Poffenbarger et al v. Hawaiian Management Alliance Association et al

Filing 24

ORDER DENYING PLAINTIFFS' MOTION TO REMAND TO STATE COURT 13 . Signed by JUDGE LESLIE E. KOBAYASHI on 8/31/2012. ~ Order follows hearing held 8/20/2012. Minutes: doc no. 23 ~ (afc) CERTIFIC ATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
)
)
)
Plaintiffs,
)
)
vs.
)
HAWAII MANAGEMENT ALLIANCE
)
)
ASSOCIATION, dba HMAA, a
Hawaii Nonprofit Corporation; )
)
HAWAII-WESTERN MANAGEMENT
)
GROUP, INC., dba HWMG, a
)
Foreign Profit Corporation;
JOHN DOES 1-10; JANE DOES 1- )
)
10; DOE PARTNERSHIPS 1-10;
)
DOE CORPORATIONS 1-10; and
DOE GOVERNMENTAL ENTITIES 1- )
)
10,
)
)
Defendants.
_____________________________ )
ROBERT POFFENBARGER and
CLAREEN POFFENBARGER,

CIVIL NO. 12-00172 LEK-KSC

ORDER DENYING PLAINTIFFS’ MOTION TO REMAND TO STATE COURT
Before the Court is Plaintiffs Robert Poffenbarger’s
and Clareen Poffenbarger’s (“Plaintiffs”) Motion to Remand to
State Court (“Motion”), filed on April 27, 2012.

Defendants

Hawaii Management Alliance Association, doing business as HMAA, a
Hawaii Nonprofit Corporation (“HMAA”), and Hawaii-Western
Management Group, Inc., doing business as HWMG, a Foreign Profit
Corporation (“HWMG”, collectively “Defendants”), filed their
memorandum in opposition on July 27, 2012, and Plaintiffs filed
their reply on August 6, 2012.
on August 20, 2012.

This matter came on for hearing

Appearing on behalf of Plaintiffs was

Mark Reck, Esq., and appearing on behalf of Defendants was

Kenneth Mansfield, Esq.

After careful consideration of the

Motion, supporting and opposing memoranda, and the arguments of
counsel, Plaintiffs’ Motion is HEREBY DENIED for the reasons set
forth below.
BACKGROUND
Plaintiffs filed their Complaint in the instant action
in state court on March 6, 2012.

[Notice of Removal, filed

3/29/12, Exh. A (dkt. no. 1-2) at 5-18.]

According to the

Complaint, on December 1, 2010, Clareen Poffenbarger submitted an
Enrollment Application for healthcare coverage through HMAA.

Her

employer, Jaro Baranik, doing business as La Boheme (“Baranik”)
submitted the application to HMAA.

HMAA issued Clareen

Poffenbarger a member identification card for coverage effective
January 1, 2011 pursuant to an employee health and welfare
benefit plan (“the Plan”).

Clareen Poffenbarger maintained her

employment and paid her premiums, as required to maintain her
coverage.

[Complaint at ¶¶ 9-14.]
On February 21, 2011, Clareen Poffenbarger was

diagnosed with a brain tumor.

She received treatment at Maui

Memorial Medical Clinic (“MMMC”) from February 21, 2011 to
March 6, 2011, Stanford Medical Center (“Stanford”) from March 7,
2011 to March 30, 2011, and Santa Clara Valley Medical Center
(“SCVMC”) from March 30, 2011 to June 1, 2011.

On June 1, 2011,

Clareen Poffenbarger returned home to Maui, where she received

2

home health care through Hale Makua.

HMAA authorized all of her

treatment at MMMC, Stanford, and SCVMC, as well as her treatment
through Hale Makua until June 30, 2011.

[Id. at ¶¶ 16-21, 24-27,

29-30.]
During Clareen Poffenbarger’s treatment at Stanford,
HMAA began a review of her eligibility.

HMAA sent Clareen

Poffenbarger a letter dated May 16, 2011 verifying her coverage
through June 30, 2011.

[Id. at ¶¶ 22-23.]

On June 3, 2011, HMAA

issued her a Certificate of Group Coverage stating that her
coverage began on January 1, 2011 and would end on June 30, 2011.
[Id. at ¶ 28.]
On June 23, 2011, HMAA issued a letter rescinding
Clareen Poffenbarger’s coverage effective January 1, 2011.
HWMG’s Research & Investigation and Subrogation Supervisor signed
the letter as HMAA’s Third Party Administrator.

Plaintiffs

submitted a timely appeal to HMAA on September 2, 2011.

HMAA

issued a letter, dated October 19, 2011, upholding the
rescission.

HWMG’s Customer Service Administrator signed the

letter as HMAA’s Third Party Administrator.

[Id. at ¶¶ 31-35.]

The Complaint alleges the following claims: insurance
bad faith against HMAA (“Count I”); violations of Hawai`i Revised
Statutes Chapter 480 by HMAA and HWMG (“Count II”); breach of
fiduciary duty by HMAA (“Count III”); breach of contract by HMAA
and HWMG (“Count IV”); negligent misrepresentation by HMAA

3

(“Count V”); negligent infliction of emotional distress (“NIED”)
against HWMG (“Count V”);1 NIED against HMAA (“Count VI”); and a
claim based on HMAA’s vicarious liability (“Count VII”).

The

Complaint seeks: general and special damages; treble damages
pursuant to Haw. Rev. Stat. § 480-13; punitive damages; fees and
costs; and any other legal and/or equitable relief the Court
deems appropriate.
Defendants filed their Notice of Removal on March 29,
2012, based on federal question jurisdiction.

Defendants assert

that Plaintiffs’ claims arise under the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.
I.

Motion
In the instant Motion, Plaintiffs argue that all of

their claims arise under state common law or state statutes and
that ERISA does not preempt their claims.

Plaintiffs argue that,

because Defendants unilaterally rescinded the insurance contract,
Defendants are estopped from claiming that the case involves an
insurance contract subject to ERISA.
In addition, Plaintiffs argue that their claims are
exempt from preemption pursuant to 29 U.S.C. § 1144(b)(5) because
Clareen Poffenbarger obtained the Plan pursuant to the Hawaii

1

Plaintiffs’ Complaint contains two claims identified as
Count V.
4

Prepaid Health Care Act (“HPHCA”).2

Plaintiffs argue that,

because Clareen Poffenbarger was entitled to the Plan pursuant to
the HPHCA, and this right is the basis of Plaintiffs’ action,
ERISA preemption does not apply.
Plaintiffs acknowledge that the Hawai`i Supreme Court
has recognized that the exemption does not apply to all claims
related to employee benefit plans which employers maintain to
comply with the HPHCA.

[Mem. in Supp. of Motion at 9 (citing

Garcia v. Kaiser Found. Hosps., 90 Hawai`i 425, 435, 978 P.2d
863, 873 (1999)).]

Plaintiffs, however, argue that Garcia is

distinguishable because that case involved an action for monetary
damages for the denial of benefits.

Plaintiffs contend that the

issue in their case is whether Clareen Poffenbarger was entitled
to the Plan in the first instance.
Plaintiffs also argue that, even pursuant to Ninth
Circuit case law, ERISA does not preempt their claims.
Plaintiffs argue that the Ninth Circuit uses a “relationship
test” to determine whether ERISA preemption applies.

[Id. at 10

(citing Geweke Ford v. St. Joseph’s Omni Preferred Care Inc., 130
F.3d 1355 (9th Cir. 1997)).]

Plaintiffs assert that state laws

which encroach upon relationships that ERISA regulates are
preempted, but ERISA does not preempt claims based upon
relationships in which the plan operates as any other commercial

2

Hawai`i Revised Statutes Chapter 393 governs the HPHCA.
5

entity.

[Id. at 10-11.]

Plaintiffs argue that their claims are

based upon contract and tort case law, as well as Chapter 480,
and these are laws of general application which do not
necessarily affect ERISA relationships.

Plaintiffs emphasize

that the merits of their claims will not require a determination
of the contents, administration, creation, operation, or failure
of the Plan.
Finally, Plaintiffs argue that their claims are outside
of the scope of 29 U.S.C. § 1132.

Plaintiffs are not seeking to

recover Clareen Poffenbarger’s benefits or rights under the Plan,
nor are they seeking an injunction or other equitable relief to
redress ERISA violations.

Plaintiffs argue that the United

States Supreme Court has held that § 1132(a)(3)(B) only
authorizes claims for typical equitable relief, not claims that
essentially seek compensatory damages.

[Id. at 15.]

Plaintiffs

seek compensatory remedies and therefore ERISA preemption does
not apply.
Plaintiffs urge the Court to grant the Motion and
remand the case to the state court.
II.

Memorandum in Opposition
In their memorandum in opposition, Defendants state

that Clareen Poffenbarger did not disclose any conditions or
symptoms in her Enrollment Application.

[Mem. in Opp., Decl. of

Paul Kaiser (“Kaiser Decl.”), Exh. A (Clareen Poffenbarger’s

6

Enrollment Application).3]

HMAA states that, after its

investigation, it rescinded Clareen Poffenbarger’s coverage
because she failed to disclose symptoms related to her later
brain tumor diagnosis.

Defendants argue that all of Plaintiffs’

claims arise out of the allegedly wrongful rescission of the
Plan, and ERISA preempts all of Plaintiffs’ state law claims.
[Mem. in Opp. at 2-3.]
Defendants argue that, although Plaintiffs have only
pled state law claims, this case is subject to an exception to
the well-pleaded complaint rule because of the ERISA enforcement
scheme.

Defendants argue that the Plan is clearly subject to

ERISA because Clareen Poffenbarger’s employer sponsored the Plan,
provided a statement of rights under ERISA, and provided for an
appeals process governed by ERISA.

[Id. at 5-6 (citing Kaiser

Decl., Exh. B (Group Services Agreement between Baranik and
HMAA)).]

Defendants argue that Plaintiffs have not provided any

case law supporting Plaintiffs’ argument that the rescission of
Clareen Poffenbarger’s Plan renders ERISA inapplicable.

Further,

the right of rescission arises under ERISA where the parties
entered into an insurance contract based on false representations
about health status, and federal courts have asserted

3

Defendants’ unredacted copy of Clareen Poffenbarger’s
Enrollment Application attached to the memorandum in opposition
is sealed. Defendants filed a redacted version on July 27, 2012.
[Dkt. no. 20.]
7

jurisdiction over claims that the insurer wrongfully rescinded
plans issued based on those representations.

[Id. at 6-9 (some

citations omitted) (citing Sec’y Life Ins. Co. of Am. v. Meyling,
146 F.3d 1184, 1191-93 (9th Cir. 1998) (per curiam); Werdehausen
v. Benicorp Ins. Co., 487 F.3d 660, 663 (8th Cir. 2007)).]
Defendants note that Werdehausen recognized that retroactive
rescission for innocent material non-disclosures was permissible,
but is not required, and the insurer is still subject to ERISA’s
fiduciary obligations.

The Eighth Circuit remanded for a

determination whether the insurer should have adjusted the
premium instead of rescinding the insurance contract.
(citing Werdehausen, 487 F.3d at 665-67).]

[Id. at 9

Defendants argue that

Plaintiffs’ claims all arise from the rescission of the Plan, and
Plaintiffs are actually seeking the right to recover benefits
under the Plan.

Thus, their claims are preempted by ERISA.

Defendants next argue that the Supreme Court’s complete
preemption doctrine applies because Plaintiffs could have brought
their claims under ERISA § 502(a)(1)(B).

Clareen Poffenbarger

was a participant in an ERISA plan, and Plaintiffs’ claims arise
from an allegedly unlawful rescission and denial of benefits.
[Id. at 10-11 (citing Aetna Health, Inc. v. Davila, 542 U.S. 200,
211 (2004)).]

Further, all of Plaintiffs’ claims relate to an

ERISA employee benefit plan, and Plaintiffs seek remedies that
are not authorized under ERISA’s civil enforcement scheme.

8

[Id.

at 16.]

Defendants also argue that the relationship test

Plaintiffs rely upon may not be applicable after Davila.

Even if

the relationship test is still applicable, Defendants contend
that Geweke is distinguishable on its facts.

[Id. at 16 n.3.]

Defendants argue that each of Plaintiffs’ claims either
has an impermissible relationship with an ERISA plan or conflicts
with ERISA’s civil enforcement scheme.

Insurance bad faith seeks

general and punitive damages, which are not available under
ERISA.

Further, insurance bad faith has its roots in general

contract law and is therefore not aimed directly at entities
engaged in the insurance business.

[Id. at 17-18.]

Although

Count I relies on several Hawai`i statutes, they are either
irrelevant or are not directed specifically at entities in the
insurance business.

In addition, Plaintiffs’ Chapter 480 claim

is completely preempted because Chapter 480 is not directed at
entities in the insurance business, and it provides for remedies
not allowed under ERISA.

Plaintiffs’ tort and breach of contract

claims are also preempted because tort and contract law provide
for remedies not allowed under ERISA.

[Id. at 19-20.]

Finally,

Defendants argue that Plaintiffs’ Complaint does not rely on the
HPHCA.

Moreover, the HPHCA does not provide for a private right

of enforcement, and the Hawai`i Supreme Court has held that the
HPHCA does not prevent the application of ERISA preemption.

[Id.

at 21 (citing Garcia v. Kaiser Foundation Hospitals, 90 Hawai`i

9

425, 433, 978 P.2d 863, 871 (1999)).]
Defendants therefore urge the Court to deny the Motion.
III. Reply
In their reply, Plaintiffs argue that their claims do
not have a connection with or a reference to an ERISA plan.

They

emphasize that their claims do not require an interpretation of
the Plan, nor do their claims seek payment or reinstatement of
benefits.

Plaintiffs assert that an award of damages will not

affect Plaintiffs’ relationship with the Plan.
Plaintiffs further argue that Davila does not apply
because Defendants owed Plaintiffs a duty of to provide a benefit
plan mandated by Hawai`i law.

The cancellation of the Plan

violated a duty independent of ERISA.

Further, insofar as

Plaintiffs seek monetary damages that are unavailable under
ERISA, ERISA does not preempt their claims.

[Reply at 6.]

STANDARD
Defendants removed the instant case pursuant to 28
U.S.C. §§ 1441 and 1446.

[Notice of Removal at 3-4.]

Section

1441(a) provides, in pertinent part:
(a) Generally.--Except as otherwise expressly
provided by Act of Congress, any civil action
brought in a State court of which the district
courts of the United States have original
jurisdiction, may be removed by the defendant or
the defendants, to the district court of the
United States for the district and division
embracing the place where such action is pending.
. . . .
10

(c) Joinder of Federal law claims and State
law claims.--(1) If a civil action includes-(A) a claim arising under the
Constitution, laws, or treaties of the
United States (within the meaning of
section 1331 of this title), and
(B) a claim not within the original
or supplemental jurisdiction of the
district court or a claim that has been
made nonremovable by statute, the entire
action may be removed if the action
would be removable without the inclusion
of the claim described in subparagraph
(B).
(2) Upon removal of an action described
in paragraph (1), the district court shall
sever from the action all claims described in
paragraph (1)(B) and shall remand the severed
claims to the State court from which the
action was removed. Only defendants against
whom a claim described in paragraph (1)(A)
has been asserted are required to join in or
consent to the removal under paragraph (1).
28 U.S.C. § 1441.

Section 1441 is strictly construed against

removal and courts resolve any doubts about the propriety of
removal in favor of remanding the case to state court.

See

Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir.
2006).

The party seeking to remove the case bears the burden of

establishing the existence of federal jurisdiction.

See

California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838
(9th Cir. 2004).
DISCUSSION
Plaintiffs’ Complaint does not expressly allege any
federal claims.

Generally, the well-pleaded complaint rule would
11

preclude federal jurisdiction such a case.
Federal courts have original jurisdiction over
“all civil actions arising under the Constitution,
laws, or treaties of the United States.” 28
U.S.C. § 1331. “For a case to ‘arise under’
federal law, a plaintiff’s well-pleaded complaint
must establish either (1) that federal law creates
the cause of action or (2) that the plaintiff’s
asserted right to relief depends on the resolution
of a substantial question of federal law.”
Peabody Coal [Co. v. Navajo Nation], 373 F.3d
[945,] 949 [(9th Cir. 2004)] (citing Franchise Tax
Bd. v. Constr. Laborers Vacation Trust, 463 U.S.
1, 27–28, 103 S. Ct. 2841, 77 L. Ed. 2d 420
(1983)). Federal jurisdiction cannot hinge upon
defenses or counterclaims, whether actual or
anticipated. Vaden v. Discover Bank, 556 U.S. 49,
129 S. Ct. 1262, 1272, 173 L. Ed. 2d 206 (2009).
K2 Am. Corp. v. Roland Oil & Gas, LLC, 653 F.3d 1024, 1029 (9th
Cir. 2011).

“One exception to the statutory ‘well-pleaded

complaint’ rule is when Congress ‘so completely pre-empt[s] a
particular area that any civil complaint raising this select
group of claims is necessarily federal in character.’”

Proctor

v. Vishay Intertechnology Inc., 584 F.3d 1208, 1219 (9th Cir.
2009) (some citations omitted) (quoting Metro. Life Ins. Co. v.
Taylor, 481 U.S. 58, 63–64, 107 S. Ct. 1542 (1987)).
Defendants assert that there is federal question
jurisdiction over the instant case because ERISA preempts all of
Plaintiffs’ claims.

The Ninth Circuit has stated:

“There are two strands of ERISA preemption:
(1) ‘express’ preemption under ERISA § 514(a), 29
U.S.C. § 1144(a); and (2) preemption due to a
‘conflict’ with ERISA’s exclusive remedial scheme
set forth in [ERISA § 502(a),] 29 U.S.C.
§ 1132(a).” Paulsen v. CNF Inc., 559 F.3d 1061,
12

1081 (9th Cir. 2009) (citing Cleghorn v. Blue
Shield of Cal., 408 F.3d 1222, 1225 (9th Cir.
2005)), cert. denied, ––– U.S. ––––, 130 S. Ct.
1053, 175 L. Ed. 2d 882 (2010). [The federal
Health Insurance Portability and Accountability
Act (“HIPAA”)] contains an additional express
preemption provision relevant here: ERISA
§ 731(a), 29 U.S.C. § 1191(a), which is described
in greater detail below.
All of these preemption provisions defeat
state-law causes of action on the merits. See,
e.g., Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
57, 107 S. Ct. 1549, 95 L. Ed. 2d 39 (1987)
(§ 514(a) preemption); Cleghorn, 408 F.3d at 1227
(§ 502(a) preemption). Conflict preemption under
ERISA § 502(a), however, also confers federal
subject matter jurisdiction for claims that
nominally arise under state law. See, e.g., Marin
Gen. [Hosp. v. Modesto & Empire Traction Co.], 581
F.3d [941,] 945 [(9th Cir. 2009)]. Ordinarily,
federal question jurisdiction does not lie where a
defendant contends that a state-law claim is
preempted by federal law. Aetna Health Inc. v.
Davila, 542 U.S. 200, 207, 124 S. Ct. 2488, 159 L.
Ed. 2d 312 (2004); Marin Gen., 581 F.3d at 945.
But state-law claims may be removed to federal
court if the “complete preemption” doctrine
applies. Marin Gen., 581 F.3d at 945; see also
Davila, 542 U.S. at 207–08, 124 S. Ct. 2488.
Relevant to this case, ERISA § 502(a) “‘set[s]
forth a comprehensive civil enforcement scheme’”
that completely preempts state-law “‘causes of
action within the scope of th[es]e civil
enforcement provisions. . . .’” Davila, 542 U.S.
at 208–09, 124 S. Ct. 2488 (quoting Metro. Life,
481 U.S. at 66, 107 S. Ct. 1542; Pilot Life, 481
U.S. at 54, 107 S. Ct. 1549); see also Marin Gen.,
581 F.3d at 945.
Following Davila, we have distilled a
two-part test for determining whether a state-law
claim is completely preempted by ERISA § 502(a):
“a state-law cause of action is completely
preempted if (1) ‘an individual, at some point in
time, could have brought the claim under ERISA
§ 502(a)(1)(B),’ and (2) ‘where there is no other
independent legal duty that is implicated by a
13

defendant’s actions.’” Marin Gen., 581 F.3d at
946 (alteration omitted) (quoting Davila, 542 U.S.
at 210, 124 S. Ct. 2488). Because this “two-prong
test . . . is in the conjunctive[,] [a] state-law
cause of action is preempted by § 502(a)(1)(B)
only if both prongs of the test are satisfied.”
Id. at 947; see also Montefiore Med. Ctr. v.
Teamsters Local 272, 642 F.3d 321, 328 (2d Cir.
2011) (noting that Davila test is conjunctive).
Both Davila and Marin General Hospital discussed
complete preemption by reference to § 502(a)(1)(B)
but not the other subparts of § 502(a). The
complete preemption doctrine applies to the other
subparts of § 502(a) as well. See Metro. Life,
481 U.S. at 66, 107 S. Ct. 1542 (“Congress has
clearly manifested an intent to make causes of
action within the scope of the civil enforcement
provisions of § 502(a) removable to federal
court.”); Sorosky v. Burroughs Corp., 826 F.2d
794, 799 (9th Cir. 1987) (holding that complete
preemption “is applicable to the section 502(a)(3)
claims alleged in this case”).
Express preemption under ERISA § 514 is also
governed in relevant part by a two-prong test.
Under § 514(a), ERISA broadly preempts “any and
all State laws insofar as they may now or
hereafter relate to any [covered] employee benefit
plan . . . .” 29 U.S.C. § 1144(a). But this
broad preemption provision is tempered by a
savings clause in § 514(b), which spares “any law
of any State which regulates insurance, banking,
or securities.” Id. § 1144(b)(2)(A). “To fall
under the savings clause, a regulation must
satisfy a two-part test laid out in Kentucky Ass’n
of Health Plans, Inc. v. Miller, 538 U.S. 329,
342, 123 S. Ct. 1471, 155 L. Ed. 2d 468 (2003).”
Standard Ins. Co. v. Morrison, 584 F.3d 837, 842
(9th Cir. 2009), cert. denied, ––– U.S. ––––, 130
S. Ct. 3275, 176 L. Ed. 2d 1182 (2010). “‘First,
the state law must be specifically directed toward
entities engaged in insurance.’” Id. (quoting Ky.
Ass’n of Health Plans, 538 U.S. at 342, 123 S. Ct.
1471). Second, “it ‘must substantially affect the
risk pooling arrangement between the insurer and
the insured.’” Id. (quoting Ky. Ass’n of Health
Plans, 538 U.S. at 342, 123 S. Ct. 1471).

14

In addition to these generally applicable
preemption provisions, ERISA also contains a
HIPAA-specific preemption clause. Under that
clause, federal HIPAA does not “supersede any
provision of State law which establishes,
implements, or continues in effect any standard or
requirement solely relating to health insurance
issuers in connection with group health insurance
coverage except to the extent that such standard
or requirement prevents the application of a
requirement of” federal HIPAA. 29 U.S.C.
§ 1191(a)(1). The provision’s plain terms appear
to permit “state laws that are, generally
speaking, more favorable to the insured.” Plumb
v. Fluid Pump Serv., Inc., 124 F.3d 849, 862 n.10
(7th Cir. 1997) (dictum); accord H.R. Rep. No.
104–736, at 205 (1996), 1996 U.S.C.C.A.N. 1990,
2018 (Conf. Rep.) (noting that HIPAA’s drafters
“intend the narrowest preemption,” and to allow
“[s]tate laws which are broader than federal
requirements”).
Fossen v. Blue Cross & Blue Shield of Mont., Inc., 660 F.3d 1102,
1107-08 (9th Cir. 2011) (footnotes omitted) (some alterations in
Fossen).
II.

Express Preemption
The Court will first address Defendants’ argument that

ERISA expressly preempts Plaintiffs’ claims.
U.S.C. § 1144), governs express preemption.

ERISA § 514 (29
It states, in

pertinent part:
(a) Supersedure; effective date
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) of this title and not
exempt under section 1003(b) of this title. This
section shall take effect on January 1, 1975.
15

(b) Construction and application
. . . .
(2)(A) Except as provided in subparagraph
(B), nothing in this subchapter shall be
construed to exempt or relieve any person
from any law of any State which regulates
insurance, banking, or securities.
(B) Neither an employee benefit plan
described in section 1003(a) of this
title, which is not exempt under section
1003(b) of this title (other than a plan
established primarily for the purpose of
providing death benefits), nor any trust
established under such a plan, shall be
deemed to be an insurance company or
other insurer, bank, trust company, or
investment company or to be engaged in
the business of insurance or banking for
purposes of any law of any State
purporting to regulate insurance
companies, insurance contracts, banks,
trust companies, or investment
companies.
. . . .
(5)(A) Except as provided in subparagraph
(B), subsection (a) of this section shall not
apply to the Hawaii Prepaid Health Care Act
(Haw. Rev. Stat. §§ 393-1 through 393-51).
(B) Nothing in subparagraph (A) shall be
construed to exempt from subsection (a)
of this section-(i) any State tax law relating to
employee benefit plans, or
(ii) any amendment of the Hawaii
Prepaid Health Care Act enacted
after September 2, 1974, to the
extent it provides for more than
the effective administration of
such Act as in effect on such date.

16

(C) Notwithstanding subparagraph (A),
parts 1 and 4 of this subtitle, and the
preceding sections of this part to the
extent they govern matters which are
governed by the provisions of such parts
1 and 4, shall supersede the Hawaii
Prepaid Health Care Act (as in effect on
or after January 14, 1983), but the
Secretary may enter into cooperative
arrangements under this paragraph and
section 1136 of this title with
officials of the State of Hawaii to
assist them in effectuating the policies
of provisions of such Act which are
superseded by such parts 1 and 4 and the
preceding sections of this part.
. . . .
Pursuant to § 1144,
A state law claim is preempted by ERISA if it
has a “connection with” or a “reference to” an
ERISA-governed benefit plan. Metro. Life Ins. Co.
v. Massachusetts, 471 U.S. 724, 739, 105 S. Ct.
2380, 85 L. Ed. 2d 728 (1985). Stated another
way, where “the existence of [an ERISA] plan is a
critical factor in establishing liability” under a
state cause of action, the state law claim is
preempted. See Ingersoll-Rand Co. [v. McClendon],
498 U.S. [133,] 136, 139-40, 111 S. Ct. 478[, 112
L. Ed. 2d 474 (1990)] (holding state tort and
contract claims were preempted under ERISA,
although no ERISA cause of action was pleaded,
because the essence of the wrongful-discharge suit
was that the employer had discharged the plaintiff
to avoid paying ERISA benefits). ERISA’s
preemption provision functions “even when the
state action purport[s] to authorize a remedy
unavailable under the federal provision.” Id. at
144, 111 S. Ct. 478 (quoting Pilot Life Ins. Co.
v. Dedeaux, 481 U.S. 41, 55, 107 S. Ct. 1549, 95
L. Ed. 2d 39 (1987)).
Wise v. Verizon Commc’ns, Inc., 600 F.3d 1180, 1190-91 (9th Cir.
2010) (some alterations in Wise).

17

All of Plaintiffs’ claims necessarily reference an
ERISA-governed plan.

Plaintiffs’ claims challenge either whether

Defendants were entitled to cancel her Plan or the manner in
which they canceled the Plan.

In Wise, the Ninth Circuit

affirmed the dismissal of the plaintiff’s state law claims
against her employer, stating:
Wise’s state law claims are preempted because
her complaint necessarily references an ERISA
plan. The state law theories of fraud,
misrepresentation, and negligence all depend on
the existence of an ERISA-covered plan to
demonstrate that Wise suffered damages: the loss
of insurance benefits. Because Wise must allege
the existence of an ERISA plan to state her claims
under Washington law, the claims are
preempted. . . .
Id. at 1191.

Similarly, in the instant case, Plaintiff’s claims

alleging insurance bad faith, Chapter 480 violations, breach of
fiduciary duty, breach of contract, negligent misrepresentation,
and vicarious liability allege that Plaintiffs suffered damages
based upon Clareen Poffenbarger’s loss of insurance benefits that
she had under the ERISA-governed Plan.

The section of the

Complaint titled “DAMAGES” states, in pertinent part:
82. As a direct and proximate result of
Defendants’ wrongful conduct, acts, and/or
omissions, Plaintiffs are financially responsible
for all outstanding medical expenses incurred for
Plaintiff Clareen’s necessary treatment.
83. As a direct and proximate result of
Defendants’ wrongful conduct, acts, and/or
omissions, Plaintiffs will be financially
responsible for all future medical expenses
incurred for Plaintiff Clareen’s necessary
18

continued treatment.
84. As a direct and proximate result of
Defendants’ wrongful conduct, acts, and/or
omissions, Plaintiffs have suffered economic harm
and will continue to suffer economic harm.
[Complaint at pg. 12.]

Further, although Plaintiffs’ NIED claims

do not allege damages based on the loss of insurance benefits,
Plaintiffs must still allege the existence of the ERISA-governed
Plan to state their NIED claims.

To the extent that all of these

claims seek monetary damages, they seek relief that is not
available under the ERISA enforcement scheme.

Moreover, all of

Plaintiffs’ claims are premised upon the allegedly wrongful
rescission of the Plan, which was based on Clareen Poffenbarger’s
allegedly false representations on her Enrollment Application.
The Ninth Circuit has recognized that “ERISA must provide a
rescission remedy when an insured makes material false
representations regarding his health.”

Sec. Life Ins. Co. of Am.

v. Meyling, 146 F.3d 1184, 1191 (9th Cir. 1998) (per curiam).
The Court also concludes that none of Plaintiffs’
claims are subject to the savings clause, “which spares ‘any law
of any State which regulates insurance, banking, or securities.’”
Fossen, 660 F.3d at 1108 (quoting § 1144(b)(2)(A)).

Neither the

Hawai`i common law governing bad faith, fiduciary duty, contract,
misrepresentation, NIED, and vicarious liability nor Haw. Rev.
Stat. Chapter 480 are specifically directed toward entities
engaged in insurance.

Further, although Plaintiffs’ claims rely
19

on generally applicable common law and statutes, the Ninth
Circuit has held that such claims are preempted because they are
based upon interference with the attainment of benefits.

See,

e.g., Bast v. Prudential Ins. Co. of Am., 150 F.3d 1003, 1008
(9th Cir. 1998) (noting that “notwithstanding ERISA’s savings
clause, we have held that insurance bad faith claims are
preempted by ERISA” and holding that the plaintiffs’ state law
claims “arise out of Prudential’s actions as the benefit plan
administrator, not as an insurance company or insurance
provider”);4 Tingey v. Pixley-Richards W., Inc., 953 F.2d 1124,
1133 (9th Cir. 1992) (holding that an Arizona tort claim alleging
that the insurance company acted in bad faith and breached the
duty of good faith and fair dealing is “flatly preempted by”
Pilot Life, 481 U.S. 41, and it “‘arises from a breach of [a]
duty . . . implicit in all contracts’” (alterations in Tingey)
(quoting Clearwater v. State Farm Mut. Auto Ins. Co., 164 Ariz.
256, 792 P.2d 719, 721 (1990))).

4

In Bast, the plaintiffs’ complaint “alleged causes of
action for breach of contract, loss of consortium, loss of
income, emotional distress, breach of the duty of good faith and
fair dealing, violation of the Washington Consumer Protection Act
and the Washington Insurance Code, and ERISA.” 150 F.3d at 1006.
The Ninth Circuit affirmed the district court’s order granting
summary judgment to the insurance company and dismissing the
complaint with prejudice. The Ninth Circuit held, inter alia,
that all of the state law claims were preempted by ERISA. Id. at
1006, 1011.
20

It would thus appear that § 1144(a) would expressly
preempt all of Plaintiffs’ claims because their Complaint
necessarily references an ERISA plan.
1191.

See Wise, 600 F.3d at

ERISA’s general preemption pursuant to § 1144(a), however,

does not apply to the HPHCA.

§ 1144(b)(5)(A).

Section

§ 1144(b)(5)(C) contains a further exception to the “Hawaii
exception to the ERISA preemption[.]”

Snider v. Crimson Enters.,

Inc., 768 F. Supp. 734, 739 (D. Hawai`i 1991); see also infra
page 17 (quoting § 1144(b)(5)(C)).

Section 1144 is part of

Subtitle B, which addresses “Regulatory Provisions”.

Part 1 of

Subtitle B addresses “Reporting and Disclosure”, and Part 4
addresses “Fiduciary Responsibility”.

Thus, irrespective of the

HPHCA, ERISA preemption still applies to claims regarding the
reporting and disclosure duties and the fiduciary
responsibilities imposed by ERISA.
Plaintiffs’ Count II (violations of Chapter 480)
alleges, in pertinent part:
HMAA failed to disclose and/or concealed
important material information from consumers,
including Plaintiffs, including but not limited to
the following:
a.

That once an application was submitted
and approved by HMAA, a paid healthcare
coverage policy could be rescinded after
a six month period.

b.

That payment could be refused for
treatment that was previously authorized
by HMAA.

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c.

That the appeal process provided by HMAA
was futile and biased in that the
rescission of a policy could not be
challenged.

[Complaint at ¶ 46.]

Part 1 of Subtitle B requires that the

administrator of an employee benefit plan furnish a summary plan
description to covered participants and each beneficiary
receiving benefits under the plan.

29 U.S.C. § 1021(a)(1).

A

summary plan description must include information about, inter
alia, “circumstances which may result in disqualification,
ineligibility, or denial or loss of benefits[.]”
§ 1022(b).

29 U.S.C.

Thus, Count II alleges the failure to disclose

information about the Plan which ERISA requires the plan
administrator to disclose to participants and beneficiaries
receiving benefits.
Plaintiffs’ Count III (breach of fiduciary duty)
alleges, inter alia:
56. HMAA owed Plaintiff Clareen a duty of
loyalty and a duty of care commensurate with their
relationship. HMAA encouraged Plaintiff to trust
it and to maintain health insurance under the HMAA
plan and to continue paying premiums.
57. HMAA breached its fiduciary duty to
Plaintiff Clareen by concealing and otherwise
failing to disclose material information to her,
by placing the financial interests of HMAA above
her interests and by failing to exercise due care
in the administration and management of the HMAA
health care plan including the actions of its
agent, HWMG.
[Complaint at pg. 9.]

Part 4 of Subtitle B provides, in

22

pertinent part:
(a) Prudent man standard of care
(1) Subject to sections 1103(c) and (d),
1342, and 1344 of this title, a fiduciary
shall discharge his duties with respect to a
plan solely in the interest of the
participants and beneficiaries and–
(A) for the exclusive purpose of:
(i) providing benefits to
participants and their
beneficiaries; and
(ii) defraying reasonable expenses
of administering the plan;
(B) with the care, skill, prudence, and
diligence under the circumstances then
prevailing that a prudent man acting in
a like capacity and familiar with such
matters would use in the conduct of an
enterprise of a like character and with
like aims[.]
. . . .
29 U.S.C. § 1104(a)(1).

Thus, Count III alleges breaches of

fiduciary duties that are governed by ERISA.
This Court concludes, for purposes of the instant
Motion only, that some of the allegations in Count II and Count
III of the Complaint are expressly preempted by ERISA pursuant to
29 U.S.C. § 1144(a) and are not subject to the exemption for the
HPHCA.5

This Court therefore CONCLUDES, for purposes of the

instant Motion only, that those claims are necessarily federal in

5

In light of this Court’s ruling on express preemption,
this Court need not address whether conflict preemption applies.
23

nature and that Defendants’ removal of the action based on
federal question jurisdiction was proper.

This Court emphasizes

that the rulings in the instant Order are solely for the purpose
of determining whether the Court has jurisdiction over the
action.

This Court expresses no opinion at this time on the

issue whether Count II and Count III, or any of Plaintiffs’ other
claims, should be dismissed based on ERISA preemption.
CONCLUSION
On the basis of the foregoing, Plaintiffs’ Motion to
Remand to State Court, filed April 27, 2012, is HEREBY DENIED.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, August 31, 2012.

/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

ROBERT POFFENBARGER, ET AL. V. HAWAII MANAGEMENT ALLIANCE
ASSOCIATION, ET AL; CIVIL NO. 12-00172 LEK; ORDER DENYING
PLAINTIFFS’ MOTION TO REMAND TO STATE COURT

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