United States Court of Appeals
For the First Circuit
No. 01-2313
MARJORIE HOTZ,
Plaintiff, Appellant,
v.
BLUE CROSS and BLUE SHIELD OF MASSACHUSETTS, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Boudin, Chief Judge,
Selya and Lipez, Circuit Judges.
Thomas J. Lynch with whom Lynch Associates, LLC was on brief
for appellant.
Joseph D. Halpern, Blue Cross and Blue Shield of
Massachusetts, Inc., Law Department, with whom Sara A. Walker was
on brief for appellee.
June 11, 2002
BOUDIN, Chief Judge. In March 2001, Marjorie Hotz
brought suit in state court against her health insurer, Blue Cross
and Blue Shield of Massachusetts ("Blue Cross"). Hotz claimed that
Blue Cross violated a state law prohibiting unfair claim settlement
practices by insurance companies, see Mass. Gen. Laws ch. 176D, §
3(9) (2000), when it waited nearly three months before approving
payment for a course of follow-up therapy recommended by her
physician after the removal of her cancerous tonsil. Hotz alleged
that Blue Cross's delay caused her condition to worsen and sued
under Mass. Gen. Laws ch. 93A, § 9(1) (2000), which was amended in
1979 to extend its private remedies provisions to violations of
chapter 176D, § 3(9) (2000).1
Hotz's insurance coverage with Blue Cross was part of an
employee benefit plan offered and paid for by the law firm where
she worked; the plan is governed by the Employee Retirement Income
Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. (2000). Blue
Cross removed the case to federal district court, claiming federal
question jurisdiction based on ERISA; it then moved to dismiss on
the ground that Hotz's chapter 93A claim fell within ERISA's clause
preempting all state laws that "relate to" employee benefit plans,
id. § 1144(a).
1
See Hopkins v. Liberty Mut. Ins. Co., 750 N.E.2d 943, 949-50
(Mass. 2001); Van Dyke v. St. Paul Fire & Marine Ins. Co., 448
N.E.2d 357, 360 (Mass. 1983). Chapter 93A is a well-known
Massachusetts statute that permits private actions for multiple
damages and attorney's fees for a broad class of "unfair methods of
competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce." Mass. Gen. Laws ch. 93A, §
2(a). Blue Cross asserts that it is not engaged in trade or
commerce but we do not reach that issue.
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The district court denied Hotz's motion to remand and
granted Blue Cross's motion to dismiss, and Hotz now appeals. As
required, we assume for this purpose the truth of her factual
allegations. Martin v. Applied Cellular Tech., Inc., 284 F.3d 1,
5-6 (1st Cir. 2002). This is so even though Blue Cross asserts
that, if the case were tried, it would show that no undue delay
occurred because it approved the treatment requested within 48
hours after it received the relevant request. Our review, which is
addressed to questions of law, is de novo. Id.
Hotz presses two points on appeal. First, at the
threshold, she argues that the district court lacked removal
jurisdiction over her state law claim. Second, she argues that her
claim is not preempted because it falls under the so-called "saving
clause" exempting from ERISA's preemption provision any state law
that "regulates insurance." 29 U.S.C. § 1144(b)(2)(A). We address
these issues in the same order and conclude that they are largely
governed by existing case law.
Normally, federal defenses including preemption do not by
themselves confer federal jurisdiction over a well-pleaded
complaint alleging only violations of state law. Franchise Tax Bd.
of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1,
9-10, 25-27 (1983). But under the doctrine of "complete
preemption," ERISA's civil enforcement provisions, 29 U.S.C. §
1132(a), have been interpreted to establish federal removal
jurisdiction over any state law claims that in substance seek
relief that is otherwise within the scope of those ERISA remedy
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provisions. See Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-67
(1987). Pertinently, ERISA permits a federal action by a
beneficiary "to recover benefits due . . . under the terms of [the]
plan, to enforce . . . rights under the terms of the plan, or to
clarify . . . rights to future benefits under the terms of the
plan." 29 U.S.C. § 1132(a)(1)(B).
Hotz denies that her claim involves a "benefit" as the
term is used in ERISA; she says that "benefit" means only the
benefit offered directly by the employer to its employees (i.e.,
coverage under the employer's group insurance policy) and not the
benefit provided by the insurance company to the employee (i.e.,
payment for medical services) pursuant to the employer's policy.
Although the distinction is linguistically possible, it would mean
that numerous past ERISA suits brought to secure payment for
medical services from third-party providers under ERISA plans
lacked a legal basis.2
In any event, Hotz's argument is foreclosed by this
court's previous opinion in Danca v. Private Health Care Systems,
Inc., 185 F.3d 1 (1st Cir. 1999). There, we found removal
jurisdiction over plaintiff's state tort claim alleging that the
defendant insurer was negligent when it approved treatment at a
mental hospital different from the hospital recommended by the
referring physician. Relying on Pilot Life Insurance Co. v.
2
E.g., I.V. Servs. of Am., Inc. v. Inn Dev. & Mgmt., Inc., 182
F.3d 51, 53 (1st Cir. 1999); Bernstein v. Capitalcare, Inc., 70
F.3d 783, 784 (4th Cir. 1995); Farley v. Benefit Trust Life Ins.
Co., 979 F.2d 653, 658 (8th Cir. 1992).
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Dedeaux, 481 U.S. 41 (1987), we said the claim fell within the
ambit of 29 U.S.C. § 1132(a)(1)(B) because it challenged "the
process used to assess a participant's claim for a benefit payment
under the plan." 185 F.3d at 6. This ruling governs Hotz's claim
against the insurer alleging undue delay in processing her
physician's referral. See also Pryzbowski v. U.S. Healthcare,
Inc., 245 F.3d 266, 273-74 (3d Cir. 2001).
We turn, then, to the question of preemption. Hotz
concedes that if what Blue Cross promises to provide is deemed a
plan benefit, then her state law claim falls at least initially
within 29 U.S.C. § 1144(a). That section broadly preempts any
state law claim that "relate[s] to" an employee benefit plan, and
it has been applied widely to bar state claims seeking damages for
alleged breach of obligations pertaining to an ERISA plan. E.g.,
Pilot Life, 481 U.S. at 47-48. Hotz's answer is that section
1144(b)'s saving clause preserves her claim as one brought under a
state law that "regulates insurance." 29 U.S.C. § 1144(b)(2)(A).
The Supreme Court has used several formulas to delineate
the scope of the saving clause. In a trilogy of cases, it has
asked whether the state law regulates insurance under a "common-
sense view" of the term and, separately, whether the practice falls
within the phrase "business of insurance" for purposes of the
McCarran-Ferguson Act based on three more technical factors.3
Finally, in one of the cases, it has separately asked whether
3
UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 367-68
(1999) (citing Pilot Life, 481 U.S. at 48-49, and Metro. Life Ins.
Co. v. Massachusetts, 471 U.S. 724, 740, 743 (1985)).
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allowing the state-created rule to govern would interfere with the
uniform remedial scheme established by ERISA itself for securing
plan benefits. Pilot Life, 481 U.S. at 51-57.
Much of the emphasis in the trilogy is on whether the
claim or rule invoked by the plaintiff is exclusive to insurance
regulation; in UNUM Life, the Court's decision not to find
preemption turned principally on the fact that the state rule
(involving failure to give notice) was unique to insurance cases.
526 U.S. at 370-71; see also Pilot Life, 481 U.S. at 50-51; Metro.
Life, 471 U.S. at 742-43. The underlying notion is that a claim or
rule directed only to insurance is one that "regulates insurance"
while one that regulates insurance along with everything else is
not within the quoted phrase.
Exclusivity is an ambiguous label in this case. The
substantive prohibition on delay in claim processing in chapter
176D is directed solely at the insurance industry, but the private
action for multiple damages and attorney's fees claim brought by
Hotz is created by chapter 93A, § 9, which applies to unfair
commercial practices in any industry. Yet looking through form to
substance, chapter 176D, § 3, invoked by Hotz, is (by its own
terms) merely a specification of particular "unfair methods of
competition and unfair or deceptive acts or practices"--which are
banned in more general terms, and for all industries, in chapter
93A (see note 1, above).
On balance, our case seems closer to Pilot Life, where
the Court held to be preempted a punitive damages tort claim for
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egregious nonpayment of benefits under an insurance policy. Under
state law, such punitive damages were also available for egregious
violations of contracts unrelated to insurance, just as chapter 93A
is available for non-insurance unfair trade practices. In
addition, the Court in Pilot Life--quite apart from the "common-
sense view" and McCarran-Ferguson tests--emphasized that to allow
punitive damages for failure to pay benefits was at odds with
Congress's refusal to allow punitive damages for benefit claims
under ERISA. 481 U.S. at 53-54.
On this last rationale, other circuits have in a number
of cases held claims under various state statutes similar to
Massachusetts' to be preempted by ERISA despite the saving clause.4
Possibly UNUM Life betokens a shift of emphasis by the Supreme
Court; plainly the law as to the scope of the saving clause is
still evolving. But under current Supreme Court precedent, we feel
bound by the similarity of Pilot Life to our own case and by the
close fit of its final rationale to Hotz's chapter 93A claim.
Affirmed.
4
Ramirez v. Inter-Cont'l Hotels, 890 F.2d 760, 763-64 (5th
Cir. 1989) (Texas unfair insurance practices statute); Kanne v.
Conn. Gen. Life Ins. Co., 867 F.2d 489, 494 (9th Cir. 1988), cert.
denied, 492 U.S. 906 (1989) (California unfair insurance practices
statute); In re Life Ins. Co. of N. Am., 857 F.2d 1190, 1194-95
(8th Cir. 1988) (Missouri statute prohibiting vexatious refusal to
pay insurance benefits); see also Custer v. Pan Am. Life Ins. Co.,
12 F.3d 410, 420 (4th Cir. 1993) (West Virginia unfair trade
practices statute); Anschultz v. Conn. Gen. Life Ins. Co., 850 F.2d
1467, 1468-69 (11th Cir. 1988) (Florida insurance statute).
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