IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-60801
GENEVA C. HAYNES, As Administratrix of the Estate of Charles
Haynes, Jr. Deceased,
Plaintiff-Appellant,
versus
PRUDENTIAL HEALTH CARE, MEMBER-AETNA US HEALTHCARE,
“PRUCARE”, a Kentucky corporation or association
contracting with SLS Incorporated, for the provision of
Medical insurance and health care services,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Mississippi
December 9, 2002
Before DeMOSS, STEWART, and DENNIS, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Geneva C. Haynes, Administratrix of the Estate of Charles Haynes, Jr. (“Haynes”), appeals
from the district court’s FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) dismissal in favor of
Prudential Health Care Plan, Inc. (“PruCare”). The issue raised on appeal is whether the district court
erred in dismissing Haynes’s negligence claims as preempted under the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”). For the following reasons, we hold that
Haynes’s negligence claims are expressly preempted under ERISA § 514(a) because PruCare’s
determination was administrative. See 29 U.S.C. § 1144(a) (hereinafter, citations are to sections of
ERISA).
FACTUAL AND PROCEDURAL BACKGROUND
Haynes was an insulin-dependent adult diabetic. Before becoming a member of the PruCare
Health Maintenance Organization (“HMO”) in January 1999, he had been under long-term care and
treatment by Dr. John Norwood for his diabetes and related circulatory conditions. Haynes continued
to be treated by Dr. Norwood after joining the plan without protest from PruCare. Indeed, up until
October 1999, PruCare allowed Dr. Norwood to administer medical treatment to Haynes as his
primary care physician (“PCP”) under the program. Haynes explained that this led him to believe that
Dr. Norwood was a PruCare PCP under the plan.
In late October 1999, Haynes began to suffer painful swelling in his right foot and lower right
leg, and developed an abscess beneath the skin of the underside of his right foot. Haynes visited Dr.
Norwood for treat ment of the condition on October 27, 1999 and was directed by him to go
immediately to the Methodist Hospital Wound Care Center in Memphis (“Wound Care Center”). In
response, Dr. Norwood’s staff attempted to make an appointment for Haynes at the Wound Care
Center but was informed that PruCare would not permit Haynes to receive treatment there. On that
same day, PruCare informed Haynes that Dr. Norwood was not a PruCare PCP, and therefore,
Haynes was precluded from visiting the Wound Care Center until he could secure a referral from a
PruCare PCP.
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By the first of November, Haynes’s foot and leg continued to swell as infection spread. A
member of Dr. Norwood’s staff, a representative from PruCare, and Haynes conversed regarding Dr.
Norwood’s status as a PCP. PruCare maintained that it did not consider Dr. Norwood a PCP and
gave Haynes the telephone numbers of three PCPs. Despite Dr. Norwood’s recommendations,
PruCare continued to refuse to permit Haynes to receive treatment at the Wound Care Center, unless
one of the PruCare-approved PCPs made the referral. Between November 1 and November 3, 1999,
Haynes alleges that he and Dr. Norwood’s staff called the three numbers that PruCare had given
them. One of the numbers was disconnected, calls to the second only reached the answering machine,
and the third never returned his calls.
By November 3, 1999, Haynes’s leg swelled to such an extent that his toes burst open,
draining blood, puss, and other fluids. Haynes called 911 and was taken to the emergency room at
Baptist Central Hospital in Memphis. Once there, he was assigned to a PruCare PCP, Dr. Robert
Kulinski. Though Dr. Kulinski attempted to save his leg by administering antibiotics and other
treatment, on November 4, 1999, he recommended an immediate amputation of Haynes’s right foot
and lower right leg. After Haynes received a second concurring opinion, his leg was amputated on
November 12, 1999. Apparently, Dr. Kulinski told Haynes that his leg could have been saved if
Haynes had received timely treatment from the Wound Care Center. Haynes was unable to work after
the amputation and died in April 2001 from unrelated causes.
Haynes brought suit (prior to his death) in the Northern District of Mississippi based on
diversity jurisdiction pursuant to 42 U.S.C. § 1332 and ground his claims on negligence principles
and estoppel . He alleged, inter alia, that PruCare created an environment which encouraged and
perpetuated negligent conduct; failed to ensure that Haynes received necessary care; failed to provide
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adequately trained health care providers to treat Haynes’s conditions; and failed to properly medically
manage Haynes’s condition. PruCare moved to dismiss pursuant to FED.R.CIV.P. 12(b)(6) contending
that such claims are expressly preempted under ERISA. The district court granted PruCare’s motion
to dismiss. This appeal followed.
STANDARD OF REVIEW
The district court’s dismissal of a claim under FED.R.CIV.P. 12(b)(6) is reviewed de
novo. Vulcan Materials Co. v. Tehuacana, 238 F.3d 382, 387 (5th Cir. 2001). “The complaint must
be liberally construed in favor of the plaintiff, and all the facts pleaded in the complaint must be taken
as true” to determine whether the plaintiff has stated a valid claim for relief. Brown v. Nationsbank
Corp., 188 F.3d 579, 586 (5th Cir. 1999). The dismissal will be upheld only if “it appears beyond
doubt that the plaintiff can prove no set of facts that would entitle him to relief.” U.S. ex rel
Thompson v. Columbia HCA/Healthcare Corp., 125 F.3d 899, 901 (5th Cir. 1997).
DISCUSSION
There are two types of ERISA preemption: complete and express preemption. In general,
complete preemption exists when a remedy falls within the scope of or is in direct conflict with
ERISA § 502(a), and therefore is within the jurisdiction of federal court. Metropolitan Life Ins. Co.
v. Taylor, 481 U.S. 58, 66 (1987). Whether state law negligence claims are completely preempted
by § 502(a) primarily answers questions of jurisdiction. Giles v. NYLCare Health Plans, Inc., 172
F.3d 332, 336 (5th Cir. 1999). As this Circuit has stated, section 502(a) “functions as an exception
to the well-pleaded complaint rule; ‘Congress may so completely pre-empt a particular area that any
civil complaint raising this select group of claims is necessarily federal in character.’ Section 502, by
providing a civil enforcement cause of action, completely preempts any state cause of action seeking
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the same relief, regardless of how artfully pleaded as a state action.” (quoting Metropolitan Life Ins.
Co., 481 U.S. at 64-65)). Id. “Unlike the scope of § 502(a)(1)(B), which is jurisdictional and creates
a basis for removal to federal court, § 514(a) ... governs the law that will apply to state law claims,
regardless of whether the case is brought in state or federal court.” Pryzbowski v. U.S. Healthcare
Inc., 245 F.3d 266, 277 (3rd Cir. 2001) (internal quotations omitted)). In this case, diversity confers
subject matter jurisdiction therefore, there are no questions of jurisdiction to invoke an analysis of
complete preemption on these facts consistent with § 502(a).
Express preemption is applicable to this case. Express preemption exists when a state law or
claim “relates to” ERISA plans unless it “regulates insurance” under § 514(a). Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 45 (1987). In pertinent parts, the statute reads:
Except as provided in subsect ion (b) of this section, the provisions of this title and
title IV shall supercede any and all state laws insofar as they may now or hereafter
relate to any employee benefit plan described in §4(a) and not exempt under §4(b).
ERISA § 514(a) (emphasis added). This preemption provision contains a savings clause in subsection
(b) which states that “nothing in this title shall be construed to exempt or relieve any person from any
law of any State which regulates insurance, banking, or securities.”
ERISA § 514(b)(2)(A) (emphasis added).
In short, this lawsuit “relates to” an employee benefit plan provided to Haynes through his
employer under § 514(a) and is a common law tort claim which does not specifically “regulate
insurance” so as to save the lawsuit from preemption under § 514(b). The limiting language of the
express preemption provision requires that the lawsuit only “relate to” an administrative decision of
the HMO to be preempted by ERISA. New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645, 661 (1995). Under this scheme, if PruCare made a medical
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necessity decision, for example, Haynes’s common law tort claim may not be preempted, and
therefore, falls under state law. If PruCare made a purely administrative decision, Haynes’s state law
tort claim is preempted under § 514(a) and is regulated by ERISA. Id. To determine whether the
district court erred in granting PruCare’s 12(b)(6) motion to dismiss, we must determine whether the
lawsuit relates to an administrative decision. At the core of our analysis is whether PruCare’s
determination that Dr. Norwood was not a PCP under the plan and therefore did not authorize Dr.
Norwood’s referral to the Wound Care Center was an administrative or a mixed determination. See
Pegram v. Herdrich, 530 U.S. 211, 228 (2000).
I. The Law
The Supreme Court continues to grapple with the precise scope of the express preemption
provisions of ERISA under § 514. See Rush Prudential HMO Inc. v. Moran, __ U.S. __; 122 S. Ct.
2151, 2158 (2002) (“The ‘unhelpful’ drafting of these clauses occupies a substantial share of this
Court’s time.”). Haynes argues that Travelers Ins. Co., 514 U.S. 645 (1995) and Pegram, 530 U.S.
211 (2000) together, stand for the proposition that decisions that are both administrative and medical
by nature are not expressly preempted under ERISA. Haynes contends that Pegram further clarifies
the scope of express preemption as defined in Travelers Ins. Co. so as to further restrict the
preemptive reach of ERISA.. In this case, PruCare made a purely administrative decision. Thus, we
need not reach the specific question of whether Pegram narrows the scope of express preemption.
We simply apply the rationale provided in Travelers Ins. Co. and Pegram to determine whether
PruCare made an administrative decision.
In Travelers Ins. Co., the Supreme Court held that a state statute requiring surcharges on
hospital rates for patients with commercial health plans but not from certain HMOs did not “relate
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to” ERISA plans because the statute had only indirect economic effects. 514 U.S. at 668. The Court
started with the “presumption that Congress [did] not intend to supplant state law ... in fields of
traditional state regulation.” Id. at 654-55. Upon a review of the text of § 514, the Court explained
that the language of “relate to” appears expansive, but taking an expansive approach would be “to
read the presumption against pre-emption out of the law.” Id. at 655. As such, the Court narrowed
the scope of express preemption of state laws by determining that only those state laws that “relate
to” the administration or benefit structure are preempted. Id. at 658. Many of the decisions of the
Court after Travelers Ins. Co. similarly held that the challenged state statutes were not preempted
because they were laws of general application and were neither directed to ERISA plans nor
interfered with their administration. See Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266, 277-78
(3d Cir. 2001) (summarizing Supreme Court cases after Travelers Ins. Co.). Travelers Ins. Co.
narrowed the scope of express preemption only to those state laws that have an effect on the
administration of the plan or benefit structure. Id.
In Pegram, the Court examined the effect on the administration or benefit structure of an
insurance plan when a physician delays treatment to satisfy the incentive program provided by the
HMO. In Pegram, Herdrich was covered by an HMO through her husband’s employer. Id. at 215.
Herdrich went to Dr. Pegram, her PCP, complaining of abdominal pains. Id. Dr. Pegram required
Herdrich to wait eight days for an ultrasound, apparently, as part of a scheme in the HMO that
rewarded physicians for limiting care. Id. at 215-16. During this eight day waiting period, Herdrich’s
appendix ruptured, causing peritonitis. Id. at 215. Herdrich sued the HMO under ERISA § 409(a)
which imposes liability for breach of fiduciary duty. Id. at 216-17. Echoing the language of Travelers
Ins. Co., the Pegram Court reiterated that there are two types of acts that HMOs perform: 1) pure
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eligibility decisions which turn on the plan’s coverage of a particular condition or medical procedure
for its treatment; and 2) “treatment decisions” which concern diagnosing or treating a patient
condition. Id. at 227-28. The Court then extended the analysis in Travelers and explained that often
these two decisions are intextricably mixed, and that Congress did not intend “the category of
fiduciary administrative functions to encompass the mixed determinations at issue.” Id. at 232. In
sum, the Court pushed the door ajar to treat mixed eligibility 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.
Haynes urges this Court to extend the holding in Pegram to apply to all ERISA preemption
claims and conclude that a mixed decision is not a preemptive decision. As we have already explained,
“we do not read Pegram to entail that every conceivable state law claim survives preemption so long
as it is based on a mixed question of eligibility and treatment.” Corporate Health Ins. Co. v. Texas
Dpt. of Ins., 220 F.3d 641, 643 (5th Cir. 2000). We decline to make such an inference here. Although
the Supreme Court recently “recall[ed] that regulating insurance tied to what is medically necessary
is probably inseparable from enforcing the quintessentially state-law standards of reasonable medical
care,” Rush, __ U.S. at __;122 S. Ct. at 2171 (2002), it merely noted “the potential for conflict when
an HMO makes decisions about appropriate treatment.” Id. at 2169 n.15. The Supreme Court has
yet to address whether, in all cases, mixed decisions are t o be treated as medical decisions for the
purposes of ERISA. See id. The threshold question, therefore, remains whether PruCare’s decision
that Dr. Norwood was not a PCP under the plan, and therefore, was not authorized to refer Haynes
to the Wound Care Center, was purely administrative. We conclude that it was.
II. Application
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In Pryzbowski, 245 F.3d 266 (3rd Cir. 2001), the Third Circuit was faced with a similar
situation. Id. at 268-70. Pryzbowski had undergone back surgery by Dr. Barolet before receiving
benefits from a new HMO through her husband’s employer. Id. After her back surgery, she was being
treated by her PCP, a member of Medemerge which is a consortium of participating physicians within
the HMO, for severe back pain. Id. Her physician concluded that her back pain stemmed from her
prior surgery and recommended that she seek corrective surgery by Dr. Barolet who was outside of
the network of participating HMO surgeons. Id. Her HMO required prior approval to seek medical
treatment from a non-HMO physician. Id. A month after her initial diagnosis, the HMO approved
surgery by Dr. Barolet. Id. Dr. Barolet examined Pryzbowski and agreed that surgery was necessary
but required consultation with a series of physicians who were also outside of the HMO network
before performing the necessary surgery. Id. Like Dr. Norwood in Haynes’s situation, Dr. Barolet,
the recommending surgeon, was outside of the network of physicians. Id. Pryzbowski again sought
prior approval from the HMO through Medemerge. Id. A few months later, after ongoing
communication between Dr. Barolet, Pryzbowski, Medemerge, and the HMO, the HMO approved
the consultations. Id. As a result, Pryzbowski’s surgery was delayed several months after the initial
recommendation of her participating PCP to undergo corrective surgery by Dr. Barolet. Id. After Dr.
Barolet performed the back surgery, Pryzbowski continued to experience severe back pain. Id. Dr.
Barolet opined that had he been allowed to perform the surgery earlier, Pryzbowski would not have
continued to experience back pain after the surgery. Id.
Similar to Haynes’s negligence claims, Pryzbowski filed a complaint against the HMO and
Medemerge alleging, inter alia, that they negligently and carelessly delayed approval for the surgery,
causing Pryzbowski’s continued back pain. Id. Pryzbowski is instructive only in that the Third Circuit
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characterized the HMO’s actions as administrative in nature given a substantially similar factual
situation. 245 F.3d at 274. As part of its analysis of whether Pryzbowski’s claims against the HMO
were completely preempted, the Third Circuit extended Pegram to the context of complete
preemption under § 502(a) and concluded that Pryzbowsi’s claims against the HMO are “limited to
its delay in approving benefits, conduct falling squarely within the administrative function.” Id. at 274.
The HMO removed the case to federal court where the district court dismissed the claims against the
HMO as completely preempted under § 502(a). The Third Circuit upheld the dismissal under
§ 502(a).1
Similarly, we read Haynes’s negligence claim to assert that PruCare’s determination that Dr.
Norwood is not a PCP, thereby delaying authorization for treatment from the Wound Care Center,
caused his subsequent injuries. Although the Third Circuit assessed Pryzbowski’s claim under
complete preemption, whereas here, PruCare asserts express preemption, we agree that for the
purposes of ERISA preemption, such a decision “fall[s] squarely within the administrative function,”
and therefore conclude that Haynes’s negligence claim is expressly preempted under § 514(a).
We are persuaded by the factual similarities between this case and the situation presented in
Pryzbowski and similarly conclude that PruCare’s decision effected the administration of the benefit
struct ure of the plan. There is no evidence in the record that Dr. Norwood was a PCP under the
1
The district court also granted summary judgment to Medemerge based on express preemption
under § 514(a). The Third Circuit reversed and held that the claims against Medemerge were not
expressly preempted under § 514(a). Id. at 270-280. However, unlike the present case, Medemerge
was not an HMO, but rather a PCP under the plan. The Third Circuit noted that in cases like
Corcoran, typically, “suits against HMOs and insurance companies for denial of benefits, even when
the claim is couched in terms of common law negligence or breach of contract, have been held to be
preempted by § 514(a).” Pryzbowski, 245 F.3d at 278. The Court’s decision turned on the fact that
Medemerge was not an HMO, and therefore, Pryzbowski’s lawsuit was not a typical claim against
an insurance company. based on a denial of benefits. Id. at 280.
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PruCare plan. It was within PruCare’s purview to make the administrative determination that Dr.
Norwood was not in fact a participant in the HMO. Even if PruCare’s administrative decision
may have had an indirect impact on Haynes’s treatment, it did not involve a medical decision, and
therefore is expressly preempted by ERISA. On a substantially different set of facts, the Supreme
Court in Travelers Ins. Co. resolved that even though medical decisions yield indirect economic
effects that is not enough to trigger ERISA preemption. 514 U.S. at 659. Al though by nature
administrative determinations impact medical decisions, they are expressly preempted under ERISA.
Id. Accordingly, Haynes’s claims are expressly preempted as benefit determinations consistent with
ERISA § 514(a).
CONCLUSION
Though the end result of Haynes losing part of his leg is tragic, his claim is based solely on
the administration of his health benefits. A review of recent Supreme Court jurisprudence reflects that
such a claim is expressly preempted by ERISA. For the foregoing reasons we AFFIRM the district
court’s dismissal.
AFFIRM.
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