Opposition Brief — Equicor, Inc. v. Lordmann Enterprises, Inc.

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-™ | Supreme Court, y. S.

4 ri. Fs

No. 94-1818 SEP 27 1995

In the Supreme Court of the Gnierstates—

OCTOBER TERM, 1995

EQUICOR, INC., PETITIONER

LORDMANN ENTERPRISES, INC.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

DREW S. DAYS, III

Solicitor General

lHOMAS S. WILLIAMSON, JR. Department of Justice

Solicitor of Labor Washington, D.C. 20530

ALLEN H. FELDMAN (202) 514-2217

Associate Solicitor

NATHANIEL I. SPILLER

Counsel for Appellate

Litigation

ELIZABETH HOPKINS

Attorney

Department of Labor

Washington, D.C. 20210

QUESTION PRESENTED

Whether the Employee Retirement Income Se-

curity Act of 1974 (ERISA), 29 U.S.C. 1001 et seq.,

preempts a state law tort claim brought by a health

care provider against an ERISA benefits adminis-

trator for negligently misrepresenting to the pro-

vider that the provider would be paid in full for all

services that it rendered to a plan participant.

(I)

TABLE OF CONTENTS

Page

SER SESE SpA ER RO I a RT 1

a ea, 2 a srenpnusidabatiabeeresennessoedase 5

lve totter hate rat slinhh celeustbe vebiacaceasuscssavasvanedvneeaseeseene 17

TABLE OF AUTHORITIES

Cases:

Abofreka v. Alston Tobacco Co., 341 S.E.2d 622 (S.C.

a is go eh Ramet as Sone, fod isueloveaagpeversnessadewesece 12

Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n of

BENE, GD BF. CPE ASSO) cnccecnsctnscsecesicceevccescseve 12

Baker Hospital v. Aetna Life Ins. & Casualty Co.,

No. 91-2004, 1991 WL 179113 (4th Cir. July 29, 1991) ... 15

Baker Hospital v. Isaac, 391 S.E.2d 549 (S.C. 1990) .... 15

Caterpillar, Inc. v. Williams, 482 U.S. 386 (19&7) ........ 12-13

Cefalu v. B.F. Goodrich Co., 871 F.2d 1290 (5th Cir.

Neen es cimdlibcdovesescees 13

Coleman v. Nationwide Life Ins. Co., 969 F.2d 54 (4th

Cir. 1992), cert. denied, 113 S. Ct. 1051 (1993) ............. 13

Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d

1272 (6th Cir. 1991), cert. dismissed, 113 S. Ct. 2

I RE es Ie s lied lndncgdackksanedectlRalbincicedssiwarsséveessens 5, 15, 16

Curtiss-Wright Corp. v. Schoonejongen, 115 S. Ct. 1223

SRNR isin drUadiecns sideavasksnbesocinbe: Sislbumtslnescébbntcdvched vescesdnns 14

District of Columbia v. Greater Washington Board of

UM REIN Oe MR, AP COND wecsdnstakcpsvicdtdinevesterceneesesese 6

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

a sacndpaepcosnnnasvapsentone 10

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) . 9, 10

Hermann Hospital v. MEBA Medical & Benefits Plan,

UU ie Be SGD GMS NUED vn dctccsessvsecenosepovassncoecssonsetes 9, 15

Hospice of Metro Denver, Inc. v. Group Health Ins. of

Oklahoma, Inc., 944 F.2d 752 (10th Cir. 1991)............. 5, 14

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990) . 6, 7

(IIT)

Cases—Continued: Page

Mackey v. Lanier Collection Agency & Serv., Inc.,

SE TE Se acini acc desdbcatibchbaetvenih dds sanedadinescceneeness 6, 9, 12

Marks v. United States, 430 U.S. 188 (1977) ................. 16

Memorial Hospital Sys. v. Northbrook Life Ins. Co.,

904 F.2d 236 (5th Cir. 1990) ...............ccceeeee 5, 8, 9, 10, 12, 14, 15

Misic v. Building Service Employees Health & Welfare

Trust, 789 F.2d 1374 (9th Cir. 1986) ...........ccccseccrsseeeees 15

Moore v. Metropolitan Life Ins. Co., 856 F.2d 488 (2d

Oe, DOIG ssssscouciivausorisacccacunoskaaercctgiiadainsdbassiethdenssevetatiees 13

Nachwalter v. Christie, 805 F.2d 956 (11th Cir. 1986) .. 14

New York State Conference of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671

CRG ciccdcccavcntacikadlatekcdanviaaiaarsiniesisaiees 5, 6, 7, 8, 10, 13, 16, 17

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) ........ 5-6

Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984), cert.

Gemed, GTS TET. TORR CRB civ ccckcccsiccincdeieisioncertsctstecess 9-10

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) ........ 6

Straub v. Western Union Telegraph Co., 851 F.2d 1262

hE RG _ | gRaenia feo apr ee 7) caged Wine ants moe yo mL FCT” see 13-14

The Meadows v. Employers Health Ins., 47 F.3d 1006

CE Pe eee ceche is eSicitininesiadcosaninesnieacees 14, 15

Statutes and regulations:

Employee Retirement Income Security Act of 1974,

Sa RE Bas te ctatlnninstictiintecatiscncctintevnssttcenpstibotrs 3

SFr Sai OD dadinersenscenivesnciosssccisncntneces 14

DBE, Bee Bie RULED picerscesnsccnscctsactnnesies 14

SEAR, Tae Crs BOUND eesticsstnsssrcavesceressevasssesseses 3,5

Labor Management Relations Act, 1947, § 301, 29 U.S.C.

BOD. caccnhaciscainsdedesheciabidsssmencebuosenpiobiadatedaaschbsendsholichiases 13

In the Supreme Court of the Giuted States

OCTOBER TERM, 1995

No. 94-1818

EQUICOR, INC., PETITIONER

LORDMANN ENTERPRISES, INC.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

This brief is submitted in response to the Court’s

invitation to the Solicitor General to express the

views of the United States.

STATEMENT

1. Paula Mitchell was a participant in an employee

welfare benefit plan sponsored by her employer, Hi-Fi

Buys, Inc. Pet. App. A2. Under the terms of the plan,

Mitchell and her infant daughter, Victoria, were

eligible for health care benefits provided by a group

insurance policy issued by First Equicor Life In-

surance Co. (First Equicor) and administered by peti-

tioner Equicor, Ine. /bid; id. at B2. The policy, which

(1)

went into effect on June 1, 1990, provided for only 30

days of home nursing care per calendar year, but

stated that Hi-Fi and petitioner could agree to cover

further rehabilitation services if an insured be-

came disabled because of “severe personal injury,” a

category that expressly included high-risk newborn

infants. Id. at A2-A3.

Victoria was born in February 1990 with severe

birth defects that required her to be hospitalized for

almost the first five months of her life. Pet. App.

A3, B2. After she was released from the hospital,

Victoria required 12 hours of home nursing care each

day. Ibid. Mitchell hired a nurse employed by respon-

dent Lordmann Enterprises, Inc., to provide that care,

and assigned to Lordmann her rights to benefits

under the plan. Jd. at A3, B2-B3. The content of the

communications that followed between respondent

and petitioner is disputed.

Respondent claims that, in July 1990, before pro-

viding its services, Susan Marot, its chief executive

officer, contacted petitioner and was informed by Geri

Castagno (of petitioner’s Medical Case Management

Department) that the plan would pay 80% of the cost

of the proposed nursing care. Pet. App. A3-A4, B3. In

October, when Marot called to update petitioner on

Victoria’s condition, Castagno represented that she

had authority to increase the benefits payable and

that she would arrange to have 100% of the nursing

charges paid. Jd. at A4, B38. Approximately six weeks

later, Castagno informed Marot that there was a

problem with Victoria’s coverage. Castagno stated,

however, that there was no need to discontinue

nursing services, and assured Marot that so long as

respondent billed Blue Cross/Blue Shield (the insurer

iia aaa iia

at the time of Victoria’s birth) first, respondent would

be paid in full for its services. Jd. at A5, B3-B4.

For its part, petitioner agrees that Marot asked

Castagno about coverage for Victoria’s nursing care,

but claims that Castagno stated only that nursing

services “would be covered under group policy

number 72610, or not covered, subject to the terms

and conditions of the contract of insurance.” Pet.

App. B4-B5, A6.

Respondent completed its care for Victoria in

January 1991. Pet. App. A6. In December 1991, First

Equicor paid petitioner $9,952, which was 80% of

respondent’s bill for 30 days of care in 1990 and four

days of care provided in January 1991, less the amount

owed by Blue Cross/Blue Shield for the same care.

Respondent collected $3,425 from Blue Cross/Blue

Shield, leaving a balance of $59,432. Id. at A6, B5.

2. Respondent sued petitioner in state court in

Georgia, asserting state law claims for fraudulent and

negligent misrepresentation. Pet. App. A6-A7, B5.

Petitioner removed the case to federal court, assert-

ing federal question and diversity jurisdiction. Jd. at

A7. Respondent then amended its complaint to add

two federal claims, in its capacity as Mitchell’s

assignee: a claim for plan benefits under the Em-

ployee Retirement Income Security Act of 1974

(ERISA), 29 U.S.C. 1001 et seqg.; and an ERISA claim

based upon federal common law equitable estoppel.

Pet. App. A7, B5-B6.

In response to petitioner’s motion for summary

judgment, the district court held that respondent’s

state law fraud and negligent misrepresentation

claims were preempted by Section 514(a) of ERISA, 29

U.S.C. 1144(a). Pet. App. B6-B9. Although the court

acknowledged (id. at B8) that the claims “d[id] not

directly implicate the employee benefit plan,” it

reasoned (7d. at B9) that allowing Lordmann, which

was an assignee of a plan beneficiary, to make state

law claims against the plan would permit it “to do that

which a beneficiary cannot do under state law,” and

thus frustrate the purposes of the ERISA preemption

provision.

The court also held that respondent could not

prevail on its ERISA-based claims. It rejected re-

spondent’s claim for benefits under the plan itself,

because the unambiguous terms of the written plan

provided only for 80% coverage for 30 days per

calendar year. Pet. App. B14, B18. The court rec-

ognized that the plan permitted Hi-Fi and petitioner,

by agreement, to provide additional coverage for

rehabilitation, but found that respondent had failed

to present any evidence of such an agreement. Id.

at B16-B18. The court then rejected respondent’s

federal common law equitable estoppel claim, because,

it concluded, the terms of the written plan were clear

and respondent presented no evidence that petitioner

had spoken with an intent to deceive. Jd. at B18-B20.

3. The court of appeals affirmed the dismissal of

respondent’s two ERISA-based claims for the reasons

stated by the district court, Pet. App. A18-A22, and it

also affirmed the dismissal of respondent’s state law

fraud claim on the ground that respondent failed to

allege specific facts that would support an inference

of scienter, id. at Al0-All. But the court reversed

the judgment entered against respondent on its claim

for negligent misrepresentation, concluding that the

claim might be viable under Georgia law, id. at A1l-

Al2, and agreeing with the Fifth and Tenth Circuits

that state law claims brought by health care pro-

viders against plan insurers “too tenuously affect the

ERISA plans to be preempted by the Act,” id. at A13-

Al4 (citing Hospice of Metro Denver, Inc. v. Group

Health Ins. of Oklahoma, Inc., 944 F.2d 752 (10th Cir.

1991), and Memorial Hospital Sys. v. Northbrook Life

Ins. Co., 904 F.2d 236 (5th Cir. 1990)). In the court’s

view, preemption in this situation would defeat,

rather than promote, the statutory goal of protecting

plan participants, since health care providers might

hesitate to provide services, or might raise their fees,

if they could not rely on representations by insurers

or plan administrators regarding coverage. Pet. App.

A15-A16. Moreover, the court found regulation of

the relationship between plan fiduciaries and health

care providers (who “were not parties to the ERISA

‘bargain’” and were not afforded “federal causes of

action under ERISA”) to be beyond the scope of the

Act. Id. at A16-A17.

ARGUMENT

The decision of the court of appeals is correct, and

it is in accord with decisions of the Fifth, Ninth and

Tenth Circuits. Although the Sixth Circuit reached

a contrary result in Cromwell v. Equicor-Equitable

HCA Corp., 944 F.2d 1272 (1991), cert. dismissed, 113

S. Ct. 2 (1992), the Sixth Circuit’s ruling in that case

rested on a view of ERISA preemption that this Court

since disapproved in New York State Conference of

Blue Cross & Blue Shield Plans v. Travelers Ins.

Co., 115 S. Ct. 1671 (1995). Because the Sixth Circuit

may, accordingly, revisit the issue and reach a result

consistent with that of the other courts of appeals,

further review at this juncture would be premature.

1. ERISA supersedes all state laws insofar as they

“relate to” an ERISA plan. 29 U.S.C. 1144(a). The

Court held in Pilot Life Ins. Co. v. Dedeauzx, 481 U.S.

41. 47 (1987), that the phrase “relate to” should be

accorded a “broad common-sense meaning,” and ex-

plained in Shaw v. Delta Air Lines, Inc., 463 U.S. 85,

96-97 (1983), that “[a] law ‘relates to’ an employee

benefit plan, in the normal sense of the phrase, if it

has a connection with or reference to uch a plan.”

Under that construction, a state law may “relate to”

an employee benefit plan, and be preempted, even if the

law is not specifically or directly designed to affect

such a plan. Ingersoll-Rand Co. v. McClendon, 498

U.S. 133, 139 (1990).

This Court has made clear, however, that pre-

emption is not unlimited, and that some state actions

may affect employee benefit plans “in too tenuous,

remote, or peripheral a manner” to warrant a find-

ing that they “relate to” a plan. Shaw, 463 U.S. at

100 n.21. That is so, the Court has explained, with

respect. to “many laws of general applicability.”

District of Columbia v. Greater Washington Board of

Trade, 113 S. Ct. 580, 583 n.1 (1992). Thus, the Court

held in Mackey v. Lanier Collection Agency & Serv.,

Inc., 486 U.S. 825 (1988), that ERISA does not pre-

empt garnishment of plan benefits under state law,

and noted in that regard that “lawsuits against

ERISA plans for run-of-the-mill state-law claims

such as unpaid rent, failure to pay creditors, or even

torts committed by an ERISA plan—are relatively

commonplace,” id. at 833.

Most recently, in Travelers, this Court rejected

“uncritical literalism” in gauging the “measure of

pre-emption” under ERISA, recognizing that, “[i]f

‘relate to’ were taken to extend to the furthest

stretch of its indeterminacy, then for all practical

purposes pre-emption would never run its course.”

115 S. Ct. at 1677; see also ibid. (“For the same

reasons that infinite relations cannot be the measure

of pre-emption, neither can infinite connections.”).

Accordingly, the Court found it necessary to “go

beyond the unhelpful text and the frustrating

difficulty of defining [the] key term [of the ERISA

preemption provision], and look instead to the ob-

jectives of the ERISA statute as a guide to the

scope of the state law that Congress understood

would survive.” Ibid. It explained that ERISA pre-

empts state laws “that mandate[] employee benefit

structures or their administration,” or that provide

“alternat[ive] enforcement mechanisms,” id. at 1678,

because such laws are inconsistent with ERISA’s

goal of providing a “nationally uniform administration

of employee benefit plans,” id. at 1677-1678. But, in-

voking the “presumption that Congress does not

intend to supplant state law,” id. at 1676, the Court

found that the New York hospital surcharge law at

issue in Travelers did not “relate to” ERISA plans,

despite the law’s admitted purpose to make Blue

Cross/Blue Shield coverage more economically at-

tractive by exempting from the surcharge patients

covered by Blue Cross/Blue Shield policies. The

“indirect economic influence” of the surcharge law,

like other laws that indirectly affect, but do not

dictate, ERISA plans’ market choices, was not

sufficient to trigger preemption. Jd. at 1679-1680.

2. The court of appeals’ holding in this case is

consistent with this Court’s teachings. The cause of

action for negligent misrepresentation under Geor-

gia law does not refer to, and is not dependent on,

the existence of an ERISA plan. See Ingersoll-Rand,

498 U.S. at 139 (distinguishing the state wrongful

discharge law held preempted in that case from “a

generally applicable statute that makes no reference

to, or indeed functions irrespective of, the existence

of an ERISA plan”). Respondent’s action also has

no direct economic or administrative impact on

the ERISA plan sponsored by Paula Mitchell’s em-

ployer. It is not an action against the plan itself, but

against the plan administrator, and it 1s not based on

the participant’s plan coverage, but on an assurance

made by the administrator to a third-party provider.

Any “one-time recovery * * * would not affect the

on-going administration or obligations” of the plan, or

expand the rights of the participant or her beneficiary

to receive benefits under the terms of the plan.

Memorial Hospital, 904 F.2d at 247; see also id. at

246.' In fact, Mitchell (the plan participant) is in-

dividually and primarily liable to pay for the services

rendered by respondent, with the only question being

whether the risk of non-payment should remain with

the provider or be shifted to the plan administrator

that allegedly misrepresented coverage. See ibid.

“Enforcing the allocation of risks between com-

If respondent prevails in this action, petitioner will have

to pay a judgment that presumably will be measured by the

cost of unpaid services that respondent provided. But the

employer’s ERISA plan itself will not be modified, and the

judgment will not affect its benefit structure generally or

require changes in its administration. Cf. Travelers, 115 S. Ct.

at 1678 (ERISA preempts “state laws that mandate[] employee

benefit structures or their administration”). It is possible that

the cost incurred by petitioner in paying the judgment will

ultimately be borne in whole or in part by the ERISA plan,

either pursuant to its contract with petitioner as administrator

or in the form of higher rates for administrative services in the

future. That consequence, however, would be the type of

indirect and purely economic impact on plans that Travelers

held insufficient to trigger preemption.

mercial entities that conduct business in a state is

a classically important state interest” (ibid.) that

“ERISA pre-emption analysis ‘must * * * respect.’”

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 19

(1987).

Further, unlike respondent’s claim for benefits

directly under the ERISA plan and respondent’s

assertion of equitable estoppel, which derive from

respondent’s status as Mitchell’s assignee, respon-

dent’s allegation of negligent misrepresentation is

based on its independent status as a third-party

health care provider. Health care providers are not

ERISA principals; and although, as here, they may

have certain derivative rights under ERISA if they

have received a valid assignment from a participant

or beneficiary, they do not have independent standing

to seek redress under ERISA. See, e.g., Hermann

Hospital v. MEBA Medical & Benefits Plan, 845 F.2d

1286, 1290 (5th Cir. 1988). As the court below rec-

ognized, “[w]hen employers and employees gave up

state law causes of action because of ERISA, they

received federal causes of action under ERISA in

exchange[,] [but] ERISA does not provide a cause of

action for aggrieved health care providers that treat

ERISA participants.” Pet. App. Al7. Because reg-

ulation of the provider/administrator relationship

falls outside the scope of the Act, misrepresentation

claims raised by health care providers do not “raise[]

any issue concerning the matters that Congress

intended to be regulated: exclusively by ERISA.”

Memorial Hospital, 904 F.2d at 247. Rather, they

are representative of the “run-of-the-mill state-law

claims” that are beyond the sweep of ERISA pre-

emption. Mackey, 486 U.S. at 833; cf. Rebaldo v.

Cuomo, 749 F.2d 133, 138 (2d Cir. 1984) (ERISA

preemption “does not require the creation of a fully

insulated legal world that excludes those plans from

regulation of any purely local transaction”), cert.

denied, 472 U.S. 1008 (1985).

Finally, it is unclear “how insulating plan fiduci-

aries from the consequences of their commercial

dealings with third-party providers would further any

of ERISA’s goals.” Memorial Hospital, 904 F.2d at

247. Congress enacted ERISA “to promote the in-

terests of employees and their beneficiaries in

employee benefit plans.” Firestone Tire & Rubber

Co. v. Bruch, 489 U.S. 101, 118 (1989) (citation

omitted); see also 29 U.S.C. 1001(b). To that end,

Congress intended, through the Act, to give em-

ployers the advantages of a uniform set of regulations

governing plan fiduciary responsibilities and pro-

cedures for processing claims and paying benefits.

Travelers, 1158S. Ct. at 1677-1678; Fort Halifax, 482

U.S. at 9-11. As the court below determined, however,

preempting respondent’s state law claim for misrep-

resentation would directly undercut the interests of

participants and beneficiaries, because “commercial

realities” require that “providers be able to rely on

the insurers’ representations as to coverage.” Pet.

App. A15.? If health care providers have no recourse

2 See Memorial Hospital, 904 F.2d at 246:

The scenario * * * is reenacted each day across the

country. A patient in need of medical care requests

admission to a hospital (or seeks treatment from a doctor).

The costs of medical care are high and many providers

have only limited budget allocations for indigent care

and for losses from patient nonpayment. Naturally, the

provider wants to know if payment reasonably can be

expected. Thus, one of the first steps in accepting a

in circumstances in which they have been misled by

erroneous assurances about the extent of coverage,

they “must either deny care or raise fees to protect

themselves against the risk of noncoverage,” Pet.

App. Al6, thereby harming the interests of partici-

pants and of the plans themselves in ensuring that

medical services are readily available to covered

employees and their dependents.

3. Petitioner argues (Pet. 16, 22-23) that because a

plan administrator acts within the scope of its official

duties when it provides information regarding the

existence and extent of coverage under a benefit plan,

the propriety of its conduct should be determined by a

uniform body of federal law under ERISA, regardless

of whether the plaintiff is a plan participant or, as

here, a third-party health care provider. That a func-

tion is performed by a person in its capacity as a

plan administrator does not mean, however, that its

actious are insulated from state law causes of action.

patient for treatment is to determine a financial source for

the cost of care to be provided.

If a provider believes that a patient may be covered

under a health care plan, it is customary practice to

communicate with the plan agents to verify eligibility and

coverage. If the provider confirms that a patient has

health insurance that covers a substantial part of the

expected costs of the health care, it will normally agree to

admit the patient without further ado. Memorial contends

that when an insurance company or its agent, including

one acting as an ERISA plan fiduciary, verifies coverage

to a third-party provider, the insurer should recognize the

commercial implications to the provider of its assurances.

Under Memorial’s theory, the insurance company is agree-

ing to pay expenses within the represented terms of the

policy or to accept the consequences for a false representa-

tion of coverage that the provider reasonably relied upon.

Indeed, as this Court has recognized, an ERISA plan

may itself sue and be sued under state tort law.

Mackey, 486 U.S. at 833.5 Moreover, contrary to peti-

tioner’s assertion (Pet. 16), the identity of the party

plaintiff is relevant to the determination whether

its claim against an ERISA principal is preempted.

ERISA preempts state law claims by beneficiaries

against plan fiduciaries because, by defining the

fiduciaries’ duties towards plan beneficiaries and pro-

viding a mechanism for enforcement of those duties,

the Act establishes a comprehensive scheme for reg-

ulation of the fiduciary/beneficiary relationship. In

contrast, “[t]he Act imposes no fiduciary responsibil-

ities in favor of third-party health care providers,”

Memorial Hospital, 904 F.2d at 247, and affords such

providers no statutory cause of action for redress of

injuries inflicted by plan fiduciaries.

Petitioner contends (Pet. 19-22) that the absence of

an ERISA remedy for misleading statements made by

plan administrators to health care providers is not

relevant to the preemption analysis. Neither Cater-

3 Significantly, Mackey cited Abofreka v. Alston Tobacco

Co., 341 S.E.2d 622 (S.C. 1986), as an example of a type of tort

claim commonly brought against plans or their fiduciaries that

is not preempted by ERISA. 486 U.S. at 833 n.8. Abofreka

involved a state libel claim by a doctor against plan fiduciaries

who, based on their belief that the doctor had submitted

fraudulent claims for benefits, posted notices to their covered

employees not to use the doctor’s services. 341 S.E.2d at 624.

As the Fifth Circuit noted in Memorial Hospital, if ERISA

does not preempt the Abofreka claim, despite its undeniable

connection to the administrative activities of plan fiduciaries in

processing the doctor’s claims for benefits, a state law claim by

a health care provider against a plan administrator for

negligent misrepresentation “creates no greater preemptive

concerns.” 904 F.2d at 248-249.

pillar, Inc. v. Williams, 482 U.S. 386 (1987), nor Avco

Corp. v. Aero Lodge No. 735, Intl Ass’n of

Machinists, 390 U.S. 557 (1968), supports that broad

argument. Although both cases held that a state law

cause of action may be preempted by Section 301 of

the Labor Management Relations Act, 29 U.S.C. 185,

even where federal law does not provide a parallel

remedy, Caterpillar, 482 U.S. at 391 n.4; Avco, 390

U.S. at 561, neither case held that the existence vel

non of a federal remedy is irrelevant to an analysis of

the scope of federal preemption. To the extent that

the presence or absence of a remedy under ERISA

bears on Congress’s intent regarding the scope of the

Act, it is obviously a factor relevant to an assessment

of the Act’s preemptive range. See Travelers, 115 S.

Ct. at 1677-1678.

Finally, petitioner argues (Pet. 22) that a health

care provider’s interests can be adequately protected,

without resort to state tort law, through an assign-

ment of the beneficiary’s rights under the plan.

Limiting a provider to the remedies available to the

plan beneficiary, however, fails to take into account

relevant differences in their respective positions. As

a general rule, a beneficiary is held to the written

terms of a plan and cannot enforce alleged oral

representations or modifications that conflict with

those written terms.’ That is so because the written

4 In general, oral or informal written communication has

been deemed ineffective to amend the terms of a written plan.

See Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 58-59

(4th Cir. 1992), cert. denied, 113 S. Ct. 1051 (1993); Cefalu v.

B.F. Goodrich Co., 871 F.2d 1290, 1295-1297 (5th Cir. 1989);

Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir.

1988); Straub v. Western Union Telegraph Co., 851 F.2d 1262,

plan document requirement of Section 402(a)(1) of

ERISA, 29 U.S.C. 1102(a)(1), and the Act’s reporting

and disclosure scheme more generally, are designed

to “enabl[e] beneficiaries to learn their rights and

obligations at any time,” Curtiss-Wright Corp. v.

Schoonejongen, 115 S. Ct. 1223, 1230 (1995). See 29

U.S.C. 1024(b) (1988 & Supp. V 1993) (requiring the

plan administrator to furnish participants and bene-

ficiaries with a copy of the summary plan description

and to make plan documents available for inspection

by participants and beneficiaries). In light of this

statutory scheme, it is one thing to hold a beneficiary

responsible for knowing the terms of the plan under

which she claims coverage, and quite another to

presume that a third-party provider, who deals with

numerous unrelated plans without having ready

access to the governing plan documents, stands on

equal footing with the administrator of a plan

regarding matters of eligibility and coverage under

that plan.

4. The decision of the court of appeals in this case

is consistent with decisions of the Fifth, Ninth and

Tenth Circuits holding that similar claims by health

care providers are not preempted by ERISA. See

Memorial Hospital, 904 F.2d at 245-249; Hospice of

Metro Denver, 944 F.2d at 755; The Meadows v.

Employers Health Ins., 47 F.3d 1006, 1008, 1011 (9th

Cir. 1995).°

1265 (10th Cir. 1988); Nachwalter v. Christie, 805 F.2d 956, 960

(11th Cir. 1986).

> Notably, the Fifth and Ninth Circuits have distinguished

state law suits by a provider “as an independent entity claiming

damages” from state law suits by a provider “as an assignee

of a beneficiary’s rights to benefits,” and have found the lat-

The Sixth Circuit’s decision in Cromwell v.

Equicor-Equitable HCA Corp., supra, thus stands

alone in holding that a health care provider’s state

law claim against a plan administrator for negligently

misrepresenting the extent of coverage is preempted

by ERISA.® In Cromwell, a health care provider

brought suit in state court based on the adminis-

trator’s false assurance of coverage and subsequent

refusal to pay. The provider alleged promissory es-

toppel, negligence, and, as an assignee of insurance

benefits, derivative claims for breach of contract and

breach of good faith. 944 F.2d at 1276-1277. After

the case was removed to federal court, the district

court dismissed the provider’s state law claims as

preempted by ERISA, and it granted the adminis-

trator’s motion for summary judgment on the breach

of contract and breach of good faith claims, which the

court treated as claims for benefits under the Act. Jd.

at 1275. The court of appeals affirmed. Stressing the

broad sweep of ERISA preemption, the court reasoned

ter preempted by ERISA. The Meadows, 47 F.3d at 1008

(distinguishing Misic v. Building Service Employees Health &

Welfare Trust, 789 F.2d 1374 (9th Cir. 1986)); Memorial

Hospital, 904 F.2d at 245 n.12, 249 n.20, 250 (distinguishing

Hermann Hopsital v. MEBA Medical & Benefits Plan, supra).

® Although the Fourth Circuit stated, in Baker Hospital v.

Aetna Life Ins. & Casualty Co., No. 91-2004, 1991 WL 179113, at

*1 (July 29, 1991) (per curiam), that ERISA precluded a

provider’s state law promissory estoppel claim, the opinion was

unpublished (and therefore did not establish circuit precedent),

and the provider in that case conceded that its claims were

preempted by ERISA. Similarly, in Baker Hospital v. Isaac,

391 S.E.2d 549, 550-551 (S.C. 1990), the parties stipulated that

the provider’s state law tort claims were preempted by ERISA.

Both of those decisions predated Travelers.

that the state law claims were “at the very heart

of issues within the scope of ERISA’s exclusive

regulation and, if allowed, would affect the

relationship between plan principals by extending

coverage beyond the terms of the plan.” Jd. at 1275-

1276.

The decision in Cromwell, however, was split three

ways, with only Senior District Judge Feikens

subscribing to the above reasoning. Judge Suhrhein-

rich, concurring only in the result, focused on “the

effect state law has on the plan.” 944 F.2d at 1279. In

his view, a judgment in this type of case, while not

based in contract, “will nonetheless have to be paid by

the plan”; “will require actuarial adjustments, since

such a judgment will not have been a factor in the

plan’s projections”; and will subject the plan “to the

laws of the individual states concerning the types of

damages recoverable in tort, including consequential

and punitive damages.” Jbid. Judge Suhrheinrich

concluded that those effects trigger preemption,

because they result in “fewer funds available to pay

the claims of beneficiaries” and “increase administra-

tive costs.” Ibid.

Judge Jones, dissenting, faulted the “majority” for

its “overzealous” and “unreflective approach to

ERISA preemption,” 944 F.2d at 1279, an approach

that “perhaps inadvertently * * * has enabled plan

administrators, either intentionally or not, to give

misinformation of coverage and avoid any inquiry into

the validity of a health care provider’s claims against

them,” id. at 1286.

The rationale of Judge Suhrheinrich’s concurrence,

which apparently was pivotal to the outcome of the

case, see Marks v. United States, 480 U.S. 188, 193

(1977), is directly called into question by this Court’s

later decision in Travelers. The “negative effects” on

plans of holding plan administrators liable for torts

committed against outside parties, like the effects of

the surcharges in Travelers, are indirect and wholly

economic, and “do[] not bind plan administrators to

any particular choice.” Travelers, 115 S. Ct. at 1679.

It was precisely the existence, and indeed prevalence,

of “common state action{s]” having such economic

impacts that led this Court to question, and ulti-

mately reject, the notion that ERISA displaces “all

state laws affecting costs and charges.” Jbid. As a

result of Travelers’ subsequent clarification of the

standards for ERISA preemption, the Sixth Circuit

may well reconsider its splintered ruling in Crom-

well concerning the viability of a health care pro-

vider’s independent state law claims against a plan

administrator. Accordingly, we do not believe that

review of that issue by this Court is warranted at the

present time.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

DREW S. Days, III

THOMAS S. WILLIAMSON, JR. Solicitor General

Solicitor of Labor

ALLEN H. FELDMAN