating to" an ERISA plan, and therefore within the broad scope
of state law claims pre-empted by the statute. In their
opposition to the motion, the Corcorans argued that "[t]his case
essentially boils down to one for malpractice against United
HealthCare. . . ." They contended that under this court's
analysis in Sommers Drug Stores Co. Employee Profit Sharing Trust
v. Corrigan Enterprises, Inc., 793 F.2d 1456 (5th Cir. 1986),
cert. denied, 479 U.S. 1034 (1987), their cause of action must be
4
See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 66
(1987) (because ERISA pre-emption is so comprehensive, pre-
emption defense provides sufficient basis for removal to federal
court notwithstanding "well-pleaded complaint" rule).
7
classified as a state law of general application which involves
an exercise of traditional state authority and affects principal
ERISA entities in their individual capacities. This
classification, they argued, together with the fact that pre-
emption would contravene the purposes of ERISA by leaving the
Corcorans without a remedy, leads to the conclusion that the
action is permissible notwithstanding ERISA.
The district court, relying on the broad ERISA pre-emption
principles developed by the Supreme Court and the Fifth Circuit,
granted the motion. The court noted that ERISA pre-emption
extends to state law claims "'of general application,' including
tort claims where ERISA ordinarily plays no role in the state law
at issue." (citing Metropolitan Life Ins. Co. v. Taylor, 481
U.S. 58 (1987) and Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41
(1987)). The court found that the state law claim advanced by
the Corcorans "relate[d] to" the employee benefit plan (citing
the statutory pre-emption clause, ERISA § 514(a)), and therefore
was pre-empted, because
[b]ut for the ERISA plan, the defendants would have played
no role in Mrs. Corcoran's pregnancy; the sole reason the
defendants had anything to do with her pregnancy is because
the terms of the ERISA plan directed Mrs. Corcoran to the
defendants (or at least to United HealthCare) for approval
of coverage of the medical care she initially sought.
The court held that, because the ERISA plan was the source of the
relationship between the Corcorans and the defendants, the
Corcorans' attempt to distinguish United's role in paying claims
from its role as a source of professional medical advice was
unconvincing.
8
The Corcorans filed a motion for reconsideration under Rule
59 of the Federal Rules of Civil Procedure. They did not ask the
district court to reconsider its pre-emption ruling, but instead
contended that language in the district court's opinion had
implicitly recognized that they had a separate cause of action
under ERISA's civil enforcement mechanism, § 502(a)(3).5 They
argued that the Supreme Court's decision in Massachusetts Mutual
Life Ins. Co. v. Russell, 473 U.S. 134 (1985), did not foreclose
the possibility that compensatory damages such as they sought
constituted "other appropriate equitable relief" available under
§ 502(a)(3) for violations of ERISA or the terms of an ERISA
plan. The district court denied the motion. Although the court
recognized that there was authority to the contrary, it pointed
out that "[t]he vast majority of federal appellate courts have .
. . held that a beneficiary under an ERISA health plan may not
recover under section 509(a)(3) [sic] of ERISA compensatory or
consequential damages for emotional distress or other claims
beyond medical expenses covered by the plan." (citations
omitted). Moreover, the court pointed out, a prerequisite to
recovery under § 502(a)(3) is a violation of the terms of ERISA
itself. ERISA does not place upon the defendants a substantive
5
The district court had stated that "[b]ecause the
plaintiffs concede that the defendants have fully paid any and
all medical expenses that Mrs. Corcoran actually incurred that
were covered by the plan, the plaintiffs have no remaining claims
under ERISA." In a footnote, the court indicated that Mrs.
Corcoran could have (1) sued under ERISA, before entering the
hospital, for a declaratory judgment that she was entitled to
hospitalization benefits; or (2) gone into the hospital, incurred
out-of-pocket expenses, and sued under ERISA for these expenses.
9
responsibility in connection with the provision of medical advice
which, if breached, would support a claim under § 502(a)(3). The
court entered final judgment in favor of Blue Cross and United,
and this appeal followed.
II. STANDARD OF REVIEW
Because this case is on appeal from the district court's
grant of summary judgment, our review is plenary. Dorsett v.
Board of Trustees for State Colleges & Universities, 940 F.2d
121, 123 (5th Cir. 1991). We view the evidence in the light most
favorable to the nonmoving party, id., and must affirm if "the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Fed. R. Civ. P. 56(c). As this case currently stands, the
parties dispute not the relevant facts, but the legal conclusions
that must be applied to those facts. As the Corcorans put it,
"[t]he question on appeal is whether the plaintiffs are afforded
any relief, under state law or ERISA, for damages caused by [the
defendants' actions]."
III. PRE-EMPTION OF THE STATE LAW CAUSE OF ACTION
A. The Nature of the Corcorans' State Law Claims
The Corcorans' original petition in state court alleged that
acts of negligence committed by Blue Cross and United caused the
10
death of their unborn child. Specifically, they alleged that
Blue Cross wrongfully denied appropriate medical care, failed
adequately to oversee the medical decisions of United, and failed
to provide United with Mrs. Corcoran's complete medical
background. They alleged that United wrongfully denied the
medical care recommended by Dr. Collins and wrongfully determined
that home nursing care was adequate for her condition. It is
evident that the Corcorans no longer pursue any theory of
recovery against Blue Cross. Although they mention in their
appellate brief the fact that they asserted a claim against Blue
Cross, they challenge only the district court's conclusion that
ERISA pre-empts their state law cause of action against United.6
We, therefore, analyze solely the question of pre-emption of the
claims against United. See Hulsey v. State of Texas, 929 F.2d
168, 172 (5th Cir. 1991) (issues stated but not briefed need not
be considered on appeal).
The claims against United arise from a relatively recent
phenomenon in the health care delivery system -- the prospective
review by a third party of the necessity of medical care.
Systems of prospective and concurrent review, rather than
traditional retrospective review, were widely adopted throughout
the 1980s as a method of containing the rapidly rising costs of
health care. Blum, supra, at 192; Furrow, Medical Malpractice
and Cost Containment: Tightening the Screws, 36 Case Western L.
6
They also do not mention Blue Cross when arguing that
extracontractual damages are available under § 502(a)(3).
11
Rev. 985, 986-87 (1986). Under the traditional retrospective
system (also commonly known as the fee-for-service system), the
patient obtained medical treatment and the insurer reviewed the
provider's claims for payment to determine whether they were
covered under the plan. Denial of a claim meant that the cost of
treatment was absorbed by an entity other than the one designed
to spread the risk of medical costs -- the insurer.
Congress's adoption in 1983 of a system under which
hospitals are reimbursed for services provided to Medicare
patients based upon average cost calculations for patients with
particular diagnoses spurred private insurers to institute
similar programs in which prospective decisions are made about
the appropriate level of care. Although plans vary, the typical
prospective review system requires some form of pre-admission
certification by a third party (e.g., the HMO if an HMO-
associated doctor provides care; an outside organization such as
United if an independent physician provides care) before a
hospital stay. Concurrent review involves the monitoring of a
hospital stay to determine its continuing appropriateness. See
generally, Blum, supra, at 192-93; Tiano, The Legal Implications
of HMO Cost Containment Measures, 14 Seton Hall Legis. J. 79, 80
(1990). As the SPD makes clear, United performs this sort of
prospective and concurrent review (generically, "utilization
review") in connection with, inter alia, the hospitalization of
Bell employees.
12
The Corcorans based their action against United on Article
2315 of the Louisiana Civil Code, which provides that "[e]very
act whatever of man that causes damage to another obliges him by
whose fault it happened to repair it." Article 2315 provides
parents with a cause of action for the wrongful death of their
unborn children, Danos v. St. Pierre, 402 So. 2d 633, 637-38 (La.
1981), and also places liability on health care providers when
they fail to live up to the applicable standard of care.
Chivleatto v. Divinity, 379 So. 2d 784, 786 (La. Ct. App. 4th
Dist. 1979). Whether Article 2315 permits a negligence suit
against a third party provider of utilization review services,
however, has yet to be decided by the Louisiana courts. The
potential for imposing liability on these entities is only
beginning to be explored, with only one state explicitly
permitting a suit based on a utilization review company's
allegedly negligent decision about medical care to go forward.
Wilson v. Blue Cross of So. California, 22 Cal. App. 3d 660, 271
Cal. Rptr. 876, 883 (1990) (reversing summary judgment for
utilization review company which determined that further
hospitalization was not necessary; ERISA not implicated);7 see
also Wickline v. State of California, 192 Cal. App. 3d 1630, 239
Cal. Rptr. 810, 819 (1986) (stating, in dicta, that negligent
implementation of cost containment mechanisms such as utilization
7
The case went to trial, but the plaintiff settled with
Western Medical, the provider of utilization review services.
See Milt Freudenheim, When Treatment and Costs Collide, N.Y.
Times, Apr. 28, 1992, at C2 col. 1.
13
review can lead to liability; ERISA not implicated), cert.
granted, 727 P.2d 753, 231 Cal. Rptr. 560, review dismissed,
cause remanded, 741 P.2d 613, 239 Cal. Rptr. 805 (1987).8
In the absence of clear Louisiana authority for their
lawsuit, the Corcorans rely on Green v. Walker, 910 F.2d 291 (5th
Cir. 1990). We held in Green that Article 2315 imposes a duty of
due care upon physicians hired by employers to conduct
employment-related exams on employees. Id. at 296. The cause of
action recognized in Green, however, is not analogous to the
8
Numerous commentators have weighed in on the propriety of
liability for utilization review decisions. See e.g., Macaulay,
Health Care Cost Containment and Medical Malpractice: On a
Collision Course, 19 Suffolk U.L. Rev. 91, 106-107 (1986)
(arguing for higher standard of negligence in "Wickline suits");
Morreim, Cost Containment and the Standard of Medical Care, 75
Calif. L. Rev. 1719, 1749-50 (1987) (arguing that liability
should be limited because patient's physician makes the ultimate
decision about treatment); Note, Paying the Piper: Third Party
Payor Liability for Medical Treatment Decisions, 25 Ga. L. Rev.
861, 907-911 (1991) (by David Griner) (arguing that without
liability for negligence in utilization review decisions, third
party payors have incentives to control costs but not to use
reasonable care in the decisionmaking process); Mellas, Adapting
the Judicial Approach to Medical Malpractice Claims Against
Physicians to Reflect Medicare Cost Containment Measures, 62 U.
Colo. L. Rev. 287, 316 (1991) (liability will reduce possibility
that poor medical decisions will be made in order to cut costs).
Even if courts put their imprimatur on negligence actions
against utilization review organizations, plaintiffs would face
difficulties in proving that the organization's decision was a
significant cause of an injury. See Wickline, 239 Cal. Rptr. at
819 (decision of doctor to discharge patient after Medi-Cal
(state utilization review body) would not authorize additional
hospital stay, not decision of Medi-Cal on appropriate length of
stay, is act upon which liability should be premised); Note,
supra, 25 Ga. L. Rev. at 902-05 (discussing problem of proving
that utilization review organization's decision is proximate
cause of injury); but see Wilson, 271 Cal. Rptr. at 883 (finding
that plaintiffs had adduced enough evidence as to causal effect
of utilization review company's decision on decedent's suicide to
avoid summary judgment).
14
cause of action brought against United because Green involved an
actual physical examination by a doctor hired by an employer, not
the detached decision of a utilization review company. Despite
the lack of clear Louisiana authority supporting the Corcorans'
theory of recovery against United, we can resolve the pre-emption
question presented in this appeal. The law in this area is only
beginning to develop, and it does not appear to us that Louisiana
law clearly forecloses the possibility of recovery against
United. Thus, assuming that on these facts the Corcorans might
be capable of stating a cause of action for malpractice,9 our
task now is to determine whether such a cause of action is pre-
empted by ERISA.
B. Principles of ERISA Pre-emption
The central inquiry in determining whether a federal statute
pre-empts state law is the intent of Congress. FMC Corp. v.
Holliday, 111 S. Ct. 403, 407 (1990); Allis-Chalmers Corp. v.
Lueck, 471 U.S. 202, 208 (1985). In performing this analysis we
begin with any statutory language that expresses an intent to
pre-empt, but we look also to the purpose and structure of the
statute as a whole. FMC Corp., 111 S. Ct. at 407; Ingersoll-Rand
Co. v. McClendon, 111 S. Ct. 478, 482 (1990).
ERISA contains an explicit pre-emption clause, which
provides, in relevant part:
9
If the Corcorans could sue United on a negligence theory,
it would appear that they could recover damages incurred in
connection with the death of their unborn child. Danos, 402 So.
2d at 637.
15
Except as provided in subsection (b) of this section, the
provisions of this subchapter and subchapter III of this
chapter 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). . . .
ERISA § 514(a).10 It is by now well-established that the
"deliberately expansive" language of this clause, Pilot Life
Insurance Co. v. Dedeaux, 481 U.S. 42, 46 (1987), is a signal
that it is be construed extremely broadly. See FMC Corp., 111 S.
Ct. at 407 ("[t]he pre-emption clause is conspicuous for its
breadth"); Ingersoll-Rand, 111 S. Ct. at 482.11 The key words
10
Statutory, decisional and all other forms of state law
are included within the scope of the preemption clause. ERISA §
514(c)(1) ("The term 'State law' includes all laws, decisions,
rules, regulations, or other State action having the effect of
law, of any State"). Section 514(b)(2)(A) exempts certain state
laws from pre-emption, but none of these exemptions is applicable
here.
11
The legislative history indicates that Congress intended
the preemption provision to be applied expansively. In Shaw v.
Delta Air Lines, Inc., 463 U.S. 85 (1983), the Court explained:
The bill that became ERISA originally contained a limited
pre-emption clause, applicable only to state laws relating
to the specific subjects covered by ERISA. The Conference
Committee rejected those provisions in favor of the present
language, and indicated that section's pre-emptive scope was
as broad as its language. See H.R. Conf. Rep. No. 93-1280,
p. 383 (1974); S. Conf. Rep. No. 93-1090, p. 383 (1974).
463 U.S. at 98. Senator Williams, one of ERISA's sponsors,
remarked:
It should be stressed that with the narrow exceptions
specified in the bill, the substantive and enforcement
provisions of the conference substitute are intended to
preempt the field for Federal regulations, thus eliminating
the threat of conflicting or inconsistent State and local
regulation of employee benefit plans. This principle is
intended to apply in its broadest sense to all actions of
State or local governments, or any instrumentality thereof,
which have the force or effect of law.
16
"relate to" are used in such a way as to expand pre-emption
beyond state laws that relate to the specific subjects covered by
ERISA, such as reporting, disclosure and fiduciary obligations.
Id. at 482. Thus, state laws "relate[] to" employee benefit
plans in a much broader sense -- whenever they have "a connection
with or reference to such a plan." Shaw v. Delta Air Lines,
Inc., 463 U.S. 85, 96-97 (1983). This sweeping pre-emption of
state law is consistent with Congress's decision to create a
comprehensive, uniform federal scheme for the regulation of
employee benefit plans. See Ingersoll-Rand, 111 S. Ct. at 482;
Pilot Life, 481 U.S. at 45-46.
The most obvious class of pre-empted state laws are those
that are specifically designed to affect ERISA-governed employee
benefit plans. See Mackey v. Lanier Collection Agency & Serv.,
Inc., 486 U.S. 825, 829-30 (1988) (statute explicitly barring
garnishment of ERISA plan funds is pre-empted); Ingersoll-Rand,
111 S. Ct. at 483 (cause of action allowing recovery from
employer when discharge is premised upon attempt to avoid
contributing to pension plan is pre-empted). But a law is not
saved from pre-emption merely because it does not target employee
benefit plans. Indeed, much pre-emption litigation involves laws
of general application which, when applied in particular
settings, can be said to have a connection with or a reference to
an ERISA plan. See Pilot Life, 481 U.S. at 47-48 (common law
120 Cong. Rec. 29933 (1974). See also Pilot Life, 481 U.S. at
46.
17
tort and contract causes of action seeking damages for improper
processing of a claim for benefits under a disability plan are
pre-empted); Shaw, 463 U.S. at 95-100 (statute interpreted by
state court as prohibiting plans from discriminating on the basis
of pregnancy is pre-empted); Christopher v. Mobil Oil Corp., 950
F.2d 1209, 1218 (5th Cir. 1992) (common law fraud and negligent
misrepresentation claims that allege reliance on agreements or
representations about the coverage of a plan are pre-empted),
petition for cert. filed 60 U.S.L.W. 3829 (U.S. May 26, 1992)
(No. 91-1881); Lee v. E.I. DuPont de Nemours & Co., 894 F.2d 755,
758 (5th Cir. 1990) (same). On the other hand, the Court has
recognized that not every conceivable cause of action that may be
brought against an ERISA-covered plan is pre-empted. "Some state
actions may affect employee benefit plans in too tenuous, remote
or peripheral a manner to warrant a finding that the law 'relates
to' the plan." Shaw, 463 U.S. at 100 n.21. Thus, "run-of-the-
mill state-law claims such as unpaid rent, failure to pay
creditors, or even torts committed by an ERISA plan" are not pre-
empted, Mackey, 486 U.S. at 833 (discussing these types of claims
in dicta).
C. Pre-emption of the Corcorans' Claims
Initially, we observe that the common law causes of action
advanced by the Corcorans are not that species of law
"specifically designed" to affect ERISA plans, for the liability
rules they seek to invoke neither make explicit reference to nor
are premised on the existence of an ERISA plan. Compare
18
Ingersoll-Rand, 111 S. Ct. at 483. Rather, applied in this case
against a defendant that provides benefit-related services to an
ERISA plan, the generally applicable negligence-based causes of
action may have an effect on an ERISA-governed plan. In our
view, the pre-emption question devolves into an assessment of the
significance of these effects.
1. United's position -- it makes benefit determinations, not
medical decisions
United's argument in favor of pre-emption is grounded in the
notion that the decision it made concerning Mrs. Corcoran was not
primarily a medical decision, but instead was a decision made in
its capacity as a plan fiduciary about what benefits were
authorized under the Plan. All it did, it argues, was determine
whether Mrs. Corcoran qualified for the benefits provided by the
plan by applying previously established eligibility criteria.
The argument's coup de grace is that under well-established
precedent,12 participants may not sue in tort to redress injuries
flowing from decisions about what benefits are to be paid under a
plan. One commentator has endorsed this view of lawsuits against
providers of utilization review services, arguing that, because
medical services are the "benefits" provided by a utilization
review company, complaints about the quality of medical services
(i.e., lawsuits for negligence) "can therefore be characterized
as claims founded upon a constructive denial of plan benefits."
12
Pilot Life, 481 U.S. at 47-48.
19
Chittenden, Malpractice Liability and Managed Health Care:
History & Prognosis, 26 Tort & Ins. Law J. 451, 489 (1991).
In support of its argument, United points to its explanatory
booklet and its language stating that the company advises the
patient's doctor "what the medical plan will pay for, based on a
review of [the patient's] clinical information and nationally
accepted medical guidelines for the treatment of [the patient's]
condition." It also relies on statements to the effect that the
ultimate medical decisions are up to the beneficiary's doctor.
It acknowledges at various points that its decision about what
benefits would be paid was based on a consideration of medical
information, but the thrust of the argument is that it was simply
performing commonplace administrative duties akin to claims
handling.
Because it was merely performing claims handling functions
when it rejected Dr. Collins's request to approve Mrs. Corcoran's
hospitalization, United contends, the principles of Pilot Life
and its progeny squarely foreclose this lawsuit. In Pilot Life,
a beneficiary sought damages under various state-law tort and
contract theories from the insurance company that determined
eligibility for the employer's long term disability benefit plan.
The company had paid benefits for two years, but there followed a
period during which the company terminated and reinstated the
beneficiary several times. 481 U.S. at 43. The Court made
clear, however, that ERISA pre-empts state-law tort and contract
actions in which a beneficiary seeks to recover damages for
20
improper processing of a claim for benefits. Id. at 48-49.
United suggests that its actions here were analogous to those of
the insurance company in Pilot Life, and therefore urges us to
apply that decision.
2. The Corcorans' position -- United makes medical
decisions, not benefit determinations
The Corcorans assert that Pilot Life and its progeny are
inapposite because they are not advancing a claim for improper
processing of benefits. Rather, they say, they seek to recover
solely for United's erroneous medical decision that Mrs. Corcoran
did not require hospitalization during the last month of her
pregnancy. This argument, of course, depends on viewing United's
action in this case as a medical decision, and not merely an
administrative determination about benefit entitlements.
Accordingly, the Corcorans, pointing to the statements United
makes in the QCP booklet concerning its medical expertise,
contend that United exercised medical judgment which is outside
the purview of ERISA pre-emption.
The Corcorans suggest that a medical negligence claim is
permitted under the analytical framework we have developed for
assessing pre-emption claims. Relying on Sommers Drug Stores Co.
Employee Profit Sharing Trust v. Corrigan Enterprises, Inc., 793
F.2d 1456 (5th Cir. 1986), cert. denied, 479 U.S. 1034 (1987),
they contend that we should not find the state law under which
they proceed pre-empted because it (1) involves the exercise of
traditional state authority and (2) is a law of general
application which, although it affects relations between
21
principal ERISA entities in this case, is not designed to affect
the ERISA relationship.13
3. Our view -- United makes medical decisions incident to
benefit determinations
We cannot fully agree with either United or the Corcorans.
Ultimately, we conclude that United makes medical decisions --
indeed, United gives medical advice -- but it does so in the
context of making a determination about the availability of
benefits under the plan. Accordingly, we hold that the Louisiana
tort action asserted by the Corcorans for the wrongful death of
their child allegedly resulting from United's erroneous medical
decision is pre-empted by ERISA.
Turning first to the question of the characterization of
United's actions, we note that the QCP booklet and the SPD lend
substantial support to the Corcorans' argument that United makes
13
Amicus curiae Louisiana Trial Lawyers Association (LTLA)
argues that United is not an ERISA fiduciary, and that therefore
the tort claims against it cannot be pre-empted. The parties,
however, agree that United is a fiduciary, and we have no reason
to dispute this. United's contract with Bell would appear to
give it "discretionary authority or discretionary control
respecting management of [the] plan" or "authority or control
respecting management or disposition of its assets. . . [,]" thus
satisfying the statutory definition of a fiduciary. 29 U.S.C. §
1002(21)(A)(i). In any event, all courts of appeals to have
considered the issue have held that ERISA pre-emption may apply
regardless of whether the defendant is a plan fiduciary.
Consolidated Beef Indus., Inc. v. New York Life Ins. Co., 949
F.2d 960, 964 (8th Cir. 1991); Gibson v. Prudential Ins. Co., 915
F.2d 414, 417-18 (9th Cir. 1990); Howard v. Parisian, Inc., 807
F.2d 1560, 1564 (11th Cir. 1987). Despite the suggestion in
Howard that this circuit so held in Light v. Blue Cross and Blue
Shield of Alabama, 790 F.2d 1247 (5th Cir. 1986), there is no
indication that the defendant in Light was not a fiduciary, and
even if it was not, no part of the opinion considers the precise
question whether ERISA pre-empts suits against nonfiduciaries.
22
medical decisions. United's own booklet tells beneficiaries that
it "assess[es] the need for surgery or hospitalization and . . .
determine[s] the appropriate length of stay for a
hospitalization, based on nationally accepted medical
guidelines." United "will discuss with your doctor the
appropriateness of the treatments recommended and the
availability of alternative types of treatments." Further,
"United's staff includes doctors, nurses, and other medical
professionals knowledgeable about the health care delivery
system. Together with your doctor, they work to assure that you
and your covered family members receive the most appropriate
medical care." According to the SPD, United will "provid[e] you
with information which will permit you (in consultation with your
doctor) to evaluate alternatives to surgery and hospitalization
when those alternatives are medically appropriate."
United makes much of the disclaimer that decisions about
medical care are up to the beneficiary and his or her doctor.
While that may be so, and while the disclaimer may support the
conclusion that the relationship between United and the
beneficiary is not that of doctor-patient, it does not mean that
United does not make medical decisions or dispense medical
advice. See Wickline, 239 Cal. Rptr. at 819 (declining to hold
Medi-Cal liable but recognizing that it made a medical judgment);
Macaulay, Health Care Cost Containment and Medical Malpractice:
On a Collision Course, 19 Suffolk U.L. Rev. 91, 106-107 (1986)
("As illustrated in [Wickline], an adverse prospective
23
determination on the 'necessity' of medical treatment may involve
complex medical judgment.") (footnote omitted). In response,
United argues that any such medical determination or advice is
made or given in the context of administering the benefits
available under the Bell plan. Supporting United's position is
the contract between United and Bell, which provides that
"[United] shall contact the Participant's physician and based
upon the medical evidence and normative data determine whether
the Participant should be eligible to receive full plan benefits
for the recommended hospitalization and the duration of
benefits."
United argues that the decision it makes in this, the
prospective context, is no different than the decision an insurer
makes in the traditional retrospective context. The question in
each case is "what the medical plan will pay for, based on a
review of [the beneficiary's] clinical information and nationally
accepted medical guidelines for the treatment of [the
beneficiary's] condition." See QCP Booklet at 4. A prospective
decision is, however, different in its impact on the beneficiary
than a retrospective decision. In both systems, the beneficiary
theoretically knows in advance what treatments the plan will pay
for because coverage is spelled out in the plan documents. But
in the retrospective system, a beneficiary who embarks on the
course of treatment recommended by his or her physician has only
a potential risk of disallowance of all or a part of the cost of
that treatment, and then only after treatment has been rendered.
24
In contrast, in a prospective system a beneficiary may be
squarely presented in advance of treatment with a statement that
the insurer will not pay for the proposed course of treatment
recommended by his or her doctor and the beneficiary has the
potential of recovering the cost of that treatment only if he or
she can prevail in a challenge to the insurer's decision. A
beneficiary in the latter system would likely be far less
inclined to undertake the course of treatment that the insurer
has at least preliminarily rejected.
By its very nature, a system of prospective decisionmaking
influences the beneficiary's choice among treatment options to a
far greater degree than does the theoretical risk of disallowance
of a claim facing a beneficiary in a retrospective system.
Indeed, the perception among insurers that prospective
determinations result in lower health care costs is premised on
the likelihood that a beneficiary faced with the knowledge of
specifically what the plan will and will not pay for will choose
the treatment option recommended by the plan in order to avoid
risking total or partial disallowance of benefits. When United
makes a decision pursuant QCP, it is making a medical
recommendation which -- because of the financial ramifications --
is more likely to be followed.14
14
It is the medical decisionmaking aspect of the
utilization review process that has spawned the literature
assessing the application of malpractice and other negligence-
based doctrines to hold these entities liable for patient
injuries. See Blum, supra, at 199 ("The overriding incentive for
[utilization review] may be cost containment, but the process
itself is triggered by a medical evaluation of a particular case,
25
Although we disagree with United's position that no part of
its actions involves medical decisions, we cannot agree with the
Corcorans that no part of United's actions involves benefit
determinations. In our view, United makes medical decisions as
part and parcel of its mandate to decide what benefits are
available under the Bell plan. As the QCP Booklet concisely puts
it, United decides "what the medical plan will pay for." When
United's actions are viewed from this perspective, it becomes
apparent that the Corcorans are attempting to recover for a tort
allegedly committed in the course of handling a benefit
determination. The nature of the benefit determination is
different than the type of decision that was at issue in Pilot
Life, but it is a benefit determination nonetheless. The
principle of Pilot Life that ERISA pre-empts state-law claims
alleging improper handling of benefit claims is broad enough to
cover the cause of action asserted here.
Moreover, allowing the Corcorans' suit to go forward would
contravene Congress's goals of "ensur[ing] that plans and plan
sponsors would be subject to a uniform body of benefit law" and
"minimiz[ing] the administrative and financial burdens of
complying with conflicting directives among States or between
States and the Federal Government." Ingersoll-Rand Co., 111 S.
an evaluation that requires a clinical judgment.") (footnote
omitted); Tiano, supra, at 80 ("The patient faces conflicting
judgments by two medical professionals: the treating physician
and the utilization review consultant"); Chittenden, supra, at
476 ("negligent implementation of cost-control mechanisms may
affect the medical judgment of the physician or other provider
resulting in physical injury to the patient").
26
Ct. at 484; see also Fort Halifax Packing, 482 U.S. at 9-10.
Thus, statutes that subject plans to inconsistent regulatory
schemes in different states, thereby increasing inefficiency and
potentially causing the plan to respond by reducing benefit
levels, are consistently held pre-empted. See Alessi v.
Raybestos-Manhattan, Inc., 451 U.S. 504, 524 (1981) (striking
down law which prohibited plans from offsetting benefits by
amount of worker compensation payments); Shaw, 463 U.S. at 105
n.25 (striking down law which prohibited plans from
discriminating on basis of pregnancy); FMC Corp., 111 S. Ct. at
408 (striking down law which eliminated plans' right of
subrogation from claimant's tort recovery). But in Ingersoll-
Rand, the Court, in holding pre-empted the Texas common law of
wrongful discharge when applied against an employer who allegedly
discharged an employee to avoid contributing to the employee's
pension plan, made clear that a state common law cause of action
is equally capable of leading to the kind of patchwork scheme of
regulation Congress sought to avoid:
It is foreseeable that state courts, exercising their common
law powers, might develop different substantive standards
applicable to the same employer conduct, requiring the
tailoring of plans and employer conduct to the peculiarities
of the law of each jurisdiction. Such an outcome is
fundamentally at odds with the goal of uniformity that
congress sought to implement.
111 S. Ct. at 484. Similarly, although imposing liability on
United might have the salutary effect of deterring poor quality
27
medical decisions,15 there is a significant risk that state
liability rules would be applied differently to the conduct of
utilization review companies in different states. The cost of
complying with varying substantive standards would increase the
cost of providing utilization review services, thereby increasing
the cost to health benefit plans of including cost containment
features such as the Quality Care Program (or causing them to
eliminate this sort of cost containment program altogether) and
ultimately decreasing the pool of plan funds available to
reimburse participants. See Macaulay, supra, at 105.16
15
See Comment, A Cost Containment Malpractice Defense:
Implications for the Standard of Care and for Indigent Patients,
26 Hous. L. Rev. 1007, 1021 (1989) (by Leslie C. Giordani).
16
We find Independence HMO, Inc. v. Smith, 733 F. Supp.
983 (E.D. Pa. 1990), cited by the Corcorans, distinguishable on
its facts. In Smith, the district court did not find pre-empted
a state court malpractice action brought against an HMO by one of
its members. The plaintiff sought to hold the HMO liable, under
a state-law agency theory, for the alleged negligence of a
surgeon associated with the HMO. The case appears to support the
Corcorans because the plaintiff was attempting to hold an ERISA
entity liable for medical decisions. However, the medical
decisions at issue do not appear to have been made in connection
with a cost containment feature of the plan or any other aspect
of the plan which implicated the management of plan assets, but
were instead made by a doctor in the course of treatment.
We also find Eurine v. Wyatt Cafeterias, No. 3-91-0408-H
(N.D. Tex. Aug. 21, 1991), cited in the Corcorans' reply brief,
irrelevant to this case. In Eurine, an employee of Wyatt
Cafeterias sued after she slipped and fell at work. Wyatt had
opted out of Texas's workers' compensation scheme, but provided
benefits for injured employees pursuant to an ERISA plan. The
court held that a tort suit against the employer for its
negligence in failing to maintain the floor in a safe condition
had nothing to do with the ERISA relationship between the
parties, but instead arose from their distinct employer-employee
relationship.
Finally, to the extent that two other decisions cited by the
28
It may be true, as the Corcorans assert, that Louisiana tort
law places duties on persons who make medical judgments within
the state, and the Louisiana courts may one day recognize that
this duty extends to the medical decisions made by utilization
review companies. But it is equally true that Congress may pre-
empt state-law causes of action which seek to enforce various
duties when it determines that such actions would interfere with
a carefully constructed scheme of federal regulation. See Pilot
Life, 481 U.S. at 48. The acknowledged absence of a remedy under
ERISA's civil enforcement scheme for medical malpractice
committed in connection with a plan benefit determination does
not alter our conclusion. While we are not unmindful of the fact
that our interpretation of the pre-emption clause leaves a gap in
remedies within a statute intended to protect participants in
employee benefit plans, see Shaw, 463 U.S. at 90; Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 113 (1989), the lack of an
ERISA remedy does not affect a pre-emption analysis. Memorial
Hosp., 904 F.2d at 248 & n.16; Lee, 894 F.2d at 757. Congress
perhaps could not have predicted the interjection into the ERISA
"system" of the medical utilization review process, but it
enacted a pre-emption clause so broad and a statute so
comprehensive that it would be incompatible with the language,
Corcorans, Kohn v. Delaware Valley HMO, Inc., No. 91-2745 (E.D.
Pa. Dec. 20, 1991 and Feb. 5, 1992), and Cooney v. South Central
Bell Tel. Co., No. 91-3870 (E.D. La. March 5, 1992), conflict
with our holding, we decline to follow them.
29
structure and purpose of the statute to allow tort suits against
entities so integrally connected with a plan.
We are not persuaded that Sommers Drug, on which the
Corcorans rely heavily, commands a different outcome. In Sommers
Drug, we observed that courts are less likely to find pre-emption
when the state law involves an exercise of traditional state
authority than when the law affects an area not traditionally
regulated by the states. Id. at 1467. The Corcorans contend
that they easily pass this hurdle, as tort law traditionally has
been reserved to the states, but this victory only puts them back
at the starting line again. We went on to say in Sommers Drug
that we were "not convinced" that the traditional or
nontraditional nature of the state law properly bears upon the
initial question whether it is pre-empted by § 514(a), because
the distinction had no support in the statutory language. Id. at
1468. We continue to adhere to this view. As cases such as
Ingersoll-Rand and Christopher illustrate, the fact that states
traditionally have regulated in a particular area has functioned
as no impediment to ERISA pre-emption. See Ingersoll-Rand, 111
S. Ct. at 483 (wrongful discharge action pre-empted);
Christopher, 950 F.2d at 1218 (fraud action pre-empted). ERISA's
pre-emption section itself contains an explicit exemption for
state laws that regulate in at least one area of traditional
state function -- insurance. ERISA § 514(b)(2)(A). There is no
reason to believe that Congress intended implicitly to exempt a
30
whole range of state laws when it showed itself perfectly capable
of carving out specific exemptions.
The second factor identified in Sommers Drug as bearing on
pre-emption -- whether the state law affects relations among
principal ERISA entities -- continues to be relevant in this
circuit, see Memorial Hospital Systems v. Northbrook Life
Insurance Co., 904 F.2d 236, 245, 248-50 (5th Cir. 1990), but it
does not help the Corcorans. In the case before us, of course,
the cause of action affects relations between principal ERISA
entities. Nevertheless, the Corcorans argue, Sommers Drug holds
that the claim will not be pre-empted where the state law is one
of general application and it does not affect relations among the
principal ERISA entities "as such," but in their capacities as
entities in another kind of relationship. They analogize to
Sommers Drug, where we held that a pension plan, acting in its
"non-ERISA" capacity as a shareholder in a company, could invoke
the state common law of corporate fiduciary duty against an
officer and director of the company and a plan fiduciary to
redress an alleged breach of fiduciary duty. 793 F.2d at 1468-
70. The short answer to this argument is that the cause of
action in this case is not between parties acting in the kind of
non-ERISA context we found in Sommers Drug. Although the claims
in Sommers Drug nominally affected relations between ERISA
entities, the lawsuit had nothing to do with the plan. Here,
however, the central purpose of the lawsuit is to hold United
liable for actions it took in connection with its duties under
31
the plan. Sommers Drug does not mitigate the pre-emptive force
of ERISA § 514(a).
IV. EXTRACONTRACTUAL DAMAGES
The Corcorans argue in the alternative that the damages they
seek are available as "other appropriate equitable relief" under
ERISA § 502(a)(3). That section provides:
(a) A civil action may be brought --
. . .
(3) by a participant, beneficiary, or fiduciary (A) to
enjoin any act or practice which violates any provision
of this subchapter or the terms of the plan, or (B) to
obtain other appropriate equitable relief (i) to
redress such violations or (ii) to enforce any
provisions of this subchapter or the terms of the plan;
. . .
Although the Corcorans did not assert a cause of action under §
502(a)(3) in their original state court complaint, they asked the
district court in their motion for reconsideration to award
damages pursuant to this section. The defendants agreed at oral
argument that the issue was properly raised and preserved for
appeal, and we proceed to consider it.
Section 502(a)(3) provides for relief apart from an award of
benefits due under the terms of a plan. When a beneficiary
simply wants what was supposed to have been distributed under the
plan, the appropriate remedy is § 502(a)(1)(B). See, e.g.,
Cathey v. Dow Chemical Co. Medical Care Program, 907 F.2d 554,
555 (5th Cir. 1990), cert. denied, 111 S. Ct. 964 (1991).
Damages that would give a beneficiary more than he or she is
32
entitled to receive under the strict terms of the plan are
typically termed "extracontractual." Section 502(a)(3) by its
terms permits beneficiaries to obtain "other appropriate
equitable relief" to redress (1) a violation of the substantive
provisions of ERISA or (2) a violation of the terms of the plan.
Although the Corcorans have neither identified which of these two
types of violations they seek to redress nor directed us to the
particular section of the Plan or ERISA which they claim was
violated, we need not determine this in order to resolve the
issue before us. As outlined below, we find that the particular
damages the Corcorans seek -- money for emotional injuries --
would not be an available form of damages under the trust and
contract law principles which, the Corcorans urge, should guide
our interpretation of ERISA's remedial scheme. Thus, we hold
that even under the interpretation of § 502(a)(3) urged by the
Corcorans, they may not recover.
The question whether extracontractual or punitive damages
are available to a beneficiary under § 502(a)(3) has been left
open by the Supreme Court ever since Massachusetts Mutual Life
Insurance Co. v. Russell, 473 U.S. 134 (1985). In Russell, the
beneficiary of a plan sought compensatory and punitive damages
under ERISA §§ 502(a)(2) and 409(a)17 for the improper processing
of her claim for disability benefits. Id. at 136, 138. The
Court rejected the argument that such damages were available
17
Section 502(a)(2) permits "the Secretary. . .a
participant, beneficiary or fiduciary" to sue for appropriate
relief under § 409.
33
under § 409(a), holding that § 409(a) (1) authorized only actions
on behalf of the plan as a whole, not individual beneficiaries,
for losses to the plan; and (2) provided no implied cause of
action for extracontractual damages caused by improper claims
processing. Russell, 473 U.S. at 140, 147. Because the
beneficiary expressly disclaimed reliance on § 502(a)(3),
however, the Court had no occasion to consider whether the
damages the plaintiff sought were available under that section.
Id. at 139 n.5.
In a concurrence joined by three other Justices, Justice
Brennan emphasized that he read the Court's reasoning to apply
only to § 409(a), and that the legislative history of ERISA
suggested that courts should develop a federal common law in
fashioning "other appropriate equitable relief" under §
502(a)(3). Id. at 155-56 (Brennan, J., concurring in the
judgment). Justice Brennan argued that Congress "intended to
engraft trust-law principles onto the enforcement scheme" of
ERISA, including the principle that courts should give to
beneficiaries of a trust the remedies necessary for the
protection of their interests. Id. at 156-57. Consequently, he
encouraged courts faced with claims for extracontractual damages
first to determine to what extent state and federal trust and
pension law provide for the recovery of damages beyond any
benefits that have been withheld, and second to consider whether
extracontractual relief would conflict with ERISA in any way.
Id. at 157-58. With respect to the first inquiry he indicated
34
that any deficiency in trust law in the availability of make-
whole remedies should not deter courts from authorizing such
remedies under § 502(a)(3), for Congress intended in ERISA to
strengthen the requirements of the common law of trusts as they
relate to employee benefit plans. Id. at 157 n.17. Finally,
Justice Brennan suggested, courts should keep in mind that the
purpose of ERISA is the "enforcement of strict fiduciary
standards of care in the administration of all aspects of pension
plans and promotion of the best interests of participants and
beneficiaries." Id. at 158.
The Corcorans urge us to apply Justice Brennan's concurrence
and hold that the damages they seek amount to "other appropriate
equitable relief." The defendants, on the other hand, urge us to
interpret "other appropriate equitable relief" to include only
declaratory and injunctive relief. Under the defendants' view of
§ 502(a)(3), which has been adopted by a number of circuits,18 no
money damages would be awardable and our discussion would be at
an end. However, even assuming that Justice Brennan's view of
"other appropriate equitable relief" as potentially encompassing
make-whole relief is a proper construction of that section, the
damages the Corcorans seek would not be available.
18
Drinkwater v. Metropolitan Life Ins. Co., 846 F.2d 821
(1st Cir.), cert. denied, 488 U.S. 909 (1988); Harsch v.
Eisenberg, 956 F.2d 651 (7th Cir. 1992), petition for cert.
filed, 60 U.S.L.W. 3816 (U.S. May 11, 1992) (No. 91-1835); Novak
v. Andersen Corp., No. 91-1957 (8th Cir. April 9, 1992); Sokol v.
Bernstein, 803 F.2d 532 (9th Cir. 1986); Bishop v. Osborn
Transp., Inc., 838 F.2d 1173 (11th Cir.), cert. denied, 488 U.S.
832 (1988).
35
The characterization of equitable relief as encompassing
damages necessary to make the plaintiff whole may well be
consistent with the trust law principles that were incorporated
into ERISA and which guide its interpretation. See Firestone,
489 U.S. at 110-11 (because ERISA is largely based on trust law,
those principles guide interpretation); H.R. Rep. No. 533, 93d
Cong., 1st Sess. (1973), reprinted in 1974 U.S. Code Cong. &
Admin. News 4639; S. Rep. No. 127, 93d Cong., 1st Sess.,
reprinted in 1974 U.S. Code Cong. & Admin. News 4838 (indicating
intent to incorporate the law of trusts into ERISA). Section 205
of the Restatement (Second) of Trusts allows for monetary damages
as make-whole relief, providing that a beneficiary has "the
option of pursuing a remedy which will put him in the position in
which he was before the trustee committed the breach of trust" or
"of pursuing a remedy which will put him in the position in which
he would have been if the trustee had not committed the breach of
trust." In the context of the breach of a trustee's investment
duties, "the general rule [is] that the object of damages is to
make the injured party whole, that is, to put him in the same
condition in which he would have been if the wrong had not been
committed. . . . Both direct and consequential damages may be
awarded." G. Bogert & G. Bogert, The Law of Trusts and Trustees
§ 701, at 198 (2d ed. 1982). See also Estate of Talbot, 141 Cal.
App. 309, 296 P.2d 848 (1956); In re Cook's Will, 136 N.J. Eq.
123, 40 A.2d 805 (1945).
36
This view may also be consistent with the common law
contract doctrine which assists us in interpreting ERISA. As the
Court observed in Russell, ERISA was enacted "to protect
contractually defined benefits." 473 U.S. at 148. Prior to the
enactment of ERISA, the rights and obligations of pension
beneficiaries and trustees were governed not only by trust
principles, but in large part by contract law. Firestone, 489
U.S. at 112-13; see also Rochester Corp. v. Rochester, 450 F.2d
118, 120-21 (4th Cir. 1971); Audio Fidelity Corp. v. Pension
Benefit Guaranty Corp., 624 F.2d 513, 517 (4th Cir. 1980); Hoefel
v. Atlas Tack Corp., 581 F.2d 1, 4-7 (1st Cir. 1978). It is
well-established that contract law enables an aggrieved party to
recover such damages as would place him in the position he would
have occupied had the contract been performed, Restatement
(Second) of Contracts § 347 & comment a (1981), including those
damages that could reasonably have been foreseen to flow from the
breach. Id. § 351; see Warren v. Society Nat. Bank, 905 F.2d
975, 980 (6th Cir. 1990) (§ 502(a)(3) allows for recovery of
beneficiaries' increased tax liability after plan administrators
failed to follow instructions regarding distribution), cert.
denied, 111 S. Ct. 2556 (1991).
However, the Corcorans seek a form of extracontractual
damages that is never, as far as we can tell, awarded for breach
of trust duties, and is granted only in the most limited of
circumstances for a breach of contract. Certainly, patients and
their physicians can enter into contracts and physicians may
37
incur liability for breach. The cases are uniform, however, in
holding that there can be no recovery against a physician on a
contractual theory, as opposed to the usual recovery on a tort
theory of medical negligence, unless there is an express
agreement to perform a particular service or to achieve a
specific cure. E.g., Bobrick v. Bravstein, 497 N.Y.S.2d 749,
751, 116 A.D.2d 682 (App. Div. 1986); Cirafici v. Goffen, 85 Ill.
App. 3d 1102, 407 N.E.2d 633, 635, 41 Ill. Dec. 135 (1980);
Depenbrok v. Kaiser Foundation Health Plan, Inc., 79 Cal. App. 3d
167, 144 Cal. Rptr. 724, 726 (1978). In a few cases, courts,
recognizing a distinction between commercial contracts and
contracts for the performance of personal services, have found
inapplicable the general rule that emotional distress damages are
not available in contract actions19 and have allowed damages for
emotional injuries within the contemplation of the parties.
Stewart v. Rudner, 349 Mich. 459, 84 N.W.2d 816, 824 (1957) ("the
parties may reasonably be said to have contracted with reference
to the payment of [emotional distress] damages therefor in event
of breach"); Sullivan v. O'Connor, 363 Mass. 579, 296 N.E.2d 183,
188-89 (1973) (although mental anguish damages are not available
for breach of a commercial contract, psychological injury may be
contemplated in a contract for an operation) (citing Stewart).
The Stewart rule, however, has not been widely adopted, and the
19
See J. Calamari & J. Perillo, The Law of Contracts §§
14-3, 14-5(b), at 595-96 (3d ed. 1987); 11 W. Jaeger, Williston
on Contracts § 1341, at 214 (3d ed. 1968); 5 Corbin on Contracts
§ 1076, at 426 (2d ed. 1964).
38
Michigan courts recently have characterized its holding
concerning damages as applying only to contracts involving deep,
personal relationships, Chrum v. Charles Heating & Cooling, Inc.,
121 Mich. App. 17, 327 N.W.2d 568, 570 (1982), and contracts to
perform very specific acts. Penner v. Seaway Hosp., 169 Mich.
App. 502, 427 N.W.2d 584, 587 (1988).
The strictness with which courts have viewed doctor-patient
contracts thwarts the Corcorans' claim that emotional distress
damages would be available here under a make-whole interpretation
of § 502(a)(3). The existence of a true doctor-patient
relationship between Mrs. Corcoran and United which could support
a contractual theory of recovery is dubious at best. Related to
this problem is the lack of an express agreement for a particular
service or for a particular result that serves as a prerequisite
to a contract-based recovery. Even assuming that United's
booklet could be considered an aspect of the "plan," breach of
which would give rise to a cause of action under § 502(a)(3), it
cannot be construed as making an agreement to perform any
particular medical procedure or to arrive at any result. At most
it makes promises to act in accordance with accepted standards of
medical care. But courts have not recognized these sorts of
promises as creating contractual duties between physicians and
patients. Cirafici, 407 N.E.2d at 635-36 (failure to perform
with requisite skill and care leads to action for negligence, not
breach of contract); Awkerman v. Tri-County Orthopedic Group,
P.C., 143 Mich. App. 722, 373 N.W.2d 204, 206 (1985) (physician's
39
breach of express or implied promise to act in accordance with
standard of care not actionable in contract). Indeed, the
Massachusetts Supreme Judicial Court has emphasized that in an
action seeking damages under Sullivan, one of the leading cases
allowing mental distress damages for a breached medical contract,
recovery is not for the doctor's failure to live up to the
standard of care but solely for a failure to perform the specific
promise contained in the agreement. Salem Orthopedic Surgeons,
Inc. v. Quinn, 377 Mass. 514, 386 N.E.2d 1268, 1271 (1979). See
also Murray v. University of Pennsylvania Hosp., 490 A.2d 839,
841 (Pa. Super. 1985) (action for breach of contract to achieve
particular result may lie even if doctor has exercised highest
degree of skill and care).
The fact that courts regularly view doctors and their
patients as standing in a fiduciary relationship, e.g., Black v.
Littlejohn, 312 N.C. 626, 325 S.E.2d 469, 482 (1985);
Liebergesell v. Evans, 93 Wash. 2d 881, 613 P.2d 1170, 1176
(1980); State ex rel. Stufflebaum v. Appelquist, 694 S.W.2d 882,
885 (Mo. App. 1985), also is of no avail. Although a plan
beneficiary certainly may sue under § 502(a)(3) for a breach of
the fiduciary duties set forth in § 404, the lack of a true
doctor-patient relationship between Mrs. Corcoran and United
undermines this ground of recovery. In any event, courts have
not held that patients may sue their doctors under any
independent "breach of fiduciary duty" theory. The remedies are
limited to contract actions (where an express agreement has been
40
made) and, in the vast majority of cases, tort actions for
negligence. Assuming without deciding, therefore, that §
502(a)(3) permits the award of make-whole relief as "other
appropriate equitable relief," we hold that the emotional
distress and mental anguish damages sought here by the Corcorans
are not recoverable.
* * *
The result ERISA compels us to reach means that the
Corcorans have no remedy, state or federal, for what may have
been a serious mistake. This is troubling for several reasons.
First, it eliminates an important check on the thousands of
medical decisions routinely made in the burgeoning utilization
review system. With liability rules generally inapplicable,
there is theoretically less deterrence of substandard medical
decisionmaking. Moreover, if the cost of compliance with a
standard of care (reflected either in the cost of prevention or
the cost of paying judgments) need not be factored into
utilization review companies' cost of doing business, bad medical
judgments will end up being cost-free to the plans that rely on
these companies to contain medical costs.20 ERISA plans, in
20
We note that, were the Corcorans able to recover against
United under state law, the contract between Bell and United
indicates that United would bear the cost. However, the general
application of a liability system to utilization review companies
would ultimately result in increased costs to plans such as the
Bell plan as it became more expensive for companies such as
United to do business.
41
turn, will have one less incentive to seek out the companies that
can deliver both high quality services and reasonable prices.
Second, in any plan benefit determination, there is always
some tension between the interest of the beneficiary in obtaining
quality medical care and the interest of the plan in preserving
the pool of funds available to compensate all beneficiaries. In
a prospective review context, with its greatly increased ability
to deter the beneficiary (correctly or not) from embarking on a
course of treatment recommended by the beneficiary's physician,
the tension between interest of the beneficiary and that of the
plan is exacerbated. A system which would compensate the
beneficiary who changes course based upon a wrong call for the
costs of that call might ease the tension between the conflicting
interests of the beneficiary and the plan.
Finally, cost containment features such as the one at issue
in this case did not exist when Congress passed ERISA. While we
are confident that the result we have reached is faithful to
Congress's intent neither to allow state-law causes of action
that relate to employee benefit plans nor to provide
beneficiaries in the Corcorans' position with a remedy under
ERISA, the world of employee benefit plans has hardly remained
static since 1974. Fundamental changes such as the widespread
institution of utilization review would seem to warrant a
reevaluation of ERISA so that it can continue to serve its noble
purpose of safeguarding the interests of employees. Our system,
of course, allocates this task to Congress, not the courts, and
42
we acknowledge our role today by interpreting ERISA in a manner
consistent with the expressed intentions of its creators.
V. CONCLUSION
For all the foregoing reasons, we find that ERISA pre-empts
the Corcorans' tort claim against United and that the Corcorans
may not recover damages for emotional distress under § 502(a)(3)
of ERISA. Accordingly, the judgment of the district court is
AFFIRMED.
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