Prachun et al v. CBIZ Benefits & Insurance Services, Inc. et al

Filing 21

REPORT AND RECOMMENDATION that 9 MOTION to Remand Case to Franklin County Court of Common Pleas be denied. Objections due within fourteen (14) days. Signed by Magistrate Judge Terence P Kemp on 2/3/2015. (agm1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Paul Prachun, et al.,

:

Plaintiffs,

:

v.

:
:

CBIZ Benefits & Insurance
Services, Inc., et al.,
Defendants.

Case No. 2:14-cv-2251
JUDGE ALGENON L. MARBLEY
Magistrate Judge Kemp

:
:

REPORT AND RECOMMENDATION
I.

Introduction

Plaintiff Paul Prachun used to work for Riverside Radiology
and Intervention Associates, Inc. (RRIA).

He is a radiologist.

He went to work for RRIA in 2011 after obtaining insurance
coverage under Medicare Parts A and B in 2010.
According to Dr. Prachun’s complaint, he dropped his
Medicare Part B coverage after being told by RRIA that he did not
need it, and that once he retired, he could reacquire it.
retired in 2013.

He

Unfortunately, as things turned out, he was

unable to reactivate his Medicare Part B coverage, and the
insurance he was able to keep after his retirement did not pay
for most of his medical expenses.
Dr. Prachun and his wife filed this case in the Court of
Common Pleas of Franklin County, Ohio.

They assert various state

law negligence claims against RRIA, CBIZ Benefits Insurance
Services, Inc. (which serves as RRIA’s benefits coordinator), and
Medical Mutual of Ohio, Dr. Prachun’s current medical insurer.
RRIA removed the case (with the consent of the other two
defendants), alleging in the notice of removal (Doc. 1, at 1-2)
that “Plaintiffs have brought claims under the laws of the United
States which state claims which fall within the scope of the
Employee Retirement Income Security Act (“ERISA”) 29 U.S.C.

§1001, et seq.

Plaintiffs’ claims are therefore preempted by

ERISA.”
The Prachuns disagree with that legal analysis.

They

believe that all of their claims are perfectly acceptable state
law claims and that ERISA does not apply here.

For that reason,

they have moved to remand the case to the Franklin County Court
of Common Pleas.

That motion (Doc. 9) is fully briefed and has

been referred to the Magistrate Judge for the issuance of a
Report and Recommendation.

For the following reasons, it will be

recommended that the motion to remand be denied.
II.

Defining the Question

ERISA preemption can, to put it mildly, be a confusing area
of the law.

As one court has put it, “any court forced to enter

the ERISA preemption thicket sets out on a treacherous path.”
Gonzales v. Prudential Ins. Co. of America, 901 F.2d 446, 451-52
(5th Cir. 1990).

It helps, however, to know exactly what the

Plaintiffs’ claims are before figuring out if they are preempted
by ERISA and replaced by ERISA claims.

Because RRIA is the party

advocating for preemption, the Court starts with its arguments.
RRIA makes the case for preemption (and therefore removal
jurisdiction) in its Memorandum Contra to Plaintiffs’ Motion to
Remand (Doc. 15).

Its argument goes as follows.

First, it

describes the claims against it as relating “entirely to
allegations of breaches of [RRIA’s] duty to provide competent and
informed advice with respect to ... Dr. Prachun’s medical
insurance coverage.”

Doc. 15, at 1.

It then asserts that the

duty which was allegedly breached was a fiduciary duty owed by an
ERISA plan administrator (presumably CBIZ) and that the damages
claimed are being measured by the value of the lost insurance
coverage, some of which would have been provided by an ERISAqualified plan.

Under these circumstances, RRIA asserts that all

of the claims in the complaint are completely preempted by ERISA,
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and that they are all necessarily claims for benefits under 29
U.S.C. §1132.
Plaintiffs say this is much too simplistic an analysis.
They first point out that there is a distinction between claims
that are defensively preempted by ERISA and claims that are
completely preempted (although they do not appear to concede that
any of their claims fall into the former category).

They then

cite to some fairly recent Supreme Court and Court of Appeals
cases which attempt to clarify the scope of ERISA complete
preemption, and argue that complete preemption does not apply
where a claimant is not seeking benefits to which he is entitled
only because of the terms of an ERISA benefit plan.

Finally,

they note that they have not alleged any breaches of duty imposed
by an ERISA benefit plan, but rather breaches of state common law
duties.

For these reasons, they urge the Court to find that it

lacks jurisdiction over their claims.
It is important, first, to identify which of the various
causes of action in the complaint must be analyzed to see if they
are completely preempted by ERISA.

It is difficult to see how

any of the claims relating to Dr. Prachun’s Medicare coverage
could be the subject of ERISA preemption.
out, Medicare is not an ERISA plan.

As Plaintiffs point

See, e.g., Kesselman v. The

Rawlings Co., LLC, 668 F.Supp.2d 604, 606 n.4 (S.D.N.Y.
2009)(Medicare is “not an ERISA plan”).

Although RRIA’s

memorandum does not engage in a claim-by-claim analysis, it does
not appear to be arguing that Medicare is somehow covered by
ERISA.

Consequently, the Court will focus only on the claims

that do not implicate Dr. Prachun’s Medicare coverage.
The allegation that Dr. Prachun dropped his Medicare Part B
coverage in reliance on statements made by one or more of the
defendants, and was unable to obtain that coverage later, is
undoubtedly a major focus of the complaint.
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There is another

claim, however, and if that one is preempted by ERISA and
necessarily converted into an ERISA claim, removal was still
proper.

The presence of one federal question is enough to

support removal of the entire action.

The Court must therefore

attempt to parse out the elements of the non-Medicare claim.
That is easier said than done.

The complaint, which is the

only document setting forth the operative facts, is somewhat
vague on this point.

Plaintiffs aver that in June, 2013, about a

month after Dr. Prachun retired from RRIA, CBIZ provided him with
some information under COBRA.

He completed and submitted the

COBRA forms he got from CBIZ, and claims that it was his
understanding that, by doing so, he was getting insurance
coverage “identical to RRIA’s existing coverage.”

It can be

inferred from the complaint that Medical Mutual of Ohio was the
carrier for this insurance coverage.

Dr. Prachun specifically

asserts that MMO told him that its insurance was “primary.”
Finally, as to this particular coverage, he claims that it paid
for only 20% of the expenses of his medical procedures.
Complaint, ¶¶15-22.
Those are the only facts pleaded about the COBRA coverage.
Dr. Prachun’s negligence claim against MMO based on these facts
includes this specific allegation: “MMO owed a duty to Dr.
Prachun to competently and accurately process his application for
continuation coverage and to provide accurate information to Dr.
Prachun regarding said coverage” - a duty which he claims was
breached.

Complaint, ¶¶33-34.

The damages on this claim are not

described in any detail, but it is a fair inference from the
complaint that since this claim does not appear to relate at all
to the Medicare Part B issue, Dr. Prachun is attempting to
recover the difference between what he thought he was getting in
the MMO policy and what he actually got, based on MMO’s having
told him something about the policy’s coverage that was not true.
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The complaint does not affirmatively state that the MMO plan
is an ERISA plan.

The notice of removal does not do so either;

its allegations about ERISA plans are much more vague.

But COBRA

is part of ERISA, and Dr. Prachun has claimed that it was his
understanding that his continuation coverage under COBRA would be
identical to the coverage he received while an employee of RRIA.
Consequently, the Court will assume that the MMO plan under which
Dr. Prachun is now covered is an ERISA plan.
by the motion to remand can now be clarified.

The question raised
As the Court

perceives it, this is the issue:
Is a state law negligence claim against a provider of
an ERISA benefits plan (or against an employer or a
claims administrator) completely preempted by ERISA if
the claim is based on an allegedly false representation
made to the beneficiary about the scope of the coverage
provided by the plan?
If that is really the question, it significantly enhances the
Court’s ability to answer it accurately notwithstanding the
complexities of ERISA preemption law.
III.

Discussion

The Court will begin with a very brief description of the
parameters of ERISA complete preemption.

The Court of Appeals,

in a case relied upon heavily by the Plaintiffs, and which in
turn draws on the Supreme Court’s decision in Aetna Health Inc.
v. Davila, 542 U.S. 200 (2004), described it this way.

After

noting that, ordinarily, the question of federal jurisdiction is
decided with reference to the plaintiff’s “well-pleaded
complaint” - the concept being that if a plaintiff has chosen not
to plead a federal claim, the Court will not second-guess that
decision by implying one - the Court of Appeals said that
there is an exception to the well-pleaded complaint
rule: “when a federal statute wholly displaces the
state-law cause of action through complete pre-emption,
the state claim can be removed.” Davila, 542 U.S. at
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207, 124 S.Ct. 2488 (brackets and internal quotation
marks omitted). Although ERISA's express-preemption
clause does not have this effect, another section of
ERISA does. Section 1132(a)(1)(B) provides that “[a]
civil action may be brought ... by a participant or
beneficiary ... to recover benefits due to him under
the terms of his plan, to enforce his rights under the
terms of the plan, or to clarify his rights to future
benefits under the terms of the plan[.]” The Supreme
Court has said that this provision is part of a “civil
enforcement scheme” whose “comprehensive” and
“carefully integrated” character “provide[s] strong
evidence that Congress did not intend to authorize
other remedies that it simply forgot to incorporate
expressly.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S.
41, 54, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (internal
quotation marks and emphasis omitted). Thus, when a
state-law claim by its nature “falls ‘within the scope
of’ ERISA § [1132](a)(1)(B)[,]” Davila, 542 U.S. at
210, 124 S.Ct. 2488, two consequences follow: first,
the claim is deemed to be a federal claim (albeit an
invalid one) for purposes of federal-question
jurisdiction and thus removal; and second, the claim is
preempted. Id. at 209, 124 S.Ct. 2488.
Gardner v. Heartland Indus. Partners, LP, 715 F.3d 609, 612-13
(6th Cir. 2013).
Davila represented an attempt to bring some clarity to the
area of ERISA preemption, especially as it relates to preemption
under §1132, through which state law claims are entirely
displaced and converted into affirmative federal law claims.
There, the plaintiffs complained that their health insurance
plans, which were ERISA plans, refused to pay for certain
medications or medical procedures.

The only relationship between

the plaintiffs and the defendants was that the defendants
administered portions of the ERISA-regulated benefit plans.

The

Court concluded that the plaintiffs were “complain[ing] only
about denials of coverage promised under the terms of
ERISA-regulated employee benefit plans” and that “[u]pon the
denial of benefits, respondents could have paid for the treatment
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themselves and then sought reimbursement through a §502(a)(1)(B)
action, or sought a preliminary injunction ....”
U.S. at 211.

Davila, 542

It rejected the notion that the plan administrators

were subject to a duty of ordinary care that arose independently
of the ERISA plans, and since the duty they allegedly breached
stemmed from

an ERISA plan, claims for the breach of that duty

were ERISA claims.
Davila has been interpreted as establishing a two-part test,
both parts of which must be met before complete preemption is
found.
Specifically, claims are completely preempted by ERISA
if they are brought (I) by “an individual [who] at some
point in time, could have brought his claim under ERISA
§ 502(a)(1)(B),” [] and (ii) under circumstances in
which “there is no other independent legal duty that is
implicated by a defendant's actions.” Id. The test is
conjunctive; a state-law cause of action is preempted
only if both prongs of the test are satisfied.
Montefiore Medical Center v. Teamsters Local 272, 642 F.3d 321,
328 (2nd Cir. 2011)(footnote omitted).

Do the Plaintiffs’ claims

against MMO satisfy this test?
Taking the second prong first, it appears from the complaint
that MMO’s entire role in the controversy was to provide the
insurance plan which covered both regular RRIA employees and,
through COBRA, retirees such as Dr. Prachun who elected
continuation coverage.

But for the existence of the plan (which,

again, the Court assumes is an ERISA-regulated plan, see
Christenson v. Mutual Life Ins. Co. Of New York, 950 F.Supp. 179,
181 (N.D. Tex.1996)(stating that “Plaintiffs' assertion of COBRA
coverage presupposes the existence of, and Plaintiffs'
participation in, a benefits plan governed by ERISA”), MMO had no
relationship with, and owed no duty to, the Plaintiffs.

Any duty

of ordinary care, which is at the heart of a negligence claim, is
derived directly from MMO’s status as the provider of coverage
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under an ERISA-regulated plan and is therefore not “independent”
of ERISA.

The same would hold true for any claim

See id.

against CBIZ, as a plan administrator, concerning the extent of
coverage under the MMO policy.

Claims for errors occurring in

the administration of ERISA benefits which seek, among other
damages, the benefits that would have been provided but for the
alleged errors, are claims premised on duties arising from ERISA
and from the defendants’ status as plan providers,
administrators, or fiduciaries.

See Overall v. Sykes Health Plan

Services, Inc., 2006 WL 1382301, *4 (W.D. Ky. May 16, 2006).
The first prong actually involves two separate inquiries.
See Montefiore Medical Center, supra.

The first question is

“whether the plaintiff is the type of party that can bring a
claim pursuant to § 502(a)(1)(B),” and the second is “whether the
actual claim that the plaintiff asserts can be construed as a
colorable claim for benefits pursuant to §502(a)(1)(B)[29 U.S.C.
§1132(a)(1)(B)].”
answer.

Id.

Here, the former inquiry is easy to

Dr. Prachun is a plan beneficiary, and beneficiaries are

within the class of persons who can sue for benefits under §1132.
“A participant or beneficiary of an ERISA qualified plan may
bring suit in federal court to recover benefits due under the
terms of the plan.”
(S.D. Ohio 2010).

Wagner v. Ciba Corp., 743 F.Supp.2d 701, 708

That leaves only the second question - the

presence of a colorable claim for benefits - to be answered, and
there is much case law on that subject.
It might be argued that Dr. Prachun is not actually
asserting a claim for benefits under the MMO plan because he
appears to concede that the plan (as written, but not as
promised) did not actually provide more benefits than the 20% of
his expenses which were paid.

That type of argument against

ERISA preemption has not fared well in other courts.

“Generally

speaking, ERISA preempts state common law claims of fraudulent or
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negligent misrepresentation when the false representations
concern the existence or extent of benefits under an employee
benefit plan.”

Griggs v. E.I. DuPont de Nemours & Co., 237 F.3d

371, 378 (4th Cir. 2001)(emphasis supplied).

Courts have found

ERISA preemption under facts very similar to those alleged by the
Plaintiffs.

For example, in McDonald v. Household Intern., Inc.,

425 F.3d 424 (7th Cir. 2005), the plaintiff claimed he was told,
incorrectly, that he would receive health insurance benefits
within thirty days of going to work for his employer.

He did

not, and incurred medical expenses which, had he been given
coverage as promised, would have been paid by the plan.

The

complaint included a claim for negligence in failing to provide
insurance coverage.

In finding preemption, the court noted that

the state law claims, no matter how they were characterized,
“focuse[d] on the defendants' failure to give McDonald the
benefits under the medical plan that he had been promised.”
at 429.

Id.

That, said the court, “is precisely the kind of claim

that ERISA §502(a) allows plan participants to bring,” id., even
though, of course, the plaintiff was not actually covered by the
terms of any employee benefit plan when he incurred the expenses
in question.

See also Van Natta v. Sara Lee Corp., 439

F.Supp.2d 911, 935 (N.D. Iowa 2006), which held that claims for
misrepresentation as to the scope of coverage under an ERISA plan
were “precisely the kinds of claims that the Davila Court held to
be preempted under § 502(a).”
It does not matter that Dr. Prachun is not seeking benefits
directly from the MMO plan.

Although “the crux of the matter is

the nature of the remedies that [Plaintiff] requests,” Thurman v.
Pfizer, Inc., 484 F.3d 855, 862 (6th Cir. 2007), any “claims ...
based on ... expectation damages ... (i.e., the difference
between the benefits promised and the benefits to which [Dr.
Prachun] was entitled) ... are clearly preempted.”
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Id.

The

complaint, fairly read, alleges just that: a difference between
the benefits under the MMO plan which Dr. Prachun believed, based
on either CBIZ’s or MMO’s representations, he was getting, and
the benefits actually provided.

That is a claim for benefits by

a plan participant; it is cognizable under §1132; and it is
therefore completely preempted, even if phrased in terms of
negligence.

That conclusion supports the existence of

jurisdiction in this case and the propriety of RRIA’s removal.
IV. Recommended Order
For the reasons set forth above, it is recommended that
Plaintiffs’ motion (Doc. 9) to remand be denied.
V.

Procedure on Objections

If any party objects to this Report and Recommendation,
that party may, within fourteen (14) days of the date of this
Report, file and serve on all parties written objections to those
specific proposed findings or recommendations to which objection
is made, together with supporting authority for the objection(s).
A judge of this Court shall make a de novo determination of those
portions

of the report or specified proposed findings or

recommendations to which objection is made.

Upon proper

objections, a judge of this Court may accept, reject, or modify,
in whole or in part, the findings or recommendations made herein,
may receive further evidence or may recommit this matter to the
magistrate judge with instructions.

28 U.S.C. §636(b)(1).

The parties are specifically advised that failure to
object to the Report and Recommendation will result in a
waiver of the right to have the district judge review the
Report and Recommendation de novo, and also operates as a
waiver of the right to appeal the decision of the District
Court adopting the Report and Recommendation.

See Thomas v.

Arn, 474 U.S. 140 (1985); United States v. Walters, 638 F.2d
947 (6th Cir. 1981).
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/s/ Terence P. Kemp
United States Magistrate Judge

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