Amicus Curiae Brief — Aetna Health Inc. v. Davila

Dre 8 Court, U.S.

10, (4 ' FILED

Nos. 02-1 nO, JAN 2 2 2004

In The

Supreme Court of the Gnited States

Sd

AETNA HEALTH INC.,

Petitioner,

V.

JUAN DAVILA,

Respondent.

¢

CIGNA HEALTHCARE OF TEXAS, INC.,

Petitioner,

V.

RUBY R. CALAD, et al.,

Respondents.

¢

On Writs Of Certiorari To The

United States Court Of Appeals

For The Fifth Circuit

¢

BRIEF OF COMMUNITY RIGHTS COUNSEL AND

THE BRENNAN CENTER FOR JUSTICE AT

NEW YORX UNIVERSITY SCHOOL OF LAW AS

AMICI CURKIAE SUPPORTING RESPONDENTS

SJ

_—

DOUGLAS T. KENDALL

TIMOTHY J. DOWLING*

Community Rights Counsel

1301 Connecticut Ave., NW

Suite 502

Washington, D.C. 20036

(202) 296-6889

*Counsel of Record for the

Amici Curiae

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

TABLE OF AUTHORITIEG...............cccssssssseeeeeeeeseneeeeees

INTEREST OF THE AMICI CURIALE ...........:::cc00000000

PRELIMINARY STATEMENT AND SUMMARY OF

GATING, cececesesssecscssecescccccssscccensosvncocnscosessosencescoes

ARGUMENT ............ hidiniecemenpicenntnessesscensaneuossnensapenensnesvens

I. A STATE-COURT ACTION RAISING ONLY

STATE-LAW CLAIMS THAT CANNOT BE

PURSUED UNDER ERISA DOES NOT

“ARISE UNDER” ERISA FOR PURPOSES OF

II. RESPONDENTS’ ACTIONS CANNOT BE

PURSUED UNDER ERISA ..............ccccceeeeeceeeees

CE A eee vceccccccescccccccvccesccnvcessnssscoccssssoosssosssossococees

ii

TABLE OF AUTHORITIES

Page

CASES

Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557

(2BGBD ..ccocccessecseccorsssescnsesenassensenssennannnnnnnn 8, 12, 13, 15, 19

Beneficial Nat'l Bank v. Anderson, 123 S. Ct. 2058

'} || | TT 7, 8,9, 15, 19

Caterpillar Inc. v. Williams, 482 U.S. 386 - ee 9,10

Cicio v. Does, 321 F.3d 83 (2d Cir. 2003), petition for

cert. filed (No. 03-69, July 11, 2003) .......ssscceceeereeeeeerens 18

Egelhoff v. Egelhoff, 532 U.S. 141 (2001) .......essseseereeereees 5

Franchise Tax Bd. of Cal. v. Construction Laborers

Vacation Trust for S. Cal., 463 U.S. 1 (1983)......... passim

Geier v. American Honda Motor Co., 529 U.S. 861

| | |) 5

Gully v. First Nat'l Bank in Meridian, 299 U.S. 109

) |) 7

Healy v. Ratta, 292 U.S. 263 (1934).......ccececeereeeereeereeennees 6

Land v. CIGNA Healthcare of Fla., 339 F.3d 1286

(11th Cir. 2003), petition for cert. filed (No. 03-

649, Oct. 28, 20038)...........sccccsereeesereesensesseneesereresenees 17, 18

Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S.

SHO (1BBB) ....0scoccccccccccsscscssccsccccsssesonssnenenneneneneeennnnans 16, 19

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58

(19B7)..00ccceccccscccccscocsssccscosssssossocensesensenneenenenna aeoneeed passim

Pegram v. Herdrich, 530 U.S. 211 (2000).....14, 16, 17, 18, 19

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987)....... 11, 12

iii

TABLE OF AUTHORITIES -— Continued

Page

Rivet v. Regions Bank of La., 522 U.S. 470 (1998)........ 7,10

Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999).......... 6

Russell v. Sprint Corp., 264 F. Supp. 2d 955 (D.

LL 8

Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28

ccs scensnssnsassnscssssccoccoonses 7

Younger v. Harris, 401 U.S. 37 (1971) ..........cccccceeeeeeeeeeeeeees 5

STATUTES

i. sc sssnemnsnnnnensones 5,7

ESSELTE 7

I. sssssssnensenennene 7

EEE SEIT TTT CT TTTTE 9

Labor Management Relations Act § 301, 29 U.S.C.

IIIa nateenennensncococseccsosecceeee 8, 9, 10, 14, 16

ERISA § 502, 29 U.S.C. § 11382............cccccccccccecccsseesees passim

ERISA § 502(a), 29 U.S.C. § 1132(a)...cccccccccccescsssseeeeeee 2, 12

ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B).....9, 11, 17

ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2)............... ...16, 17

ERISA § 514, 29 U.S.C. § 1144... ee 2, 3, 11, 12, 20

ERISA § 514(a), 29 U.S.C. § 1144(a)............ccccccccceeeeeeeeeeees 12

ERISA § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A) ............... 12

iv

TABLE OF AUTHORITIES -— Continued

Page

OTHER AUTHOR'TIES

Ernest A. Young, Two Cheers for Process Federal-

ism, 46 VILL. L. REV. 1349 (2001) ........ccccccceeeeeereeereeenees 5

James C. Rehnquist, Taking Comity Seriously: How

to Neutralize the Abstention Doctrine, 46 STAN. L.

BV, 1048 (1GO4) .......ccccccccccccccscs-ssecesccccrsscccsesessesessesesosses 6

1

INTEREST OF THE AMICI CURIAE’

Community Rights Counsel (CRC) is a nonprofit,

public interest law firm that assists state and local offi-

cials in defending community protections through the

promotion of federalist principles. For example, CRC has

submitted amicus curiae briefs on behalf of state and local

officials arguing against overly expansive readings of the

Fifth Amendment in cases involving state funding mecha-

nisms for legal services for the poor, see Brown v. Legal

Found. of Wash., 538 U.S. 216 (2003), and protections for

natural resources. See Tahoe-Sierra Pres. Council, Inc. v.

Tahoe Reg’l Planning Agency, 535 U.S. 302 (2002). More

recently, CRC has filed amicus briefs with this Court in

preemption challenges to state and local protections of

public health and the environment. E.g., Engine Mfrs.

Ass’n v. South Coast Air Quality Mgmt. Dist., No. 02-1343;

Eyl v. Ciba-Geigy Corp., No. 02-1500; City of Lodi v.

Firemen’s Fund Ins. Co., No. 02-1169.

The Brennan Center for Justice at New York Univer-

sity School of Law is a nonpartisan organization that

unites scholarship, public education, and legal action to

find innovative and practical solutions to intractable

problems in the areas of democracy, poverty, and criminal

justice. Its Fair Courts Project, part of the Brennan

Center’s Democracy Program, addresses issues like

* Counsel for the parties did not author this brief in whole or in

part. No person or entity other than the amici, their members, and

their counsel made a monetary contribution to the preparation or

submission of this brief. Petitioners and respondents have consented to

the filing of amicus briefs in letters filed with the Clerk.

2

judicial independence, access to the courts, and the

relationship among federal, state, and local power.

CRC and the Brennan Center have a strong interest

- in this case because it raises fundamental questions about

the role of state courts in our federal system and their

ability to address claims by their citizens who allege they

have been wronged under state law.

¢

PRELIMINARY STATEMENT

AND SUMMARY OF ARGUMENT

Petitioners’ submissions (Aetna Br. 40-50, Cigna Br.

42-50) contain considerable verbiage contending that our

nation’s health care system would be better off by elimi-

nating state-law actions against managed care organiza-

tions for negligent “medical necessity” determinations. The

Court need not resolve this complex policy issue here.

The question presented is jurisdictional: Who decides?

Does § 502(a) of the Employee Retirement Security Act of

1974 (ERISA), 29 U.S.C. § 1132(a), prevent state courts

from exercising jurisdiction over a suit filed under state

law challenging a medical necessity determination and

then deciding, subject to review by this Court, whether the

action may proceed in the face of the express preemption

provision in § 514? In other words, has Congress, through

§ 502(a), incapacitated the state courts from playing any

role in resolving the preemption matter?

Someday, this Court might be called upon to decide,

under principles of express and conflict preemption,

whether ERISA preempts suits like those at issue here.

But that question need not be answered in this case.

-_——_——

3

Indeed, in a separate ruling (nowhere mentioned in

petitioners’ merits briefs), the Fifth Circuit reluctantly

concluded that it was bound by outdated circuit precedent

to rule that § 514 does preempt such suits, precedent it

now correctly believes has been severely undermined and

should be reconsidered. Cigna Pet. App. 24a-28a. Yet the

Fifth Circuit simultaneously held that the more demand-

ing standards of removal under § 502 do not authorize

complete preemption of such suits (id. at 7a-20a), thereby

demonstrating the independence of these two matters.

Accord, Franchise Tax Bd. of Cal. v. Construction Laborers

Vacation Trust for S. Cal., 463 U.S. 1, 26-27 (1983) (hold-

ing that state-law actions can be preempted by ERISA but

not subject to complete preemption under § 502).

At times, petitioners seem to suggest that every claim

preempted by ERISA is subject to complete preemption

and removal under § 502. E.g., Cigna Br. 5-6. But Fran-

chise Tax Board and this Court’s other precedents demon-

strate that this is emphatically untrue.

As shown in Section I below, complete preemption — a

variant of what is commonly called the artful pleading

doctrine — is a narrow exception to the well-pleaded

complaint rule, which authorizes removal of a suit from

state to federal court only where the action could have

been brought in federal court under federal law. This

Court has never found complete preemption outside the

narrow context in which the plaintiff’s claim was actually

a claim that could have been filed under federal law. In

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987), for

example, the Court ruled that removal was proper under

§ 502 of ERISA where an employee sued in state court

under state contract law for, among other things, breach of

the applicable ERISA plan due to an improper processing

4

of benefits, a benefits claim that plainly could have been

brought dire¢tly under ERISA in federal court.

In Section II, we show that respondents’ claims could

not have been filed under ERISA. Their complaints do not

allege improper processing of benefits, and they do not

seek benefits under the applicable ERISA plans. Instead,

they seek appropriate damages under state law based on

allegedly negligent medical necessity determinations,

claims rooted in a state statute that is entirely independ-

ent from ERISA and in no way depends on an interpreta-

tion or application of respondents’ ERISA plans. Franchise

Tax Board is controlling, and because respondents’ claims

could not have been filed under ERISA, they are not

subject to complete preemption.

¢

ARGUMENT

This is a case about federalism, i.e., the appropriate

constitutional role of the States in our federal system. By

so-stating, we do not mean to minimize respondents’

plight. They allege they suffered serious physical injury

and unnecessary pain due to medical necessity decisions

by petitioners that did not meet the basic standard of

ordinary care under the Texas Health Care Liability Act.

The issue at hand, however, should turn on this

Court’s respect for the authority and responsibility of state

courts to address such claims. As Justice Black famously

put it, Our Federalism requires “a proper respect for state

functions, a recognition of the fact that the entire country

is made up of a Union of separate state governments, and

a continuance of the belief that the National Government

will fare best if the States and their institutions are left

———— a - - -

5

free to perform their separate functions in their separate

ways.” Younger v. Harris, 401 U.S. 37, 44-45 (1971).

Although Our Federalism implicates a wide array of

legal doctrines, scholars recognize that the proper limita-

tion of preemption is one of the most important aspects of

federalism because preemption directly affects the States’

ability to provide services and beneficial regulation to

their citizens. See Ernest A. Young, Two Cheers for Process

Federalism, 46 VILL. L. REV. 1349, 1377-80 (2001). In the

same vein, Justice Breyer recently concluded:

(Tjhe true test of federalist principle may lie, not

in the occasional constitutional effort to trim

Congress’ commerce power at its edges, or to pro-

tect a State’s treasury from a private damages

action, but rather in those many statutory cases

where courts interpret the mass of technical de-

tail that is the ordinary diet of the law.

Egelhoff v. Egelhoff, 532 U.S. 141, 160-61 (2001) (citations

omitted) (Breyer, J., joined by Stevens, J., dissenting); cf.

Geier v. American Honda Motor Co., 529 U.S. 861, 887

(2000) (Stevens, J., joined by Souter, Thomas, & Ginsburg,

JJ., dissenting).

Sensitive issues of federalism are especially evident in

cases like this one that involve the artful pleading doctrine

because they are predicated on federal-question jurisdic-

tion under 28 U.S.C. § 1331, which “masks a welter of

issues regarding the interrelationship of federal and state

authority.” Franchise Tax Board, 463 U.S. at 8. While a

proper interpretation of § 502 certainly implicates a “mass

of technical detail,” affirmance here is compelled by both

a straightforward application of principles governing

6

removal and a proper respect for the appropriate role of

state courts in our federal system.

In assessing the propriety of removal of a case from

state to federal court, a “State’s dignitary interest bears

consideration.” Ruhrgas AG v. Marathon Oil Co., 526 U.S.

574, 576 (1999); accord, Healy v. Ratta, 292 U.S. 263, 270

(1934) (“Due regard for the rightful independence of state

governments * * * requires that [federal courts] scrupu-

lously confine their own jurisdiction to the precise limits

which the statute has defined.”). The mere notice of

removal strips the state court of jurisdiction to take any

further action in the case, subject only to the discretion of

a federal district judge. See James C. Rehnquist, Taking

Comity Seriously: How to Neutralize the Abstention Doc-

trine, 46 STAN. L. REV. 1049, 1087-88 (1994) (“A state court

that has a case snatched from its docket has a legitimate

cause for offense. More than insult, this is injury — a result

that renders fruitless a previous investment of scarce

resources.”).

We show below that the Fifth Circuit paid proper

respect to the appropriate role of state courts in our

federal system by concluding that respondents’ claims do

not arise under ERISA and thus are not removable to

federal court.

I. A STATE-COURT ACTION RAISING ONLY

STATE-LAW CLAIMS THAT CANNOT BE PUR-

SUED UNDER ERISA DOES NOT “ARISE UN-

DER” ERISA FOR PURPOSES OF REMOVAL.

The standards for removing a case to federal court are

more than a century old. A state-court action may be

removed to federal court only if it qualifies as a “civil

———_——n — rio — Oo

7

action *** of which the district courts of the United

States have original jurisdiction.” 28 U.S.C. § 1441(a).

Removal is “entirely a creature of statute,” Syngenta Crop

Prot., Inc. v. Henson, 537 U.S. 28, 28 (2002), and “these

statutory procedures for removal are to be strictly con-

strued.” Jd. at 32.

The only possible basis for removal in this case is

federal-question jurisdiction, which gives district courts

the authority to preside over “[a]ny civil action * * *

founded on a claim or right arising under the Constitution,

treaties or laws of the United States.” 28 U.S.C. § 1441(b);

see also 28 U.S.C. § 1331. The presence or absence of

federal-question jurisdiction depends on an examination of

the “well-pleaded” allegations on the face of a state court

complaint. See Beneficial Nat'l Bank v. Anderson, 123

S. Ct. 2058, 2062 (2003); Gully v. First Nat'l Bank in

Meridian, 299 U.S. 109, 112-113 (1936). Defenses, includ-

ing a defense based on the preemptive effect of federal law,

do not provide a basis for federal-question jurisdiction. See

Franchise Tax Bd. of Cal. v. Construction Laborers Vaca-

tion Trust for S. Cal., 463 U.S. 1, 14 (1983) (“a case may

not be removed to federal court on the basis of a federal

defense *** even if the defense is anticipated in the

plaintiff’s complaint, and even if both parties admit that

the defense is the only question truly at issue in the

case.”).

Thus, complaints such as those filed by respondents,

which raise only state-law claims, generally cannot be

removed from state to federal court. Removal here de-

pends on the “artful pleading” doctrine and a subspecies of

that doctrine known as “complete preemption.” See Rivet v.

Regions Bank of La., 522 U.S. 470, 475 (1998) (“The artful

pleading doctrine allows removal where federal law

8

completely preempts a plaintiff’s state-law claim.”). The

doctrine of complete preemption, or more accurately

removal preemption, originated in Justice Douglas's

opinion for the Court in Auvco Corp. v. Aero Lodge No. 735,

390 U.S. 557 (1968), which stands for the proposition that

the preemptive force of certain federal statutes is suffi-

cient to displace entirely state-law actions that, in sub-

stance, assert claims maintainable under federal law.

Thus, in Avco, the Court permitted removal of a state-law

claim for violation of a contract between an employer and

a labor organization on the ground that these claims could

be brought only under § 301 of the Labor Management

Relations Act (LMRA). As the Court explained last Term in

Beneficial National Bank, “(wJhen the federal statute

completely pre-empts the state-law cause of action, a claim

which comes within the scope of that cause of action, even

if pleaded in terms of state law, is in reality based on

federal law.” 123 S. Ct. at 2062.

The standard for permitting removal based on the

artful pleading doctrine is distinct from, and more de-

manding than, the question of whether ERISA preempts

state law. As the Franchise Tax Board Court explained,

“(merely to hold that ERISA does not have the same effect

on appellant’s suit in this case that § 301 of LMRA had on

the petitioner’s contract suit in Auco is not to prejudge the

merits of [the] preemption claim.” 463 U.S. at 27; id. at 26

(rejecting removal even though “the Court of Appeals may

2 Courts use the terms “complete preemption” and “removal

preemption” interchangeably. See Russell v. Sprint Corp., 264 F. Supp.

2d 955, 961 (D. Kan. 2003). We do so as well.

-<- — -o

9

well be correct that ERISA precludes enforcement of the

State’s levy in the circumstances of this case”).

To date, this Court has permitted removal under the

complete preemption doctrine only where at least one

claim brought in state court paralleled a federa! claim and

thus could have been brought originally in federal court.

In Avco, for example, the employer’s state-law claim

sought to enforce a no-strike clause of a collective bargain-

ing agreement, a claim at the very heart of the area

preempted by § 301 of the LMRA. Similarly, in Metropoli-

tan Life, this Court’s only case to date that allows removal

under ERISA, the claimant sought, among other relief,

“money contractually owed” under the terms of Metropoli-

tan Life’s ERISA plan. 481 U.S. at 61. The Metropolitan

Life Court permitted removal of the state-law contract

claim because the claim was “by a beneficiary to recover

benefits from a covered plan,” an action that “falls directly

under § 502(a)(1)(B) of ERISA, which provides an exclu-

sive federal cause of action for resolution of such disputes.”

Id. at 62-63. Because the contractual claim for ERISA

benefits supported removal, the Metropolitan Life Court

had ample authority to exercise jurisdiction over the

plaintiff's other contract and tort claims without an

independent analysis of whether those claims would

support removal. See 28 U.S.C. § 1441(c).

Other precedents confirm that removal preemption is

limited to claims that could have been brought under

federal law notwithstanding the complaint’s failure to

refer to that law. Compare Beneficial Nat'l Bank, 123

S. Ct. at 2063 (permitting removal of a state-law claim

against a national bank because the complaint “expressly

charged petitioners with usury,” a claim that could have

been filed under federal law), with Caterpillar Inc. v.

10

Williams, 482 U.S. 386, 397 (1987) (rejecting removal

under § 301 of the LMRA where the claim was based on an

alleged individual employment contract that pre-existed a

collective agreement and thus could not have been filed

under § 301).

The Court’s unanimous ruling in Rivet explains why

removal on the basis of complete preemption is appropri-

ate only where the state-law claims at issue could actually

be brought in federal court. In Rivet, Regions Bank at-

tempted to remove a state-law claim to federal court on

the ground that the claim was precluded as a matter of

federal law by an earlier federal court ruling. The Court

rejected this proposed extension of the artful pleading

doctrine, expressly distinguishing complete preemption

cases:

A case blocked by the claim preclusive effect of a .

prior federal judgment differs from the standard

case governed by a completely preemptive federal

statute in this critical respect: The prior federal

judgment does not transform the plaintiff’s

state-law claims into federal claims but rather

extinguishes them altogether. Under the well-

pleaded complaint rule, preclusion thus remains

a defensive plea involving no recasting of the

plaintiff’s complaint, and is therefore not a

proper basis for removal.

522 U.S. at 476-77 (citation omitted).

The rule of Rivet is that the artful pleading exception

to the well-pleaded complaint doctrine is viable only where

the state-court claim could actually be maintained under

federal law. Where a claim cannot be brought under

federal law, a successful defense that a state claim is

preempted by federal law would extinguish the claims

11

altogether. In such cases, preemption involves no recasting

of the plaintiff’s complaint, and there is no proper basis

for removal.

II. RESPONDENTS’ ACTIONS CANNOT BE PUR-

SUED UNDER ERISA.

Section 502(a)(1)(B) authorizes suits by ERISA plan

participants and beneficiaries to recover benefits due

under the plan, and to enforce and clarify rights under the

plan. 29 U.S.C § 1132(a)(1)(B). Through their state court

lawsuits, respondents seek none of these things. Their

claims are rooted in a state statutory duty of ordinary care

that is entirely independent of ERISA and the obligations

imposed thereunder. The elements respondents must

establish to prevail on their claims and obtain the relief

they seek have nothing to do with the enforcement of

ERISA rights or the collection of plan benefits.

Respondents thus stand in stark contrast to the

plaintiff in Metropolitan Life, who alleged an “improper

processing of a claim for benefits” (481 U.S. at 60) and

sought “reimplementation of all benefits and insurance

coverages” (id. at 61). Similarly, the complaint in .ilot Life

Ins. Co. v. Dedeaux, 481 U.S. 41 (1987), expressly chal-

lenged a termination of disability plan benefits, and the-

complaint requested “[djamages for failure to provide

benefits” under an ERISA plan. Jd. at 43.° Respondents

. * Although petitioners rely heavily on Pilot Life, that case did not

involve removal preemption under § 502, but instead express preemp-

tion under § 514. To be sure, Pilot Life discusses § 502 in the course of

analyzing preemption under § 514, but only because the claim sought

relief due to an allegedly improper denial of benefits, a claim that could

(Continued on following page)

12

neither allege improper processing nor seek reinstatement

of benefits. Thus, their claims do not arise under ERISA.

The Court’s unanimous ruling in Franchise Tax Board

is controlling on this point. There, a California tax author-

ity filed suit in state court to enforce a tax levy against

funds held in trust pursuant to an ERISA-covered em-

ployee benefit plan, and for a declaration that the trustees

were required to honor future levies. The trust removed to

federal court, arguing that under Avco, California’s claims

were “in substance” federal claims because they were

within the scope of, and thus removable under, § 502. 463

U.S. at 22. The Court rejected this argument, holding that

the claims were not within the scope of § 502. Id. at 22-28.

In analyzing the levy enforcement claim, the Court

anticipated its subsequent ruling in Metropolitan Life,

acknowledging that “[iJt may be that * * * any state action

coming within the scope of § 502(a) of ERISA would be

removable to federal district court, even if an otherwise

adequate state cause of action were pleaded without

have been brought directly under § 502. See Pilot Life, 481 U.S. at 43

(articulating the question presented as whether ERISA preempts state

actions “asserting improper processing of a claim for benefits under an

insured employee benefit plan” and describing the claims as seeking

“(djamages for failure to provide benefits under the insurance policy”);

id. at 51-52 (concluding that § 502 was relevant to the § 514 issue

“(bJecause in this case, the state cause of action seeks remedies for the

improper processing of a claim for benefits under an ERISA-regulated

plan.”); id. at 57 (concluding “that Dedeaux’s state law suit asserting

improper processing of a claim for benefits under an ERISA-regulated

plan is not saved by § 514(b\(2)(A), and therefore is pre-empted by

§ 514(a).”). As shown herein, respondents’ claims under the Texas

Health Care Liability Act are independent of ERISA and could not have

been brought under § 502. Pilot Life is thus plainly distinguishable.

13

reference to federal law.” 463 U.S. at 24. The Court went

on to make clear, however, that such a ruling would not

mean that ariy claim seeking funds from, or otherwise

related to, an ERISA plan would justify removal.

Specifically, the Franchise Tax Board Court cast the

complete preemption issue as whether California’s claims

were, “in substance,” ERISA claims notwithstanding the

state's failure to plead an ERISA claim. Jd. at 22. This

issue reduced to an inquiry into whether California had

tried to “defeat removal by omitting to plead necessary

federal questions in [its] complaint.” Jd. (emphasis added).

After examining § 502 in detail, the Court concluded that

California had not omitted any necessary federal questions

because “on the face of a well-pleaded complaint there are

many reasons completely unrelated to the provisions and

purposes of ERISA why the State may or may not be

entitled to the relief it seeks.” Jd. at 26. For example, the

Court observed that “[iJn theory (looking only at the

complaint), it may turn out that the levy was improper

under state law, or that in fact the defendant had complied

with the levy.” Jd. at 26 n.29. The Court distinguished

Avco by stressing that “[uJnlike the contract rights at issue

in Avco, the State’s right to enforce its tax levies is not of

central concern to the federal statute,” even though

California’s levy suit sought to raid the coffers of an

ERISA-sponsored plan. Jd. at 25-26.

In the same way, respondents’ complaints do not omit

“necessary” federal questions because their state statutory

claims against petitioners do not require interpretation of

ERISA or their ERISA plans. As in Franchise Tax Board,

respondents’ claims might well fail or succeed for reasons

entirely independent of ERISA, including a failure to

prove the requisite elements of a claim under the Texas

14

Health Care Liability Act, elements that have no cognates

in a § 502 claim. And as in Franchise Tax Board, respon-

dents’ suits as pleaded do not “arise under” ERISA simply

because respondents are subject to ERISA plans adminis-

tered by respondents. Nor is the Texas state statutory duty

of medical care a central concern of ERISA. See pages 16-

18, below (discussing Pegram). Of course, to apprehend the

basic nature of respondents’ claims, the Texas courts on

remand would need to acknowledge the obvious fact that

respondents are challenging medical necessity determina-

tions. But this is no different from Franchise Tax Board,

where a basic understanding of California's claim required

acknowledgment that its levy was asserted against an

ERISA plan whose members included delinquent taxpay-

ers. In neither case would a court need to interpret and

apply the plan to resolve the claim.

Another passage of the Franchise Tax Board opinion

drives this conclusion home. In footnote 28 and the accom-

panying text, the Court contrasted § 502 of ERISA with

§ 301 of the LMRA, interpreted in Avco, and determined

that §301 is more encompassing with respect to suits

related to employment contracts than § 502 is with respect

to ERISA plans. Jd. at 25 n.28. It nonetheless concluded

that “even under § 301, we have never intimated that any

action merely relating to a contract within the coverage of

§ 301 arises exclusively under that section.” Jd. For exam-

ple, “a state battery suit growing out of a violent strike

would not arise under § 301 simply because the strike may

have been a violation of an employer-union contract.” Id.

at 25 n.28. In the same way, a state tort suit challenging

the negligent act of a managed health care organization

ee eee a em eee —7 eee eee

15

does not arise under ERISA simply because the injured

employee is subject to an ERISA plan.

To be sure, in analyzing California’s declaratory

judgment action, the Franchise Tax Board Court provided

a second basis for distinguishing Avco and ruling against

removal, namely that § 502 provides a cause of action only

to plan participants, beneficiaries, and fiduciaries, not to

the State of California. Jd. at 26-27. Although this ground

for finding no removal would not apply to respondents

here, the hag analysis makes clear that removal is

inappropriate where either one of the distinguishi

features exists, i.e., either where the state page

independent from ERISA or where the plaintiff is not a

plan participant, beneficiary, or trustee. Jd.

Franchise Tax Board, which receives only a single

passing reference by petitioners (Aetna Br. 23-24), is fully

consistent with Metropolitan Life. As mentioned above

Franchise Tax Board expressly anticipated the Metropoli-

tan Life ruling, handed down just four years later. Last

Term, this Court reaffirmed both Franchise Tax Board and

Metropolitan Life. See Beneficial Nat’l Bank, 123 S. Ct. at

2062-63 (relying on Franchise Tax Board, Avco, and

Metropolitan Life to “provide[ ] the framework” for analyz-

ing removal preemption). Taken together, these rulings

instruct federal district courts (1) to allow removal where

a state-court action seeks to enforce or clarify rights under

an ERISA plan and thus could have been filed in federal

court under § 502 (notwithstanding the absence of any

reference to ERISA), and (2) not to remove state court

actions that do not seek to clarify obligations arising

16

directly from an ERISA plan, but rather attempt to vindi-

cate rights from an independent source that would not

require interpretation of ERISA or an ERISA plan.

The distinct nature of respondents’ suits under the

Texas Health Care Liability Act is confirmed by the

Court’s unanimous ruling in Pegram v. Herdrich, 530 U.S.

211 (2000). We will not burden the Court with another

lengthy description of this case. But it bears repeating

that Pegram concludes that Congress did not intend to

federalize state-law malpractice claims by allowing them

to be brought as fiduciary claims under § 502(a)(2). Id. at

236. This conclusion has direct relevance to the removal

issue under § 502, for as the U.S. Court of Appeals for the

Eleventh Circuit determined, “it makes little sense to

* Lingle v. Norge Div. of Magic Chef, Inc., 486 US. 399 (1988), a

LMRA cnemation aim reinforces this argument. The Lingle =

held that § 301, which preempts suits arising out of union contracts, di

not preempt a state-tort claim for wrongful termina tion, even =

the union contract at issue limited discharges to “just cause. Id. at

13. The Lingle Court invoked state anti-discrimination laws as a

helpful analogy to support its conclusion that Lingle’s retaliatory

discharge claim was independent from, and thus not preempted by, any

potential claim for violation of the contract: .

(T]he mere fact that a broad contractual protection against

discriminatory - or retaliatory —- discharge may provide a

remedy for conduct that coincidentally violates state law

does not make the existence or the contours of the state law

violation dependent upon the terms of the private contract.

For even if an arbitrator should conclude that the contract

does not prohibit a particular discriminatory or retaliatory

discharge, that conclusion might or might not be consistent

with a proper interpretation of state law. aa

- at 412-13. Likewise, a ruling by a state court on respondents’ aims

mt - rely exclusively on state statutory law and be entirely independ-

ent from obligations arising under ERISA.

ela <a ee

17

believe that Congress did not intend to federalize malprac-

tice claims under section 502(a)(2) [as held in Pegram], but

intended to do so under section 502(a)(1)(B)” by requiring

that such claims be brought exclusively in federal court as

an ERISA claim to recover benefits. Land v. CIGNA

Healthcare of Fla., 339 F.3d 1286, 1293 (11th Cir. 2003),

petition for cert. filed (No. 03-649, Oct. 28, 2003).

Petitioners seek to distinguish Pegram by noting that

the treating physicians there owned the defendant-HMO

and thus made the mixed eligibility-treatment decisions

alleged to have been negligent. But the Pegram Court

made clear that its analysis turned not on who made the

decisions, but instead on the nature of the decisions being

made:

[Treatment and eligibility] decisions are often

practically inextricable from one another. * * *

This is so not merely because, under a scheme

like [the HMO at issue], treatment and eligibility

decisions are made by the same person, the

treating physician. It is so because a great many

and possibly most coverage questions are not

simple yes-or-no questions * * * .

Id. at 228 (emphasis added; citation and footnote omitted). In

practical terms, the Court continued, such eligibility deci-

sions cannot be untangled from judgments about reasonable

medical treatment. Jd. at 229. This is true regardless of

whether that decision is made by a treating physician who

owns and operates an HMO, or by a desk nurse who

exercises discretion on behalf of an HMO. Indeed, the

Court stressed that its conclusion in this regard was not a

narrow one limited to the relatively rare physician-owned

HMO context, but instead extended to “countless medical

administrative decisions [made] every day.” Id.

18

Although Pegram is not directly controlling on re-

moval, several federal appeal courts have received its

message loud and clear, ruling that medical malpractice

claims filed in state court are not claims arising under

ERISA and thus are not subject to removal. E.g., Land,

339 F.3d at 1289-94 (malpractice action filed in state court

alleging that an HMO’s failure to diagnose the plaintiff’s

condition correctly and authorize the proper treatment

does not arise under ERISA and thus is not subject to

removal); Cicio v. Does, 321 F.3d 83, 102 (2d Cir. 2003)

(state-law malpractice action challenging a mixed eligibil-

ity/treatment decision does not arise under ERISA and is

not removable to federal court), petition for cert. filed (No.

03-69, July 11, 2003)).

At bottom, the removal issue boils down to a proper

notion of “artful pleading.” Franchise Tax Board, Metro-

politan Life, and this Court’s other precedents governing

removal preemption emphasize that the artful pleading

prohibited by §502 occurs where a plaintiff seeks to

recover benefits due to a violation of an ERISA plan, but

files a complaint based exclusively on state contract law

without reference to ERISA. On those facts, the very

contract being breached is an ERISA plan, and the state-

law contract claim implicates the same evidence and legal

analysis — including, notably, construction of the plan —

that would attend a claim for benefits under § 502. Under

those circumstances, the breach of contract claim really is

an ERISA claim, and the plaintiff is not permitted to

artfully plead around § 502’s exclusive remedy scheme for

the collection of benefits.

Petitioners essentially contend that § 502 prevents

injured patients from filing in state court under state law

any complaint against a plan administrator, regardless of

19

whether the patient seeks to recover plan benefits, or

otherwise enforce or clarify rights and obligations under

the plan. Their position is that any challenge to their

allegedly negligent medical necessity decisions must be

brought under § 502, regardless of whether resolution of

the claim would involve an interpretation of ERISA or the

applicable plans. Under this theory, even a state-law

discrimination claim challenging a denial of benefits would

be removable (compare Lingle, discussed in note 4, supra).

This radical expansion of removal preemption finds no

support in precedent and would constitute a frontal

assault on the proper role of state courts in our federal

system.”

¢

CONCLUSION

. To understand the scope and propriety of the Fifth

Circuit's ruling, it is critical to distinguish the more

demanding standards for removal under § 502 from those

* In Beneficial National Bank, Justice Scalia, joined by Justice

Thomas, argued vigorously in dissent against the an of

removal preemption beyond the limited facts of Avco and Metropolitan

Life, calling the Avco ruling an “unprecedented act of jurisdictional

alchemy.” 123 S.Ct. at 2066 (Scalia J., dissenting). Petitioners’ pro-

posed expansion of removal preemption represents a far greater threat

to state-court authority than that at issue in Beneficial National Bank

because, in that case, the state-law usury claims were unquestionably

preempted and thus there were “good reasons” based in policy to permit

removal jurisdiction. Jd. at 2069. Here, this Court’s rulings in Pegram

and other recent cases raise serious questions about whether state

medical malpractice claims are preempted by ERISA. Comity concerns

dictate that state courts be permitted to address this important

question in the first instance, subject to this Court’s review.

20

for ERISA preemption generally. Petitioners and their

supporting amici conflate the issues.° The Fifth Circuit

correctly concluded that respondents’ claims do not arise

under ERISA and thus are not removable under § 502. The

judgment of the court of appeals should be affirmed.

Respectfully submitted,

DOUGLAS T. KENDALL

TIMOTHY J. DOWLING*

Community Rights Counsel

1301 Connecticut Ave., NW

Suite 502

Washington, D.C. 20036

(202) 296-6889

; *Counsel of Record for the

Amici Curiae

* To cite one more example, we are befuddled by the Justice

Department's assertion that the “court of appeals held that respondents’

claims are not completely preempted — indeed, are not preempted at all

*** ” See U.S. Br. 17. It is simply wrong to suggest that the Fifth

Circuit held that respondents’ claims “are not preempted at all.” After

deciding it lacked jurisdiction over Calad and Davila’s claims, the court

did the only thing it could do: it left the substantive preemption issue

for resolution by the Texas courts on remand. With respect to Robert

Roark, as noted above, the court felt bound by outdated circuit prece-

dent and reluctantly held that similar state-law claims are preempted

by §514. See Cigna Pet. App. 24a-28a. The Justice Department’s

misstatement of the Fifth Circuit’s holding, coupled with petitioners’

silence regarding the lower court’s ruling in their favor on the substan-

tive preemption issue, serve to obscure the critical distinction between

removal preemption under § 502 and express preemption.

—

OP ma a Ae