Golas v. Homeview, Inc.

United States Court of Appeals
For the First Circuit

No. 96-1696

CHARLENE TAGAN GOLAS, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF
DONALD M. GOLAS,
Plaintiff, Appellant,

v.

HOMEVIEW INC. AND PAUL REVERE LIFE INSURANCE COMPANY,
Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before
Stahl, Circuit Judge,

Bownes, Senior Circuit Judge,

and Lynch, Circuit Judge.

John J. Weltman, with whom Lawson & Weitzen was on brief, for

appellant.

Joan O. Vorster, with whom Joseph M. Hamilton and Mirick,

O'Connell, DeMallie & Lougee were on brief, for appellee Paul Revere

Life Insurance Company.

February 7, 1997

LYNCH, Circuit Judge. This is an appeal from the
LYNCH, Circuit Judge.

denial of plaintiff's motion to amend her complaint to add

Ellen Kaplan, an insurance broker, as a defendant in a suit

arising out of Paul Revere Life Insurance Company's refusal

to pay disability insurance benefits to plaintiff's late

husband when he was suffering from his final illness. In her

motion to amend, plaintiff sought to add a new party

defendant on a state law claim in an action which the

district court was simultaneously dismissing against the

original defendants as being preempted by federal law. We

review the denial of the motion to amend for abuse of

discretion and conclude that there is no such abuse under the

circumstances. We need not and do not reach the issue of

whether the state law misrepresentation claim is preempted by

the Employee Income Security Act of 1974, 29 U.S.C. 1001 et

seq. ("ERISA").

In August 1992, plaintiff's husband obtained a

disability insurance policy through his employer, HomeView

Inc. One month later he was diagnosed with bone cancer and

sought disability benefits. His request was denied as being

related to a preexisting condition for which he sought

treatment during the enrollment period.

After her husband's death, plaintiff brought suit

in Massachusetts state court against Paul Revere and HomeView

based on state law misrepresentation theories. The complaint

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alleged that HomeView supplied its employees, including

Donald Golas, with a pamphlet, prepared by Paul Revere,

explaining the rules governing preexisting conditions.

Plaintiff contends that this pamphlet was misleading. It

indicated that an insured individual could obtain disability

benefits as long as the disability was not caused by a

sickness that required him to consult a doctor during the

three month enrollment period. Plaintiff claims that, in

reliance on this statement, her husband visited a doctor

during the enrollment period for administrative purposes

only. However, he was not diagnosed with bone cancer at that

time. It was this visit, plaintiff alleges, that made him

ineligible to receive benefits. Plaintiff argues that,

absent the flawed information, her husband would have waited

until after the enrollment period ended to visit the doctor

and therefore would have been eligible for benefits.

Plaintiff sought damages in state court for her

late husband's emotional distress and for her own loss of

consortium. Plaintiff simultaneously brought suit in federal

court against the same two defendants for benefits allegedly

due under the disability policy pursuant to ERISA. That

ERISA case continues to be pending in the District of

Massachusetts. Defendants removed the state law suit to

federal court, arguing that those claims were also governed

by ERISA. The two cases were not consolidated.

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Once in federal court, Paul Revere moved to dismiss

the state law claims, arguing that they were preempted by

ERISA.1 Plaintiff countered by moving for a remand to state

court. While these motions were pending, plaintiff moved to

amend the complaint to add Kaplan as a defendant, asserting

that, since filing her initial action, she had "discovered

that critical misrepresentations upon which her husband

relied were made to him by Ellen Kaplan." The complaint

alleged that, "[p]rior to accepting disability coverage, Mr.

Golas spoke to Ellen Kaplan who made false statements to him

regarding his coverage under the disability policy," and

that, "[a]s the broker responsible for overseeing the

provision of disability insurance from Paul Revere to

HomeView employees, Ms. Kaplan owed Mr. Golas a duty to make

sure she did nothing to interfere with his obtaining coverage

under the policy."

Defendants opposed the motion to add Kaplan as a

defendant, arguing that amendment would be futile because the

claim against Kaplan would also be preempted by ERISA.

Plaintiff argued that a claim against Kaplan would not be

preempted by ERISA because Kaplan was not an agent of

HomeView or Paul Revere, but an independent insurance broker.

1. HomeView made its own motion to dismiss some three months
later, incorporating by reference Paul Revere's arguments in
support.

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The district court adopted the magistrate's

recommendation to grant the motion to dismiss the state law

claims against HomeView and Paul Revere based on ERISA

preemption. The district court went on to consider whether

to adopt the magistrate's recommendation to deny plaintiff's

motion to amend the complaint to add Kaplan as a defendant.

Having already decided to dismiss the claims against Paul

Revere and HomeView, the district court was faced with an

anomalous situation. Plaintiff wished to add a defendant to

a case which was being dismissed as to the two original

defendants. In addition, the ERISA cause of action against

Paul Revere and HomeView was pending in the same court but in

a different action from the one in which the motion to amend

was filed. The district court's ultimate decision to adopt

the magistrate's recommendation to deny the motion to amend

the complaint must be viewed in this practical and procedural

context.

Golas appeals only from the denial of the motion to

amend the complaint to add Kaplan as a defendant and not from

the dismissal of the underlying action on preemption grounds.

Review is for abuse of discretion. Reid v. New Hampshire, 56

F.3d 332, 342 (1st Cir. 1995); see also Carlo v. Reed Rolled

Thread Die Co., 49 F.3d 790, 792 (1st Cir. 1995) (noting that

the appeals court will "generally defer to a district court's

decision to deny leave to amend where the reason is apparent

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or declared" (internal quotation marks and citation

omitted)). It is well-settled, as the concurring opinion

from our respected colleague points out, that, when a

district court makes an error of law, by definition it abuses

its discretion. However, that is not the issue that concerns

us here. The facts and circumstances of the case necessarily

influence our evaluation of the denial of the motion to amend

the complaint, and here, they make it unnecessary to reach

the ERISA preemption issue.

We note that at the time the motion was denied, the

two original defendants had been dismissed and there was no

diversity jurisdiction over Kaplan.2 Furthermore, a parallel

ERISA action was pending against HomeView and Paul Revere in

2. The concurrence argues that the ERISA issue must be
reached because issues of jurisdiction must be addressed
first and, in the absence of diversity, there is no other
basis for federal jurisdiction. This is incorrect. We
disagree with the premise that the court could not address
the motion to amend without first addressing the ERISA issue.
Second, even if the claim against Kaplan were not preempted
by ERISA, the district court would have supplemental
jurisdiction over the claim, because the other two state law
claims had properly been before the district court. In any
civil action over which the district courts have original
jurisdiction, they also have supplemental jurisdiction over
all other claims that form part of the same case or
controversy. 28 U.S.C. 1367. The district court had
jurisdiction over the state law claims against Paul Revere
and HomeView under the complete preemption doctrine.
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987).

This is sufficient to confer original jurisdiction on the
district courts. Franchise Tax Bd. v. Construction Laborers

Vacation Trust, 463 U.S. 1, 23-24 (1983); American

Policyholders Ins. Co. v. Nyacol Prods., Inc., 989 F.2d 1256,

1263 (1st Cir. 1993).

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federal court. Federal courts have traditionally been more

reluctant to exercise jurisdiction over pendent parties than

over pendent claims. See, e.g., Lykins v. Pointer, Inc., 725

F.2d 645, 649 (11th Cir. 1984).3 Under these circumstances,

the district court could not have abused its discretion when

it denied plaintiff's motion to amend the complaint to add

Kaplan as the sole defendant. Even if our review were de

novo, as the concurrence suggests, we could affirm on any

legal ground supported in the record. See, e.g., Eagan v.

United States, 80 F.3d 13, 16 (1st Cir. 1996); Levy v. FDIC,

7 F.3d 1054, 1056 (1st Cir. 1993).

We therefore uphold the denial of the motion to

amend, albeit on different grounds than those relied on by

the district court, and thus we express no opinion on the

preemption issue. This opinion does not, as the concurrence

claims, uphold the district court's preemption decision sub

silentio. Plaintiff may decide to attempt to add Kaplan as a

defendant in the pending ERISA action.4 The district court's

3. The codification of the supplemental jurisdiction
doctrine in 1990, which makes clear that such jurisdiction
includes the joinder of additional parties, 28 U.S.C.
1367(a), does not change the prudential analysis.

4. It is true that the three-year statute of limitations for
a state law based fraudulent misrepresentation claim expired,
at the very latest, in early 1996. However, to the extent
that plaintiff has a viable state law claim (on which we
express no opinion), the claim could apparently still be
brought, within a year of the date of this opinion, pursuant
to Mass. Gen. Laws ch. 260, 32.

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ruling that any claim against Kaplan would be preempted

presents no bar. It has no precedential or issue preclusive

effect. If a motion is made to add Kaplan to the ERISA

action, the court will have the ability to consider the

preemption issue anew in light of the facts that have been

developed in discovery. Cf. Boston Children's Heart Found.,

Inc. v. Nadal-Ginard, 73 F.3d 429, 439-40 (1st Cir. 1996)

(absent precedent on closely related issue, the inquiry as to

whether state law is preempted requires the court to look at

the facts of the particular case).5

The decision of the district court is affirmed.

5. At oral argument we were advised that there was discovery
taken on the issue of whether Kaplan was an agent, either of
HomeView or of Paul Revere. The proffered amended complaint
is ambiguous on this issue, although the concurrence assumes
that Kaplan was not an agent of either company. In Kaplan's
deposition testimony attached to Golas' brief, Kaplan states
that she held an employee benefits meeting for HomeView
employees to explain the Paul Revere disability policy and an
Aetna insurance policy that was also being offered to
HomeView employees. This undermines Golas' argument that
Kaplan was an independent broker. The facts may by now be
established, but no findings are before us. However, if
Kaplan was an agent of either of the two companies, the
factual assumption underlying the concurrence is incorrect,
and the resulting legal conclusions unjustified. Indeed, if
Kaplan is an agent of HomeView, the case would fall squarely
within the ambit of Vartanian v. Monsanto Co., 14 F.3d 697

(1st Cir. 1994).

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BOWNES, Senior Circuit Judge, concurring. I concur
BOWNES, Senior Circuit Judge, concurring.

in the result, but, with respect, I do not think that this

case can be disposed of by the conclusory assertion that the

district court did not abuse its discretion in denying

plaintiff's motion to amend her complaint so as to add Ellen

Kaplan as a defendant. In his report and recommendation,

adopted by the district court, the magistrate judge stated

the following reason for denying the motion to amend the

complaint:

I find that Plaintiff['s] attempt to add
Ellen Kaplan as a party defendant and to
assert against her a claim for
misrepresentation would be futile because
such a claim would be pre-empted by
ERISA.

It is clear that the district court's denial of the

motion was not an exercise of discretion, but was compelled

by its legal ruling that the claim against Kaplan would be

pre-empted by ERISA. Accordingly, the district court's
.

denial of the motion is subject to review de novo, rather

than for abuse of discretion. See Carlo v. Reed Rolled

Thread Die Co., 49 F.3d 790, 793 (1st Cir. 1995). The

Supreme Court has stated unequivocally that "[a] district

court by definition abuses its discretion when it makes an

error of law." Koon v. United States, 116 S. Ct. 2035, 2047

(1996) (citation omitted).

To be sure, in the ordinary case, the decision

whether to grant or deny a motion to amend the complaint is

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discretionary with the trial court, and so is normally

reviewed for abuse of discretion; but the case before us is

not ordinary in this respect. Here it is clear that the

motion was denied because of the magistrate's stated

conclusion that the claim against Kaplan was pre-empted as a

matter of law, and his unstated but apparent corollary

conclusion that, as a result, he was deprived of discretion

(by the doctrine of futility) to grant the motion.

Thus, the question before us is not whether the

district court abused its discretion in denying plaintiff's

motion to amend the complaint, but whether the basis for this

ruling was legally correct. If the district court's ruling

was erroneous, as I think it was, then the motion to amend

was not "futile" and should not have been denied on that

ground. As a consequence, the district court lacks

jurisdiction to decide the merits of the state-law

misrepresentation claim because, as the majority acknowledges

inferentially, the only basis for federal jurisdiction is

ERISA pre-emption. I do not think, therefore, that this

appeal can be decided on a principled basis without

discussing the scope of ERISA pre-emption.

The majority purports to "express no opinion on the

preemption issue," and suggests that the plaintiff could

still pursue her claim against Kaplan by seeking to amend her

pending ERISA complaint so as to add Kaplan as a defendant.

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The majority fails to recognize, however, that the practical

effect of its disposition of the case is to uphold the

district court's pre-emption ruling sub silentio, and to

leave the plaintiff with no recourse in any forum. A finding

of no pre-emption results in dismissal of the claim for lack

of federal jurisdiction and leaves the plaintiff free to seek

redress in state court. In contrast, the majority's refusal

to address the merits of the district court's pre-emption

ruling is not only analytically unsound, it also leaves the

plaintiff exactly where she started -- with her state-court

action subject to removal to federal court on the ground of

pre-emption and with pre-emption as a bar to recourse in

federal court.

For the reasons that follow, I conclude that ERISA

does not pre-empt plaintiff's misrepresentation claim against

Kaplan and that, therefore, the proper disposition of this

case would be to deny plaintiff's motion for lack of federal

jurisdiction over the purported state-law claim, leaving the

plaintiff free to pursue the claim in the state court.6

I.
I.

I start my analysis with the key words of the

statute bearing on pre-emption:

Except as provided in subsection (b)
of this section, the provisions of this

6. I, of course, intimate no opinion as to the merits of
plaintiff's state-law claim.

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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

. . . .

29 U.S.C. 1144(a) (emphasis added).

For purposes of this section:
(1) The term "State law"
includes all laws, decisions,
rules, regulations, or other
State action having the effect
of law, of any State.

29 U.S.C. 1144(c)(1).

The Supreme Court teaches that the pre-emption

provision of 514(a), codified at 29 U.S.C. 1144(a), was

intended

to ensure that plans and plan sponsors
would be subject to a uniform body of
benefits law; the goal was to minimize
the administrative and financial burden
of complying with conflicting directives
among States or between States and the
Federal Government. Otherwise, the
inefficiencies created could work to the
detriment of plan beneficiaries. . . .
Particularly disruptive is the potential
for conflict in substantive law. It is
foreseeable that state courts, exercising
their common law powers, might develop
different substantive standards
applicable to the same employer conduct,
requiring the tailoring of plans and
employer conduct to the peculiarities of
the law of each jurisdiction. Such an
outcome is fundamentally at odds with the
goal of uniformity that Congress sought
to implement.

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990)

(citations omitted).

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In concluding that plaintiff's misrepresentation

claims were pre-empted, the magistrate judge relied on Carlo

v. Reed Rolled Thread Die Co., 49 F.3d 790. In Carlo we

stated

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the ERISA pre-emption doctrine as follows:

Section 514 of ERISA supersedes "any
and all State laws insofar as they may
now or hereafter relate to any employee

benefit plan. . . ." 29 U.S.C. 1144(a)
(emphasis added). "The term 'State Law'
includes all laws, decisions, rules,
regulations, or other State action having
the effect of law, of any State." 29
U.S.C. 1144(c)(1). The Supreme Court
has established that "a law 'relates to'
an employee benefit plan . . . if it has
a connection with or reference to such a
plan." Ingersoll-Rand Co. v. McClendon,

498 U.S. 133, 139, 111 S. Ct. 478, 483,
112 L. Ed. 2d 474 (1990) (quoting Shaw v.

Delta Air Lines, Inc., 463 U.S. 85, 96-

97, 103 S. Ct. 2890, 2900, 77 L. Ed. 2d
490 (1983)). "Under this 'broad common-
sense meaning,' a state law may 'relate
to' a benefit plan, and thereby be pre-
empted, even if the law is not
specifically designed to affect such
plans, or the effect is only indirect."
Id. (quoting Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41, 47, 107 S. Ct.

1549, 1553, 95 L. Ed. 2d 39 (1987)).

Id. at 793 (footnote omitted).

Carlo, a leading case in this circuit on ERISA pre-

emption, see Degnan v. Publicker Indus., Inc., 83 F.3d 27, 29

(1st Cir. 1996), held that ERISA pre-empted the state-law

misrepresentation claims because they had "a connection with

or reference to" an employee benefit plan. Carlo, 49 F.3d at

794-95. But we have never held that Carlo sweeps all state-

law misrepresentation claims into the ERISA corner merely

because an employee benefit plan exists.

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In Boston Children's Heart Found., Inc. v. Nadal-

Ginard, 73 F.3d 429 (1st Cir. 1996), we reviewed ERISA pre-

emption cases, including Carlo, and concluded:

State laws that have merely a
"tenuous, remote, or peripheral
connection with a covered benefit plan"
may not be preempted by ERISA. Rosario-

Cordero v. Crowley Towing & Transp. Co.,

46 F.3d [120,] 123 [1st Cir. 1995]
(citation and internal quotation marks
omitted). Such is normally the case with
respect to laws of general applicability.
See District of Columbia v. Greater

Washington Board of Trade, 506 U.S. at

130 n.1, 113 S. Ct. at 583 n.1; Rosario-

Cordero v. Crowley Towing & Transp. Co.,

46 F.3d at 123; Combined Mgt., Inc. v.

Superintendent of the Bureau of

Insurance, 22 F.3d 1, 3 (1st Cir.), cert.

denied,, U.S. , 115 S. Ct. 350,

130 L. Ed. 2d 306 (1994). A court cannot
conclude that a state law is one of
general applicability, and as such is not
preempted by ERISA, based on the form or
label of the law, however. See Carlo v.

Reed Rolled Thread Die Co., 49 F.3d at

794 n.3; Zuniga v. Blue Cross and Blue

Shield of Michigan, 52 F.3d 1395, 1401

(6th Cir. 1995). Absent precedent on a
closely related problem, the inquiry into
whether a state law "relates to" an ERISA
plan or is merely "tenuous, remote, or
peripheral" requires a court to look at
the facts of [sic] particular case. See

Rosario-Cordero v. Crowley Towing &

Transp. Co., 46 F.3d at 125 n.2.

Boston Children's Heart Found., 73 F.3d at 439-40.

In Johnson v. Watts Regulator Co., 63 F.3d 1129

(1st Cir. 1995), we pointed out the consequences that may

flow from ERISA pre-emption: It "may cause potential state-

law remedies to vanish, or may change the standard of review,

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or may affect the admissibility of evidence, or may determine

whether a jury trial is available." Id. at 1131-32

(citations omitted).

A recent Supreme Court decision has a direct

bearing on the scope of ERISA pre-emption. In New York State

Conference of Blue Cross & Blue Shield Plans v. Travelers

Ins. Co., 115 S. Ct. 1671 (1995), several commercial

insurers, acting as fiduciaries of ERISA plans they

administered, joined with their trade associations and "[o]n

the claimed authority of ERISA's general preemption

provision" brought actions in the United States District

Court against state officials to invalidate three hospital

surcharge statutes. Id. at 1675. Writing for a unanimous

Court, Justice Souter made a number of observations on the

scope of ERISA pre-emption:

Our past cases have recognized that
the Supremacy Clause, U.S. Const., Art.
VI, may entail pre-emption of state law
either by express provision, by
implication, or by a conflict between
federal and state law. And yet, despite
the variety of these opportunities for
federal preeminence, we have never
assumed lightly that Congress has
derogated state regulation, but instead
have addressed claims of pre-emption with
the starting presumption that Congress
does not intend to supplant state law.
Indeed, in cases like this one, where
federal law is said to bar state action
in fields of traditional state
regulation, we have worked on the
assumption that the historic police
powers of the States were not to be
superseded by the Federal Act unless that

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was the clear and manifest purpose of
Congress.

Id. at 1676 (citations and internal quotation marks omitted).

The Court commented on the statutory pre-emption language of

514(a), "all state laws insofar as they . . . relate to any

employee benefit plan," pointing out that "[i]f 'relate to'

were taken to extend to the furthest stretch of its

indeterminacy, then for all practical purposes pre-emption

would never run its course." Id. at 1677. The Court

concluded:

We simply must go beyond the unhelpful
text and the frustrating difficulty of
defining its key term, and look instead
to the objectives of the ERISA statute as
a guide to the scope of the state law
that Congress understood would survive.

Id.

The Court, in the course of its analysis, stated:

Indeed, to read the pre-emption
provision as displacing all state laws
affecting costs and charges on the theory
that they indirectly relate to ERISA
plans that purchase insurance policies or
HMO memberships that would cover such
services, would effectively read the
limiting language in 514(a) out of the
statute, a conclusion that would violate
basic principles of statutory
interpretation and could not be squared
with our prior pronouncement that
[p]reemption does not 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.

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Id. at 1679-80 (citation and internal quotation marks

omitted) (alteration in original).

In discussing the sweep of ERISA pre-emption the

Travelers Court pointed to three categories of state laws

that Congress intended to pre-empt: first, "state laws that

mandate[] employee benefit structures or their

administration," id. at 1678; second, "state laws providing

alternate enforcement mechanisms," id.; third, state laws

that bind plan administrators to a "particular choice and

thus function as a regulation of an ERISA plan itself," id.

at 1679. See also Coyne & Delaney Co. v. Selman, 98 F.3d

1457, 1468-69 (4th Cir. 1996). It is obvious that none of

these state-law categories are implicated here.

The Court held that the New York statutory

surcharges had only "an indirect economic effect on choices

made by insurance buyers, including ERISA plans" and,

therefore, there was no pre-emption. Travelers at 1679-80.

Two other observations about Travelers must be

made. First, it was decided seven weeks after Carlo. This

means, of course, that the Carlo panel did not have the

benefit of the Court's latest views on ERISA pre-emption.

Second, none of the ERISA pre-emption cases decided in this

circuit subsequent to Travelers have cited it.

I now turn to post-Travelers decisions by other

circuits. In a case the Fourth Circuit described as a

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"garden-variety professional malpractice claim" the court

held:

In light of the Supreme Court's recent
(and narrowing) interpretation of the
scope of ERISA preemption in New York

State Conference of Blue Cross & Blue

Shield Plans v. Travelers, --- U.S. ---,

115 S. Ct. 1671, 131 L. Ed. 2d 695
(1995), we hold that Delany's malpractice
claim is not preempted because it does
not "relate to" an employee benefit plan
within the meaning of ERISA's preemption
provision, 29 U.S.C. 1144(a).

Coyne & Delany Co., 98 F.3d at 1466-67. Quoting Travelers

for the proposition that courts "'address claims of

preemption with the starting presumption that Congress does

not intend to supplant state law,'" 98 F.3d at 1467

(citations omitted), the Fourth Circuit added, "[t]his is

especially true in cases involving fields of traditional

state regulation, including common law tort liability," id.

In the course of its opinion the Fourth Circuit noted that

plaintiff's malpractice claim was "not aimed at a plan

administrator at all since the defendants [were] sued in

their capacities as insurance professionals for actions taken

in that capacity." Id. at 1471. This case is analogous to

the one before us.

Morstein v. National Ins. Servs., Inc., 93 F.3d 715

(11th Cir. 1996) (en banc), cert. denied, 1996 WL 693349

(U.S. Jan. 21, 1997) (No. 96-764), is even more closely

analogous to the case at bar. Plaintiff Morstein was

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president, director, and sole stockholder of a small company.

She met with an insurance broker for the purpose of obtaining

a replacement policy of major medical insurance for herself

and the company's other employee. The policy was to be

administered by National Insurance Services, Inc. At the

meeting with the broker, plaintiff informed him that any

replacement policy would be unacceptable if it excluded from

coverage treatment related to any preexisting medical

condition. Plaintiff alleged that the broker assured her

that the replacement policy would provide the same coverage

as her existing policy. Over a year after the replacement

policy was issued, plaintiff had total hip replacement

surgery. National Insurance Services refused to pay her

claim for payment on the ground that the surgery was for a

preexisting condition which plaintiff had not disclosed on

her application. 93 F.3d at 716-17.

Plaintiff filed an action in state court alleging

negligence, malfeasance, misrepresentations, and breach of

contract. Defendants removed the case to federal court on

the basis of ERISA pre-emption. Id. at 717.

In Morstein, the Eleventh Circuit, sitting en banc,

characterized the Supreme Court's decision in Travelers as

having "essentially turned the tide on the expansion of pre-

emption doctrine." Id. at 721. The holding of the Eleventh

Circuit bears quoting:

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Allowing preemption of a fraud claim
against an individual insurance agent
will not serve Congress's purpose for
ERISA. As we have discussed, Congress
enacted ERISA to protect the interests of
employees and other beneficiaries of
employee benefit plans. To immunize
insurance agents from personal liability
for fraudulent misrepresentation
regarding ERISA plans would not promote
this objective. If ERISA preempts a
beneficiary's potential cause of action
for misrepresentation, employees,
beneficiaries, and employers choosing
among various plans will no longer be
able to rely on the representations of
the insurance agent regarding the terms
of the plan. These employees, whom
Congress sought to protect, will find
themselves unable to make informed
choices regarding available benefit plans
where state law places the duty on agents
to deal honestly with applicants.

Id. at 723-24 (citation omitted).

In Central States, Southeast and Southwest Areas

Health and Welfare Fund v. Pathology Lab. of Ark., P.A., 71

F.3d 1251, 1253 (7th Cir. 1995), cert. denied, 116 S. Ct.

1876 (1996), the Seventh Circuit, citing Travelers, held:

Nothing in ERISA prevents medical
professionals from submitting--and state
courts from enforcing--bills for services
that are not covered by welfare benefit
plans. Although ERISA preempts state law
that "relates to" plans, 29 U.S.C.
1144(a), that clause does not annul state
laws of general applicability just
because they affect the price of medical
care.

In Boyle v. Anderson, 68 F.3d 1093 (8th Cir. 1995),

cert. denied, 116 S. Ct. 1266 (1996), a case involving a

challenge to certain provisions of a Minnesota health care

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reform statute known as MinnesotaCare, the court relied on

Travelers in holding that there was no ERISA pre-emption,

stating, "In the context of the MinnesotaCare legislation,

Travelers and the other precedents cited in this litigation

compel this court not to preempt a state's effort to serve as

a 'laboratory of democracy' in the realm of health care."

Id. at 1109.

The Seventh Circuit also relied on Travelers in

rejecting an ERISA pre-emption claim in Safeco Life Ins. Co.

v. Musser, 65 F.3d 647 (7th Cir. 1995). The case was brought

by a health insurer who challenged the fees assessed against

such insurers to provide health insurance to individuals

whose physical and mental conditions prevented them from

obtaining insurance in the private market. In a similar

case, the Second Circuit, relying on Travelers, inter alia,

held that ERISA did not pre-empt a Connecticut statute that

imposed surcharges on hospital bills of patients with private

health insurance to subsidize medical care for the poor.

Connecticut Hosp. Ass'n v. Weltman, 66 F.3d 413 (2d Cir.

1995). See also Greenblatt v. Delta Plumbing & Heating

Corp., 68 F.3d 561, 573-74 (2d Cir. 1995) (noting the

limiting gloss put on the broad language of 514(a) of ERISA

by Travelers).

As these cases recognize, Travelers has restricted

the scope of ERISA pre-emption.

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II.
II.

I turn now to what I consider to be the sole issue

before the panel: whether the district court erred in ruling

that ERISA pre-emption rendered "futile" plaintiff's motion

to amend her complaint to add Ellen Kaplan as a defendant.

The question of ERISA pre-emption is reviewed de novo. See

Degnan v. Publicker Indus., Inc., 83 F.3d at 28-29. I

recognize that the standard of review for a district court's

refusal to allow an amendment to the complaint is abuse of

discretion. This standard is not applicable here, however,

because the root issue -- stated by the district court as the

basis for its decision -- is ERISA pre-emption, a question of

law. See Carlo v. Reed Rolled Thread Die Co., 49 F.3d at

792-93. Moreover, if there is no pre-emption, the federal

courts are bereft of jurisdiction. Thus, in my view, there

is no way of avoiding the pre-emption issue.

Normally in a pre-emption case the starting point

is an examination of the facts, but there is not much in the

way of facts here. All we know is derived from the

allegations in the purported amended complaint, which must be

accepted as true at this stage of the litigation. These

allegations can only be construed as stating that Kaplan made

misrepresentations to plaintiff's husband, Donald Golas,

and/or failed to give him correct information about the

conditions of eligibility for participation in the Revere

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Insurance policy. The amended complaint alleges that Kaplan

was an insurance broker. I take that to mean that she "sold"

Revere's insurance policy to HomeView. Although Kaplan is

linked to HomeView and Revere as to the alleged

misrepresentations, there is no claim that Kaplan acted as

agent for or on behalf of either or both of the other two

defendants. The amended complaint, broadly construed,

alleges a common-law misrepresentation claim against Kaplan

individually.

Strictly speaking, the ERISA disability insurance

plan is not implicated in plaintiff's misrepresentation

claim. Donald Golas never became a covered employee;

instead, the complaint focuses on the alleged

misrepresentations which plaintiff alleges were the cause of

Golas's being excluded from insurance coverage. Neither the

extent of insurance coverage nor the amount of benefits is

involved. Even the eligibility requirements themselves are

not in dispute; it is only the alleged misrepresentations

about those eligibility requirements that give rise to

plaintiff's cause of action. Plaintiff's burden of proof

thus goes to whether her husband would have been eligible to

join the plan if Kaplan had not made misrepresentations as to

his eligibility. See Coyne & Delaney Co., 98 F.3d at 1462

n.4.

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This case is markedly different from Carlo, 49 F.3d

790. In Carlo, the plaintiff was a former employee of

defendant Reed and a participant in its retirement plan.

Plaintiff Carlo elected early retirement on the basis of

monthly benefits he was told he would receive. The actual

monthly benefits he received were twenty percent less than

the amount promised him. Defendant apologized for the error

and offered to let him continue working at the same position.

Carlo did not accept the offer and took early retirement

under protest. He subsequently brought suit in Massachusetts

state court for breach of contract and negligent

misrepresentation. Id. at 792. We found ERISA pre-emption.

In Carlo, plaintiff had been a participant in the

plan and one of the issues was the amount of monthly

retirement pay due him under the substantive provisions of

the plan. Here, by contrast, Donald Golas was not a covered

employee and none of the issues implicate the substantive

provisions of the insurance plan. The allegations are solely

concerned with misrepresentations regarding Golas's

eligibility to become a covered employee.

The analysis used in Boston Children's Heart Found.

v. Nadal-Ginard has much to recommend it. In Boston

Children's Heart Found., 73 F.3d 429, suit was brought in

federal district court against defendant, who worked for

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plaintiff nonprofit corporation as an officer and director.

The suit alleged that defendant breached his fiduciary duty

by misappropriating plaintiff's funds. The basis of the suit

was defendant's failure to disclose to the other directors of

the corporation important information concerning provisions

of a severance-benefit plan (the Banks Plan) he had devised.

When the plan was terminated on defendant's initiative, he

received more than $4,000,000 in severance benefits. On

appeal defendant contended that ERISA specifically exempted

the type of severance benefits plan at issue from its

fiduciary duty provisions and pre-empted the application of

state fiduciary law. 73 F.3d at 438. We held:

Here, the alleged breach of fiduciary
duty relates to Nadal-Ginard's action in
establishing the Banks Plan without
disclosing information that a self-
interested fiduciary would be required to
reveal to his fellow directors. Nadal-
Ginard's misconduct preceded the formal
adoption of the plan. The legal
determination that Nadal-Ginard's conduct
constitutes a fiduciary breach does not
require the resolution of any dispute
about the interpretation or
administration of the plan. Further, the

application of state law in this instance

does not raise the core concern

underlying ERISA preemption. Indeed, the

fact that Nadal-Ginard chose an ERISA
plan rather than some other form of
compensation is peripheral to the
underlying claim that Nadal-Ginard
breached his corporate responsibilities.

This being the case, it cannot be
said that Massachusetts fiduciary law
must be preempted in this instance.

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Id. at 440 (emphasis added).

Based upon our own circuit cases, the restriction

of the scope of pre-emption under 514(a) of the statute

established in Travelers, and the post-Travelers cases in

other circuits, it is evident that ERISA does not pre-empt

the misrepresentation claim against Ellen Kaplan. There are

eight reasons, gleaned from the cited cases, for this

conclusion. (1) No ERISA benefits are sought and no ERISA

rights or obligations are asserted. (2) Defendant Kaplan

would be personally responsible for any money damages awarded

to plaintiff. (3) Defendant Kaplan is not an ERISA entity,

nor does the alleged misrepresentation claim affect the

relationship between ERISA entities. (4) None of the three

categories of state laws that Travelers holds Congress

intended to pre-empt are implicated. (5) The common-law

claim of misrepresentation is a state law of general

application. Moreover, tort law in general is traditionally

an area of state regulation. It is therefore unlikely that

Congress intended to intrude into this area by pre-emption.

(6) Congress did not intend to shield tortfeasors from

liability for misrepresentation where ERISA benefits, rights,

obligations, and core concerns are not implicated. (7) State

common law imposes a duty of care relative to representations

made by insurance professionals which does not in any way

depend upon ERISA. (8) The alleged misrepresentation

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occurred prior to the time when the ERISA plan would have

taken effect.

I would hold, therefore, that the district court

committed reversible error in denying plaintiff's motion to

amend on the ground that the claim raised therein "would be

pre-empted by ERISA."7 Because ERISA does not pre-empt the

claim asserted against Ellen Kaplan, and because there is no

diversity of citizenship between the parties, nor any other

basis for federal jurisdiction, the motion should have been

denied for lack of federal jurisdiction. Plaintiff should be

left to pursue her misrepresentation claim against Kaplan in

the Massachusetts state courts.

Although the majority and I agree on the ultimate

result, we disagree as to the proper path to take in reaching

it. Because I think that this is a case in which the

procedural path is important, I must respectfully concur,

rather than join the majority opinion.

7. I would also hold that the district court erred in
adopting the magistrate's recommendation, without considering
the application of ERISA to Kaplan as an individual, in light
of the differences between her status vis-a-vis ERISA and
that of the other defendants. Instead, the magistrate merely
said, "For the reason stated . . . [regarding Paul Revere and
HomeView] . . .," plaintiff's claim against Kaplan would also
"be pre-empted by ERISA." He simply assumed that, if ERISA
pre-empted the claim against Revere and HomeView, it must
likewise pre-empt the claim against Kaplan. Given the
distinctions between Kaplan's status as an ERISA entity and
that of the other defendants, this failure to consider the
claim against Kaplan on its own merit also constituted legal
error.

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