United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
July 1, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
__________________________ Clerk
No. 02-30188
__________________________
CHERYL MAYEAUX, RAYMOND GERMAIN,
and DR. AND MRS. EDWARD S. HYMAN,
Plaintiffs-Appellants,
versus
LOUISIANA HEALTH SERVICE AND
INDEMNITY COMPANY (d/b/a BLUE CROSS
& BLUE SHIELD OF LOUISIANA),
Defendant-Appellee.
___________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
___________________________________________________
Before DAVIS, WIENER, and STEWART, Circuit Judges.
WIENER, Circuit Judge:
Cheryl Mayeaux, her husband Raymond Germain, and her treating
physician and his wife, Dr. and Mrs. Edward S. Hyman (collectively
the “Plaintiffs”) sued Louisiana Health Services and Indemnity
Company, d/b/a Blue Cross and Blue Shield of Louisiana (“BCBS”).
The Plaintiffs asserted various causes of action alleged to have
arisen from BCBS’s denial of insurance coverage for the costs of
Dr. Hyman’s treatment of Mayeaux’s illness with high doses of
antibiotics. After several years of litigation, the Plaintiffs
sought leave to amend and supplement their complaint for a third
time in an apparent attempt to defeat federal subject matter
jurisdiction. The district court denied the Plaintiffs’ motion for
leave to amend and subsequently entered summary judgment against
the Plaintiffs on all their claims. On appeal, the Plaintiffs
contest the district court’s denial of their motion for leave to
amend and, in the alternative, the district court’s grant of
summary judgment in favor of BCBS. We affirm.
I. FACTS AND PROCEEDINGS
A. BACKGROUND
In 1982, Mayeaux went to work for Coleman E. Adler & Sons
(“Adler”). The following year, she sought medical treatment from
Dr. Hyman who diagnosed Mayeaux as having a connective tissue
illness that he calls “systemic coccal disease” (“SCD”). Dr. Hyman
treated Mayeux’s condition with a so-called “High Dose Antibiotic
Treatment” (“HDAT”). In December 1993, BCBS began providing group
health insurance coverage for Adler’s employees under a
comprehensive medical benefit plan (the “Adler Plan”). BCBS denied
coverage for Mayeaux’s HDAT, stating that it was excluded under the
terms of the Adler Plan as experimental or investigational.1
The Adler Plan expressly excludes benefits for “[s]ervices or
supplies which are Investigational in nature” and defines
1
BCBS’s decision was the result of a utilization review by
BCBS’s Physician Advisory Council, a ten-physician board that
examined Dr. Hyman’s office notes, the claim form submitted by
him, and his description of the prescribed therapy.
2
“Investigational” as “the use of any treatment, procedure,
facility, equipment, drug device or supply not accepted, as
determined by [BCBS], as standard medical treatment of the
condition being tested, or any such items requiring federal or
other governmental agency approval not granted at the time services
were rendered.” BCBS maintains that its decision to deny coverage
for HDAT was purely a question of plan coverage and was not based
on any determination regarding the medical appropriateness of Dr.
Hyman’s procedures.
In April 1995, Mayeaux asked BCBS to reconsider its coverage
decision, but BCBS refused. Counsel for the parties exchanged a
series of letters in which Mayeaux’s lawyer challenged BCBS’s
refusal to cover the HDAT. At one point in that exchange, counsel
for BCBS invited Mayeaux to obtain a second medical opinion in
support of the HDAT therapy. Mayeaux submitted an opinion from Dr.
Quentin Deming that concurred with Dr. Hyman’s prescribed
treatment, but BCBS continued to deny coverage.
B. COURT PROCEEDINGS
In 1995, the Plaintiffs filed suit in Louisiana state court
seeking damages allegedly resulting from BCBS’s failure to pay for
Mayeaux’s HDAT, as well as bad faith and fraud. BCBS removed the
case to federal court invoking federal subject matter jurisdiction
because Mayeaux was asserting, inter alia, a claim for benefits
under an ERISA-governed plan. The district court allowed the
Plaintiffs to amend their complaint to seek a declaratory judgment
3
of Mayeaux’s right to receive future benefits under the Adler Plan.
Protracted discovery ensued.
In 1997, over BCBS’s objection, the district court permitted
the Plaintiffs to supplement and amend their complaint a second
time to add state law causes of action for unfair trade practices,
intentional interference with contract, and defamation. Discovery
continued until April 1998, when the district court closed the case
administratively until we ruled on two appeals that were pending.2
In February 2001, the Plaintiffs filed a motion to reopen this
case, and shortly thereafter moved, for a third time, to supplement
and amend their complaint. This time, the Plaintiffs proposed to
dismiss Mrs. Hyman as a plaintiff and to add BCBS Medical Director,
Dr. James Gengelbach, as a defendant. In the proposed amendment,
the Plaintiffs alleged that Dr. Gengelbach (1) breached his duty of
2
These cases were Moore v. Ashland Chem., 151 F.3d 269 (5th
Cir. 1998) (en banc) and Pick v. Am. Med. Sys., Inc., 198 F.3d
241 (5th Cir. 1999) (unpublished). In Moore, we effectively
affirmed a district court’s exclusion of a physician’s opinion on
the causal relationship between the plaintiff’s exposure to
industrial chemicals and his pulmonary illness. 151 F.3d at 279.
Likewise, in Pick, we ultimately concluded that Dr. Hyman’s
“inability to objectively demonstrate his method’s accuracy,”
slip op. at 2, 6, supported the exclusion of his medical
diagnosis that a patient suffered from SCD. We also affirmed the
Daubert exclusion of Dr. Hyman’s opinion testimony that the
defendant’s penile prosthesis could cause SCD. Id. at 2, 7. We
further held that the district court could exclude Dr. Deming’s
opinion that the plaintiff suffered from SCD, because Dr. Deming
reached his conclusion by examining medical slides prepared using
Dr. Hyman’s “scientifically unreliable” method. Id. at 7. See
Pick v. Am. Med. Sys., Inc., 958 F. Supp. 1151, 1174-79 (E.D. La.
1997).
4
care under Louisiana state law, (2) conspired to retaliate against
Dr. Hyman, (3) committed unethical practices, and (4) intentionally
caused Mayeaux injury. The Plaintiffs further alleged that BCBS
(1) was liable for Dr. Gengelbach’s actions under the theory of
respondeat superior, (2) breached an implied warranty, and (3)
breached its duty of good faith and fair dealing. Importantly, in
their proposed amended complaint, the Plaintiffs specifically
disavowed any claim against BCBS for denial of benefits. The
magistrate judge denied leave to amend; and, on review of the
magistrate judge’s order, the district court affirmed.
BCBS filed three separate summary judgment motions regarding
the Plaintiffs’ state and federal causes of action. Relying on
ERISA preemption, the district court granted summary judgment to
BCBS on all the Hymans’ claims. The district court also ruled that
Mayeaux’s denial-of-benefits claim was governed by ERISA and that
there was no genuine issue of material fact regarding whether BCBS
abused its discretion in denying coverage. The district court
therefore granted summary judgment in favor of BCBS and dismissed
the remainder of Mayeaux’s state law claims as preempted. The
Plaintiffs timely filed their notice of appeal.
II. ANALYSIS
A. STANDARD OF REVIEW
We review the district court’s denial of leave to amend a
complaint under Federal Rule of Civil Procedure 15 for abuse of
5
discretion.3 Because of the liberal pleading presumption
underlying Rule 15(a), we have acknowledged that the term
“discretion” in this context “may be misleading, because FED. R.
CIV. P. 15(a) evinces a bias in favor of granting leave to amend.”4
As a result, absent a “substantial reason” such as undue delay, bad
faith, dilatory motive, repeated failures to cure deficiencies, or
undue prejudice to the opposing party,5 “the discretion of the
district court is not broad enough to permit denial.”6 Stated
differently, district courts must entertain a presumption in favor
of granting parties leave to amend.
We review a district court’s grant of summary judgment de
novo.7 Summary judgment is appropriate when, viewing the evidence
and all justifiable inferences in the light most favorable to the
non-moving party, there is no genuine issue of material fact, and
3
Lowrey v. Texas A & M Univ. Sys., 117 F.3d 242, 245 (5th
Cir. 1997).
4
Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863, 872 (5th
Cir. 2000) (internal quotations and citations omitted).
5
This oft-cited list of justifications was pronounced by
the Supreme Court in Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct.
227, 230 (1962).
6
Martin’s Herend Imports, Inc. v. Diamond & Gem Trading
United States of America Co., 195 F.3d 765, 770 (5th Cir. 1999);
Stripling, 234 F.3d at 872.
7
Hodges v. Delta Airlines, Inc., 44 F.3d 334, 335 (5th Cir.
1995) (en banc).
6
the moving party is entitled to judgment as a matter of law.8 If
the moving party meets its burden, the non-movant must designate
specific facts showing there is a genuine issue for trial.9
B. DENIAL OF THE PLAINTIFFS’ THIRD ATTEMPT TO AMEND
In March 2001, the district court entered a preliminary
pretrial conference order that gave the parties thirty days in
which to file any final amendments. Within the prescribed period,
the Plaintiffs filed a motion for leave to supplement and amend
their complaint for a third time (the district court had allowed
two previous amendments). Because the Plaintiffs’ filing was
considered to be somewhat incoherent, the magistrate judge ordered
the Plaintiffs “to provide opposing counsel with a comprehensive
pleading that they propose to file,” and offered BCBS an
opportunity to submit a supplemental opposition. In response, the
Plaintiffs filed what they styled as a “Restated Complaint.”
BCBS opposed this third amendment on two principal grounds.
First, BCBS asserted that the Plaintiffs’ amendment would be
unfairly prejudicial because it would radically change the nature
of the litigation after extensive discovery and pretrial activity,
and only five months before the case was scheduled for trial.
Second, BCBS argued that leave to amend should be denied as futile
8
Hunt v. Cromartie, 526 U.S. 541, 552, 119 S. Ct. 1545,
1551-52 (1999); FED. R. CIV. P. 56(c).
9
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.
1994) (en banc).
7
because the new claims proposed by the Plaintiffs were preempted by
ERISA.
In denying the Plaintiffs’ motion for leave to amend, the
magistrate judge stated that “[t]he state law claims which
plaintiff attempts to assert appear to be preempted by ERISA.” The
magistrate judge further observed that “the claims are not new and
should have been brought far earlier than now.” The district court
affirmed the magistrate judge’s ruling, declaring that “[t]he
proposed amendment to the complaint is untimely; further, it seeks
to add state law claims that are preempted by ERISA.”
1. Timeliness
The Plaintiffs’ motion for leave to amend was filed well
within the time prescribed by the trial court in its pretrial
conference order. Neither the district court nor the magistrate
judge made any express findings that the Plaintiffs acted in bad
faith or with a dilatory motive or that BCBS would be prejudiced by
the amendment. “The Supreme Court has explicitly disapproved of
denying leave to amend without adequate justification.”10 We have
consistently expressed our “strong preference for explicit reasons”
and “indicated the disfavor with which we view district court
denials of amendments without stated reasons.”11 In light of the
10
Lowrey, 117 F.3d at 245 (emphasis added) (citing Foman,
371 U.S. at 182, 83 S. Ct. at 230).
11
Rhodes v. Amarillo Hosp. Dist., 654 F.2d 1148, 1153-54
(5th Cir. 1981) (emphasis added).
8
presumption in favor of allowing pleading amendments, courts of
appeals routinely hold that a district court’s failure to provide
an adequate explanation to support its denial of leave to amend
justifies reversal.12
When the reason for the denial is “readily apparent,”13
however, a district court’s failure to explain adequately the basis
for its denial “is unfortunate but not fatal to affirmance” if the
record reflects “ample and obvious grounds for denying leave to
amend.”14 This is such a case. Our examination of the procedural
12
See, e.g., Howey v. United States, 481 F.2d 1187, 1191-92
(9th Cir. 1973) (holding that a district court’s conclusory
denial of leave to amend was an abuse of discretion); Gootee v.
Colt Indus., Inc., 712 F.2d 1057, 1065 n.7 (6th Cir. 1983)
(remanding the district court’s unexplained denial of leave to
amend with instructions to “either allow the amendment or explain
the basis upon which it refuses to ‘freely’ grant it”); Pittston
Co. v. United States, 199 F.3d 694, 706 (4th Cir. 1999)
(reversing the district court when “in its order denying the
motion for leave to amend, [the court] did not indicate that it
found any bad faith on Pittston’s part and did not identify how
it believed the Government might be prejudiced by the late
amendment”). See also Duggins v. Steak ’N Shake, Inc., 195 F.3d
828, 834 (6th Cir. 1999) (noting the importance of the need for
the district court to give reasons for its decision to deny leave
to amend); Doherty v. Davy Songer, Inc., 195 F.3d 919, 928 (7th
Cir. 1999) (remanding to the district court for findings of
prejudice where the district court failed to articulate its
reasons for denying leave to amend).
13
Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 597 (5th
Cir. 1981). See also Foman, 371 U.S. at 182, 83 S. Ct. at 230
(recognizing that the reason for denying leave to amend may be
“apparent or declared”).
14
Rhodes, 654 F.2d at 1153-54. Accord Feldman v. Am. Mem’l
Life Ins. Co., 196 F.3d 783, 793 (7th Cir. 1999) (“Although the
district court did not articulate its basis for decision, denial
of a motion to amend pleadings without explanation does not
constitute abuse of discretion if the delay and prejudice that
9
history of this action leaves us with a definite and firm
conviction that BCBS and Dr. Genegelbach would have suffered undue
prejudice if the district court had allowed the Plaintiffs’
proposed amendments. It is true that the Plaintiffs motion for
leave to amend was not “untimely” in the sense of being filed
outside the deadline prescribed in the preliminary pretrial
conference order. And, we know that delay alone is an insufficient
basis for denial of leave to amend: The delay must be undue, i.e.,
it must prejudice the nonmoving party or impose unwarranted burdens
on the court.15 The Plaintiffs’ motion was certainly “untimely” in
light of the procedural history and posture of the case. The
district court was obviously concerned that the Plaintiffs had
waited until such a late stage in the proceedings before seeking
leave to assert these amended claims, which —— if granted —— would
work a massive change in the nature and direction of the case.
2. Fundamental Alteration of the Case
In this context, we must determine whether the proposed
amendment (1) was merely proposing alternative legal theories for
recovery on the same underlying facts or (2) would fundamentally
would result from such amendment was apparent.”).
15
See Dussouy, 660 F.2d at 598 & n.2; Duggins, 195 F.3d at
834; Doherty v. Davy Songer, Inc., 195 F.3d 919, 922, 927 & n.5
(7th Cir. 1999); Bell v. Allstate Life Ins. Co., 160 F.3d 452,
454 (8th Cir. 1998); Moore v. City of Paducah, 790 F.2d 557, 562
(6th Cir. 1986).
10
alter the nature of the case.16 Amendments that fall into the
former category generally should be permitted, as they advance Rule
15(a)’s policy of promoting litigation on the merits rather than on
procedural technicalities. Amendments that fall into the latter
category, however, may be denied if the circumstances warrant.
Here, they clearly do.
The Plaintiffs’ so-called “Restated Complaint” —— an unabashed
attempt to avoid ERISA preemption and defeat federal court
jurisdiction —— essentially pleaded a fundamentally different case
with new causes of action and different parties. As stated by the
Eighth Circuit, “when late tendered amendments involve new theories
of recovery and impose additional discovery requirements, courts
[of appeal] are less likely to find an abuse of discretion due to
the prejudice involved.”17 In their Restated Complaint, the
Plaintiffs were effectively reconstructing the case anew, after it
had been pending in the district court for years and was nearing
the close of extensive discovery. Indeed, the Plaintiffs were
16
See Lowrey, 117 F.3d at 246 n.2.
17
Bell, 160 F.3d at 454. See also Little v. Liquid Air
Corp., 952 F.2d 841, 846 (5th Cir. 1992) (affirming order denying
leave to amend where the amended complaint would have
“established an entirely new factual basis for the plaintiffs’
claims” and thus “radically altered the nature of trial on the
merits”), reinstated in relevant part, 37 F.3d 1069, 1073 & n.8
(5th Cir. 1994) (en banc); Morongo Band of Mission Indians v.
Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (“The new claims set
forth in the amended complaint would have greatly altered the
nature of the litigation and would have required defendants to
have undertaken, at a late hour, an entirely new course of
defense.”).
11
proposing to abandon Mayeux’s claim for medical benefits under the
ERISA Plan —— the claim that had been at the core of the
Plaintiffs’ case from the outset. We conclude that permitting the
amendment would have unduly prejudiced BCBS and Dr. Genegelbach,
the new defendant whom the Plaintiffs proposed to add to the suit.
The district court, therefore, did not abuse its discretion by
denying the Plaintiffs leave to amend.18
C. DISMISSAL OF MAYEAUX’S BENEFITS CLAIM
Mayeaux asserts two reasons why the trial court erred in
granting summary judgment dismissing her benefits claim. First,
Mayeaux insists that the letter from BCBS’s general counsel
inviting a second opinion was a contractual offer which, when she
accepted it by tendering Dr. Deming’s report, created a binding
obligation on BCBS’s part to provide benefits. Second, Mayeaux
challenges BCBS’s interpretation of the Adler Plan as precluding
coverage for Dr. Hyman’s prescribed treatment as investigative.
1. Letter Contract
Following BCBS’s denial of Mayeaux’s pre-authorization
request, counsel for the parties exchanged a series of letters
discussing the basis for BCBS’s decision. In one of these letters
to Mayeaux’s lawyer, BCBS’s general counsel stated:
Blue Cross and Blue Shield of Louisiana, as an insurer,
18
Because we affirm the district court’s denial of leave to
amend on grounds of undue prejudice to the opposing party, we
need not analyze the district court’s alternative holding
concerning futility.
12
is not obligated to pay for medical treatment which, in
our sole discretion, is not medically appropriate.
Further, we are not obligated to pay for the “trial and
error” practice of medicine. It may be true that Dr.
Hyman’s treatment is “good medicine”; however, the
manufacturer of the medication states otherwise and the
terms of our subscriber contract allow us to deny
benefits for this reason. Finally, I would like to make
it clear that we are not closed-minded regarding this
issue. We have urged our subscriber to seek the advice
of another physician and, if that physician agrees that
Dr. Hyman’s treatment is appropriate, then we will
continue to pay claims.19
Ignoring everything but the final sentence quoted, Mayeaux argues
that this statement was a legal offer, which she accepted by
submitting the concurring medical opinion of Dr. Deming. She
contends that the effect of the letter was “that the health insurer
[BCBS] gave up its discretionary authority to determine whether the
benefits were appropriate (medically necessary).”
In granting summary judgment in BCBS’s favor, the district
court observed that “even if that claim was not preempted by ERISA,
counsel’s letter attempting amicable settlement of an issue that
was clearly headed towards litigation did not create any
contractual relationship between the principles [sic] unless those
principles [sic] expressly gave the attorney authority to do so.”
Relying on Article 2997 of the Louisiana Civil Code, which requires
a principal to give authority “expressly” before a mandatary
(agent) can “enter into a compromise,”20 the district court
19
Emphasis added.
20
LA. CIV. CODE ANN. art. 2997(5) (West 1994 & Supp. 2003).
13
concluded that the letter from BCBS’s general counsel could create
no binding contractual agreement between Mayeaux and BCBS,
irrespective of Mayeaux’s proffer of Dr. Deming’s opinion.
The district court correctly granted summary judgment against
Mayeaux on her claim for breach of contract. When BCBS’s general
counsel sent the subject letter to Mayeaux’s attorney, this dispute
was plainly heading toward litigation. BCBS had consistently
maintained that its denial was based on the express exclusion of
investigational treatment from coverage under the Adler Plan.
Mayeaux’s attempt to create a state contractual obligation by
isolating a single sentence out of a single letter from BCBS’s
lawyer to hers —— a letter that was part of an extensive ongoing
dialogue between the parties’ attorneys —— is feckless. Indeed the
“four corners” of what Mayeaux would have us deem to be a binding
agreement between the parties would necessarily encompass the whole
chain of correspondence between their respective counsel; and
Article 2050 of the Louisiana Civil Code requires that “[e]ach
provision in a contract must be interpreted in light of the other
provisions so that each is given the meaning suggested by the
contract as a whole.”21
In light of the whole exchange, BCBS’s lawyer’s statement was
nothing more than an invitation for Mayeaux to demonstrate that the
HDAT was not investigational —— that it was, contrary to BCBS’s
21
LA. CIV. CODE ANN. art. 2050 (West 1994); see Brown v.
Drillers, Inc., 630 So. 2d 741, 748 (La. 1994).
14
position, “standard medical treatment” generally accepted by the
wider medical community. On summary judgment, Mayeaux adduced no
evidence to illustrate an intention by BCBS to relinquish its
discretionary authority to determine what constitutes standard
medical treatment under the Adler Plan. Mayeaux’s attempt to
characterize BCBS’s letter as an offer inviting her acceptance
misses the mark.22
2. Plan Administrator’s Denial of Benefits
Mayeaux also contends that the Adler Plan’s administrator
improperly denied coverage for Dr. Hyman’s prescribed therapy and
that the district court erroneously affirmed that decision. We
disagree.
As a preliminary matter, Mayeaux advances that the district
court failed to apply the correct standard of review. Mayeaux
maintains that the Adler Plan administrator’s decision is tainted
by a conflict of interest, requiring the district court to employ
our Vega case’s “sliding scale” standard of review to evaluate
whether there was an abuse of discretion.23 Mayeaux’s assertion in
this regard is baseless: The record makes clear that the district
22
Cf. Anthony v. Liberty Mut. Ins. Co., 759 So. 2d 910, 914
(La. App. 3d Cir. 2000).
23
See Vega v. Nat’l Life Ins. Svcs. Inc., 188 F.3d 287, 299
(5th Cir. 1999) (en banc); Gooden v. Provident Life & Accident
Ins. Co., 250 F.3d 329, 333 (5th Cir. 2001). We have made no
independent factual determination concerning whether the Adler
Plan’s administrator was, in fact, tainted by a conflict of
interest.
15
court expressly applied Vega and accorded the administrator’s
decision less than full deference.
The essence of Mayeaux’s substantive challenge to the Adler
Plan administrator’s decision is that the plan’s wording does not
contain an express exclusion for the “investigational use of
drugs.” Mayeaux’s argument is a red herring. As we explained
earlier,24 the Adler Plan specifically excludes benefits for
investigational treatments and any procedures that BCBS determines
not to be “standard medical treatment” for that particular
condition.
Simply put, Mayeaux has failed to identify sufficient record
evidence on appeal to support the Plaintiffs’ contention that HDAT,
as prescribed by Dr. Hyman for the connective tissue malady that he
diagnosed in Mayeaux, is “standard medical treatment.” Mayeaux, of
course, relies on Dr. Deming’s medical opinion to make this
showing. Even assuming arguendo that Dr. Deming’s opinion provided
some additional support for the Plaintiffs’ position that HDAT is
not purely investigational, we certainly cannot conclude that the
Adler Plan administrator’s decision was an abuse of discretion.
The administrator could readily have concluded, as he did, that one
concurring medical opinion is inadequate to establish that HDAT is
a “standard medical treatment.” As such, Mayeaux has failed to
show abuse of discretion by the administrator of the Adler Plan, so
24
See supra Part I.A.
16
the district court’s grant of summary judgment on Mayeaux’s denial-
of-benefits claim was proper.
D. THE PLAINTIFFS’ STATE LAW CLAIMS
We turn finally to the Plaintiffs’ state law claims. For the
reasons stated below, we affirm the district court’s grant of
summary judgment dismissing these claims.
1. State Law Tort Claims for Damages
Mayeaux and Germain contend that the district court erred in
granting summary judgment dismissing their tort claims for pain and
suffering, irreparable connective tissue damage, depression, loss
of consortium, loss of earning capacity, lost wages, mental
anguish, and attorney’s fees. We agree with the district court’s
holding that these claims are preempted by ERISA.
Mayeaux and Germain base their insistence that these state law
tort claims have not been preempted on the Supreme Court’s decision
in Pegram v. Herdrich.25 There, the Court held that mixed
eligibility and treatment decisions that were made by an HMO acting
through its physicians were not fiduciary acts under ERISA; and
that, as such, those mixed decisions could not give rise to an
ERISA breach of fiduciary duty claim.26
Pegram carved out a narrow class of state law claims from
ERISA conflict preemption. That carve-out was predicated on the
25
530 U.S. 211, 120 S. Ct. 2143 (2000).
26
Id. at 231-37, 120 S. Ct. at 2155-58.
17
defining feature of the HMO scheme as a combination of both insurer
and provider of medical services.27 In the traditional fee-for-
service context, treatment decisions are made by the patient’s
unconflicted physician based exclusively on his medical judgment
about the appropriate medical response: In contrast, eligibility
decisions are made subsequently by the insurer based on the
policy’s coverage for a particular condition or medical procedure.28
When an HMO makes benefits decisions through its physicians,
though, the structure of that business model allows for some
treatment decisions to converge with eligibility decisions.29 In
that context, such decisions consequently become “mixed” because
the eligibility determination cannot, in practical terms, be
untangled from physicians’ judgments about reasonable medical
treatment.30 As we recognized in Haynes v. Prudential Health Care,
“the [Pegram] Court pushed the door ajar to treat mixed eligibility
27
Id. 530 U.S. at 224, 120 S. Ct. at 2152; Rush Prudential
HMO, Inc. v. Moran, 536 U.S. 355, 367-70, 122 S. Ct. 2151, 2160-
62 (2002).
28
Pegram, 530 U.S. at 228, 120 S. Ct. at 2154.
29
See id. at 219-20, 120 S. Ct. at 2149. See also infra
text accompanying notes 35-37. We are cognizant that not all
HMOs share an identical structure, and we recognize the
possibility that the characteristics which make HMOs unique vis-
à-vis Pegram’s analysis could coalesce in another non-HMO, ERISA-
governed insurance model. There is no dispute, however, that
BCBS is a not an HMO and no allegation that BCBS has the salient
features of a physician-owned-and-operated HMO.
30
Id. at 229, 120 S. Ct. at 2154. See also infra text
accompanying note 37.
18
and treatment decisions as medical decisions for the purposes of
ERISA, but it did not sanction the blanket application of mixed
eligibility decision in all ERISA preemption cases.”31 Now, by
baldly characterizing BCBS’s interpretation of the Adler Plan as a
“mixed” decision, Mayeaux and Germain attempt to have us broaden
Pegram’s carve-out to cover the denial-of-benefits decision at
issue here. This we cannot do because we now know that the Supreme
Court rejects such an expansive reading of Pegram.
While this case was pending, the Supreme Court unanimously
decided Aetna Health Inc. v. Davila,32 a consolidated appeal of two
law suits by individuals who sued their HMOs for liability under
the Texas Health Care Liability Act (“THCLA”), a statute that
imposed a duty on health insurance carriers, HMOs, and other
entities managing health care plans “to exercise ordinary care when
making health care treatment decisions.”33 In holding that such
suits were completely preempted by ERISA, the Court’s decision in
Davila confirms the extreme narrowness of the scope of the mixed
31
313 F.3d 330, 335-36 (5th Cir. 2002). To be sure, in
Haynes we concluded simply that the plaintiff’s negligence
claims against his HMO were preempted by ERISA because the HMO
decision at issue was a pure eligibility decision, only
indirectly affecting the medical treatment sought by the
plaintiff. Id. at 337. We expressed no opinion about whether we
read Pegram to carve out all mixed decisions from ERISA
preemption. See id. at 336.
32
Nos. 02-1845, 03-83, 542 U.S. ___, --- S. Ct. ___, Slip
Op. (June 21, 2004).
33
TEX. CIV. PRAC. & REM. CODE ANN. § 88.002(a).
19
decision carve-out articulated in Pegram. Davila explains that
“[t]he fact that a benefits determination is infused with medical
judgments” does not necessarily convert the plan administrator’s
decision into a non-fiduciary act.34 Instead, the indispensable
pillar buttressing Pegram’s rationale for excluding mixed decisions
from being treated as fiduciary acts under ERISA was, as Davila
makes clear, the structure of the ERISA plan in question —— that
is, a physician-owned-and-operated HMO in which “[t]he plaintiff’s
treating physician was also the person charged with administering
plaintiff’s benefits.”35 As a result, Pegram has no application
outside the HMO context:
Pegram, in highlighting its conclusion that “mixed
eligibility decisions” were not fiduciary in nature,
contrasted the operation of “[t]raditional trustees
administer[ing] a medical trust” and “physicians through
whom HMOs act.” A traditional medical trust is
administered by “paying out money to buy medical care,
whereas physicians making mixed eligibility decisions
consume the money as well.” And, significantly, the
Court stated that “[p]rivate trustees do not make
treatment judgments.” But a trustee managing a medical
trust undoubtedly must make administrative decisions that
require the exercise of medical judgment.36
Davila thus expressly rejects any effort to extend Pegram’s mixed-
decision principle to cover traditional indemnity insurers like
34
Davila, 542 U.S. at ___, --- S. Ct. at ___, Slip Op. at
17.
35
Id. at ___; --- S. Ct. at ___, Slip Op. at 16 (citing
Pegram, 530 U.S. at 228).
36
Id. at ___; --- S. Ct. at ___, Slip Op. at 17 (quoting
Pegram, 530 U.S. at 231-232).
20
BCBS:
Since administrators making benefits determinations, even
determinations based extensively on medical judgments,
are ordinarily acting as plan fiduciaries, it was
essential to Pegram’s conclusion that the decisions
challenged there were truly mixed eligibility and
treatment decisions, i.e., medical necessity decisions
made by the plaintiff’s treating physician qua treating
physician and qua benefits administrator. Put another
way, the reasoning of Pegram only makes sense where the
underlying negligence also plausibly constitutes medical
maltreatment by a party who can be deemed to be a
treating physician or such a physician’s employer.37
We, therefore, hold that Mayeaux and Germain’s state law tort
claims are completely preempted by ERISA and affirm the district
court’s grant of summary judgment in favor of BCBS.
2. The Remaining State Law Claims
The Plaintiffs also appeal the district court’s summary
judgment dismissal of the Hymans’ state law claims, which were
grounded in negligence, unfair trade practices, defamation, and
intentional interference with contracts. We affirm the district
court’s dismissal of these causes of action via a grant of summary
judgment, however, because these remaining claims are indisputably
preempted by ordinary conflict preemption under § 514 of ERISA.
ERISA preempts “any and all State laws insofar as they may now
or hereafter relate to any employee benefit plan.”38 Although the
term “relate to” is intended to be broad, “pre-emption does not
37
Id. at ___; --- S. Ct. at ___, Slip Op. at 19 (internal
quotation marks and citations omitted).
38
29 U.S.C. § 1144(a) (2000).
21
occur...if the state law has only a tenuous, remote, or peripheral
connection with covered plans, as is the case with many laws of
general applicability.”39 If the facts underlying a state law claim
bear some relationship to an employee benefit plan, we evaluate the
nexus between ERISA and state law in the framework of ERISA’s
statutory objectives.40
Relevant statutory objectives include establishing uniform
national safeguards “with respect to the establishment, operation,
and administration of [employee benefit] plans,” and “establishing
standards of conduct, responsibility, and obligation for
fiduciaries of employee benefit plans.”41 Thus, ERISA preempts a
state law claim if a two-prong test is satisfied: (1) The state law
claim addresses an area of exclusive federal concern, such as the
right to receive benefits under the terms of an ERISA plan; and (2)
the claim directly affects the relationships among traditional
ERISA entities —— the employer, the plan and its fiduciaries, and
the participants and beneficiaries.42
We agree with the district court that “Dr. Hyman’s claims
39
New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645, 661, 115 S. Ct. 1671,
1680 (1995).
40
Id. at 656, 115 S. Ct. at 1677.
41
29 U.S.C. § 1001(a), (b) (2000).
42
Smith v. Texas Children’s Hosp., 84 F.3d 152, 155 (5th
Cir. 1996); Hubbard v. Blue Cross & Blue Shield Ass’n, 42 F.3d
942, 945 (5th Cir. 1995).
22
relate to an ERISA plan because they challenge [BCBS]’s handling,
review, and disposition of a request for coverage. The purpose of
these proceedings is to collaterally attack [BCBS’s] determination
of the actual obligations under the terms of the insurance policy.”
This reasoning is sound: If a medical practitioner could
collaterally challenge a plan’s decision not to provide benefits,
he would directly affect the relationship between the plan and its
beneficiary, two traditional ERISA entities. That clearly cannot
be allowed, so Dr. Hyman’s negligence and unfair trade practice
claims cannot survive ERISA conflict preemption.
Dr. Hyman’s state law claims for interference with contract
and defamation also fail the conflict preemption test. To allow a
medical practitioner to sue for defamation and intentional
interference when an ERISA plan administrator decides that the plan
does not cover a particular medical treatment for a particular
participant or beneficiary would undoubtedly jeopardize the
relationships among the traditional ERISA entities, of which the
treating physician is not one. These are the sort of claims that
go to the very heart of the ERISA administration process. We
further agree with the district court that “[e]ven though these
claims are labeled by Plaintiffs as state law, the claims arose
from the manner in which [BCBS] determined not to cover Hyman’s
high dosage antibiotic treatments and the subsequent notification
23
to patients that HDAT would not be covered under the Adler Plan.”43
Thus, we have no difficulty holding that “the existence of an
[ERISA] plan is a critical factor in establishing liability” for
the state law causes of action asserted by Dr. Hyman.44 We conclude
that, as such, they are conflict preempted.
III. CONCLUSION
The district court’s denial of the Plaintiffs’ third motion
for leave to amend their complaint was not an abuse of discretion.
The motion was untimely in the sense of coming so far into the
progress of the case and so close to the scheduled commencement of
trial. Permitting the amendment would have been unfairly
prejudicial to BCBS and Dr. Gengelbach by effecting so profound a
shift in the nature of the suit. And, the district court’s grant
of summary judgment to BCBS on the Plaintiffs’ ERISA and state law
claims was clearly proper and free of reversible error. The
judgments and orders of the district court are, in all respects,
AFFIRMED.
43
See Davila, 542 U.S. at ___; --- S. Ct. at ___, Slip Op.
at 12 (holding that the particular label affixed to a cause of
action does not affect whether the claim is preempted).
44
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139-40,
111 S. Ct. 478, 483 (1990).
24