ERIC A. SHORE, P.C. v. INDEPENDENCE BLUE CROSS et al
MEMORANDUM AND/OR OPINION SIGNED BY HONORABLE GERALD A. MCHUGH ON 11/17/16. 11/18/16 ENTERED AND COPIES E-MAILED.(ti, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ERIC A. SHORE, P.C.,
INDEPENDENCE BLUE CROSS
INDEPENDENCE HEALTH GROUP,
NOVMEMBER 17, 2016
This case arises out of an improper denial of claims under an ERISA-qualified health
plan. To settle that dispute, the insurer offered to freeze premiums for a substantial period of
time, and then allegedly reneged on its commitment, leading the plan sponsor to sue. The
question before me is whether this subsidiary dispute over enforcement of the agreement is
preempted by ERISA, which would give rise to federal jurisdiction and mandate application
of federal law, or whether the controversy should be litigated in state court under
Pennsylvania law. Because I am constrained by the “extraordinary preemptive power” of
ERISA, New Jersey Carpenters & the Trs. Thereof v. Tishman Constr. Corp. of N.J., 760
F.3d 297, 303 (3d Cir. 2014), Plaintiff’s Motion to Remand will be denied, and state law
claims inconsistent with ERISA dismissed.
I. Factual Background
Plaintiff is a law firm that contracted with Defendant Independence Blue Cross (IBC) in
September 2014 to obtain health insurance for its employees. According to Plaintiff, IBC
violated the parties’ contract in early 2015 by accidentally denying coverage for some claims that
it was obligated to pay. On March 26, 2015, Defendant offered in writing to freeze Plaintiff’s
premium rates for sixteen months – purportedly in order to “make good” for its earlier mistake.
Plaintiff accepted Defendant’s rate freeze offer approximately two months later. IBC later
informed Plaintiff that it could not honor the premium freeze agreement it first extended because
of a mistake – the offer should have read that rates would be frozen through December 2015
rather than 2016.
Plaintiff, asserting losses suffered in reliance on the agreement, sued in state court for
common law fraud, breach of contract, statutory bad faith (42 Pa. Cons. Stat. § 8371), promissory
estoppel, “reasonable expectation,” breach of fiduciary duty, and violation of the Pennsylvania
Unfair Trade Practices and Consumer Protection Law (73 Pa. Stat. and Const. Stat. Ann.
§§201.1-9.3). IBC responded to the suit with a removal and motion for partial dismissal,
asserting that the Employment Retirement Income Security Act of 1974 (ERISA) controls.
II. Plaintiff’s Motion to Remand
A. Standard of Review
As courts of limited jurisdiction, federal courts closely scrutinize removal. On a
motion to remand, a federal district court should “assume[ ] as true all factual allegations of
the complaint,” and resolve “all doubts” “in favor of remand.” Steel Valley Auth. v. Union
Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987). The defendant has the burden of
proving that an action has been properly removed, Sikirica v. Nationwide Ins. Co., 416 F.3d
214, 219 (3d Cir. 2005), and federal preemption, because it is an affirmative defense, would
ordinarily “not authorize removal to federal court.” Metro. Life Ins. Co. v. Taylor, 481 U.S.
58, 63 (1987). But the general principles typically weighing against removal lose much of
their force here, because, as the Court of Appeals has stated: “ERISA's civil enforcement
mechanism, Section 502(a), ‘is one of those provisions with such extraordinary preemptive power that it converts an ordinary state common law complaint into one stating a
federal claim for purposes of the well-pleaded complaint rule,’ and permits removal.”
Tishman, 760 F.3d at 303.
Because removal determinations are jurisdictional in nature, I must first apply the modified
standard for ERISA-related removal to determine if the case is properly before me.
B. ERISA Preemption
I conclude that the doctrine of complete preemption, which is applicable to ERISA suits,
requires removal in this context. In rare instances, “Congress may so completely preempt a
particular area that any civil complaint raising this select group of claims is necessarily federal in
character.” Taylor, 481 U.S. at 63–64. The U.S. Supreme Court has found federal preemption
broadly necessary in cases that relate to the administration of employee healthcare plans, stating
that Congress passed ERISA “to provide a uniform regulatory regime over employee benefit
plans,” and to establish that employee benefit plans are “exclusively a federal concern.” Aetna
Health Inc. v. Davila, 542 U.S. 200, 208 (2004).
Within the Third Circuit, two factors determine when preemption of an ERISA-related
claim is necessary. A claim is preempted where (1) it could have been brought under ERISA’s
Section 502(a) (see 29 U.S.C. § 1132), and (2) it alleges breach of a legal duty that is not
independent of the ERISA plan. Pascack Valley Hosp. v. Local 464A UFCW Welfare
Reimbursement Plan, 388 F.3d 393, 398 (3d Cir. 2004), as amended (Dec. 23, 2004). Applying
this test, I find that the rate freeze agreement at issue here cannot be evaluated without an
understanding of the underlying plan. Furthermore, because Plaintiff’s claims could have been
brought under ERISA, and because they rest on a legal duty dependent upon the existence of an
ERISA plan, they are necessarily preempted by federal law.
1. Plaintiff’s claims fall within the scope of Section 502(a)
Section 502(a) of ERISA authorizes suits “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.” 29 U.S.C. § 1132. Plaintiff
argues it lacks standing to bring suit under ERISA, but that is incorrect. As an individual
employer that negotiated and contracted into an ERISA plan for its employees – i.e. a plan
sponsor – Plaintiff is a “participant or beneficiary” under Section 502(a). See id. § 1002(16)(B),
(A)(ii); Duda v. Standard Ins. Co., 205 WL 1961170 (E.D. Pa. 2015), aff’d, 649 Fed. Appx. 230
(3d Cir. 2016); see also United States Steel Corp. v. Pa. Human Relations Comm’n., 669 F.2d
124 (3d Cir. 1982).
Plaintiff further claims that preemption does not apply because it is not suing to recover
benefits, enforce rights, or clarify future entitlements under an ERISA plan, but instead suing
over a broken promise untethered to any ERISA-regulated agreement. This argument is
superficially appealing but ultimately unpersuasive. Although the rate freeze agreement is
technically ancillary to Plaintiff’s ERISA plan, it was put in place in order to clarify updated
responsibilities due under the plan arising out of a failure to pay covered benefits. Moreover,
Plaintiff is suing to enforce a benefit – the rate freeze – due to it under the terms of an (albeit
amended) ERISA plan. This type of suit is specifically authorized by Section 502(a). 29 U.S.C.
§ 1132(a)(3). While Plaintiff’s common law claims are not themselves cognizable causes of
action under ERISA, they “relate to” a contract governed by ERISA. Menkes v. Prudential Ins.
Co. of Am., 762 F.3d 285, 290 (3d Cir. 2014). For these reasons, Plaintiff could have sued under
Section 502(a), triggering ERISA preemption.
2. The duty asserted in Plaintiff’s Complaint does not arise independent of ERISAcovered benefits
Plaintiff and Defendant agree that the health benefits plan giving rise to Plaintiff’s
underlying claims is an ERISA-qualified plan, but they disagree about whether the related rate
freeze is independent of the plan for preemption purposes. This dispute turns on the meaning of
“independent” in the context of ERISA. The Third Circuit has found that a legal duty is
“independent” only if it “would exist whether or not an ERISA plan existed.” Tishman, 760 F.3d
at 303–304 (3d Cir. 2014); see also Khan v. Guardian Life Ins. Co. of Am., No. CV 16-253, 2016
WL 1574611, at *2 (D.N.J. Apr. 19, 2016) (“[T]he claims ‘relate to’ the Plan because if there
were no Plan, there would be no alleged causes of action.”); Torsiello v. Strobeck, 955 F. Supp.
2d 300, 309 (D.N.J. 2013) (“The second [Tishman] prong evaluates whether ‘ERISA benefit
plans and obligations underscore Plaintiff’s state law claims.’”) (citation omitted). While
Plaintiff’s claims will likely not require detailed interpretation of the underlying ERISA plan,
they clearly rely upon the existence, and alleged breach, of an ERISA contract. 1 Federal
Plaintiff argues that preemption is not appropriate here because resolution of its claims will not
require interpretation of the terms of an ERISA plan. I recognize that the Third Circuit made
statements in New Jersey Carpenters & the Trustees Thereof v. Tishman Const. Corp. of New
Jersey, 760 F.3d 297, suggesting that a preemption inquiry turns on whether plan interpretation
would be necessary. However, the court also stated in Tishman that preemption turns on whether
an independent contract would exist in the absence of an ERISA plan. Shortly thereafter, the
jurisdiction is appropriate on these grounds. Therefore, I will deny Plaintiff’s Motion to
III. Defendant’s Motion to Dismiss
Because ERISA controls, Plaintiff’s claims for common-law fraud, statutory bad faith
“reasonable expectation,” and violation of the Pennsylvania Unfair Trade Practices and
Consumer Protection Law are preempted and must be dismissed. As IBC concedes, Plaintiff’s
claims for breach of contract and breach of fiduciary duty are properly brought under ERISA and
therefore not preempted. Plaintiff separately pleads promissory estoppel. Because I view that
claim as an alternative means of proving a contractual violation under Section 502(a), it will
Recognizing that Plaintiff brought this action in state court under Pennsylvania law, to
the extent that Plaintiff deems it desirable to amend its complaint to restate its claims under
ERISA, it is granted leave to do so within 20 days, and shall give notice to Defendant whether it
will exercise this option. Defendant shall answer the pending or amended complaint accordingly.
/s/ Gerald Austin McHugh
United States District Judge
Circuit expressed its hesitance to “unbundle closely related components of an employer’s
broader ERISA benefits plan,” see Menkes, 762 F.3d at 292. To the extent that there is any
internal inconsistency in Tishman, I view Menkes as resolving such inconsistency in favor of
preemption in close cases.
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