# Amicus Curiae Brief — Cigna Healthcare of Texas, Inc., Dba Cigna Corp. v. Calad

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0694%3A11

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2003
- **Citation:** 540 U.S. 981

## Text

Supreme Court, U.S,
pty

FILED

/
(gy C4 ) 3 200
Nos. 02-1845 and BEC 1 3 2003

»

In the Supreme Court of the Giuted-

AETNA HEALTH INC., FKA AETNA U.S. HEALTHCARE
INC. AND AETNA U.S. HEALTHC ARE OF
NORTH TEXAS INC., PETITIONER

v.
JUAN DAVILA

CIGNA HEALTHCARE OF TEXAS, INC., DBA CIGNA
CORPORATION, PETITIONER

v.
RUBY R. CALAD, ET AL.

ON WRITS OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES AS
AMICUS CURIAE SUPPORTING PETITIONERS

PAUL D. CLEMENT
Acting Solicitor General

HOWARD M. RADZELY Counsel of Record
Solicitor of Labor EpWIN S. KNEEDLER

ALLEN H. FELDMAN Deputy Solicitor Geneval
Associate Solicitor JAMES A. FELDMAN

NATHANIEL I. SPILLER Assistant to the Solicitor
Deputy Associate Solicitor General

EDWARD D. SIEGER Department of Justice
Attorney Washington, D.C. 20530-0001
Department of Labor (202) 514-2217

Washington, D.C. 20210

eee

is e ¥oy ".
a ee:

h

3

MG
ba

ee ” Soey gra Ee
Pee: coy

a

QUESTION PRESENTED

Under Metropolitan Life Insurance Co. v. Taylor, 481
U.S. 58 (1987), certain state-law claims can be removed from
state to federal court if they fall within the scope of the civil
enforcement provisions of the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. 1132(a), and are
thereby “completely preempted.” The question presented is
whether ERISA completely preempts state-law claims by an
ERISA plan participant or beneficiary against a health
maintenance organization (HMO) where the claims challenge
an HMO’s decision to deny coverage of treatment or care
that was prescribed by the claimant’s physician but that the
HMO decided was not authorized under the plan’s “medical
necessity” proviso.

(I)

TABLE OF CONTENTS

Interest of the United States ......00ccccccsccccsccccsersccevssossecsssesseesesees 1
Statement: 2
1. Aenta Health Inc. Vv. Davila o......c.cccccccccccceeeeeeeeeeneeees 2

2. Cigna HealthCare of Texas, Inc. v. Calad ................ 4
5

6

3. The court of appeals’ decision ............ccsseseseesnensneesees

I IEEIIIIIID ccsncessersesesssnsessasesenscessscsnensnssssssesscssscscsnseentts
Argument:
ERISA completely preempts respondents’ state-
law claims because they fall within the scope of
Section 502(a) ' 9
A. State-law claims within the scope of Section 502(a)
are removable from state to federal court .............+-+. 9
B. Respondent’s claims fall within the scope of
Section 502(a)(1)(B) 12
C. The fact that plaintiffs’ actions are tort-based
underscores their complete preemption ............0:0-++++« 17
D. Pegram v. Herdrich does‘not bar complete pre-
emption of respondents’ claims .............0sss0sssssseeesnees 21
E. Complete preemption effectuates the congres-
sional balance between providing prompt and
appropriate remedies for claimants and
encouraging the formation and growth of employee
ID crnscnsccsnrescesnsassescscemsrenerenenessnsssesrscsesmnssseaces
Conclusion

& F

TABLE OF AUTHORITIES
Cases:

Allis-Chalmers Corp. v. Lueck, 471 U.S. 202

(1985) ps nsesaueasesussunagasaseseusscsussnnstseneseneesns 19
Beneficial Nat'l Bank v. Anderson, 123 S. Ct. 2058

TE crietateesrerneenemnssonnevecnnssensesencesascacesee menentenemmmenen 9,10, 15

(IIT)

IV

Cases—Continued: Page

Black & Decker Disability Plan v. Nord, 538 U.S.

822 (2003) 27
Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574

(7th Cir. 2000) 28
Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) ........... 10
Cicio v. Does, 321 F.3d 83 (2d Cir.), petition for cert.

filed, No. 03-69 (July 11, 2003) 21
Dardinger v. Anthem Blue Cross & Blue Shield,

781 N.E.2d 121 (Ohio 2002) on 30
Franchise Tax Bd. v. Construction Laborers

Vacation Trust, 463 U.S. 1 (1983) .........c.cceccsesesesererseeneees 12
Great-West Life & Annunity Ins. Co. v. Knudson,

534 U.S. 204 (2002) 27
Healthcare Inc., In re, 193 F.3d 151 (3d Cir. 1999),

cert. denied, 530 U.S. 1242 (2000) . 29
Heasley v. Belden & Blake Corp., 2 F.3d 1249 (3d

Cir. 1993) 16
Ingersoll-Rand Co. v. McClendson, 498 U.S. 133

(1990) 7, 11, 18, 26, 29

Kekis v. Blue Cross & Blue Shield of Utica-
Watertown, Inc., 815 F. Supp. 571 (N.D.N.Y.

1993) 16
Kopicki v. Fitzgerald Auto. Family Employee

Benefits Plan, 121 F. Supp. 2d 467 (D. Md. 2000) .......... 16
Kulakowski v. Rochester Hosp. Serv. Corp.,

779 F. Supp. 710 CW.D.N.Y. 1991) ....ccccecsessessecsesseeneeneeneens 16-17
Lockheed Corp. v. Spink, 517 U.S. 882 (1996) .........0cc0c000 26
Marro v. K-III Communications Corp., 943 F.

ee 16
Massachusetts Mut. Life Ins. Co. v. Russell,

473 U.S. 134 (1985) ....... suamnaseseonenenenatenanegesennnatanesmescsensemenes 21
Mattive v. Healthsource of Savannah, Inc.,

893 F. Supp. 1559 (S.D. Ga. 1995) ...........ccccccecnsseceesesneneeneees 16
Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) «0.0.0... 27

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58
EE ne 4,6, 10, 11, 12, 13, 15, 18, 20

Cases—Continued: Page

Pegram v. Herdrich, 530 U.S. 211 (2000) ....... 8, 21, 22, 23, 24
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) .... passim
Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266

(3d Cir. 2001) 16, 28, 29
Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355

(2002) sd 8, 12,

18, 19, 20, 21, 23, 28
Shannon v. Jack Eckerd Corp., 113 F.3d 208 (11th

Cir. 1997), cert. denied, 522 U.S. 1111 (1998) ................... 17
Shaw v. Delta Air Lines, Inc., 463 U.S. 85

(1983) seiecueaieicliehainitiibiiapiatatii 26
Strom v. Goldman Sach & Co., 202 F.3d 138 (2d Cir.

1999) eocenebanaaaiaitiianesmaaiainidiiaass 28
UNUM Life Ins. Co. v. Ward, 526 U.S. 358 (1999) ......... 12
U.S. Healthcare, Inc., In re, 193 F.3d 151 (3d

Cir. 1999), cert. denied, 530 U.S. 1242 (2000) ................... 29
Varity Corp. v. Howe, 516 U.S. 489 (1996) ......... 17, 24-25, 27
Villazon v. Prudential Health Care Plan, Inc.,

843 So. 2d 842 (Fla. 2003) _ 29
White v. Caterpillar, Inc., 765 F. Supp. 1418

(W.D. Mo.), aff’d, 985 F.2d 564 (8th Cir. 1991) ............. 17, 27

Wilson v. Group Hospitalization & Med. Servs.,
Inc., 791 F. Supp. 309 (D.D.C. 1992), appeal
dismissed, 995 F.2d 306 (D.C. Cir. 1993) 7 - 16,27

Statutes and regulations:
Employee Retirement Income Security Act of 1974,
hs Cg ID, cccceptrccinesceiatscincstcnattintnccineeien 6
BD WEALD, BERR GD ccccenecnssssnsnnszsennnsnscecsnsnsnssnensnsnssmanmecensnss 26
ST, TD ccceererssereseerseeteenntenetnmmnaen 1
Un 24
TS | 21
BD DEG. GED ccccennennssssmnssenssnensnsssscscemscmesesennmemmen 21
29 U.S.C. 1132(a) (§ 502(a)) ............. 1, 4, 7, 8, 10, 12, 13, 26

29 USC. 1132(aX(1)(B) (§ 502(a)(1)(B)) enusenvasnssessese passim

Statutes and regulations—Continued: Page
29 U.S.C. 1132(a)(2) (§ 502(a)(2)) ........recresseseresernssnesneneens 6, 21
29 U.S.C. 1132(a)(3) (§ 502(a)(3)) 5, 17, 20, 27
29 U.S.C. 1132(g) 27
29 U.S.C. 1133 (§ 508) ...........c.cscssseeseeeees 9, 28
29 U.S.C. 1133(1) ...... 26°
29 U.S.C. 1133(2) (§ 50B(2)) ........ssescseesseessneerneeeneces 24, 25, 26
Sf 1
PGE. TECTED cccenmces 12,14
29 U.S.C. 1144 (D2) A) .....ccsceceeseeeseeeees 12
Se. SD ereessnnenn 26
28 U.S.C. 1441(b) 9-10
Texas Health Care Liability Act, Tex. Civ. Prac. & Rem.
Code Ann. (West Supp. 2004):
By NINDS scnenninstassessssenreenteeiesicenimameneeenmenten 3
§ 88.001(5) 3
§ 88.002(a) 3
§ 88.002(c) 3
29 C.F.R.:
Section 2560.503-1(f)(2)(i) ......... 28
Section 2560.503-1(f)(2)(ii)(A) . 28
Section 2560.503-1(g)(1) (2000) . 25
Section 2560.503-1(g)(1)(i) 26, 28
Section 2560.503-1(h)(1) 25, 26
Section 2560.503-1(h)(2)(iv) ....... 26
Section 2560 .503-1(h)(3)(ii) 25
Section 2560.503-1(7)(1)(ii) «.........00+. 25
Section 2560.503-1(j)(1) ...........00+ 26
Section 2560.503-1(j)(5)(ii) ........ 26
Miscellaneous:
Gail B. Agrawal & Mark A. Hall, What If You Could
See Your HMO? Managed Care Liability Beyond
the ERISA Shield, 47 St. Louis U.L.J. 235 (2003) ...... 29, 30
George G. Bogert & George T. Bogert, The Law
of Trusts and Trustees (rev. 2d ed. 1995) ...........ccccceseseeees 28

Vi

Vil

Miscellaneous—Continued:

66 Fed. Reg. 35,886 (2001) ...........:secsessssesnesneneencnnenensnennsnnes
Restatement (Second) of the Law of Trusts (1959) .......
United States General Accounting Office, Employer-

Based Managed Care Plans: ERISA’s Effect on
Remedies for Benefit Denials and Medical Mal-
practice (July 1998) (GAO/HEHS-98- 154) .............

Jn the Supreme Court of the Anited States

No. 02-1845

AETNA HEALTH INC., FKA AETNA U.S. HEALTHCARE
INC. AND AETNA U.S. HEALTHCARE OF
NORTH TEXAS INC., PETITIONER

Vv.
JUAN DAVILA

No. 03-83

CIGNA HEALTHCARE OF TEXAS, INC., DBA CIGNA
CORPORATION, PETITIONER

Vv.
RuBY R. CALAD, ETAL.

ON WRITS OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES AS
AMICUS CURIAE SUPPORTING PETITIONERS

INTEREST OF THE UNITED STATES

This case concerns the scope of “complete preemption” un-
der Section 502(a) of the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. 1132(a), as applied
to state-law claims against a health maintenance organiza-
tion (HMO). Because the Secretary of Labor has primary
authority for enforcing and administering Title I of ERISA,
see 29 U.S.C. 1002(13), 1136(b), which includes Section
502(a), the United States has a substantial interest in

(1)

2

ensuring that ERISA’s complete preemption principle is
appropriately applied.
STATEMENT
1. Aetna Health Inc. v. Davila

a. Petitioner Aetna Health Inc.’s predecessors provided
HMO coverage to respondent Juan Davila pursuant to an
ERISA plan sponsored by Davila’s employer. 02-1845 Pet.
App. 4a, 67a. The agreement between Aetna and the em-
ployer provided that Aetna would contract with participat-
ing physicians who were independent contractors and solely
responsible for health services rendered to covered patients.
Id. at 98a. The agreement gave Aetna “complete authority
to review all claims for Covered Benefits,” including “dis-
cretionary authority to determine whether and to what
extent eligible individuals and beneficiaries are entitled to
coverage and construe any disputed or doubtful terms under
thle] Group Agreement.” Jd. at 102a.

The agreement required benefits to be “[mJedically [nJec-
essary” to be covered and specified that “(flor the purpose of
coverage, [Aetna] may determiné whether any benefit pro-
vided under the [Certificate of Coverage] is [mlJedically
[njecessary.” 02-1845 Pet. App. 122a. Among other things,
“medically necessary” means that a service or supply “must
* * * be no more costly * * * than any equally effective
service or supply” in satisfying certain standards of medical
efficacy. Jd. at 122a-123a. The agreement pr vided that its
coverage “does not restrict a Member’s ability to receive
health care benefits that are not, or might not be, [clovered
[bjenefits.” Jd. at 177a.

b. In April 2000, Davila’s primary care physician pre-
scribed Vioxx for Davila’s arthritis. 02-1845 Pet. App. 67a,
76a. Aetna refused to pay for the prescription, which led the
physician to contact Aetna concerning the refusal. Jd. at 77a.
In May 2000, an Aetna representative informed the physi-

3

cian that, under its formulary policy, Aetna would approve
Vioxx only if Davila “has a diagnosis of osteoarthritis or
acute pain and has a contraindication, intolerance, allergy to
or a documented adequate trial” of at least two other
covered drugs. /d. at 80a; see id. at 4a, 67a-68a. Davila be-
gan taking one of those other drugs (a generic drug, napro-
syn), which allegedly led to a hospitalization for bleeding
ulcers, a near-heart attack, and internal bleeding. /d. at 5a,
68a, 77a.

After his hospitalization, Davila sued Aetna in Texas state
court for violations of the Texas Health Care Liability Act
(THCLA), Tex. Civ. Prac. & Rem. Code Ann. §§ 88.001 et
seq. (West Supp. 2004) (reproduced at 02-1485 Pet. App. 56a-
63a). See id. at 68a-70a. The THCLA requires a health
insurance carrier, HMO, or other managed care entity “to
exercise ordinary care when making health care treatment
decisions” and imposes liability for damages for harm to an
insured or enrollee proximately caused by its failure to exer-
cise such care. Tex. Civ. Prac. & Rem. Code Ann. § 88.002(a)
(West Supp. 2004). The THCLA defines “(health care treat-
ment decision” to mean

a determination made when medical services are actually
provided by the health care plan and a decision which
affects the quality of the diagnosis, care, or treatment
provided to the plan’s insureds or enrollees.

Id. § 88.001(5). It is a defense to an action asserted against
an insurer, HMO, or other managed care entity that neither
it nor any of its employees or agents “controlled, influenced,
or participated in the health care treatment decision” and
“did not deny or delay payment for any treatment prescribed
or recommended by a provider to the insured or enrollee.”
Id. § 88.002(c).

Davila alleged that Aetna’s adherence to its policies on the
use of Vioxx amounted to a failure to use ordinary care in
making a health care treatment decision that affected the

d

quality of the treatment Davila received. 02-1845 Pet. App.
68a-69a. He further alleged that Aetna was liable for puni-
tive damages because Aetna knew its policy involved a risk
of serious injury or death. Jd. at 70a-71a.

ce. Aetna removed the action to federal court based on
the “complete preemption” doctrine recognized in Metropoli-
tan Life Insurance Co. v. Taylor, 481 U.S. 58 (1987). 02-1845
Pet. App. 89a. Under that doctrine, a state-law claim that
falls within the scope of the civil enforcement provisions in
Section 502(a) of ERISA, 29 U.S.C. 1132(a), is deemed to be
a federal claim subject to removal. Taylor, 481 U.S. at 65-67.
Aetna argued that Davila’s state-law claims were within the
scope of Section 502(a) because they were based on Aetna’s
“allegedly wrongful conduct of denying benefits.” 02-1845
Pet. App. 87a.

Davila filed a motion to remand the case to state court,
which the district court denied. 02-1845 Pet. App. 30a-35a.
The district court reasoned that while ERISA would not
completely preempt a claim challenging the quality of medi-
cal care a participant received, the claim here, “fairly con-
strued, actually challenges the administration of health bene-
fits under an ERISA plan.” Jd. at 33a-34a. Because Davila
chose not to refile his state-law claims as ERISA claims, the
district court dismissed his state-law claims with prejudice.
Id. at 34a-35a.

2. CIGNA HealthCare of Texas, Inc. v. Calad

a. Ruby Calad became a member of CIGNA Health-
Care’s HMO through an ERISA plan provided by her hus-
band’s employer. 03-83 Pet. App. 3a, 33a. Under the plan,
hospital benefits would not be paid for any day in excess of
the number of days certified through a pre-admission certi-
fication (PAC) or continued stay review (CSR). CIGNA
Opp. Mot. Remand App. 22.

In September 1999, Calad was admitted to a hospital for a
hysterectomy. Cause No. 00-09041 Pl. Orig. Pet. para. 4.

5

During pre-authorization procedures, CIGNA allegedly in-
formed her that it authorized only one day of hospitalization
following the surgery. 03-83 Pet. App. 34a. On the second
day after surgery, a CIGNA representative allegedly in-
formed Calad’s treating physician that CIGNA would not
extend her hospital stay unless she had hemorrhaging, fever,
or high blood pressure; without those symptoms, Calad
would have to pay the cost of an extended hospitalization.
Id. at 34a-35a. Calad was discharged, but she suffered
complications that caused her to return to the emergency
room a few days later. Jd. at 3a. Alleging that she did not
qualify for a continued hospital stay under CIGNA’s medical
necessity criteria and was unable to pay for the hospitaliza-
tion, she sued CIGNA in state court under the THCLA for
failing to use ordinary care in its medical decisions. See id.
at 3a, 30a, 35a.

CIGNA removed the action to federal court under the
complete preemption doctrine. See 03-83 Pet. App. 30a-31a.
The district court denied Calad’s- motion to remand and
dismissed her state-law claims with prejudice because she
chose not to amend her pleading to bring an ERISA claim.
Id. at 40a. :

3. The court of appeals’ decision

The Fifth Circuit consolidated appeals by Davila and
Calad and reversed the district courts’ refusals to remand
their claims to state court. 02-1845 Pet. App. 2a-3a. Re-
moval of the claims by Davila and Calad was improper, the
court held, because their claims were not covered by rele-
vant provisions of Section 502(a) authorizing a suit for
breach of fiduciary duty or a claim for benefits. Id. at 10a- -
20a.

In particular, the court concluded that respondents’ claims
were not within Section 502(a)(3) of ERISA, 29 U.S.C.
1132(a)(3), which authorizes suits to enjoin violations of
ERISA or the plan or to obtain “other appropriate equitable

6

relief” to redress such violations or enforce ERISA or the
plan, because respondents sought damages rather than equi-
table relief. 02-1845 Pet. App. 10a. The court also concluded
that the claims were not within the scope of Section 502(a)(2)
of ERISA, 29 U.S.C. 1132(a)(2), which authorizes a plan par-
ticipant, beneficiary, or fiduciary or the Secretary to obtain
“appropriate relief” for the plan against a fiduciary who
breaches ERISA duties, because petitioners “were not act-
ing as plan fiduciaries when denying [respondents] medical
treatment.” 02-1845 Pet. App. 12a.

Finally, the court of appeals concluded that the claims by
Davila and Calad did not fall within the scope of Section
502(a)(1)(B) of ERISA, 29 U.S.C. 1132(a)(1)(B), which allows
a suit by a plan participant or beneficiary “to recover bene-
fits due to him under the terms of his plan, to enforce his
rights under the terms of the plan, or to clarify his rights to
future benefits under the terms of the plan.” 29 U.S.C.
1132(a)(1)(B); see 02-1845 Pet. App. 15a-20a. The court
reasoned that Section 502(a)(1)(B) “creates a cause of action
for breach of contract,” which permits patients to obtain the
benefits due “[w]hen a plan administrator incorrectly inter-
prets the plan to deny benefits.” Jd. at 16a. “(B]y contrast,”
the court held, “{respondents] assert tort claims; they have
not sued their ERISA plan administrator, nor do they
challenge his interpretation of the plan.” [bid.

SUMMARY OF ARGUMENT

A. The Employee Retirement Income Security Act of
1974, 29 U.S.C. 1001 et seq., “completely preempts” respon-
dents’ state-law claims. In Pilot Life Insurance Co. v. Ded-
eaux, 481 U.S. 41 (1987), the Court concluded that ERISA’s
civil enforcement provisions provide an exclusive set of
remedies and therefore preempt state-law claims that fall
within the scope of those provisions. In Metropolitan Life
Insurance Co. v. Taylor, 481 U.S. 58 (1987), decided the
same day as Pilot Life, the Court held that such state-law

7

claims are “completely preempted”—i.e., are removable from
state to federal court as a jurisdictional matter and pre-
empted by federal law on the merits. “Complete preemp-
tion” reflects a Congressional intent for Section 502(a) to
provide the exclusive remedies for claims that fall within the
scope of that section.

B. Respondents’ state-law claims are completely pre-
empted because they fall within the scope of Section
502(a)(1)(B) of ERISA, 29 U.S.C. 1132(a)(1)(B). That pro-
vision affords plan participants and beneficiaries a cause of
action to obtain benefits or enforce rights under an ERISA
plan. The state-law claims in these cases clearly attempt to
enforce rights under an ERISA plan, because petitioners’
liability is dependent on a showing that respondents were
entitled to have petitioners pay for benefits under the plans.
Because respondents’ state-law claims thus fall within the
scope of Section 502(a)(1)(B) of ERISA, they are subject to
complete preemption, and the federal courts accordingly had
removal jurisdiction over these cases.

C. The court of appeals held that respondents’ claims are
not completely preempted because they sound in tort, while
Section 502(a)(1)(B), in the court’s view, creates a cause of
action for breach of contract. That distinction is untenable;
this Court has repeatedly held—in Pilot Life, in Taylor, and
in Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990)—
that tort-based claims are preempted or completely pre-
empted by ERISA’s civil enforcement provisions in Section
502(a). The Court has never suggested that preemption
under Section 502(a) depends on the categorization of a claim
as contract-based or tort-based. To the contrary, the Court
has stated that Section 502(a) provides exclusive remedies;
the fact that a plaintiff seeks tort-type remedies or other
remedies not authorized in Section 502(a) only reinforces the
conclusion that the plaintiff’s claim is preempted or com-
pletely preempted. Although the court of appeals purported

8

to find support for its view in Rush Prudential HMO, Inc. v.
Moran, 536 U.S. 355 (2002), that case supports and reaffirms
the conclusion that state-law claims seeking remedies not
authorized by Section 502(a) of ERISA are preempted under
the principles of Pilot Life, Taylor, and Ingersoll-Rand.

D. Pegram v. Herdrich, 530 U.S. 211 (2000), does not
alter that conclusion. In Pegram, the Court held that an
HMO physician, who was both treating the patient and de-
ciding whether treatment was covered by a plan, was not
acting as an ERISA fiduciary when she made a “mixed” eli-
gibility and treatment decision. Pegram’s conclusion about
the existence of a fiduciary duty under ERISA, however, has
little to do with whether respondents’ claims fall within the
scope of a Section 502(a)(1)(B) claim for benefits. Moreover,
Pegram’s holding that a physician making a medical
necessity determination is not an ERISA fiduciary is prop-
erly limited to cases, such as Pegram itself, in which the
physician is a treating physician serving simultaneously in a
medical-treatment and benefits-determination role. ERISA
and the governing regulations of the Secretary of Labor
make clear that where, as here, the HMO and its representa-
tives are not treating the patient but are making benefits
determinations under an ERISA plan, they may serve in an
ERISA fiduciary capacity.

E. ERISA is designed to provide participants and bene-
ficiaries with the benefits promised by their plans and other
appropriate equitable relief. While the remedies available
under Section 502(a) of ERISA are not as broad as the tort
remedies and punitive damages sought by respondents,
ERISA’s civil enforcement scheme—which the complete
preemption doctrine makes exclusive—nonetheless effectu-
ates the congressional balance between providing prompt
and appropriate remedies for claimants and encouraging the
formation and growth of employee benefit plans. The
ERISA regime protects claimants and permits remedies

9

that are effective for most claimants, including an injunction
ordering an HMO to pay for proposed treatment before it is
provided, appropriate equitable relief to redress violations of
ERISA or an ERISA plan, important procedural protections
under the recently revised claims regulations promulgated
by the Department of Labor pursuant to Section 503 of the
Act, 29 U.S.C. 1133, independent review of HMO medical-
necessity decisions if state law so provides, and a possible
state-court suit against a treating physician for malpractice
and against an HMO when it is vicariously liable for a
treating physician’s decisions. Permitting state-law damage
actions concerning what are at bottom coverage disputes in
addition to those protections and remedies under ERISA
itself would undermine the exclusivity of the remedies
ERISA does provide. It would also undermine the uniform
administration of plans operating in more than one State
Moreover, by increasing costs through awards of or expo-
sure to punitive damages and other state-law remedies in
ways that cannot readily be predicted or budgeted, allow-
ance of state-law damage actions against HMOs or other in-
surers for an allegedly wrongful denial of a claim for benefits
could frustrate ERISA’s goal of promoting the interests of
employees in having their employers provide and maintain
adequate health plans.

ARGUMENT

ERISA COMPLETELY PREEMPTS RESPONDENTS’
STATE-LAW CLAIMS BECAUSE THEY FALL WITHIN
THE SCOPE OF SECTION 502(a)

A. State-Law Claims Within The Scope Of Section 502(a)
Are Removable From State To Federal Court

1. Under 28 U.S.C. 1441(b), “[a] civil action filed in a
state court may be removed to federal court if the claim is

one ‘arising under’ federal law.” Beneficial Nat’l Bank v.
Anderson, 123 S. Ct. 2058, 2062 (2603). Ordinarily, Section

10

1441(b) authorizes removal only when the federal question
appears on the face of a well-pleaded compiaint, but not
when preemption is simply raised as a federal defense to a
plaintiff’s suit. Metropolitan Life Ins. Co. v. Taylor, 481
U.S. 58, 63 (1987). But certain statutes so completely occupy
an area Congress has chosen to regulate exclusively as
federal law, with a federal cause of action, “that any civil
complaint raising this select group of claims is necessarily
federal in character.” Taylor, 481 U.S. at 63-64. With re-
spect to those statutes, a claim that on its face raises only
state-law claims but that also falls within the scope of the
federal cause of action will be considered to raise the federal
claim. See, e.g., Beneficial Nat'l Bank, 123 S. Ct. at 2063;
Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987);
Taylor, 481 U.S. at 65.

2. ERISA’s enforcement provisions have such a “com-
plete preemption” effect. That conclusion follows from two
basic premises. The first premise, established by Pilot Life
Insurance Co. v. Dedeaux, 481 U.S. 41 (1987), is that
ERISA’s civil enforcement provisions—and, in particular,
Section 502(a)(1)(B) of ERISA, 29 U.S.C. 1132(a)1)(B)—
provide an exclusive remedy; they therefore preempt any
state-law claims that fall within their scope. The second
premise, established by this Court’s decision the same day in
Taylor, is that the preemptive force of ERISA’s civil en-
forcement provisions gives rise to complete preemption, and
thus federal removal jurisdiction over claims that are
pleaded under state law but that fall within the scope of
Section 502(a).

a. In Pilot Life, an ERISA plan participant unsuccess-
fully sought disability benefits from the ERISA plan’s in-
surer for a back injury at work. 481 U.S. at 43. The partici-
pant brought state-law tort and contract claims against the
insurer in state court, seeking compensatory and punitive
damages for the failure to provide benefits. Jd. at 43-44.

1]

This Court held that suits “asserting improper processing of
claims under ERISA-regulated plans [are to] be treated as
federal questions governed by § 502(a)” of ERISA, and are
preempted. /d. at 56.

The Court’s conclusion in Pilot Life was based largely on
its determination that “ERISA’s civil enforcement remedies
were intended to be exclusive.” 481 U.S. at 54. ERISA’s
civil enforcement scheme was carefully crafted by Congress,
balancing “the need for prompt and fair claims settlement
procedures against the public interest in encouraging the
formation of employee benefit plans.” Jbid. The Court
concluded that “{t]he policy choices reflected in the inclusion
of certain remedies and the exclusion of others under the
federal scheme would be completely undermined if ERISA-
plan participants and beneficiaries were free to obtain reme-
dies under state law that Congress rejected in ERISA.”
Ibid. See also Ingersoll-Rand Co. v. McClendon, 498 U.S.
133, 145 (1990) (state-law cause of action preempted because
it “purports to provide a remedy for the violation of a right
* * * exclusively enforced by § 502(a)[3]”).

b. Taylor was decided the same day as Pilot Life. As in
Pilot Life, an ERISA plan participant sought disability
benefits for a back injury he had suffered at work. 481 U.S.
at 61. As in Pilot Life, the insurer of the ERISA plan found
that the plaintiff was not disabled and therefore not eligible
for benefits. [bid. Unlike in Pilot Life, the plaintiff brought
suit in state court, asserting state-law “contract and tort”
claims, id. at 62, and seeking both the disability benefits that
he believed had been wrongfully denied and damages for his
“mental anguish.” Ibid. The insurer removed the case to
federal court.

This Court held that “this suit, though it purports to raise
only state law claims, is necessarily federal in character by
virtue of the clearly manifested intent of Congress,” and that
it was accordingly “removable to federal court by the defen-

12

dants” under the complete preemption doctrine. Taylor, 481
U.S. at 67. The Court noted that its companion decision in
Pilot Life held that “state common law causes of action
asserting improper processing of a claim for benefits under
an employee benefit plan regulated by [ERISA] are pre-
empted by the Act.” /d. at 60. Although a mere preemption
defense is not ordinarily a sufficient basis for removal juris-
diction, the Court explained that Congress had “clearly
manifested an intent to make causes of action within the
scope of the civil enforcement provisions of § 502(a) remov-
able to federal court.” Jd. at 66. Accordingly, the Court held
that it was appropriate “to recharacterize a state law
complaint displaced by § 502(a)(1)(B) as an action arising
under federal law.” Jd. at 64.'

B. Respondents’ Claims Fall Within The Scope Of Section

502(a)(1)(B)

1. Pilot Life and Taylor establish that claims that fall
within the scope of Section 502(a)(1)(B) are subject to com-
plete preemption. In each of those cases, the plaintiffs could
not have been successful on their contract and tort claims
unless they could show that they were in fact entitled to
have the defendants pay for benefits under their ERISA
plans. In Pilot Life, for example, the plaintiff sought, inter

! In contrast to “complete preemption” of state causes of action that
fall within the scope of Section 502(a) under Taylor, “ordinary” pre-
emption of state law under Section 514(a) of ERISA, 29 U.S.C. 1144(a),
does not by itself permit removal of a state-court action to federal court.
Taylor, 481 U.S. at 64; Franchise Tax Bd. v. Construction Laborers Vaca-
tion Trust, 463 U.S. 1 (1983). A state law may be saved from “ordinary”
preemption under ERISA’s insurance saving clause, see 29 U.S.C.
1144(b)(2)(A), even in a case in which the underlying claim is removable
from state to federal court under the complete preemption doctrine. That
would occur, for example, if the state law’s sole effect is to add a
mandatory plan term that is enforceable only through an ERISA Section
502(a) action. See Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355,
379-380 (2002); see also UNUM Life Ins. Co. v. Ward, 526 U.S. 358, 376-
377 (1999).

13

-

alia, “{djamages for failure to provide benefits under the
insurance policy.” 481 U.S. at 43. In Taylor, the plaintiff
sought, inter alia, “compensatory damages for money con-
tractually owed Plaintiff.” 481 U.S. at 61. In both cases, the
plaintiffs’ claims obviously could not have been successful if
it were ultimately determined that they were not entitled to
the benefits at issue.

Because the plaintiffs in Pilot Life and Taylor brought
claims that depended on a showing that they were entitled to
have the defendants pay for benefits under their ERISA
plans, the Court had no difficulty in concluding in each case
that the plaintiff’s claims fell within the scope of Section
502(a)(1)(B). Indeed, the showing of entitlement to payment
that plaintiffs had to make in Pilot Life and Taylor was
essentially the same showing that would have been required
for them to bring a successful suit under Section
502(a)(1)(B), which creates a cause of action “to recover
benefits due [a participant] under the terms of his plan” or
“to enforce his rights under the terms of the plan.” 29 U.S.C.
1132(a)(1)(B). Accordingly, the state-law claims in those
cases were squarely preempted.

2. Just as in Pilot Life and Taylor, respondents’ claims
fall within the scope of Section 502(a)(1)(B) because they re-
quire adjudication of respondents’ entitlement to have peti-
tioners pay for benefits under their ERISA plans. They also
seek remedies additional to those provided under Section
502(a)(1)(B). They are therefore completely preempted.”

a. Respondent Davila’s state-law action alleges that
Aetna, through its prescription drug formulary policies,
“controlled, influenced, participated in and made decisions

2 Because the state-law claims in these cases depend on a showing that
respondents were entitled to benefits under their ERISA plans, these
cases do not present the question whether a state-law claim that does not
require adjudication of rights under an ERISA plan may nonetheless fall
within the scope of Section 502(a) and therefore be completely preempted.

14

which affected the quality of the diagnosis, care, and treat-
ment provided to” him; that Aetna thereby “violat[ed] the
duty of ordinary care” set forth in Texas law; and that
“{s]uch violation of ordinary care was the proximate cause of
{Davila’s] damages.” 02-1845 Pet. App. 69a. In particular,
Davila alleges that Aetna did not exercise due care when it
concluded that he could not obtain Vioxx under the plan
unless and until he had first tried other medications to treat
his condition. /d. at 67a-69a.

As was true of the claims in Pilot Life and Taylor,
Davila’s state-law claim necessarily requires adjudication of
Davila’s right to obtain payment for Vioxx under his ERISA
plan. Specifically, Davila’s claim requires a showing that
Davila was entitled to payment for Vioxx either under the
literal terms of the plan or under any provision of law incor-
porated into the plan—i.e., any federal law applicable to the
plan or any state law applicable to the plan that is not
preempted (or saved from preemption) under Section 514(a).
If he was not so entitled, then Aetna’s failure to pay for the
drug was both justified and not the proximate cause of any
injuries Davila suffered. In other words, Davila’s state-law
claim depends on the showing that would have been neces-
sary under Section 502(a)(1)(B) of ERISA “to recover
benefits due to him under the terms of his plan” or “to
enforce his rights under the terms of the plan.” 29 U.S.C.
1132(a)(1)(B).

Under the principles of Pilot Life and Taylor, claims like
Davila’s that require a showing that the claimant could have
recovered on a Section 502(a)(1)(B) claim are subject to
complete preemption under ERISA. That is more, not less,
clear when such state-law claims involve remedies not avail-
able under Section 502(a)(1)(B). Although Davila has pur-
ported to plead his claim under an alternative state-law
cause of action that provides for remedies in addition to
those available under ERISA, his claim nonetheless “is in

15

reality based on federal law” and is therefore completely
preempted. Beneficial Nat'l Bank, 123 8. Ct. at 2063.

b. Similarly, Calad’s claim in No. 03-83 is completely pre-
empted. The basis for her state-law complaint is an asserted
right under her ERISA plan to obtain what she viewed as
medically necessary treatment—in her case, more than one
day of hospitalization after a hysterectomy, as recommended
by her treating physician. Calad alleged that CIGNA inter-
fered with that right by informing Calad and her treating
physician that CIGNA would not pay for an extended hospi-
tal stay because she did not qualify under CIGNA’s medical
necessity criteria for extended hospital coverage. 03-83 Pet.
App. 34a-35a. If Calad did not have a legal right under her
ERISA plan to payment for a medically necessary additional
period in the hospital, then her state-law claim would fail.
Accordingly, her state-law claim, like Davila’s, depends on a
showing that she was entitled to payment under her ERISA
plan for the additional medica] treatment she sought. It fol-
lows that Calad’s complaint, like Davila’s, is subject to re-
moval under the complete preemption doctrine.

ce. These cases differ from Pilot Life and Taylor in that
the benefits involved here are health care benefits, rather
than disability benefits, and the defendants here are HMOs,
rather than traditional insurers. Those facts, however, have
no bearing on the analysis. Congress “expressed an intent
that the civil enforcement provisions of ERISA § 502(a) be
the exclusive vehicle for actions by ERISA-plan participants
* * * asserting improper processing of a claim for benefits,
and that varying state causes of action for claims within the
scope of § 502(a) would pose an obstacle to the purposes and
objectives of Congress.” Pilot Life, 481 U.S. at 52; see
Taylor, 481 U.S. 63. That rationale applies regardless of
whether the defendant is a traditional insurer making a post-
treatment coverage decision under a fee-for-services plan (as
in Pilot Life and Taylor) or an HMO making a pre-certifica-

16

tion coverage decision (as here), and regardless of whether
the claims involve disability benefits (as in Pilot Life and
Taylor) or medical benefits (as here). Accordingly, the ra-
tionale of Pilot Life and Taylor applies here, and respon-
dents’ claims are completely preempted.*

3. If any doubt remained as to whether respondents’
state law claims fall within the scope of Section 502(a)(1)(B)
of ERISA, the ability of claimants who are similarly situated
to respondents to sue under ERISA confirms that respon-
dents’ claims are completely preempted. As the Third Cir-
cuit noted in holding that ERISA completely preempted a
state-law claim against an HMO for denying treatment by an
out-of-network provider, “(t]here have been numerous cases
in which [federal] courts have issued preliminary injunctions
under similar circumstances.” Pryzbowski v. U.S. Health-
care, Inc., 245 F.3d 266, 274 (3d Cir. 2001). There are also

3 By requiring that claims challenging HMO coverage decisions be
brought under Section 502(a)(1)(B), the complete preemption doctrine en-
sures that ERISA standards—including the federal common law that
Congress expected would apply to benefit claims, see Pilot Life, 481 U.S.
at 56—will continue to apply to HMO coverage decisions in the same way
they apply to coverage decisions by traditional insurers, such as Blue
Cross and Blue Shield, and companies that administer self-insured plans.
See, e.g., Kopicki v. Fitzgerald Auto. Family Employee Benefits Plan, 121
F. Supp. 2d 467, 470 (D. Md. 2000) (pre-treatment coverage decision by
company administering self-insured plan); Kekis v. Blue Cross & Blue
Shield of Utica-Watertown, Inc., 815 F. Supp. 571, 573-576 (N.D.N-Y.
1993) (pre-treatment coverage decision by Blue Cross/Blue Shield).

4 See, e.g., Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1253 (3d Cir.
1993) (participant’s challenge to administrator’s decision not to pre-
authorize liver transplant); Kopicki v. Fitzgerald Auto. Family Employee
Benefits Plan, 121 F. Supp. 2d at 470-471 (beneficiary's challenge to
administrator’s decision not to pre-authorize stem cell treatment for
cancer); Marro v. K-11] Communications Corp., 943 F. Supp. 247, 248-249
(E.D.N.Y. 1996) (similar); Mattive v. Healthsource of Savannah, Inc., 893
F. Supp. 1559, 1562-1563 (S.D. Ga. 1995) (similar); Kekis, 815 F. Supp. at
576-577 (similar); Wilson v. Group Hospitalization & Med. Servs., Inc., 791
F’. Supp. 309, 310 (D.D.C. 1992) (similar), appeal dismissed, 995 F.2d 306
(D.C. Cir. 1993); Kulakowski v. Rochester Hosp. Serv. Corp., 779 F. Supp.

17

cases in which a claimant obtains treatment recommended
by a treating physician despite a refusal by a managed care
entity to pay for it, and later challenges the HMO’s denial of
benefits under ERISA. See, e.g., Shannon v. Jack Eckerd
Corp., 113 F.3d 208, 209 (11th Cir. 1997), cert. denied, 522
U.S. 1111 (1998); United States General Accounting Office,
Employer-Based Managed Care Plans: ERISA’s Effect on
Remedies for Benefit Denials and Medical Malpractice 12
(July 1998) (GAO/HEHS-98-154) (GAO Report) (“A health
plan’s decision to deny coverage does not preclude the at-
tending physician from providing treatment—if the patient
ean obtain other funding to pay for it.”); 02-1845 Pet. App.
177a; 03-83 Pet. App. 34a-35a. The fact that Section
502(a)(1)(B) provides remedies for the precise types of
wrongs respondents allege confirms that respondents’ state-
law claims fall within the scope of that provision and are
therefore completely preempted.”

C. The Fact That Plaintiffs’ Actions Are Tort-Based
Underscores Their Complete Preemption

1. The court of appeals held that respondents’ claims are
not completely preempted—indeed, are not preempted at all
—because the fact that they are tort-based makes their
“claims of HMO medical malpractice differ fundamentally

710, 711-712 (W.D.N.Y. 1991) (similar); White v. Caterpillar, Inc., 765 F.
Supp. 1418, 1419-1420 (W.D. Mo.) (similar), aff'd, 985 F.2d 564 (8th Cir.
1991).

5 If, contrary to our argument, respondents’ state-court actions fell
outside the scope of Section 502(a)(1)(B), they may nevertheless be com-
pletely preempted because they would fall within the scope of Section
502(a)(3) of ERISA, 29 U.S.C. 1132(a)(3). Section 502(a)(3) allows a par-
ticipant or beneficiary to sue to enjoin a violation of ERISA or of the plan,
or to obtain “other appropriate equitable relief” to redress such a violation
or to enforce any provisions of ERISA or the plan. 29 U.S.C. 1132(a)(3).
Section 502(a)(3) thus allows participants and beneficiaries to obtain
individual relief for a breach of a fiduciary obligation. Varity Corp. v.
Howe, 516 U.S. 489, 507-515 (1996). See also note 13, infra.

18

from * * * § 502(a)(1)(B) claims.” 02-1845 Pet. App. 16a.
The court reasoned that “Section 502(a)(1)(B) * * * creates
a cause of action for breach of contract,” while respondents
“assert tort claims.” Ibid. The court went on to emphasize
the remedies sought and noted that “Calad is not requesting
the value of an extra night at the hospital, and Davila is not
requesting reimbursement for the more expensive drug the
HMO denied.” /d. at 17a. -Because respondents “are not
seeking reimbursement for benefits denied them,” ibid., the
court concluded that their claims are not preempted or
completely preempted by Section 502(a)(1)(B).

The court’s conclusion is inconsistent with Pilot Life,
Taylor, and Ingersoll-Rand, each of which involved claims
that were directly pleaded as tort or tort-like claims and
each of which involved claims for damages that extended
beyond the benefits or rights due.° In each of those cases,
the Court held that the plaintiff’s claims were preempted,
and nothing in the Court’s analysis or result suggested that
the label placed upon the plaintiff’s claim in those cases—
whether contract, tort, or some mixture of the two—had any
relevance at all to the question. “Any.other result would
elevate form over substance and allow parties to evade the
requirements of [the federal statute] by relabeling their
contract claims as claims for tortious breach of contract.”

® See Pilot Life, 481 U.S. at 43 (plaintiff pled claims for “Tortious
Breach of Contract,” “Breach of Fiduciary Duties,” and “Fraud in the
Inducement,” and sought compensatory and punitive damages); Taylor,
481 U.S. at 61, 62 (noting that plaintiff sought “compensation for mental
anguish caused by breach of * * * contract” and holding that plaintiff's
“common law contract and tort claims are pre-empted by ERISA”);
Ingersoll-Rand, 498 U.S. at 136 (Plaintiff “sought compensatory and
punitive damages under various tort and contract theories.”); see also
Rush, 536 U.S. at 377 (“In Pilot Life, an ERISA plan participant who had
been denied benefits sued in a state court on state tort and contract
claims.”); id. at 379 (noting that in Ingersoll-Rand, the court “had no
trouble finding that Texas’s tort of wrongful discharge * * * conflicted
with ERISA enforcement”).

Ae

19

Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 211 (1985)
(holding that complete preemption under Section 301 of the
LMRA, which provides for enforcement of contract rights
under a collective bargaining agreement, applies to state-law
tort claims). Indeed, the fact that the state-law claims pro-
vide additional tort-based remedies rather than merely
duplicating the remedies typically available under Section
502(a)(1)(B) only underscores the rationale for finding those
claims preempted. Although the labels placed on the
plaintiffs’ claims in Pilot Life and subsequent cases thus had
no significance, the fact that the plaintiffs in those cases
sought tort-like remedies that extended beyond those
authorized in Section 502(a)(1)(B) was at the heart of the
Court’s conclusion that the claims conflicted with Congress’s
tailoring of remedies in ERISA and therefore were pre-
empted or completely preempted.

2. The court of appeals recognized that Pilot Life “in-
cludes some expansive language” that “arguably supports”
complete preemption, 02-1845 Pet. App. 19a, but the court
believed that this Court’s more recent decision in Rush Pru-
dential HMO, Inc. v. Moran, 536 U.S. 355 (2002), “indicates
that Pilot Life does not sweep so broadly.” As support for
that contention, the court of appeals noted that this Court in
Rush had characterized Ingersoll-Rand as a case in which
the “state law duplicated the elements of a claim available
under ERISA” and had stated that the state law thus “con-
verted the remedy from an equitable one under § 1132(a)(3)
* * * into a legal one for money damages.” 02-1845 Pet.
App. 19a-20a (quoting Rush, 536 U.S. at 379). In the court of
appeals’ view, that reference in Rush generated a rule that
“the test employed for ‘complete preemption’” is that
“States may not duplicate the causes of action listed in
ERISA § 502(a).” Id. at 20a.

The court of appeals’ reasoning is faulty. Nothing in Rush
suggests that complete preemption is limited to such cases

20

of “duplication.” And in any event, the sense in which the
claim in Ingersoll-Rand “duplicated” the ERISA cause of
action is identical to the sense in which the claims in Pilot
Life, Taylor, and this case do. As explained above, the
plaintiff’s claim in each case “duplicate[s]” an ERISA claim
because it cannot succeed without essentially proving the
elements of an ERISA claim. The fact that the plaintiffs in
_ Ingersoll-Rand and other cases prior to Rush might have
had to prove additional facts or elements beyond those re-
quired by Section 502(a)(1)(B) or Section 502(a)(3) to obtain
the additional forms of recovery they sought under state law
did not prevent preemption of the state-law claims. It is
typically true that a plaintiff seeking to recover compensa-
tory or punitive damages must prove facts beyond those
necessary to establish a violation of a substantive duty by
the defendant. That aspect of the cases therefore was of no
significance. What was significant was that, with respect to
claims that required proof of the essential elements of an
ERISA claim, state law provided for remedies beyond those
available under ERISA, thus making the preemption of the
state law particularly clear. See Pilot Life, 481 U.S. at 54-57;
Taylor, 481 U.S. at 63, 64-65; Ingersoll-Rand, 498 U.S. at
144-145. Similarly here, the fact that respondents would
have to prove additional facts or elements to obtain the com-
pensatory and punitive damages they seek—remedies not
available under Section 502(a)(1)(B)—does not prevent pre-
emption of their state-law claims.

Far from casting doubt on those earlier precedents, this
Court’s decision in Rush relied upon and reinforced them.
The Court emphasized that the state statute providing for

independent review of HMO medical necessity determina- '

tions in that case “provides no new cause of action under
state law and authorizes no new form of ultimate relief.” 536
U.S. at 379. Because “the relief ultimately available [after
the independent review] would still be what ERISA author-

21

izes in a suit for benefits under § 1132(a),” the Court
explained that Rush “does not involve the sort of additional
claim or remedy exemplified in Pilot Life [and] Ingersoll-
Rand.” Id. at 380. On that basis, the Court held that the
state-law independent-review scheme did not fall within
Pilot Life’s rule of categorical preemption. Jbid. In this
case, by contrast, respondents plainly do seek remedies be-
yond those provided by Section 502(a)(1)(B). Accordingly,
the Court’s reasoning in Rush supports and reaffirms the
conclusion that under Pilot Life, Taylor, and Ingersoll-
Rand, respondents’ claims are completely preempted.

D. Pegram v. Herdrich Does Not Bar Complete Pre-
emption Of Respondents’ Claims

The court of appeals suggested briefly that this Court’s
concern in Pegram v. Herdrich, 530 U.S. 211 (2000), that
“ERISA should not be interpreted to preempt state mal-
practice laws or to create a federal common law of medical
malpractice” supports its conclusion that the state-law
claims in this case are not completely preempted. 02-1845
Pet. App. 20a; see also Cicio v. Does, 321 F.3d 83, 100-104 (2d
Cir. 2003), petition for cert. filed, No. 03-69 (July 11, 2003).
That suggestion is mistaken.’

1. In Pegram, an ERISA plan participant contended that
an HMO had violated its fiduciary duties under ERISA by
structuring its operations so that its physician-owners re-

7 The court of appeals relied more extensively on Pegram for its
conclusion that the claims here are not preempted by Section 502(a)(2) of
ERISA, 29 U.S.C. 1132(a)(2). 02-1845 Pet. App. 12a-15a. That provision
does not preempt respondents’ actions for reasons independent of
Pegram. Section 502(a)(2) allows a participant or beneficiary to sue a
fiduciary for “appropriate relief” under Section 409 of ERISA, 29 U.S.C.
1109, including “removal of [a breaching) fiduciary,” 29 U.S.C. 1109(a).
Section 502(a)(2), however, provides relief to the plan, rather than to
individuals. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140
(1985). Because the claimants here seek only individual relief, their claims
do not fall within the scope of Section 502(a)(2).

22

ceived greater profits if they held down the HMO’s medical
treatment expenses. The plaintiff alleged that the plan’s
physicians acted in a fiduciary capacity when they made
“mixed eligibility and treatment decisions,” 530 U.S. at 229
—decisions that mix questions concerning “the plan’s cover-
age of a particular condition or medical procedure for its
treatment” with “choices about how to go about diagnosing
and treating a patient’s condition,” id. at 228. This Court
held that “mixed eligibility [and treatment] decisions by
HMO physicians are not fiduciary decisions” that are subject
to suit under Section 502(a)(2) for breach of a fiduciary duty
under ERISA. 7d. at 237.

2. Pegram is inapposite here. Even if HMO coverage
decisions by a non-treating physician were “mixed” eligibil-
ity and treatment decisions under Pegram (but see pp. 23-25,
infra), there would be no reason for the Court to read
Pegram to foreclose complete preemption of respondents’
state-law claims. The Court in Pegram stated that it was
not addressing preemption issues. See 530 U.S. at 229 n.9.
Moreover, this case does not turn on whether any particular
decision was or was not a fiduciary decision under ERISA. It
does not matter in this case whether the HMO representa-
tives who decided not to pay for respondents’ requested
medical treatment made a fiduciary decision under ERISA
or a “mixed” eligibility and treatment decision that was not a
fiduciary act under Pegram. In either event, the state-law
actions brought by respondents fall within the scope of
Section 502(a)(1)(B) and seek to add to ERISA’s remedies by
permitting a plan participant to recover damages, including
punitive damages, for a denial of benefits. A wrongful denial
of benefits is actionable under Section 502(a)(1)(B) regard-
less of whether it constitutes a fiduciary breach. Accord-
ingly, those state-law actions fall within the scope of Section
502(a)(1)(B), and are removable to federal court, regardless

23

of the fiduciary or non-fiduciary nature of the decisions
attacked by respondents.

3. In any event, as the government pointed out in its
brief as amicus curiae in Rush, Pegram’s holding that “mixed
eligibility [and treatment] decisions by HMO physicians are
not fiduciary decisions” under ERISA, 530 U.S. at 237,
should not be extended beyond decisions made by treating
physicians who are also making HMO eligibility decisions.
See U.S. Br. at 7-11, Rush, supra (No. 00-1021). Although
some statements in Pegram, if read in isolation, might sug-
gest a broader application of the “non-fiduciary” rule, the
better reading of Pegram is that it addresses only mixed
decisions made by treating physicians.”

That limitation of Pegram to treating physicians serving
dual roles makes sense. When the same doctor decides both
treatment and eligibility questions, as may occur in a staff-
model HMO, the treatment decision truly is “practically
inextricable” from the eligibility decision. In HMOs such as
those in this case, however, the treatment and coverage
questions are separate, with a contract physician deciding
the appropriate treatment and the HMO independently de-
ciding whether to pay for it. The coverage decision may, as
in Pegram, turn on a determination of medical necessity, but

8 The plaintiff's claim in Pegram grew out of a decision made by her
treating physician, see 530 U.S. at 215, 217, 231, and there is no indication
that she then sought review through the plan’s appeal process. Further-
more, although the Court in Pegram did not regard the plaintiff's claim of
fiduciary breach as limited to a single incident of poor treatment, see id. at
226, the Court did appear to view her claim as involving only an attack on
the compensation policies as they affected treating physicians. See, e.g.,
id. at 228 (noting that treatment and eligibility decisions are “practically
inextricable from one another * * * not merely because” they are “made
by the same person, the treating physician,” but also “because a great
many * * * coverage questions are not simple yes-or-no questions”)
(emphasis added); id. at 232 (“physicians through whom HMOs act make
just the sorts of decisions made by licensed medical practitioners millions
of times every day”).

24

in the end it is a decision on whether the HMO will pay
under the terms of the plan, not whether the physician may
provide the recommended treatment anyway (with some
other source of funds) outside the plan. See GAO Report 12
(a health plan’s decision to deny coverage does not preclude
the attending physician from providing treatment if the
patient can pay for it). Under the Pegram categorization,
therefore, the HMO’s decision is an “eligibility” determina-
tion that is subject to ERISA fiduciary duty standards, not a
“mixed” decision outside those standards.

Pegram also must be read against the background of pro-
visions of ERISA itself and longstanding Labor Department
regulations and interpretations that provide that plan ad-
ministrators who make coverage decisions on review of the
denials of claims for benefits are plan fiduciaries. Whatever
else HMOs do to provide health care to the participants and
beneficiaries of an ERISA plan they service, acting as the
entity that determines eligibility for plan benefits in a given
case is at the core of what HMOs do.” ERISA makes clear
that an entity responsible for that determination must be an
ERISA fiduciary. See 29 U.S.C. 1002(21)(A)(iii) (a fiduciary
includes a person to the extent “he has any discretionary
authority or discretionary responsibility in the administra-
tion of such plan”); Varity Corp., 516 U.S. at 511 (“a plan

® See Pegram, 530 U.S. at 219 (citations omitted):

At the least, HMOs, like traditional insurers, will in some fashion
make coverage determinations, scrutinizing requested services
against the contractual provisions to make sure that a request for
care falls within the scope of covered circumstances (pregnancy, for
example), or that a given treatment falls within the scope of the care
promised (surgery, for instance). They customarily issue general
guidelines for their physicians about appropriate levels of care. * * *
And they commonly require utilization review (in which specific treat-
ment decisions are reviewed by a decisionmaker other than the
treating physician) and approval in advance (precertification) for
many types of care, keyed to standards of medical necessity or the
reasonableness of the proposed treatment.

25

administrator engages in a fiduciary act when making a dis-
cretionary determination about whether a claimant is enti-
tled to benefits under the terms of the plan documents”); ac-
cord id. at 530 (Thomas, J., dissenting). Construing Pe-
gram to mean that HMO representatives are not ERISA
fiduciaries when they decide on behalf of the plan whether to
pay for treatment that a primary care physician recommends
would- thus conflict with the statutory and administrative
framework for claims adjudication generally.

E. Complete Preemption Effectuates The Congressional

Balance Between Providing Prompt And Appropriate
Remedies For Claimants And Encouraging The For-
mation And Growth of Employee Benefit Plans

ERISA does not provide the full range of remedies avail-
able under state tort law and does not provide at all for puni-
tive damages. In some circumstances, moreover, a denial of
coverage by an HMO may result in a denial of treatment—if
time constraints effectively preclude a suit for injunctive
relief under ERISA and the claimant cannot afford to pay
for treatment from other funds and then later seek recovery
from the HMO. Those features of ERISA’s enforcement
scheme, however, do not mean that this Court should refuse
to apply the complete preemption doctrine to HMO coverage
decisions that may in turn have an effect on a claimant’s

10 See also 29 U.S.C. 1133(2) (“{iJn accordance with regulations of the
Secretary [of Labor], every employee benefit plan shall * * * afford a
reasonable opportunity to any participant whose claim for benefits has
been denied for a full and fair review by the appropriate named fiduciary
of the decision denying the claim”) (emphasis added). Section 503(2) also
requires ERISA plans to decide claims “{iJn accordance with regulations
of the Secretary.” 29 U.S.C. 1133(2). The Secretary has made clear that
claimants must have an opportunity to appeal “an adverse benefit deter-
mination to an appropriate named fiduciary.” 29 C.F.R. 2560.503-1(h)(1)
(emphasis added); see also 29 C.F.R. 2560.503-1(h)(3)(ii) and (¢)(1)(ii)); 29
C.F.R. 2560.503-1(g)(1) (2000) (superseded regulation, requiring appeal to
fiduciary or person designated by the fiduciary).

26

ability to obtain medical treatment. Such a refusal would
upset the balance reflected in ERISA’s civil enforcement
provisions between providing prompt and appropriate
remedies for claimants and encouraging the formation and
growth of employee benefit plans.

1. In enacting ERISA, Congress intended generally to
promote the interests of participants and beneficiaries in
employee benefit plans, 29 U.S.C. 1001(b), but Congress
stopped short of requiring employers to establish such plans.
Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996). Congress
also did not require employers that offer plans to “provide
any particular benefits.” Shaw v. Delta Air Lines, Inc., 463
U.S. 85, 91 (1983)."" Accordingly, the “comprehensive civil
enforcement scheme’” in Section 502(a) of ERISA, 29 U.S.C.
1132(a), “represents a careful balancing of the need for
prompt and fair claims settlement procedures against the
public interest in encouraging the formation of employee
benefit plans.” IJngersoll-Rand, 498 U.S. at 144 (quoting
Pilot Life, 481 U.S. at 54).

The balance Congress struck provides effective remedies
for most claimants who promptly and properly seek them.”

1! One of the very few exceptions is 29 U.S.C. 1185(a), which requires
group health plans and health insurance issuers to provide at least 48
hours of hospitalization after childbirth, if they offer maternity benefits.
ERISA does not require minimum periods of hospitalization for other
benefits a plan chooses to provide, such as coverage for respondent
Calad’s hysterectomy.

12 HMOs must provide claimants with “full and fair review” of a denial
of a claim for benefits. 29 U.S.C. 1133(2); 29 C.F.R. 2560.503-1(h)(1). Such
review must “take[] into account all comments, documents, records, and
other information submitted by the claimant relating to the claim.” 29
C.F.R. 2560.503-l(h\(2)(iv). The plan administrator’s decision must also
provide the “specific reasons” for any adverse determination (29 U.S.C.
1133(1); 29 C.F.R. 2560.503-l(g)(1)(i) and (j)(1)), and the claimant must be
furnished, or afforded the right to obtain, an “explanation of the scientific
or clinical judgment” for certain determinations by group health and dis-
ability plans. 29 C.F.R. 2560.503-1(j)(5)(ii). See generally U.S. Amicus Br.

27

First, under Section 502(a)(1)(B), Congress has allowed
claimants to sue not just for benefits that are due, but also to
enforce their rights under the plan and clarify rights to
future benefits. 29 U.S.C. 1132(a)(1)(B). Thus, a claimant
may bring an action under Section 502(a)(1)(B) to challenge a
pre-treatment denial of coverage by asking a court to order a
managed care company (or other entity that administers a
health plan) to pay for proposed treatment. See note 4,
supra. Successful claimants may be awarded attorneys’ fees.
See 29 U.S.C. 1132(g). District courts have been able to act
quickly to provide relief to such claimants when necessary.
See, e.g., Wilson v. Group Hospitalization & Med. Servs.,
Inc., 791 F. Supp. 309, 310 (D.D.C. 1992) (April 13, 1992 tem-
porary restraining order prevented insurer from refusing to
pay for April 14, 1992 treatment), appeal dismissed, 995 F.2d
306 (D.C. Cir. 1993); White v. Caterpillar, Inc., 765 F. Supp.
1418, 1418-1419 (W.D. Mo.) (action brought June 13, 1991;
preliminary injunction issued June 26, 1991), aff’d, 985 F.2d
564 (8th Cir. 1991). Further remedies may also be available
under Section 502(a)(3) of ERISA, which provides, inter
alia, for “appropriate equitable relief” to “redress” viola-
tions of ERISA (including its fiduciary-duty provisions, see
Varity Corp., 516 U.S. at 507-515) or of an ERISA plan.”

at 8-11, 15-17, Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003)
(No. 02-469).

13 Although this Court has construed Section 502(a)(3) not to authorize
an award of money damages against a non-fiduciary, it has also recognized
that the “equitable relief” authorized by Section 502(a)(3) means relief
typically available in equity. See Great-West Life & Annuity Ins. Co. v.
Knudson, 534 U.S. 204, 210, 217 (2002); Mertens v. Hewitt Assocs., 508
U.S. 248, 248-250, 256-258 (1993). Neither Great-West nor Mertens in-
volved actions against a fiduciary. After Great-West, the government has
taken the position in several cases pending in the courts of appeals that
Section 502(a)(3) allows at least some forms of “make-whole” relief against
a breaching fiduciary in light of the general availability of such relief in
equity at the time of the divided bench. See generally Sec’y of Labor
Amicus Br. at 19-23, Mathews v. Chevron Corp., Nos. 02-15936 & 02-16209

28

Second, Congress required plans to establish a claims pro-
cedure in accordance with regulations of the Secretary of
Labor. 29 U.S.C. 1133. The Department of Labor’s new
claims regulations, applicable to plan years beginning July 1,
2002, see 66 Fed. Reg. 35,886 (2001), specifically address
managed care decision-making by including short time
frames for a group health plan’s decisions on claims. See 29
C.F.R. 2560.503-1(f)(2)i) (decision no later than 72 hours
after receipt of claim for urgent care claims); 29 C.F.R.
2560.503-1(f)(2)(iii)(A) (not later than 15 days for a pre-ser-
vice claim, subject to one extension for matters beyond
plan’s control). Those new regulations may reduce the need
for and incidence of court challenges. See Pryzbowski v.
U.S. Healthcare, Inc., 245 F.3d 266, 275 (3d Cir. 2001).

Third, States may provide for an independent review of
HMO medical necessity decisions. Rush, 536 U.S. at 359-360.

(9th Cir. filed Nov. 25, 2002). Historically, a beneficiary's claim against a
trustee for a breach of trust was typically remedied exclusively in the
courts of equity because the beneficiary had only an equitable, not a legal
interest, in the trust and its assets. See Restatement (Second) of the Law
of Trusts §§ 2 cmts. e and f, 197 (1959). A beneficiary therefore could
maintain a suit in equity to obtain various forms of relief, including to com-
pel the trustee to perform his duties as trustee, to enjoin the trustee from
committing a breach, and “to compel the trustee to redress a breach of
trust.” Jd. § 199(a)-(c). The trustee’s liability in the everit of a breach gave
rise to various alternative remedies, including a remedy that “will put [the
beneficiary} in the position in which he would have been if the trustee had
not committed the breach of trust.” Jd. § 205 & cmt. a. A monetary
recovery in those circumstances did not require a showing of unjust en-
richment. See, e.g., id. § 205, cmt. ¢; Strom v. Goldman, Sachs & Co., 202
F.3d 138 (2d Cir. 1999); Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574
(7th Cir. 2000); see generally George G. Bogert & George T.’ Bogert, The
Law of Trusts and Trustees 861, at 3-4 (rev. 2d ed. 1995). Neither Great-
West nor Mertens supports the proposition that Congress intended that
the courts should ignore that settled trust-law understanding dating from
the days of the divided bench. There is no occasion for the Court to ad-
dress that issue here. Judicial acceptance of this position would, however,
provide an effective remedy in many cases where the remedy under
Section 502(a)(1)(B) may be inadequate.

29

Such review also decreases the chances that a claimant will
be harmed by an erroneous HMO coverage decision. See
GAO Report 24 (external review procedure “could resolve
disputes before harm occurred and could prevent the need
for lawsuits later on”); Gail B. Agrawal & Mark A. Hall,
What If You Could Sue Your HMO? Managed Care Liabil-
ity Beyond the ERISA Shield, 47 St. Louis U. L.J. 235, 278
(2003)).

Finally, claimants may also sue their treating physicians
for malpractice if the physicians’ actions of commission or
omission fall below the standards set for appropriate medical
care. See, e.g., Pryzbowski, 245 F.3d at 279. Courts have also
held that HMOs may be sued under state law, without pre-
emption by ERISA, when they are vicariously liable for a
treating physician’s decisions. See, e.g., In re U.S. Health-
care, Inc., 193 F.3d 151, 162 (3d Cir. 1999), cert. denied, 530
U.S. 1242 (2000); Villazon v. Prudential Health Care Plan,
Inc., 843 So. 2d 842, 851-854 (Fla. 2003). In addition, HMOs
like petitioner Aetna and CIGNA in this case have an incen-
tive to inform participants clearly that they provide only
coverage, not treatment, and that an HMO determination
not to provide coverage does not preclude claimants from
obtaining care recommended by a treating physician through
other sources of funds.

2. Failing to find preemption of state remedies would
“completely undermine[]” Congress’s decision to include
certain remedies and exclude others under ERISA itself.
Ingersoll-Rand, 498 U.S. at 144 (quoting Pilot Life, 481 U.S.
at-54). As employers have noted, imposition of liability
under state law could prevent employers from designing in-
novative health plans that are consistent across state
borders and could make employers less willing to provide
health benefits because of the higher costs associated with
them. GAO Report 22; see also id. at 27. That result would

30

frustrate ERISA’s broader goal of promoting the interests
of participants and beneficiaries.

Indeed, permitting such suits against HMOs that provide
health care through ERISA plans could easily lead to large
punitive damage awards—something that ERISA itself,
with its tailored remedies, does not allow. See Dardinger v.
Anthem Blue Cross & Blue Shield, 781 N.E.2d 121, 140-145
(Ohio 2002) ($30 million punitive damage award); Gail B.
Agrawal & Mark A. Hall, supra, 47 St. Louis U. L.J. at 240
n.16 (reporting punitive damage awards of $77 million and
$120 million, and an award of $80 million that was set aside
on appeal for improper jury instructions and evidentiary
errors). There is nothing in ERISA or in this Court’s
precedents that requires such a result. —

CONCLUSION
The judgment of the court of appeals should be reversed.
Respectfully submitted.
PAUL D. CLEMENT

Acting Solicitor General”
HOWARD M. RADZELY oan KNEEDLER
Solicitor of Labor Deputy Solici
y Solicitor General
—_ rh amma JAMES A. FELDMAN
ssociale Solicr Assistant to the Solicitor
NATHANIEL I. SPILLER General
Deputy Associate Solicitor
EDWARD D. SIEGER
Attorney
Department of Labor
DECEMBER 2003

* The Solicitor General is recused in this case.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0694%3A11. Public record. Not legal advice.